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The Attack on Net Neutrality Is Just One Small Part of a Much Bigger, Dumber Plan

The end goal is blind deregulation of federal and state oversight of big telecom.

Karl Bode

Image: John Lamparski/Getty

Internet users have been justly outraged by the FCC’s decision to ignore the public and repeal net neutrality rules. But few media outlets or internet users seem to understand that the net neutrality repeal is just one small part of a massive, larger plan to eliminate nearly all meaningful federal and state oversight of some of the least-liked and least-competitive companies in America.

To be clear: the net neutrality repeal itself is awful policy that ignores both the will of the public and the people who built the damn internet. It eliminates a wide variety of consumer protections that prevent incumbent ISPs from abusing a lack of competition in the broadband market.

Without these rules, ISPs will be able to engage in all manner of bad behavior, from paid prioritization deals that disadvantage smaller competitors, to imposing unnecessary usage caps that their content is allowed to bypass (aka zero rating). Should the FCC’s repeal survive a 2018 court challenge, the only thing standing between you and Comcast’s bad behavior is going to be empty promises from an industry with a long history of ripping you off.

But it’s actually much worse than all that.

Image: Getty

There’s another angle to the FCC’s “Restoring Internet Freedom” proceeding that should be even more worrying. A big part of the FCC’s plan involves rolling back the FCC’s tailor-made authority over broadband providers, then shoveling all remaining government oversight to an FTC ill-equipped to handle it.

Why is that a problem? The FTC has no rule-making ability, and can only move to protect consumers after a violation has occurred. And that action can only occur if it’s painfully clear that an ISP engaged in “unfair and deceptive” behavior, something that’s easy for an ISP to dodge in the net neutrality era, where anti-competitive behavior is often buried under faux-technical jargon and claims that it was done only for the health and safety of the network.

According to FCC boss Ajit Pai, this shift in enforcement will result in better, stronger oversight of broadband duopolies.

But experts in the field warn that this claim is complete nonsense. Telecom lawyer and consumer advocate Harold Feld, for example, recently noted that under this new FTC-dominant enforcement system, most of the net neutrality violations we’ve frequently cited wouldn’t fall within FTC authority, leaving the agency powerless to stop offenses we’ve already seen, much less any new, creative ISP efforts to abuse a lack of competition. As we reported earlier this year, the FTC is poorly placed to protect net neutrality.

Former FCC bos Tom Wheeler, who helped crafted the FCC rules, went so far as to call this entire plan a fraud in an interview earlier this year.

“It’s a fraud,” Wheeler argued. “The FTC doesn’t have rulemaking authority. They’ve got enforcement authority and their enforcement authority is whether or not something is unfair or deceptive,” he notes. “And the FTC has to worry about everything from computer chips to bleach labeling. Of course, carriers want [telecom issues] to get lost in that morass. This was the strategy all along.”

If you understand nothing else in the wake of last week’s FCC vote, understand that this repeal of net neutrality is just one part of an even larger, dumber plan that’s neither subtle nor nuanced

This is all before you realize that AT&T is currently engaged in a legal fight with the FTC that could result in the FTC losing what little authority over broadband providers it currently has.

The FTC sued AT&T in 2014 after AT&T throttled the company’s “unlimited” data customers then lied about it repeatedly. To tap dance around that lawsuit, AT&T lawyers leaned heavily on the common carrier exemption in section 5 of the FTC Act—claiming that its common carrier status (ironically the same classification it has fought tooth and nail against on the net neutrality front) exempted it from being held accountable by the FTC.

Last year, the FTC warned that should the agency lose that court fight, it could create a situation where companies are able to dodge FTC oversight entirely if any part of their business qualifies for common carrier status. Worse, companies could buy small subsidiaries with the express purpose of dodging FTC oversight, the agency said.

“The panel’s ruling creates an enforcement gap that would leave no federal agency able to protect millions of consumers across the country from unfair or deceptive practices or obtain redress on their behalf,” the FTC said. “Companies that are not common carriers today may gain that status by offering new services or through corporate acquisitions.”

The fact that the FTC is facing a lawsuit that could obliterate its ability to protect consumers almost entirely is something Ajit Pai and friends apparently just forgot to mention.

Giant ISPs like AT&T and Comcast are lobbying for this plan because they know it will reduce the government’s ability to rein in bad behavior in an uncompetitive market. And should individual states get the crazy idea of stepping in to protect consumers, Verizon and Comcast have successfully convinced the FCC to crack down on these efforts as well.

"The order makes plain that broadband will be subject to a uniform, national framework that promotes investment and innovation," FCC Commissioner Michael O'Rielly said in his statement before voting to approve the repeal last week. "Broadband service is not confined to state boundaries and should not be constrained by a patchwork of state and local regulations."

O’Rielly and Pai have long argued that it’s OK for ISPs to quite-literally write protectionist state laws that prevent competition from taking root in underserved markets, and that any attempt to prevent these legislative handouts is an assault on “states rights.” When states actually try to protect consumers, you’ll note that this breathless concern for states rights disappears.

Again, if you understand nothing else in the wake of last week’s FCC vote, understand that this repeal of net neutrality is just one part of an even larger, dumber plan that’s neither subtle nor nuanced.

History repeatedly tells us that blind deregulation of natural monopolies results in higher prices, worse service, and even worse behavior by the monopolists

Verizon, AT&T, and Comcast have successfully convinced the government to gut both state and federal oversight of uncompetitive telecom duopolies with a generation of documented anti-competitive behavior under their belt. And with many telcos giving up on broadband expansion, this is occurring just as cable broadband is enjoying a greater broadband monopoly than ever before. The one two punch of less competition and less oversight is a perfect storm of stupid for those already unhappy with their broadband options.

And while some believe wireless broadband will arrive to save the day, that ignores the fact that business broadband connectivity and wireless backhaul (the fiber lines feeding towers) is also a monopoly problem the FCC is turning a blind eye to, and wireless is quickly proving to be no solid replacement for wired in countless rural and smaller urban markets.

Similarly, while there’s still plenty of folks who believe that eliminating all telecom regulation magically somehow fixes everything, history repeatedly tells us that blind deregulation of natural monopolies (especially without addressing the underlying problems in government corruption or market failure) results in higher prices, worse service, and even worse behavior by the monopolists.

That’s not theory, that’s precisely how Comcast was born. Comcast’s perennial spot atop the list of America’s most hated companies occurred largely after the sector was heavily deregulated back in 2002 and 2005, with then FCC boss Michael Powell (now the top lobbyist for the cable industry) promising a competitive utopia that you may have noticed never materialized.

We’re now apparently intent on doubling down on historically-bad ideas. But with neither adult regulatory oversight nor healthy competition in place to police bad behavior, there’s going to be nothing but fluff and nonsense standing between you and telecom’s next really awful idea.