Did You Really Mean That FCC?

 

This week, the House Energy and Commerce Committee held a hearing on a bill, HR 2666, which would prevent the FCC from regulating broadband rates. In fact, the FCC’s Chairman Tom Wheeler is quoted as saying “Let me be clear, the FCC will not impose ‘utility style’ regulation…” when
issuing the Commission’s decision to subject broadband service providers to regulations that govern telecommunications services – Title II of the Communications Act.

 

That begs the question, why pass a bill that reiterates what the Chairman promised? There are a couple of reasons why. First, FCC Commissioners do not have permanent appointments—they arinternet.jpge appointed by the President and serve five-year terms. While we doubt anyone questions Chairman Wheeler’s integrity, the next set of Commissioners may not hold the same view. Second, regulating rates in utility- style fashion does not really fit the fast moving technological changes that come with the industry providing internet services. Third, talk about a damper on investment – subjecting broadband networks to the government’s slow ratemaking process would surely have a negative effect.

 

As we understand this issue, no one is purporting to restrict the FCC’s ability to protect the consumer with respect to broadband access or technology companies who rely on an open internet to conduct business. Women-owned businesses have much to lose if the government does not properly balance internet access with regulation.

 

We are keenly aware that according to the SBA Office of Advocacy, “Small businesses, defined as firms employing fewer than 20 employees, bear the largest burden of federal regulations. As of 2008, small businesses face an annual regulatory cost of $10,585 per employee, which is 36 percent higher than the regulatory cost facing large firms (defined as firms with 500 or more employees).” Small businesses are usually the losers when it comes to more regulation.

 

The Congress ought to pass this bill. Broadband access is a critical lifeline to all businesses. Business certainty resonates throughout our economy—especially small companies. Putting the FCC intent into law with respect to broadband rate regulation is a good idea.

Time for Congress to Move a Neutral Net into Drive

WIPP infographic II

Capital investment is a solid predictor of economic health. That’s why recent news in the communications policy arena deserves Congress’ attention.

Last week, a new regulatory regime over the Internet took effect. But before these rules came to life, a half-dozen small Internet providers in the Midwest, South and Pacific Northwest told federal officials that they had been forced to cut back on expanding faster broadband service because of the FCC’s recent decision to begin micromanaging the Internet.

All six of these Internet providers specialize in serving small towns and underserved areas; none have the size or scale to accommodate the new regulations’ expenses without budget cuts elsewhere. Moreover, their statements were made under threat of perjury.

For women in particular, this issue should raise serious concerns. Almost half of women-owned businesses are home-based. Anything that slows home broadband deployment has a potential to impact the full economic participation of women.

These verified reports about higher regulatory costs and less money for investment are a clear “canary in the coal mine” warning to Congress about the FCC’s decision to regulate the Internet with Title II regulations written in 1934. That 3-2 party line vote on February 26 overturned decades of successful experience about the benefits of “light touch” rules for the Internet.

Prior to that ill-fated FCC vote, federal Internet policy was both an area of broad agreement and a shining example of successfully encouraging an important new industry. The lack of federal micromanagement that was a hallmark of federal policy since Bill Clinton’s Presidency was key to unleashing a tidal wave of communications investment — $1.3 trillion since 1996 and $75 billion just in 2013.

The results speak for themselves, especially when compared with other countries’ experiences. The U.S. has a huge lead over Europe in both fiber optic deployment and high-speed 4G LTE broadband. Americans spend more time talking on their mobile phones than people in any developed country in the world.

This investment also produced jobs – lots of them. The growth of the mobile app economy, which developed because of America’s high-speed wireless networks, sustains more than 750,000 U.S. jobs, according to the Progressive Policy Institute.

The FCC’s decision to regulate the Internet as a public utility with outdated Title II rules undercuts the very policies that helped spur this success. The FCC’s action is as inexplicable as it is wrongheaded.

Indeed, the Commission’s efforts to explain this action border on the comical. As Hal Singer noted in a recent Forbes commentary, the FCC’s own economic analysis of its action is almost amusing. For example, the agency claimed that the broadband industry’s strong record of investment in 2010 showed that its regulations encourage investment, despite the fact that the Commission’s vote on a more reasonable set of Internet rules occurred on December 21, 2010.

Ultimately, the key reason that Congress must update America’s communications laws is to protect the people who lost an opportunity for better Internet service, because the FCC’s action added pointless new expenses and legal uncertainties to broadband deployment.

The 8,000 St. Louis-area residents served by Wisper ISP, a Missouri-based Internet provider, have felt the negative impact of these utility style regulations. As a result of the FCC’s decision, Wisper estimates that compliance costs will grow to 10% of its operating revenue. It has already had to cut investment, resulting in what the company calls “slower broadband speeds, less dense coverage, and absence of expansion into new areas.”

It is a testament to the bipartisan, light-touch policies implemented back when Internet access meant a 56 KB modem that consumers enjoy so much today. Yet, at just the time when the United States was poised to run the table in a 21st century economy, the FCC pulled the rug out from under small businesses. The FCC’s February vote, and last week’s rules enactment, undid the phenomenal success of the modern Internet.

It is time for Congress to set things right again. We hope that members of both parties come together to enact common-sense legislation that both protects the Internet and reinstitutes the wise telecom policy that has brought us the Internet we use and enjoy today.