H.R. 2666: House Prepares to Give ISPs License To Price Gouge (Even More).

The House Rules Committee has scheduled a floor vote for Friday April 15 (today!) for an amended version of H.R. 2666 aka the “No Rate Regulation of Broadband Internet Access Act,” aka the “Twice The Evil of the Beast” Act. Ostensibly, the bill is supposed to codify the commitment made by President Obama, FCC Chair Tom Wheeler, and just about everyone else that the FCC would never use the classification of broadband as a Title II service to engage in “utility style rate regulation.”

 

Surprise! As I explain in a much shorter version over here, H.R. 2666 basically removes the authority of the FCC to take action on any complaints relating to overcharges, fees or other nasty practices that broadband providers may do to overcharge you — provided they disclose them honestly (and, since there is not exactly a lot of competition, disclosure doesn’t help much). It also effectively strips the FCC of its authority to address zero-rating — even in the worst anticompetitive cases where a provider zero-rates its own content while applying its broadband cap (however discriminatory) to rival services. Along the way, it renders various merger commitments involving offering low cost service to the poor unenforceable and has lots of other nasty impacts.

 

Needless to say, the collective trade associations of the broadband industry are thrilled.

 

That’s not just me talking. That’s from the President’s veto threat message. Additionally, this group of 50 public interest groups think H.R. 2666 is a very, very bad bill, and 30 groups signed on to this letter explaining how H.R. 2666 will screw up privacy protection by letting ISPs charge you for it (aka “pay for privacy” like this from AT&T).

 

I’m going to repeat a pitch here I will repeat often: If you think letting broadband providers price gouge and undermine net neutrality is a bad thing, please call your Representative in the House directly, or use this link to go to BattleForTheNet.com and call your Representative (they have a tool to help find your Rep and have a script — but use your own words, that is always more convincing.

 

Made your call? Good. See below for lots more details so you can explain to your friends why they should call. . . .

Normally we can treat passing bills against things no one wants to do the same way we treat the endless House votes to repeal Obamacare — as election year stunts designed to burnish credentials with the conservative base and prove to various industry donors that their campaign contributions are getting them the best government money can buy. But H.R. 2666 radically changes the definition of “rate regulation” from the traditional definition of “using a rate setting proceeding to actually set a rate” (a definition reaffirmed back in January by the Supreme Court in a case called FERC v. Electric Power Supply Assoc.), H.R. 2666 uses a new and far more expansive definition of rate regulation. To quote the key language from Section 5 of the bill:

 

“(4) REGULATION.—The term ‘‘regulation’’ or  ‘‘regulate’’ means, with respect to a rate, the use by the Commission of rulemaking or enforcement authority to establish, declare, or review the reasonableness of such rate.” (emphasis added).

 

By prohibiting the FCC from even reviewing a rate — even through an enforcement action — and prohibiting the FCC from even declaring a rate “unreasonable,” H.R. 2666 insulates broadband providers from the consequences of any price gouging, below lines fees or other exercises of market power to collect monopoly rents. True, Section 3, the exemptions section, permits the FCC to enforce its truth-in-billing rules. But given that landline broadband is usually limited to only two providers (and for anything 25 mbps down or better, for many consumers it’s either cable or nothing), this doesn’t help much.

 

But why on Earth would anyone, even House Republicans who hate the FCC, want to legalize price gouging by cable companies? Sure, some of it is the usual “let me show you how I earn your PAC money and pretend crony capitalism is about protecting consumers from ‘Big Government.'” But it has a lot more to do with the ongoing House Republican vendetta against net neutrality and the Wheeler FCC.

 

 

A Bit of Background

 

As folks may recall, one of the main anti-Net Neutrality and anti-Title II talking points was that this amounted to “utility style price regulation.” Since the FCC announced it would not do rate regulation and would forbear (and because the FCC hasn’t done significant rate regulation proceedings for residential service for years), this claim made no sense except as ridiculous hyperbolic scare mongering (or, as we say in D.C. “SSDD”).  When pressed on this (by me and others) purveyors of the “price regulation” talking point (for example, FCC Commissioner Pai) responded that while forbearance might eliminate “ex ante” rate regulation, but because Section 201(b) of the Communications Act outlaws any “unjust or unreasonable” rates or practices, it permitted “ex post” rate regulation.

 

If you never heard of ex post price regulation before, you aren’t alone. As my Public Knowledge colleague Kate Forscey explained in this blog post, “ex post” rate regulation is what us normal people call “enforcement of consumer protection law. But of course, you can’t say in plain English “I want to get rid of the FCC’s ability to stop broadband providers from ripping people off and let them engage in all manner of anti-competitive practices like zero-rating their own content.” So, with the clever addition of a legal sounding Latin phrase meaning “after the fact,” stripping the FCC of consumer protection authority and antitrust authority can be relabeled as “rate regulation.”

 

Enter H.R. 2666.

 

Despite the overwhelming support of millions of Americans, and the utter failure of the broadband market to collapse into a socialist nightmare on reclassification as Title II, Congressional Republicans simply cannot let go of Net Neutrality. G.O.P. presidential candidate Ted Cruz famously declared that net neutrality was “Obamacare for the Internet.” Apparently, by that he meant “thing Congressional Republicans will obsess about endlessly rather than focus on real issues.” So, in the year or so since net neutrality became “law of the land,” we’ve seen House Republicans introduce various provisions to try to undermine net neutrality.

 

Those got beaten back because lots and lots of people called their members (including Democrats, who need reassurances from voters that they still support net neutrality, because Democrats) got lots and lots of phone calls demanding that they vote against these anti-net neutrality measures. This is why I am repeating my PSA for you to call your Representative and tell them to vote against H.R. 2666, the Kinzinger “No Rate Regulation Of Broadband Internet Act,” aka the “ISP Freedom To Price Gouge Act.” You can call by clicking this link to Battleforthenet.com.

 

The History of H.R. 2666.

 

Among the various House Republican offerings to undermine net neutrality and/or punish the FCC for taking its job seriously is H.R. 2666. Introduced by Representative Adam Kinzinger (R-IL), the bill started with a simple statement that “regardless of any other provision of law” the FCC shall not engage in “rate regulation” of broadband. According to Kinzinger and the other bill sponsors, they intended the bill to codify the statement made by President Obama, Chairman Wheeler, and everyone else that the FCC would never engage in “utility style rate regulation” of broadband Internet access service (as defined by the FCC in the Open Internet Order). As the initial story went, the bill was necessary to prevent a future FCC from “unforbearing” and actually applying real honest to God tariffing and rate setting as authorized by 47 U.S.C. 203-205.

 

My initial response to this was that it would take circumstances so awful for the FCC to start doing tariffing again that we would probably be grateful to have it. I used to do tariffing for energy services back in the day and no one, I mean no one, liked it. It’s pretty much the dialysis of regulation, flushing monopoly prices out of the system when competition utterly fails. But what the heck. If it made people happy to make the current forbearance permanent, I could shrug.

 

The problem, as I explained at the hearing on the bill last January, was that the bill combined broad language on its prohibition on “rate regulation” (using the words “regardless of any other provision of law”) with no definition of “rate regulation.” Taking these two things together, opponents of any FCC action unrelated to traditional rate regulation (including opponents of enforcement actions for violating consumer protection rules or engaging in anticompetitive practices) could claim the bill prohibited any FCC action. That would go well beyond the codification of FCC forbearance against “utility style” rate regulation. My anxiety was further heightened by the repeated use of the brand new phrase “ex post rate regulation” as a substitute for “enforcing consumer protection and competition law” by various witnesses and House Members.

 

H.R. 2666 Goes From Ambiguous and Therefore Potentially Awful, to Crystal Clear In Its Utter Awfulness.

 

The good news is that the Committee Republicans took these criticisms seriously and amended the bill to make it clear what they intended. The bad news is that it turns out, yup, this was not about “rate regulation.” In the fine tradition of famed Republican pollster Frank Luntz, the sponsors of H.R. 2666 have relabeled “consumer protection and competition enforcement” as “price regulation.”

 

As my PK colleague Kate Forscey explains in this blog, Republicans rejected pretty much any amendment that would limit this to actual traditional rate regulation. Sure enough, if you listen to this video here, you can hear Subcommittee Chairman Walden defend this all in the name of the exciting brand new concept of “after the fact” rate regulation, aka “enforcement.”

 

Listening to the hearing, members on both sides of the aisle keep saying “we want to work together to get these things right.” Which raises the question: “OK, in that case, why the heck did the Rs push this through at warp speed when there is no actual problem or issue?” If the concern is really “someday, some future FCC might start going all whacky rate regulation nutbar,” then why can’t you wait another couple of weeks and work out the details? But no! Without any “cost benefit analysis” and despite all that “solution in search of a problem” crap we heard endlessly for the ten freaking years we debated debated net neutrality, Republicans absolutely must push this bill out of Committee and vote it through because — why?

 

Oh right, because it has nothing whatsoever to do with preventing any actual rate regulation.

 

Meanwhile, in advance of tomorrow’s vote, the entire ISP industry has rallied around H.R. 2666 to give this stirring defense:

“America’s broadband industry invested more than $80 billion last year to help expand and enhance the broadband access enjoyed and depended upon by American consumers and businesses. Those investments support American jobs and have helped enhance a range of industries, from agriculture to entertainment to healthcare, that depend on high-speed Internet connectivity. But inherent in every company’s decision to invest such massive amounts of capital is the ability to earn a return and retain the flexibility to price service to respond to competition. H.R. 2666 provides the certainty necessary for this investment to continue by alleviating the threat that the Federal Communications Commission will limit provider pricing flexibility or otherwise dictate the terms and conditions of our members’ service offerings.”

 

Srsly. That is the entire substance of the letter. Don’t believe me? Click here. To summarize “It’s not price gouging, it’s ‘price flexibility.’ And unless we know that we can charge outrageous prices, keep sticking it to consumers on fees and overages that we make up to rack in more dough, and use our market power to screw over competing streaming services with ridiculous bandwidth caps and zero-rating, we won’t keep investing in broadband.”

 

C’mon ISP industry, can’t you at least try. This is where is the bogus study about declining investment? Where are the graphs and pie charts? If you are going to justify freedom to price gouge and zero rate your own affiliated content you us at least a pie chart. Geez, the way they behave, you would think the cable industry owns Congress.

 

And this looks like a good place for me to put my standard PSA to CALL YOUR MEMBER OF CONGRESS!! You can use this link here!!! 

 

So How Does H.R. 2666 Manage To Be So Craptastic?

 

Turning to the plain language of the statute, we start with Section 2:

“Not withstanding any other provision of law, the Federal Communications Commission may not regulate the rates charged for broadband Internet access service.” (Emphasis added.)

The language “notwithstanding any other provision of law” is extraordinarily broad. It covers, for example, the provisins by which the FCC reviews mergers and license transfers (Sections 214(a) and  310(d)). It covers the provision under which the FCC regulates “unfair or deceptive” anticompetitive cable practices (Section 628). It covers cable privacy (Sections 631 and 338(i)), it covers broadband privacy (Section 222). And, of course, it gets to Section 201(b), the general consumer protection protection statute.

 

 

H.R. 2666 does exclude certain things. Unfortunately, this is a rather small set.

Section 3 allows the FCC to do the following:

  1. Condition receiving USF funds on providing supported services at specified rates.
  2. Enforce the existing Truth-In-Billing rules at 47 C.F.R. Part 64 Subpart Y (but not the broadband Net Neutrality Transparency Rules found in 47 C.F.R. 8.3, so broadband providers can still lie to you about those if it involves rates).
  3. Enforce the rule against paid prioritization at 47 C.F.R. 8.9.

Mind you, the statute does not permit the FCC to enforce the rule against throttling (47 C.F.R. 8.7) or even the rule against blocking (47 C.F.R. 8.5). So if an ISP says: “Sure, I’m blocking that application. It will cost you extra to reach it because, well, I can” the FCC has no power to even review such a complaint, let alone stop an ISP from charging you extra to “unblock” it.

 

If this last seems far fetched, I will remind you that AT&t did something almost exactly like this in 2012 over use of the application Facetime on the iPhone. To actually be able to use Facetime, you needed to subscribe to the most expensive tier of service. These days, that would clearly violate either the “no blocking” rule or the “no unreasonable discrimination/unreasonable advantaging” rule (47 C.F.R. 8.11).

 

So yes, not only would H.R. 2666 clearly prevent the FCC from addressing actual network neutrality problems, it would explicitly exempt ISPs from a network neutrality violation that has already happened.

 

But what really does it in terms of making H.R. 2666 an invitation to ISPs to price gouge is the brand-spanking-new and extremely broad definition of what “rate regulation” means. Turning to the definition section (Section 5), we see two definitions, one for “rate” and one for “regulation.”

 

(3) RATE.—The term ‘‘rate’’ means the amount charged by a provider of broadband Internet access service for the delivery of broadband Internet traffic.

(4) REGULATION.—The term ‘‘regulation’’ or ‘‘regulate’’ means, with respect to a rate, the use by the Commission of rulemaking or enforcement authority to establish, declare, or review the reasonableness of such rate.

 

Please note the highlighted terms. The activity prohibited under Section 2 of the Act, the “regulation” of a “rate,” explicitly includes any enforcement action. Indeed, the statute even prohibits the FCC from reviewing whether the rate is reasonable. It means that all charges that a broadband provider chooses to impose on the “delivery of broadband Internet traffic” are beyond the scope of the Commission’s review.

 

Mind you, since broadband is still a Title II service, the Federal Trade Commission (FTC) likewise has no jurisdiction over the rates charged by broadband ISPs. Section 5 of the FTC Act (15 U.S.C. 45) prohibits the FTC from regulating common carriers (including broadband providers). To put the cherry on the cake, most states have passed laws prohibiting any regulation of IP-enabled services — such as broadband Internet access service.

 

In other words, if H.R. 2666 were to become law, there would be absolutely no state or federal oversight of broadband ISP practices with regard to charges, fees, overages, consumer rip offs, or any anticompetitive behavior the ISP could class as relating to the “delivery of broadband Internet traffic.”

 

It is every industry’s dream. Unlimited permission to price gouge without consequence.

 

But What About The Statute Exempting The Truth In Billing Rules?

 

We’ll set aside for the moment that the statue identifies the existing truth-in-billing rules and not the broadband Transparency Rule. I’m going to assume that because the existing Truth-In-Billing Rules cover “telecommunications,” they unquestionably apply to broadband (best case assumption).

 

As majority counsel for the Republicans stressed at the H.R. 2666 mark up, the Truth-In-Billing rules simply require a carrier to disclose charges clearly on a bill after the fact. They do not require carriers to disclose terms and conditions before you incur any charges or fees (unless the provider changes the terms of service, in which case they need to give you notice that they changed he terms — but they don’t have to let you unsubscribe). As Rule 64.2400 explains, the purpose of the Truth-in-Billing rules is to help consumers get relief from deceptive or unwarranted overcharges and dishonest practices through other provisions of the FCC’s rules.

 

So the current H.R. 2666 does not prevent carriers from lying to you in advance to get you to sign on the dotted line, promising you stuff and not delivering, or just making up whatever overcharges or fees they feel like. They just have to tell you on the bill what they billed you for.

 

Can You Provide Some Examples of Craptastic Price Gouging Under H.R. 2666 Would Work? 

 

So, for example, suppose you are one of the many people who rents their modem from their broadband provider. You decide to go out and buy your own. You return the rented modem and everything is going along fine until you notice you are still being billed a “modem rental fee.” After several hours of working through the phone tree, you finally reach the appropriate customer service representative.

“We charge all our customers a modem fee,” explains the polite person on the end of the line.

“But I returned the modem,” you reply.

“Sure, but we charge all our customers a modem fee whether they rent our modem or not.”

“You never told me that before! You told me before I could buy my own modem!”

“That’s right. You can buy your own modem and use it with our system. We will just continue to charge you the modem fee anyway.”

 

If that sounds preposterous and too outrageous even for a cable company, I remind you that this is exactly what cable companies did to block people from using CableCard, except they called it a “Cablecard fee” that magically equaled what the cable operator charged you in rental fees.

 

Under current law, the FCC can say — “we declare that charging people a ‘modem rental fee’ when they are not actually renting the modem is an unjust and reasonable fee and the broadband provider needs to stop ripping people.” If H.R. 2666 passed, the analysis would go like this:

 

FCC: Did your broadband ISP clearly label this a ‘modem rental fee on your bill?’

You: Yes, it’s clearly labeled on the bill. But they shouldn’t have charged me for it in the first place.

FCC: We can no longer help you with that. We can’t even review your complaint about it. As long as they clearly indicated on the bill that they called it a ‘modem fee’ then we’re done.

 

Got Some Net Neutrality Examples?

 

Sure. Suppose I am a broadband provider who also runs a rival video service and a cable subscription service. I really hate the fact that people are ‘cutting the cord’ and unsubscribing from my cable service because they can get competing video programming by streaming it over the Internet. So I decide to impose a “bandwidth cap.” If you use 150 gigabits per data a month (the current cap on AT&T DSL), then you start to incur serious overcharges.

 

That already makes it hard for me to stream a rival video service. Meanwhile AT&T is offering cheap DIRECTV and free streaming of its own over-the-top video service. AT&t decides that, while streaming a rival service like Go90 or Amazon Prime counts against your rate cap, streaming AT&T’s video service (or just staying a DIRECTV subscriber) doesn’t trigger any overcharges.

 

This is, of course, precisely the kind of anti-competitive and anti-consumer conduct net neutrality is supposed to prevent. So, naturally, this is exactly the kind of anti-competitive and anti-consumer conduct that H.R. 2666 is designed to protect. Because H.R. 2666 exempts only the paid prioritization rule, and this form of discrimination is not ‘paid prioritization,’ the broadband ISP is free to charge whatever fees or overages it wants to punish you for using a rival service.

 

What About Merger Conditions Like Charter’s Promise Not To Impose Data Caps For 3 Years If They Buy Time Warner Cable?

 

Sadly, under H.R. 2666, this would go from “enforceable merger condition” to “unenforceable promise Charter could decide to ignore.” Why? Merger conditions work because they are part of a provider’s license. The FCC, under 47 U.S.C. 309(h) (and other provisions of law), can require a provider to follow the requirements in its license by bringing an enforcement action to enforce Section 309(h).

 

But not if H.R. 2666 becomes law. H.R. 2666 prohibits any “enforcement action” over a rate. Heck, it prevents even review of a complaint. Section 309, and the FCC general enforcement power, are part of that any provision of law under which the FCC is forbidden to regulate the rates broadband ISPs charge customers. It doesn’t matter if the broadband ISP agreed in a merger to accept the terms and make it a condition of their license. The condition is there, just like Section 201(b) is there to make broadband ISP price gouging “unlawful.” But, as with the price gouging example, H.R. 2666 would prevent the FCC from even reviewing a complaint, let alone actually enforcing the law.

 

What Does This Have To Do With Privacy?

 

As this letter from 30 public interest groups points out, one of the ways broadband ISPs are looking at to get consent to track you with things like Supercookies is by offering you a discount if you agree to be tracked, an arrangement some call “pay for privacy.” It does not take a genius to see that a broadband ISP can set its rate very high (even higher than it is right now) to get you to take the “discount” and agree to tracking. Heck, if H.R. 2666 passes, a broadband ISP can charge you a monthly “privacy fee” unless you agree to waive all your privacy rights under 47 U.S.C. Section 222 (the FCC privacy statute).

 

Normally, the FCC would say “hey! You can’t charge people a “privacy fee” to fulfill your statutory obligation to protect their personal information! That totally defeats the point of Congress giving people a rate to privacy. It’s a right not a luxury.” However, Section 222 is, once again, one of those any provision of law that H.R. 2666 explicitly prohibits the FCC from doing anything to enforce.

 

How on Earth Do Members of Congress Think They Can Vote To Protect The Most Hated Industry In America From Basic Consumer Protection And Competition Law? And During An Election Year?

 

Well let’s see. Has the media covered it? Has anyone called their member of Congress about it? Has anyone asked any of the bill sponsors, or people who voted for the bill in Committee, “Hey! Why the heck are you fighting to protect the cable companies when you’re supposed to be fighting to protect me from price gouging monopolies?”

 

Nope.

 

Heck, through the magic of rebranding, the bills sponsors have made this a bill to prevent “Rate regulation.” Heck, we have cartloads of wussie Democrats who — despite everything so far — are trembling in their boots about voting for something that claims to be against “Rate regulation.” Because Washington is a very special place, and unless people actually call their member of Congress and say “H.R. 2666 is not about preventing rate regulation, it’s about letting cable companies price gouge and undermine net neutrality. You damn well better vote “no” on H.R. 2666 if you want my vote!” Then members of Congress get all confused and vote for things based on their label rather than their substance.

 

Fortunately, you can help. Why don’t you call your member of Congress and tell him or her to vote no on H.R. 2666. You can use this link right here to get connected.

 

But if you can’t be bothered to even click a stupid link to vent off at your Member of Congress, then you know the answer to why members of Congress pass bills like this for their corporate buddies.

 

It’s because you let them.

 

Stay tuned . . .

 

 

 

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