Tom Wheeler Places His Title II Bet

by Mike Wendy on January 13, 2015

After a year of speculation and missteps, last week in Las Vegas FCC Chairman Tom Wheeler showed his Net Neutrality cards, finally revealing that the FCC would reclassify the Internet as a 1934 telephone service at February’s open meeting. 

Pokerface: FCC Chairman Tom Wheeler.

Pokerface: FCC Chairman Tom Wheeler.

The pressure to arrive at this decision has been immense. Millions of average people commented on how the FCC should, or should not, regulate the Internet. Internet players from all parts of the ecosystem lobbied the matter heavily. Even the President weighed in, urging the FCC to regulate broadband providers as old-fashioned utilities.

But, independent ‘ol Tom saw the light on his own. And, last week he said that he had finally found the regulatory model that’s just right for the Internet. Speaking at a CES keynote address, Wheeler noted (in this article):

“…The model has been set in the wireless business…[F]or the last 20 years the wireless industry has been monumentally successful — hundreds of billions of dollars of investments as a Title II regulated [industry].”

Really, Tom? What monumental success are you talking about? The voice side – which is indeed regulated, albeit lightly, under Title II? Or, the wireless broadband side – which has never been regulated in that manner?

Aww heck, it doesn’t matter. Tom is going to impose Title II regardless of the facts. The whole successful model thing is a fiction he needs to tell in order to regulate full bore all of the Internet. If you believe it, then it’s OK to regulate broadband, in any form, back to 1934.

Does Tom believe Tom? Probably not. But that’s beside the point.

In speeches he made this Fall, while Wheeler praised the wireless industry for its growth and expansion, he bemoaned the lack of “meaningful competition” in the industry, and essentially relegated wireless communications services to third-class status, ultimately concluding:

We have great hopes for wireless as a potential substitute for fixed broadband connections. But today it seems clear that mobile broadband is just not a full substitute for fixed broadband…

To ensure that (among other things), last week he proposed lifting the definition of broadband from 4mbps to 25mbps downstream, which would mean that most wireless broadband providers would technically no longer be considered broadband providers. Not accidentally, this changed goal post would put millions of wireless users into the digital divide, thus (self) justifying the FCC’s “help” – meaning, imposition of Title II Net Neutrality rules – to connect them to the “true promise” of the Internet (which is wired gigabit, not wireless LTE, or some other wireless service).

On top of this, last month the FCC failed to find that the wireless market was “effectively competitive,” the Agency explaining:

[The] Seventeenth Report does not reach an overall conclusion or formal finding regarding whether or not the [wireless] marketplace was effectively competitive…Given the complexity of the various inter-related segments and services within the mobile wireless ecosystem, we refrain from providing any single conclusion because such an assessment would be incomplete and possibly misleading in light of the variations and complexities we observe.

This all raises an interesting set of questions.  If the complex wireless industry is “monumentally successful,” and this ostensibly happened by virtue of how it was regulated by the FCC, how could it be that it is not “effectively competitive”? Moreover, how could this Title II model of regulation work for the entire Internet?

And this touches on the larger, underlying truth. Yes, the wireless marketplace is vibrant and competitive. And similarly, so is the wired broadband marketplace. But, that all happened in spite of Title II regulation, not because of it. Every gain that the marketplace experienced was made by trying to avoid the corrosive effect of utility regulation.

You know, the broadband companies weren’t just sitting around, saying to themselves and their shareholders, “Gee we want to be even more innovative and profitable. We’ve got this great idea. Let’s get heavily regulated under Title II so that’ll happen even better and faster.”

Nope.  Didn’t happen.

Tom knows the real story. Title II doesn’t incentivize anyone to invest and innovate. Simply, companies have to invest billions just to stay competitive. And the FCC’s gonna’ leverage that hook bigtime. If the broadband providers make a couple fewer dollars, so be it. Running the table, Tom simply doesn’t care. He will issue his Title II rule. It will be appealed. The FCC will lose for a fourth time. But, by then, Tom will be long gone. And the companies he’s really done this for – those freeloaders in Silicon Valley – will have gotten what they wanted; they will have profited handsomely from the subsidy; and most Americans won’t even know what him ‘em.

How come my X-Box ain’t connectin’ to the Internet so fast, Mamma? Aww, those damn telephone monopolies.  They’re at it agin’.”

Yeah, blame it on the broadband providers. That pretty much always works.

It’s easy to be a betting man when you don’t have to pay the house. Sad, however, that the present leadership at the “independent” FCC and the White House bet U.S. communications policy with chips they don’t have.

What happens in Vegas stays there.

Too bad that doesn’t seem true for Tom Wheeler and the FCC.

Previous post:

Next post: