Pai: Title II Order Will Mean Rate Regulation

Calls Again For Chairman To Publish Order Before Vote
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Federal Communications Commission commissioner Ajit Pai said Tuesday (Feb. 10) that the public has been misled, and shielded from key details, about FCC chairman Tom Wheeler's proposed Title II-based network neutrality rules, including saying that the "claim" -- made by the chairman -- that the plan did not include rate regulation was "flat out false," though he continued to characterize the proposal as the president's, rather than the chairman's.

That came in an unusual press conference in that it was held by a minority commissioner in the FCC's meeting room. Pai has been highly critical of the proposal, circulated last week, and the fact that it tracks with the president's call for Title II after Wheeler initially proposed not to reclassify Internet access as a common carrier service. But he said the plan was "worse than I had imagined."

"The plan clearly states that the FCC can regulate the rates that Internet service providers charge for broadband Internet access or interconnection or transit,” Pai said. “In short, for the core aspects of Internet services."

He said that it was clear to him from the order that the FCC was only forbearing from some Title II provisions "at this time" -- he said the phrase was used repeatedly -- and that in talking about tariffs, last-mile unbundling, accounting standards and more, the plan talks about revisiting them at a future time "and proceed in an incremental manner with respect to additional regulation."

In the 2010 Open Internet order, the FCC did not apply the same rules to wireless, but said it would revisit the issue, and this time will do so.

Pai said he expected "regulation to ratchet up and forbearance to fade."

While Pai conceded the order did not impose any ex ante (before the fact) rate regulation. But he said that only meant the FCC would not set rates ahead of time, but could do so ex post facto through a complaint process through which it determines what rates are just and reasonable. He said the plan repeatedly states the FCC will apply Title II sections that include rate regulation authority, and invites complaints from edge providers and end users.

He said it would be the first time that the FCC had claimed the authority to declare rates unreasonable after the fact. And lest anyone think the FCC would allow the market to set those rates, he said the plan "goes out of its way" to say that competition is limited, using the FCC's new 25 Mbps high-speed definition to "claim that competition doesn't exist for a majority of Americans."

He said it would be naive to think that utility-style rate regulation won't happen on the basis of such findings is naive. He also said the order suggested that usage-based pricing and data allowances are subject to regulation through the case-by-case review of the general Internet conduct standard catch-all. He said that standard uses seven "vaguely defined factors" to determine whether a practice is allowed. "The plan makes clear that these practices are now on the chopping block," though he did not say exactly how it did that.

A spokesman for the chairman maintained that the order was not about rate regulation. "Mobile voice services have been classified under similar Title II rules for 21 years, including a requirement by Congress that the FCC apply sections 201 and 202 to that service, and the FCC has never used that authority to question prices in that sector," the spokesman said. "The Chairman’s Open Internet  proposal follows this model."

In addition, said Pai, for the first time, said Pai, the FCC was asserting broad authority over the entirety of the Internet, from the last mile to the backbone, though he said his understanding was that only edge providers and CDNs, not ISPs, could lodge complaints about interconnection, something representatives of the chairman also told reporters last week.

"This plan gives a Washington bureaucracy a blank check to decide how Internet Service Providers deploy and manage their networks,” Pai said.

Taking interconnection for an example, he said the plan states that the FCC can determine "when a plan provider must establish physical interconnection points, where they must locate those points, and how much they can charge for provision of that infrastructure, and how they will route traffic over those connections. That is anything but light touch regulation."

He said it was no small wonder that in the wake of the order, "some pro-regulation activists were already deeming the FCC 'The Department of the Internet.' "

Pai called the order a gift to trial lawyers since it allows for class action suits with attorneys fees should anyone want to challenge a networks management practices or rates. It expressly declines to forbear from sections of Title II that allow for private rights of action.

The end result, he said, will be more litigation, less innovation, and fewer consumer benefits.

Pai called again for the chairman to release the text of the order before the Feb. 26 vote, but said as a stickler for process and a respecter of rules (he was formerly in the FCC's general counsel's office), he would not release it himself.

"[T]he Chairman will continue following the FCC’s longstanding practice of circulating proposals to  the commission three weeks before a meeting, getting their input, and making the final Order as agreed upon by the commissioners public after the vote," said the FCC spokesman. The chairman has also been anxious to get new rules on the books after a year of comment, and millions of comments, on the issue.