FCC Chair Ajit Pai Reveals His Plan To Kill Net Neutrality

Image courtesy of FCC.gov

You can say this much for new FCC Chair Ajit Pai: He keeps his word. Unfortunately for people who believe that internet service providers should not be allowed to determine what sites you visit, Pai’s key promise has been to kill net neutrality. Today, Pai pulled back the curtain on his plan to undo all recent efforts to regulate broadband.

Pai outlined his vision for the future of net neutrality today in Washington, D.C., at an event held by anti-regulation think tank FreedomWorks.

The Chair’s goal is to replace the neutrality rules that have been in place since 2015 with a voluntary standard. In short, we’d lose the law that tells companies what they can’t do and punishes them for breaking it, and instead replace it with a pinky swear from Comcast, AT&T, Verizon, and everyone else that, sure, they’ll play along — until they don’t.

Pai called the Internet, “the greatest free-market success story in history,” thanks, he said, to a hands-off approach by government.

According to Pai, that all changed in 2015 thanks to “politics,” not law or facts. To counterbalance the “party-line” vote of 2015, then, he has a new proposal that, too, is certain to find support and opposition based on party lines.

Let’s break it down.

The Current Rule

The version of net neutrality we have now is actually something of a 2.0, after the original 2010 iteration was gutted by a Verizon lawsuit in Jan. 2014. That left only a few ways that the FCC could regroup and create a stronger rule that would stand up in court.

So, after nearly a year spent receiving public comment and dithering over details, the FCC finally adopted the Open Internet Rule in 2015.

The Rule reclassified broadband providers as common carriers under Title II of the Communications Act. Enacting that classification gave the FCC legal authority to then create three bright-line rules for what ISPs are and aren’t allowed to do with your internet traffic:

  1. Broadband providers may not block access to legal content, applications, services, or non-harmful devices.
  2. They may not impair or degrade lawful internet traffic on the basis of content, application, services, or any classes thereof.
  3. They may not favor some internet traffic over other internet traffic in exchange for consideration of any kind — no paid prioritization or fast lanes.

The telecom industry and its lobbyists sued over the rule, but in June 2016 a federal appeals court sided with the Commission and let the rule stand.

What Pai Wants To Have Instead

Today, Pai is proposing a new rule that will have three main sections.

First, he wants to straight-up undo the Title II classification. Instead of putting ISPs under the same broad heading as phone services (which many of them also are, these days), they’d go back to being considered “information services” regulated under Title I of the law.

“This Title I classification was expressly upheld by the Supreme Court in 2005,” Pai said, and to his view, “it’s more consistent with the facts and the law.”

However, in the 2014 ruling that upended the first net neutrality rule, the court held that so long as ISPs are considered information services and not telecommunications services, the Commission doesn’t have the authority to put a net neutrality rule in place. So without that classification as the foundation, other things start to fall apart.

Second, Pai wants to scrap the part of the Open Internet Rule known as the conduct standard. Critics have claimed that the standard is too vague, because it was designed to be deliberately open-ended, not tied to any existing tech or standards in order to be future-proof. That standard says that ISPs should not harm consumers or edge providers, but does not delineate how.

The standard is the guideline by which, for example, the FCC evaluated AT&T and Verizon to determine if their sponsored data and zero rating programs were harmful to consumers. (The Commission said in 2016 that they were; in Feb. 2017, the FCC changed its position and completely scrapped the reports from last year.)

To Pai, this is bad. Zero-rating is popular among consumers, he said, but, “the prior FCC had met the enemy, and it was consumers getting something for free from their wireless providers.”

(The recent renaissance of unlimited data plans suggests that wireless carriers have found a better way than targeted zero-rating to attract and retain subscribers.)

Lastly, Pai is opening the floor to comment on what to replace the Commission’s three key bright-line rules with, if anything.

Why Change?

In his remarks, Pai repeated his claim that the Open Internet Rule has depressed investment in broadband infrastructure, and must be stopped.

“Among our nation’s 12 largest Internet service providers, domestic broadband capital expenditures decreased by 5.6% percent, or $3.6 billion” between 2014 and 2016, Pai said. “This decline is extremely unusual. It is the first time that such investment has declined outside of a recession in the Internet era.”

There is one huge problem with Pai’s assertion, a statistic for which the FCC has not provided a source. It points to investment figures from 2014 through 2016, but the neutrality rules weren’t approved until Feb. 2015 and didn’t go into effect until June 2015. So the Chair is blaming a rule that didn’t exist for a large part of the time period he’s talking about.

And indeed, looking at publicly available financial data for major ISPs in both 2016 and 2017 gives no indication that providers are scaling back on investment.

Pai also claims that it’s bad for smaller ISPs, “which simply do not have the means or the margins to withstand the Title II regulatory onslaught.”

As to why a rule saying, effectively, “don’t do this thing you already claim you aren’t doing and have no need to do” is a regime that would cost providers money, however, he did not explain, saying only that Title II “hung like a black cloud” over small businesses. In short, his argument is that Title II costs money, and money means that small ISPs are not serving poor and/or rural customers as well as they could.

His goals, Pai says, are to bring high-speed broadband access to more Americans; to create jobs; to boost competition; and to protect your privacy.

The first three are all related to the idea of investment. The privacy protection, however, connects directly back to the now-defunct ISP privacy rule.

MORE: The ISP privacy rule is dead, but could anyone bring it back?

The FCC adopted that rule — which limited what your ISP could do with your data before getting your permission — in Oct. 2016, based on the legal underpinning of Title II regulation. But Congress passed, and the White House signed, a resolution killing off that rule. That puts privacy into a legal limbo: The FTC can’t regulate common carriers, and the FCC can’t regulate ISPs. Pai’s solution? Kill the common carrier designation, to hand over privacy protection to the FTC.

Why This Is A Terrible Idea

The FTC has very limited authority to make industry-wide regulations, and can really only create rules that prohibit unfair or deceptive business practices.

So it can not, for example, tell ISPs to stop collecting and selling sensitive user data, so long as these companies are disclosing the practice in their fine print. That means we must rely on ISPs promising to play nice.

In most of the country, thanks to the history of cable, broadband providers are a local monopoly. Several reports over the years have shown ghat for the majority of is, competition is nonexistent.

That leads to an environment where prices get higher and customer service gets worse, because there’s basically nothing you can do about it; you’re a captive audience. Customers are overwhelmingly dissatisfied with their internet providers, consistently ranking them worst among any industry.

With that as the backdrop, it’s very easy to be skeptical that any voluntary promise is even worth the pixels it’s printed with — because companies break their promises all the time.

Stripping ISPs of their common carrier classification would make it the FTC’s job, not the FCC’s, to make sure that the ISPs do what they’re going to say — but there’s a big catch there.

The FTC can only step in if companies are doing something anticompetitive or if they say one thing but then do another, basically. If, absent net neutrality, Comcast or AT&T were to change their terms of service to say something like, “All use of Netflix instead of our proprietary video service will incur you a $1/month additional ‘network usage’ fee, otherwise we throttle it to 768 Kbps” then they’d be in the clear to charge you that fee or throttle your connection. It would only be if they didn’t first disclose their intention that the FTC would bust them.

Companies can, and do, change their terms of service and customer agreements all the time. If you’re lucky, you get notice and the policy is comprehensible. If not, it happens on the sly. Without a law, there is absolutely nothing to prevent companies from changing their terms and creating fast lanes and additional access fees down the line when people aren’t paying attention.

What Happens Now

“From a political standpoint, there is no question that the easiest path would be to do nothing,” Pai said. “Leave Title II alone and move on to other issues.”

He’s definitely right about that. Alas, we have no such luck; Pai is apparently not interested in the easy path. So now, the fight begins again.

He’s releasing the full text of the NPRM and NOI — the proposed rule and the open questions the Commission’s asking — on April 27, for the FCC to vote whether or not to consider it in the Commission’s open meeting on May 18.

If the FCC votes to consider the NPRM and NOI, that will kick off a months-long comment process where the public — which includes advocacy groups, businesses, individuals, and anyone else you can think of — gets to start having its say.

The battle lines are already drawn, and they look a lot like they did in 2014. In favor of doing away with the Open Internet Rule are ISPs and the organizations that lobby for their interests — AT&T, Comcast, Verizon, and groups like USTelecom and the NCTA (now called the Internet & Television Association).

The folks asking the FCC to just leave well enough alone, meanwhile, are a wide swath of tech companies and consumer advocates. The big internet companies like Amazon, Facebook, Google, Microsoft, Netflix, Reddit, and Twitter started asking Pai to leave net neutrality alone a couple of weeks ago.

They’re joined today by another chorus of companies: Tech advocacy group Engine sent the FCC a letter in support of net neutrality signed by more than 800 internet businesses from all 50 states. Many are small, niche companies or new entrants you probably haven’t heard of — and that are relying on an open internet to start and grow their businesses. The list also includes several companies that were once tiny and scrappy and that successfully used the open internet to make their now-widely-known businesses grow, including: Etsy, Medium, Meetup, NextDoor, Patreon, Reddit, and Warby Parker.

Our colleagues down the hall at Consumers Union (the policy and mobilization arm of Consumerist’s parent company, Consumer Reports) had strong words for Pai.

“Doing away with net neutrality rules could ultimately mean doing away with the internet as we know it,” said senior policy counsel Jonathan Schwantes.

“Net neutrality rules keep the internet open for all and ensure consumers can access the websites and apps they – not their internet service provider – choose. Rather than leveling the playing field to spur competition and innovation, Chairman Pai’s proposal would allow a select few corporations to choose winners and losers.”

“The only way to ensure that all content is treated equally is to keep the the internet classified as a public utility,” Schwantes continued. “In this digital age, where individuals and businesses rely on the internet every day, it should no longer even be a question. Voluntary commitments from broadband providers to adhere to net neutrality ‘principles’ are simply not a substitute — especially when there would be no cop left on the beat with the authority to ensure providers stick to their promises.”

He added “millions of consumers voiced their support for net neutrality rules” the first time around, which is true. The Commission had to extend the public comment deadline after a surge of interest crashed its aging online system. In the end, about four million people commented on the net neutrality proceeding — a record-smashing number.

Former FCC Commissioner Michael Copps says that gutting the neutrality rules jeopardizes “core protections for online free speech and competition.”

“Ending net neutrality would be a body blow to the open dialogue upon which successful self-government depends,” adds Copps, now a special advisor to Common Cause. “It would be a red light for democracy and a green light for cable and telecom giants to control where we go and what we do on the internet.”

Weeks ago, when Pai first set his sights on net neutrality, lawmakers started promising that a second net neutrality fight would make the first one look “minuscule” in comparison. It seems it is time to start fighting that fight.

You can read Pai’s full remarks here: PDF.