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ACA: Reversing Title II Classification Needed to Stem Decline in Broadband Investment, Innovation and Rollout of New Services

Smaller ISPs Support Restoration of Title I’s Light Touch As Refuge From Burdens of Common Carrier Regs

PITTSBURGH, July 18, 2017 -  The American Cable Association said that the reclassification of broadband Internet access as a Title II telecommunications service was a mistake from a legal and policy perspective, especially for smaller broadband Internet service providers (ISPs) that were harmed by having their Internet service subjected to Title II common carrier regulation. 

Revocation of Title II status, ACA stressed, will not itself cause diminution of Internet openness or harm to consumers. Rather, it will simply restore the regulatory status quo that existed from the 1990s until 2015 that treated Internet access service as a lightly regulated Title I information service.

"Without question, the FCC under Chairman Ajit Pai is headed in the right direction and needs to end the unnecessary and burdensome utility-style Title II regulation of the Internet imposed by the 2015 Open Internet Order. The FCC should reinstate a light-touch regulatory approach that will reverse the decline in broadband infrastructure investment, innovation and options for consumers the FCC's misguided 2015 Order set in motion," ACA President and CEO Matthew M. Polka said.

ACA's support for Chairman Pai's proposal to revoke the Title II classification came in comments filed with the FCC as part of the agency's plan to restore Internet freedom by embracing the Clinton-era consensus that minimal regulation and reliance on market forces best fuel investment in broadband and the rollout of new services to consumers.

In the comments, ACA commended the FCC for proposing to return broadband Internet access service to its Title I information service classification, proposing to eliminate, without replacement, the Internet General Conduct standard and for asking the right questions about the need for ex ante regulation of broadband Internet access service and whether, specifically, to retain, modify or eliminate some or all of the three bright-line "Net Neutrality" prohibitions as well as the Transparency Rule. 

As a legal matter, ACA said restoring the information service classification of broadband Internet access service is consistent with the statute and that the FCC has the legal authority to make this classification. ACA noted that the text and structure of the Communication Act, together with decades of FCC precedent, support classifying broadband Internet access service as an information service.

ACA said it emphatically supported the FCC's proposed elimination of the Internet General Conduct standard.  The rule was not only ill conceived and unnecessary, it was hopelessly vague and open-ended, leaving broadband ISPs guessing about what behaviors the FCC would find unacceptable after-the-fact, particularly regarding service terms and pricing. 

The manifold harms associated with Title II regulation were detailed in several declarations submitted by ACA member companies accompanying ACA's comments, including one by Richard Sjoberg. He is President & CEO of Sjoberg's Inc., a Thief River Falls, Minn., cable provider with 21 employees and 6,800 residential broadband Internet customers.

Among other things, the impact of Title II was felt in a major way by the Sjoberg firm, a family-owned business since the 1960s when it began as a CATV (Community Antenna TV) service started by Richard Sjoberg's parents that has grown into a full-fledged voice, video and data provider in a rural community not far from the Canadian border.

Sjoberg's declaration, representative of the views of many smaller providers, explained how the application of Title II regulation harmed his company's financial profile and business outlook in any number of tangible ways. Title II, he said, required unplanned expenditures, caused operational paralysis fed by regulatory uncertainty, prompted technical changes to its broadband service to forestall the risk of FCC enforcement action and chilled the company's willingness to make long term investments in expanding broadband and in reaching unserved communities.

Specifically, Sjoberg said that in the wake of the FCC's Title II reclassification decision, his firm's borrowing costs -- once at the prime rate -- shot up by more than one full percentage point, putting in doubt the financial feasibility of network investments.

The company had to divert capital to hire consultants to help understand common carrier regulation, a totally new regulatory category for the firm. Uncertainty about possible broadband price regulation by the FCC and potential costs to respond to consumer complaints, coupled with the prospect of heavy FCC fines, plagued decision making about future capital expenditures.

"For a company our size, a huge fine can be devastating. Even if you win these cases, you lose because of how expensive it is to fight the battle. All these extra costs add up and deplete our scarce resources," Sjoberg said.

Innovation suffered as well. Sjoberg abandoned efforts to install a Netflix caching device to lower transport costs based on fears the FCC might find a violation of Title II. Similarly, Sjoberg suspended data caps, a key network management tool, because of the vagueness surrounding how the FCC might respond to complaints about data caps.

"Because the FCC would not give an ironclad seal of approval for data caps, they were too risky for us to continue to employ," Sjoberg said.

Investment too took a hit as the company, wary of the prospect of rate regulation, passed on opportunities to extend its network further into rural areas with fewer households per mile and to undertake costly capital improvements to upgrade its existing plant through a major system rebuild. Sjoberg characterized Title II as a "minefield," causing forward progress to stop, and stated that "[r]emoving the overhang of Title II regulatory uncertainty will remove the hesitation we have felt in moving ahead with offering consumers innovative new service and upgrading and expanding our broadband network into unserved rural areas."

About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 750 smaller and medium-sized, independent cable companies who provide broadband services for nearly 7 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/

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