The FCC’s Proposed “Third Way” on Net Neutrality

1. John Windhausen, Telepoly Consulting Cathy Sloan, Computer and Communications Industry Association May 19, 2010 The FCC’s Proposed “Third Way” on Net Neutrality

2. FCC Chairman Genachowski announces that the FCC will recognize the “transmission component of broadband access service—and only this component—as a telecommunications service.” May 6, 2010:

3. What does this mean for Net Neutrality? What are the implications for higher education? What are the implications for the Computer and Broadband Industries? What does this mean?

4. 1980’s: The FCC decides that computerized services (data processing, dial-a-horoscope) should be classified as unregulated “information services.” • However, when the Bell Operating Companies provide information services bundled with telecommunications services, they must separate out the “telecommunications services” and offer them as stand-alone (regulated) services. Setting the stage: Computer II and III

5. Retained the separation between “telecommunications services” (regulated) and “information services” (unregulated) • Also included Section 706 – intended to promote the deployment of “Advanced Services” (broadband). 1996 Telecom Act

6. Found that “Internet Access Services” are “information services.” (e-mail, web hosting, usenet, etc.) Initially did not directly address the classification of “broadband services” because they were not available to the general public. FCC Implementation of 1996 act

7. FCC found that cable modem access to the Internet should be classified as an “information service”. • FCC did NOT require cable companies to separate out the transmission function from the Internet function. • On appeal, the Supreme Court upheld the FCC’s Order in 2005 (Brand X case), finding that the FCC’s Order was reasonable. 2002: Cable modem order

8. After the Supreme Court decision, the FCC found that all broadband Internet access (including by telephone companies) should also be classified as “information services.” It reversed its Computer II/III rulings and said Bell Companies do NOT have to separate out their telecommunications services. It said this was necessary to promote broadband investment and Section 706. 2005: FCC deregulated all broadband

9. “Not to worry” (said the FCC), we will protect the consumer by exercising our authority under the vague provisions of Title I. The FCC issued 4 principles to ensure that consumers have a right to access any content, use any service or equipment. But Chairman Martin said at the time that these principles were “unenforceable.” Reliance on title i

10. In 2008, the FCC found that Comcast violated net neutrality principles and ordered Comcast to change its network management practices. Comcast appealed. The Court of Appeals overturned the FCC and said Congress had not given FCC authority to regulate broadband under Title I. 2008-2010: Comcast case

11. FCC releases National Broadband Plan in March 2010. • Many of these NBP proposals are put in jeopardy by Comcast Decision. • Universal Service Reform • Disabilities Access • Promote broadband deployment and adoption Fcc’s national broadband plan

12. Option 1: Classify all broadband Internet access as “telecommunications services.” Option 2: Continue to try to use Title I, despite the court opinion. The Third Way: regulate only the “transmission component” of broadband services. FCC’s Options after the comcast decision:

13. The FCC is not proposing to regulate the Internet – it says only the “on-ramps” to the Internet will be regulated. • Only six provisions of Title II will be applied to the “transmission component.” • Section 201 requires just and reasonable rates. • Section 202 requires nondiscrimination. • Section 208 allows filing of complaints. the third way:

14. Will the Third Way require all Internet Service Providers (ISPs) to offer stand-alone broadband transmission service? (as in Computer II/III?) • Will the Third Way consider rate regulation of broadband services? • Will the Third Way apply to Google, Skype, E-bay and other application providers that also own their own transmission facilities? Many open questions:

15. FCC will consider two separate proceedings. • To define the telecommunications component that will be regulated. • To determine which regulations will apply. • Both proceedings will be launched this summer, with decisions expected later this year/early next year. Process:

16. Will resolve many uncertainties about access to the network; Will constrain market power of broadband companies to manipulate the market; Will encourage more innovation and investment at the edge of the network. Potential benefits for the computer industry

17. The Third Way may promote freedom of speech, promote marketplace of ideas. The Third Way may reduce prices that smaller colleges and community colleges must pay for broadband services; Risk that the Third Way could affect non-profit research networks or private networks. Potential implications for higher education

18. Many Democrats (i.e. Rockefeller, Waxman) will encourage the FCC to move forward. Many Republicans will attack the FCC (and Obama Administration) for regulating the Internet (encouraged by the Tea Party) Moderates of both parties will seek/support pragmatic solutions while avoiding both inflammatory rhetoric and heavy-handed regulation. Political predictions

19. Not concerned about Net Neutrality Cable is expected to “win” the broadband war with telcos, now that Verizon and AT&T have put any future fiber investment on hold. Cable downgraded because the Third Way may prevent cable from “reaping the spoils of victory.” (i.e. monopoly prices) Wall street reaction