The Last Time The FCC Classified A Service As Title II Was 2007. Here’s How It Worked.

Predictably, as we get closer to actually adopting Title II for broadband, we see much scrambling about by folks who never seriously considered the question of how Title II would actually work because no one in the press or the opposition ever really thought it could get that far. Opponents of Title II, needless to say, describe a blasted bureaucratic Hellscape smothering broadband service with (to quote the latest missive from a bunch of House and Senate Republicans) “1000 active rules that are based on Title II, and 700 pages of the C.F.R.”

 

After 6 solid years of Republicans opting for the partisan politics of obstruction rather than engaging on substance, such ridiculous claims hardly come as a surprise. It’s also a rather silly argument given that the bulk of those rules address things that would not apply to broadband and that everyone — even Republicans — actually like: making sure  9-1-1 works reliably, fixing rural call completion problems, keeping track of phone reliability and phone outages during natural disasters, protecting the privacy of our phone calls and requiring providers to report data breaches, etc.

 

Still, even without deliberate efforts to muck things up and exaggerate things, I recognize that this whole “Title II” thing doesn’t happen every day and lots of folks have questions about what the heck does this all mean. As I (and others) have noted in the past, classification doesn’t have to be a big deal. To illustrate this, I will go back to the last time the FCC classified a service — automatic voice roaming in the wireless world — as a Title II service. As we will see, this took remarkably little effort. The FCC explicitly rejected the requirement to do rate regulation or a requirement to file tariffs with the prices and did not need to engage in any extensive forbearance. They just said “nah, we’re not gonna do that.” The final adopted rules are less than a page and a half.

 

I will also note that despite classifying automatic voice roaming as a Title II service in 2007 (and classifying mobile wireless phone service as a Title II service in 1993), the wireless industry seems to be doing OK, with more than 300 million subscribers and (as CTIA never tires of telling us) several gagillion dollars worth of capital investment.

 

The automatic voice roaming decision also provides a nice comparison with a similar service classified under NOT TITLE II some years later. In 2011, the FCC issued an Order adopting data roaming rules, but couldn’t bring itself to go the Title II route. The result was an insanely complicated “commercial reasonableness” standard which requires wireless carriers to negotiate under a bunch of vague guidelines that still allow carriers to avoid coming to an actual deal. As the D.C. Circuit pointed out in affirming this approach, the FCC needed to leave enough room for carriers to discriminate against each other to avoid triggering the “common carrier prohibition.” Recently, T-Mobile (which opposes using Title II) filed a Petition on data roaming with the FCC alleging that the existing “commercially reasonable” standard is utterly useless unless the FCC adopts a bunch of “benchmarks” and presumptions to put some teeth into the standard. Without getting into the merits of the data roaming petition (which my employer Public Knowledge supports), it is interesting to compare how the Title II automatic voice roaming worked out v. the Title III/Title I data roaming rules.

 

I do not claim that reclassifying broadband as a Title II service (which, as I have noted before, was tariffed back in the day it was Title II) is exactly comparable. Rather, I offer this as an example of the principle of the Black Swan. Just as the appearance of a single black swan falsifies the statement “all swans are white,” the hysterical ravings of the anti-net neutrality crowd that classifying something as Title II would require the FCC to impose price controls, tariffs, and the occasional human sacrifice to avert structural separation is falsified by demonstrating that the FCC has, in the past, classified services as Title II and did not impose any of these things. In fact, the Title II solution worked out much better than the NOT TITLE II alternative.

 

More detail below . . . .

 

The FCC rarely classifies services these days because usually the classification is obvious or, in the case of new wireless services such as the AWS-3 auction running right now, the Commission allows providers flexibility to elect whether or not they want to provide the service on a common carrier basis. But every now and then, technology throws the FCC a curve ball and the FCC has to sit on its rump and scratch its head and futz with it. To take an example from outside the broadband context, it has now been more than seven years since the first online video distributor (a company called VDC) tried to get access to programming under the FCC’s MVPD rules, and it is only now that the FCC Chairman has even circulated a proposal to even look at the classification question.

 

But some of us old geezers remember how it was done. And the last time the FCC actually decided to classify a service as Title II involved the question of automatic voice and text roaming in 2007.

 

What Is Automatic Voice and Text Roaming?

 

If your wireless carrier doesn’t have a spectrum license for a particular geographic area, or if they get overwhelmed on their existing capacity, you may actually end up on another carrier’s network. This arrangement is called “roaming.” When the FCC was first putting together service rules for mobile phones in the 1980s, they assumed that this would get done manually by the customer making roaming agreements with the various cell carriers in the various regions (at the time, no one thought there would be national carriers). The FCC called this “manual roaming” and made manual roaming a Title II service like most other wireless mobile phone services.

 

In 1996, when the FCC was setting the service rules for the new PCS service, it reaffirmed that manual roaming service was a Title II service. But the FCC declined to do anything about the growing practice of “automatic roaming,” where the carriers requested roaming on behalf of all their customers. Instead, the FCC continued to monitor the industry occasionally asking about automatic roaming from time to time and never doing anything about it because, frankly, until industry consolidation started everything worked fine.

 

When Did Things Stop Working Fine?

 

The FCC repealed its “spectrum cap” in 2002 (effective 2003), which meant carriers could (a) devour each other until only a handful remained, and (b) thus get big enough that the largest surviving firms didn’t need to do roaming with rivals. As consolidation continued, the number of roaming partners for the smaller firms diminished. Bigger, like sized firms will roam on each other’s network because they derive equal benefit from the arrangement. As consolidation continued after the spectrum cap was lifted, the smaller firms couldn’t find roaming partners at affordable rates, making it harder for them to compete, forcing them to sell out to the larger carriers, aggravating the cycle.

 

So the smaller carriers pushed the FCC to adopt an automatic voice roaming rule. At the time, data was a small segment of the market. (The iPhone was only just released in 2007, and was at that time exclusive to AT&T.) Voice was the super important thing. And without automatic voice roaming, smaller and mid-size carriers could not get roaming partners. The FCC waited, hoping that the 2006 AWS-1 auction would straighten things out. As I’ve noted before, however, auctions tend to make bigger carriers bigger and leave smaller carriers in the dust.

 

So in 2007, the FCC decided to adopt an order making automatic voice roaming service a Title II service. At the time, T-Mobile and Sprint were still part of the “big boy” club as 4 national carriers of roughly equal size (although Verizon and AT&T were still clearly #1 and #2, the gap between them and #3 and #4 was not as great). But we had many more regional players that don’t exist anymore (AllTel, Metro, Cricket) trying to make the jump to national and generally provide competition on a regional basis. Since Republican Chairman Kevin Martin and the other Republicans on the Commission actually cared about promoting competition (although disliking to use regulation as anything other than a last resort), the FCC decided to clarify that automatic voice roaming was a Title II service so that regional players could get access to voice roaming and continue to compete with the 4 national players.

 

Let us pause a moment to let that sink in. The FCC continued to find that wireless services were competitive in that there were 4 national competitors who all said we didn’t need a voice roaming rule and that Title II would interfere with innovation, the free market, etc. The FCC adopted a Title II classification anyway because classification doesn’t have anything to do with the state of competition. It has to do with whether the FCC decides that the service meets the definition of “telecommunications service” in 47 U.S.C. 153, and — for wireless — that the service is a “commercial mobile radio service” (CMRS), or the functional equivalent of CMRS, pursuant to 47 U.S.C. 332(d).

 

Didn’t This Require All Manner of Wonderful Signs and Portents? Did the Skies Echo With Thunder, The Earth Quake, and the Wireless Industry Collapse Under the Weight of these New Onerous Regulations?

 

Not even remotely. You can read the Order adopting Title II as the classification for automatic voice roaming here. The Commission summarized the history, noted that they had declined to make automatic voice roaming a Title II service previously, and adopted that classification for Title II. The Commission went on to declare that the new Title II service would be subject to the general obligation of Sections 201 (no unjust and unreasonable rates and practices), 202 (no unreasonable discrimination) and, in the event a carrier wanted to file a complaint, that carrier could do so under the rules adopted pursuant to Section 208.

 

And that was it. Period. Full stop. The FCC declined to adopt any price regulations, price caps or tariffing. The entire rules take up about a page and a half, and mostly define the service of automatic voice roaming and when it applies.

 

But What About Price Regulation and Tariffing And All That Stuff That People Keep Going On About?

 

The FCC addressed this fairly briefly in Par. 35 of the Order:

“We reiterate that our general policy regarding CMRS services is to allow competitive market forces, rather than regulations, to promote the development of wireless services. On balance, taking into consideration the concerns raised in the record by certain CMRS carriers and our preference for allowing competitive market forces to govern rate and rate structures for wireless services, we expressly decline to impose any corresponding rate regulation of automatic roaming services.”

 

The FCC explicitly rejected a call to impose price caps or any other sort of price regulation on the grounds that it didn’t think any kind of price cap or price regulation was justified in light of the record. Instead, having set up a very basic obligation to play nice, subject to a complaint process, the FCC decided it would be better to let the market work things out. (Par. 36-37). Likewise, the FCC declined to require to have carriers file their contracts for voice roaming – never mind tariffing the rates — because it seemed an unnecessary burden given the general duty to provide automatic voice roaming on reasonable terms and the availability of a remedy if carriers did not play nicely with each other (Par. 61-62).

 

But What About The Forbearance? The “1000 Live Regulations” And the Crushing Burdens And All That Stuff?

 

As I keep telling people the FCC didn’t even need to do forbearance. (For those of you unfamiliar with “forbearance,” see this explainer over here.) Most of the statutory provisions and regulations don’t apply on their face, so the FCC didn’t deal with them. Similarly, a bunch of these things (like tariffing) have been so deregulated over the years that the FCC doesn’t even need forbearance. It just says “nah, we’re not going to apply that” and that works.

 

Likewise, as noted above, the FCC found explicitly that the wireless market at the time was generally competitive. But they needed to apply Sections 201, 202, and 208 to get at a specific problem. So that’s what they did.

 

Lots of other sections, such as disability access and USF and privacy and interconnection and so forth could still have applied to automatic voice roaming as a Title II service. But the FCC didn’t need to address them to resolve the problem in front of it, so it just left them for another day. As the Book of Matthew (6:34) advises: “Sufficient unto the day is the evil thereof.” Or, in a more legally binding statement, as the Supreme Court said in Brand X, the FCC does not need to resolve every legal question in front of it right away. It can decide enough to resolve the specific question in front of it and then come back to the other stuff later.

 

Did The Wireless Industry Collapse Under The Terrible Weight of These Onerous Regulations?

 

Not as far as I can tell. In 2010, the FCC adopted a second order to eliminate something called the “home network exception.” Under the 2007 rule, carriers did not have to offer automatic voice roaming if the requesting carrier (a) had spectrum in the geographic market in question; but, (b) had not built out its own network. The FCC in 2007 worried that carriers might “freeload” and not build out their own spectrum. By 2010, the FCC realized that carriers seeking voice roaming had lots of incentive to build out their networks even with voice roaming available, and that delays in build out could result from things outside the control of the carrier (like, say, a global financial collapse in 2008). So the FCC eliminated the “home network exception” and made automatic voice roaming a general obligation with no exceptions.

 

Or, in other words, the rule worked so well, and proved so useful for competition, that the only time the FCC decided to adjust it was to expand it. 

 

How Does This Stack Up Against Data Roaming Rules Adopted In 2011 Under Title III and Title I?

 

Time goes on, and we start to see the same problems emerge on the data roaming side that we saw on the voice roaming side. Like-sized carriers (now limited to AT&T and VZ v. “everyone else”) make deals with each other, but refuse to make deals with smaller, weaker carriers. Why? Because that is the rational economic thing to do. If you are big, why would you help out a rival at any price? AT&T and VZ can’t roam on each other because of they use different wireless standards (which matters despite deployment of LTE, and mattered a lot more back in 2010-11), so they can just avoid doing data roaming deals because there are no rules, making it impossible for their spectrum-constrained rivals to compete. OTOH, when they want to do a deal, like mutual termination of VoLTE traffic on each other’s network, nothing requires them to offer similar deals to smaller rivals they would prefer (quite rationally) to disadvantage.

 

With every carrier except AT&T and Verizon begging for help, the FCC finally agreed to adopt data roaming rules in 2011. But by this time, Title II had gone from “a tool you use when appropriate” in 2007 to become the “third rail” “nuclear option” “rising of Cthulhu from the depths of the sea” thing we hear Title II described as today. So no way was the FCC going to do what it did in 2007, and declare data roaming a Title II service. Instead, the FCC in this 2001 Order  adopted a set of rules using its Title III authority over wireless and whatever Title I authority it needed over and above that to set rules.

 

In order to avoid the “common carrier prohibition,” the FCC needed a much bigger and more complicated set of rules than under Title II. Under the ABSOLUTELY NOT TITLE II rules, carriers need to negotiate with each other. They do not have to conclude any actual deal, but their refusal to deal (or the deal they conclude) is subject to a standard of “commercial reasonableness.” The FCC went on at great length to discuss some endless number of rebutable presumptions for determining “commercial reasonableness.” The D.C. Circuit, in a case called Cellco Partnership v. FCC, aka the “data roaming case,” found that this approach provided sufficient “flexibility” to avoid being a “common carrier duty” and hence a violation of the “common carrier prohibition.” The D.C. Circuit also warned that if the FCC got too aggressive on enforcing this it would find that this was effectively a common carrier prohibition, and be subject to an “as applied” challenge.

 

So how did the TOTALLY NOT TITLE II data roaming rules work out, as compared to the Title II automatic voice roaming rules? According to T-Mobile and other carriers supporting the T-Mobile Data Roaming Petition, the “commercial reasonableness” standard under and the rules adopted in 2011 have been an utter, colossal useless failure. AT&T charges whatever it wants (according to T-Mo and other carriers) and that is what they have to take.  T-Mobile has asked the FCC to adopt some “benchmarks” to limit the discretion of the carriers to set rates or refuse to deal. AT&T and Verizon — surprise! — argue that any benchmarks will violate the common carrier prohibition. They will sue, the rules will end up in litigation, innovation will be crushed, etc.

 

In other words, AT&T and Verizon are pretty much making the same arguments under ABSOLUTELY NOT TITLE II as they would under Title II. So, final score on the most recent case study on Title II v. ABSOLUTELY NOT TITLE II is as follows.

 

Title II automatic voice roaming: Easy to do once the FCC settled down to it. Small number of applicable statutes and short but effective rules. No problem since adopted in 2007 and expanded in 2010.

 

ABSOLUTELY NOT TITLE II data roaming: Complicated with lots of ability for carriers to negotiate so as not to violate “common carrier prohibition.” Not very effective. Back to trying to deal with the problems 3 years later because, absent Title II, the FCC rules must give sufficient flexibility to set their own terms or refuse to offer roaming altogether  — which is the problem we were trying to solve with rules.

 

Are You Saying Reclassifying Broadband As Title II Will Work Out Just As Easily?

 

To be clear, I don’t want to pretend that reclassifying broadband as Title II would be the same “no biggie” as automatic voice roaming. Automatic voice roaming was one service, albeit an important one, impacting one industry (wireless) where the main players were already carriers. Reclassifying broadband as Title II obviously faces much bigger political hurdles and covers a much more vital and essential service (which is actually a big reason to classify it as Title II) that impacts many more things such as universal service, privacy and so forth much more directly and immediately than automatic voice roaming did.

 

The point of this little exercise is to demonstrate that the hysteria from anti-Title II forces is way, way waaaaaay overblown. Title II is not some antiquated thing we haven’t done since the stone ages with thousands of rules and statutory provisions ready to crush the lifeblood out of the Internet if we think “Title” and “II” too closely together. The FCC has used it in the past, relatively recently, and without all kinds of heavy handed regulation or forbearance. To the contrary, as I keep saying, we don’t even need to get out in front and start forbearing all over the place. We could actually do this rationally.

 

(That said, given that even Obama has called for a sacrifice of statutory provisions to the Gods of the marketplace to appease them for Title II, rather like sacrificing Iphegenia at Aulis or Jepthah sacrificing his daughter to win victory over the Ammonites, we’re going to have forbearance. Fine. Happily, it remains easy-peasy to do. I will gladly forbear against my imaginary future price regulation if that is what will make Princes Comcast Celestia, Twilight Verizon Sparkle, and the rest of the Broadband Equestria team happy (Because Broadband is MAGIC!).)

 

Stay tuned . . . .

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One Comment

  1. Bandoleer says:

    Nice piece of down-to-earth analysis. It would be great if you could expand your thinking,or rather share it with us, about how Title II might work for broadband. Once taxes and tariffs are taken out of the equation, Title common carrier classification, at least in some respects, doesn’t seem that scary. But still the question remains: what would it look like? Comcast already seems to be saying that Title II isn’t a problem for them, provided it is applied industry-wide and not as a term or condition of approval for the acquisition of TWC.

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