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Cable Technology Feature Article

March 12, 2010

Analyst: A 'Grave Mistake' to Classify ISPs as Common Carriers

By Gary Kim, Contributing Editor

Reclassifying “broadband access” as a regulated common carrier service would be a grave mistake, says Larry Downes, a nonresident fellow at the Stanford Law School Center for Internet & Society, in a CNET post.
In 1996, Congress passed the landmark Telecommunications Act. Since then, consumers have lived in two very different worlds, he says.
One is the land of unregulated “information services.” The other is the regulated world of “telecommunications services.” Information services are governed by Title I, while telecommunications services are regulated under Title II of the communications act.
But some now call for putting broadband access under Title II.
“Why would anyone propose a return to the calcified world of the pre-Internet communications industry, a world dominated by the monopoly power of the former AT&T (News - Alert)?” he asks. Under Title II, the FCC could treat ISPs as common telecommunications carriers.
That might be “the worst idea in communications policy to emerge in the last 75 years,” says Downes.
Consider life since 1996 under the largely unregulated Title I. Internet access has improved in every measure, he says. Data communications speeds have increased exponentially, major new technologies including fiber optics and 3G/4G wireless have emerged, and even traditional voice applications have been adapted to the nonproprietary, packet-switched protocols of TCP/IP.
Consumers in all but the most remote parts of the country can choose between a variety of ISPs, including cable, wireline, wireless, and satellite providers, many of which offer bundled packages of phone, television, and Internet services.
By comparison, life under Title II has stagnated, at best. Under the 1996 Act, the FCC (News - Alert) was required to force open local phone service to unlimited competition. With access to the legacy carriers’ network and equipment guaranteed, and prices overseen by the FCC, thousands of new local phone companies emerged.
These new providers had no infrastructure of their own to build or maintain, and they largely competed with the legacy carriers and each other on price. Many had no experience in the communications business, existing only to arbitrage the regulations.
With limited demand for local phone service and little to distinguish the carriers, by 2000, most of the new phone companies had gone broke.
By and large, the business side of Title II has only gotten worse, while we now have a vibrant, expanding Internet economy, one of the few bright spots on the economic scene, says Downes.
Broadband providers have invested hundreds of billions of dollars in the Title I networks, even as Title II services languish and die, he says.
Under Title I, investments are likely to continue being made by the private sector. Reclassified under Title II, however, infrastructure improvements will come to a screeching halt, he warns.
Wall Street is already terrified, many would say. Moving broadband Internet to Title II, according to Craig Moffett of Bernstein Research, would lead investors to “run for the hills.”
Companies that provide Internet backbone and caching services, including Level 3 Communications and Akamai (News - Alert) Technologies, could likely find themselves treated as common carriers. Bandwidth-peering arrangements in which companies voluntarily connect their networks for greater redundancy and increased transmission speeds, might also be considered a “telecommunications service.”
In a Title II world, Internet services from the core to the edge of the network could be swept into a regulatory regime designed in the 1930s to control the monopoly of a company that no longer exists.
Forward-looking that is not.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Marisa Torrieri