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Trump's FCC Votes to Allow Broadband Rate Hikes for Schools and Libraries

Another day, another anti-consumer corporate giveaway.

President Trump's recently-installed Federal Communications Commission chief, Republican Ajit Pai, has made clear that he wants to roll back US rules protecting net neutrality, the principle that all internet content should be equally accessible to consumers.

But the forthcoming Republican assault on net neutrality is just one component of an escalating effort by Trump's FCC to deregulate the broadband industry in ways that benefit corporate giants like AT&T and Verizon, and hurt consumers, according to public interest advocates.

For example, the FCC voted today to approve a controversial plan to deregulate the $45 billion market for business-to-business broadband, also known as Business Data Services (BDS), by eliminating price caps that make internet access more affordable for thousands of small businesses, schools, libraries and hospitals. The price caps, which have been in place for years, are designed to protect small businesses and other community institutions from predatory behavior by monopoly broadband providers like AT&T and Verizon.

FCC Chairman Pai, a former Verizon lawyer, justifies the BDS rollback by claiming price caps aren't necessary in markets where "sufficient competition" exists. So how does Pai define "sufficient competition"? Believe it or not, Pai's FCC claims that "sufficient competition" exists if a local BDS market is served by one broadband provider, as long as there is a second broadband provider within a half-mile.

Public interest advocates say the removal of the BDS price caps will deliver a massive financial windfall to broadband giants like AT&T and Verizon, while driving up costs for consumers. That's because every time you use an ATM or a credit card at the gas pump or grocery store, the transaction takes place over a BDS network. Higher costs for businesses inevitably lead to higher prices for consumers.

"This is crony capitalism that favors broadband giants, is anti-business, and kicks consumers," Chip Pickering, CEO of pro-competition tech industry trade group INCOMPAS, said in a recent statement. According to Pickering, Pai's BDS proposal is likely to result in a 25 percent broadband price increase for small businesses, ultimately costing consumers billions of dollars per year—dollars that will flow straight into the corporate coffers of companies like AT&T and Verizon.

"Instead of looking out for millions of 'little guys,' the majority has again chosen to side with the interests of multi-billion dollar providers," Democratic FCC Commissioner Mignon Clyburn, who voted against the measure, said at Thursday's FCC open meeting. "Communities where competition is unlikely to ever develop will see substantial deregulation, so rural and poor areas will see prices go up without the hope of any relief."

"Today is a sad day for the proud small business owners across this great nation, for rural hospitals, schools, libraries, and police departments, indeed, for all consumers," Clyburn added.

Pai's plan to deregulate the BDS market is particularly troubling for public interest advocates because, contrary to the Trump FCC's assertions, the market for BDS services is already woefully uncompetitive, and has been for many years, hence the need for price caps to prevent monopoly broadband providers from jacking up prices to sky-high levels.

"This is a huge rip-off."

In 2016, the Obama-era FCC cited research showing that 73 percent of BDS locations are served by only a single broadband provider, and only 24 percent of BDS locations are served by two providers. That means 97 percent of the tens of thousands of BDS locations across the country—small businesses, schools, libraries, hospitals, and other local institutions—face monopoly or duopoly market conditions.

And yet Trump's FCC under Pai blithely asserts that there is "strong competition in the business data services market," hence the need to "ease the regulatory burdens" on BDS broadband providers like AT&T and Verizon, a contention that is vigorously contested by public interest advocates.

In fact, as a result of the lack of competition in the BDS market, US businesses are forced to pay an estimated $20 billion annually in market failure-driven overcharges, according to the Consumer Federation of America (CFA), which argues that Pai's plan will increase BDS overcharges by as much as an additional $20 billion per year. These business costs will be transferred to consumers, to the tune of $300 per household every year, according to the CFA.

"This is a huge rip-off," Mark Cooper, CFA Research Director, told reporters earlier this week on a conference call. Cooper said that the FCC proposal, which relies on what he called "contradictory data," likely violates several sections of the federal Communications Act, as well as the Administrative Procedure Act.

Pai's BDS plan is just the latest example of Trump's FCC putting the interests of corporate giants like AT&T and Verizon ahead of the interests of the American people, according to Phillip Berenbroick, senior policy counsel at DC-based digital rights group Public Knowledge.

"The BDS order is another in a long list of issues on which Chairman Pai has chosen to side with the biggest telcos and cable companies possessing market power, instead of the public interest and consumers," Berenbroick told reporters. "The common theme of Chairman Pai's young tenure as head of the FCC is that his FCC will stand up for the biggest companies that are regulated by the agency, rather than consumers."

Pai has only been in charge of the FCC for three months, but his record of anti-consumer actions is already substantial. For example:

  • Pai nuked a proceeding that could have saved consumers billions of dollars annually by introducing more competition into the cable "set-top box" market. Not surprisingly, the broadband industry vehemently opposed the measure.
  • Pai killed the agency's inquiry into zero-rating, a controversial practice in which ISPs exempt certain services from data caps, effectively favoring those offerings at the expense of rivals, undermining net neutrality.
  • Pai moved to scale back the FCC's Lifeline subsidy program, which provides crucial financial assistance to low-income people so they can afford phone and internet service. That action drew fierce protest from public interest advocates.
  • And of course, Pai urged Congress to repeal the FCC's broadband privacy rules, giving the nation's largest broadband companies a green light to sell private consumer data to the highest bidder.

What's next on Pai's anti-consumer hit list? You guessed it: Net neutrality, the internet's open access principle. Pai is expected to soon launch a formal FCC proceeding designed to roll back the agency's net neutrality rules, which in turn will give Republican lawmakers in Congress political cover to pass legislation stripping away the FCC's power to enforce strong net neutrality protections.

Trump's "crony capitalism" agenda is picking up steam—and FCC Chairman Pai appears more than willing to do the president's bidding. The question now is whether open internet activists can organize enough grassroots opposition to stop Pai's forthcoming assault on net neutrality in its tracks.

This story was updated after initial publication to reflect that the FCC indeed voted to eliminate the BDS rate caps.