Small Rural Providers Got Option To Continue Old Title II Regulation in Net Neutrality Order
A little-noticed provision in the FCC net neutrality order (see 1502270045) would let small rural broadband providers opt to continue to be partially regulated under the old Communications Act Title II rules instead of the order’s “light-touch” version that forbears from several provisions of the section, the agency and attorneys representing the providers told us. The providers and groups like NTCA and the National Exchange Carriers Association lobbied for the provision, fearing a change in their classification could jeopardize their eligibility to receive USF support for providing telecom service, said Michael Romano, NTCA senior vice president-policy, and Jeffrey Dupree, NECA vice president-government relations. Continuing to be under the old Title II rules also would not weaken what the providers can count under rate-of-return rules.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
While the provision isn't controversial and was a minor part of the sweeping order, the decision by rural carriers to remain under old-style Title II set off a back and forth. USTelecom Senior Vice President-Law and Policy Jonathan Banks criticized Commissioner Mignon Clyburn and Chairman Tom Wheeler as “misunderstanding” how the rural providers are regulated. Clyburn responded with a statement to us, saying Banks had “missed the point.” The exchange appeared to Romano to illustrate how an arcane aspect of telecom law is confused in “the fog of the net neutrality debate.”
The issue goes back to the history of broadband classification, Romano told us. When the agency reclassified broadband as a Title I information service in 2005, small rural telecom providers, which had been regulated under Title II, successfully pushed the agency to let them have the option to stay under Title II if they chose, Romano said. Under the 2005 order, ISPs were given the ability to not be subject to tariffing requirements. But to give providers the “flexibility” to “maximize” broadband deployment, the order also gave providers the option to continue to be tariffed. In addition to continuing to receive USF, continuing to be under rate of return gave the providers assurances of being able to recover costs and get a return, Dupree said.
When broadband classification was again thrown into question during the net neutrality debate, the rural providers again wanted to preserve the option to continue being regulated under Title II, as before, Romano and Dupree said. Working with Clyburn, they had the provision added to the order.
Under the provision, an agency spokesman said, the rural broadband providers have the option to remain regulated under the same Title II regulations as before, or be regulated under Title II with forbearance as in the rest of the order. If they choose the old Title II, the providers would be allowed to continue counting the cost of broadband transmission in the calculation used to determine their rates under the rate-of-return process, an agency official said. Should a provider choose to be regulated under the order's version of Title II with forbearance, broadband costs would not be counted in the rate-of-return calculations, the official told us. That would decrease the rates that could be charged, Dupree said.
To Clyburn, the voluntary regulation of rural providers under Title II showed reclassification was not the end of the world. Responding to the concerns of Title II critics that the net neutrality order would lead to rate regulation, Clyburn at the commission meeting said 700 small rural broadband ISPs have been regulated under “the full panoply of Title II regulation” and “the sky has not fallen and things are okay.” Banks responded in a blog post that the rural carriers are regulated under Title II for transmission but as information services under Title I for the Internet access they sell customers (see 1503020038).
Now, Clyburn said in a statement to us, the “hysteria over the impact of Title II is misguided” and Banks’ blog post misses “the point entirely.” Clyburn said the carriers “voluntarily operate pursuant to Title II” and advocated the net neutrality order “not change their status and require a lighter touch Title II.” Clyburn worked with Wheeler, the statement said, to also allow the providers the option of choosing the “lighter touch Title II. Although doing so will mean these providers will no longer have a guarantee to receive 100 percent of their costs down to the last penny -- costs that include common costs, salaries, legal expenses, etc. -- all of their costs and investment plus an 11.25 percent return.”