One year ago the FCC approved its Open Internet Order making net neutrality the law of the land. The Commission received plaudits from consumer advocates, some content providers and liberal journalists for ensuring that the Internet would remain open for all forms of traffic.

The sad fact is one year later, however, we have no idea whether the Order was really needed and whether it will still be here one year from today. We do have preliminary evidence that the Open Internet Order has been damaging to broadband investment, added tremendous uncertainty to the industry and clearly led to a more partisan and less effective FCC. 

Let’s review the Open Internet Order at age one.

The Order was controversial in so many ways.  Before the Commission issued the Order, there were relatively few industry complaints alleging that ISPs were prioritizing certain Internet traffic while slowing down or throttling other traffic. Broadband investment was steadily increasing and more and more Americans were choosing broadband to access the Internet. Many industry observers (including this one) questioned whether any new Internet regulation was needed.       

Moreover, when it appeared that regardless of the lack of evidence that a real problem existed, the FCC was still gung-ho on regulating the Internet, ISPs and their Republican backers in Congress agreed to the “bright line” requirements of no blocking, throttling or prioritization of Internet traffic. This acquiescence should have been enough to satisfy the Commission. It was not. 

At first, it appeared that the Commission would issue an Order that did not disturb the existing regulatory classification of broadband as a Title I information service. Instead, the agency would use its ancillary authority under section 706 of the Telecommunications Act to regulate broadband as an advanced service. While ISPs thought this unnecessary, they were prepared to live with this solution as it would not increase regulatory paper work, or permit the FCC to control Internet pricing.  It would also add certainty for potential broadband infrastructure investors. A draft order based on section 706 was even written and circulated at the Commission.

Then President Obama became involved, and appeared to order the FCC to drop its original plans for a more heavy-handed solution. After the President’s issued a statement urging the Commission to adopt more stringent Internet regulation, the Commission and Chairman Tom Wheeler turned on a dime.  Without a new Public Notice, they quickly issued an Order reclassifying broadband Internet access service as a Title II telecommunications service. The same Title II regulations that were mandated 80 years ago to control the original telecom utilities were now going to regulate the 21^st century Internet.

To be sure, the agency congratulated itself on imposing Title II for the new century, a regulatory environment that would forebear from many of the onerous Title II obligations such as tariffing and unbundling. However, this “new” Title II approach fooled nobody. ISPs were well aware that by choosing to enforce sections 201 and 202 of the Act, the FCC ensured that it will maintain complete control over all Internet pricing and the freedom to determine if any service is unreasonably discriminatory.

Shockingly, the FCC went even one step further. With its new “Internet Conduct” rule, the Commission could now review the business plans of every proposed new Internet service and delay or keep it from the market at will. 

Not surprisingly, despite the Commission’s “light” Title II regulation, there is already evidence that broadband investment has been impacted. In a February 26, 2016 speech to the Heritage Foundation, FCC Commissioner Ajit Pai stated:

As predicted, the FCC’s decision is having a disproportionate impact on our nation’s smallest ISPs. Many of them have reduced investment in the communities they serve because of the FCC’s decision to treat the Internet like a 19th century railroad or 20th century water company. One of them, called Aristotle, told Congress last month: “Before the [Title II Order] was adopted, it was our intention to triple our customer base” and “cover a three-county area. However, we have pulled back on those plans, scaling back our deployment to three, smaller communities that abut our existing network.” Another, KWISP (a wireless ISP), delayed network upgrades that would have increased speeds from 3 Mbps to 20 Mbps for its 475 rural customers in northern Illinois. And Wisper ISP, which serves 8,000 customers around St. Louis, shelved plans to triple the number of new base stations it would deploy each month to provide broadband to new customers. I’ve heard similar stories from other small businesses over and over again. Remember, these are the companies many Americans rely on, or would like to, for competitive alternatives. At larger ISPs, growth in broadband investment has also flat-lined. That’s only happened twice before on a year-over-year basis: following the dot com bust in 2001 and after the Great Recession in 2008. Indeed, economist Hal Singer has shown that the Obama Administration has now overseen the first-ever reduction in year-over-year investment by major ISPs that happened outside a recession, one which “[j]ust happens to coincide with the Title II era.”

In addition, the Commission has involved itself in the “zero-data” offerings of ISPs in which certain content does not count in an end user’s data limits. Proponents of these services believe it introduces customers to additional content they may find is worth paying for in the future and allows ISPs unique ways of marketing their services. Detractors believe that these services violate the Internet “no traffic prioritization” requirements. Although the Commission has met with the ISPs offering zero-data services, it has yet to launch any official investigations.

The truth is the Commission is holding back on many of the actions it could take to enforce the Open Internet Order.  It can and almost certainly will require ISPs to contribute to the Connect America Fund and the expanded Lifeline program. The Commission can launch investigations into any new ISP services at any time. And it can begin to examine the interconnection agreements between ISPs and edge providers as soon as a complaint is filed.

The Commission has not taken these actions while it waits for the DC Circuit decision regarding the appeals of the Order. That decision could come this spring or summer.  If that decision is delayed however, the Commission will probably wait until the presidential election this November. The agency is well aware that if a Republican is elected the Open Internet Order will be overturned. That is the danger of making nakedly partisan decisions. They are at the mercy of the political process and will be thrown out as soon as your side loses an election. 

Thus, one year after the Open Internet Order was released; we are far from determining its final outcome. Next year at this time, we should have a much clearer idea of the future of Internet regulation. 

By Andy Registky, CCMI