Cable One, the Phoenix-based mid-sized cable operator serving some of the poorest communities in the country is charging some of the nation’s highest prices for broadband service, raking in an unprecedented 47% margin in the fourth quarter of 2017, the highest in the cable industry.

That growth has come courtesy of CEO Julie Laulis, who has doubled down on data caps — automatically enrolling customers in higher priced plans if they exceed data caps three times in any 12-month period, raised prices, and ended most new customer and customer retention promotions in favor of ‘take it or leave it‘ pricing, especially on broadband service. Laulis has also decided to devote most of Cable One’s marketing efforts on selling broadband service, while de-emphasizing cable television. As a result, customers dissatisfied with Cable One’s lineup are encouraged to leave quietly.

Because video programming is costly to provide and broadband is relatively cheap to offer, the more the company can extract from its internet customers, the higher the profits earned. In 2011, cable television represented 49.1% of Cable One’s $779 million in revenue, with residential and commercial broadband comprising 34%. Today, 57% of Cable One’s $960 million in revenue comes from selling internet service. Cable One not only de-emphasized its video business, it also raised prices on internet service to further enhance earnings.

New customers coming to Cable One can subscribe to an entry-level broadband plan of 100 Mbps with a 300 GB monthly data cap for $55 a month. There are no discounts or promotions on this plan. But Cable One also requires customers to lease ($10.50/mo.) or buy an added-cost cable modem, raising the price higher. To prevent customers from taking advantage of promotions on higher speed products, Cable One requires customers to disconnect from service for a full year before being considered a new customer once again.

Laulis

Cable One has been able to raise prices and attach stingy usage caps to customers primarily because there are no good alternatives in the rural markets it prefers. One analyst said 77% of Cable One’s customers are in largely rural areas of Arizona, Idaho, Illinois, Missouri, Montana and Oklahoma. But prices are clearly getting too high for some, because the company lost more video and phone customers that it gained in new broadband subscriptions during the fourth quarter of 2017.

The fact Cable One broadband is now considered by many subscribers to be “too expensive” is also reflected by the extremely anemic broadband growth at Cable One. In 2017, the company added just 1.5% to its residential broadband customer base, despite very limited competition from phone companies.

MoffettNathanson’s Craig Moffett has complained all winter that Cable One is sacrificing broadband subscriber growth in favor of profits from price increases.

“[Cable One has] the most limited broadband competition of any publicly traded operator, and they have the lowest starting penetration,” Moffett told his investors. “Should they not be growing broadband the fastest of anyone? If price elasticity is greater than anyone thinks, how long is the runway, not just for Cable One, but for any operator choosing a strategy of price increases rather than unit growth?”

Cable One is also squeezing its newest customers at its latest acquisition – NewWave, which now features pricing very similar to Cable One. It recently started to turn over past due NewWave customers to collections after going 40 days past due. Previously, it was 90 days before account holders were threatened with cancellation and collections.

For now, NewWave’s introductory offer remains: 100 Mbps High-Speed Internet is $39 for the first three months before these rates kick in:

Defenders of FCC Chairman Ajit Pai are rushing to defend the Republican majority’s likely support for an initiative to roll back the FCC’s 25/3Mbps speed standard embraced by his predecessor, Thomas Wheeler.

Johnny Kampis, writing for Watchdog.org, claims that broadband speed standard has had an adverse affect on solving America’s rural broadband gap.

After raising that standard, suddenly those areas with speeds below 10 mbps were lumped into the same group with those who could access speeds of 10-25 mbps, resulting in diminished focus on those areas where the broadband gap cut the deepest.

Raising the standard meant, too, that fans of big government could point to the suddenly higher percentage of the population that was “underserved” on internet speeds and call for more taxpayer money to solve that “problem.”

Kampis is relying on the talking points from the broadband industry, which also happens to support the same ideological interests of Watchdog.org’s benefactor, the corporate/foundation-funded Franklin Center for Government & Public Integrity. The argument suggests that if you raise broadband standards, that opens the door to more communities to claim they too are presently underserved, which then would qualify them for government-funded broadband improvements.

Kampis’ piece, like many of those published on Watchdog.org, distorts reality with suggestions that communities with 50Mbps broadband service will now be ripe for government handouts. He depends on an unnamed source from an article written on Townhall.com and also quotes the CEO of Freedom Foundation of Minnesota, which is closely associated with the same Franklin Center that hosts Watchdog.org. Kampis’ piece relies on sourcing that is directly tied to the organization hosting his article.

In reality, rural broadband funding has several mechanisms in place which heavily favor unserved, rural areas, not communities that already have 50Mbps internet access. ISPs also routinely object to projects proposed within their existing service areas, declaring them already served, and much of the funding doled out by the Connect America Fund (CAF) Kampis suggests is a government handout are being given to telephone companies, not municipalities.

Kampis

Kampis is satisfied free market capitalism will eventually solve the rural broadband problem, despite two decades of lackluster or non-existent service in areas deemed unprofitable to serve.

“So while Pai’s critics denigrate him because his FCC is considering lowering that broadband standard, he’s just correcting an earlier mistake, with the realization that the free market, not big government, will solve the rural broadband gap if given enough time,” Kampis writes. “And returning to the old standards will help ensure that the focus will be placed squarely on the areas that need the most help.”

Kampis suggests that free market solution might be 5G wireless broadband, which can potentially serve rural populations less expensively than traditional wired broadband service. Communities only need wait another 5-10 years for that to materialize, if it does at all.

Kampis claims to be an investigative reporter, but he didn’t venture too far beyond regurgitating press releases and talking points from big phone companies and opponents of municipal broadband. If he had spent time reviewing correspondence sent to the FCC in response to the question of easing broadband speed standards, he would have discovered the biggest advocates for that are large phone companies and wireless carriers that stand to benefit the most from the change.

Following the money usually delivers a clearer, more fact-based explanation for what motivates players in the broadband industry. In this case, the 25Mbps speed standard has regularly been attacked by phone and wireless companies hoping to tap into government funds to build out their networks. Traditional phone companies are upset that the 25Mbps requirement means their typical rural broadband solution – DSL, usually won’t cut it. Wireless companies have also had a hard time assuring the FCC of consistent 25Mbps speeds, making it difficult for them to qualify for grants. AT&T wasn’t happy with a 10Mbps standard for wireless service either.

Incidentally, these are the same companies that have failed to solve the rural broadband gap all along. Most will continue not serving rural areas unless the government covers part of their costs. AT&T illustrates that with its own fixed wireless rural broadband solution, which came about grudgingly with the availability of CAF funding.

The dark money ATM network hides corporate contributions funneled into advocacy groups.

The free market broadband solution is rooted in meeting Return On Investment metrics. In short, if a home costs more to serve that a company can recoup in a short amount of time, that home will not be served unless either the homeowner or someone else covers the costs of providing the service. By wiping out the Obama Administration’s FCC speed standard, more ratepayer dollars will be directed to phone and wireless companies that will build less expensive and less-capable DSL and wireless networks instead of investing in more modern technology like fiber optics.

Mr. Kampis, and others, through their advocacy, claim their motive is a reduction in government waste. But in reality, and not by coincidence, their brand of journalism hoodwinks readers into advocating against their best interests of getting fast, future-proofed broadband, and instead hand more money to companies like AT&T. The Franklin Center refuses to reveal its donor list, of course, but SourceWatch reported the Center is heavily dependent on funding from DonorsTrust, which cloaks the identity of its corporate donors. Mother Jones went further and called it “a dark money ATM.”

Companies like AT&T didn’t end up this lucky by accident. It donates to dark money groups that fund various sock puppet and astroturf operations that avoid revealing where the money comes from, while the groups get to claim they are advocating for taxpayers. By no coincidence, these groups frequently don’t attack corporate welfare, especially if the recipient is also a donor.

New York’s rural broadband initiative is on track to deliver near 100% broadband coverage to all New York homes and has speed requirements and a ban on hard data caps.

Raising speed standards does not harm rural broadband expansion. In New York, Gov. Andrew Cuomo’s broadband expansion campaign is on track to reach the remaining 150,000 homes still without broadband access by sometime next year. His program relies on broadband expansion funding that comes with requirements that insist providers offer internet access capable of at least 25Mbps (with a preference for 100Mbps) for $60 or less and a ban on hard usage caps. Kampis claims the 25Mbps speed standard hampers progress, yet New York is the first state in the nation moving towards 100% broadband availability for its residents at that speed or better.

Chairman Pai’s solution is little more than a gift to the country’s largest phone and wireless companies that would like to capture more CAF money for themselves while delivering the least amount of service possible (and keep money out of the hands of municipalities that want to build their own more capable networks). The evidence is quite clear — relying on the same companies that have allowed the rural broadband crisis to continue for more than 20 years is a stupendously bad idea that only sounds brilliant after some corporation writes a large check.

Providers’ tall tales.

Year after year, equipment manufacturers and internet service providers trot out predictions of a storm surge of internet traffic threatening to overwhelm the internet as we know it. But growing evidence suggests such scare stories are more about lining the pockets of those predicting traffic tsunamis and the providers that use them to justify raising your internet bill.

This month, Cisco — one of the country’s largest internet equipment suppliers, released its latest predictions of astounding internet traffic growth. The company is so confident its annual predictions of traffic deluges are real it branded a term it likes to use to describe it: The Zettabyte Era. (A zettabyte, for those who don’t know, is one sextillion bytes, or perhaps more comfortably expressed as one trillion gigabytes.)

Cisco’s business thrives on scaring network engineers with predictions that customers will overwhelm their broadband networks unless they upgrade their equipment now, as in ‘right now!‘ In turn, the broadband industry’s bean counters find predictions of traffic explosions useful to justify revenue enhancers like usage caps, usage-based billing, and constant rate increases.

“As we make these and other investments, we periodically need to adjust prices due to increases [in] business costs,” wrote Comcast executive Sharon Powell in a letter defending a broad rate increase imposed on customers in Philadelphia late last year.

In 2015, as that cable company was expanding its usage caps to more markets, spokesman Charlie Douglas tried to justify the usage caps claiming, “When you have 10 percent of the customers consuming 50 percent of the network bandwidth, it’s only fair that those consumers should pay more.”

When Cisco released its 2017 predictions of internet traffic growth, once again it suggests a lot more data will need to be accommodated across America’s broadband and wireless networks. But broadband expert Dave Burstein has a good memory based on his long involvement in the industry and the data he saw from Cisco actually deflates internet traffic panic, and more importantly provider arguments for higher cost, usage-capped internet access.

“Peak Internet growth may have been a couple of years ago,” wrote Burstein. “For more than a decade, internet traffic went up ~40% every year. Cisco’s VNI, the most accurate numbers available, sees growth this year down to 27% on landlines and falling to 15-20% many places over the next few years. Mobile growth is staying higher — 40-50% worldwide. Fortunately, mobile technology is moving even faster. With today’s level of [provider investments], LTE networks can increase capacity 10x to 15x.”

According to Burstein, Cisco’s estimates for mobile traffic in the U.S. and Canada in 2020 is 4,525 petabytes and in 2021 is 5,883 petabytes. That’s a 30% growth rate. Total consumer traffic in the U.S. and Canada Cisco sees as 48,224 petabytes and 56,470 petabytes in 2021. That’s a 17% growth rate, which is much lower on wired networks.

Burstein’s findings are in agreement with those of Professor Andrew Odlyzko, who has debunked “exaflood/data tsunami” scare stories for over a decade.

“[The] growth rate has been decreasing for almost two decades,” Odlyzko wrote in a 2016 paper published in IPSI BgD Transactions. “Even the growth rate in wireless data, which was extremely high in the last few years, shows clear signs of a decline. There is still rapid growth, but it is simply not at the rates observed earlier, or hoped for by many promoters of new technologies and business methods.”

Burstein

The growth slowdown, according to Odlyzko, actually began all the way back in 1997, providing the first warning the dot.com bubble of the time was preparing to burst. He argued the data models used by equipment manufacturers and the broadband industry to measure growth have been flawed for a long time.

When new internet trends became popular, assumptions were made about what impact they would have, but few models accurately predicted whether those trends would remain a major factor for internet traffic over the long-term.

Peer-to-peer file sharing, one of the first technologies Comcast attempted to use as a justification for its original 250GB usage cap, is now considered almost a footnote among the applications having a current profound impact on internet traffic. Video game play, also occasionally mentioned as a justification for usage caps or network management like speed throttling, was hardly ever a major factor for traffic slowdowns, and most games today exchange player actions using the smallest amount of traffic possible to ensure games are fast and responsive. In fact, the most impact video games have on the internet is the size of downloads required to acquire and update them.

Odlyzko also debunked alarmist predictions of traffic overloads coming from the two newest and largest traffic contributors of the period 2001-2010 — cloud backups and online video.

Odlyzko

“Actual traffic trends falsified this conjecture, as the first decade of the 21st century witnessed a substantial [traffic growth rate] slowdown,” said Odlyzko. “The frequent predictions about ‘exafloods’ overwhelming the networks that were frequent a decade ago have simply not come to pass. At the 20 to 30% per year growth rates that are observed today in industrialized countries, technology is advancing faster than demand, so there is no need for increasing the volume of investments, or for the fine-grained traffic control schemes that are beloved by industry managers as well as researchers.”

That’s a hard pill to swallow for companies that manufacture equipment designed to “manage,” throttle, cap, and charge customers based on their overusage of the internet. It also gives fits to industry executives, lobbyists, and the well paid public policy researchers that produce on spec studies and reports attempting to justify such schemes. But the numbers don’t lie, even if the industry does.

Although a lot of growth measured these days comes from wireless networks, they are not immune to growth slowdowns either. The arrival of the smartphone was hailed by wireless companies and Wall Street as a rocket engine to propel wireless revenue sky high. Company presidents even based part of their business plans on revenue earned from monetizing data usage allegedly to pay for spectrum acquisitions and upgrades.

McAdam

Verizon’s CEO Lowell McAdam told investors as late as a year ago “unlimited data” could never work on Verizon Wireless again.

“With unlimited, it’s the physics that breaks it,” he said. “If you allow unlimited usage, you just run out of gas.”

The laws of physics must have changed this year when Verizon reintroduced unlimited data for its wireless customers.

John Wells, then vice president of public affairs for CTIA, the wireless industry’s top lobbying group, argued back in 2010 AT&T’s decision to establish pricing tiers was a legitimate way for carriers to manage the ‘explosive growth in data usage.’ Wells complained the FCC was taking too long to free up critically needed wireless spectrum, so they needed “other tools” to manage their networks.

“This is one of the measures that carriers are considering to make sure everyone has a fair and equal experience,” Walls said, forgetting to mention the wireless industry was cashing in on wireless data revenue, which increased from $8.5 billion annually in 2005 to $41.5 billion in 2009, and Wall Street was demanding more.

“There were again many cries about unsustainable trends, and demands for more spectrum (even though the most ambitious conceivable re-allocation of spectrum would have at most doubled the cellular bands, which would have accommodated only a year of the projected 100+% annual growth),” Odlyzko noted.

What the industry and Wall Street did not fully account for is that their economic models and pricing had the effect of modifying consumer behavior and changed internet traffic growth rates. Odlyzko cites the end of unlimited data plans and the introduction of “tight data caps” as an obvious factor in slowing down wireless traffic growth.

“But there were probably other significant ones,” Odlyzko wrote. “For example, mobile devices have to cope not just with limited transmission capacity, but also with small screens, battery
limits, and the like. This may have led to changes of behavior not just of users, but also of app developers. They likely have been working on services that can function well with modest
bandwidth.”

“U.S. wireless data traffic, which more than doubled from 2012 to 2013, increased just 26% from 2013 to 2014,” Odylzko reported. “This was a surprise to many observers, especially since there is still more than 10 times as much wireline Internet traffic than wireless Internet traffic.”

Many believe that was around the same time smartphones achieved peak penetration in the marketplace. Virtually everyone who wanted a smartphone had one by 2014, and as a result of fewer first-time users on their networks, data traffic growth slowed. At the same time, some Wall Street analysts also began to worry the companies were reaching peak revenue per user, meaning there was nothing significant to sell wireless customers that they didn’t already have. At that point, future revenue growth would come primarily from rate increases and poaching customers from competitors. Or, as some providers hoped, further monetizing data usage.

The Net Neutrality debate has kept most companies from “innovating” with internet traffic “fast lanes” and other monetization schemes out of fear of stoking political blowback. Wireless companies could make significant revenue trying to sell customers performance boosters like higher priority access on a cell tower or avoiding a speed throttle that compromised video quality. But until providers have a better idea whether the current administration’s efforts to neuter Net Neutrality are going to be successful, some have satisfied themselves with zero rating schemes and bundling that offer customers content without a data caps or usage billing or access to discounted packages of TV services like DirecTV Now.

Verizon is also betting its millions that “content is king” and the next generation of revenue enhancers will come from owning and distributing exclusive video content it can offer its customers.

Odlyzko believes providers are continuing the mistake of stubbornly insisting on acquiring or at least charging content providers for streaming content across their networks. That debate began more than a decade ago when then SBC/AT&T CEO Edward Whitacre Jr. insisted content companies like Netflix were not going to use AT&T’s “pipes for free.”

“Much of the current preoccupation of telecom service providers with content can be explained away as following historical precedents, succumbing to the glamour of ‘content,'” Odlyzko wrote. “But there is likely another pressing reason that applies today. With connection speeds growing, and the ability to charge according to the value of traffic being constrained either directly by laws and regulations, or the fear of such, the industry is in a desperate search for ways not to be a ‘dumb pipe.'”

AT&T and Verizon: The Doublemint Twins of Wireless

A number of Wall Street analysts also fear common carrier telecom companies are a revenue growth ‘dead-end,’ offering up a commodity service about as exciting as electricity. Customers given a choice between AT&T, Verizon, Sprint, or T-Mobile need something to differentiate one network from the other. Verizon Wireless claims it has a best in class LTE network with solid rural coverage. AT&T offers bundling opportunities with its home broadband and DirecTV satellite service. Sprint is opting to be the low price leader, and T-Mobile keeps its customers with a network that outperforms expectations and pitches constant promotions and giveaways to customers that crave constant gratification and change.

The theory goes that acquiring video content will drive data usage revenue, further differentiate providers, and keep customers from switching to a competitor. But Odylzko predicts these acquisitions and offerings will ultimately fail to make much difference.

“Dumb pipes’ [are] precisely what society needs,” Odylzko claims and in his view it is the telecom industry alone that has the “non-trivial skills” required to provide ubiquitous reliable broadband. The industry also ignores the utility-like built-in advantage it has owning pre-existing wireline and wireless networks. The amortized costs of network infrastructure often built decades ago offers natural protection from marketplace disruptors that likely lack the fortitude to spend billions of dollars required to invade markets with newly constructed networks of their own.

Odylzko is also critical of the industry’s ongoing failure of imagination.

Stop the Cap! calls that the industry’s “broadband scarcity” business model. It is predicated on the idea that broadband is a limited resource that must be carefully managed and, in some cases, metered. Companies like Cox and Comcast now usage-cap their customers and deter them from exceeding their allowance with overlimit penalties. AT&T subjectively usage caps their customers as well, but strictly enforces caps only for its legacy DSL customers. Charter Communications sells Spectrum customers on the idea of a one-size fits all, faster broadband option, but then strongly repels those looking to upgrade to even faster speeds with an indefensible $200 upgrade fee.

Rationing Your Internet Experience?

“The fixation with video means the telecom industry is concentrating too much on limiting user traffic,” Odlyzko writes. “In many ways, the danger for the industry, especially in the wireline arena, is from too little traffic, not too much. The many debates as to whether users really need 100Mbps connections, much less 1Gbps ones, reveal lack of appreciation that burst capability is the main function of modern telecom, serving human impatience. Although pre-recorded video dominates in the volume of traffic, the future of the Net is likely to be bursts of traffic coming from cascades of interactions between computers reacting to human demands.”

Burstein agrees.

“The problem for most large carriers is that they can’t sell the capacity they have, not that they can’t keep up,” he writes. “The current surge in 5G millimeter wave [talk] is not because the technology will be required to meet demand. Rather, it is inspired by costs coming down so fast the 5G networks will be a cheaper way to deliver the bits. In addition, Verizon sees a large opportunity to replace cable and other landlines.”

On the subject of cost and broadband economics, Burstein sees almost nothing to justify broadband rate hikes or traffic management measures like usage caps or speed throttling.

“Bandwidth cost per month per subscriber will continue flat to down,” Burstein notes. “For large carriers, that’s been about $1/month [per customer] since ~2003. Moore’s Law has been reducing equipment costs at a similar rate.”

“Cisco notes people are watching more TV over the net in evening prime time, so demand in those hours is going up somewhat faster than the daily average,” he adds. “This could be costly – networks have to be sized for highest demand – but is somewhat offset by the growth of content delivery networks (CDN), like Akamai and Netflix. (Google, YouTube, and increasingly Microsoft and Facebook have built their own.) CDNs eliminate the carrier cost of transit and backhaul. They deliver the bits to the appropriate segment of the carrier network, reducing network costs.”

Both experts agree there is no evidence of any internet traffic jams and routine upgrades as a normal course of doing business remain appropriate, and do not justify some of the price and policy changes wired and wireless providers are seeking.

But Wall Street doesn’t agree and analysts like New Street Research’s Jonathan Chaplin believe broadband prices should rise because with a lack of competition, nothing stops cable companies from collecting more money from subscribers. He isn’t concerned with network traffic growth, just revenue growth.

“As the primary source of value to households shifts increasingly from pay-TV to broadband, we would expect the cable companies to reflect more of the annual rate increases they push through on their bundles to be reflected in broadband than in the past,” Chaplin wrote investors. Comcast apparently was listening, because Chaplin noticed it priced standalone broadband at a premium $85 for its flagship product, which is $20 more than Comcast’s non-promotional rate for customers choosing a TV-internet bundle.

“Our analysis suggests that broadband as a product is underpriced,” Chaplin wrote. “Our work suggests that cable companies have room to take up broadband pricing significantly and we believe regulators should not oppose the re-pricing. The companies will undoubtedly have to take pay-TV pricing down to help ‘fund’ the price increase for broadband, but this is a good thing for the business. Post re-pricing, [online video] competition would cease to be a threat and the companies would grow revenue and free cash flow at a far faster rate than they would otherwise.”

Comcast customers in Bucks, Chester, Delaware, Montgomery, and Philadelphia counties in Pennsylvania as well as parts of New Jersey and New Castle County, Del. can now subscribe to the company’s DOCSIS 3.1-powered gigabit broadband service.

Jim Samaha, senior vice president of Comcast’s “Freedom Region” surrounding southeastern Pennsylvania says at least two million customers will be able to subscribe to the new, faster broadband speed immediately.

“We have been on a pace of doubling our network capacity every 18 to 24 months, ensuring that we stay well ahead of demand,” said Samaha in a statement.

Comcast is running an introductory promotion that will price the gigabit service at $79.99 a month with a one-year contract or $104.95 a month for month-to-month service. A 1TB usage cap did apply to customers on a gigabit plan who did not agree to a term contract, but there was some debate on that point with Comcast representatives giving conflicting answers. Customers who want a cap-free experience with Comcast may have to pay an additional $50 a month.

July 17, 2017

Marlene H. Dortch, Secretary
Federal Communications Commission
Office of the Secretary
445 12th Street, SW
Washington, DC 20554

Dear Ms. Dortch,

Stop the Cap! is writing to express our opposition to any modification now under consideration of the 2015 Open Internet Order.

Since 2008, our all-volunteer consumer organization has been fighting against data caps, usage-based billing and for Net Neutrality and better broadband service for consumers and businesses in urban and rural areas across the country.

Providing internet access has become a bigger success story for the providers that earn billions selling the service than it has been for many consumers enduring substandard service at skyrocketing prices.

It is unfortunate that while some have praised Clinton era deregulatory principles governing broadband, they may have forgotten those policies were also supposed to promote true broadband competition, something sorely lacking for many consumers.

As a recent Deloitte study[1] revealed, “only 38 percent of homes have a choice of two providers offering speeds of at least 25Mbps. In rural communities, only 61 percent of people have access to 25Mbps wireline broadband, and when they do, they can pay as much as a 3x premium over suburban customers.”

In upstate New York, most residents have just one significant provider capable of meeting the FCC’s 25Mbps broadband standard – Charter Communications. In the absence of competition, many customers are complaining their cable bills are rising.[2]

Now providers are lobbying to weaken, repeal, or effectively undermine the 2015 Open Internet Order, and we oppose that.

We have heard criticisms that the 2015 Order’s reliance on Title II means it is automatically outdated because it depends on enforcement powers developed in the 1930s for telephone service. Notwithstanding the fact many principles of modern law are based on an even older document – the Bill of Rights, the courts have already informed the FCC that the alternative mechanisms of enforcement authority that some seem motivated to return to are inadequate.

In a 2-1 decision in 2014, the U.S. Court of Appeals for the D.C. circuit ruled:

“Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order.”[3]

In fact, the only important element of the pre-2015 Open Internet rules that survived that court challenge was a disclosure requirement that insisted providers tell subscribers when their internet service is being throttled or selected websites are intentionally discriminated against.

Unfortunately, mandatory disclosure alone does not incent providers to cease those practices in large sections of the country where consumers have no suitable alternative providers to choose from.

Reclassifying broadband companies as telecommunications services did not and has not required the FCC to engage in rate regulation or other heavy-handed oversight. It did send a clear message to companies about what boundaries were appropriate, and we’ve avoided paid prioritization and other anti-consumer practices that were clearly under consideration at some of the nation’s top internet service providers.

In fact, the evidence the 2015 Open Internet Order is working can be found where providers are attempting to circumvent its objectives. One way still permitted to prioritize or favor selected traffic is zero rating it so use of preferred partner websites does not count against your data allowance.[4] Other providers intentionally throttle some video traffic, offering not to include that traffic in your data allowance or cap.[5] Still others are placing general data caps or allowances on their internet services, while exempting their own content from those caps.[6]

Our organization is especially sensitive to these issues because our members are already paying high internet bills with no evidence of any rate reductions for usage-capped internet service. In fact, many customers pay essentially the same price whether their provider caps their connection or not. It seems unlikely consumers will be the winners in any change of Open Internet policies. Claims that usage caps or paid prioritization policies benefit consumers with lower prices or better service are illusory. One thing is real: the impact of throttled or degraded video content which can be a major deterrent for consumers contemplating disconnecting cable television and relying on cheaper internet-delivered video instead.

Arguments that broadband investment has somehow been harmed as a result of the 2015 Order are suspect, if only because much of this research is done at the behest of the telecom industry who helped underwrite the expense of that research. Remarkably, similar claims have not been made by executives of the companies involved in their reports to investors. Those companies, mostly publicly-traded, have a legal obligation to report materially adverse events to their shareholders, yet there is no evidence the 2015 Order has created a significant or harmful drag on investment.

In a barely regulated broadband duopoly, where no new significant competition is likely to emerge in the next five years (and beyond), FCC oversight and enforcement is often the only thing protecting consumers from the abuses inherent in that non-competitive market. Preserving the existing Open Internet rules without modification is entirely appropriate and warranted, and has not created any significant burdens on providers that continue to make substantial profits selling broadband service to consumers.

Transferring authority to an overburdened Federal Trade Commission, not well versed on telecom issues and with a proven record of taking a substantial amount of time before issuing rulings on its cases, would be completely inappropriate and anti-consumer.

Therefore, Stop the Cap!, on behalf of our members, urges the FCC to retain the 2015 Open Internet Order as-is, leaving intact the Title II enforcement foundation.

Respectfully yours,

Phillip M. Dampier
Founder and Director

Footnotes:

[1] https://www2.deloitte.com/us/en/pages/consulting/articles/communications-infrastructure-upgrade-deep-fiber-imperative.html#1

[2] “Thousands of Time Warner Cable Video Customers Flee Spectrum’s Higher Prices.” (http://bit.ly/2tjHJ8f); “Lexington’s Anger at Spectrum Cable Keeps Rising. What Can We Do?” (http://www.kentucky.com/news/local/news-columns-blogs/tom-eblen/article160754069.html)

[3] http://www.cadc.uscourts.gov/internet/opinions.nsf/3AF8B4D938CDEEA685257C6000532062/$file/11-1355-1474943.pdf

[4] https://cdn3.vox-cdn.com/uploads/chorus_asset/file/7575775/Letter_to_R._Quinn_12.1.16.0.pdf

[5] https://www.t-mobile.com/offer/binge-on-streaming-video.html

[6] http://www.chicagotribune.com/bluesky/technology/ct-data-cap-policies-20151214-story.html