Title II Forbearance Is Actually So Easy It Makes Me Want To Puke.

For those following the debate around whether to classify broadband access service as a “Title II” telecommunications service under the Communications Act of 1934, you may have heard about a thing called “forbearance.” For those unfamiliar with telecom law lingo, “forbearance” refers to  a special magic power that Congress gave the FCC as part of the Telecommunications Act of 1996 — the major edit/update Congress did almost 20 years ago. The 1996 Act added Section 10 (now codified at 47 U.S.C. 160) which gives the FCC the power to say “you know that specific provision of law that Congress passed? We decide it really doesn’t make sense for us to enforce it in some particular case, so we will “forbear” (hence the term ‘forbearance’) from enforcing it.” Or, as the D.C. Circuit explained in a case called Orloff v. Federal Communications Commission, once the FCC invokes forbearance and decides to forbear from a particular statute, the statute for all practical purposes disappears.

 

For those familiar with the argument, you will also know that the anti-Net Neutrality camp argues that getting the FCC to forbear from any rule is such a horribly complicated and detailed market-by-market analysis that the FCC couldn’t possibly grant the kind of broad, nationwide forbearance we would need to make Title II workable. As someone who actually lived through the 8 years of the Bush Administration and saw almost every single pro-competition provision of the 1996 Act stripped away by forbearance proceedings, I can only say “hah, I wish.”

Anyone who actually troubles to look up cases like Earthlink v. FCC or Ad Hoc Telecommunications Users Committee v. FCCor a bunch of other FCC and DC Circuit cases that are not that hard to find, you will discover that Forbearance is so easy it makes a consumer protection and rule of law guy like me want to puke. Srsly, the standards on this are so low, and so deferential to the FCC, that if Chairman Wheeler stands up at an open meeting and chants “Broadband is great, competition is good, be deregulated like you should. All in favor say ‘aye!'” — and then at least two other Commissioners vote yes — the DC Circuit will affirm it. Heck, according to ATT, Inc. v. FCCyou can even forbear as against potential obligations that don’t even exist yet.

Not that I expect mere facts to alter firmly held opinions that have become factesque. What Paul Krugman has termed the Very Serious People of telecom have all decided that Title II is a terrible onerous thing and that forbearance is just not going to make it work — despite the fact that the stupid cell phone you’re using couldn’t even have existed if Congress hadn’t made it Title II in 1993 by adding Section 332(c) of the Communications Act and the only non-Title II service we have other than broadband access — cable service — is widely regarded a monopolistic nightmare with all the innovating power of a fossilized brick. But the lawyer and eternal optimist in me keeps trying. So I unpack all this below — with lots of quotes because I know most of y’all not gonna actually click through to the cases.

Besides, I do a My Little Pony (MLP) mashup below because “Broadband is magic!” And that always cracks me up. . . .

 

I’m gonna assume if you’re reading this that you already know about the whole Title I/Title II thing and why it matters. If not, see previous blog post here among many others.

 

What is interesting about 2014 over 2010 is that pushing for Title II reclassification is no longer a geek issue pushed by a hardcore set of policy wonks like yr hmbl obedien’t blogger as the right thing to do. Title II — more broadly framed as “broadband is a utility” — has gone mainstream. Senator Chuck Schumer, who is generally regarded as centrist, has now joined Senator Ed Markey’s letter calling for the FCC to reclassify broadband as Title II. So the whole “reclassify broadband as Title II telecom” looks a lot more real now, and the carriers and their cheerleaders are correspondingly much more frantic.

 

Why Are We Talking About This Forbearance Thingy?

 

Those opposed to classifying broadband as Title II (aka telecommunications service, aka public utility regulation) keep arguing that Title II of the Communications Act has all these awful, horrible terribly complicated provisions designed for monopoly Ma Bell regulation in the 1930s and that delicate little flowers like AT&T will be crushed under its onerous and burdensome weight — as explained in this blog post by delicate flower AT&T. Horrible Tyrannosaurus Tariffs will once again stalk the Earth, broadband providers will need to abide by the most awful consumer protection rules like “truth in billing” and the dreaded CPNI will force broadband operators to  *shudder* respect user privacy! (Srsly, I have no idea why anti-Net Neutrality folks think that the way to win this debate is to point out that it would lead to stronger consumer protections and better privacy protection for all subscribers. But they make that argument a lot here in DC and the Very Serious Telecom People all nod sagely.)

 

Without going to the merits of the argument that today’s Title I “information service” classification makes the current broadband industry a happy lightly regulated Equestria where Princess Comcast CelestiaPrincess Twilight Verizon Sparkle and the rest of the Broadband Equestria Girls give us goodies because “Broadband Is Magic” — while Title II would convert this to a hideous socialist Hellscape in which no packet moves without 13 government forms and unanimous approval of all 5 FCC Commissioners — the FCC can pretty much eliminate any statute or regulation that doesn’t make sense to apply through forbearance. 47 U.S.C. 160 (aka Section 10 of the Communications Act) explicitly lets the FCC forbear from enforcing any provision of the Act, if it finds that forbearance will serve the public interest. Just for good measure, Section 706 (47 U.S.C. 1302) tells the FCC to use forbearance (along with other “regulating methods”) to promote broadband adoption and investment in infrastructure.

For example, although pretty much no one does rate regulation proceedings any more because we essentially deregulated by rule, anti-Net Neutrality guys argue that 47 U.S.C. 203 would require all broadband providers to go into horrible rate making proceedings as if this were Ma Bell in the 1960s. OK, the FCC can forbear from Section 203 (as it did with Title II mobile phone service) and then no broadband provider has to file a tariff. *poof* Expelliarmus Tariff. So says the D.C. Circuit in Orloff.  

In other words, by using forbearance where appropriate, the FCC can simply absolve My Little Broadband Ponies from any regulatory obligations that would keep Princess Comcast Celestia and the Broadband Equestria Girls from dispensing their Brony (broadband pony) goodness — because Broadband Is Magic and so is forbearance.

 

Are We Done With The My Little Ponies (MLP) Thing?

 

Fine.

 

So If The FCC Can Use This Forbearance Thingy To Get Rid Of Whatever Title II Obligations Would Cause Problems, Doesn’t the Objection to Title II Go Away?

 

You would think! But the reason carriers don’t want Title II classification has nothing to do with “onerous rules.” They want a firewall against the FCC’s ability to protect consumers. So they need to pretend that forbearance won’t work.

 

The chief means of pretending that the FCC can’t possibly forbear enough is that forbearance is a hideously complicated process requiring detailed findings on a market-by-market basis to show adequate levels of competition to justify forbearance. Not even all the broadband providers with all their vast resources could possibly hope to ever make such a showing. So forbearance really couldn’t possibly work at all. Which means Title II would be crushing regulatory Hellscape, giant Tyrannosaurus Tariffs, etc. and an end to the beloved lightly regulated kingdom of Good Princess Comcast Celestia and Broadband Ponies.

 

Setting Aside the MLP Thing, Isn’t That Basically A Confession That Broadband IS an Uncompetitive Monopoly Just Like Susan Crawford Keeps Saying?

 

Yes, but you’re not actually supposed to think about that too hard. You’re supposed to be frightened by the giant Tyrannosaurus Tariffs devouring Princess Comcast Celestia and stomping Twilight Verizon Sparkle.

 

You Are just Not Gonna Let Go Of the MLP Thing Are You? Anyway, What Makes You Say They’re Wrong?

 

Now we get to actual settled law stuff and not speculation. In a case called Earthlink v. FCC, 462 F.3d 1 (D.C. Cir. 2006), Earthlink challenged the FCC relieving, on a nationwide basis without any market-by-market analysis, any incumbent local exchange carriers (ILECs — formerly known as the local monopoly Baby Bell companies) that built out fiber lines to replace copper from certain statutory obligations to share their facilities with competitors. The FCC analysis basically consisted of “Section 706 says we need to encourage deployment of broadband infrastructure. Giving ILECs incentive to build out fiber by relieving them of their sharing obligations if they upgrade to fiber will speed broadband deployment. True, that will suck for competition in the short term. But there’s cable broadband and new cool technologies like Broadband Over Powerline so we assume that even if competition takes a hit in the short term, people will probably have lots of choices for broadband provider in the long term. And even if the hoped for competition doesn’t actually emerge, it seems like this will help broadband deployment. So “Broadband is great, competition is good. Be deregulated like you should! Expelliarmus Section 270!”

Earthlink appeals to the D.C. Circuit. The D.C. Circuit affirms. Let me quote some choice language at length.

“According to EarthLink, the statute permits the FCC to grant forbearance only after a “painstaking analysis of market conditions” in “particular geographic markets and for specific telecommunications services.”

[That sounds exactly like the argument the carriers and their cheerleaders make for what forbearance requires, right? Let’s see how the D.C. Circuit responded.]

“We disagree.”

[Oooh, that doesn’t look good for the carriers.”]

“On its face, the statute imposes no particular mode of market analysis or level of geographic rigor. See 47 U.S.C. § 160(a) (requiring forbearance in “any or some of [a carrier’s] geographic markets” if three conditions are met). Seizing on the phrase “geographic markets” in § 160(a), EarthLink contends the decision to forbear on a nationwide basis—without considering more localized regions individually—is per se improper. This argument is tenuous, at best. In context, the language simply contemplates that the FCC might sometimes forbear in a subset of a carrier’s markets; it is silent about how to determine when such partial relief is appropriate. Similarly, the statute does not require consideration of specific services. See id. (permitting forbearance as to a “class of telecommunications carriers or telecommunications services” (emphasis added)). Instead, we are persuaded the agency reasonably interpreted the statute to allow the forbearance analysis to vary depending on the circumstances.”

But could the FCC really forbear just because it thinks forbearance would be good for encouraging broadband deployment? To quote the D.C. Circuit again:

Insofar as EarthLink suggests the statute does not permit the FCC to make the forbearance decision with an eye to the future—by accounting for section 706’s goals and assessing likely market developments—the argument also fails.”

Wait! There’s even more language stomping all over the argument that you need detailed market-by-market analysis:

Similar to its statutory interpretation argument, EarthLink contends “competition” can only rationally be assessed by focusing on more specific product and geographic markets and by conducting a “traditional market analysis (including market share, demand and supply elasticity, and other factors).” While such an analysis is no doubt appropriate in some circumstances, we cannot say the FCC was unreasonable in taking another tack here, tailoring the forbearance inquiry to the situation at hand.”

Or, to paraphrase, ‘Harold is totally right that forbearance is easy-peasy and the carriers are totally wrong that it requires a detailed market by market showing.’

 

That’s Just One Case. Got Anything Else? And Could You Make It More On Point For The Idea You Could Do National Forbearance of Everything But Sections 201, 202 and 208 of the Act? And Could This Forbearance Apply Only To Internet Things Rather Than To Traditional Telecom Obligations?

 

No problem! In Ad Hoc Telecommunications Users Committee, 572 f.3d 903 (D.C. Cir. 2009), the Court addressed the FCC’s determination to forbear from certain Special Access Requirements that the FCC imposed on wholesale broadband servies like Ethernet and Frame Relay Service. And yes, that means the FCC really did regulate broadband as Title IIThe FCC decided to relieve the major carriers of their specific obligations to make these services available through tariffs, etc. However, recognizing that the ILECs still had market power in a signficant number of national markets, the FCC required the ILECs to continue to offer these services on just and reasonable terms and conditions and without unjust and unreasonable discrimination subject to Sections 201, 202, and 208.

 

The D.C. Circuit affirmed, finding no problem with the FCC granting forbearance on a national basis despite recognizing that market power still existed. As the Court explained:

 

“The general and generous phrasing of § 706 means that the FCC possesses significant, albeit not unfettered, authority and discretion to settle on the best regulatory or deregulatory approach to broadband —a statutory reality that assumes great importance when parties implore courts to overrule FCC decisions on this topic.

“As contemplated by § 706, the FCC has utilized forbearance from certain Title II regulations as one tool in its broadband strategy. Forbearance decisions are governed by the Communications Act’s § 10, codified as amended at 47 U.S.C. § 160, which provides that any telecommunications carrier may file a petition with the FCC requesting that the Commission forbear from applying any Communications Act provisions or FCC rules to specific services. Under § 10, the FCC must grant forbearance if enforcement is unnecessary to ensure that rates and practices are just, reasonable, and not unreasonably discriminatory; enforcement is unnecessary to protect consumers; and forbearance is consistent with the public interest, in that it ‘will promote competitive market conditions’ and ‘enhance competition among providers of telecommunications services.’ . . .

“Congress has directed the FCC to make the major policy decisions and to select the mix of regulatory and deregulatory tools the Commission deems most appropriate in the public interest to facilitate broadband deployment and competition.Telecommunications Act of 1996, § 706, 47 U.S.C. § 1302.”

That Seems Pretty Definite and On Point.

Yes indeed. The FCC did exactly what folks asking it to classify broadband access as Title II want them to do — give general national forbearance based on the competing interests in Section 706 with a backstop of fairly light Title II authority under Sections 201, 202 and 208 (which allows parties to complain to the FCC about violations and allows the FCC to resolve these complaints). The FCC did that, and the D.C. Circuit approved it.

As I wrote recently when discussing The Problem of the Black Swan, you can’t claim something is impossible if it has actually happened. A single black swan falsifies the statement “all swans are white.” Two D.C. Circuit cases saying “you can totally forbear from Title II requirements on a national basis without detailed market-by-market analysis” proves that the contrary statement “you can never forbear without detailed market-by-market analysis” is false.

So Why Do People Keep Saying It?

In recent years, as we deregulated down to the bare bones obligations and competition failed to emerge, the FCC pulled back from its forbearance binging. For the last couple of years, as carriers in the least competitive markets have wanted forbearance from the last remaining Title II regulations, the FCC has demanded a higher standard of proof.

That doesn’t mean the law changed. The whole point of the D.C. Circuit cases quoted above (and others) is that the FCC has discretion to make decisions on a case-by-case basis. That’s what Congress wanted. It had a general set of goals and told the expert agency to use its expert predictive powers and expert judgment. So if they decide that forbearance should be easy-peasy because Section 706 broadband good etc., then it is. If they decide that things on the ground in specific markets still look like they need regulation, they can say no to forbearance and require a lot more proof.

So Princess Comcast Celestia and Twilight Verizon Sparkle Are Safe?

Yes, because Broadband Is Magic! And so is forbearance under Section 10 of the Communications Act, especially when combined with Section 706 of the Telecommunications Act of 1996. We can have Title II, prevent paid prioritization under  Section 201 and 202 by declaring them inherently unreasonable practices, and still keep the light regulatory touch that makes it all sparkly wonderful! No bad Tyrannosaurus Tariffs devouring innocent  Broadband Ponies!

Now all we need is the FCC to make the right decision.

Stay tuned . . .

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One Comment

  1. Harold,

    The 3000 words it takes to make your “easy as puke” case illustrates the problem.

    I appreciate you are master of the nuances of telecom law, but mastery of telecom law does not build communication networks.

    Using court case summaries to illustrate “easy” also seems an odd strategy.

    A 20 Word Bottom Line: The forebearance/non-forebearance distinction represents a entirely new standard for information services whether or not forebearance is “easy” to obtain.

    Asserting Title II on IP networks ends the telecom versus information services distinction defining regulated/not-regulated since the 1956 AT&T Consent Decree.

    It vaporizes sixty years of effort by policymakers to establish a robust distinction between regulated/non-regulated.

    Forbearance/non-forebearance is a kingly-prerogative and not a rule of law.

    Whatever the king (aka the FCC Chairman) wants the king gets.

    The implications of the net neutrality advocacy for Title II remains unexamined beyond the question of authority.

    Dragging IP networks over to the regulated side of the telecom versus information services line exposes the entire information technology industry to uncertainty.

    The merits of making the “IP Network” versus “not-IP Network” distinction owes to the importance of obtaining a robust *operational* definition between regulated and non-regulated.

    The issue does not hinge on a special status attributed to IP networks. The IP network versus not-IP network distinction exists because it removes ambiguity between regulated/not-regulated networks – we do not need a court to recognize an IP network.

    Asserting Title II on IP networks represents a veto of a communicating public decision to abandon Title II regulated telecom in favor of unregulated information services.

    The Title II enthusiasts might consider why Title II regulated domains become innovation free zones.

    Independent of decisions a given Commission makes about forebearance/non-forbearance, applying Title II to IP networks creates a Federal Computer Commission with discretionary powers to regulate anything attached to a IP network (aka everything.)

    Daniel Berninger
    dan@danielberninger.com
    http://vcxc.org

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