FCC Declares War on Broadband

The Federal Communications Commission (FCC) made clear today it is ready to go to war with service providers in order to maintain and, to a degree, extend its authority on broadband services.

The FCC said it's pursuing a revised legal framework -- a "Third Way" -- for reclassifying its authority on the broadband. That would allow the agency to keep its ambitious National Broadband Plan moving forward while also addressing major concerns about how its authority over broadband was being siphoned away after it lost an important case with Comcast Corp. (Nasdaq: CMCSA, CMCSK) over Internet network management policies. (See Net Neutrality Ruling: FCC Loses, Comcast Wins and The National Broadband Plan.)

Nearly Nuclear
The FCC is now looking to reclassify broadband in a way that keeps its Title I (information service) authority on broadband going, but also looks to sprinkle in some elements of a stronger Title II (telecommunications) regime that could see some rules typically applied to common carriers fall on ISPs, as well. However, the FCC's proposal doesn't apply a full-on Title II assault on broadband -- sometimes referred to a "nuclear option" -- but will instead take a significantly lighter touch on how common carrier rules could be enforced on ISPs.

Under the proposal, the provisions sought for the revised Title II classification for broadband would apply only to the "transmission component" of those services, covering items such as denial of service, the protection of confidential information, and making sure ISPs ensure that services and equipment is accessible to people with disabilities, "unless not reasonably achievable."

At this juncture of the "Third Way" proposal and its specific treatment of a Title II classification, it wouldn't mandate that MSOs provide access to third-party ISPs or regulate rates.

As proposed, the "information" components of broadband, meanwhile, would still exist under the existing Title I designation.

A word of caution
But in a note issued today, Sanford C. Bernstein & Co. Inc. analyst Craig Moffett questioned the FCC's plan to forbear, or not enforce, most of the existing Title II regulations on broadband. "Forbearance can, in theory, be reversed at any time," making it "unclear" how long it that stance would be maintained.

Moffett noted earlier that it would be easy for the FCC to "go nuclear" and pursue Title II authority on broadband, but warned that it would likewise expose the Commission to big risks and legal challenges trying to make it stick. (See Title II's Nuclear Fallout .)

So instead it appears that the FCC is keeping its nukes stockpiled for now, but will still apply some traditional warfare tactics to maintain and expand some of its authority on broadband, but only to a certain degree.

Cable stocks get smacked
The FCC's proposed lighter touch on Title II still delivered a blow to cable stocks on Thursday, with Comcast shares down about 6 percent, Time Warner Cable Inc. (NYSE: TWC) down almost 8 percent, Cablevision Systems Corp. (NYSE: CVC) down more than 9 percent, and Mediacom Communications Corp. down almost 10 percent in midday trading.

Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) were fairing a bit better, with both down a bit more than 4 percent on a day in which most of the market was getting creamed anyway.

Comcast SVP of government communications Sena Fitzmaurice issued a statement this morning, noting that the MSO still believes that the existing Title II classification of broadband is sufficient.

"While we are disappointed with the inclination not to lean in favor of Title I regulation, we are prepared to work constructively with the Commission to determine whether there is a 'third way' approach that allows the Commission to take limited but effective measures to preserve an open Internet and implement critical features of the National Broadband Plan, but does not cast the kind of regulatory cloud that would chill investment and innovation by ISPs."

National Cable & Telecommunications Association (NCTA) president and CEO Kyle McSlarrow offered a similar reaction, adding that "any Title II approach is still fraught with legal uncertainty and practical consequences which pose real risks to our ability to provide the high-quality and innovative broadband services that our customers expect, thus undermining the very investment and innovation goals we share with chairman Genachowski and upon which the National Broadband Plan depends."

Charter Communications Inc. president and CEO Mike Lovett commented on it during his company's first-quarter conference call, noting that the MSO keeps an active dialogue with the FCC but warned that new broadband regulations "may stifle investment in Internet infrastructure." (See Charter Revs Up Wideband, SDV Rollouts .)

Cablevision president and COO Tom Rutledge also commented on his company's earnings call, and was somewhat sympathetic to the FCC's position on the matter.

"Here in our operation we've offered over 100-Megabit capacity to our entire customer base, so we don't think there's a real problem, but we do have some sympathy for the objectives that chairman Genachowski and the FCC have in ensuring that the Internet continues to function well," he said.

— Jeff Baumgartner, Site Editor, Light Reading Cable

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fgoldstein 12/5/2012 | 4:37:00 PM
re: FCC Declares War on Broadband

War?  More like two lashes with a wet noodle.  At ten paces.

If you read the whole statement of the General Counsel, the meat being near the end, you realize that what they're doing goes like this:

<li>The Court overturned the Comcast Order because no locus to Title II was shown, and Title I "ancillary jurisdiction" must be ancillary to something.</li>
<li>The FCC didn't want to use Title II because it is entitled "common carriage", which implies that the facilities are open to third party ISPs.</li>
<li>The Third Way defines the transmission component of Internet access as being, uh, something, under Title II, but not quite common carriage, really, though Section 254 (Universal Service) applies, so they can apply USF charges to cable modems and subsidize rural telco monopoly DSL.</li>
<li>The transmission component is not made available to third-parties, so while Sections 201 and 202 (non-discrimination; just and reasonable rates) are applied, they only apply to the transmission component, and since that is only made available to the affiliated ISP,
<li>it will be prohibited for a telco or cableco to discriminate or charge unreasonable rates to itself, its only customer.</li>
<li>Because the transmission component is Title II, there is now a nexus to reimpose the Internet Fairness Doctrine on the content carried by ISPs.</li>

Boy, that'll really throw the Bells for a loop.&nbsp; Bear in mind that the IFD ("network neutrality") was an attack on cable, not telcos, and as we all know, the Bells consider themselves above the law.&nbsp; So VZ, while whining publicly against NN rules, has hated it as much as Bre'r Rabbit hated the brier patch.

It's very tricky legal acrobatics, hoping to confuse the Courts by meeting what might be arguably the letter of the Order, while flouting its spirit.

Jeff Baumgartner 12/5/2012 | 4:37:00 PM
re: FCC Declares War on Broadband This is starting to look like Title II without the teeth, so the ISPs should get ready for a nice gumming.

Given that this approach does look to maintain the status quo with some relatively weak looking Title II add-ins, was it too strong to characterize this move as an act of war by the FCC?

We've seen some opinions stating that it is and isn't. Where are you coming out on it? JB

Jeff Baumgartner 12/5/2012 | 4:36:58 PM
re: FCC Declares War on Broadband That's a good rundown. When you take it all in this looks like the FCC trying to reassert its power, and adding a bit more without trying to wield too much. They're certainly trying to appease all sides and find middle ground, but that probably means both sides are going to be equally disturbed by it .JB
DCITDave 12/5/2012 | 4:36:56 PM
re: FCC Declares War on Broadband Isn't it always a mistake to try and solve today's problems by reinterpreting stuff what was written before the iPhone was invented? This whole issue gives me tired-head because net neutrality is best argued and mediated on a case-by-case basis. This idea that one principle will keep all network operators and all applications in line is about as arrogant and stupid as, well, the last car of clowns that the FCC drove out to the telecom circus.
dkuzoian 12/5/2012 | 4:36:54 PM
re: FCC Declares War on Broadband I'd be interested to hear from people at either telcos or cable companies what you are hearing this will mean (if anything) in terms of the impact on the current Network Investment and CAPEX plans? Will this actually lead to slowing or cutting investment plans - or is that merely a hollow threat to try to get some leverage over the FCC? I'd love to hear any feedback.
paolo.franzoi 12/5/2012 | 4:36:54 PM
re: FCC Declares War on Broadband



One thing that we could do as a group - heck maybe you guys could sponsor some forum or competition or something - is to define net neutrality.

We here in the experienced Telecom world who talk about Title I and Title II and FCC rules and regs are one group.&nbsp; But the public has really no idea of what is being discussed in a way that is meaningful for them.&nbsp; Most people have a different idea of what net neutrality means than the people here.

Given the bully pulpit of the online community, is there a way to get some common thoughts and views named in a consistent way?



Edit:&nbsp; iPhone example.&nbsp; "People" don't see a net neutrality difference between the defeat of VoIP on an iPhone by AT&amp;T and the lack of Flash support on the iPhone.&nbsp; They just know that they can't do what they want to do and think it sucks.



DCITDave 12/5/2012 | 4:36:53 PM
re: FCC Declares War on Broadband

Great point, especially about the iPhone comment. I think the FCC could stand to see things from a consumer point of view. They seem intent on trying to commercially knee-cap cable, telcos, media companies, or all three, depending on the administration. But I usually don't get the sense that they are as interested in what those of us at home are seeing.


nelson3748 12/5/2012 | 4:36:03 PM
re: FCC Declares War on Broadband

sad. feds have been screwing up schools since the 70s, hospitals since the 80s, and housing since since the 90s-- why do you think investors provided mortgages for people who could not afford them? because the feds were subsiding them. thank you for proving my conclusion. all of those industries have been getting less efficient as the Feds have gotten more involved

nelson3748 12/5/2012 | 4:36:03 PM
re: FCC Declares War on Broadband

it may start with a "wet noodle," but that is not where it will end. i want the federal government as far away from the internet as possible, period, end of story. beware of lawyer double speak (so speaketh the reformed lawyer). look what happened to radio: if you want to tell us, "that can't happen to the internet!" you are either a fool or piratical lawyer/bureaucrat/lobbyist/monopolist.

Larry, Monkey 12/5/2012 | 4:36:03 PM
re: FCC Declares War on Broadband

So you "want the federal government as far away from the internet as possible, period, end of story"?

As they kept away from Wall Street, from oil companies, from the housing market? How's that working out?

Let's keep'em away from schools, hospitals, highways, and police &amp; fire departments as well.

"Government interference" is not an argument. It's a catch-phrase.

Stop jerking your knee so much. You'll hurt yourself!

And whatever did happen to radio?

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