Title II Would Lead to Legal Uncertainty, Hurt Investments, Panelist Say

The issue exemplifies government mistakes in dealing with the changing industry, Pai said. The FCC, as it does at times, is “getting bogged down in a debate of the past,” Pai said. “The FCC obviously has plenty to do when it comes to preparing for the all-IP future. So we don’t have time to waste on yesterday’s battles. But that’s precisely what we're doing.” The “countless staff hours, meetings, and phone calls” on net neutrality” is time not “being devoted toward modernizing many of our rules to expedite the IP Transition,” he said.

The “Title II discussion is being driven by a parade of horribles that is entirely hypothetical,” Pai said, and the commission is “crippled by fear of the future.” He likened it to concerns public interest groups are raising about the shift from copper to fiber, when “the simple truth is fiber is better than copper.” Pai “must know -- one would hope -- that the famed light-touch regulation of wireless voice is firmly grounded in Title II,” responded Free Press Policy Director Matt Wood, who did not speak on the panel. “It’s a shame that he pretends core communications principles like nondiscrimination are a ‘distraction.'"

IIA did not file comments on net neutrality but its members include pro-free market organizations like the American Conservative Union and Americans for Tax Reform. Concerns driving the push for Title II can be handled through Section 706, said Fred Campbell, director of the Center for Boundless Innovation in Technology. “Seems to me the only reason for reclassification is if you want to do a whole lot more than net neutrality. … You're going to get the ability to regulate a lot more stuff,” he said.

Litigation likely to be caused by a Title II approach could take as much as a decade to sort out and create uncertainty for investors, said Anna-Maria Kovacs, visiting senior policy scholar at the Georgetown Center for Business and Public Policy. “Investors are very impatient and they have a lot of choices. … They can invest in China or anywhere in the world, in any industry. They're likely to exit [from investing in] not only the traditional telecommunications industry but the edge providers as well,” she said. Those with a choice of investing in a regulated industry or an unregulated one would choose the latter, said George Reed-Dellinger, senior vice president and telemedia/Internet analyst at Washington Analysis. “To inject regulatory crappola and uncertainty would be patently negative,” he said.

"Litigation is a certainty no matter what the FCC does,” said Wood, saying courts would toss a 706 approach. “If you're looking for uncertainty, 706 is where you'll find it. It would give the FCC a broad purview to attempt pretty much whatever it wants in the Internet ecosystem -- just not prevent discrimination and keep Internet access open to all. … The question is whether the agency will act on firm ground this time, or continue to swing and miss with another patched-together compromise."

Predictions about Title II deterring investment are also off-base, Wood said. “All of the data shows massive investment under Title II,” Wood said. “Remember what happened that last time the FCC enacted Open Internet rules without Title II?” said Public Knowledge Senior Staff Attorney John Bergmayer, who also did not participate on the panel. “Court challenges are a fact of life for the modern FCC. The question is whether the FCC can win and have its rules upheld. With Title II, it can,” Bergmayer said.

A reference Pai made to special access reform in his speech was called “very disappointing” by Comptel General Counsel Angie Kronenberg. To illustrate how the FCC gets “bogged down in brouhahas from the past,” Pai said the commission two years ago suspended its deregulatory special access rules and said it would offer reforms last year. “It put on the table such things as … even mandating different prices on different floors of the same building,” he said. “To justify these types of intrusive regulations, it teed up a one-time, complex market analysis” that has cost an estimated “934,400 burden-hours in total, which translates into tens of millions of dollars in administrative costs,” he said.

The most popular special access circuit is the T1 line, “which offers subscribers just 1.5 Mbps,” Pai said. “In other words, we have spent countless hours debating whether to suspend our rules, what data to collect, how to analyze that data, and whether we should reregulate the market, all for a product that does not even meet the FCC’s definition of broadband,” Pai said.

Special access reform “is not about the past -- it is about the future,” Kronenberg said in a statement. “Special access is used to deliver IP-based services that small and mid-sized businesses across the nation rely upon, and it’s often the large incumbent telcos which have the only access to the customer. … We too were concerned about the burden on providers to respond to the data request, but the greater burden has been on American consumers during the lost decade of special access reform.” The data “will show large incumbent telcos are dominant providers and the Commission’s earlier decisions to grant pricing flexibility (i.e., to deregulate) special access was premature,” her statement said. -- Kery Murakami (kmurakami@warren-news.com)