FCC’s proposed readoption of Title II rules won’t likely increase access and affordability

The Federal Communications Commission’s proposed rulemaking that would once again reclassify internet services as common carrier telecommunications utilities under Title II of the Communications Act from their current classification as information services under Title I of the statute in theory isn’t likely to have any meaningful impact on access and affordability.

President Joe Biden encouraged the FCC to adopt the rulemaking in a July 9, 2021 executive order, Promoting Competition in the American Economy. But the intent of the order to promote competition is at odds with the underlying rationale of Title II regulation that was used for decades to regulate voice telephone service. That regulatory scheme is properly predicated on the notion that telecommunications like other utilities functions as a natural terminating monopoly. The high cost of building utility infrastructure naturally deters potential competitors from entry – a point made by FCC Chairwoman Jessica Rosenworcel in a speech announcing the proposed rulemaking.

Utility infrastructure also affords incumbents first mover advantage, making it difficult for would be competitors to dislodge them. Investor owned utilities recognize the value there since connecting a customer premise essentially means owning the customer for the long term and potentially selling out to a consolidator for a big future payday. That incentive is now drawing in private equity capital into fiber to the premise (FTTP) deployment in areas where FTTP is spotty or nonexistent.

Since these microeconomic conditions cannot assure universal and affordable access, Title II does so by making telecommunications a common carrier utility, barring discrimination, and requiring reasonable requests for service be honored. It also allows for rate regulation. Authority for the latter was not included when the FCC last reclassified internet as a utility in a 2015 rulemaking and won’t in the forthcoming one, according to Rosenworcel. But the non-discrimination/universal service mandate – that Public Knowledge's Harold Feld has termed "the quintessential common-carrier obligation" – was.

Should it also reappear in the new proposed rulemaking expected to largely mirror the 2015 rulemaking, it’s questionable whether it will be meaningfully enforced. The FCC didn’t enforce that provision of the 2015 rulemaking, effectively letting service providers off the hook in response to a consumer complaint that a request for service wasn’t honored. All providers have to do is claim the customer location isn’t in its current footprint and the complaint is summarily dismissed. Similarly, providers might argue a request for service outside of its existing footprint is unreasonable since the necessary delivery infrastructure doesn’t exist, rendering the universal service mandate moot and allowing continued neighborhood redlining.