Because every American
should have access
to broadband Internet.

The Internet Innovation Alliance is a broad-based coalition of business and non-profit organizations that aim to ensure every American, regardless of race, income or geography, has access to the critical tool that is broadband Internet. The IIA seeks to promote public policies that support equal opportunity for universal broadband availability and adoption so that everyone, everywhere can seize the benefits of the Internet - from education to health care, employment to community building, civic engagement and beyond.

The Podium

Blog posts tagged with 'Title Ii'

Wednesday, October 08

Wednesday Reading

By Brad

In an op-ed for Roll Call, Bret Swanson — President of Entropy Economics and one of our Broadband Ambassadors — argues that even the so-called Title II ‘Lite’ could have disastrous results. An excerpt:

In a new legal analysis, in fact, the Phoenix Center says “Title II Lite” is an impossibility. Any imposition of Title II on broadband, Phoenix argues, will bring tariffing and thus price controls to the entire net. It will convert all edge providers, by definition, into customers of the broadband service providers. And the FCC will not, contra the “lite” advocates’ assertions, be able to forbear from the numerous and weighty rules of Title II.

Law allows for forbearance — itself a long and convoluted process — if there is competition. The FCC, however, has defined the BSPs as “terminating monopolies” — Comcast, in other words, has a monopoly on Comcast customers. Competition is thus impossible and therefore, argues Phoenix, is forbearance. Because of the complex, interconnected nature of the net, where software and content firms are also network firms, and vice versa, where consumers are also content providers, the inability to forbear would mean Title II spreading across every node and layer of the net and likely affecting the entire ecosystem.

Thursday, October 02

8 Myths Muddying the Net Neutrality Debate

By Rick Boucher

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There are several commonly disseminated myths aimed at perpetuating confusion and misinformation during the pendency of the Federal Communications Commission’s (FCC) Open Internet proceeding. Facts, however, cut through the clutter and allow for a discussion rooted in reality rather than rhetoric.

Title II reclassification of broadband is not necessary to preserve an Open Internet.
Here’s why the FCC can and should move forward with Open Internet rules designed under its Section 706 authority rather than reclassifying broadband services under Title II of the Communications Act:

TITLE II AND SECTION 706: Myths vs. Facts

Myth: Title II regulations helped bring about the Internet boom of the early 2000s.

Fact: Although an initial investment spike occurred immediately after the passage of the 1996 Act, that investment was short-lived. That initial spate of investment was primarily directed at technologies and business models that were quickly outstripped by more modern technologies. In fact, the majority of the investment in our country’s broadband infrastructure occurred after the FCC’s 2003-05 decisions to decrease regulations on the broadband industry. This surge in investment laid the groundwork for high-speed Internet to become a leading driver of our nation’s economic growth and to spur the incredible innovation consumers enjoy today.

Myth: Title II-like regulations helped Europe leapfrog the U.S. on broadband deployment.

Fact: Europe gave up its leadership position when it began its path toward heavy-handed regulation that deterred broadband investment and deployment.

According to an independent study, today nearly 82% of U.S. consumers enjoy access to next-generation, high-speed broadband networks (over 25Mbps) while only 54% of Europeans have comparable access. In rural areas, the U.S. again leads in access, 48% to 12%. Next-generation wireless broadband (LTE) is available to 86% of Americans but only 27% of Europeans.

European broadband policies are built on extensive, public utility-style regulation that has depressed broadband investment. In contrast, the U.S. light-touch regulation model has enabled U.S. broadband network operators to invest more than double per household than Europe does: $562 versus $244 in Europe.

Myth: Applying Title II regulations to broadband networks and providers will prevent companies from creating Internet “fast lanes”.

Fact: The FCC has stated that no ISP has ever engaged in paid prioritization schemes. No evidence exists that ISPs have ever or are likely to create fast lanes and slow lanes.

Reclassifying broadband under Title II would not prevent such. In fact, under Title II, public utilities have always been allowed to offer prioritized services. Telephone companies routinely offer installation and repair priority along with service level guarantees to those willing to pay extra money.

According to FCC Chairman Wheeler, the 2010 net neutrality rules were never intended to cover these privately-negotiated business deals, only the last mile of the Internet.

Myth: Wireless networks and wireline networks are virtually interchangeable these days and should have the same net neutrality rules.

Fact: In the 2010 rules, to which all carriers committed, the FCC stated that special characteristics of mobile broadband infrastructure make it essential to give mobile providers additional flexibility in how they manage the traffic on their networks. Due to resource constraints, such as the limited amount of spectrum available for consumer use, mobile networks operate differently than wireline networks. A stringent regulatory environment established under Title II, and intended primarily for a monopoly-era copper wireline world, would be onerous.

The FCC still imposed two conditions on wireless networks in 2010. First, wireless networks cannot block access to legal websites, with exclusions for reasonable network management. Second, wireless network providers were required to disclose their network management practices, performance and terms and conditions of their broadband services.

The current approach acknowledges how wireless networks are different from fixed networks but still protects consumers and enables investment and innovation in the intensely competitive wireless marketplace.

Myth: ISPs harm the open Internet through discriminatory practices. The only way to keep the Internet open is to reclassify Internet services as telecommunications services.

Fact: The Internet, without Title II regulations, is and has been open since its first public use. It continues to thrive in the current regulatory environment. In contrast, Title II regulation would stifle investment and hinder innovation. Innovative new services and business models would have to be vetted and approved by the FCC, slowing the Internet’s vitality and growth.

Ensuring a fair and open Internet through authority granted by Section 706 is a better path. Section 706 permits the FCC to prevent paid prioritization while encouraging innovation and investment from ISPs and other Internet companies.

Myth: Title II can be easily adapted to today’s modern communications systems.

Fact: The past 20 years have seen stunning technological advancements in the communication industry. Americans can now access a wealth of information in myriad new ways. The transformation of the communications industry has caused companies to no longer fit neatly into legal categories envisioned by the 1996 Telecommunications Act or, even more obviously, the Title II rules written in 1934. That’s why companies not normally thought of as “broadband providers” could find themselves categorized and regulated as telecommunications carriers because their service overlaps with the services provided by ISPs if Title II regulations are placed on broadband services. For example, when Google connects you to a business you searched, should it be considered subject to Title II? Or if a provider of email enables a video messaging session, would it open itself up to Title II regulation on the grounds that it is a facilities-based provider or reseller? Could be. And that’s the fear.

Myth: The FCC could apply Title II to broadband, but exercise its forbearance authority when dealing with innovative companies and services.

Fact: Reclassifying broadband services as telecommunication services under Title II would burden 1/6 of the nation’s economy with stringent, investment-inhibiting government regulation. The government would have expansive power over all broadband services, likely including all edge providers and consumer broadband applications and services. The process necessary to analyze and identify which areas of the nation’s broadband economy the FCC would spare from heavy government intrusion would be both lengthy and costly. Additional time and resources would probably be squandered in the litigation that will inevitably follow.

Myth: Unlike Title II, the FCC does not have the power to promote an open Internet under the limited provisions of Section 706.

Fact: Relying on Section 706 to protect consumers and ensure an Open Internet is a superior choice to the overbroad, utility-style Title II regulatory framework of the 1934 Communications Act.

The FCC’s Section 706-like approach in 2010, created rules that found the right balance between regulations necessary to advance consumer protection goals and the need to attract new investment to broadband to ensure future deployments of modern high-speed networks. Under those rules, access to capital grew and we saw massive growth in the digital app economy, video over broadband, VoIP, the advent of tablet computing, and the rise of mobile e-commerce.

Moreover, a Federal Appeals court has given Section 706 its seal of approval and the FCC can assert this authority with confidence. In fact, the courts have said that the FCC is empowered to create rules “governing broadband providers’ treatment of Internet traffic…that they will preserve and facilitate the “virtuous circle” of innovation that has driven the explosive growth of the Internet.”

The facts are clear: Reclassification of broadband under Title II is unnecessary to ensure continued Internet openness and would backfire with harmful consequences for innovation and investment. The FCC should instead make use of its powers under Section 706 to protect consumers, promote innovation and encourage nationwide deployment of next-generation broadband.

Wednesday, September 17

Protection Without Breaking the Internet

By Brad

Speaking of net neutrality, over at USA Today, Jeff Pulver makes the case that the government can look out for consumers with onerous new rules:

The heavy hand of the early 20th Century rules is not necessary to protect an open Internet, and the benefit of the more modern “information services” classification approach is that it doesn’t kill off the investment needed to continue modernizing our Internet infrastructure. As FCC Chairman Tom Wheeler and the courts have suggested, other provisions in the act provide ample authority for the FCC to protect consumers from potential anti-competitive conduct.

We should do everything to protect the open Internet – no one argues that. But we are doing the American public a disservice if we insist that the only path to that end is a Title II regulatory approach. If we go down that dead-end road and turn the Internet into a regulated public utility, we will ignore the lessons learned a decade ago in the process that led to the “Pulver Order” and choke off a new wave of innovation and investment that will support the next generation of entrepreneurs.

Filings Reveal…

By Brad

Among the tidal wave of comments the FCC has received over the open Internet/Title II issue, Fred Campbell of the Center for Boundless Innovation in Technology finds something interesting. As he writes:

A stunning revelation is buried in a lengthy Netflix filing at the Federal Communications Commission (FCC): Netflix used its subscribers as pawns in a Machiavellian game of regulatory chess designed to win favorable Internet regulations.

The filing reveals that Netflix knowingly slowed down its video streaming service with the intention of blaming Internet service providers (ISPs). Specifically, Netflix used its relationships with Internet ‘backbone’ providers (e.g., Level 3, Cogent) to deliberately congest their peering links with ISPs, and at the same time, started publishing ‘ISP speed rankings’ to make it appear that ISPs were causing the congestion. It appears that Netflix cynically held its subscribers hostage to reduced service quality in order to pressure the FCC into adopting favorable Internet regulations that would permanently lower Netflix’s costs of doing business.

Netflix’s plan to frame ISPs for sabotaging its service has been surprisingly successful so far. Some subscribers have blamed their ISPs for the service disruptions Netflix itself caused, which prompted the FCC to open an investigation of the Internet backbone market. Now all Netflix needs is for the FCC to adopt new regulations.

At the very least, Campbell’s post should serve as a reminder that in the current version of the seemingly never-ending “net neutrality debate,” it’s not really little guys vs. big guys, but one big tangled mess of special interests and corporations. All the more reason for the FCC to move forward without extreme caution.

Monday, September 15

Regarding Title II Reclassification

By IIA

This morning, IIA filed Reply Comments with the FCC urging the Commission to embrace its 706 Authority instead of Title II reclassification in order to preserve an open Internet. In our comments we warned that reclassification would reverser decades of Commission precedent and potentially hurt the Internet ecosystem’s continued success and future of innovation.

Section 706 has worked well to protect the open Internet that everyone wants to preserve, while minimizing harm to investment and innovation. Section 706 remains viable and effective. By contrast, Title II is an antiquated regulatory framework designed for the era of monopoly telephone service that would undermine today’s competitive broadband marketplace and disserve consumers, dissuade entrepreneurs and inject unnecessary regulatory uncertainty threatening future dynamism in the broadband ecosystem.

— IIA Co-Chairman Bruce Mehlman

Reliance on Section 706, we argue, enables proper balance between necessary regulation to advance such goals as consumer protection and the imperative of attracting new investment to broadband to ensure further deployments of ever-fast systems that will support the applications of tomorrow. It is also the only way to ensure the innovation and continued explosive growth necessary to meet the ambitious goals of the National Broadband Plan.

The FCC already has enough authority under Section 706 to keep the Internet open with high-speed access for consumers and flexibility for entrepreneurs to innovate. Reclassifying broadband as a utility is like using a sledgehammer when a screwdriver will suffice. Title II is a blunt instrument that might break the Internet’s record of innovation and investment, while Section 706 is a better tool for fixing any problems that arise.

— IIA Co-Chairman Jamal Simmons

Title II, we also note, was not the primary catalyst behind the massive investment that occurred following the enactment of the 1996 Telecommunications Act, and that if regulators wanted an example of the chilling effect Title II could have on broadband, Europe offers a good example.

European policies built on extensive, public utility-style regulation and wholesale network unbundling have depressed broadband investment and access to next-generation networks overseas, as fully 82% of U.S. consumers enjoy access to high-speed broadband networks compared to only 54% of European consumers. Section 706 fortunately offers us an alternative path that will enable the private investment necessary to deploy modern broadband networks—wireline, wireless, and cable—and continue the virtuous circle fueled by light-touch regulation of the Internet ecosystem.

— IIA Honorary Chairman Rick Boucher

To read our Reply Comments in full, visit here.

Friday, September 12

Investment Heroes

By Brad

The Progressive Policy Institute has released its annual list of “Investment Heroes,” and at the top of the list are AT&T and Verizon, with estimated capital expenditures of more than $20 billion and $15 billion, respectively. That’s a lot of investment dollars, but as Hal Singer warns in Forbes, current regulations being considered by the FCC could severely hurt that investment going forward:

This week, PPI released its third annual report on “U.S. Investment Heroes,”  authored by Diana Carew and Michael Mandel, which analyzes publicly available information to rank non-financial companies by their capital spending in the United States. Once again, AT&T and Verizon ranked first and second, respectively, with $21 and $15 billion in domestic investment in 2013. Comcast, Google, and Time Warner also made PPI’s top 25 list, each investing over $3 billion. The authors credit investment in the core of the network with sparking the rise of the “data-driven economy.”

In light of the results from prior experiments in rate regulation, the FCC should eschew calls to regulate ISPs under Title II. The incremental benefits (potentially barring fast lanes) are dubious, but the incremental costs (less investment at the core of the network) would be economically significant. Given its size and contribution to the U.S. economy in terms of jobs and productivity, even a small decline in core investment in response to rate regulation would impose social costs beyond the immediate harm to broadband consumers from an atrophying network.

Tuesday, September 09

Big Investment in Broadband

By Brad

$1.3 trillion.

That’s the amount of investment broadband providers have made in networks since 1996, according to a new report from the US Telecom association. Obviously, that’s a lot of investment, and as the paper shows, all those dollars have made a huge difference when it comes broadband access and speeds. Some highlights:

• Over 95% of Americans can access fixed broadband, with 88% having at least two providers to choose from.

• 99% of Americans have broadband at speeds 10 mbps or more available to them.

• 99% also have mobile broadband available, with 97% able to choose from at least three providers.

• Broadband investment jumped to 10% — from $69 billion in 2012 to $75 billion in 2013.

While those are some impressive numbers across the board, It’s not all rosy news from US Telecom. As the association notes in its press release:

Ongoing investment in all broadband networks, wireline and wireless, will be essential to accommodate the expected data traffic growth and enable the continued adoption of more powerful information and communications technologies and applications. Economically efficient investment in U.S. broadband infrastructure will pay off in the form of consumer welfare, business productivity, and global competitiveness. As noted in USTelecom’s blog on investment, a move to stricter Title II regulation could inject unnecessary uncertainty and negative pressures into the broadband investment equation. This poses risks to broadband investment, and also to the so-called “virtuous cycle” of innovation among broadband and related information technology industries.

Investment in broadband matters, which makes any move away from the “light regulatory touch” in place since 1996 all the more problematic. Can the FCC keep the Internet open without putting all this investment at risk? The Progressive Policy Institute thinks so. According to their recent paper, “The Best Path Forward on Net Neutrality,” they’re confident the FCC can achieve its goals by leaning on its Section 706 authority.

Monday, September 08

Title II and Internet Video

By Brad

Late last week, Bret Swanson of Entropy Economics (he’s also one of our Broadband Ambassadors) penned a column for Forbes breaking down the negative effects Title II regulations could have on the growing industry of web video. An excerpt:

Broadband and mobile networks and the core Internet have all grown up outside of Title II. The lack of interference from Washington is a big factor in their success (and why the heavily regulated Title II telephone network is withering away).

A Title II reclassification of broadband would throw broadband into a regulatory world it’s never seen; undermine the economics and existing technical and business arrangements of the entire ecosystem; and ignite a decade’s worth of strident litigation. Not only would Title II disrupt today’s broadband, video, and Web markets, it would also prevent this highly dynamic system from finding its way toward the new technologies, better products, lower prices, and unseen content innovations of the future.

Check out Swanson’s full piece over at Forbes.

Friday, September 05

The Smarter Path

By Brad

A new paper from Progressive Policy Institute Senior Fellow Hal Singer and Brookings Non-Resident Senior Fellow Robert Litan examines the effect Title II regulations could have on investment and the Internet ecosystem as a whole. An excerpt:

Imposing public-utility style regulation on Internet access would dampen innovation and investment in more, faster broadband. We propose the FCC implement the same case-by-case process to adjudicate discrimination complaints it has established for cable companies to broadband providers.

It’s not just investment from traditional ISPs that could be negatively effected, Singer and Litan also warn. Many companies that provide services on the Internet could also find themselves among those regulated under Title II:

Reclassifying Internet access as a “telecommunications service” under Title II, as supplemented by the provisions of the Telecommunications Act of 1996, opens up the possibility that other tech services meet the same test. The clearest example would be Google’s ultra-fast broadband service, Google Fiber, which the company is gradually rolling out. But it does not stop there. There is a very slippery slope from subjecting ISPs as common carriers to including other forms of Internet transmissions, because they arguably use “telecommunications services,” the legal hook in Title II for its application.

For example, why not then include within the ambit of a telecommunications service the linkage to an advertiser’s website that Google and Microsoft provide for users of their search engines? By clicking on links, the search engine uses the Internet backbone; if Internet access is a “telecommunications service,” because it provides “transmissions,” then so, too, are the search engines. The same logic potentially applies to Amazon’s Kindle book reader device and service, because its owners are able to download books from Amazon, but only because they are connected to a wireless provider of Internet access in the process. Indeed, what would stop the FCC from classifying as Title II common carriers all device makers that have a connection to an ISP?

It’s not all concern and dire warnings in Singer and Litan’s paper, however, as the duo argue the FCC should focus its efforts on something already within its power:

[W]e think the FCC should eschew the heavy-handed approach of Title II regulation, and lean instead on its Section 706 authority to regulate potential abuses by ISPs on a case-by-case basis. Investment across both edge and content providers will be greater compared to Title II, and the FCC can avoid any unintended consequences such as creeping regulation that encompasses content providers or other ISP services.

Check out the full paper, “The Best Path Forward on Net Neutrality,” over at the Progressive Policy Institute.

Thursday, August 28

Downes on Title II

By Brad

In the Washington Post, Larry Downes completely dismantles the argument made by those pushing for regulating broadband under Title II. An excerpt:

So why the hysteria?  Many of the groups involved in what became a very personal campaign against Wheeler have long sought to turn the Internet into a regulated utility or even to nationalize it outright. Any real or perceived threat to “the Internet as we know it,” even a manufactured crisis, is simply another opportunity to push an agenda Congress wisely rejected in 1996.

The extremists don’t want the FCC to adopt any rules.  They want the agency, instead, to take over. That’s the hammer; net neutrality is just a convenient nail.

Yet much of the mainstream media, including The New York Times and US News, continue to validate the non-conspiracy. They continue to accept, for example, that Wheeler is proposing to “authorize” practices dangerous to the Internet (again, the rules only prohibit practices), to “end” existing net neutrality rules (there are none), and even to allow ISPs to “block” content at their discretion (the no-blocking rule explicitly prohibits this, as does antitrust law).

If you care about the future of the Internet, Downes column is required reading.

Monday, August 25

About Service, Not About Content

By Brad

At Tech Policy Daily, Babette Boliek clears up some confusion about Title II regulations:

So I say to you NYT, and others under the same misted view of Title II, “I do not think it means what you think it means.” Title II treats telephone services as a common carrier. It is not about content, it is about prices – namely the regulation of prices. The “unjust and unreasonable” language the NYT points to is about prices. For example, if the post office (the quintessential common carrier) offers shipping services to a beef producer, they have to make those services available to other beef producers. Title II does not speak to the instance where beef producers are not offered delivery services (or, by analogy, certain content not allowed), and it does not prohibit the beef producer from asking for special treatment of her beef – like refrigeration or overnight delivery.

For more on Title II and its potential negative impact on broadband, check out our recent Telecommunications Forum featuring FCC Commissioner Ajit Pai.

Friday, August 15

Just the Facts

By Brad

Given all the faulty information being tossed around about regulating broadband under Title II, Patrick Brogan of US Telecom has posted a blog correcting inaccuracies being spread by some of the biggest interest groups. An excerpt:

In comments filed at the Federal Communications Commission (FCC) and in an earlier blog, net neutrality proponent Free Press, is making a puzzling and questionable claim that broadband investment will not be harmed by reclassification to common carrier regulation under Title II of the Communications Act. In fact, Free Press makes the incorrect claim that “Title II is good for the economy” and actually promotes broadband investment.

On the contrary, a reclassification to Title II would create unambiguously negative pressures on broadband provider investment that would not exist absent reclassification. The question is one of degree and the relative weight compared to opposing forces, like demand and competition. At a minimum, Title II reclassification seems unnecessarily risky and potentially counterproductive for policy goals dependent on more investment, such as expanding deployment to all parts of the country and enhancing U.S. global competitiveness.

Head on over to the US Telecom site to read Brogan’s post. It will add some clarity to a complex — and often misconstrued — issue.

Tuesday, August 12

Simmons on Title II

By Brad

Over at The Grio, our Co-Chairman Jamal Simmons has penned an op-ed on the perils of reclassifying broadband under Title II. An excerpt:

Government should help set standards for business, such as a worthwhile minimum wage for workers. Defining the boundaries of acceptable behavior like emission standards is good too, but it doesn’t make much sense to have regulators in the middle of each team’s huddle signing off on plays. The market requires more flexibility than that. Uncle Sam should mostly get out of the way to let businesses compete.

Those in support of Title II argue that the fears of many business owners can be allayed by the FCC’s power to “forbear” from enforcing some of the Title II provisions. That exercise of restraint, however,  doesn’t bind future commissions from rescinding that grant of forbearance.

Once the regulatory bear is out of its cage, there is no telling where it would stop. Some companies have proposed having wireless broadband service come under the umbrella of Title II also. Until now, the FCC has kept those services in a separate category that allows innovation and investment to flourish.

You can read Simmons’ full op-ed over at The Grio.

Monday, August 04

Irving Talks Title II

By IIA

Last week, our Co-Chairman Larry Irving appeared on Government Matters to discuss Title II and the very real risks it could have on investment, innovation, and the entire Internet ecosystem. Check it out.

Tuesday, July 29

Title II Telecom Forum With FCC Commissioner Ajit Pai

By IIA

If you missed last week’s Telecommunications Forum on Title II and its impact on broadband investment, check out archived stream below.

Wednesday, July 23

IIA Telecommunications Forum

By IIA

Tomorrow morning at 10 a.m., at the Mandarin Oriental Hotel in Washington D.C., IIA is holding a telecommunications forum on Title II regulation and its potential impact on deployment of 21st century broadband networks and services.

The Keynote Speaker for the event is FCC Commissioner Ajit Pai.

Also participating are Fred Campbell, Director of the Center for Boundless Innovation in Technology; George Reed-Dellinger, Senior Vice President and TeleMedia/Internet Analyst for Washington Analysis; Anna-Maria Kovacs, Visiting Senior Policy Scholar at the Georgetown Center for Business and Public Policy; and Roslyn Layton, Ph.D. fellow in Internet Economics at the Center for Communication, Media and Information Technologies at Aalborg University in Denmark.

Our own Co-Chairman Bruce Mehlman will be moderating what promises to be a lively and informative discussion about the future of technology. More information, including how to watch the forum via livestream, is available here.

Friday, July 18

Let’s Get Nerdy — Episode 3

By IIA

This is the second installment of our “Let’s Get Nerdy!” series, where we take tech policy issues that are currently top of mind in our nation’s capital and explain how they are relevant to Americans across the map.

In this installment, our Co-Chairman Larry Irving discusses the effect reclassifying Internet service under Title II of the 1934 Communications Act will have on investment and innovation.

Ready to get nerdy? Let’s go!

How could Title II affect investment?

Could Title II regulations impact the Internet ecosystem on a large scale?

What is the best path for the Federal Communications Commission (FCC) to take in terms of net neutrality?

Our thanks to Irving for sharing his thoughts. Check out the previous episodes of “Let’s Get Nerdy.”

Thursday, July 17

More Harm Than Good

By Brad

In a must-read piece for GigaOm, Richard Bennett, the co-inventor of Wi-Fi, argues that Title II would do much more harm than good to the Internet. An excerpt:

Technology regulators must be humble, only intervening in commercial squabbles as a last resort. For all its warts, the permissive broadband approach to internet regulation is the better way forward. The FCC should free broadband networks from the specter of telephone-era regulations and nudge them in the direction of even higher performance, including expedited delivery services for applications that need them, such as immersive video conferencing, HD voice, and other real-time applications.

Read the entire piece over at GigaOm.

Friday, June 20

U.S. v. Europe: Who’s Winning the Broadband Race?

By Rick Boucher

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We’ll find out soon enough whether the U.S. soccer team can survive the World Cup’s “Group of Death” with two strong European competitors (England and Germany). But for broadband, it’s clear who’s winning:  the U.S.

It’s basic economics that if we as a society want less of something—for instance, smoking—we will impose a tax on it or restrict it by regulation, and consumption will fall. The opposite is also true: if we want more of something, deregulation and lower taxes will, by the operation of markets, lead to more of it.

The price, availability and quality of broadband follows the same rules. If we want more and faster broadband—and we do—then excessive and inappropriate regulation of broadband, such as some activists’ proposals for “Title II” common carrier regulation, is the wrong way to go. On top of all the legal and technological problems Title II would bring, we can confidently predict that it would sharply inhibit broadband investment.

A new paper from Christopher Yoo of Penn Law School’s Center for Technology Innovation and Competition takes a fresh look at the data and shows that the US is far ahead of Europe on virtually every relevant metric of broadband deployment. The reason, not surprisingly, is that the US regulates broadband lightly while European countries impose investment crippling wholesale unbundling requirements on broadband providers.

Res ipsa loquitur, the lawyers like to say, and Yoo says exactly that: “The data speak for themselves, and the empirical evidence confirms that the United States is performing much better than Europe in the high-speed broadband race[.]” 

Look at the data from different angles (as CTIC’s interactive micro-site permits), and it tells the same story: access to next-generation networks (over 25 Mbps), the U.S. leads 82% to 54%; access to next-generation networks in rural areas, 48% to 12%; and LTE coverage, 86% to 27%.  Unsurprisingly given these figures, the U.S. (meaning U.S. network operators) invests more than twice as much per household as Europe does—$562 vs. $244.  Better service, with less packet loss in the U.S.. And entry-level broadband prices are lower here, too.

Why is the U.S. winning? It all comes down to fundamentally different models of regulation and the incentives each provides for investment: Europe relies on regulations that treat broadband as a public utility and foster competition among multiple leased access providers on incumbent provider platforms. New entrants lease incumbents’ facilities at wholesale cost (also known as unbundling). The U.S. regulatory light- touch has generally left buildout, maintenance, operation and modernization of Internet infrastructure to private companies and focuses on promoting facilities-based competition, in which new entrants are expected to construct their own networks.

The regulatory structure government chooses directly affects broadband availability, quality and price.

Focus on that investment statistic for a minute: there’s over twice as much investment per household in the U.S. as in Europe, which leads to more coverage.

We’ve already had a glimpse of what can happen if the U.S. government tries a different path, that of Title II regulation. When the FCC announced in 2010 that it was considering Title II reclassification of broadband as a possible approach to ensuring network neutrality, there was an immediate negative effect on the stock prices of the network operators who were deploying broadband across the country. On average, the market capitalization of the four largest ISPs in the United States lost a combined $18 billion and the market value of one of those entities dropped 15% overnight. The ability of these companies to acquire the financing necessary for aggressive broadband deployment diminishes as their value in the market declines. This was but one early sign of the kinds of problems that broadband providers will encounter in continuing their world leading broadband deployment performance if the FCC turns to Title II regulation.

So the light regulatory model of the U.S. brings greater adoption, more investment, and faster speeds, while due to the heavy-handed leased access regime on which Europe built its policies, the continent is now lagging far behind.

None of this is surprising to anyone who knows a bit of economics, but it’s a useful reminder as the FCC considers what sort of rules would best achieve our nation’s broadband goals. We can ill afford to neglect history and economics by imposing telephone-era, public utility regulation that will dampen investment at precisely the moment when carriers will have to undertake even greater expenditures to acquire spectrum in the upcoming incentive auction and then spend more to deploy facilities to bring wireless broadband to the entire US population at 4G levels. As Yoo writes, “we have a real-world basis for assessing the impact of imposing telephone-style regulation on the Internet[.] As regulators in the United States contemplate rules for next-generation networks, it would be wise to consider how going down the path of stiff telephone-era regulation has fared elsewhere.”

Because whatever happens in Brazil, the U.S. has already beaten Europe in the broadband competition for economic growth.

Friday, June 06

The Better Way Forward

By IIA

With the net neutrality debate once again on the front burner, AT&T Senior Executive Vice President Jim Cicconi has penned a lengthy post at the company’s Public Policy Blog to break down how reclassifying broadband service under Title II is a bad idea for just about everyone with a stake in the open Internet. An excerpt:

Title II would not prohibit the creation of fast lanes and slow lanes on the Internet — that is clear in the plain language of the law, not to mention 80 years of FCC precedent and court decisions.  Arguments to the contrary are pure fantasy. At a minimum, Title II supporters have to concede that their argument depends on the bank shot that an appellate court will agree (a) that the FCC can change its mind about how the Internet works after the Supreme Court has validated its prior decision; and (b) the FCC can then ignore the plain language of the statute and 80 years of precedent to determine that the prohibition of “unjust and unreasonable” discrimination actually means it can prohibit any discrimination. And think of all the additional proceedings that will be needed to unpack where we draw the lines between information services “haves” and telecommunications services “have nots.” If that is the road we choose to travel, the investment uncertainty alone will have a massive negative impact on American broadband deployment for years to come.

There’s another important argument against Title II — invoking it would risk massive collateral damage to many, if not most, U.S. Internet companies. Title II could turn every edge or content company into a common carrier for at least part, if not all, of their services.

Cicconi goes on to argue that FCC Chairman Tom Wheeler already has a way to ensure an open Internet without the regulatory hammer of Title II:

Section 706, as interpreted by the court and explained by Chairman Wheeler, does provide a path. It’s a path AT&T supports. For one, it has already been blessed as a valid source of jurisdiction to address the kinds of concerns articulated by Chairman Wheeler and others throughout the current debate. In upholding Section 706 authority, the Verizon court gave the FCC wide latitude to prohibit conduct that would deter broadband investment. And the approach that Chairman Wheeler has proposed would clearly prevent practices like paid prioritization that we feel would change the fundamental nature of the Internet.

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