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Sunday, June 25, 2017

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Regulation puts net neutrality at risk


The Consumer and Governmental Affairs Bureau of the FCC issued a news release in late February announcing that it will enforce raising the threshold on the number of connections required of a broadband provider to be exempt from the Title II amendment.

Title II refers to the section in the Communications Act which designates these services as common carriers, and subjects these providers to regulation requirements. The Title II designation for fixed and mobile broadband came into effect almost two years earlier, when the FCC released the Open Internet Order

This rollback of requirements is most likely a hint of future deregulation to come and is being championed as relieving providers of “onerous reporting obligation stemming from the ‘2015 Title II Order.’

Last month, FCC chairman Ajit Pai tweeted a picture of a 332-page plan to regulate the internet that is presumably meant to convey the idea that the paperwork is burdensome.

Pai’s picture is comical because he made his living practicing law, which can often be nothing but reading and dissecting onerous reporting. This familiarity could perhaps explain Pai’s disdain for the shackles of regulation present in consumer affairs.

The tragically ironic aspect of this story, however, is that Pai was a former lawyer for Verizon, the Antitrust Division of the Department of Justice and a law firm that works in corporate litigation. A quick look at Pai’s resume shows that he probably has more intimate knowledge of the implications posed by a concentration of power than the average person.

Sadly, Pai is a fox guarding the hen house, which is the FCC in this case. Deregulation and decentralization are not exactly two sides of the same coin.

In theory, deregulation helps foster a free market economy, which leads to increased competition. This leads to a better consumer environment and so on. Deregulation has its pros and cons but is largely pro-business, while decentralization, with its pros and cons, is largely pro-consumer.

The threshold for being exempt from the Communications Act Title II stipulations will increase from businesses that have 100,000 broadband connections or fewer to businesses with 250,000 connections.

Admittedly, few broadband companies operate at that volume. That said, larger broadband companies can still act as a holding company for the businesses that are under the exemption. This rollback of previous requirements is the beginning of stripping the Title II regulations that uphold net neutrality principles such as transparency.

The Small Business Broadband Deployment Act (H.R. 288), would formalize the threshold outside of the FCC. It has already been passed by the House of Representatives and the Small Business Broadband Deployment Act of 2017 (S. 228) has been introduced to the Senate.

Repealing this regulation, and the future net neutrality related practices, will almost always be disguised as helping under-served communities by reducing the red tape that is keeping these companies from competing. In reality, the ability of under-served communities to access unmitigated gateways of information and transparencies to pricing policies is hindered.

In his biography on the FCC’s website, Pai states two parts of his regulatory philosophy that conflict on this matter. He states: “no regulatory system should include arbitrage; regulators should be skeptical of pleas to regulate rivals, dispense favors, or otherwise afford special treatment” and also that “the FCC should do everything it can to ensure that its rules reflect the realities of the current marketplace and basic principles of economics.” The current marketplace has barriers to entry way too high and the economies of scale are too large for most small broadband providers to truly operate competitively. That’s the reality.

Although I am sympathetic to the struggles of small to mid-sized businesses, playing favorites with the “little guys” is still playing favorites. The other reality is that deregulation invites arbitrage.

It would seem that these points are just lip service to the idea that future pro-consumer reforms in the telecommunications industry are in store for a monumental de-scaling.

Opinion columnist Nicholas Bell is an MBA graduate student and can be reached at [email protected]

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