Interconnect, Rate Regulation at Center of Net Neutrality Lobbying

The statements came as companies and industry groups questioned the claim that utilities-style rate regulation would still be imposed on providers, because the agency would still hold Section 201’s mandate that rates be “just and reasonable.” The official in an email said the section's authority to protect "consumers from unjust and unreasonable practices is central to protecting an open Internet." The draft "follows the CMRS model, where wireless voice providers have been subject to 201, but not 203, 204, and 205. And, in the 22 years since Title II applied to CMRS, the Commission has never regulated wireless providers’ rates. We will not do so for broadband.”

Two weeks before the FCC is to vote on Chairman Tom Wheeler’s draft net neutrality order, agency officials are being pushed to tighten proposed interconnection rules, according to interviews and ex parte filings. Industry lobbyists also are pushing to strengthen protections against subjecting broadband providers to Title II rate regulations. A cable attorney told us that in addition to rates, the industry is concerned Title II could lead to regulations of practices like data caps.

Meanwhile, Commissioner Ajit Pai, citing a new study by the Internet Innovation Alliance, said in a statement Thursday that Title II reclassification would deter broadband deployment.

The draft order envisions handling interconnection disputes case by case. Cogent Communications, whose officials met with top agency officials, is pushing for “as much clarity as possible on what practices are and are not permitted with respect to interconnection so as to reduce the need for case by case adjudication,” Robert Beury, vice president of Cogent Communications, emailed us Thursday, adding “more [guidance] is better.” Free Press also pushed in a meeting with officials for strong interconnection language, according to an ex parte filing.

The commission should “provide guidance” of what costs it would consider reasonable when judging interconnection disputes, and limit them to “only those [disputes] actually and demonstrably” connected to providing interconnection, Cogent CEO Dave Schaeffer and other company officials told Wheeler aides Daniel Alvarez and Gigi Sohn, plus Wireline Bureau and General Counsel’s office officials Tuesday, an ex parte filing said. Overhead or the costs of maintaining or upgrading a network shouldn’t be included, Schaeffer said.

Saying it’s important to “avoid the inadvertent creation of loopholes” to circumvent the rules, Schaeffer said the order should “be explicit” that no blocking, no throttling and no paid prioritization rules apply to interconnection as well as in the last mile. The practices “harm consumers regardless of whether they occur within the last mile or at the entryway to the last mile,” Schaeffer argued.

The commission should “clearly prevent” broadband providers from charging access fees “in the guise of ‘interconnection fees,’" if it wants to prevent the blocking, degrading or impairment of traffic, Free Press Policy Director Matt Wood told Deputy Wireline Bureau Chief Matthew DelNero Monday, the group’s filing said. Disputes over access fees are what put net neutrality “in the national spotlight,” Wood said.

“The Title II authority asserted over interconnection ensures that the FCC, for the first time, can step in and address abusive interconnection practices,” said the agency official, who called it “an essential tool ... in protecting consumers and competition.”

NCTA and Comcast urged the FCC to forbear from Section 201(b), according to the filings on separate meetings with commission officials Monday. The argument, also made this week by Pai and NCTA Chairman Michael Powell in a blog post, centers on Wheeler's and the agency’s claims in statements and a fact sheet that the draft order wouldn't subject broadband providers to utilities-style rate regulation.

The draft order wouldn't subject providers to a utilities-style requirement that providers get agency approval to raise rates, the NCTA and Comcast officials said during the meetings. But without forbearing from Section 201, the agency could later bar rates under the requirement that rates be “'just and reasonable,’” NCTA representatives including Rick Chessen, senior vice president-law and regulatory policy, and Steven Morris, vice president and associate general counsel, told aides to commissioners Mike O’Rielly and Ajit Pai. Failing to forbear “would authorize the very sort of ‘rate regulation’ that the Chairman, the President, and even the Commission’s recent 'Fact Sheet' [on the draft order] all purport to disclaim,” NCTA’s ex parte filing said. Comcast officials, including Lynn Charytan, senior vice president-legal regulatory affairs, made a similar argument to aides to O’Rielly, and commissioners Mignon Clyburn and Jessica Rosenworcel, according to that company’s filing.

Whether leaving Section 201 authority still constitutes removing utilities-style rate regulation has been under dispute the past couple of days. Public Knowledge Senior Vice President Harold Feld came to the agency’s defense in a blog post Wednesday. He said Pai and others are not “technically lying,” but they are “deliberately creating a false impression by invoking 'utility style rate regulation,’ conjuring up all manner of government approved prices after lengthy hearings debating which costs, exactly, get to go into the cost-basis for the rate of return calculation.” Even without reclassification, Section 706 already gives the agency authority to “use ‘price caps’ to promote broadband deployment,” Feld wrote.

“They’re all right but they have their own spin and emphasis,” said a former FCC official now representing the telco industry. Feld is right that the agency has Section 706 authority but hasn’t used it, he said. The possibility that reclassification could mean rates could be overturned “creates uncertainty for the incumbents and cable operators that didn’t exist before -- not only for rates but for rate practices.” Data caps could be challenged, the former official said. “Imposing a duty of just and reasonable practices and charges could encompass not just the rates themselves but use of consumption-based billing, zero-rating, etc.,” the cable attorney emailed. But another former agency official, also now a telecom attorney, said Section 201(b) rate authority has been used at times, but as in regulating inmate calling rates, applying it “is very unusual and as a practical matter would have to be something extraordinary for that realistically to happen.” An agency spokesman told us the order doesn't ban data plans but that the commission can "step in" if usage-based plans "harm consumers."