Thursday, May 15, 2014

Reclassifying Internet Access as a Title II Regulated Telecommunications Service

           Today’s Notice of Proposed Rulemaking on Internet access reportedly contains a section inviting comments whether the FCC should reclassify Internet access from largely unregulated information service to telecommunications service.  Should the Commission opt to do this—something months away, if at all, in light of grave political impediments—any and all concerns about discrimination do not miraculously evaporate.

            Comcast EVP David L. Cohen and others correctly note that even Title II-regulated common carriers have the option of offering different tiers and categories of service.  Telecommunications service providers cannot discriminate among “similarly situated” carriers, but nothing prevents common carriers from offering different tiers of service, i.e., to offer different price points and levels of service. Put another way, even common carriers can engage in price and quality of service discrimination provided the differentiation is cost-based and available to anyone meeting a fair list of qualifying criteria.  Nothing prohibits the FCC from approving a tariff that contains this type of permissible discrimination applied to retail broadband subscribers, or upstream to other carriers and content providers.  Additionally nothing prevents the FCC from eliminating the requirement that Internet Service Providers even file tariffs.

            Title II regulation does not toggle on an all or nothing pivot.  Section 160 of the Telecommunications Act of 1996, allows the FCC to streamline and forbear from applying most common carrier regulations.  The FCC could reclassify information service at the same time as it forbears from applying most of the possibly unnecessary, costly and burdensome regulations.

             On the other hand Title II makes it clear that a carrier cannot engage in deliberate discrimination, such as dropping packets, simply to disadvantage a competitor, or to extort a surcharge payment from an upstream carrier satisfied with best efforts routing.  Title II regulated ISPs would have to operate more transparently and probably could not get away with tactics designed to generate artificial congestion as may have occurred with the slowdown of Netflix streaming video traffic.

             Here's another tricky issue from the Title II, telecom world: normally the carrier triggering the need for carriage--on behalf of its customers--incurs the cost of this service.  The FCC used to use the term "cost causative" carrier.  Under a pure ("old skool") view, it would appear that Comcast would have to compensate upstream carriers for the Netflix traffic and other demand from Comcast customers.   I don’t see this happening, just as I don’t see the FCC risking a show down with incumbents on a reclassification gambit.

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