WASHINGTON — The president of the United States has thrown his weight into passing strict new laws that will fundamentally alter the business model for the nation’s cable operators, regulating them like utilities and requiring faster minimum speeds for Internet delivery.
Last week, President Obama asserted that stance in a speech delivered at the municipal utility in Cedar Falls, Iowa — also that community’s cable provider — vowing to pass the law as he builds a last-term broadband legacy in concert with Federal Communications Commission chairman Tom Wheeler.
Should the nation’s broadband pipes, paid for by private capital and entrepreneurial companies, be allowed to flourish as they have since inception without government intervention? Or should those pipes now be governed by federal regulations because the Internet is just as critical as electricity, the means by which we communicate, educate, buy goods, receive health care and even decide who we meet and marry?
The signal from the Obama administration and an army of regulators appears to be that it almost doesn’t matter how ISPs gained the power they have — that the power to connect people to the Internet is now so great, and the Web so central to daily life and commerce, that it is in the public interest for government to step in.
In the call for new rules, the Obama Administration has made the speed of delivery an issue to be highlighted. Its message: ISPs aren’t delivering broadband that’s fast enough to meet all of those needs, and they aren’t facing enough competition for service to lower prices and boost those speeds. Moreover, they need common-carrier rules to keep them from blocking and discriminating and prioritizing that Internet traffic.
The president pulled no punches last week, defending his support for FCC pre-emption of state laws that limit municipal broadband by saying consumers were at the whim of Internet-service provider monopolies that “jacked up” rates while trying to squash competition.
ISPs are pushing back, but they are on the defensive. National Cable & Telecommunications Association president and CEO Michael Powell warned the FCC about “chas[ing] false solutions.” Walter McCormick, president of telco trade group USTelecom, said the president’s plans for regulations based on Title II of the Telecommunications Act and FCC pre-emption sound like a “call for the federal government to regulate the Internet, and for municipal governments to own the Internet.”
Cable operators continue to call for light-touch regulations and point to hundreds of billions of dollars of private- enterprise investment at stake, but the hand of government is beginning to weigh heavily on their collective shoulders.
Over on Capitol Hill, top Republicans on the FCC oversight committees were trying to help cable operators on the Title II front, announcing they were working on legislation that would prevent discrimination, blocking and even paid prioritization, but under existing authority clarified by Congress.
But the larger issue is the administration’s apparent view that broadband is so ubiquitous and important that unusual measures are justified.
NEW DEAL PARALLEL
Last week, the White House drew a direct parallel between government efforts in the 1930s to get electricity to rural areas and the high-speed broadband initiatives that the administration and the FCC are backing to ensure that broadband reaches those same rural areas.
“In the 1930s, many argued that electricity was a luxury, something too costly to bring to rural communities and to every American and too modern for them to take advantage of,” Jeff Zients, director of the President’s National Economic Council, said in in a White House-arranged call with reporters. “We are at a similar moment today. Broadband is no longer a luxury, it’s a necessity.”
Punctuating that comparison, Obama is now defining broadband by speeds several times higher than current FCC definitions.
The White House has already told Wheeler it thinks the agency needs to reclassify Internet access under Title II common-carrier regulations to ensure that cable and phone companies don’t become gatekeepers.
The push for high-speed Internet penetration is going to be one of the themes of Obama’s State of the Union address Tuesday night (Jan. 20), but the White House is taking a different tack this time around, previewing those themes, as it did with broadband and cybersecurity last week.
The White House even sent out an email with a link to a video of the president plugging his midweek broadband speech from the Oval Office.
The Obama administration and Wheeler appear to be on the same page when it comes to viewing the rollout of broadband service, which they are defining at higher speeds — 10 Megabits per second, then 25 Mbps and now perhaps as fast as 1 Gigabit per second — as a seminal moment in the nation’s relatively brief digital history.
In Cedar Falls last week, the White House was talking up 1-Gbps services as a good mark to aim for — not just for watching videos and playing games, but for helping small businesses be more competitive.
Defining competition in a market, or determining whether a market is “underserved” and even “unserved,” may eventually be measured not by whether an incumbent is offering service, but at what speed and price the service is offered.
Wheeler is even teeing up some action items the president could reference in his speech to show the FCC’s foot was on the broadband accelerator, including scheduling a vote this month on raising minimum broadband speeds to 25 Mbps, and next month on a pair of petitions to pre-empt state broadband laws.
Affordability may also become the table stakes for the definition of “available” broadband. Zients said the president wanted to remove roadblocks to competitors entering local markets — which would include state laws limiting municipal broadband. Pre-empting state broadband regs is just one of several initiatives Obama is backing to boost high-speed broadband (see sidebar).
The White House said 19 states had broadband-limiting laws, though the Coalition for Local Internet Choice put that number at 21 and potentially 22 if a newly introduced Missouri law is passed.
CALL FOR MORE MUNIS
The White House initiatives on speed and ISP reclassification also mirrors calls by Susan Crawford, a former tech adviser to Obama — as was Tom Wheeler — for municipal buildouts, an approach to broadband similar to the Roosevelt-era rural electrification program, and for regulating broadband like a utility, all on the president’s list. Crawford is a Cardozo School of Law professor and author of Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.
Wheeler has already signaled that he thinks the FCC should use its preemption powers to reverse what he characterizes as incumbent ISPs trying to prevent competition. ISPs counter that municipal broadband networks sometimes fail, leaving taxpayers holding the bag. Others said cities sometimes overbuild existing service from private companies that have a hard time competing on price with government-subsidized networks.
The FCC currently has two petitions in front of it asking for state law pre-emption — from the cities of Chattanooga, Tenn., and Wilson, N.C. A spokesperson said the FCC was still vetting them at press time, but a highly placed source said the chairman wanted a vote in February, and he is likely to get a Democratic majority to support pre-emption. Democratic commissioner Jessica Rosenworcel said last week she supported the president’s initiatives. Republican commissioners Ajit Pai and Michael O’Rielly signaled they were not on board, saying the FCC did not have that pre-emption authority.
The White House stopped short of endorsing those petitions, but it might as well have, saying Obama wanted to “end laws that harm broadband competition. Chattanooga Mayor Andy Berke joined Zients on the call outlining the president’s high-speed initiative, and the fact sheet cited three cities that had taken aggressive steps to improve broadband: Chattanooga, Wilson, and Kansas City, Kan. (The latter struck a deal with Google Fiber.)
Promoting municipal broadband could have a side benefit for an FCC and administration concerned about ISPs favoring their own content.
Because city-owned cable systems don’t own content or networks, they don’t “have the same incentives as cable- or telco-owned networks to play favorites with Internet content,” Robert Cooper, a partner at Boies, Schiller & Flexner LLP in Washington, said.
Cable operators were already on the defensive after Wheeler pivoted toward Title II, and he has since signaled that he is likely to follow the president’s lead. That has led to a new round of pushback from cable operators who argue that reclassification will mean billions in new taxes and fees, decreased investment and innovation, and certainly more legal challenges.
Not that cable operators have been resting on their laurels. There seems to be an announcement almost daily of a speed upgrade in cities across the country, but going forward, those upgrades would be needed not just to keep up with Google Fiber and others but to keep pace with the policy imperatives.
In a blog post rebutting the presidential announcement that had already been telegraphed via online videos and press calls and fact sheets, the NCTA pointed to the $230-billion cable providers had invested to extend and upgrade broadband to communities “urban and rural,” and speeds that had increased by 3200% in the last decade.
NCTA FIRES BACK
The NCTA talked about declining permegabit prices and even faster speeds via DOCSIS 3.1 and the new Broadcom Gigasphere chips on display earlier this month at the International CES in Las Vegas.
While the president was touting the Cedar Falls, Iowa, municipal system’s speeds as rivaling those in Paris and other high-speed cities, the NCTA talked about cable operator Mediacom Communications bringing state-of-the-art speeds to the entire state of Iowa.
The NCTA conceded that there are two “discrete” areas where government “may” play a targeted role. That is in “very rural” areas where there is no service and no business case for it, and in adoption education.
The White House signaled the administration did not think Title II would put a damper on investment of innovation, as cable operators have argued, and that price and availability of high speeds, rather than not wanting broadband, were the key roadblocks to ubiquitous broadband.
Among those pushing back in Congress last week was Sen. Deb Fischer (R-Neb.), who likened the president’s broadband speech to announcing he was nationalizing the Internet. “This afternoon, we will see the president parachute into Iowa and tout a new federal takeover of state laws governing broadband and the Internet,” she said.
Obama’s Broadband Initiatives
The White House last week announced some new executive actions to promote high-speed broadband, building, it said, on President Obama’s network-neutrality proposal to have the FCC reclassify Internet access under Title II:
► Calling to End Laws that Harm Broadband Service Competition: “Laws in 19 states — some specifically written by special interests trying to stifle new competitors — have held back broadband access and, with it, economic opportunity. Today, President Obama is announcing a new effort to support local choice in broadband, formally opposing measures that limit the range of options available to communities to spur expanded local broadband infrastructure, including ownership of networks. As a first step, the Administration is filing a letter with the Federal Communications Commission (FCC) urging it to join this effort by addressing barriers inhibiting local communities from responding to the broadband needs of their citizens.”
► Expanding the National Movement of Local Leaders for Better Broadband: “As of today, 50 cities representing over 20 million Americans have joined the Next Century Cities coalition, a nonpartisan network pledging to bring fast, community-supported broadband to their towns and cities. They join 37 research universities around the country that formed the Gig.U partnership to bring fast broadband to communities around their campuses. To recognize these remarkable individuals and the partnerships they have built, in June 2015 the White House will host a Community Broadband Summit of mayors and county commissioners from around the nation who are joining this movement for broadband solutions and economic revitalization. These efforts will also build on the US Ignite partnership, launched by the White House in 2012, and which has grown to include more than 65 research universities and 35 cities in developing new next-generation gigabit applications.”
► Announcing a New Initiative to Support Community Broadband Projects: “To advance this important work, the Department of Commerce is launching a new initiative, BroadbandUSA, to promote broadband deployment and adoption. Building on expertise gained from overseeing the $4.7 billion Broadband Technology Opportunities Program funded through the Recovery Act, BroadbandUSA will offer online and in-person technical assistance to communities; host a series of regional workshops around the country; and publish guides and tools that provide communities with proven solutions to address problems in broadband infrastructure planning, financing, construction, and operations across many types of business models.”
► Unveiling New Grant and Loan Opportunities for Rural Providers: “The Department of Agriculture is accepting applications to its Community Connect broadband grant program and will reopen a revamped broadband loan program, which offers financing to eligible rural carriers that invest in bringing high-speed broadband to unserved and underserved rural areas.”
► Removing Regulatory Barriers and Improving Investment Incentives: “The president is calling for the Federal Government to remove all unnecessary regulatory and policy barriers to broadband build-out and competition, and is establishing a new Broadband Opportunity Council of over a dozen government agencies with the singular goal of speeding up broadband deployment and promoting adoptions for our citizens. The Council will also solicit public comment on unnecessary regulatory barriers and opportunities to promote greater coordination with the aim of addressing those within its scope.”
— John Eggerton
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Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.