Crushed:  The Weight of Heavy Regulation on Broadband

In the NFL, it’s a penalty for a defensive lineman sacking a quarterback to land on the quarterback with his full body weight.  The NFL knows the damage that the crush of weight can do.

The federal government is now applying the bodyweight of regulation to broadband.  The FCC’s proposed application of utility-style regulation from Title II of the Communications Act along with the Digital Discrimination Act (“the Act”) and accompanying FCC rules are the government’s version of a 350 pound lineman.  

With Title II, the FCC is invoking its heaviest authority to regulate broadband “on par” with water, electricity and other utilities.  Even with forbearance and preemption, Title II regulations will burden internet service providers (“ISPs”) with innovation and investment-chilling regulations.

The Digital Discrimination Act adds its own considerable regulatory weight.  The well intentioned policy of the Act is that “subscribers should benefit from equal access to broadband internet access service within the service area of a provider of such service.”  It directs the FCC to adopt rules “preventing digital discrimination of access based on income level, race, ethnicity, color, religion, or national origin” and to identify necessary steps for the FCC to take to eliminate discrimination.  The FCC promulgated its rules last November.

However, the FCC created an unnecessarily expansive regulatory regime by determining that intent to discriminate isn’t required to constitute digital discrimination.  Instead of using the disparate treatment standard of review, which requires intentional discrimination for a violation, the FCC used the disparate impact standard, which is results-based and for which intent is not a factor.  

While the FCC believes that any rule that excludes disparate impact liability would render the digital discrimination section of the Act “largely meaningless,” not requiring intent to discriminate creates expansive potential liability for ISPs for merely making rational business decisions with no intent or desire to discriminate. As Commissioner Carr observed, the rules would give the federal government “a roving mandate to micromanage nearly every aspect of how the Internet functions…” and “veto power over every decision about the provision of Internet service in the country.”

An analysis of alleged discrimination, or what the FCC terms “differential impact,” will require a review of the ISP decisions that led to the allegation.  Any price, promotion, network build or upgrade can be subject to an allegation of differential impact, so ISPs will need to be prepared to defend almost every decision they make.  Examples of ISP decision points now subject to regulatory review include:

• How, when and where to allocate capital.
• Deployment locations and schedules.
• System investments and upgrades.
• Pricing, promotions and the analysis of the underlying costs and competitive threats driving those determinations.
• Marketing decisions and content.

This likely will lead to the proverbial “paralysis from analysis.” ISPs will be in a constant state of uncertainty because they will be preoccupied with how the FCC may interpret their decisions.

And despite Chair Rosenworcel’s promised “no how, no way” to rate regulation in the Title II proceeding, the Act and FCC rules create rate regulation because if there is an allegation that a rate in a service area creates a differential impact, the FCC will approve or disapprove of that rate.  The FCC will therefore be engaging in what it promised it won’t do under Title II.

No one wants consumers to incur unlawful discrimination and it’s in our county’s interest to have high quality broadband deployed widely and priced rationally.  But the FCC could have limited the expansive potential of the Act by applying the disparate treatment standard and requiring evidence of actual intent to discriminate, a more reasonable and manageable approach.

Moreover, the best way to achieve “equal access” to broadband is to have pro-investment policies that create market competition and produce the best deployment and pricing decisions.  The high quality broadband networks that consumers enjoy today have thrived in the current light touch regulatory regime and heavy regulation will only deliver a lesser consumer experience.  

Unfortunately, when the federal government applies its considerable regulatory weight, it’s broadband that will be crushed.