Pennsylvania Bill Would Turn Broadband Internet Networks into Public Utilities

On March 17, Pennsylvania House Bill 924 was referred to a legislative committee in that state's lower chamber. If it were to become law, the bill would change the definition of "public utility" under Pennsylvania law to include "[p]roviding persons with the ability to connect to the Internet through equipment that is located in this Commonwealth." In short, PA House Bill 924 is a state net neutrality bill, that would impose no blocking, no throttling, no paid prioritization, and other restrictions on provider network management, and delegate authority to the state's public utility commission to regulate broadband Internet access services.  

PA House Bill 924 was filed in the wake of the Sixth Circuit's March 11 order denying a rehearing en banc on that court’s January 2 three-judge panel decision to vacate the FCC's 2024 Title II Order. The state bill also follows closely on the heels of the Supreme Court's February 24 order deny a rehearing on its prior order to deny a writ of certiorari in New York State Telecommunications Association v. James. The denial of a rehearing in James leaves in place a Second Circuit decision from April 2024 that upheld New York State’s Affordable Broadband Act that imposed rate regulation on interstate Internet broadband access services offered by broadband providers in that state.

 

It seems unlikely, if not implausible, that Congress intended to open up jurisdictionally interstate information services (previously known as "enhanced services") like broadband access to state regulation when it established non-regulated or lightly-lightly regulated Title I classification for "information services" in the Telecommunications Act of 1996. But according to three circuit courts of appeal, that apparently is what Congress did. The Second, Ninth, and D.C. Circuits – have concluded that the FCC's decision in the 2017 Restoring Internet Freedom order to classify broadband access services as Title I services had the effect of removing the agency's jurisdiction over interstate broadband services, thus preventing the Commission from preempting state public utility regulation of those same services. 

 

For some further context, the FCC's proceeding that led up to the FCC's 2024 Title II Order cited zero instances of blocking, throttling, or harmful paid prioritization arrangements. Moreover, all or nearly all broadband ISPs in America have terms of service pledges to not engage in blocking, throttling, or harmful paid prioritization. So long as broadband access services are Title I "information services" (and not Title II "telecommunications services") those service term pledges are enforceable by the Federal Trade Commission under its authority to address unfair and deceptive trade practices. 

 

Expect the issue of state-level public utility regulation of broadband Internet access services, including price controls, to be a subject of discussion at the Free State Foundation's Seventeenth Annual Policy Conference – #FSFConf17 – on March 25, in Washington, D.C. Register today for the conference. 

Court Hears Arguments on Challenges to FCC's New Title II Order

On October 31, the U.S. Court of Appeals for the Sixth Circuit heard oral arguments in case MCP No. 185 Open Internet Rule. The case consolidates several legal challenges against the FCC's April 2024 Securing and Safeguarding the Open Internet Order. The Commission's order turned broadband Internet access services into a public utility and subjected broadband Internet service providers (ISPs) to rate regulation.

By an August 1, 2024, order, a three-judge panel of the Sixth Circuit stayed the Commission's order pending resolution of legal merits of challenges to that order. The court's decision to stay the agency's order was discussed in an August 23 Perspectives from FSF Scholars by FSF President Randolph May, "The Sixth Circuit Stays the FCC's Latest Net Neutrality Flip-Flop." A different panel was designated to decide the legal merits.

 

Oral arguments before the three-judge merits panel lasted approximately one hour. Judge Raymond M. Kethledge pressed legal counsel on the meaning of statutory terms – such as "information services" under Title I of the Communications and "telecommunications services" under Title II. Other judges expressed greater interest in the "major questions doctrine." They pointedly asked if the "major questions doctrine" is still operative following the Supreme Court's decision in Loper-Bright v. Raimondo and whether reclassifying broadband Internet access services under Title II and subjecting it to public utility regulation and rate controls amounts to a matter of economic and political significance under the "major questions doctrine." 

 

The Free State Foundation's 2017 initial comments and reply comments in the FCC's Restoring Internet Freedom proceeding emphasized the statutory definitional case for why broadband Internet access services are Title I "information services." 

 

Moreover, FSF's 2023 initial comments and reply comments in the Safeguarding and Securing the Open Internet proceeding explained why reclassifying broadband Internet access services under Title II and thereby subjecting those services to a public utility regime with rate regulation triggers the "major questions doctrine." That is, turning broadband ISPs into public utilities and asserting control over their rates is a politically and economically significant matter. Congress nowhere provided the FCC clear authority to make such a momentous decision. 

 

The Sixth Circuit panel that issued the August 2024 stay decision in the MCP No. 185 Open Internet Rule concluded that the FCC's order likely violated the "major questions doctrine." But the Sixth Circuit's merits panel that just held oral arguments will offer its view in due time. The judges will more comprehensively answer the disputed questions about the Commission’s authority.

Joint Resolution in House Would Repeal FCC's New Title II Order

On May 23, Rep. Bob Latta announced that he had introduced a Congressional Review Act (CRA) joint resolution of disapproval to overturn the FCC's Safeguarding and Securing the Open Internet Order. By a 3-2 vote, the Commission reclassified broadband Internet access services as "telecommunications services" under Title II of the Communications Act, subjecting advanced broadband networks to public utility regulation. 

Rep. Latta deserves credit for introducing this CRA joint resolution. The House of Representatives should give the legislation due consideration. 

 

The CRA provides a fast-track process for Congress to repeal new agency regulations. For helpful background on the CRA in the context of broadband regulatory policy, see FSF Board of Academic Advisors' Member Daniel Lyons' June 2018 Perspectives from FSF Scholars, "The Congressional Review Act and the Toxic Politics of Net Neutrality."

 

The Free State Foundation filed public comments and reply comments with the FCC in opposition to public utility regulation. Several Perspectives from FSF Scholars have been published critiquing the imposition of public utility restrictions on broadband Internet networks," including my May 21 Perspectives, "The FCC's New Title II Order Allows Harmful Rate Regulation."

FCC Releases Text of New Title II Order

On May 7, the FCC released the text of its Safeguarding and Securing the Open Internet Order – that is, the agency's new Title II Order. By a 3-2 vote on April 25, the Commission reclassified broadband Internet access services as "telecommunications services" under Title II of the Communications Act. It established a public utility regulatory regime for broadband. Under that regime, broadband Internet service providers are subject to bright-line restrictions on network management and a vague "catch-all" standard. Broadband providers will be subject to informal and formal complaint proceedings for alleged violations of the Commission's rules and "catch-all" standard.

The Free State Foundation filed comments and reply comments in the FCC's Safeguarding and Securing the Open Internet proceeding that opposed public utility regulation of broadband services. In the weeks and days leading up to the Commission's April 25 vote, Perspectives from FSF Scholars papers were published on the agency's empty national security and public safety rationales for Title II regulation, the legal problems with Title II reclassification under the Supreme Court's Major Questions Doctrine, and the harm to innovative 5G "network slicing" under Title II. Additionally, an April 25 Press Release by FSF President Randolph May and I provided a brief initial response to the Commission's vote to adopt its new Title II Order. 

My Federalist Society Blog post from May 3 analyzing the Second Circuit's decision in New York State Telecommunications Association, Inc. v. James, pointed to questions still needing to be directly sorted out regarding preemption and specific state-level rate regulation of interstate broadband Internet services. Now that the text of the new Title II Order has been publicly released, expect forthcoming analyses from FSF scholars about rate regulation as well as other law and policy issues and implications of the Order. 

PRESS RELEASE: The FCC's Democrat Majority Converts Internet Providers Into Public Utilities

Regarding today's action by the FCC classifying Internet providers as public utilities, the following statement may be attributed to Free State Foundation President Randolph May and Director of Policy Studies Seth Cooper:

The FCC's vote to convert broadband Internet providers into regulated public utilities is likely the most momentous power grab by the administrative state thus far in the 21st century. Without any evidence of present consumer or competitive harm, the FCC's Democrat majority has asserted far-reaching government control over Internet providers and the Internet's physical infrastructure. Rarely, if ever, has an administrative agency attempted to seize so much power based on so little evidence. The FCC's action is based only on empty claims of speculative harms. The result almost certainly will be a chilling of investment and innovation.

Unlike most claims for the imposition of public utility regulation, the FCC in this case does not even try to justify its action based on the claims of Internet provider market power. Indeed, it couldn't if it tried, because the high-speed broadband market has become effectively competitive, with cable, fiber, fixed wireless, mobile, and satellite platforms providing consumers with choices. And the record is unequivocal that broadband providers do not block or throttle their subscribers' free speech or access to content of their choice. 

 

The Commission's novel late-blooming invocation national security and public safety as a justification for asserting government control over Internet providers is disingenuous. The order fails to identify any specific security or safety harms or adopt any new targeted security or safety rules to address them.

 

Finally, and importantly, the FCC's action almost certainly is unlawful and will fail under the Supreme Court’s Major Questions Doctrine. Congress never clearly authorized such a politically and economically significant assertion of government control over the Internet.

Report IDs Key Stats on Wireless Infrastructure, But Regulatory Threat Looms

On April 16, the Wireless Industry Association (WIA) released its report, "Wireless Infrastructure By The Numbers: 2023 Key Industry Statistics." As the title indicates, WIA's report provides a high-level look at the overall number of cell towers, macro sites, and small cell facilities that mobile service providers use to offer mobile broadband Internet access services. According to WIA's report, as of 2023, there were 153,400 cellular towers in operation in the U.S., in addition to nearly 245,000 macrocell sites and 202,100 outdoor small cells in operation. The report found that there also were nearly 776,000 indoor small cell nodes in use as of last year. These figures surely have grown since 2023.  

Moreover, WIA's report found that "[t]he U.S. cellular industry spent $11.6 billion building additional capacity and coverage into the nation’s wireless networks in 2023." Another interesting observation in the report is that "[m]ore towers and cell sites are being deployed but the amount spent building networks is flat" because "[a]s wireless network technologies mature and evolve, network equipment becomes more efficient and cost effective." Also, "[t]he amount spent on maintaining and operating the cellular networks increased but build spending dropped" due to larger networks increasing the necessary maintenance costs.

 

The deployment and operation of 4G LTE and 5G wireless networks depends on private market investment remaining strong. Subjecting mobile broadband networks to public utility regulation – as the FCC proposes in its Draft Order to be considered for a vote at the agency’s April 25 meeting – would undermine the ability of wireless infrastructure owners and operators to use their property and generate returns. This would reduce incentives to build and upgrade such infrastructure. The 2018 Restoring Internet Freedom Order found that the imposition of public utility regulation under the now-repealed 2015 Title II Order inhibited investment: 

The Commission has long recognized that regulatory burdens and uncertainty, such as those inherent in Title II, can deter investment by regulated entities and, until the Title II Order, its regulatory framework for cable, wireline, and wireless broadband Internet access services reflected that reality. This concern is well-documented in the economics literature on regulatory theory, and the record also supports the theory that the regulation imposed by Title II will negatively impact investment. The balance of the evidence in the record suggests that Title II classification has reduced ISP investment in broadband networks, as well as hampered innovation, because of regulatory uncertainty. The record also demonstrates that small ISPs, many of which serve rural consumers, have been particularly harmed by Title II. And there is no convincing evidence of increased investment in the edge that would compensate for the reduction in network investment.  

Imposing restrictions on 5G network slicing – either by outright prohibitions or by regulatory uncertainty under the vague "general conduct" standard contained in the Draft Order – also would be detrimental to wireless innovation and investment, including investment in the physical infrastructure that supports 5G uses. For more on this topic, see Free State President Randolph May's and Senior Fellow Andrew Long's April 2 Perspectives from FSF Scholars, "The 'Network Slicing' Debate Exposes How Title II Will Kill Innovation." Also, check out FSF President May's FSF Blog post from April 18: "Don't."

FSF Scholars Warn Against the Title II Threat to Innovative 5G Network Slicing

On April 2, the Free State Foundation released a Perspectives from FSF Scholars by President Randolph May and Senior Fellow Andrew Long titled "The 'Network Slicing' Debate Exposes How Title II Will Kill Innovation." Their Perspectives paper provides a helpful descriptive overview of 5G mobile network slicing and how it can provide optimal service for different use cases, including broadband Internet access services, telemedicine, Internet-of-Things, and more. But as FSF President May and Mr. Long explain, the Commission's proposal to reclassify broadband Internet access services as a Title II "telecommunications service” under the Communications Act threatens to impede these breakthrough uses of next-generation broadband networks. Their paper concludes: "To encourage continued investment and innovation, the Commission should shelve its entire proposal to impose a public utility straitjacket on Internet providers and let technological advancements and marketplace competition do the job of enhancing consumer welfare."

FSF President May and Mr. Long's Perspectives paper is worthwhile reading on network slicing and the harm to innovation posed by Title II regulation. Also, an April 5 FedSoc Blog post by former NTIA Administrator John Kneuer, titled "Network Slicing and Net Neutrality" elaborates on these same matters and cites favorably to that paper. 

Smaller Networks Marshall the Evidence for Broadband Market's Competitiveness

A report by ACA Connects – included in a February 22 ex parte filing with the FCC – provides a window into the competitiveness of the broadband market from the vantage point of medium and smaller providers. Members of ACA Connects collectively serve nearly 32 million households – or about 25% of all U.S. households – including 7.3 million households in rural communities – or about 29%.

Insightful data points about communities served by ACA members include the following:

• "Members reached 31% more households via FTTH over the last year, a rate far higher than their overall increase in coverage."
• "96% of households have two or more fixed broadband options—and 85% have three or more options."
• "Over a third of all households (37%) in areas served by ACA Connects Members have access to gigabit broadband service."
• "The ACA Connects Members increased gigabit service availability in [] rural communities from 24% in 2022 to 33% in 2023." 

The ACA Connects report also includes figures about trends in the wider broadband market. This includes a breakdown of the share of U.S. households with competitive presence by technological capabilities of 100/20+ Mbps. According to FCC and Cartesian data for 2022-2023, almost 95% of households are in census blocks where there is an actual or potential presence of a cable, fiber, or licensed fixed wireless access (FWA) broadband provider offering speeds of 100/20+ Mbps. For 89.1% of households, a cable provider offering those speeds has a competitive presence, for 49.7% a fiber provider has a competitive presence, and for 39.6% a licensed FWA has a competitive presence. While those figures are higher than actual access figures for households, there are strong pro-deployment and pro-competitive trends. Back in 2017, only 69% of households had access to a provider offering 100/20+ Mbps, with a cable/fiber/licensed FWA competitive presence breakdown in 2017 of 59.3%/19.4%/1.7%.

 

The ACA Connects report was filed with an ex parte regarding the FCC's proposal to reclassify broadband Internet services as Title II telecommunications services and subject them to public utility regulation, including conduct-based restrictions that could eliminate consumer choice for reduced pricing options such as usage-based billing or free-data mobile offerings.

 

In December 2023, the Free State Foundation filed comments opposing the FCC's Title II reclassification proposal. And in January of this year, FSF filed reply comments. If the Commission adopts its proposal, the harm to private market investments and the ability to generate returns on future investments would come to all broadband providers, with small and medium providers almost certainly being hit the hardest. 

FirstNet's Public Safety Communications Network Continues to Grow

On January 24, AT&T released its report for the fourth quarter of 2023. AT&T announced that the FirstNet nationwide public safety broadband network it constructed has increased its total connections to more than 5.5 million across 27,500 law enforcement and first responder agencies. FirstNet is overseen by FirstNet Authority, an agency within the NTIA.

The widespread adoption by law enforcement and first responder agencies of FirstNet and other enterprise networks is significant because it undermines the FCC's attempted partial rebranding of public utility regulation of residential mass-market retail broadband Internet access services as a vital public safety measure. The Commission's Notice proposing to reclassify broadband Internet access services as a public utility under Title II of the Communications Act even acknowledges that "much of the communications between public safety entities and first responders take advantage of enterprise-level dedicated public safety broadband services." Indeed, enterprise-level dedicated networks with quality-of-service guarantees are more ideally suited for government agencies such as emergency first responders. 

 

On December 14, 2023, the Free State Foundation filed public comments opposing Title II reclassification and imposition of public utility regulation on broadband Internet access services. FSF's comments called attention to the glaring disconnect between imposing public utility regulation on commercial broadband Internet access services in the name of national security and public safety when the military, law enforcement, and emergency responders rely heavily on dedicated networks. 

 

Also, in the Free State Foundation's reply comments, filed on January 17, 2024, we observed that "it is a weighty matter to impose government controls over private services and property catering to civilians in the name of national security and public safety." And thus, "[i]t is unlikely that Congress intended to alter the balance between public power and private rights through such an expansive reading of Title II." Our reply comments voiced agreement with the proposition that national security and public safety have never before been relied upon by the Commission as a justification for common carrier regulation of broadband.

 

For more on the empty national security and public safety rationale for regulating residential commercial broadband Internet services as public utilities, see FSF’s comments and reply comments. See also my October 2023 Perspectives from FSF Scholars, "Net Neutrality Regulation Is Not a Public Safety Measure."

PRESS RELEASE: The FCC's Proposal to Convert Internet Providers Into Public utilities Should Be Stopped

Today, Free State Foundation President Randolph May and Senior Fellow and Director of Communications Policy Studies Seth Cooper filed comments in the FCC proceeding proposing to classify broadband Internet access service providers as common carriers. The FSF comments, which are available on FSF's website and which contain an Introduction and Summary, are 74 pages with 196 supporting footnotes. The comments demonstrate conclusively the Commission should not move forward with its proposal. 

Here are a few key excerpts from the Introduction and Summary of the comments:

The Commission’s proposal to convert broadband Internet networks into public utilities is legally unsupportable as well as unwise, unnecessary, and unjustified from a policy perspective. Stated bluntly, the Commission’s proposal, if adopted, by asserting stringent bureaucratic control over the practices and operations of private sector Internet service providers, would constitute one of the 21st century’s most flagrant government power grabs.

 

Supreme Court decisions such as West Virginia v. EPA (2022) have embedded the Major Questions Doctrine in the Court’s jurisprudence. And even if the Chevron doctrine is not directly overruled by the Court in the pending Loper Bright Enterprises v. Raimondo case, in effect its scope already has been meaningfully curtailed. As a result, the Commission cannot rely on the claimed ambiguity of Communications Act statutory terms as the basis for authority to reclassify Internet services under Title II. If adopted, the proposed reclassification decision undoubtedly would be a major rule falling within the Major Questions Doctrine. Transforming massive broadband Internet access networks built with over $2.1 trillion in private capital since 1996, and upon which so much of our nation’s economy is now dependent to function, unmistakably involves issues of vast economic significance. Reclassification of broadband services away from a lightly regulated Title I “information service” into a heavily regulated Title II “telecommunications service” would impact all broadband Internet service providers (ISPs), online edge companies, and residential broadband subscribers – whether through the regulation of revenues, prices, or service offering terms and conditions. “Net neutrality” regulation also has been a matter of vast political significance and considerable public controversy for two decades, up to and including Chairwoman Rosenworcel’s recent call for the public to “make some noise” and “raise a ruckus” so as to influence the Commission’s decision. The Major Questions Doctrine requires a clear statement of authority from Congress authorizing a major rule such as one that would impose public utility regulation on Internet networks that have thrived in a primarily market-oriented environment. But the lack of any such clear statement in the Communications Act almost certainly would be legally fatal, as even two former Obama Administration Solicitors General have concluded.

 

Surely the case for Title II reclassification is far weaker in 2024 than it was in 2015 – and it was demonstrably weak then. Myriad gloom-and-doom predictions about the “end of the Internet as we know it” after repeal of the Commission’s short-lived public utility regulation were quicky proven false. That the Notice cannot point to any real-world instances of ISPs blocking, throttling, or otherwise harming consumers ability to access lawful Internet content is readily explainable by economic realities. Increases in broadband network availability, competing alternatives, and broadband speeds have followed in the wake of Title I reclassification. The competitiveness of the broadband Internet access services market has increased since early 2018 due to the expansion of fiber, the rapid nationwide deployment of 5G mobile and 5G fixed wireless access (FWA) services and new satellite services, as well as the launch of DOCSIS 4.0 cable broadband and hybrid cable mobile virtual network operator (cable MVNO) services. And, significantly, U.S. broadband networks passed the ultimate stress test by successfully accommodating dramatic spikes in Internet traffic and actually improving service during the lockdowns of 2020.

 

An additional problem is that the Commission’s proposal opens the Internet to rate regulation. Title II, at its core, is a rate regulation regime. The Notice does not propose to forbear from applying Sections 201(b) and 202(a); it suggests the agency will only refrain from ex ante rate regulation, not ex post. Those statutory provisions would impose on the Commission a positive duty to consider complaints that rates charged by broadband ISPs are unjust or unreasonably discriminatory. The Notice also suggests rate regulation with its proposed ban on paid prioritization; its assertion of agency authority over network interconnection agreements that set pricing for peering; and its possible ban on “free data” mobile plans. Rate regulation will defeat what should be the Commission’s priorities – promoting network investment and deployment, along with consumer choice and innovation.

 

In a surprise to many who have observed the two decades-long policy debate over “net neutrality” regulation and “Internet openness,” the Notice tries to reframe proposed Title II regulation of broadband services into a national security and public safety measure. But it is highly doubtful that regulating ISPs as public utilities will make the nation and its people more secure and safe. The Notice’s security and safety rationale for public utility regulation is a classic case of the tail wagging the dog.

 

The Commission also proposes to adopt an impermissibly vague “general conduct standard” as an admitted “catch-all backstop” that would restrict an unknown and unknowable number of network practices that the Commission believes might “unreasonably disadvantage” retail service end users or Internet edge providers like Google and Facebook. This proposed “catch-all backstop” consists of several unclear factors that are not tied to any safe harbors, ascertainable economic theory, or legal precedents that would provide predictable application. The elasticity of those factors would enable the Commission to restrict nearly any network practice it chooses. Also, it appears that the Commission’s enforcement rules, in many instances, would require ISPs to prove that they comply with the agency’s ad hocdeterminations regarding what technical network practices best promote Internet openness. The result would be a gross expansion of agency power over private networks and a negative impact on innovation and investment. The “general conduct” standard would be the Commission’s tool of choice to ban popular “free data” mobile plans and other innovative offerings.

 

Aside from the agency’s lack of legal authority already described above, the Commission’s proposal to regulate broadband ISPs like common carriers under Title II raises significant issues under the First Amendment. The proposed rulemaking would burden broadband ISPs’ First Amendment right to make editorial decisions involving paid priority arrangements as well as “free data” or “sponsored data” offerings. Although an ISP can claim no First Amendment right to hold itself out as a neutral and indiscriminate pathway but then conduct its operations differently, an ISP likely has a First Amendment right to qualify the meaning of that offering in its written terms of service to include certain traffic priority, speed, pricing, content, or other terms. Moreover, the Commission’s suggestion that its proposed regulation is likely to be upheld as content-neutral and subject to intermediate First Amendment scrutiny is questionable because the Commission is unconcerned with findings of market power.  

PRESS RELEASE: The FCC's Proposal to Impose Public Utility Regulation on Internet Providers Is Deeply Flawed

 

In response to the FCC’s adoption of a notice of proposed rulemaking to reclassify Internet service providers as common carriers, Free State Foundation President Randolph May issued the following statement:

“Despite the over-the-top scare tactics and doom-and-gloom predictions employed by Chairwoman Rosenworcel and net neutrality proponents throughout 2017 in opposing the Restoring Internet Freedom Order, the FCC’s own rulemaking notice doesn’t purport to claim there is any present evidence of consumer harm to justify imposing a costly intrusive public utility regime on Internet service providers. Instead, the proposal concededly is based on conjecture about what ‘could' or ‘might' occur at some time in the future. For this reason alone, today’s proposed agency action will go down in history as one of the most egregious overreaches in regulatory history. Rather than “net neutrality,” the proposed strict government control of Internet providers by the imposition of public utility regulation might more properly be called “net neutering." 

Chairman Rosenworcel claims that public utility regulation is justified because the Internet is now 'essential' like water and electricity, and providers of those services are most often public utilities. This claim is misguided because, unlike water and power companies, Internet service providers operate in a facilities-based competitive marketplace, and one that is steadily growing increasingly competitive. Regardless of whether Internet service should be characterized as ‘essential’ for some purpose or another, in light of the competitive conditions in which Internet providers operate, likening them to water and electric utilities is especially inapt. Food and clothing are 'essential' too, but no one suggests they should be subjected to public utility regulation. If they were, there almost certainly would be less food and clothing available because, as most economists acknowledge, public utility regimes almost always, over time, suppress investment and innovation. This is because of the regulatory costs imposed and uncertainties created regarding regulators’ decisions.

As but one example in this instance of such inevitable regulatory uncertainties that necessarily disincentivize investment and innovation, the FCC is proposing to adopt what it calls a 'general conduct standard.' But the conduct standard is inherently ambiguous and subject to abuse, based as it is on ad hoc determinations of ‘reasonableness’ and 'totality of the circumstances' evaluations.  

Rather than proposing regulatory solutions for non-existent problems, at a time when Congress has appropriated over $100 billion to promote ubiquitous broadband deployment, especially to unserved areas, and to support adoption, it would make far more sense for the FCC and the Biden Administration to devote their full attention and resources to implementing these programs in an efficient and cost-effective manner, with as little fraud and abuse as possible.

On top of the reasons why, as a matter of policy, the FCC’s proposal is so seriously flawed, as I have explained elsewhere, it is very unlikely to survive judicial review because Congress has not clearly authorized the Commission to take an action of such major economic and political significance. Indeed, Congress has rejected several attempts to amend the Communications Act to provide the FCC with such authority.”

Please direct any press inquiries to Mr. May at info@freestatefoundation.org

Recent Free State Foundation Resources Regarding Net Neutrality:

Seth L. Cooper, Net Neutrality Regulation Is Not a Public Safety Measure, October 17, 2023

 

Randolph J. May, Net Neutrality Redux: A Fight Over First Principles, October 16, 2023

 

Seth L. Cooper, FCC Ambiguous 'General Conduct' Standard Is Bad Policy and Likely Unlawful, October 13, 2023

Randolph J. May, There’s Little Question Net Neutrality Is a Major Question, September 28, 2023

 

Randolph J. May, Reimposing Burdensome Net Neutrality Mandates Will Harm Consumers, September 21, 2023

 

Randolph J. May, Don’t Regulate Internet Providers as Public Utilities – Again!, July 6, 2023 

 

USTelecom Report Shows Price Drops and Speed Increases for Broadband Services

On October 11, USTelecom released its "2023 Broadband Pricing Index." This latest edition of the BPI report found that prices for fixed wireline broadband services – DSL, cable, and fiber-to-the-home – declined between March 2022 and March 2023. According to the BPI Report, inflation-adjusted prices for providers' most popular broadband speed tier decreased by 18.1% and prices for their fastest speed tier option went down 6.5%. Additionally, between 2015 and 2023, inflation-adjusted prices for the most popular speed tier declined 54.7% and prices for the highest speed tier option dropped by 55.8%. 

Also, the BPI Report found that, between 2015 and 2023, "download speeds offered in the most popular tier increased by 141.5%, while upload speeds increased by nearly 285%" and that "[i]n the fastest-offered tier, download speeds increased by 117.1%, with upload speeds up by nearly 90%."

 

The BPI Report also shows Consumer Price Index (CPI) trends for broadband Internet services compared to other goods and services. Between 2015 and 2023, costs for consumer goods and services rose by 28%, according to CPI-U, but consumer prices for the most popular and the fastest speed options went down by 37% and 39%, respectively. 

 

The report relies on the FCC's Urban Rate Survey of the largest 14 wireline broadband providers that collectively serve 90% of all terrestrial fixed broadband services sold in the U.S. The 2023 BPI Report is available on USTelecom's website. FSF Senior Fellow Andrew Long wrote about the 2022 BPI Report in a June 2022 blog post and about the 2021 BPI Report in a May 2021 blog post. 

 

The findings of the BPI Report are particularly significant now that the FCC has opened its Safeguarding and Securing the Open Internet proceeding and proposed to subject broadband Internet access services to public utility regulation. The continuing improvements in network speeds and the consumer-friendly pricing trends on broadband service plans are strong indicators that the broadband marketplace is competitive. Certainly, these market developments do not justify imposing stringent new regulation on broadband services. The Commission should not impose public utility regulation on broadband networks but maintain its market-oriented framework that has helped promote the private investment in competitive wireline broadband networks. For more on this point, see Free State Foundation President Randolph May's September 21, 2023, Perspectives from FSF Scholars, "Reimposing Burdensome Net Neutrality Mandates Will Harm Consumers."

Over 40 Republican Senators Tell FCC to Say No to Net Neutrality

In a letter that was released earlier today, Senators John Thune (R-SD), ranking member of the Commerce Committee's Subcommittee on Communications, Media, and Broadband, and Ted Cruz (R-TX), ranking member of the Commerce Committee, called FCC Chairwoman Jessica Rosenthal's proposal to subject broadband Internet access services to public utility regulation under Title II of the Communications Act a "historic mistake."

More than forty GOP Senators, including the entire Senate Republican leadership team, added their names to the letter.

In the letter, the Senators warn that "[r]e-imposing heavy-handed, public-utility regulations would threaten the progress our country has made since 2017, and it would steer our country out of the fast lane and into a world of less competition, less choice, less investment, slower speeds, and higher prices."

They also emphasize that, because "the FCC lacks this statutory authority over broadband internet access," any attempt to reclassify broadband under Title II "will not survive judicial review."

In a September 26, 2023, press release posted to the FSF Blog, Free State Foundation President Randolph May characterized Chairwoman Rosenworcel's proposal as "foolhardy," made similar predictions regarding its ability to survive application of the "major questions doctrine," and cautioned that, despite claims to the contrary, it inevitably would result in rate regulation.

A Reader on Net Neutrality and Restoring Internet Freedom: A Relevant Book for 2023

On September 28, the FCC released a draft proposed notice of rulemaking that would reclassify broadband Internet services as a "telecommunications service" under Title II of the Communications Act and reimpose every or near every aspect of the repealed 2015 Title II Order. At its upcoming October 19 public meeting, the full Commission will vote on whether to approve the draft and issue the proposed rulemaking for public comment. Free State Foundation President Randolph May offered his initial reaction to the anticipated release of the draft in a September 26 press release.  

In 2017, the Free State Foundation filed initial comments and reply comments in the Restoring Internet Freedom proceeding that led to the Commission's repeal of the Title II Order and return to broadband Internet access services as an "information service" under Title I of the Communications Act. (Additionally, FSF filed comments in April 2020 in the Restoring Internet Freedom Order remand proceeding.)

 

The draft proposed rulemaking in the new Safeguarding and Securing the Open Internet proceeding amounts to an effectively wholesale return to the Title II Order, premised largely upon the same premises upon which the Title II Order was adopted. The draft presents the same issues of serious concerns regarding rate regulation, vague general conduct standard, harm to innovation in paid prioritization agreements that could benefit consumers, and more that several Free State Foundation scholars addressed in the FSF Press's 2018 book A Reader on Net Neutrality and Restoring Internet Freedom, edited and with an introduction by FSF President Randolph May and I. The chapters in that book – which defend the market-oriented light-touch regulatory approach to broadband under the RIF Order and identify problems with public utility regulation of broadband Internet services under the Title II Order – remain extremely relevant in 2023. 

Copies of A Reader on Net Neutrality and Restoring Internet Freedom are still available for purchase at outlets such as Amazon and Barnes & Noble. The book is recommended reading for anyone who wants a refresher on the policy debate over net neutrality regulation or who are new to the debate and want to be brought up to speed.

Expect FSF scholars to say more in the days ahead about the Safeguarding and Securing the Open Internet proceeding and FCC Chairwoman Jessica Rosenworcel's draft proposal to reimpose public utility regulation on broadband services. 

Major Questions Doctrine Is a Major Obstacle to Net Neutrality Regulation

On September 20, attorneys Donald B. Verrilli, Jr. and Ian Heath Gershengorn published a white paper titled "Title II 'Net Neutrality' Broadband Rules Would Breach Major Questions Doctrine." The co-authors served respectively as former Solicitor General and Acting Solicitor General in the Obama Administration. The paper's co-authors are right in identifying the ascendant major questions doctrine as a major legal impediment to any future attempt by the FCC to re-impose Title II public utility-like regulations on broadband Internet access services. According to Messrs. Verrilli and Gershengorn:

The Supreme Court will surely consider the question whether to classify broadband as a Title II telecommunications service subject to common carrier regulation to be a “major question”—that is, one involving a matter of major economic and political significance… The statutory text on which the Commission proposes to hang its hat lacks the clear statement of authority that the Supreme Court demands. Nothing in Title II of the Communications Act itself or in any other statute gives the Commission the clear and unambiguous authority to classify broadband as a Title II telecommunications service subject to common carrier regulation, and the Commission cannot reasonably conclude otherwise. 

The paper's co-authors trace the Supreme Court's recent major questions decisions – including the June 2023 decision in Biden v. Nebraska and helpfully lays out the factors that the court uses to assess whether Congress provides "clear congressional authorization for agency action" on a matter of major economic and political significance. They provide straightforward analysis of relevant provisions in the Communications Act of 1934 as well as the Telecommunications Act of 1996, concluding that clear congressional authorization is lacking for prospective Title II regulation of broadband by the FCC. Additionally, the co-authors explain why the Supreme Court's 2005 decision in NCTA v. Brand X Services – which upheld the FCC's decision to classify broadband Internet services as a Title I "information service" and not as a Title II "telecommunications service" does not justify Title II reclassification but forecloses it. 

 

According to the paper's co-authors, with Title II amounting to a legal dead end for net neutrality regulation, other avenues should be preferred: 

Congress should enact legislation to resolve this issue once and for all. Absent that, the Commission could use its finite resources to pursue more legally defensible policy initiatives, such as adopting light-touch net neutrality rules under Section 706 of the Telecommunications Act, thereby avoiding Title II reclassification that would be inevitably doomed under the major questions doctrine.

The legal reasoning of Messrs. Verrilli and Gershengorn is persuasive that the FCC lacks statutory authority to impose Title II regulation on broadband Internet access services. And their paper is worthwhile reading. Both Congress and the FCC ought to carefully consider the points made in their paper. 

 

Aside from serious legal roadblocks to imposing Title II public utility-like regulation on broadband Internet services Free State Foundation President addressed policy reasons why such regulation would be a serious mistake in his Perspectives from FSF Scholars – originally published on September 21 as an op-ed in the Washington Examiner – "Reimposing Burdensome Net Neutrality Mandates Will Harm Consumers." And for additional legal background, see FSF President May's July 2022 Perspectives from FSF Scholars, "A Major Ruling on Major Questions."

Ninth Circuit Denies En Banc Rehearing on California's Net Neutrality Law

On April 20, the U.S. Court of Appeals of the Ninth Circuit denied a petition for a rehearing en banc of the January 2022 decision by a 3-judge panel in ACA Connects v. Bonta. In that decision, the Ninth Circuit panel upheld California's 2018 law imposing public utility regulation on broadband Internet access services. The petition of broadband Internet service providers who were seeking an en banc rehearing was the subject of my blog post from February 25 of this year. Among other things, petitioning ISPs argued that the panel decision incorrectly interpreted the FCC's Restoring Internet Freedom Order as an act of surrender or abandonment of the agency's statutory authority over broadband that extinguished the agency's conflict preemptive authority.

The U.S. District Court for the Eastern District of New York reached a completely different conclusion on the issue of the preemptive authority of the Commission under the RIF Order. The District Court's decision in New York State Telecommunications Association v. James is analyzed in my June 2021 Perspectives from FSF Scholars, "Court Halts New York Price Controls on Broadband Internet Services: California's Net Neutrality Law Should Suffer Similar Fate." Here's the paper's key paragraph on this point:

As the District Court rightly recognized, "[t]he FCC’s affirmative decision" in its 2018 Restoring Internet Freedom Order to reclassify broadband Internet as a Title I information service "is different from an abdication of jurisdiction writ large." Pursuant to that affirmative determination, the Commission may still impose regulatory obligations on the service under its Title I ancillary jurisdiction. Drawing on D.C. Circuit precedents, the District Court observed that the Communications Act confers on the Commission "various bases of jurisdiction and various tools to protect the public interest," and the agency has discretion in selecting the basis and corresponding regulatory tools to best accomplish that objective. Thus, the court wrote that choosing Title I "does not tender jurisdiction to the states to regulate interstate broadband providers as common carriers." Instead, the Commission "cement[ed] its long-standing policy choice concerning the propriety of imposing common-carrier rate regulations upon broadband internet service." 

The District Court's decision in James is now on appeal to the Second Circuit, as I discuss in a January 2022 Perspectives.

 

Getting back to ACA Connects v. Bonta: The Ninth Circuit's April 20 order likely will be followed by a petition for certiorari to the U.S. Supreme Court. Expect to hear more from Free State Foundation scholars as the case involving California's broadband Internet regulation law continues.