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Cisco's Chambers: Title II Net Neutrality Talk Already Hurting

Cisco Chairman and CEO John Chambers weighed in against a proposal to classify service providers as Title II common carriers in an effort to preserve net neutrality. And he noted that just talking about Title II is likely to slow down carrier spending.

Speaking on Cisco Systems Inc. (Nasdaq: CSCO)'s quarterly earnings call Wednesday, Chambers said Title II classification would inhibit rather than encourage broadband buildout, and cut revenues for service providers and for companies that rely on service providers for revenue.

"It would be a very disappointing end result if we moved back to regulation of the Internet as we did with voice years ago," Chambers said. Title II regulations would dramatically reduce the ability of service providers to build out broadband at a time when the US is just catching up.

Carriers are reducing spending on opex and will continue to do so if they can't get payback for their investment, Chambers said. While Cisco's revenue was up year-over-year for the first fiscal quarter of 2015 -- following a 2014 in which revenue declined -- Cisco's revenue from carrier business was down 10%.

The US can achieve the goals of both sides of the net neutrality debate without resorting to Title II classification, Chambers said. The Cisco chief endorsed a proposal by FCC Chairman Tom Wheeler to "split the baby" on net neutrality regulations. (See Wheeler: Between a Rock and a Hard Place.)

President Obama this week urged the FCC to adopt strong net neutrality rules for wireline and wireless service providers, including Title II regulations. Title II gives the FCC substantial power to set rules prohibiting providers from blocking or throttling web traffic, favoring some services over others and charging fees for prioritized "fast lane" service. (See Obama Backs Net Neutrality, Stuns Industry.)

FCC Chairman Tom Wheeler told Silicon Valley business executives he favored a more nuanced approach, according to a report in the Washington Post.

As my colleague, Mari Silbey, noted, Wheeler has previously said that he would consider reclassifying broadband services under Title II of the Communications Act, but he's also given indications that he'd prefer to stick with regulating the industry under the looser Section 706 rules with some additional requirements put in place.


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The FCC floated a proposal in May that would allow content providers to purchase Internet fast lanes, but Wheeler said the FCC would not allow a two-tiered Internet system to develop. (See FCC Split on Net Neutrality Plans .)

Cisco plans to work to educate people on the importance of avoiding damaging net neutrality regulation, Chambers said on Wednesday's call. "We do plan to be very aggressive on this in trying to educate people on all sides how this is not right for the country," Chambers said.

The mere possibility of Title II classification will reduce service provider investments for the next one or two quarters, which will have a ripple effect, Chambers said. "I think it's going to have negative impact for all of us that are connected with service providers in the US."

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to [email protected]

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kq4ym 11/14/2014 | 8:27:31 AM
Re: Please regulate it The industry of course is going to protest any change and the standard response might well be "...that just talking about Title II is likely to slow down carrier spending." I don't think in the end net neutrality will have much effect on carriers other than forcing new innovations and marketing to capture customer's loyaty with better service and products.
DHagar 11/13/2014 | 6:22:55 PM
Re: Wow, just what the industry needs: regulatory uncertainty Mitch Wagner, I would agree with your clarification.  To be "more correct", he uses his populist image and sells as a pretext for his real goals; greater regulation and control.
Mitch Wagner 11/13/2014 | 5:52:37 PM
Re: Wow, just what the industry needs: regulatory uncertainty Obama is no populist. He's an establishmentarian. He trusts big, institutional solutions. In net neutrality, that means big Internet companies run things regulated by big government. 
TomNolle 11/13/2014 | 5:51:26 PM
Re: Wow, just what the industry needs: regulatory uncertainty It may stand in that it wasn't overturned, but once the FCC decides the ISPs are Title II then all bets are off.  The FCC is not bound by its own precedent.  But as I said, I'm not sure of the current state.
brooks7 11/13/2014 | 5:31:47 PM
Re: Wow, just what the industry needs: regulatory uncertainty Tom,

This is WAY different than the Net Neutrality regulation and the Trienniel Order stands.  

 

http://transition.fcc.gov/wcb/cpd/triennial_review/

 

As far as I know, it has never even been challenged.

seven

PS - I looked and it was challenged.  In 2006, the Courts agreed with this order and it stands today.  The reasonI bring it up was the commentary on Gigapower being put on hold.  One of the reasons that FTTH and later FTTC were exempted was to encourage investment.  Seems like nobody cares about UNE-L at this point.
TomNolle 11/13/2014 | 5:12:15 PM
Re: Wow, just what the industry needs: regulatory uncertainty My concern is that all of that stuff predates the "seminal shift" in policy that allowed the FCC positions to pass the court review.  Just because the FCC said something doesn't make it so.  In regards to the loop plant for example, they could not (and would not need to) exempt broadband if the ISPs weren't common carriers.  It would take some digging to see where we stand, but the inference of the DC Court of Appeals ruling on the Neutrality Order was that the FCC's position that ISPs were NOT Title II was what was in force.  That would mean that prior FCC comment on the state of fiber regulation was obsolete.
brooks7 11/13/2014 | 4:51:14 PM
Re: Wow, just what the industry needs: regulatory uncertainty Tom,

From the Trienniel Reveiw Order in 8/21/03 (Page 115)....

1.      In addition, we find that different policy considerations, as well as different technical considerations, are associated with copper loops, hybrid copper/fiber loops, and FTTH loops.  For example, we decline to require incumbent LECs to provide unbundled access to their hybrid loops for the provision of broadband services.[1]  Similarly, we decline to unbundle loops that consist of FTTH facilities for broadband services.  As explained more fully below, this unbundling approach – i.e., greater unbundling for legacy copper facilities and more limited unbundling for next-generation network facilities – appropriately balances our goals of promoting facilities-based investment and innovation against our goal of stimulating competition in the market for local telecommunications services.  




[1]       Incumbent LECs must continue to provide unbundled access to the TDM features, functions, and capabilities of their hybrid loops.  This will allow competitive LECs to continue providing both traditional narrowband services (e.g., voice, fax, dial-up Internet access) and high-capacity services like DS1 and DS3 circuits.

 

 

Note this was extended later to FTTC @ 500' loop length in 8/04.

 

seven

PS - In case you are unclear about the TDM features what it means in practice is that you might still have to hand off a phone line at a consumer, but no more UNE-L or partial UNE-L by renting the high frequency bandwidth.  Also, in practice nobody cares about unbundling POTS.
DHagar 11/13/2014 | 3:01:44 PM
Re: Wow, just what the industry needs: regulatory uncertainty Gabriel Brown, I agree with you and Tom, that "do no harm" may be the best position at this time.

It appears that the evolution of the internet to the new communications and network use (especially with mobile) has expanded the uses and mixed the lines from infrastructure access to multiple commercial uses and new partnerships and systems.  Any future regulation needs to be thoughtful and/or a mix of regulations (ie Communications, Commerce, etc.)
burn0050 11/13/2014 | 2:53:54 PM
Please regulate it Ma Bell was broken up because of a monopoly, and now we have been reduced to 2 or 3 carriers once again. And now they own more than just phone lines, they own television networks.

Let the carriers whine about regulation. Verizon STILL hasn't fixed phone lines that have been down since hurricane Sandy - and won't. A 2 tiered network will stifle just as much innovation as imposing Title II.

I have no love or sympathy for the carriers. They have overcharged and under-delivered for years, taken money from states and cities, received tax breaks, and haven't fulfilled their promises for providing fiber.

Perhaps when they can act honestly we can trust them not to screw up the internet, but I'm not holding my breath. This will be one more avenue for them to screw people over for money. Wheeler has a direct conflict of interest in this matter.

Our internet costs more and is slower than every other developed nation.
James_B_Crawshaw 11/13/2014 | 2:25:12 PM
Proper gander (sic) Chambers said service provider orders fell 10% during the quarter due principally to cutbacks by 3 US operators given regulatory uncertainty over net neutrality. But Cisco's quarter ended on 25 October. And the only major news on net neutrality of late is Obama's speech on 10 November. 
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