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 Sets Aside FCC's New Title II Order

On January 2, the U.S. Court of Appeals for the Sixth Circuit issued a decision on the merits in MCP No. 185. The three-judge panel's decision set aside the FCC's 2024 Securing and Safeguarding the Open Internet Order. The court wrote:   

Using "the traditional tools of statutory construction," id., we hold that Broadband Internet Service Providers offer only an "information service" under 47 U.S.C. § 153(24), and therefore, the FCC lacks the statutory authority to impose its desired net-neutrality policies through the "telecommunications service" provision of the Communications Act, id. § 153(51).

The Sixth Circuit's decision in MCP No. 185 presents a straightforward reading of the Communications Act. It thus reaches a relatively easy conclusion that broadband Internet access services are best understood as fitting the definition of lightly regulated "information services" under Title I of the Act. This decision is welcome because it means that innovative broadband networks will remain free from unjustifiable public utility regulation that Congress never authorized. 

The Sixth Circuit's opinion is refreshing because it shows how the traditional tools of statutory interpretation can be used to resolve even seemingly technical questions like the regulatory classification of broadband. It's the type of decision that eluded us so long as lower courts were subject to the "Chevron doctrine" and effectively required to rationalize even far-fetched agency interpretations or re-interpretations of supposed ambiguous statutory provisions. 

The Sixth Circuit's commendable decision was made possible by the Supreme Court's overruling of the "Chevron doctrine" in its 2025 Loper Bright Enterprises v. Raimondo decision, which signaled a return to principles of judicial review based on the best reading of statutes rather than elastic deference to regulatory agencies. 

 

The August 2024 stay order issued by a different Sixth Circuit panel in an earlier stage of the litigation presented a persuasive analysis that the FCC's order is contrary to the Supreme Court's Major Questions Doctrine. However, the merits panel's decision that was issued on January 2 rightly takes a first-things-first approach by concluding the FCC's order exceeded the terms of the Communication Act. Recourse to the Major Questions Doctrine is unnecessary to reach that conclusion. 

 

P.S. In December 2023, the Free State Foundation filed public comments with the FCC opposing the agency's proposed Title II reclassification decision. And in January 2024, the Free State Foundation filed reply comments in the Commission's Securing and Safeguarding the Open Internet proceeding. Those comments and reply comments predated the Supreme Court's decision in Loper Bright. For a defense of the Loper Bright decision, see FSF President Randolph May's July 2024 Perspectives from FSF Scholars, "Chevron's Demise Re-Aligns Administrative State With Founders' Vision."

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.

ISPs Request High Court Ruling on State-Level Rate Regulation of Broadband

On August 10, a handful of trade associations representing broadband Internet service providers (ISPs) filed a petition for a writ of certiorari with the Supreme Court in New York State Telecommunications Association v. James. The petition presents the question of whether the Communications Act preempts New York's broadband rate-regulation law.

New York's Affordable Broadband Act imposes price ceilings – a form of rate regulation – on broadband ISPs offering service within the state. Under the New York law, ISPs offering service in the state must offer $15-per-month and $20-per-month plans to low-income individuals. 

 

On April 26 of this year, a Second Circuit panel's 2-1 majority rejected broadband ISPs' claims that the New York rate regulation law was subject to field preemption and conflict preemption. My summary of the court's decision in NYTSA v. James is presented in a May 3 Perspectives from FSF Scholars, "Second Circuit Rejects Preemption Challenge to New York's Broadband Rate Regulation."

 

At the time it was released, the Second Circuit's decision in NYSTA v. James was expected to be short-lived because the ruling was based on the FCC's Title I "information services" classification of broadband Internet access services under the Restoring Internet Freedom Order. The court's decision was issued a day after the Commission repealed the RIF Order and made its Title II "telecommunications services" reclassification decision in the Securing and Safeguarding the Open Internet Order. As I observed in a June 20 blog post, the petitioners in NYSTA v. James declined to file a petition for a rehearing en banc at the Second Circuit. They similarly declined to file a motion for reconsideration by the panel in light of the FCC’s new Title II Order. 

 

However, the legal ground shifted dramatically once again following the Supreme Court's decision in Loper Bright Enterprises v. Raimondo overturning the "Chevron doctrine" and especially after the Sixth Circuit's August 1 order staying the new Title II Order pending a decision on the merits in that case. For more, see Free State Foundation President Randolph May's August 23 Perspectives from FSF Scholars, "The Sixth Circuit Stays the FCC's Latest Net Neutrality Flip Flop."

 

On August 2, the petitioners in NYSTA v. James filed an emergency petition with Supreme Court Justice Sotomayor, seeking a stay on the Second Circuit's decision. On August 8, the petitioners filed a letter with an attached stipulated agreement by the parties. Under the stipulation, New York agreed to not enforce its rate regulation law pending the Supreme Court's decision on the ISPs' now-pending petition for a writ of certiorari. In their cert petition, filed on August 10, the ISPs renewed their arguments that New York's rate regulation law is subject to both field preemption and conflict preemption. According to the docket, New York is required to file its response by September 13.

 

For a critique of the Second Circuit's narrow understanding of conflict preemption, check out a May 10 Perspectives from FSF Scholars titled "Second Circuit Preemption Decision Won't Save New York Broadband Rate Regulation Scheme," by Law Professor Daniel Lyons, a member of the Free State Foundation's Board of Academic Advisors.  

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."

USTelecom Study Comparing Broadband in the U.S. and the EU Confirms the Wisdom of a Light Regulatory Touch

USTelecom | The Broadband Association yesterday released a study comparing broadband deployment and adoption levels in the United States and the European Union (EU). Not surprisingly, it underscores the indisputable superiority of the former's largely hands-off approach to the public-utility model embraced by the latter.

In 2017's Restoring Internet Freedom Order (RIFO), the FCC under then-Chairman Ajit Pai once again embraced a light-touch regulatory framework for broadband Internet access service. In an October 2020 Order on Remand responding to the D.C. Circuit's 2019 decision in Mozilla Corp. v. FCC, which largely upheld the RIFO, the Commission concluded that:

[E]ven with unprecedented increases in traffic during the COVID-19 pandemic, [American] broadband networks have been able to handle the increase in traffic and shift in usage patterns…. [U]nlike the European Union, which takes a utility-style approach to broadband regulation and has had to request that bandwidth intensive services such as Netflix reduce video quality in order to ease stress on its network infrastructure, the United States has not had to take similar steps, despite similar surges in Internet traffic. This country's robust and resilient broadband networks are, in significant part, the result of over two decades of almost continuous light-touch regulation, which has promoted substantial infrastructure investment and deployment.

The just-released USTelecom study, "US vs. EU Broadband Trends (2012-2019)," provides strong evidentiary support for that assessment.

Unencumbered by the investment disincentives inherent in public utility regulation, American broadband providers spend three times more on network infrastructure than their EU counterparts. As a direct consequence, the United States enjoys a substantial, across-the-board advantage with respect to both deployment and adoption:

• Facilities that can deliver 30 megabits per second (Mbps) downstream cover 12 percent more of the U.S., and infrastructure capable of 100 Mbps or greater downstream has been constructed in 25 percent more of this country.
• Over 9 percent more Americans subscribe to 30 Mbps service, and over 21 percent more subscribe to 100 Mbps or greater packages.

American leadership is even more pronounced in rural areas, where deployment of 30 Mbps service exceeds that in the EU by over 22 percent.

To quote USTelecom President and CEO Jonathan Spalter, "if the U.S. had followed the EU's more regulatory path, then our nation's digital divide could be more than triple what it is today."

Five Years After the FCC's Ill-Fated Title II Order, Broadband is Thriving

Five years ago today, the Wheeler/Obama FCC adopted its Title II Order, subjecting broadband Internet access services to public utility-like regulation. The Commission's imposition of Title II regulation was a heavy-handed reversal of the prior bipartisan consensus policy favoring a light-touch regulation of broadband Internet services. When the 2015 Title II Order was adopted, pro-regulatory Commissioners and advocates claimed that stringent new rules were absolutely necessary to save free speech on the Internet. And Title II regulation was touted as the only way to prevent the rise of broadband service "fast-lanes" that would divide the Internet between haves and have-nots. 

Thankfully, under Chairman Ajit Pai's leadership, the FCC changed course and repealed Title II regulation in the 2018 Restoring Internet Freedom Order. The RIFO concluded that Title II regulation actually harmed broadband investment and innovation, slowing deployment to all Americans. Now, five years after the Title II Order's adoption, none of the horror stories about broadband service provider speech suppression or fast lanes and slow lanes have materialized. 

Broadband subscribers are better off than they were five years ago, without Title II regulation. Since the repeal of the Title II Order, broadband investment has improved, wireless and wireline subscribers have risen, speeds have increased, data traffic has dramatically grown, and deployments of next-generation networks such as 5G wireless and gigabit wireline are underway. For more on this, see my September 2019 Perspectives from FSF Scholars paper, "Resurgence in Broadband Deployment Vindicates FCC's Pro-Investment Policies." And for a more recent look at the state of the broadband Internet services in this restored light-touch regulatory environment, see my Perspectives paper, "The Communications Market at 2020: The Competitiveness of Video, Mobile, and Fixed Broadband."

Consumers Receive High Volumes of Spam Calls, Low Volumes of Spam Texts

Americans are inundated with high numbers of unwanted robocalls, but they receive much lower numbers of unwanted text messages. A survey released in December by Zipwhip, a leading provider of text messaging solutions for businesses, shows that whereas 51% of respondents "often" receive spam over the phone, only 18% "often" receive spam texts. 

The survey findings reaffirm the importance of the Commission's Title I non-regulatory policy for texting. Given the freedom and flexibility to implement solutions, text messaging service providers – not Title II public utility-like restrictions – have successfully curbed unwanted messages. Those providers should remain free to pursue innovative solutions to maintain quality of service. 

According Zipwhip's survey, about 51% responded that they receive spam "often" over the phone and 83% receive spam at least "somewhat often" over the phone. Furthermore, 70% receive spam "often" over email and 92% receive email spam at least "somewhat often." However: "Only 18% of respondents said they get text spam 'often' and only 17% said they receive scam attempts 'often.' Most said they 'rarely' receive these types of messages (41% and 40% for spam and scam, respectively)." Illegal scam rates also are notably higher for voice calls and emails than for texts.

Importantly, the Zipwhip survey figures regarding low rates of unwanted texts vindicates the FCC's determination in its Wireless Messaging Service Order (2018) that text messaging services are lightly- or non-regulated "information services" under Title I of the Communications Act. That determination was amply supported, first and foremost, by the fact that wireless text messaging service capabilities fit the statutory definition of "information services." But the Commission also justified its Title I classification of wireless text messaging services with the compelling policy rationale that entrepreneurial innovation protects subscribers from spam and unwanted texts better than the strictures of public utility regulation. The 2018 Order stated: "In the absence of a Commission assertion of Title II regulation, wireless providers have employed effective methods to protect consumers from unwanted messages and thereby make wireless messaging a trusted and reliable form of communication for millions of Americans." Survey findings of markedly lower rates of unwanted communications via text messaging compared to other media platforms indicate that, a year after the 2018 Order, the policy for non-regulation of texting is succeeding in protecting consumers.

Zipwhip survey figures regarding the high rates of robocalls and emails are consistent with other reports. According to YouMail's Robocall Index, about 58.5 billion robocalls were sent nationwide in 2019. A YouMail analysis found that while about 27% of robocalls provided consumers with important alerts or reminders for things such as a school closure or doctor's appointment, the remaining 73% of robocalls are unwanted or spam. And about 25% of robocalls are illegal scams. It is elsewhere estimated that spam constituted around 55% of global email traffic in 2019. 

The problem of unwanted robocalls and the closely related problem of caller ID spoofing prompted Congress to pass the TRACED Act, which President Trump signed into law on December 31, 2019. Under the TRACED Act, voice service providers are required to make available to consumers – free of charge – technologies to authenticate calls and block robocalls. The Act extends the statute of limitation and increases fines for making unwanted robocalls. Additionally, the Act directs the FCC to undertake rulemakings to further ensure subscribers are protected from one-ring scams as well as other unwanted calls or texts. 

In its implementation of the TRACED Act, the Commission should rightly take aim at the sky-high number of scam calls as well as other unwanted robocalls. And it should exercise its oversight authority over voice service providers to ensure consumers are protected. At the same time, it is imperative that the Commission adhere to its Title I policy for text messaging, which has an established track record in protecting consumers. 

Wireless Carriers Launch Next-Generation Text Messaging Initiative

On October 24, the four major national wireless carriers announced a new joint venture to develop a next-generation wireless text messaging system. The Cross Carrier Messaging Initiative (CCMI) will be based on the Rich Communication Services (RCS) protocol. In my Perspectives from FSF Scholars paper, "The FCC Should Halt Bogus Lawsuits Threatening Popular Texting Services," I explained:

Texting services are in the process of upgrading to a next-generation technology called Rich Communication Services (RCS). This new protocol, which is being made available for cell phones with Android operating systems, allows more interactive functions, including live group chats, as well as transmission of higher-quality audio and video files. 

The launch of CCMI will help accelerate the adoption of RCS and provide consumers more advanced texting functions. The market for texting and messaging services generally is innovative and competitive. RCS text messaging services ought to receive the same unregulated treatment under Title I of the Communications Act that SMS and MMS texting services receive pursuant to the FCC's Wireless Messaging Services Order (2018). (That order states: "To the extent that successor protocols share the characteristics of SMS and MMS that we find controlling here, we expect they would be similarly classified under the Act.")

FCC's Defining Case for Repealing Internet Regulations Upheld in Court

In my December 2017 Perspectives from FSF Scholars paper "The FCC's Defining Case for Repealing Internet Regulations," I explained that the legal fate of the Restoring Internet Freedom Order (RIFO) would come down to definition of terms in the Communications Act. Indeed, the D.C. Circuit's decision in Mozilla v. FCC upheld the RIFO based on the agency's interpretation of the relevant statutory terms. 

My paper explained that the draft RIFO presented a convincing explanation for why broadband Internet access service meets the definition of an "information service" under Title I. Further, my paper explained that the RIFO's reclassification decision was supported by agency precedent and the U.S. Supreme Court's decision in NCTA v. Brand X Services (2005). Also, my paper stated that "if an appellate court applies the deferential Chevron standard of review for agency interpretations of federal statutes, the Restoring Internet Freedom Order’s legal validity should be a foregone conclusion." In fact, Brand X and "Chevron deference" weighed heavily in the D.C. Circuit's decision in Mozilla v. FCC.

Notably, the D.C. Circuit did not uphold the RIFO's express preemption provision. For incisive commentary on that aspect of the decision, see the October 4 Perspectives paper by Professor Daniel Lyons, a Member of the Free State Foundation's Board of Academic Advisers. For a same-day reaction to the decision in Mozilla v. FCC, see Free State Foundation President Randolph May's October 1 Media Advisory.

FCC Should Close Its Toll-Free Texting Proceeding and Tackle Robocalls

There were nearly 5 billion robocalls in February, according to press reports. A substantial number of robocalls are scams or unwanted calls. Yet during that same month, there likely were zero instances of toll-free phone numbers being enabled to receive text messages without authorization by business subscribers. That's because toll-free texting isn't a genuine consumer protection problem – but robocalls are a serious and growing problem.

Instead of devoting any further agency resources to considering proposals to impose unhelpful new regulation on toll-free texting, the FCC should promptly close its toll-free texting proceeding and direct its attention to actions which will curb unwanted robocalls. To its credit, the Commission is now trying to determine what further actions it can take to address the robocall problem. 

Although texting is ubiquitous for mobile wireless services, many enterprises sign up with texting service providers to receive texts to their landline numbers, including toll-free numbers. So it was rather unexpected when in 2018 the FCC proposed rules to control authorizations for text enabling of toll-free numbers. Free State Foundation President Randolph May and I filed public comments with the FCC regarding its proposal. As we explained, there is no good reason for regulating authorization of texting services for toll-free numbers. Rather, there are several reasons why regulating toll-free texting would be unwise and harmful. 

First, there is no market failure problem regarding texting and online messaging services.

According to a CTIA estimate, in 2017 American consumers sent a combined 1.77 billion text messages (counting 160-character texts as well as photos and video clips). Competing mobile wireless providers offer consumers service plans that bundle unlimited texting with voice and data. Also, instant messaging, social media, and email are widely available alternatives for consumers. Furthermore, the record evidence compiled in the FCC's proceeding shows no clear-cut instances of consumer harm caused by unauthorized text-enabling of toll-free numbers. 

Second, new regulation would undermine the non-regulated, pro-innovation environment in which texting emerged – and which FCC policy supports.

Text messaging services are a technological and marketplace innovation success story. They developed outside the strictures of legacy telephone regulation. Moreover, in December 2018, the FCC issued an order declaring that text-messaging services fit within the statutory definition of non- or lightly-regulated “information services” under Title I of the Communications Act. The Commission's order acknowledged that SMS spam texting rates of around 2.8% are drastically lower than email spam rates of over 50%. And the order stated that "continuing to empower wireless providers to protect consumers from spam and other unwanted messages is imperative." Just as the order found that legacy telephone regulation under Title II would be harmful to innovation necessary to combat unwanted texts, expanding legacy regulation to text-enabling of toll-free numbers would be equally harmful. 

Third, the FCC's 2018 Declaratory Ruling addressed any potential problems.

In itsDeclaratory Ruling from June 2018, the Commission "clarif[ied] that only a toll-free subscriber may authorize the text-enabling of a toll-free number and that such authorization must occur beforea toll free number is text-enabled." The Commission's ruling sufficiently set forth the rights of toll-free number owners, facilitating recourse at the Commission or in the courts in cases of alleged violations. Additionally, text messaging service providers have confirmation processes in place for toll-free number owners. Those providers do not stand to gain from text-enabling numbers without authorization, and existing market incentives are adequate to protect consumers. If text-messaging providers abuse the confirmation process, they will damage their reputation and lose valuable business to rival providers and messaging platforms – of which there are many.

Fourth, new regulation would create obstacles to addressing any actual instances of unauthorized text-enablement of toll-free numbers.

The Commission's proposal would require "Responding Organizations" (RespOrgs) to verify that toll-free number owners consented to text-enablement. This would mean inserting RespOrgs – which assign toll-free numbers for voice calling – into an entirely new role of administering already assigned toll-free numbers for texting. But owners of toll-free numbers would not benefit by this because RespOrgs don't possess reliable information regarding the identity of toll-free number owners. Rather, RespOrgs would accrue, wrongfully, a benefit from Commission regulation handing them a new line of business. 

In sum, it's time for the FCC to close its toll-free text-enabling proceeding and to focus the freed-up resources on combatting the increasing number of unwanted robocalls to consumers. 

FCC Proposal Keeps Text Messaging Free From Unnecessary Regulation and Spam

At its December 12 meeting, the FCC will vote on a sensible proposal to keep popular wireless messaging services free from public utility regulation. By declaring texting and other wireless messaging services are Title I "information services," the FCC will ensure messaging service providers have flexibility to protect consumers from spam and other unwanted messages. 

For several years, Free State Foundation President Randolph May and I have urged the Commission, in comments filed with the agency and in publications, to declare text messaging services to be lightly-regulated Title I information services. We applaud the Commission's proposal, finally, to provide deregulatory certainty for messaging services.

In today's competitive communications marketplace, wireless service providers routinely offer consumers messaging services bundled with voice and mobile broadband services. Text messaging or short messaging services (SMS) typically involve person-to-person transmission of texts up to 160 characters long. Multi-media messaging services (MMS) are person-to- person transmission of photos or video clips. The popularity of wireless messaging services is reflected in CTIA's estimate that, in 2017, American consumers sent a combined 1.77 billion SMS and MMS messages. 

As the Commission's draft proposal states: "The Communications Act, as amended, divides communications services into two mutually exclusive types: highly regulated 'telecommunications services' and lightly regulated 'information services.'" The Commission proposes to declare that SMS and MMS wireless messages meet the statutory definition of Title I information services because they involve the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications. 

For starters, when SMS and MMS messages are sent by users, they are routed through servers on mobile networks, stored on those networks, and forwarded to the recipients when their devices are able to receive them. Thus, the proposal finds: "This storage and retrieval capability is analogous to email service, which has been recognized under Commission precedent as an information service and similarly involves storage and retrieval functionality." 

Additionally, the Commission rightly recognizes adoption of its proposed Title I classification determination "will empower wireless providers to continue their efforts to protect consumers from unwanted text messages." Pointing to an estimated 2.8% spam rate for SMS compared to an over 50% spam rate for email, the Commission draft concludes:

[C]ontinuing to empower wireless providers to protect consumers from spam and other unwanted messages is imperative in light of the fact that the growth and popularity of SMS and MMS wireless messaging services have made them an attractive target for bad actors and spammers.

A Title II declaration would make it more difficult to combat unwanted messages. As the proposal says: "[I]n the context of voice service, under Title II, the Commission has generally found call blocking by providers to be unlawful, and typically permits it only in specific, well-defined circumstances." Under a Title II regime, messaging service providers would be restricted in their ability to stop spam from reaching consumers, thereby flooding consumers with messages they don't want.   

Finally, no good reason exists for increased regulation. SMS and MMS services emerged from and thrive in a competitive, essentially unregulated environment. Consumers have choices among competing wireless providers offering messaging service. Data cited in the draft Communications Market Competition Reportindicates that at the end of 2017, 92% of the population had access to at least four 4G LTE providers. Also, over-the-top applications and email are other popular means of communication, providing further competitive market checks on service provider behavior. Meanwhile, messaging service providers are subject to the Federal Trade Commission's authority to take action against unfair and deceptive trade practices. Antitrust is another available resource for safeguarding competition in the market. 

The Commission should adopt its proposed declaratory ruling on text messaging in order to preserve a light-touch regulatory environment and to allow service providers to continue to prevent consumers from getting spammed.