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FCC Commissioners Clyburn and Rosenworcel Blast Republican Colleagues Over Net Neutrality Repeal

The two Democratic minority members of the Federal Communications Commission shared their strong sentiments today in remarks condemning the 3-2 vote to repeal net neutrality. Commissioners Mignon Clyburn and Jessica Rosenworcel appeared irritated at today’s Open Commission Meeting. They expressed concern that today’s vote appeared politically motivated and ignored more than 20 million comments filed by members of the public, most in favor of net neutrality.

FCC Chairman Ajit Pai did not reference any comments from the public in his remarks supporting net neutrality’s repeal, which the FCC website celebrated as, “Reversing Title II Framework, Increases Transparency to Protect Consumers, Spur Investment, Innovation, and Competition.”

Jessica Rosenworcel

“Net neutrality is internet freedom. I support that freedom. I dissent from this rash decision to roll back net neutrality rules. I dissent from the corrupt process that has brought us to this point. And I dissent from the contempt this agency has shown our citizens in pursuing this path today. This decision puts the Federal Communications Commission on the wrong side of history, the wrong side of the law, and the wrong side of the American public.

The future of the internet is the future of everything. That is because there is nothing in our commercial, social, and civic lives that has been untouched by its influence or unmoved by its power. And here in the United States our internet economy is the envy of the world. This is because it rests on a foundation of openness.

That openness is revolutionary. It means you can go where you want and do what you want online without your broadband provider getting in the way or making choices for you. It means every one of us can create without permission, build community beyond geography, organize without physical constraints, consume content we want when and where we want it, and share ideas not just around the corner but across the globe. I believe it is essential that we sustain this foundation of openness—and that is why I support net neutrality.

Net neutrality has deep origins in communications law and history. In the era when communications meant telephony, every call went through, and your phone company could not cut off your call or edit the content of your conversations. This guiding principle of nondiscrimination meant you were in control of the connections you made.

This principle continued as time advanced, technology changed, and Internet access became the dial tone of the digital age. So it was twelve years ago—when President George W. Bush was in the White House—that this agency put its first net neutrality policies on paper. In the decade that followed, the FCC revamped and revised its net neutrality rules, seeking to keep them current and find them a stable home in the law. In its 2015 order the FCC succeeded—because in the following year, in a 184-page opinion the agency’s net neutrality rules were fully and completely upheld.

So our existing net neutrality policies have passed court muster. They are wildly popular. But today we wipe away this work, destroy this progress, and burn down time-tested values that have made our Internet economy the envy of the world.

Rosenworcel

As a result of today’s misguided action, our broadband providers will get extraordinary new power from this agency. They will have the power to block websites, throttle services, and censor online content. They will have the right to discriminate and favor the internet traffic of those companies with whom they have pay-for-play arrangements and the right to consign all others to a slow and bumpy road.

Now our broadband providers will tell you they will never do these things. They say just trust us. But know this: they have the technical ability and business incentive to discriminate and manipulate your internet traffic. And now this agency gives them the legal green light to go ahead and do so.

This is not good. Not good for consumers. Not good for businesses. Not good for anyone who connects and creates online. Not good for the democratizing force that depends on openness to thrive. Moreover, it is not good for American leadership on the global stage of our new and complex digital world.

I’m not alone with these concerns. Everyone from the creator of the world wide web to religious leaders to governors and mayors of big cities and small towns to musicians to actors and actresses to entrepreneurs and academics and activists has registered their upset and anger. They are reeling at how this agency could make this kind of mistake. They are wondering how it could be so tone deaf. And they are justifiably concerned that just a few unelected officials could make such vast and far-reaching decisions about the future of the internet.

So after erasing our net neutrality rules what is left? What recourse do consumers have?

We’re told don’t worry, competition will save us. But the FCC’s own data show that our broadband markets are not competitive. Half of the households in this country have no choice of broadband provider. So if your broadband provider is blocking websites, you have no recourse. You have nowhere to go.

We’re told don’t worry, the Federal Trade Commission will save us. But the FTC is not the expert agency for communications. It has authority over unfair and deceptive practices. But to evade FTC review, all any broadband provider will need to do is add new provisions to the fine print in its terms of service. In addition, it is both costly and impractical to report difficulties to the FTC. By the time the FTC gets around to addressing them in court proceedings or enforcement actions, it’s fair to assume that the start-ups and small entities wrestling with discriminatory treatment could be long done. Moreover, what little authority the FTC has is now under question in the courts.

We’re told don’t worry, the state authorities will save us. But at the same time, the FCC all but clears the field with sweeping preemption of anything that resembles state or local consumer protection.

If the substance that got us to this point is bad, the process is even worse.

Let’s talk about the public record.

The public has been making noise, speaking up, and raising a ruckus. We see it in the protests across the country and outside here today. We see it in how they lit up our phone lines, clogged our e-mail in-boxes, and jammed our online comment system. It might be messy, but whatever our disagreements are on this dais I hope we can agree this is democracy in action—and something we can all support.

To date, nearly 24 million comments have been filed in this proceeding. There is no record in the history of this agency that has attracted so many filings. But there’s something foul in this record:

Two million comments feature stolen identities.

Half a million comments are from Russian addresses.

Fifty thousand consumer complaints are inexplicably missing from the record.

I think that’s a problem. I think our record has been corrupted and our process for public participation lacks integrity. Nineteen state attorneys general agree. They have written us demanding we halt our vote until we investigate and get to the bottom of this mess. Identity theft is a crime under state and federal law—and while it is taking place this agency has turned a blind eye to its victims and callously told our fellow law enforcement officials it will not help.

This is not acceptable. It is a stain on the FCC and this proceeding. This issue is not going away. It needs to be addressed.

Finally, I worry that this decision and the process that brought us to this point is ugly. It’s ugly in the cavalier disregard this agency has demonstrated to the public, the contempt it has shown for citizens who speak up, and the disdain it has for popular opinion. Unlike its predecessors this FCC has not held a single public hearing on net neutrality. There is no shortage of people who believe Washington is not listening to their concerns, their fears, and their desires. Add this agency to the list.

I, too, am frustrated. But here’s a twist: I hear you. I listen to what callers are saying. I read the countless, individually written e-mails in my in-box, the posts online, and the very short and sometimes very long letters. And I’m not going to give up—and neither should you. If the arc of history is long, we are going to bend this toward a more just outcome. In the courts. In Congress. Wherever we need to go to ensure that net neutrality stays the law of the land. Because if you are conservative or progressive, you benefit from internet openness. If you come from a small town or big city, you benefit from internet openness. If you are a company or non-profit, you benefit from internet openness. If you are a start-up or an established business, you benefit from internet openness. If you are a consumer or a creator, you benefit from internet openness. If you believe in democracy, you benefit from internet openness.

So let’s persist. Let’s fight. Let’s not stop here or now. It’s too important. The future depends on it.”

Mignon Clyburn

“I dissent. I dissent from this fiercely-spun, legally-lightweight, consumer-harming, corporate-enabling Destroying Internet Freedom Order.

I dissent, because I am among the millions who is outraged. Outraged, because the FCC pulls its own teeth, abdicating responsibility to protect the nation’s broadband consumers. Why are we witnessing such an unprecedented groundswell of public support, for keeping the 2015 net neutrality protections in place? Because the public can plainly see, that a soon-to-be-toothless FCC, is handing the keys to the Internet – the Internet, one of the most remarkable, empowering, enabling inventions of our lifetime – over to a handful of multi-billion dollar corporations. And if past is prologue, those very same broadband internet service providers, that the majority says you should trust to do right by you, will put profits and shareholder returns above, what is best for you.

Each of us raised our right hands when we were sworn in as FCC Commissioners, took an oath and promised to uphold our duties and responsibilities ‘to make available, so far as possible, to all the people of the United States, without discrimination… a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges.’ Today the FCC majority officially abandons that pledge and millions have taken note.

I do not believe that there are any FCC or Congressional offices immune to the deluge of consumer outcry. We are even hearing about state and local offices fielding calls and what is always newsworthy is that at last count, five Republican Members of Congress went on the record in calling for a halt of today’s vote. Why such a bipartisan outcry? Because the large majority of Americans are in favor of keeping strong net neutrality rules in place. The sad thing about this commentary, it pains me to say, is what I can only describe as the new norm at the FCC: A majority that is ignoring the will of the people. A majority that will stand idly by while the people they serve lose.

We have heard story after story of what net neutrality means to consumers and small businesses from places as diverse as Los Angeles’ Skid Row and Marietta, Ohio. I hold in my hand letters that plead with the FCC to keep our net neutrality rules in place but what is striking and in keeping with the new norm, despite the millions of comments, letters, and calls received, this Order cites, not even one. That speaks volumes about the direction the FCC is heading. That speaks volumes about just who is being heard.

Clyburn

Sole proprietors, whose entire business model, depends on an open internet, are worried that the absence of clear and enforceable net neutrality protections will result in higher costs and fewer benefits because you see: they are not able to pay tolls for premium access. Even large online businesses have weighed in, expressing concern about being subject to added charges as they simply try to reach their own customers. Engineers have submitted comments including many of the internet’s pioneers, sharing with the FCC majority, the fundamentals of how the internet works because from where they sit, there is no way that an item like this would ever see the light of day, if the majority understood the platform some of them helped to create.

I have heard from innovators, worried that we are standing up a mother-may-I regime, where the broadband provider becomes arbiter of acceptable online business models. And yes, I have heard from consumers, who are worried given that their broadband provider has already shown that they will charge inscrutable below-the-line fees, raise prices unexpectedly, and put consumers on hold for hours at a time. Who will have their best interests at heart in a world without clear and enforceable rules overseen by an agency with clear enforcement authority? A toothless FCC?

There has been a darker side to all of this over the past few weeks. Threats and intimidation. Personal attacks. Nazis cheering. Russian influence. Fake comments. Those are unacceptable. Some are illegal. They all are to be rejected. But what is also not acceptable, is the FCC’s refusal to cooperate with state attorney general investigations, or allow evidence in the record that would undercut a preordained outcome.

Many have asked, what happens next? How will all of this – Net Neutrality, my internet experience, look after today? My answer is simple. When the current protections are abandoned, and the rules that have been officially in place since 2015 are repealed, we will have a Cheshire cat version of net neutrality. We will be in a world where regulatory substance fades to black, and all that is left is a broadband provider’s toothy grin and those oh so comforting words: we have every incentive to do the right thing.

What they will soon have, is every incentive to do their own thing.Now the results of throwing out your Net Neutrality protections, may not be felt right away. Most of us will get up tomorrow morning and over the next week, wade through hundreds of headlines, turn away from those endless prognosticators, and submerge ourselves in a sea of holiday bliss. But what we have wrought will one day be apparent and by then, when you really see what has changed, I fear, it may not only be too late to do anything about it, because there will be no agency empowered to address your concerns. This item insidiously ensures the FCC will never be able to fully grasp the harm it may have unleashed on the internet ecosystem. And that inability might lead decisionmakers to conclude, that the next internet startup that failed to flourish and attempted to seek relief, simply had a bad business plan, when in fact what was missing was a level playing field online.

Particularly damning is what today’s repeal will mean for marginalized groups, like communities of color, that rely on platforms like the internet to communicate, because traditional outlets do not consider their issues or concerns, worthy of any coverage. It was through social media that the world first heard about Ferguson, Missouri, because legacy news outlets did not consider it important until the hashtag started trending. It has been through online video services, that targeted entertainment has thrived, where stories are finally being told because those same programming were repeatedly rejected by mainstream distribution and media outlets. And it has been through secure messaging platforms, where activists have communicated and organized for justice without gatekeepers with differing opinions blocking them.

Where will the next significant attack on internet freedom come from? Maybe from a broadband provider allowing its network to congest, making a high-traffic video provider ask what more can it pay to make the pain stop. That will never happen you say? Well it already has. The difference now, is the open question of what is stopping them? The difference after today’s vote, is that no one will be able to stop them.

Maybe several providers will quietly roll out paid prioritization packages that enable deep-pocketed players to cut the queue. Maybe a vertically-integrated broadband provider decides that it will favor its own apps and services. Or some high-value internet-of-things traffic will be subject to an additional fee. Maybe some of these actions will be cloaked under nondisclosure agreements and wrapped up in mandatory arbitration clauses so that it will be a breach of contract to disclose these publicly or take the provider to court over any wrongdoing. Some may say ‘Of Course this will never happen?” After today’s vote, what will be in place to stop them?

What we do know, is that broadband providers did not even wait for the ink to dry on this Order before making their moves. One broadband provider, who had in the past promised to not engage in paid prioritization, has now quietly dropped that promise from its list of commitments on its website. What’s next? Blocking or throttling? That will never happen? After today’s vote, exactly who is the cop of the beat that can or will stop them?

And just who will be impacted the most? Consumers and small businesses, that’s who. The internet continues to evolve and has become ever more critical for every participant in our 21st century ecosystem: government services have migrated online, as have educational opportunities and job notices and applications, but at the same time, broadband providers have continued to consolidate, becoming bigger. They own their own content, they own media companies, and they own or have an interest in other types of services.

Why are millions so alarmed? Because they understand the risks this all poses and even those who may not know what Title II authority is, know that they will be at risk without it.

I have been asking myself repeatedly, why the majority is so singularly-focused on overturning these wildly-popular rules? Is it simply because they felt that the 2015 Net Neutrality order, which threw out over 700 rules and dispensed with more than 25 provisions, was too heavy-handed? Is this a ploy to create a “need” for legislation where there was none before? Or is it to establish uncertainty where little previously existed?

Is it a tactic to undermine the net neutrality protections adopted in 2015 that are currently parked at the Supreme Court? You know, the same rules that were resoundingly upheld by the D.C. Circuit last year? No doubt, we will see a rush to the courthouse, asking the Supreme Court to vacate and remand the substantive rules we fought so hard for over the past few years, because today, the FCC uses legally-suspect means to clear the decks of substantive protections for consumers and competition.

It is abundantly clear why we see so much bad process with this item: because the fix was already in. There is no real mention of the thousands of net neutrality complaints filed by consumers. Why? The majority has refused to put them in the record while maintaining the rhetoric that there have been no real violations. Record evidence of the massive incentives and abilities of broadband providers to act in anti-competitive ways are missing from the docket? Why? Because they have refused to use the data and knowledge the agency does have, and has relied upon in the past to inform our merger reviews. As the majority has shown again and again, the views of individuals do not matter, including the views of those who care deeply about the substance, but are not Washington insiders.

There is a basic fallacy underlying the majority’s actions and rhetoric today: the assumption of what is best for broadband providers, is best for America. Breathless claims about unshackling broadband services from unnecessary regulation, are only about ensuring that broadband providers, have the keys to the internet. Assertions that this is merely a return to some imaginary status quo ante, cannot hide the fact, that this is the very first time, that the FCC, has disavowed substantive protections for consumers online.

And when the current, 2015 Net Neutrality rules are laid to waste, we may be left with no single authority with the power to protect consumers. Now this Order loudly crows about handing over authority of broadband to the FTC, but what is absent from the Order and glossed over in that haphazardly issued afterthought of a Memorandum of Understanding or MOU, is that the FTC is an agency, with no technical expertise in telecommunications; the FTC is an agency that may not even have authority over broadband providers in the first instance; the FTC is an agency that if you can even reach that high bar of proving unfair or deceptive practices and that there is substantial consumer injury, it will take years upon years to remedy. But don’t just take my word for it: even one of the FTC’s own Commissioners has articulated these very concerns. And if you’re wondering why the FCC is preempting state consumer protection laws in this item without notice, let me help you with a simple jingle that you can easily commit to memory: If it benefits industry, preemption is good; if it benefits consumers, preemption is bad.

Reclassification of broadband will do more than wreak havoc on net neutrality. It will also undermine our universal service construct for years to come, something which the Order implicitly acknowledges. It will undermine the Lifeline program. It will weaken our ability to support robust broadband infrastructure deployment. And what we will soon find out, is what a broadband market unencumbered by robust consumer protections will look like. I suspect the result will not be pretty.
I know there are many questions on the mind of Americans right now, including what the repeal of net neutrality will mean for them. To help answer outstanding questions I will host a town hall through Twitter next Tuesday at 2pm EST. What saddens me is that the agency that is supposed to protect you is abandoning you, but what I am pleased to be able to say is the fight to save net neutrality does not end today. This agency does not have, the final word. Thank goodness.

As I close my eulogy of our 2015 net neutrality rules, carefully crafted rules that struck an appropriate balance in providing consumer protections and enabling opportunities and investment, I take ironic comfort in the words of then Commissioner Pai from 2015, because I believe this will ring true about this Destroying Internet Freedom Order:

“I am optimistic, that we will look back on today’s vote as an aberration, a temporary deviation from the bipartisan path, that has served us so well. I don’t know whether this plan will be vacated by a court, reversed by Congress, or overturned by a future Commission. But I do believe that its days are numbered.”

Amen to that, Mr. Chairman. Amen to that.

Editor’s Note: In deference to journalism style books and the forthcoming introduction of several pieces of proposed legislation to enshrine the idea of an open internet into law, we are henceforth referring to “net neutrality” in lowercase. Since Stop the Cap! began, we have consistently referred to the concept as “Net Neutrality,” but because we will soon see various bills and policy proposals outlining different ideas about what that represents, it is more appropriate to refer to it as a general concept as opposed to a singular policy. The change should not suggest any editorial commentary about the principle of net neutrality or its importance. Most print publications began referring to net neutrality in lowercase more than a year ago. We now join them for the reasons referenced above.

Jangling Shiny Keys of Distraction: Pai Claims Twitter, Edge Providers are the Real Threat to Open Internet

Pai

FCC Chairman Ajit Pai has gone all out to defend internet service providers and his plan to jettison Net Neutrality, claiming companies like Twitter and other “edge providers” that offer a platform to a diversity of voices are a much bigger threat to an open internet than companies like AT&T and Comcast.

Speaking at the Future of Internet Freedom conference in Washington, Pai faced down the torrent of criticism that has been expressed about his plans to roll back Title II enforcement of ISPs and Net Neutrality rules that protect internet content from discriminatory behavior. In remarks to the audience, Pai used partisan framing to criticize companies like Twitter that he claims have targeted bans on conservative users who violate its terms and conditions and removes tweets for political reasons.

“Now look, I love Twitter, and I use it all the time,” Pai said. “But let’s not kid ourselves; when it comes to an open internet, Twitter is part of the problem. The company has a viewpoint and uses that viewpoint to discriminate. As just one of many examples, two months ago, Twitter blocked Rep. Marsha Blackburn (R-Tenn.) from advertising her Senate campaign launch video because it featured a pro-life message. Before that, during the so-called Day of Action [to preserve Net Neutrality], Twitter warned users that a link to a statement by one company on the topic of internet regulation ‘may be unsafe.’  And to say the least, the company appears to have a double standard when it comes to suspending or de-verifying conservative users’ accounts as opposed to those of liberal users.  This conduct is many things, but it isn’t fighting for an open internet.”

Pai also used additional examples of “edge provider” censorship that he claims targets conservatives far more often than liberals:

  • Apple’s app store bars apps from cigar aficionados as promoting tobacco use
  • YouTube “restricts videos from the likes of conservative commentator Dennis Prager on subjects he considers ‘important to understanding American values.'”
  • Mysterious algorithms target content to specific users but without transparency and disclosure
  • Edge providers champion their own free speech while supporting online censorship at the behest of foreign governments for business reasons.

But Pai’s own statements lacked transparency:

  1. Twitter blocked, then rescinded its block, on one sponsored Tweet from Blackburn that claimed in the ad she ‘stopped the sale of baby body parts.’ Twitter declared the ad was inflammatory and violated Twitter’s advertising standards. Other media fact-checkers were less polite, calling her claim false advertising. “No investigation ever found proof of actual tissue sales. The only criminal charges stemming from the videos were filed against antiabortion activist David Daleiden and another activist in California for violations of privacy. Yet to this day, ‘baby body parts’ remain a rallying cry in conservative and antiabortion circles,” according to a Washington Post story. Twitter’s advertising standards differ from its general code of user conduct.
  2. Apple’s app store does indeed block apps promoting products deemed harmful to users. There is no financial incentive to block these apps, however. The specific language: “Apps that encourage consumption of tobacco products, illegal drugs, or excessive amounts of alcohol are not permitted on the App Store. Apps that encourage minors to consume any of these substances will be rejected. Facilitating the sale of marijuana, tobacco, or controlled substances (except for licensed pharmacies) isn’t allowed.”
  3. Pai suggests YouTube is unfairly restricting Mr. Prager’s videos, but in fact it is only placing advisories on some of his more inflammatory content warning the video may not be suitable for some audiences. YouTube also demonetized certain videos, making them ineligible for pre-roll advertisements, primarily because advertisers do not want to be associated with inflammatory content. But no videos have been censored, blocked, or removed. Anyone can view them by acknowledging the content advisory. Members of the LGBTQ community have also been upset with YouTube for similar actions, so there is scant evidence YouTube’s motives are political and target conservatives.
  4. Pai’s ‘mysterious algorithms’ have existed across the internet for years, including Verizon’s “super cookie” and AT&T that extracted more money from customers to switch off its monitoring and tracking software following customers’ internet usage. Pai was highly instrumental in blocking internet privacy regulations that would have forced the kind of disclosure of practices he suddenly objects to now.
  5. Pai’s claims about American companies caving in to foreign governments’ censorship policies seem to echo his similar 2015 claim that Net Neutrality also helps authoritarian regimes, as long as one interprets Net Neutrality as a “government takeover” of the internet. “If in the United States we adopt regulations that assert more government control over how the internet operates… it becomes a lot more difficult for us to go on the international stage and tell governments: ‘Look, we want you to keep your hands off the internet. Even if the ideas aren’t completely identical, you can appreciate the optical difficult[y] in trying to make that case,” Pai said. But that argument distorts like a fun house mirror. Pai’s declaration that Net Neutrality is a bad thing is based on his premise it would hand the keys to information control to the government to act as gatekeeper. He prefers trusting private companies to be more reliable and safer gatekeepers than the FCC or the Trump Administration. But that argument puts Pai at war with himself, considering his attacks on edge providers — private companies — for bias and censorship. Incidentally and ironically, he raised many of his 2015 objections on RT — the external television service of Russian State Television.

Pai reserved much of his remarks to attack Hollywood celebrities that occasionally inelegantly promote Net Neutrality with inexact language Pai loves to exploit. Among his targets were Mark Ruffalo, who played Hulk, Cher, and George “Sulu” Takei.

Takei

Pai called out Mr. Takei for his suggestion eliminating Net Neutrality would allow internet companies to further monetize the internet by selling additional packages of services to access certain internet content.

“The complaint by Mr. Takei and others doesn’t hold water. They’re arguing that if the plan is adopted, Internet Service Providers would suddenly start doing something that Net Neutrality rules already allow them to do. But the reason that Internet service providers aren’t offering such packages now, and likely won’t offer such packages in the future, is that American consumers by and large don’t want them.”

But of course that didn’t prevent ISPs like Comcast and AT&T to impose data caps on their customers with scant evidence of their necessity and with purely arbitrary allowances. From this regime of data caps, Wall Street analysts push providers to further monetize internet usage to raise revenue to return to shareholders. What customers want has not had much impact on Comcast’s business decisions, as the record on data caps illustrates. The threat of regulation like Net Neutrality enforcement has cooled enthusiasm for these pricing schemes, however, until recently. In April, after Mr. Pai introduced his Net Neutrality repeal plan, Comcast quietly repealed its self-ban on paid prioritization — internet fast lanes.

In a barely competitive marketplace, what customers want may not count for much if they have few, if any alternatives.

Chip Pickering, CEO of INCOMPAS, which includes as member major Silicon Valley edge providers, called Pai’s speech a diversion from the real issues.

“Chairman Pai’s attack on Twitter is like a boxer losing a fight and taking wild and erratic swings,” Pickering said. “Preventing hate speech and bullying behavior online is not the same thing as allowing cable companies to block, throttle and extort money from consumers and the websites they love. Twitter is an amazing platform for left, right and center. Donald Trump might not be President without it, and Chairman Pai’s plan to kill Net Neutrality will put Comcast and AT&T in charge of his Twitter account.”

FCC Chairman Ajit Pai Announces Plan to Eliminate Net Neutrality

Pai

WASHINGTON (Reuters) – The head of the U.S. Federal Communications Commission unveiled plans on Tuesday to repeal landmark 2015 rules that prohibited internet service providers from impeding consumer access to web content in a move that promises to recast the digital landscape.

FCC chief Ajit Pai, a Republican appointed by President Donald Trump in January, said the commission will vote at a Dec. 14 meeting on his plan to rescind the so-called Net Neutrality rules championed by Democratic former President Barack Obama that treated internet service providers like public utilities.

The rules barred broadband providers from blocking or slowing down access to content or charging consumers more for certain content. They were intended to ensure a free and open internet, give consumers equal access to web content and prevent broadband service providers from favoring their own content.

The action marks a victory for big internet service providers such as AT&T, Comcast and Verizon Communications that opposed the rules and gives them sweeping powers to decide what web content consumers can get and at what price.

It represents a setback for Google parent Alphabet Inc and Facebook, which had urged Pai not to rescind the rules.

With three Republican and two Democratic commissioners, the move is all but certain to be approved. Trump, a Republican, expressed his opposition to Net Neutrality in 2014 before the regulations were even implemented, calling it a “power grab” by Obama.

Pai said his proposal would prevent state and local governments from creating their own Net Neutrality rules because internet service is “inherently an interstate service.” The preemption is most likely to handcuff Democratic-governed states and localities that could have considered their own plans to protect consumers’ equal access to internet content.

“The FCC will no longer be in the business of micromanaging business models and preemptively prohibiting services and applications and products that could be pro-competitive,” Pai said in an interview, adding that the Obama administration had sought to pick winners and losers and exercised “heavy-handed” regulation of the internet.

“We should simply set rules of the road that let companies of all kinds in every sector compete and let consumers decide who wins and loses,” Pai added.

Tom Wheeler, who headed the FCC under Obama and advocated for the Net Neutrality rules, called the planned repeal “a shameful sham and sellout. Even for this FCC and its leadership, this proposal raises hypocrisy to new heights.”

AT&T, Comcast and Verizon have said that repealing the rules could lead to billions of dollars in additional broadband investment and eliminate the possibility that a future presidential administration could regulate internet pricing.

‘HEAVY COSTS’

Pelosi: FCC move will hurt consumers and chill competition.

Verizon said it believed the FCC “will reinstate a framework that protects consumers’ access to the open internet, without forcing them to bear the heavy costs from unnecessary regulation.”

The Internet Association, representing major technology firms including Alphabet and Facebook, said Pai’s proposal “represents the end of Net Neutrality as we know it and defies the will of millions of Americans. This proposal undoes nearly two decades of bipartisan agreement on baseline Net Neutrality principles that protect Americans’ ability to access the entire internet.”

Pai’s proposal would require internet service providers to disclose whether they allow blocking or slowing down of consumer web access or permit so-called internet fast lanes to facilitate a practice called paid prioritization of charging for certain content. Such disclosure will make it easier for another agency, the Federal Trade Commission, to act against internet service providers that fail to disclose such conduct to consumers, Pai said.

A U.S. appeals court last year upheld the legality of the Net Neutrality regulations, which were challenged in a lawsuit led by telecommunications industry trade association US Telecom.

The group praised Pai’s decision to remove “antiquated, restrictive regulations” to “pave the way for broadband network investment, expansion and upgrades.”

The FCC’s repeal is certain to draw a legal challenge from advocates of Net Neutrality.

Nancy Pelosi, the top U.S. House of Representatives Democrat, said the FCC move would hurt consumers and chill competition, saying the agency “has launched an all-out assault on the entrepreneurship, innovation and competition at the heart of the internet.”

Republican Senator John Thune said Pai’s plan was an improvement over the Obama rules but that “the only way to create long-term certainty for the internet ecosystem is for Congress to pass a bipartisan law.”

The planned repeal represents the latest example of a legacy achievement of Obama being erased since Trump took office in January. Trump has abandoned international trade deals, the landmark Paris climate accord and environmental protections, taken aim at the Iran nuclear accord and closer relations with Cuba, and sought repeal Obama’s signature healthcare law.

Pai, who has moved quickly to undo numerous regulatory actions since becoming FCC chairman, is pushing a broad deregulatory agenda. Pai said he had not shared his plans on the rollback with the White House in advance or been directed to undo Net Neutrality by White House officials.

The FCC under Obama regulated internet service providers like public utilities under a section of federal law that gave the agency sweeping oversight over the conduct of these companies.

Language in the new proposal would give the FCC significantly less authority to oversee the web. The FCC granted initial approval to Pai’s plan in May, but had left open many key questions including whether to retain any legal requirements limiting internet providers conduct.

His plan also would eliminate the “internet conduct standard,” which gave the FCC far-reaching discretion to prohibit internet service provider practices deemed to violate a list of factors and sought to address future discriminatory conduct.

Reporting by David Shepardson; Editing by Will Dunham

The Great Telecom Merger Carousel: Altice <-> Sprint <-> T-Mobile <-> Charter

A last-ditch effort last weekend by executives of SoftBank and Deutsche Telekom to overcome their differences in merging Sprint with T-Mobile USA ended in failure, killing Wall Street’s hopes combining the two scrappiest wireless carriers would end a bruising price war that had heated up competition and hurt profits at all four of America’s leading wireless companies.

Now Wall Street, hungry for a consolidation deal, is strategizing what will come next.

Sprint/T-Mobile Merger

In the end, SoftBank’s chairman, Masayoshi Son, simply did not want to give up control of Sprint to Deutsche Telekom, especially considering Sprint’s vast wireless spectrum holdings suitable for future 5G wireless services.

The failure caused Sprint Corp. shares and bonds to plummet, and spooked investors are worried Sprint’s decade-long inability to earn a profit won’t end anytime soon. Sprint’s 2010 Network Vision Plan, which promised better coverage and network performance, also helped to load the company with debt, nearly half of which Sprint has to pay back over the next four years before it becomes due. Sprint’s perpetual upgrades have not tremendously improved its network coverage or performance, and its poor performance ratings have caused many customers to look elsewhere for wireless service.

Investors are also concerned Sprint will struggle to pay its current debts at the same time it faces new ones from investments in next generation 5G wireless technology. Scared shareholders have been comforted this morning by both Son and Sprint CEO Marcelo Claure in an all-out damage control campaign.

Son has promised the now-orphaned Sprint will benefit from an increased stake in the company by SoftBank — a signal to investors SoftBank is tying itself closer to Sprint. Son has also promised additional investments to launch yet another wave of network upgrades for Sprint’s fourth place network. But nothing is expected to change very quickly for customers, who may be in for a rough ride for the immediate future. Son has already said his commitment to raise Sprint’s capital expenditures from the current $3.5-4 billion to $5-6 billion annually will not begin this year. Analysts claim Sprint needs at least $5-6 billion annually to invest in network improvements if it ever hopes to catch up to T-Mobile, AT&T, and Verizon Wireless.

Masayoshi Son, chairman of SoftBank Group

“Even if the next three-four years will be a tough battle, five to 10 years later it will be clear that this is a strategically invaluable business,’’ Son said, lamenting losing control of that business in a deal with T-Mobile was simply impossible. “There was just a line we couldn’t cross, and that’s how we arrived at the conclusion.”

During a call with analysts on Monday, Sprint’s chief financial officer Tarek Robbiati acknowledged investors’ disappointment.

Investors were hoping for an end to deep discounting and perks given to attract new business. T-Mobile’s giveaways and discounting have reduced the company’s profitability. Sprint’s latest promotions, including giving away service for up to a year, were seen by analysts as desperate.

Son’s own vision plan doesn’t dwell on the short-term, mapping out SoftBank’s progress over the next 300 years. But for now, Son is concerned with supporting the investments already made in the $100 billion Vision Fund Son has built with Saudi Arabia’s oil wealth-fueled Public Investment Fund. Its goal is to lead in the field of next generation wireless communications networks. Sprint is expected to be a springboard for those investments in the United States, supported by the wireless company’s huge 2.5GHz spectrum holdings, which may be perfect for 5G wireless networks.

But Son’s own failures are also responsible for Sprint’s current plight. Son attempted to cover his losses in Sprint by pursuing a merger with T-Mobile in 2014, but the merger fell apart when it became clear the Obama Administration’s regulators were unlikely to approve the deal. After that deal fell apart, Son has allowed T-Mobile to overtake Sprint’s third place position in the wireless market. While T-Mobile grew from 53 million customers to 70.7 million today, Sprint lost one million customers, dropping to fourth place with around 54 million current customers.

Son’s answer to the new competition was to change top management. Incoming Sprint CEO Marcelo Claure promptly launched a massive cost-cutting program and layoffs, and upgrade-oriented investments in Sprint’s network stagnated, causing speeds and performance to decline.

Claure tweetstormed damage control messages about the merger’s collapse, switching from promoting the merger’s benefits to claims of relief the merger collapsed:

  • “Jointly stopping merger talks was right move.”
  • Sprint is a vital part of a larger SoftBank strategy involving the Vision Fund, Arm, OneWeb and other strategic investments.”
  • “Excited about Sprint’s future as a standalone. I’m confident this is right decision for our shareholders, customers & employees.”
  • “Sprint added over 1 million customers last year – we have gone from losing to winning.”
  • “Last quarter we delivered an estimated 22% of industry postpaid phone gross additions, our highest share ever.”
  • “Sprint network performance is at best ever levels – 33% improvement in nationwide data speeds year over year.”
  • “We are planning significant investments to the Sprint network this year and the years to come.”
  • “In the last 3 years we’ve reduced our costs by over $5 billion.”
  • “Sprint’s results are the best we’ve achieved in a decade and we will continue getting better every day.”

In Saturday’s joint announcement, Claure said that “while we couldn’t reach an agreement to combine our companies, we certainly recognize the benefits of scale through a potential combination. However, we have agreed that it is best to move forward on our own. We know we have significant assets, including our rich spectrum holdings, and are accelerating significant investments in our network to ensure our continued growth.”

“They need to spend (more) money on the network,” said William Ho, an analyst at 556 Ventures LLC.

CNBC reports Sprint’s end of its T-Mobile merger deal has hammered the company’s stock. What does Sprint do now? (1:30)

Sprint/Altice Partnership

Sprint executives hurried out word on ‘Damage Control’ Monday that Altice USA would partner with Sprint to resell wireless service under the Altice brand. In return for the partnership, Sprint will be able to use Altice’s fiber network in Cablevision’s service area in New York, New Jersey, and Connecticut for its cell towers and future 5G small cells. The deal closely aligns to Comcast and Charter’s deal with Verizon allowing those cable operators to create their own cellular brands powered by Verizon Wireless’ network.

An analyst at Cowen & Co., suspected the Altice deal may be a trial to test the waters with Sprint before Altice commits to a future merger between the two companies. Altice is hungry for expansion, currently owning Cablevision and Suddenlink cable operators in the U.S. But Altice has a very small footprint in the U.S., leading some analysts to believe a more lucrative merger might be possible elsewhere.

Sprint/Charter Merger

Charter Communications Logo. (PRNewsFoto/Charter Communications, Inc.)

Charter Communications stock was up more than 7% in early Monday morning trading as a result of speculation SoftBank and Charter Communications were restarting merger talks after a deal with T-Mobile collapsed.

CNBC reported that Mr. Son was willing to resume talks with Charter executives about a merger between the cable operator and Sprint. Charter executives have shown little interest in the deal, still distracted trying to merge their acquisitions Time Warner Cable and Bright House Networks into Charter’s current operation. Charter’s entry into wireless has been more tentative, following Comcast with a partnership with Verizon Wireless to resell that considerably stronger network under the Charter brand beginning sometime in 2018.

According to CNBC, John Malone’s Liberty Media, which owns a 27% stake in Charter, is now in favor of a deal, while Charter’s top executives are still opposed.

CNBC reports Charter and Sprint may soon be talking again about a merger between the two. (6:33)

Dish Networks <-> T-Mobile USA

Wall Street’s merger-focused analysts are hungry for a deal now that the Sprint/T-Mobile merger has collapsed. Pivotal Research Group is predicting good things are possible for shareholders of Dish Network, and upgraded the stock to a “buy” recommendation this morning.

Jeff Wlodarczak, Pivotal’s CEO and senior media analyst, theorizes that Sprint’s merger collapse could be good news for Dish, sitting on a large amount of unused wireless spectrum suitable for 5G wireless networks. Those licenses, estimated to be worth $10 billion, are likely to rise in value as wireless companies look for suitable spectrum to deploy next generation 5G networks.

Multichannel News quotes Wlodarczak’s note to investors:

“In our opinion, post the T-Mobile-Sprint deal failure there is a reasonable chance that T-Mobile could make a play for Dish or Dish spectrum as it would immediately vault the most disruptive U.S. wireless player into the leading U.S. spectrum position (w/ substantially more spectrum than underpins Verizon’s “best in class” network),” Wlodarczak wrote. “This possible move could force Verizon to counter-bid for Dish spectrum (or possibly the entire company) as Dish spectrum is ideally suited for Verizon and to keep it out of T-Mobile’s hands.”

AT&T/DirecTV Buyout of Dish Network

Wlodarczak has also advised clients he believes the deregulation-friendly Trump Administration would not block the creation of a satellite TV monopoly, meaning AT&T should consider pairing its DirecTV service with an acquisition of Dish Networks’ satellite TV business, even if it forgoes Dish’s valuable wireless spectrum.

“AT&T, post their Time Warner deal, could (and frankly should) be interested in purchasing Dish’s core DBS business taking advantage of a potentially more laissez faire regulatory climate/emergence of V-MVPD’s, to significantly bolster their DirecTV business (and help to justify the original questionable DirecTV deal) by creating a SatTV monopoly in ~10-15M US households, increased programming scale and massive synergies at a likely very attractive price.”

Such a transaction would likely resemble the regulatory approval granted to merge XM Satellite Radio and Sirius Satellite Radio into SiriusXM Satellite Radio in 2008. Despite the merger, just months after its approval, the combined company neared bankruptcy until it was bailed out with a $530 million loan from John Malone’s Liberty Media in February 2009. Liberty Media maintains an active interest in the satellite radio company to this day.

Mission Possible: Ajit Pai’s Stated Goal is to Kill Telecom Regulation

Phillip Dampier October 11, 2017 Public Policy & Gov't 2 Comments

Pai

“We want to eliminate, as much as we can, government regulation of the telecommunications marketplace so as to permit present players to provide new and innovative services to consumers and likewise permit new players to come in and compete,” FCC Chairman Ajit Pai told an audience attending a speech at the Ronald Reagan Library in Simi Valley, Calif.

He was quoting and affirming words first spoken by Reagan era FCC Chairman Mark Fowler. It was a core theme in Pai’s speech, entitled “Morning in Digital America,” and it signaled Pai and his Republican colleagues would do everything possible to inspire and affirm the country’s largest telecom companies’ investments that he felt would only grow with the obliteration of rules and regulations established by his predecessor during the Obama Administration.

Pai cited the wireless industry’s transition to 5G service, quoting the CTIA — the wireless industry’s top lobbying organization, as creating “three million jobs and over $500 billion in additional economic growth over seven years.”

“The most powerful tool for expanding digital opportunity is market-based, light-touch regulation—for this maximizes private investment in high-speed networks,” Pai predicted. “That’s why we’ve sought to break down regulatory barriers to installing wireless and wireline infrastructure. Too often, government at all levels makes it hard for companies to construct next-generation networks. So we’re focused on cutting as much of this red tape as we can.”

Pai also claimed he restored the “collaborative and collegial traditions of the FCC.”

“Under my leadership, about 80% of the major items voted on at our monthly meetings have been approved with bipartisan support and without dissent, compared to less than 50% under my predecessor,” Pai claimed.

All but one of the current commissioners were in place during the second term of the Obama Administration, meaning under Pai’s predecessor, it was Republican commissioners Pai and O’Rielly that dissented the most at the time.

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