Concurrent FCC rulemakings would bar redlining for Internet service

One month after proposing a rulemaking to classify Internet protocol-based advanced telecommunications as a common carrier utility subject to universal service and non-discrimination mandates, the U.S. Federal Communications Commission will take up a similar rulemaking. The FCC’s proposed rulemaking Preventing Digital Discrimination is set for a vote at its November 15 meeting. It is primarily intended to remedy disparate impact (versus intentional) discrimination by providers that affects neighborhoods based on their demographics: income level, race, ethnicity, color, religion and national origin.

According to the FCC, the rulemaking implements section 60506 of the Infrastructure Investment and Jobs Act of 2021. It states federal policy that “insofar as technically and economically feasible— subscribers should benefit from equal access to broadband internet access service within the service area of a provider of such service.” Section 60506 defines equal access as “the equal opportunity to subscribe to an offered service that provides comparable speeds, capacities, latency, and other quality of service metrics in a given area, for comparable terms and conditions.”

Since IP telecom is currently classified as lightly regulated optional information service under Title I of the Communications Act, providers are free to deploy delivery infrastructure wherever they wish and at rates of their choosing. They naturally prefer denser, higher income neighborhoods that will produce faster return on capital investment (ROI) and where households are less price sensitive and more inclined to subscribe to higher priced services, thereby maximizing average revenue per unit (ARPU).

The proposed rulemaking gives providers an out by allowing them to defend deployment and pricing decisions based on technical and economic feasibility. They could conceivably argue that they must be more conservative in building infrastructure in lower income neighborhoods and charge more for comparable services than those offered in higher income communities in order to feasibly meet their ROI and ARPU targets. The higher rates in turn would be out of reach of some lower income households, making them less likely to sign up for services and perpetuating an unvirtuous cycle. Similarly, they could argue middle mile infrastructure isn’t adequate to serve a given community, thus making delivery infrastructure deployment technically unfeasible. It's entirely logical to segment markets and pricing in a market-based scheme under Title I regulation. Disparate market impact will be a natural outcome. Additionally, providers choosing to build fiber in higher income areas but not in lower income areas could be seen as intentional discrimination based on income, i.e. disparate treatment.

The proposed rulemaking apparently contemplates a comparison of deployment activity to help regulators establish a pattern of market conduct demonstrating discrimination. That assessment would be based on a mandate on providers annually report on their deployment activities:

We propose that each annual report must address the following components to provide a
comprehensive picture of each major deployment, maintenance, and upgrade project completed or substantially completed for each state and territory within its service area or footprint: (1) the nature of each project completed or substantially completed in the calendar year immediately preceding the submission of the report (i.e., deployment, upgrade, maintenance, or a combination thereof); (2) the number of housing units affected by the project (i.e., the number of housing units whose broadband availability or quality is positively impacted by the project) by census tract (utilizing the system presently used in the BDC); and (3) a narrative description of the project and of the areas served by the project, to allow for greater precision and clarity regarding what the project is designed to accomplish and what communities are served by the project. 

While the language of the proposed rulemaking includes providers’ more proscriptive term to describe where they have built infrastructure and offer advanced telecommunications services , i.e. “footprint,” should the FCC reclassify Internet protocol telecommunications as a utility under Title II of the Communications Act as proposed in a separate notice of proposed rulemaking issued September 28, 2023, Safeguarding and Securing the Open Internet, 47 U.S.C. 214(e)(5) affords state public utility commissions and the FCC authority to develop their own geographic parameters for the purpose of Title II’s universal service mandate requiring providers to offer service to all serviceable addresses within the service area:

(5) “Service area” defined

The term “service area” means a geographic area established by a State commission (or the Commission under paragraph (6)) for the purpose of determining universal service obligations and support mechanisms. In the case of an area served by a rural telephone company, “service area” means such company’s “study area” unless and until the Commission and the States, after taking into account recommendations of a Federal-State Joint Board instituted under section 410(c) of this title, establish a different definition of service area for such company.

Similar to the FCC’s Preventing Digital Discrimination rulemaking, reclassification of IP services under Title II would give regulators additional statutory authority to sanction discriminatory conduct under 47 U.S.C. 202, titled Discrimination and Preferences. While FCC is forbearing rate regulation in the proposed Title II reclassification rulemaking, this provision makes it unlawful for common carriers engage in “unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.” The statute allows for fines of $6,000 for each violation and $300 daily penalties for ongoing violations.