This week, the Federal Communications Commission will vote to reinstate the net neutrality rules that were rescinded under former FCC Chairman Ajit Pai and resume real regulatory oversight over broadband. While this action has the potential to significantly narrow the digital divide and ensure internet service providers act in the public interest, it is critical that the text of this reinstated regulatory framework does not inadvertently undermine its own objectives in regards to broadband affordability.
Like the 2015 Open Internet Order, the draft text of the 2024 “Safeguarding and Securing the Open Internet” Order is primarily concerned with the mechanics of reclassifying broadband as a Title II service and the regulations we’ve come to associate with net neutrality – prohibiting blocking, throttling, and paid prioritization. These actions are essential to ensuring the internet is an open space for commerce, innovation, and speech.
The draft Order also distances itself from “rate regulation.” In the days of the monopoly telephone system, the FCC and state regulators reviewed and approved the rates that phone companies could charge, and the FCC has decided to “forbear from” – that is, not apply – any of the statutory provisions that would give it the authority to do this in the broadband context. In addition to forbearing from its own rate regulation authority, the draft Order also mentions that it finds the practice “detrimental,” meaning it would be more likely to preempt states from imposing their own “rate regulation.”
That’s fine as far as rate regulation goes; no one is seriously arguing that the FCC should directly set the rates that broadband providers can charge. But there are some potential ambiguities in the draft Order, which Public Knowledge has conveyed in discussions with the FCC. First, “rate regulation” has a specific meaning, but broadband providers have taken to labeling almost any form of regulation they don’t like as “rate regulation.” Second, the FCC’s stance towards state laws that do not conflict with, but are different than, its own policies could be clarified, especially in this area.
To be clear, “rate regulation” does not mean any regulation that in some indirect way might affect customer billing. Consumer protection rules that guard against unfair overages and bill shock, or that mandate billing transparency, are not “rate regulation.” Neither are programs designed to promote affordability or plans for low-income consumers. Congress has repeatedly, explicitly supported the creation and requirement of affordability programs and subsidy conditions. In the Infrastructure Investment and Jobs Act (IIJA), Congress stated that “access to affordable, reliable” broadband service has proven essential to participation in modern-day life. Public opinion shows that most Americans concur with this opinion on the internet’s importance, but this finding also draws on a strong body of current research, which shows that lagging adoption due to affordability – not infrastructural access – is the chief barrier to broadband access for many consumers.
However, industry advocates and their champions in Congress have consistently weaponized overly broad interpretations of “rate regulation” as a cudgel against such affordability programs and requirements. These claims have been voiced by industry groups through research reports and by congressional members in U.S. House oversight hearings and legislative proposals. They’ve also been echoed at the state level, such as when Virginia refused to specify an “affordable” price as required by the National Telecommunications and Information Administration as part of the administration of Broadband Equity, Access, and Deployment (BEAD) funds, on the grounds that setting an affordable price would constitute rate regulation. These allegations are unfounded. The NTIA is not price setting, and conditions such as the low-income plan requirements provisioned by the NTIA are commonly woven into state subsidies – providers who are uninterested in offering a low-cost option can simply opt out of the application process. States need the authority to ensure that their subsidies are used judiciously and in a way that’s beneficial to the public interest. If the NTIA is granting billions of dollars to the private sector, then the agency should ensure that these dollars are deployed effectively.
Beyond BEAD, an overly broad characterization of rate regulation also jeopardizes the FCC’s consumer protection and anti-discrimination work. Opponents of the Commission’s anti-digital discrimination rules have characterized consideration of discriminatory pricing as “rate regulation.” Those opponents have also characterized the proposed requirement to ban early termination fees and to require all-in pricing as “rate regulation,” too.
There are obviously many problems with this. It is clear that the FCC choosing to forbear from directly regulating broadband rates has no bearing on congressionally mandated efforts like the Commission’s new digital discrimination rules, or other FCC consumer protection rulemakings. But it never hurts to state the obvious, so the Commission should clarify that its discussion of rate regulation is not about these kinds of programs.
Furthermore, the Commission has rightly decided to not preempt state law unless there is a true conflict – that is, when it’s not possible to follow state law and federal law at the same time. In such instances, federal law takes priority. Otherwise, as the draft Order states, the Commission is “leaving room for states to experiment and explore their own approaches.” This is good: It means, for example, that California can have specific rules banning certain forms of zero-rating, even if those would only be covered by the FCC’s catchall “general conduct” rule. But the potential ambiguity around the term “rate regulation” raises its head here, as well. While in the preemption context, the draft Order states that the Commission finds rate regulation “detrimental,” this statement should not be read to imply that the FCC has preempted states from imposing rules that might be called “rate regulation” – only that, in the right circumstance, it might. But more pertinently, beyond the question of whether the Order’s text actually does preempt “detrimental” state laws, is that many of the state initiatives that could be challenged as rate regulation are not “rate regulation” to begin with.
To preclude these kinds of attacks, the FCC should clarify that forbearance from “rate regulation” does not impede the authority of the agency itself, state agencies, or other federal agencies to require providers to offer discounted affordability programs for qualifying subscribers. For example, the Commission should affirm its authority to impose and enforce low-cost offerings to qualifying individuals as merger conditions, or as conditions on subsidies. Even more concretely, the draft Order characterizes state affordability programs like the state of New York’s as a form of permissible state oversight – yet New York’s affordability program is currently being challenged as “rate regulation” and could therefore be interpreted as preempted under the current ambiguous text of the Order. The Order should explicitly clarify that states are free to require such affordability programs and that they do not constitute “rate regulation.”
Broadband affordability programs and provisions not only move us closer to the FCC’s objective of providing universal service, but also facilitate a wide range of downstream benefits. Since weak demand in nascent and underserved broadband markets makes it difficult for the government to secure investment in such areas, policies designed to shore up demand can remedy this issue by directly stimulating economic activity. Affordability policies demonstrate a shrewd understanding of the realities of broadband markets by acknowledging the need for a dual approach to broadband that builds up supply and corresponding demand. Subsidized demand, in turn, leads to enhanced access to education, jobs, e-commerce, and online communities.
In clarifying their Order, the FCC can preserve these gains and clarify areas of potential confusion over the agency’s authority, thereby ensuring that it has a full range of tools at its disposal for furthering broadband connectivity.