Entries in Net Neutrality (11)


2012 Regulatory Outlook: New Year, Same Basic Goals  

FCC Agenda Likely to Stay Laser-Focused on Broadband, Spectrum

2011 was undoubtedly a landmark year for Julius Genachowski & Friends, but will 2012 include great leaps forward as USF/ICC reform, Connect to Compete and the White Spaces? The FCC certainly has its work cut out tying up loose ends on all three of these seminal issues.  We can likely anticipate further powerful thrusts to improve wired and wireless broadband deployment and adoption in 2012, as well as initiatives to alleviate the spectrum crunch.

2012 might be the Year of the Reverse Auction. Reverse auctions could be spectacularly disastrous or sensationally effective, depending on a variety of factors including auction design and industry participation. Two other issues that RLECs should watch for in 2012 are solutions for the rural call termination problems and the PSTN transition—I would expect proceedings on both in 2012, and hopefully a swift resolution to the call termination problems. 

A December 8 speech by Commissioner Robert McDowell to the Federal Communications Bar Association titled “2012: The Year of the U.N. Regulation of the Internet?” revealed some clues about what may come in 2012 at the FCC. I was most excited about this possibility: “Until it actually happens, I will keep talking about launching and concluding a proceeding to reform our Universal Service program’s contribution methodology by mid-year.” As the USF contribution rate reaches an all-time high of nearly 18%, the FCC should have adequate pressure to make a move on contributions reform. Additionally, USF contributions reform is basically the last box left to check under the National Broadband Plan goals for modernizing USF. The question is: who will have to contribute under the new methodology? Will all broadband service providers and consumers be on the chopping block? What about major content providers like Google and Netflix? I expect that the contributions reform proceeding will be every bit as action-packed and controversial as the 2011 USF/ICC reform proceedings.

We aren’t nearly finished grappling with the November 18 USF/ICC Reform Order either—not by a long shot. Comments in response to the FNPRM are due in several rounds throughout January, February and March. Following these comment cycles, we will possibly get some resolution on 2011 rural telecom cliff-hangers like rate-of-return re-prescription, CAF methodologies for RLECs, broadband public interest obligations, IP interconnection, and the Remote Areas Fund.

A Policy “Roulette Wheel”

The dreaded HCLS regression analysis will cause no end of headaches for RLECs in 2012 as these companies will need to play a rather sadistic guessing game with their costs in order to avoid placement at or above the ninetieth percentile. The precise regression analysis methodology will be finalized through the FNPRM—it is very concerning that the proposed methodology inserts such a great deal of unpredictability in HCLS because RLECs will not know in advance if they will fall above the ninetieth percentile—this level of unpredictability is far greater than the rather constant artificial increases in the NACPL used to cap current HCLS.

The FCC appears to protect itself from legal challenges by adopting a regression analysis methodology that will be used, predictably, but the methodology itself is where things get murky. In other words, it is predictable that the FCC will use the regression analysis, but it is unpredictable as to how individual companies are impacted by the model. The unfortunate carriers who fall in or above the ninetieth percentile of similarly situated carriers may face a double-whammy punishment: clipped support and ineligibility to receive redistributed support.    

John Staurulakis Inc. economic and policy director Douglas Meredith provided the following statement about the regression analysis: “The FCC regression methodology proposed to limit capital and operational expenditures is fraught with policy and technical challenges.  This method is an order of magnitude less predictable for individual carriers than the current HCLS mechanism—even with the current capping procedure.  This method has been summarized as a ‘race to the middle.’  If adopted, we should consider whether a capital expenditure race to the middle will promote and advance universal service in high-cost and remotely populated areas of the nation.” 

Meredith continues, “I submit that the proposed method fails to achieve the Congressional goals for universal service.  In addition to serious policy concerns, the technical aspects of the proposed method are also suspect: study areas that are missing from the FCC’s analysis, descriptive independent variables missing from the model, relatively low goodness of fit measures and a high reliance on covariance relationships among carriers makes the application of this regression method look more like a roulette wheel in Las Vegas than well-established public policy.”

There’s a First Time for Everything

As mentioned above, I expect 2012 to be the Year of Reverse Auctions. The FCC is responsible for designing—for the first time ever—reverse auctions for second phases of the Mobility Fund and the wireline broadband Connect America Fund. Furthermore, if Congress releases under-utilized government spectrum in 2012, the FCC may also be tasked with designing auctions for this spectrum too. According to McDowell’s December 8 speech, “If that were to occur in 2012, suddenly the Commission could be working furiously on auction and service rules, band plans and such throughout the year.”

Voluntary incentive auction legislation has passed in the House, which Genachowski praised as a “major achievement.” Genachowski’s December 13 statement explains that the legislation “would authorize the Federal Communications Commission to conduct voluntary incentive auctions as recommended in the FCC’s National Broadband Plan. This would free up new spectrum for mobile broadband, driving investment, innovation, and job creation; generating many billions of dollars in revenue; and helping foster U.S. leadership in mobile broadband.” Genachowski insists that FCC incentive auction authority “needs to become law;” but warns that the House bill “could be counterproductive” by downplaying FCC policies to promote unlicensed spectrum and limiting the FCC’s ability to develop band plans and auction structures “in ways that maximize the value of licensed spectrum.”

How will the FCC avoid pitfalls associated with reverse auctions, which have been implemented internationally with less-than-stellar results? How will the FCC ensure that small rural carriers have a fair shot in future auctions? The Mobility Fund Phase II proceeding may provide an excellent opportunity for small carriers to state their demands and recommend a methodology that is fair for companies of all shapes and sizes. But... will the FCC listen, or pull a Consensus Framework 2.0, demanding industry input then essentially ignoring it?

Broadband for President in 2012

The FCC built up considerable momentum in 2011 with broadband adoption and deployment initiatives; but the U.S. has a whole lot of work to do before reclaiming #1 in the world for broadband adoption, deployment and speed—a spot in the top ten would be a nice goal for now. You can debate how important international broadband rankings are in the grand scheme of things, but with a presidential election on the horizon it probably wouldn’t be out of line to speculate that America’s sub-par international broadband ranking could become a hot-button issue in 2012.

A December 14 FCC blog post by Josh Gottheimer and Jordan Usdan includes a line that could easily be inserted into any run-of-the-mill campaign sound-byte: “Closing the digital divide isn’t just an economic issue, it’s one of the great civil rights challenges of our time. Broadband can be the great equalizer – giving every American with an Internet connection access to a world of new opportunities that might otherwise be beyond their reach.” The common assumption among politicos is that more broadband means more jobs, so increasing broadband will surely make it into multiple presidential-hopefuls’ campaigns. As a result, the FCC could be pressured to take further drastic steps to influence broadband adoption and deployment, even if 2011 initiatives (like Connect to Compete, for example) prove unsuccessful at actually adding percentage points to deployment and adoption rates.

The Legislative and Legal Fronts

2012 is also looking to be a significant year for telecom and Internet-related legislation and legal decisions. The Internet ecosystem is in an uproar over House and Senate legislation to combat online piracy and “rogue” foreign websites, to the extent that the uproar over net neutrality almost pales in comparison. Given the public outcry, it seems unlikely that SOPA or PIPA will pass as they stand, but we can probably expect similar legislation to go through in 2012—hopefully it won’t kill the Internet as we know it.

A House bill to actually reform the FCC is still a live wire on the Hill, so we might continue to see a power struggle between Congress and the independent agency charged with regulating telecom that we all love so much. According to a December 20 Politico article, Senator Jim DeMint (R-SC) “called the FCC ‘way out of control,’” and stated, “’We need to reign them in and remind them that their job is not to manage the industry but to provide just a light hand of regulation to make sure there is fairness.’”

Additionally, courts in DC and Denver will hear appeals cases on net neutrality and USF/ICC reform, respectively. Although it is too early to tell how these cases will conclude, we can’t rule out the possibility that the decisions could throw a wrench into the regulations and reforms that the FCC spent the better part of the last 3 years bringing to fruition.

If the regulatory theme of 2010 was the National Broadband Plan (with net neutrality a close second) and USF/ICC reform dominated 2011; what will be the one thing that we will remember the 2012 FCC for accomplishing? You know my guess is designing and implementing reverse auctions for the Mobility Fund, CAF and re-released spectrum, but what do you think?


January – April 2011: USF NPRM, AT&T/T-Mobile Merger Dominate Headlines

A Veritable "Spring Awakening" of Blockbuster Agendas

Looking back over the year, there were so many exciting telecom regulatory decisions, actions and mishaps that I just had to do a “2011: Regulatory Year in Review” series, in part to keep it light before the holidays and in part to help predict what might be on the “hot list” next year. 2011 kicked off with the FCC’s controversial late-December approval of the Net Neutrality rules still stinging for many telecom providers, and 2011 is ending on a similar controversial note with the Stop Online Piracy Act debate in Congress (which, ironically, is almost the direct antithesis of Net Neutrality). But in between these groundbreaking Internet policy and legislation bookends, there was definitely no shortage of drama in all areas of telecom regulation.

January 2011: The stage was set for the year-long flurry of merger, joint-venture and consolidation activity with the FCC’s Jan. 18 approval of the massive Comcast-NBC Universal deal. According to the FCC’s Memorandum Opinion and Order, “The proposed transaction would combine, in a single joint venture, the broadcast, cable programming, online content, movie studio, and other businesses of NBCU with some of Comcast’s cable programming and online content businesses.” For those of you who were a little uneasy about a vertical and horizontal (depending on who you talk to) merger of this magnitude, the FCC imposed a variety of conditions including the “voluntary commitment” that Comcast provide broadband for $9.95 to low income consumers—we’ll see this pop up again towards the end of the year. Commissioner Michael Copps dissented, claiming the merger “confers too much power in one company’s hands;” and “The potential for walled gardens, toll booths, content prioritization, access fees to reach end users, and a stake in the heart of independent content production is now very real.”

Also in January, Verizon and MetroPCS jumped the gun on Net Neutrality appeals… but they fired before locking in a target that could actually be appealed. Eager parties had to hold tight for 10 more months before the rules were finally published in the Federal Register.  (The ILEC Advisor: Verizon Appeals FCC’s Net Neutrality Rules, MetroPCS Joins Verizon in Suing FCC Over Net Neutrality Rules)

February 2011: I clearly recall at around this time last year expressing frustration (putting it nicely) that the USF/ICC Reform NPRM was pushed back when Net Neutrality took center stage. Well, we didn’t have to wait very long in 2011 for the 350-plus page NPRM that set in motion an entire year’s worth of anxiety and insomnia for the RLEC industry. Once the NPRM was released, the FCC pressed forward with the reforms at lightning speed (well, for the FCC anyway), and it almost seems surreal that we are now ending the year still trying to make sense of all changes to USF and ICC. Anyway, FCC Chairman Julius Genachowski demanded that USF/ICC reforms conform to four guiding principles: modernized to support broadband networks, fiscal accountability, accountability, and market-driven incentive-based policies. When the NPRM was revealed, Genachowski made sure to emphasis how the current USF/ICC system is fraught with waste, fraud and abuse; and he arguably made RLECs seem like Public Enemy #1. The FCC essentially insisted that the industry develop a consensus proposal in response to the NPRM, but as we will see, that didn’t work out so well… (The ILEC Advisor: Wireless Excess Highlights Needs for Universal Service Reform).  

Not ten days later, we got another zinger- the NTIA’s National Broadband Map was released. RLECs scurried to check the data and make sure speeds and coverage were accurately portrayed in their service areas, only to find… A LOT of mistakes. My initial response to the map was “For $200m, why couldn’t they get it right?” JSICA’s Richelle Elberg wrote that the map was “disappointing, buggy, and the data incomplete;” and “it was a year in the making, it cost an awful lot of money, and it doesn’t seem to be fully baked just yet.” The biggest disappointment was that wireless providers like Verizon seemed to blanket extremely rural areas with 3-6 Mbps broadband, even though I know from experience in at least one such area that this is not an accurate representation—you see, it only takes one household in a census block to be served at that level for the entire block to be reported “served” on the map. Unfortunately, this is only one of the problems with the map, and nearly a year later it hasn’t improved much. (The ILEC Advisor: National Broadband Map Not All it’s Cracked Up to Be).

March 2011: Early in the year, there were a lot of rumors swirling that T-Mobile might be up for grabs—possibly by Sprint, which seemed like a long shot—would Sprint really want to repeat the technology incompatibility mess it had with its Nextel merger (The Deal Advisor: Sprint and T-Mobile in Talks (Again))? The telecom world shuddered on Sunday evening of March 20 when AT&T announced its intentions to abolish T-Mobile from the wireless market for a cool $39b—I was walking home from dinner and getting ready for the NTCA Legislative Conference when I got the news, and it is not an exaggeration to say that I nearly fell over. Anyway, there’s nothing like talks of ol’ Ma Bell reclaiming its monopoly to incite gut reactions from everyone—and I mean everyone. When the FCC comment cycle began, tens of thousands of consumers chimed in with very colorful opinions, one even likening the merger to rape (a comment that has literally haunted me all year…and don’t even get me started on the bizarre “interest groups” like the International Rice Festival who wrote in with questionable favor of the merger). Although many analysts initially assumed that the deal would fly through, JSICA was skeptical from the get-go, warning that the antitrust and FCC reviews would be harsh—and we were right. (The ILEC Advisor: AT&T to Acquire T-Mobile for $39b, Sprint Says it Will Vigorously Oppose AT&T Buy of T-Mobile, What’s Really Behind AT&T’s Acquisition of T-Mobile).

April 2011: USF/ICC Reform started heating up in April, with the first round of comments in response to the NPRM due on April 1 (ICC) and April 18 (USF), and two corresponding public FCC workshops held on April 6 and 27. On the ICC front, rural carriers were fairly unified in insisting that the FCC immediately adopt rules to curb arbitrage and classify VoIP as functionally equivalent to PSTN traffic. One highlight from the April 6 ICC workshop was when the panelist from AT&T (of course), asked sarcastically, “Does Iowa really need 200 small carriers?” The RLEC panelists expressed concern that ICC uncertainty contributes to low valuations for RLECs looking to sell or consolidate, which is contrary to the FCC hopes that the little guys will just consolidate once and for all.

The Rural Associations (NTCA, OPASTCO, WTA, NECA and state associations) released the RLEC Plan for USF/ICC reform, which many expected would be adopted by the FCC in the final rules—maybe not entirely, but at least in some capacity. The RLEC Plan focused on careful, “surgical” transitions for rural carriers to ensure reasonable cost recovery as well as continued broadband deployment, but without back-peddling the tremendous progress that rural carriers have made as a result of the original USF/ICC regime. Hundreds of other rural telecom stakeholders weighed in on the NPRM, many calling for Rate-of-Return stability, keeping the High-Cost Fund (now Connect America Fund) uncapped, and ensuring sufficient and predictable cost recovery. (The ILEC Advisor: Universal Service Reform – Their Two Cents: Nebraska Rural Independent Companies, Universal Service Reform – Their Two Cents: CoBank).

Finally, April also brought a sensible, well-received FCC Order on data roaming that “requires facilities-based providers of commercial mobile data services to offer data roaming arrangements to other such providers on commercially reasonable terms and conditions, subject to certain limitations.”  Naturally, Verizon argued that the FCC overstepped its authority, but overall this Order signaled an important step forward for the FCC’s realization that voice and data are well on the road to becoming one and the same. Smaller rural wireless carriers applauded the decision, arguing that it will help reduce barriers to competition with the large wireless carriers. (The ILEC Advisor: FCC Adopts Order on Automatic Data Roaming).

As the mercury started rising in DC, so did the tension in the USF/ICC Reform proceeding. Stay tuned for more “2011: The Regulatory Year in Review” posts throughout the week!


Net Neutrality Resolution for Disapproval – Disapproved by Senate, 52-46

Controversial Rules Soldier On, Better Have your Net Management Disclosures Ready!

Following a heated four-hour debate on Nov. 9, a Senate resolution to halt the FCC’s Net Neutrality rules (S.J. Res. 6) failed to achieve the necessary 51-vote majority on Thursday, Nov. 10… But not by much, indicating that either the rules still aren’t very well received on The Hill; or that this has just become a big, politically polarized wrangle more focused on D vs. R than on whether the rules are actually necessary and lawful. No matter what side of this debate you happen to be on, it may come as a relief that the rules will move next to a politically “neutral” court (see The ILEC Advisor: Net Neutrality Fight Intensifies – In Washington, Anyway).

S.J. Res. 6 was spearheaded by Sen. Kay Baily Hutchison (R-TX) who argued that “Over the past 20 years, the Internet has grown and flourished,” without any regulations. Senate Republicans commented yesterday in the debate about how Internet behemoths like Facebook, Twitter, Google and Apple all emerged from small start-ups to become multi-billion dollar corporations absent any codified Open Internet rules. It is hard to disagree on this point, but the Senate Democrats held that the rules are necessary to protect consumers from anti-competitive behavior by ISPs.

Both sides seem to argue that they are looking out for the best interests of the little guy, but Senators John Barrasso (R-WY) and Marco Rubio (R-FL) both specifically mentioned that the rules will be harmful to small rural providers. Senator Barrasso referenced rural Wyoming WISP LARIAT, whose proprietor Brett Glass is very concerned that “the red tape will hurt his ability to deploy new service to currently underserved or unserved areas.” Senator Rubio added, “One small Internet provider stated that the imposition of network management rules will hinder its ability to obtain investment capital and deploy new services in unserved areas. The regulations would also increase costs and they would hamper innovation, which would only further discourage outside investment in the company.”

RLEC associations have generally remained mum on the Net Neutrality debate, albeit commenting that small rural carriers “cannot bear the costs of complying with overly burdensome or vaguely defined requirements” (The ILEC Advisor: Brace Yourself for the Net Neutrality Rules). While scanning reactions to the Senate debate and vote, I noticed that the RLEC associations were absent from the declarations of “Victory!” by left-leaning consumer groups and proclamations of “We’ll get ‘em in court!” by conservatives.  One way or the other, the fight still isn’t over yet. The question is—does it even matter to RLECs now that the bills from the consultants and lawyers for creating disclosure documents are probably in the mail at this very moment?

The rules become effective on November 20. Hopefully no rural telcos were hedging their bets on S.J. Res. 6 being approved and thus procrastinated on drafting their network management policy disclosure statements.

I got a sneak peek at the Network Management Practices Policy Disclosure for Walnut Communications which will be distributed to Internet service customers. The 5-page document basically explains that the company complies with the Open Internet rules, and “utilizes reasonable network management practices…[to prevent] its customers from being subjected to the negative effects of spam, viruses, security attacks, network congestion, and other risks that threaten to degrade service…consistent with industry standards.” The disclosure goes on to explain specific practices that the company uses, or refrains from using, for the purposes of congestion management, application-specific behavior, device attachment and network security. The disclosure describes services offered by the company and actual speeds and latencies that consumers can expect to experience based on Ookla Speedtest software.

Overall, it is a fairly straight-forward and non-threatening document, but it is hard to tell if the FCC will continue to impose additional disclosure requirements in the future now that the door has been opened, so to speak.

It certainly will be interesting to see if the Net Neutrality rules end up specifically preventing small rural providers from accessing capital to innovate and expand their networks, as Senator Rubio warned. It will also be interesting to see the “average customer” response to the disclosure policies. What do you think about the Net Neutrality rules—are they necessary, a necessary evil, or just plain evil?


Net Neutrality Fight Intensifies - In Washington Anyway

Seven Court Challenges Consolidated but not Akin

The digital ink is practically still drying on the September 23 Federal Register, where the infamous Open Internet Order (Net Neutrality) rules were finally published nearly 10 months after being narrowly approved at the FCC. As anticipated, Verizon wasted no time in filing an appeal, and the FCC likewise wasted no time in filing a motion to dismiss Verizon’s appeal. Challenges from six other organizations have quickly been consolidated with Verizon’s appeal, and the U.S. Appeals Court in Washington was chosen “randomly” as the venue for Verizon v. FCC. This very same court ruled in the Comcast case last year that the FCC lacked authority regulate the Internet, so things might get really interesting once this case gets rolling. All this action already, in less than 3 weeks!

Things also get really interesting when you look at where the opposition is coming from- Verizon was completely expected, but the first challenger was actually liberal media reform group Free Press who has been one of the most vocal advocates for strong Net Neutrality rules. Free Press contends that the rules do not go far enough to protect mobile consumers because mobile broadband providers are not subject to the same set of rules as wireline providers. Free Press policy director Matt Wood argued that the differentiation between wired and mobile broadband “[fails] to protect wireless users from discrimination, and they let mobile providers block innovative applications with impunity.” Free Press filed its Petition for Review in the U.S. Court of Appeals for the First Circuit in Boston.

Possibly in a coordinated effort to keep the case out of the D.C. Appeals Court, National Journal reports that Media Access Project, Media Mobilizing Project, Access Humboldt, and Mountain Area Information Network have filed similar petitions as Free Press in courts across the country, and “the groups could be looking to increase their odds of getting a sympathetic court…The more courts involved, the less likely it will end up in D.C., statistically speaking.” Well, it looks like the odds were against these groups, and the case will be heard in D.C. where Verizon filed. Yes, the liberal hard-line pro-Net Neutrality advocates’ petitions will be consolidated with Verizon’s decidedly anti-Net Neutrality appeal.

The crux of Verizon’s argument is that the Open Internet Order is “(1) in excess of the Commission’s statutory authority; (2) is arbitrary, capricious and an abuse of discretion within the meaning of the Administrative Procedure Act; (3) contrary to constitutional right, and (4) is otherwise contrary to law.” Verizon filed pursuant to 47 U.S.C. § 402(b)(5) which grants the DC Appeals Court “exclusive jurisdiction over FCC decisions that modify individual radio licenses.” However, in its Motion to Dismiss, the FCC contends that the Net Neutrality decision does not modify individual radio licenses, and “402(b)(5) applies only when this Court is asked to review an FCC order that modifies specific individual licenses, not generally applicable orders like this one.”

The FCC’s Motion to Dismiss outlines a long list of precedents and legislative history where 402(b)(5) has only applied to specific modifications of individual licenses, not general rulemakings like Net Neutrality. The FCC argues that the Net Neutrality rules are “basic rules to govern the conduct of all broadband Internet access service providers, both fixed and mobile…not directed at any specific broadband provider and [do] not purport to modify any specific license.” A point that I found interesting in the FCC’s Motion to Dismiss was that Verizon, as a wireline and wireless provider, “would be subject to the Order even if it did not hold a radio license.” Even though the rules for wireline broadband providers are more restrictive, Verizon is challenging the wireless rules specifically—just like Free Press et al, only from a vastly different perspective.

From my Washington perspective, this rapid, polarized activity is fascinating and dramatic; but what does this all mean for the rural providers beyond the Beltway? RLECs have remained fairly neutral in this whole ordeal (The ILEC Advisor: Brace Yourself for the Net Neutrality Rules), aside from some grumbling about extra paperwork and network management rights. It gets stickier when you start thinking about the long-term implications of the Net Neutrality rules for small ISPs, especially considering the growing bandwidth crunch and the possibility that small carriers may no longer be able to collect fair access revenue to help offset network investment costs.

While following both the Net Neutrality and USF/ICC reform debates, I can’t help but ask: is the Net Neutrality fiasco a foreboding of what lies ahead for the USF/ICC reforms? Will it take 10 months for the final USF/ICC rules to be published, only to be slammed with opposition and heavy-hitting court cases within weeks of publication? This is mere speculation, but it is definitely interesting to compare the similarities of these two groundbreaking and game-changing rulemakings…

First, one could argue that both sets of rules are to some extent Chairman Genachowski’s special babies. They are both controversial decisions with potentially widespread ramifications spearheaded primarily by the FCC Chairman. Genachowski seemed to be the only commissioner who actually approved of the Net Neutrality rules, with the other four commissioners falling firmly on the left and right of his position. The Commission votes on USF/ICC on October 27, and with one commissioner short it will be interesting to see if Genachowski’s rules slide through unopposed.

Moving on, both sets of rules have been in the making for many years and have hit significant roadblocks along the way—USF/ICC reform nearly happened a few years ago and was scrapped when Commissioners couldn’t agree; and the Net Neutrality rules stumbled hard on the Comcast decision. The two sets of rules are both stretching the FCC’s authority over the Internet, and both have instigated a significant amount of tension between the industry, Congress, the FCC and consumers. There are familiar battle lines in both rulemaking proceedings—consumers vs. industry, industry vs. FCC, FCC vs. Congress. For example, the argument that consumers feel taken advantage of by telecom corporations could be used interchangeably to describe tensions in either rulemaking.

There is also considerable polarization within the industry, especially with USF/ICC, where ILECs, wireless and cable have been facing off with very little agreement throughout the proceeding. The final Net Neutrality rules, and the likely final USF/ICC rules, are largely the result of a so-called “industry consensus,” but the actual level of consensus in both situations is debatable. In both proceedings, extreme arguments that the rules (or lack of rules) will destroy innovation, stifle investment, and prohibit broadband deployment and adoption have been cited with high frequency by most stakeholders.

So, will the USF/ICC reform follow the same bumpy road as Net Neutrality once the rules are approved at the FCC? Will the Net Neutrality and USF/ICC rules primarily just maintain the status quo, or will they each deliver radical changes to help bring telecommunications policy into the broadband era, as they both promise to do? And, what are the short- and long-term implications of these two rulemakings together for RLECs?


Brace Yourself for the Net Neutrality Rules

After Nearly 10 Months, FCC Finally Sends Rules to Federal Register

Way back in December 2010, the FCC voted 3-2 to approve the Net Neutrality Rules to “Preserve the Open Internet.”  Republicans thought the rules went too far, some Democrats thought the rules didn’t go far enough—and this was just within the left and right sides of the FCC.  Since then, there have been appeals by companies and Congressional movements to try to prevent the rules from being implemented, all before the rules were even published in the Federal Register.  Well, the controversial rules have finally been submitted for publication as of Friday, September 16.  In a few short weeks the rules will be published, and will go into effect 60 days later, presumably on November 20.

Will the publication of these rules be the end of the years-long drama, or plant a whole new crop of resistance? Both Verizon and MetroPCS prematurely challenged the then-unpublished rules earlier this year, but were kindly told that they needed to hold their fire until the rules were actually published in the Federal Register.  It is unlikely that they have forgotten about this in the past eight months, and other companies may also join the crusade against Net Neutrality once they have the green light to do so (i.e. when the rules are finally published in the Federal Register).

In addition to carriers, Republican lawmakers may also keep trying to prevent the rules from being implemented.  According to a September 13 Washington Post article, “lawmakers are expected to invoke the Congressional Review Act to overturn the rules, experts say.  Republicans have been particularly outspoken critics of one of the FCC’s biggest policy initiatives under Chairman Julius Genachowski, calling the open Internet policy an overstretch of the agency’s authority.”

The Net Neutrality debate lines have generally been drawn between Republicans and telecommunications/ Internet service providers on the “Rules will Destroy the Internet” side; and Democrats and consumer advocates on the “Rules will Save the Internet” side.  It has become one of the most politically polarized telecom policy debates in recent history, which is certainly notable (but probably not in a good way).  For a while, it seemed like people—industry experts and lawmakers included—were just agreeing with whatever side happened to represent their personal political views without actually thinking deeply about the telecom policy implications.

Where do RLECs stand in this debate, once political affiliations are removed from the equation?  I wouldn’t expect the same level of legal resistance by small companies as I do from Verizon, etc., but that doesn’t mean the RLECs are necessarily happy about the rules either.  They just have bigger battles to fight right now, obviously, and trying to appeal these rules would definitely be a costly and time-consuming affair.

What RLECs can expect, however, is paperwork, paperwork and more paperwork—and probably some new legal fees as well.  The rural associations have remained fairly neutral on the Net Neutrality debate this year, but Mike Romano, senior vice president of policy at NTCA, provided the following statement when asked about the rural perspective on the Net Neutrality rules:

“Our most significant concern at this point is that the rules must be sufficiently defined to enable compliance by rural telecom companies.  These are small businesses who cannot bear the costs of complying with overly burdensome or vaguely defined requirements.  We also hope that the rules will be applied and enforced consistent with long-standing rules that have worked in the telecommunications industry for years to prohibit unjust and unreasonable discrimination, rather than requiring compliance with newly developed standards that are more strict or unclear.“

One the rules are published, we should be able to better analyze how RLECs will be impacted.  Until that time, you can take bets with your friends on which company will be first to challenge the rules in court.