FCC-15-24A1

The Federal Communications Commission this morning released its final order detailing the agency’s official Net Neutrality rules intended to protect and preserve a free and open Internet.

The 400-page document includes footnoted, plain language explanations and arguments in favor of the new regulations as well as the rules of the road for Internet Service Providers, details about how to complain about alleged violators, and lengthy objections from the two Republican commissioners who oppose the new net policies.

Despite the exposition and dissent (and the Wall Street Journal editorial page calling the document a “blobfish,” the Net Neutrality rules and supplementary definitions are around 450 words long:

A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not block lawful content, applications, services, or nonharmful devices, subject to reasonable network management.

A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not impair or degrade lawful Internet traffic on the basis of Internet content, application, or service, or use of a non-harmful device, subject to reasonable network management.

A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not engage in paid prioritization.

“Paid prioritization” refers to the management of a broadband provider’s network to directly or indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an affiliated entity.

Any person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not unreasonably interfere with or unreasonably disadvantage (i) end users’ ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice, or (ii) edge providers’ ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be considered a violation of this rule.

A person engaged in the provision of broadband Internet access service shall publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.

A mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all Internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up Internet access service. This term also encompasses any service that the Commission finds to be providing a functional equivalent of the service described in the previous sentence, or that is used to evade the protections set forth in this Part.

A network management practice is a practice that has a primarily technical network management justification, but does not include other business practices. A network management practice is reasonable if it is primarily used for and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service.

In brief, the new rules forbid providers from fiddling with your Internet traffic for the purposes of speeding up their preferred partners while slowing down everyone else for economic motivations. It does allow providers to engage in reasonable “network management” as long as those management techniques apply equally to all content of a specific type. For instance, Comcast cannot slow down Netflix while speeding up its own affiliated online streaming services.

As part of the Federal Communications Commission’s release of final Net Neutrality regulations, the FCC included this “Fact/Fiction” news release intending to debunk industry (and political) opposition to Net Neutrality.

The Open Internet Order: Preserving and Protecting the Internet for All Americans

The Commission has released the full and final text of the Open Internet Order, which will preserve and protect the Internet as a platform for innovation, expression and economic growth. An Open Internet means consumers can go where they want, when they want. It means innovators can develop products and services without asking for permission. It means consumers will demand more and better broadband as they enjoy new Internet services, applications and content.

Protecting Consumers, Providing Certainty for Innovators and Investors
Before the Commission adopted this Order, there were no rules preventing broadband providers from conduct that would threaten the Open Internet.  This Order implements bright line rules to ban blocking, throttling and paid prioritization (or “fast lanes”) and, for the first time, the rules fully apply to mobile.

Open Internet rules are grounded in the strongest possible legal foundation by relying on multiple sources of authority, including Title II of the Communications Act and Section 706 of the Telecommunications Act of 1996. However, as part of this Order, the Commission refrains (or “forbears”) from enforcing provisions of Title II that are not relevant to modern broadband service.  Together, Title II and Section 706 support clear rules of the road, providing the certainty needed by innovators and investors, and the competitive choices and freedom demanded by consumers.

Separating Fact from Fiction
The Order uses every tool in the Commission’s toolbox to make sure the Internet stays fair, fast and open for all Americans, while ensuring investment and innovation can flourish. We encourage the public to read the Order, which reflects the input of millions of Americans and allows everyone to separate myths from fact, such as:

Myth: This is utility-style regulation.

Fact: The Order takes a modernized approach to Title II, tailored for the 21^st Century

There is no “utility-style” regulation. The Order bars the kinds of tariffing, rate regulation, unbundling requirements and administrative burdens that are the hallmarks of traditional utility regulation. No broadband provider will need to get the FCC’s approval before offering any price, product or plan. (paragraphs 37-38, 417, 451-452, 497-505)

Myth: The FCC plans to set broadband rates and regulate retail prices in response to consumer complaints.

Fact: The Order doesn’t regulate retail broadband rates.

Old-style telephone regulation required companies to file tariffs with the FCC and await regulatory review before they could bring new products to markets – such an approval process does not exist and is not permitted under this Order. Broadband providers will be able to adjust retail rates without Commission approval and without having to wait even a minute. (paragraphs 37, 451-452, 497-505)

Much has been made of the Section 201(b) authority in Title II under which the Commission may hear complaints and respond to conduct that violates our Open Internet rules. The claim is made that it will be a back-door form of rate regulation. This exact same authority has existed for wireless voice service since 1993 and has never produced rate regulation. (paragraphs 38, 409-410, 421-423)

Myth: This will increase consumers’ broadband bills and/or raise taxes.

Fact: The Order doesn’t impose new taxes or fees or otherwise increase prices.

Nothing in the Order imposes or authorizes new taxes or fees.  In fact, the Internet Tax Freedom Act currently bans state and local taxes on broadband access regardless of how the FCC classifies it.  With respect to Universal Service, the Order does not impose mandatory contribution assessments, but simply allows a current, separate proceeding on how to reform universal service contributions to proceed.  (paragraphs 37, 57-58, 430-433, 488-491)

Myth: This is a plan to regulate the Internet and let the government take over the Internet.

Fact: The Order doesn’t regulate Internet content, applications or services or how the Internet operates, its routing or its addressing.

The Order does not regulate the Internet. It applies to broadband providers – the companies that connect people’s homes to the public Internet.  In other words, the Order protects consumers’ and innovators’ “last-mile” access to what’s on the Internet—the applications, content or services that ride on it and the devices that attach to it.  It means consumers can go where they want, when they want and it means innovators can develop products and services without asking for permission.  (paragraphs 25-26, 186-193,336-340,382)

Myth: This proposal means the FCC will get to decide which service plan you can choose.

Fact: The Order doesn’t limit consumers’ choices or ban broadband data plans.

There is no approval requirement before retail plans, prices or services can be offered to consumers. Broadband providers will continue to be able to offer new competitive services and rates. This means that when a broadband provider wants to add a faster tier of service at a new price, for instance, it is free to do so. Similarly, a broadband provider is free to change pricing without approval. What providers can’t do is engage in behavior that threatens the Open Internet. (paragraphs 139, 144, 151-153)

Myth: This will embolden authoritarian states to tighten their grip on the Internet.

Fact: The Open Internet rules ensure the Internet continues to be a powerful platform for free expression, innovation and economic growth.

This Order does not regulate the operation of the Internet nor does it endorse governmental control of the way people use the Internet. This Order is a strong statement that no one – government or corporation – should interfere with the user’s right of free and open access to the Internet.  In order to encourage other governments to establish policies to protect the free exchange of ideas on an open, unrestricted Internet, we must first protect those values at home.  (paragraphs 76-77)

Myth: This will stifle innovation in new areas of Internet connectivity like connected cars or tele-health.

Fact: The Order doesn’t regulate the class of IP-based services that do not connect to the public Internet.

The Order does not regulate data services that do not go over the public Internet —sometimes called “specialized services” or “managed services” and described in the Order as “non-BIAS (Broadband Internet Access Service) services”. Consumers who buy these services don’t get, and don’t expect to get, access to all points on the Internet. Examples can include: VoIP from a cable system, VoLTE from a mobile operator, a dedicated heart-monitoring service, e-readers, connected cars, and other innovative data services we cannot imagine today. (paragraphs 35, 207-213)

Myth: This will lead to slower broadband speeds and reduced investment in broadband deployment.

Fact: The Order doesn’t reduce broadband investment or slow broadband speeds.

More openness leads to more consumer demand for more and better broadband. It’s that simple. No price regulation means consumer revenues for ISPs should be the same the day after the Order takes effect as they were the day before. It is these revenues that provide the stimulus for investment. History proves that investment will not be affected. For instance, in addition to the $270 billion invested in wireless voice service in the years in which it was the prime driver of mobile traffic (through 2009), wireline DSL was regulated as a common-carrier service until 2005—including a period in the late ‘90s and early 2000’s that saw the highest levels of wireline broadband infrastructure investment ever. (paragraphs 39, 412-414, 421-425)

More recently, Verizon spent $4.74 billion in 2008 for licenses to C-block spectrum governed by FCC open access regulations and since then has invested tens of billions of dollars deploying mobile services.  And just this year, Sprint, T-Mobile, Google Fiber, Frontier Communications, COMPTEL and NTCA—The Rural Broadband Association have all said that applying Title II to broadband services won’t harm investment.  Finally, the recent AWS auction, conducted under the prospect of Title II regulation, generated bids (net of bidding credits) of more than $41 billion—further demonstrating that robust investment is not inconsistent with a modern, light-touch Title II regime. (paragraphs 339-40, 416, 423)

Myth: The new transparency rules add up to a new form of regulation.

Fact: Clear disclosure requirements benefit both consumers and industry.

The enhanced transparency requirements, which build on the existing transparency rule, will do a better job of ensuring that consumers know the price and performance of their Internet connections. They also benefit broadband providers and Internet content, application, and service providers by removing unnecessary uncertainties that affect the quality of their services.  That’s not regulation, that’s efficient common-sense consumer protection. (paragraphs 23-24, 154-185)

Myth:  The general conduct standard will chill innovation.

Fact: This is not new ground.  The Commission also adopted a general conduct standard in 2010 and investment flourished.

There has always been a “just and reasonable” standard for telecommunications services – and investment has flourished. Since 2005, the Commission has made plain its intent to take action to preserve the Open Internet – and broadband services and investment have continued grow. Of specific significance, the 2010 Open Internet Order applied such a general conduct standard that was in force until 2014. In the three years that the 2010 Open Internet rules were in effect, broadband capital expenditures increased from $64 billion in 2009 to $75 billion in 2013. The standard adopted in the Order is tailored to the open Internet harms the Commission has identified.  It focuses on whether the broadband provider is using its gatekeeper status in ways that unreasonably affect consumers’ and edge providers’ ability to use the Internet to communicate with each other.  (paragraphs 2-4, 20-22, 133-153)

Charter Communications is in talks with Si Newhouse, Jr., the billionaire owner of Bright House Networks, to acquire the cable operator in an all-stock deal that could be worth over $12 billion, according to a report by Bloomberg News.

Bright House Networks serves 2.5 million customers, primarily in central Florida but also in parts of Alabama, Indiana, California and Michigan. Bright House has been closely controlled by the Newhouse family and has avoided efforts to consolidate the cable industry for more than two decades.

The deal is not yet finalized, according to two people asking not to be identified discussing confidential details of the deal. A side dispute over who will control voting shares of Charter after any acquisition remains at issue. John Malone’s Liberty Broadband, the largest single shareholder of Charter, is said to be seeking a larger ownership share of Charter Communications in what analysts expect will be a gradual takeover of Charter by Malone.

This afternoon, Bright House confirmed acquisition talks are underway.

“While we have had conversations with many parties about this transaction, we do not have an agreement with anyone regarding future plans for Bright House,” a company spokeswoman said in the statement.

The deal may also depend on whether regulators approve the merger of Comcast and Time Warner Cable. Time Warner Cable currently represents Bright House in most cable programming negotiations and the two cable companies have closely worked together on technology and services for more than a decade. That collaboration is likely to end if the Comcast merger is approved, stranding New House as a small independent operator.

Charter was long-expected to make offers to acquire other cable operators in its quest to grow larger, especially after failing in its bid to acquire Time Warner Cable for itself. An acquisition of Bright House by Charter would allow the company to further expand its presence in the south and midwest where it focuses most of its cable operations.

But it is not a done deal yet. The talks between Charter and Bright House could still fall apart and may not result in a deal, one source cautioned.

[flv]http://www.phillipdampier.com/video/Bloomberg Charter in Talks to Buy Newhouse Bright House Networks 3-12-15.flv[/flv]

Bloomberg News reports Charter Communications is in talks with the Newhouse family to acquire Bright House Networks in an all-stock deal. (1:22)

Dunedin is New Zealand’s “Gigatown” and ISP Orcon sells residents unlimited access to gigabit speeds for $68.50US a month.

New Zealand is now the world leader in fiber optic broadband deployment, achieving an annual growth rate of 272 percent and on the way to becoming one of the top 10 nations for broadband speed.

“We are now ahead of Australia, the United States and Japan for fixed broadband, with more than 31 broadband subscriptions for every 100 New Zealanders signed up for this service,” said Amy Adams, New Zealand’s Communications Minister. “This is an impressive jump and demonstrates the impact that the government’s $2 billion investment in the Ultra-fast Broadband and Rural Broadband Initiative program is having on the telecommunications services available to New Zealanders. People are increasingly choosing fiber for its superior speeds, capacity and reliability as the build continues across New Zealand.”

Before the government intervened, broadband in New Zealand was notoriously slow and rationed with low usage allowances and speed throttling. Most of the country received ADSL service, a technology that is rapidly being discarded by most developed nations in favor of VDSL in rural areas and fiber optic broadband in urban and suburban communities. Government policy defined broadband as an essential service for the country’s current and future economic growth and implemented a nationwide broadband improvement plan designed to replace or augment outdated copper telephone lines with fiber optic infrastructure.

While countries like the United States and Canada effectively allow private corporations to define and control their digital destinies, New Zealand believes transformational ultra-fast broadband is too important to leave in the hands of industry alone.

“Fiber is very much like electricity was 100 years ago,” said Maxine Elliot, CEO of Ultra-Fast Fibre (New Zealand). “It’s the single biggest infrastructure build we have done in a long time and it will make that kind of difference in our lives. I think when they first began building out electricity, it was all about a light bulb. No one could have imagined we would have microwaves and computers. We cannot begin to imagine the change that we are about to see with fiber.”

The explosive growth of fiber broadband has helped the country leap ahead of much larger OECD members like Australia and the United States.

“Over the past ten years, we have moved up from 22nd place out of 30 OECD countries in June 2004 to being 15th out of 34 OECD countries for fixed broadband subscriptions as at June 2014,” Adams noted. “At the same time, the quality of people’s broadband packages is improving, with greater numbers of customers using VDSL or fiber, rather than the older ADSL technology.”

The fiber infrastructure has also led to other benefits not originally anticipated. Wireless companies throughout the country have tapped into the fiber connections which deliver backhaul connectivity between cell towers and the fiber broadband network, allowing greater wireless broadband speeds and more capacity. Today, New Zealand is in the top 10 in the OECD for wireless broadband.

New Zealand’s fiber network has allowed providers to cut prices, increase speeds, and offer unlimited access as an affordable option for customers who want the service. It is also expected to dramatically cut the costs of maintaining the country’s telecom network, which were growing as older copper infrastructure aged.

[flv]http://www.phillipdampier.com/video/Ultra Fast Fibre Why ultra-fast broadband.mp4[/flv]

New Zealand believes its digital future depends on fiber optics, not on last generation DSL from the phone company. This video explains the immediate benefits of discarding century-old copper infrastructure in favor of fiber optics. (3:17)

[flv]http://phillipdampier.com/video/Ultrafast Fibre Installation process.mp4[/flv]

Ultra-Fast Fibre installation is orderly, on time, and technicians will even plant new grass seed and color-match any replacement concrete or driveway patches. This video explains the three-step process customers go through to get fiber service installed. (3:59)

The deck is stacked against independent cable operators fighting to stay competitive in a marketplace obsessed with consolidation and volume discounts on cable programming. The excessive costs paid by small, often family owned cable operators have now become so great, they are impeding broadband upgrades and expansion, according to the American Cable Association.

The ACA represents small and medium cable operators that live in a different world than Comcast and Time Warner Cable. For years, these smaller, usually rural operators have been at a disadvantage negotiating with cable programmers for reasonable programming rates. The largest cable operators win the best volume discounts, often offset by higher rates for the smaller cable companies that are typical of ACA’s membership roster.

With the FCC now enforcing Section 706 of its mandate requiring the Commission to advance the cause of competitive and ubiquitous broadband, the ACA has gotten creative in comments urging the FCC to crack down on the kinds of unfair programming contracts that force small operators to spend an ever-increasing amount of their budgets on cable television networks instead of broadband expansion.

Video margins are dropping, which means smaller operators have less to invest in broadband. (Chart: SNL/Kagan)

“It has become evident that the increasing prices video programmers and broadcasters charge multichannel video programming distributors (MVPDs) can act as a drag on broadband deployment,” said ACA president Matt Polka. “If these prices continue their upward spiral, existing providers of both broadband and MVPD services and new entrants will be deterred from expanding their broadband networks or otherwise undertaking new builds.”

Removing barriers to investment is one of the requirements the FCC is supposed to enforce under Section 706 and it has recently shown a willingness to do that by overturning Tennessee and North Carolina laws restricting the growth of municipal broadband. The ACA now wants to learn if the FCC will give small cable operators some relief as well.

The ACA argues that broadband providers must offer consumers video along with broadband and voice services, yet they face ever-increasing video programming costs that squeeze margins.  As a result, smaller triple play providers’ ability to achieve a sufficient return on investment for deploying broadband, particularly in new areas, is quickly diminishing.

The trade group wants the FCC to reform program-access rules to guarantee fairer treatment for smaller cable operators who depend on group buying power through buying co-ops like the National Cable Television Cooperative. The ACA also wants a prohibition on programmers yanking their signals in the middle of retransmission consent contract negotiations. The ability to pull a signal off a cable system gives programmers an unfair negotiating advantage according to the ACA.