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FCC's Simington Warns of Title II-Driven 'Artificial' Crisis

FCC nominee Nate Simington
(Image credit: C-SPAN)

New Republican FCC commissioner Nathan Simington can clearly see the Title II-based net neutrality reg handwriting on the wall, now that Democrats will control the FCC, but wants make sure its proponents consider the potential message it will send to the financial markets and the possibility of an artificial broadband infrastructure crisis created by government.

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That warning came in a thoughtful, and erudite, virtual speech to the Free State Foundation. "Title II net neutrality can have a light or a heavy touch," he said. "As it is likely to be back on the agenda this year, I think we need to get serious about what different approaches may mean."

He suggested that after Verizon's challenge of earlier some version of Title I-based net neutrality rules--something some Republicans and many ISPS have pushed for--"seems like a dead letter."

That leaves the 1) "monopoly" argument for Title II regs, he said, which is that there is not enough meaningful choice in ISPS; and the 2) "gatekeeper' argument, which is that ISP "Internet intermediaries" should not be able to leverage that position to block, throttle or favor content because companies who need to reach consumers must have access to all all the time, and vice versa.

There is a third argument, he said, which he called the "minimum standards" argument, which is that commercial ISPS have to be accountable for baseline resiliency and reliability because consumers are so reliant on the internet they should be held the same reliability as utilities, which is more an argument for Title II than network neutrality he conceded.

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Simington argues the monopoly argument is being mooted by growing competition from both new providers and new technologies. 

Of the gatekeeper argument, he says, the implications go far beyond ISPs, and would, or should, include "search engines, app stores, e-commerce sites, and social media accounts," which he said "are more fundamental components of our online activity than whichever ISP we may happen to subscribe to."

He suggested he was no fan on a Title II regime that would catch those up in its net. "I’ve had one particular e-commerce account since 1999, and I’ve used it for at least ten different addresses. And yet, it seems facially absurd to require that they abstain from restricting others’ content. What’s the point of building a commercial service if you have to open it to exploitation by non-contributors?"

It is hard to argue with minimum standards argument, he says, though adds that there could be "unacceptably high costs" or "lock-in" effects if it were under Title II. He skipped over that option to focus on the consequences of a heavier-handed return of Title II.

Coming from the world of corporate and project finance--he is a former senior counsel to Brightstar who negotiated various business transactions--Simington suggested the consequence of "heavy touch" Title II would not be a death grip on ISPs, but "it will make their infrastructure return profiles worse than they would be otherwise," adding that this could not help but chill infrastructure investment."

If that happens, he said, the result would be "an entirely avoidable and artificial broadband infrastructure crisis" of the government's own making.

"[I]f we experience a chill to construction incentives at the very moment that demand is dramatically escalating, I worry that free market solutions will seem impossible – not because the corporate sector is incapable or greedy, but because they’ve been put in a regulatory bind," he warned. "This will generate calls for a government-led solution, because the problem of capacity will be a genuine problem, even if it is rooted in regulatory choices. Indeed, a government-led solution may even be the best solution once we find ourselves at the point. I’d prefer to avoid a government-led solution by not precipitating the problem in the first place."

Simington said was not opposed to government activity on general principle, but that he did not want the government to become the "infrastructure financier of first resort." He said if there is no way for broadband to be viable without government subsidies, government will definitely get involved. 

But if heavy-handed Title II puts ISPs in a regulatory, and investment, bind, and there is no other economically viable way to build broadband infrastructure absent state involvement, the state will definitely get involve, at which point "we have permanently politicized broadband infrastructure as an economic sector, adding: "Frankly, if we’re going to have an industrial policy, I could think of sectors that need it more." He did not elucidate.

He said he hoped the Title II fans now in the political ascendance would work with those who have concerns like those he has raised and said he will talk with anyone willing to "bring a respectful, open, mind to the conversation."

That probably sounds like wishful thinking to those who have been targeted with the angry rhetoric that has characterized this issue, with former FCC chairman Ajit Pai something of reluctant expert on the topic.

Telecom Act and Beyond

Elsewhere in the speech, Simington clearly established his deregulatory bona fides (He had laid out his basic regulatory philosophy in his inaugural interview with Multichannel News.)

Marking the 25th anniversary of the Telecommunications Act of 1996, Simington said that instead of regressing to an incumbent-driven, "restrictive regulatory environment of the postwar era," the country had instead chosen the free market and light regulatory touch. "[A] quarter century of transformative innovation speaks to the wisdom of this choice," he said. 

"Your phone might well be a wireless device connected to home WiFi through which you access fiber internet and on which you watch television and read the news," he said, but cautioned that such "mundane" activity was "is a smooth surface over a convoluted legal infrastructure."

That is because "[r]eading the news at the breakfast table is an act that combines licensed and unlicensed regimes--Titles I, II, and III of the Communications Act--content that may be international or multinational; and that’s all before you’ve had your morning coffee."

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He did not blame the act for that "curiously converged" landscape, saying that trying too much on anticipate future markets can result in regulatory overreach.

Simington had a hand in the National Telecommunications & Information Administration (NTIA) petition to the FCC last year to regulate social media, though he has said it was mostly a footnote checking role. That role, whatever it was, is credited with his being tapped to replace Republican commissioner Michael O'Rielly, who raised issues about the petition and the FCC's role in regulating the edge.

Simington raised the issue of online speech, saying it was a complicated issue made more complicated by the simplicity of the consumer-facing technology, but also suggested it was likely more the purview of Congress than the FCC to resolve it.

"A public raised on certain standards of public speech and platform access feels betrayed and bewildered by the new role of online companies in the dissemination of speech," he said, "even as such companies try hard to be responsible to both the free speech and speech accountability constituencies – and even as they are burdened by unclear or contradictory legal and regulatory guidance. Today, there’s a debate

about fact-checking on voice-chat applications. But we’d hardly be happy if people proposed to fact-check our phone calls! Convergence has left everyone in a state of uncertainty – what is permissible, what will be recorded, who decides, and where to turn. And it’s tough to tell the public that the transmission medium is the basis for what they can say, even if that’s the legally correct answer."

Broadcasters know all about that, since they have been subject to indecency rules that apply to no other medium, though the government has never been shy about explaining that to them.