Republicans’ Latest Plan to Undermine FCC On Consumer Protection

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You keep using that word. I do not think it means what you think it means.” -Inigo Montoya, Princess Bride

On tomorrow’s episode of Attempts to Undermine the Efficacy of the Federal Communications Commission, the House Energy and Commerce Communications Subcommittee will mark up H.R. 2666, the so called “No Rate Regulation of Broadband Internet Access Act”. Ostensibly, the one-paragraph bill seems straightforward, prohibiting the FCC from “rate regulation,” or regulating “the rates charged for broadband internet access service,” as defined by the Commission’s 2015 Open Internet Order. But in fact, the inclusion of the sweeping phrase “without regard to any other provision of law,” combined with copious remarks from last month’s hearing, suggest that the bill is simply another effort to gut the FCC’s ability to enforce net neutrality and protect broadband subscribers from overcharges and carrier abuse.

A little background: When the Commission issued its Open Internet Order, reclassifying Internet service as a Title II telecommunications service, there was a great hubbub about certain “archaic” rate regulation provisions of the act that would stifle innovation and broadband buildout. The charge was that, under Title II, broadband providers would have to ask the FCC for permission to amend prices, tweak product offerings, or bring new services to market. As a result, the Commission said it would forbear from using certain sections of the law for broadband purposes - including those specific sections of the statute that provided for rate regulation (Sections 203, 204, and 205 of the Telecommunications Act). Throughout the net neutrality debate, Chairman Wheeler has consistently said he “will not engage in rate regulation.”

So what’s the problem with H.R. 2666? After all, the sponsors of the bill claim that it merely codifies into law what FCC Chairman Wheeler and President Obama said they wouldn’t do anyway. Unfortunately, as net neutrality opponents such as Commissioner Ajit Pai previewed last year when they accused the Open Internet Order of being “rate regulation,” this bill is more than likely an effort to rebrand any sort of consumer protection that prevents carriers from blocking access to services, misleading customers, or using their market power to extort monopoly terms of service as rate regulation. Proponents of the bill have even invented an exciting new term to help the rebranding -- “ex ante rate regulation” and “ex post rate regulation.” (Because if it’s got a Latin term, it must be official, right?)

It’s a clever move, to be sure, since the effect of the law turns on how “rate regulation” per se is defined. Is it just tariffing, which is defined as the act of “setting the rate”? Or can we read it as “anything having to do with pricing at all”? The former merely codifies the declarations of Chairman Wheeler to forbear from “rate regulation.” The latter interpretation calls into question the FCC’s ability to investigate all sorts of tactics the ISPs use to strong-arm competitors and price-gouge consumers: data caps, zero-rating, interconnection disputes, below-the-line and hidden fees, price hiking, and many other kinds of business practices service providers like to impose on their subscribers.

So, how do we define rate regulation? Serendipitously, the Supreme Court just answered exactly that question and issued a 6-2 decision last month in Federal Energy Regulation Commission v. Electric Power Supply Association, the TL;DR of which can be boiled down to “anyone with a dictionary can tell you what rate regulation is, and anyone who tries to cast it as some amorphous, broader thing is full of it”:

“The modifier...is doing quite a lot of work in that argument—more work than any conventional under­standing of rate-setting allows. The standard dictionary definition of the term ‘rate’ (as used with reference to prices) is “[a]n amount paid or charged for a good or ser­vice.’...Nothing in [the statute] or any other part of the FPA suggests a more expansive notion, in which FERC sets a rate for electricity merely by altering con­sumers’ incentives to purchase that product. And neither does anything in this Court’s caselaw. Our decisions uniformly speak about rates, for electricity and all else, [emphasis added] in only their most prosaic, garden-variety sense. As the Solicitor General summarized that view, “the rate is what it is...It is the price paid, not the price paid plus the cost of a forgone economic opportunity.”

The effect of this decision is to settle as a matter of law the interpretation of rate regulation to align with the way Chairman Wheeler presumably meant it when he said he would forbear. It is common sense, specifically tailored to a certain type of practice, and lest we second guess our common sense understanding, the Court has officially blessed it. “The most prosaic, garden-variety sense.”

Yet back on Capitol Hill, efforts persist to invoke some new, overly broad interpretation of this term, mutating a fairly straightforward concept into an all-encompassing, catch-all term for consumer protection enforcement. (To paraphrase John Oliver, if you want to do something questionable, hide it in something boring.) During a legislative hearing on H.R. 2666, at which my colleague Harold Feld testified, many of the majority members on the House Committee made seemed intent on interpreting “rate regulation” as anything to do with pricing of Internet service whatsoever, however attenuated. By the time we were through the opening statements, it was obvious that many people who had opposed the Commission’s 2015 Open Internet Order were trying to expand the definition of “rate regulation” far beyond what Congress originally intended, and what it has historically been understood to mean.

From Chairman Walden: “The no Rate Regulation of Broadband Internet Access Act seeks to codify the assurances of FCC Chairman Tom Wheeler by prohibiting the FCC from using its new authority under the Open Internet order to regulate the rates charged for broadband. Simply put, this is what President Obama and Chairman Wheeler have stated, time and again, in statutory form. President Obama, in his now infamous YouTube directive to the FCC, directed the FCC to reclassify broadband under title II ‘while forbearing from rate regulation[.]’ In front of multiple Congressional committees, in both the House and the Senate, Chairman Wheeler has continually repeated what he stated succinctly in his statement when the FCC adopted the Open Internet order: ‘That means no rate regulation, no filing of tariffs, and no network unbundling.’”

If the proponents of the “anti rate-regulation” movement were sincere about bolstering Chairman Wheeler’s forbearance promises, they could simply make the forbearance of Sections 203, 204, and 205 of the Telecommunications Act permanent, since that’s what rate regulation means, and that’s the forbearance to which this administration committed when it invoked Title II authority over broadband Internet. Instead, opponents of the Open Internet Order seize upon this as an opportunity to circumvent great swaths of the Commission’s congressionally delegated consumer protection powers.

This expansive reading was thematic of the legislative hearing, with members and some witnesses both readily recasting the “No Rate Regulation” language as a prohibition on any consumer protection actions by the agency that they just don’t like. Former Commissioner McDowell’s revealing testimony goes so far as to explicitly praise the fact that it would enable cable companies to impose ever higher fees and ever lower caps on their customers at a whim, without enabling any oversight from the FCC.

“The Order does nothing to proscribe ex post rate regulation. Instead, because the Commission has reclassified broadband as a Title II service, its provision is subject to Section 201(b) of Title II, which requires that all charges and prices be ‘just and reasonable… The Order explains that the Commission will be reviewing practices such as usage-based pricing and zero-rating of broadband uses, which have a direct effect on the rates that consumers pay for broadband Internet access service.”

(A Commission empowered to ensure the rates companies charge their consumers are just and reasonable? To investigate questionable pricing practices they think deserve a closer look? God forbid.)

And then there are these newly concocted concepts of “ex ante” and “ex post” regulation. Both the hearing notice and many of the statements went on apocalyptically about the future Commissioners running around squashing the poor cable companies with so called “ex post” rate regulation. This is not a thing. These are fancy-sounding constructs conjured in their efforts to read “no rate regulation” as “the Chairman can’t step in when companies wield their monopoly power to impose business models premised on artificial scarcity and jacked-up pricing schemes.” There is no such thing as “rate regulation after the fact,” yet both members and the former Commissioner pontificated ever more shrilly that something must be done to stop government overreach of the fair market, lest cable companies find themselves in the cruel position of not just being able to ratchet consumers’ rates up 200% whenever they feel like it. Speaking as a subscriber myself, I suspect Commission oversight in such a situation is something most consumers would probably be okay with.

Flatly, there are a number of suspicious things about this bill. It’s moving aggressively quickly. It’s apparently a continuance of the strategy launched by Commissioner Pai and others at the outset last year. And frankly, many people trying to move the item forward don’t seem to be genuinely interested in negotiating a compromise. If they were, they would heed the myriad warnings of the “unintended” consequences such broad language could have for the FCC’s consumer protection capabilities and adjust the language accordingly. That the majority has so far declined any tweaks that would effectively mitigate these harms speaks volumes about the alternative purposes of the item. H.R. 2666 could be easily amended to clarify that “rate regulation” is defined as the way the Supreme Court just did. If Congress pushes the bill through as it is written now, they do so is at the very least in willful negligence to the potential harms to millions of consumers.

But if we’re realistic, it’s probably what it looks like: an attempt by certain people who opposed Title II reclassification of broadband Internet access to circumvent the Open Internet Order because this time, Comcast and other big ISPs, who seem to be so persuasive over there, just didn’t get what they want.

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