April 27 2017 FACT SHEET Restoring Internet Freedom Notice of Proposed Rulemaking – WC Docket No 17-108 Background For almost twenty years the Internet flourished under a light-touch regulatory approach During this time the Internet underwent rapid and unprecedented growth Internet service providers ISPs invested approximately $1 5 trillion in the Internet ecosystem and American consumers enthusiastically responded Businesses developed in ways that government officials could not have fathomed even a decade ago The Internet became an ever-increasing part of the American economy offering new and innovative changes in how we work learn receive medical care and entertain ourselves The Commission’s 2015 decision to subject ISPs to Title II utility-style regulations risks that innovation serving ultimately to threaten the open Internet it purported to preserve The Chairman of the Federal Communications Commission FCC has proposed a Notice of Proposed Rulemaking NPRM to end the utility-style regulatory approach that gives government control of the Internet and to restore the market-based policies necessary to preserve the future of Internet Freedom and to reverse the decline in infrastructure investment innovation and options for consumers put into motion by the FCC in 2015 To determine how to best honor our commitment to restoring Internet Freedom the NPRM also evaluates the existing rules governing Internet service providers’ practices What the NPRM Would Do        Propose to reinstate the information service classification of broadband Internet access service and return to the light-touch regulatory framework first established on a bipartisan basis during the Clinton Administration Propose to reinstate the determination that mobile broadband Internet access service is not a commercial mobile service and in conjunction revisit the elements of the Title II Order that modified or reinterpreted key terms in section 332 of the Communications Act and our implementing rules Propose to return authority to the Federal Trade Commission to police the privacy practices of Internet service providers Propose to eliminate the vague Internet conduct standard Seek comment on whether to keep modify or eliminate the bright-line rules set forth in the Title II Order Propose to re-evaluate the Commission’s enforcement regime to analyze whether ex ante regulatory intervention in the market is necessary Propose to conduct a cost-benefit analysis as part of this proceeding This document is being released as part of a “permit-but-disclose” proceeding Any presentations or views on the subject expressed to the Commission or its staff including by email must be filed in WC Docket No 17-108 which may be accessed via the Electronic Comment Filing System https www fcc gov ecfs Before filing participants should familiarize themselves with the Commission’s ex parte rules including the general prohibition on presentations written and oral on matters listed on the Sunshine Agenda which is typically released a week prior to the Commission’s meeting See 47 CFR § 1 1200 et seq Federal Communications Commission FCC-CIRC1705-05 Before the Federal Communications Commission Washington D C 20554 In the Matter of Restoring Internet Freedom WC Docket No 17-108 NOTICE OF PROPOSED RULEMAKING Adopted Released Comment Date July 17 2017 Reply Comment Date August 16 2017 By the Commission TABLE OF CONTENTS Heading Paragraph # I INTRODUCTION 1 II BACKGROUND 6 III ENDING PUBLIC-UTILITY REGULATION OF THE INTERNET 23 A Reinstating the Information Service Classification of Broadband Internet Access Service 25 1 The Text and Structure of the Act 26 2 Commission Precedent Supports Classification as an Information Service 38 3 Public Policy Supports Classification as an Information Service 44 4 The Commission has Legal Authority to Classify Broadband Internet Access Service as an Information Service 52 B Reinstating the Private Mobile Service Classification of Mobile Broadband Internet Access Service 55 C Effects on Regulatory Structures Created by the Title II Order 63 IV A LIGHT-TOUCH REGULATORY FRAMEWORK 70 A Re-evaluating the Existing Rules and Enforcement Regime 71 1 Eliminating the Internet Conduct Standard 72 2 Determining the Need for the Bright Line Rules and the Transparency Rule 76 3 Additional Considerations Applicable to Existing Rules 91 4 Enforcement Regime 95 B Legal Authority to Adopt Rules 99 This document has been circulated for tentative consideration by the Commission at its May 2017 open meeting The issues referenced in this document and the Commission’s ultimate resolutions of those issues remain under consideration and subject to change This document does not constitute any official action by the Commission However the Chairman has determined that in the interest of promoting the public’s ability to understand the nature and scope of issues under consideration the public interest would be served by making this document publicly available The Commission’s ex parte rules apply and presentations are subject to “permit-but-disclose” ex parte rules See e g 47 CFR §§ 1 1206 1 1200 a Participants in this proceeding should familiarize themselves with the Commission’s ex parte rules including the general prohibition on presentations written and oral on matters listed on the Sunshine Agenda which is typically released a week prior to the Commission’s meeting See 47 CFR §§ 1 1200 a 1 1203 Federal Communications Commission FCC-CIRC1705-05 C Cost Benefit Analysis 104 V PROCEDURAL MATTERS 115 A Initial Regulatory Flexibility Analysis 115 B Initial Paperwork Reduction Act Analysis 116 C Other Procedural Matters 118 1 Ex Parte Rules – Permit-But-Disclose 118 2 Comment Filing Procedures 119 VI ORDERING CLAUSES 129 APPENDIX A – Proposed Rules APPENDIX B – Initial Regulatory Flexibility Act I INTRODUCTION 1 Americans cherish a free and open Internet And for almost twenty years the Internet flourished under a light touch regulatory approach It was a framework that our nation’s elected leaders put in place on a bipartisan basis President Clinton and a Republican Congress passed the Telecommunications Act of 1996 which established the policy of the United States “to preserve the vibrant and competitive free market that presently exists for the Internet unfettered by Federal or State regulation ”1 2 During this time the Internet underwent rapid and unprecedented growth 2 Internet service providers ISPs invested over $1 5 trillion in the Internet ecosystem3 and American consumers enthusiastically responded Businesses developed in ways that the policy makers could not have fathomed even a decade ago Google Facebook Netflix and countless other online businesses launched in this country and became worldwide success stories The Internet became an ever-increasing part of the American economy offering new and innovative changes in how we work learn receive medical care and entertain ourselves 4 3 But two years ago the FCC changed course It decided to apply utility-style regulation to the Internet This decision represented a massive and unprecedented shift in favor of government control of the Internet 4 The Commission’s Title II Order has put at risk online investment and innovation threatening the very open Internet it purported to preserve Investment in broadband networks declined Internet service providers have pulled back on plans to deploy new and upgraded infrastructure and services to consumers This is particularly true of the smallest Internet service providers that serve consumers in rural low-income and other underserved communities Many good-paying jobs were lost 1 47 U S C § 230 b 2 2 See e g Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in A Reasonable Timely Fashion Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996 As Amended by the Broadband Data Improvement Act 2015 Broadband Progress Report and Notice of Inquiry on Immediate Action to Accelerate Deployment 30 FCC Rcd 1375 1383 para 15 2015 2015 Broadband Progress Report noting that broadband providers recognized “both the value of and the need for continued investment to develop a robust broadband network that will meet consumers’ demands ” and that between 2012 and 2013 broadband providers had increased their investments by approximately 10 percent to $75 billion 3 USTelecom Broadband Investment Historical Broadband Provider Capex 2017 data through 2015 https www ustelecom org broadband-industry broadband-industry-stats investment 4 See e g Aaron Smith Pew Research Center Searching for Work in the Digital Era at 2 2015 http www pewinternet org files 2015 11 PI_2015-11-19-Internet-and-Job-Seeking_FINAL pdf detailing the importance of the Internet for job seekers Lifeline Link Up Reform Modernization Order on Reconsideration 31 FCC Rcd 3962 3967 para 16 2016 discussing the benefits of telemedicine 2 Federal Communications Commission FCC-CIRC1705-05 as the result of these pull backs And the order has weakened Americans’ online privacy by stripping the Federal Trade Commission—the nation’s premier consumer protection agency—of its jurisdiction over ISPs’ privacy and data security practices 5 Today we take a much-needed first step toward returning to the successful bipartisan framework that created the free and open Internet and for almost twenty years saw it flourish By proposing to end the utility-style regulatory approach that gives government control of the Internet we aim to restore the market-based policies necessary to preserve the future of Internet Freedom and to reverse the decline in infrastructure investment innovation and options for consumers put into motion by the FCC in 2015 Our actions today continue our critical work to promote broadband deployment to rural consumers and infrastructure investment throughout our nation to brighten the future of innovation both within networks and at their edge and to close the digital divide II BACKGROUND 6 Long before the commercialization of the Internet federal law drew a line between the heavily regulated common carrier services and more lightly regulated services that went beyond mere transmission Starting in 1966 the Commission initiated the Computer Inquiries 5 which created a dichotomy between basic and enhanced services 6 Basic services offered “pure transmission capability over a communications path that is virtually transparent in terms of its interaction with customer supplied information”7 and were “regulated under Title II of the Communications Act ”8 Enhanced services were “any offering over the telecommunications network which is more than a basic transmission service In an enhanced service for example computer processing applications are used to act on the content code protocol and other aspects of the subscriber’s information ”9 Unlike basic services the Commission found that “enhanced services should not be regulated under the Act ”10 7 Just two years later the federal courts would draw a similar line in resolving the government’s antitrust case against AT T The Modification of Final Judgment MFJ of 1982 distinguished between “telecommunications services ” which Bell Operating Companies could offer when “actually regulated by tariff ”11 and “information services ” including “data processing and other computer-related services”12 and “electronic publishing services ”13 which Bell Operating Companies were prohibited from offering entirely 14 8 In the Telecommunications Act of 1996 intended to “promote competition and reduce regulation ”15 President Clinton and Congress drew a line between lightly regulated “information 5 Regulatory and Policy Problems Presented by the Interdependence of Computer and Communication Services Notice of Inquiry 7 FCC 2d 11 1966 Amendment of Section 64 702 of the Commission’s Rules and Regulations Second Computer Inquiry Docket No 20828 Final Decision 77 FCC 2d 384 420 para 97 1980 6 7 Id at 420 para 96 8 Id at 428 para 114 9 Id at 420 para 97 10 Id at 428 para 114 11 United States v Am Tel Tel Co 552 F Supp 131 228–29 D D C 1982 12 Id at 178 13 Id at 180 14 Id at 228 15 Preamble Telecommunications Act of 1996 Pub L No 104-104 110 Stat 56 1996 describing the purpose of the 1996 Act as “ a n Act t o promote competition and reduce regulation in order to secure lower prices and higher 3 Federal Communications Commission FCC-CIRC1705-05 services” and more heavily regulated “telecommunications services ”16 They also found that the “Internet and other interactive computer services have flourished to the benefit of all Americans with a minimum of government regulation”17 and declared it the policy of the United States to “promote the continued development of the Internet and other interactive computer services and other interactive media” and “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services unfettered by Federal or State regulation ”18 The 1996 Act went on to define “interactive computer service” to include “any information service system or access software provider that provides or enables computer access by multiple users to a computer server including specifically a service or system that provides access to the Internet ”19 9 Congress weighed in again two years later Five Senators—John Ashcroft Wendell Ford John F Kerry Spencer Abraham and Ron Wyden—wrote the Commission that “ n othing in the 1996 Act or its legislative history suggests that Congress intended to alter the current classification of Internet and other information services or to expand traditional telephone regulation to new and advanced services ”20 These five members further warned that if the Commission “subject ed some or all information service providers to telephone regulation it seriously would chill the growth and development of advanced services to the detriment of our economic and educational well-being ”21 10 For the next 16 years the Commission repeatedly followed their advice opting for a light-touch approach to the Internet that favored discrete and targeted actions over traditional pre-emptive sweeping regulation of Internet service providers In the 1998 Stevens Report the Commission comprehensively reviewed the Act’s definitions as they applied to the emerging technology of the Internet and concluded that Internet access service was properly classified as an information service 22 The Stevens Report exhaustively reviewed the text and legislative history of the Telecommunications Act along with the agency’s own administrative precedent and the courts’ administration of antitrust law 23 Looking to the Act’s text the Commission concluded that “Internet access providers do not offer a pure transmission path they combine computer processing information provision and other computermediated offerings with data transport ”24 and it “recognize d the unique qualities of the Internet and did not presume that legacy regulatory frameworks are appropriately applied to it ”25 Further even “address ing the classification of Internet access service de novo” the Stevens Report reached the same quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies” 16 47 U S C § 153 24 53 17 47 U S C § 230 a 4 18 47 U S C § 230 b 1 2 19 47 U S C § 230 f 2 20 Letter from Senators John Ashcroft Wendell Ford John Kerry Spencer Abraham and Ron Wyden to the Honorable William E Kennard Chairman FCC at 1 Mar 23 1998 Five Senators Letter available at http apps fcc gov ecfs document view id 2038710001 21 Id 22 Federal-State Joint Board on Universal Service Report to Congress 13 FCC Rcd 11501 11536 para 73 1998 Stevens Report 23 See e g id 13 FCC Rcd at 11513 11520 11536–37 paras 27 39 74–75 The Stevens Report also noted that “ s ince Computer II we have made it clear that offerings by non-facilities-based providers combining communications and computing components should always be deemed enhanced ” while “the matter is more complicated when it comes to offerings by facilities-based providers ” Id at 11530 para 60 24 Id at 11536 para 73 25 Id at 11540 para 82 4 Federal Communications Commission FCC-CIRC1705-05 conclusion Internet access service is an information service according to the statute 26 The Stevens Report also found that subjecting Internet service providers and other information service providers to “the broad range of Title II constraints ” would “seriously curtail the regulatory freedom that the Commission concluded in Computer II was important to the healthy and competitive development of the enhanced-services industry ”27 11 In the 2002 Cable Modem Order the Commission classified broadband Internet access service over cable systems as an “interstate information service ”28 The Commission did so based on the “functions that cable modem service makes available to its end users ”29 on the fact that the “telecommunications component is not however separable from the data-processing capabilities of the service ”30 and is an information service “regardless of whether subscribers use all of the functions provided as part of the service such as e-mail or web-hosting and regardless of whether every cable modem service provider offers each function that could be included in the service ”31 The Commission was also guided by its belief that “broadband services should exist in a minimal regulatory environment that promotes investment and innovation in a competitive market ”32 and the knowledge that regulatory uncertainty “may discourage investment and innovation ”33 12 In June 2005 the Supreme Court decisively upheld the Commission’s 2002 classification of broadband Internet access service over cable systems as a lightly-regulated Title I information service 34 13 In 2004 then FCC-Chairman Michael Powell announced four principles for Internet freedom to further ensure that the Internet would remain a place for free and open innovation with minimal regulation 35 These four “Internet freedoms” include the freedom to access lawful content the freedom to use applications the freedom to attach personal devices to the network and the freedom to obtain service plan information 36 14 In the 2005 Wireline Broadband Classification Order the Commission classified broadband Internet access service over wireline facilities as an information service 37 In reaching this conclusion the Commission relied on the plain text of the Act finding that “providers of wireline 26 See e g id 27 Id at 11524 para 46 28 See Inquiry Concerning High-Speed Access to the Internet Over Cable Other Facilities Internet Over Cable Declaratory Ruling Appropriate Regulatory Treatment for Broadband Access to the Internet Over Cable Facilities GN Docket No 00-185 CS Docket No 02-52 Declaratory Ruling and Notice of Proposed Rulemaking 17 FCC Rcd 4798 4802 para 7 2002 Cable Modem Order 29 Id at 4821 para 35 30 Id at 4823 para 39 31 Id at 4822–23 para 38 footnote omitted 32 Id at para 5 33 Id 34 Nat’l Cable Telecomms Ass’n v Brand X Internet Servs 545 U S 967 2005 Brand X 35 Michael K Powell Chairman Federal Communications Commission Preserving Internet Freedom Guiding Principles for the Industry Remarks at the Silicon Flatirons Symposium Feb 8 2004 https apps fcc gov edocs_public attachmatch DOC-243556A1 pdf 36 Id 37 See Appropriate Framework for Broadband Access to the Internet Over Wireline Facilities et al CC Docket Nos 02-33 01-337 95-20 98-10 WC Docket Nos 04-242 05-271 Report and Order and Notice of Proposed Rulemaking 20 FCC Rcd 14853 2005 Wireline Broadband Classification Order 5 Federal Communications Commission FCC-CIRC1705-05 broadband Internet access service offer subscribers the ability to run a variety of applications that fit under the characteristics stated in the information service definition ”38 and that users of wireline broadband Internet access service were provided “more than a pure transmission path” whenever they accessed the Internet 39 15 In 2005 the Commission also unanimously endorsed the four Internet freedoms in the Internet Policy Statement 40 The Internet Policy Statement announced the Commission’s intent to “incorporate these principles into its ongoing policymaking activities” in order to “foster creation adoption and use of Internet broadband content applications services and attachments and to ensure consumers benefit from the innovation that comes from competition ”41 16 In the 2006 BPL-Enabled Broadband Order the Commission concluded that broadband Internet access service over power lines was properly classified as an information service 42 This decision established “a minimal regulatory environment” which promoted “ubiquitous availability of broadband to all Americans ”43 The Commission noted that broadband-powerline-enabled Internet access service “combines computer processing information provision and computer interactivity with data transport which enable es end users to run a variety of applications ”44 and concluded that classification as an information service “encourage es the deployment of broadband Internet access services ”45 17 In the 2007 Wireless Broadband Internet Access Order the Commission classified wireless broadband Internet access service as an information service again recognizing the “minimal regulatory environment” that promoted the “ubiquitous availability of broadband to all Americans ”46 Consistent with its prior interpretations the Commission concluded that “wireless broadband Internet access service offers a single integrated service to end users Internet access that inextricably combines the transmission of data with computer processing information provision and computer interactivity for the purpose of enabling end users to run a variety of applications ”47 The Commission also found that “mobile wireless broadband Internet access service is not a ‘commercial mobile radio service’ as that term is defined in the Act and implemented in the Commission’s rules ”48 18 In the 2008 Comcast-BitTorrent Order the Commission sought to directly enforce 38 Id at 14860 para 9 39 Id at 14864 para 15 40 Appropriate Framework for Broadband Access to the Internet over Wireline Facilities et al GN Docket No 00185 CC Docket Nos 02-33 01-33 98-10 95-20 CS Docket No 02-52 Policy Statement 20 FCC Rcd 14986 2005 Internet Policy Statement 41 Internet Policy Statement 20 FCC Rcd at 14988 para 5 The Commission did this for example by incorporating such principles in its rules governing certain wireless spectrum See Service Rules For the 698-746 747-762 and 777-792 MHz Bands et al WT 06-150 et al Second Report and Order 22 FCC Rcd 15289 15361 15365 paras 194 206 2007 See United Power Line Council’s Petition for Declaratory Ruling Regarding the Classification of Broadband over Power Line Internet Access Service as an Information Service WC Docket No 06-10 Memorandum Opinion and Order 21 FCC Rcd 13281 2006 BPL-Enabled Broadband Order 42 43 Id at 13281 para 2 44 Id at 13826 para 9 45 Id at 13827 para 10 46 See Appropriate Regulatory Treatment for Broadband Access to the Internet Over Wireless Networks Declaratory Ruling 22 FCC Rcd 5901 5902 para 2 2007 Wireless Broadband Internet Access Order 47 Id at 5910 para 26 48 Id at 5916 para 41 6 Federal Communications Commission FCC-CIRC1705-05 federal Internet policy consistent with the Internet Policy Statement finding Comcast’s actions “contravene d federal policy” by “significantly imped ing consumers’ ability to access the content and use the applications of their choice ”49 In 2010 the U S Court of Appeals for the D C Circuit rejected the Commission’s action holding that the Commission had not justified its action as a valid exercise of ancillary authority 50 19 In response the Commission adopted the 2010 Open Internet Order where once again the Commission specifically rejected more heavy-handed regulation of broadband Internet access service 51 Instead the Open Internet Order relied on among other things newly-claimed regulatory authority under section 706 of the Telecommunications Act to establish no-blocking and nounreasonable-discrimination rules as well as a requirement that broadband Internet access service providers “publicly disclose accurate information regarding the network management practices performance and commercial terms of its broadband Internet access services ”52 In doing so the Commission distinguished between fixed and mobile broadband Internet access services reasoning that the latter “presents special considerations that suggest differences in how and when open Internet protections should apply ”53 20 In 2014 the D C Circuit vacated the no-blocking and no-unreasonable-discrimination rules adopted in the Open Internet Order finding that the rules impermissibly regulated broadband Internet access service providers as common carriers 54 in conflict with the Commission’s prior determination that broadband Internet access service was not a telecommunications service and that mobile broadband Internet access service was not a commercial mobile service 55 The D C Circuit nonetheless upheld the transparency rule 56 claimed the Commission had authority to regulate broadband Internet access service providers under section 706 of the Telecommunications Act and suggested that no-blocking and no-unreasonable-discrimination rules might be permissible if Internet service providers could engage in individualized bargaining 57 21 Later that year the Commission embarked yet again down the path of rulemaking proposing to rely on section 706 of the Telecommunications Act to adopt enforceable rules using the 49 Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation for Secretly Degrading Peer-to-Peer Applications Broadband Industry Practices Petition of Free Press et al for Declaratory Ruling that Degrading an Internet Application Violates the FCC's Internet Policy Statement and Does Not Meet an Exception for “Reasonable Network Management ” File No EB-08-IH-1518 WC Docket No 07-52 Memorandum Opinion and Order 23 FCC Rcd 13028 13054 13057 paras 44 49 2008 Comcast-BitTorrent Order 50 Comcast Corp v FCC 600 F 3d 642 D C Cir 2010 Among other things the court held that section 706 of the 1996 Act could not serve as the source of direct authority to which the Commission’s action was ancillary because the Commission was bound in Comcast by a prior Commission determination that section 706 did not constitute a direct grant of authority Id at 658–59 51 Preserving the Open Internet Broadband Industry Practices GN Docket No 09-191 WC Docket No 07-52 Report and Order 25 FCC Rcd 17905 17972–80 17981 paras 124–35 137 2010 Open Internet Order 52 Id at 17992 Appendix A 53 Id at 17956 para 94 Verizon v FCC 740 F 3d 623 655-58 D C Cir 2014 Verizon vacating the Commission’s rule prohibiting “unreasonable discrimination” by fixed broadband providers on the theory that it “so limited broadband providers’ control over edge providers’ transmissions that it constitute d common carriage per se” and finding that the noblocking rules “would appear on their face” to impose common carrier obligations on fixed and mobile broadband providers 54 55 Id at 650 56 Id at 635–42 57 See e g id at 657 quoting Cellco Partnership v FCC 700 F 3d 534 549 D C Cir 2012 7 Federal Communications Commission FCC-CIRC1705-05 court’s “roadmap ”58 22 In November 2014 then-President Obama called on the FCC to “reclassify consumer broadband service under Title II of the Telecommunications Act ”59 Three months later the Commission adopted the Title II Order reclassifying broadband Internet access services from information services to telecommunications services 60 In doing so the Commission found it necessary to forbear from enforcing the “vast majority of rules adopted under Title II ” including “30 statutory provisions and render over 700 codified rules inapplicable ”61 The Commission adopted no-blocking no-throttling and no-paidprioritization rules as well as a general Internet conduct standard and “enhancements” to the transparency rule 62 In 2016 a divided panel of the D C Circuit Court of Appeals upheld the Title II Order in United States Telecom Ass’n v FCC 63 Petitioners have sought a rehearing of the case en banc 64 III ENDING PUBLIC-UTILITY REGULATION OF THE INTERNET 23 Between enactment of the Telecommunications Act and the 2015 adoption of the Title II Order the free and open Internet flourished Providers invested over $1 5 trillion to construct networks high-speed Internet access proliferated at affordable rates and consumers were able to enjoy all that the Internet had to offer In 2015 the Commission abruptly departed from its prior posture and classified broadband Internet access service as a telecommunications service subject to public-utility regulations under Title II 24 Today we propose to reinstate the information service classification of broadband Internet access service and return to the light-touch regulatory framework first established on a bipartisan basis during the Clinton Administration We also propose to reinstate the determination that mobile broadband Internet access service is not a commercial mobile service A Reinstating the Information Service Classification of Broadband Internet Access Service 25 Our proposal to classify broadband Internet access service as an information service is based on a number of factors First we examine the text structure and history of the Communications Act and the Telecommunications Act combined with the technical details of how the Internet works Second we examine Commission precedent Third we examine public policy and our goal of benefiting consumers through greater innovation investment and competition We seek comment on our proposals and these analyses 1 The Text and Structure of the Act 26 We start with the text of the Act itself Section 3 of the Act defines an “information service” as “the offering of a capability for generating acquiring storing transforming processing retrieving utilizing or making available information via telecommunications and includes electronic 58 Protecting and Promoting the Open Internet GN Docket No 14-28 Notice of Proposed Rulemaking 29 FCC Rcd 5561 2014 2014 Notice 59 President Obama Statement on Net Neutrality Nov 10 2014 https obamawhitehouse archives gov the-pressoffice 2014 11 10 statement-president-net-neutrality 60 In the Matter of Protecting and Promoting the Open Internet Report and Order on Remand Declaratory Ruling and Order 30 FCC Rcd 5601 2015 Title II Order 61 Id at 5616 para 51 62 Id at 5607-09 paras 15–24 63 United States Telecom Ass’n v FCC 825 F 3d 674 D C Cir 2016 USTelecom pets for reh’g pending See Joint Petition of USTelecom and CenturyLink for Rehearing En Banc United States Telecom Ass’n v FCC D C Cir filed Jul 29 2016 64 8 Federal Communications Commission FCC-CIRC1705-05 publishing but does not include any use of any such capability for the management control or operation of a telecommunications system or the management of a telecommunications service ”65 Section 3 defines a “telecommunications service” as “the offering of telecommunications for a fee directly to the public or to such classes of users as to be effectively available directly to the public regardless of the facilities used ”66 Section 3 also defines “telecommunications ” used in each of the prior two definitions as “the transmission between or among points specified by the user of information of the user’s choosing without change in the form or content of the information as sent and received ”67 27 We believe that Internet service providers offer the “capability for generating acquiring storing transforming processing retrieving utilizing or making available information via telecommunications ”68 Whether posting on social media or drafting a blog a broadband Internet user is able to generate and make available information online Whether reading a newspaper’s website or browsing the results from a search engine a broadband Internet user is able to acquire and retrieve information online Whether it’s an address book or a grocery list a broadband Internet user is able to store and utilize information online Whether uploading filtered photographs or translating text into a foreign language a broadband Internet user is able to transform and process information online In short broadband Internet access service appears to offer its users the “capability” to perform each and every one of the functions listed in the definition—and accordingly appears to be an information service by definition We seek comment on this analysis Can broadband Internet users indeed access these capabilities Are there other capabilities that a broadband Internet user may receive with service If broadband Internet access service does not afford one of the listed capabilities to users what effect would that have on our statutory analysis More fundamentally we seek comment on how the Commission should assess whether a broadband provider is “offering” a capability Should we asses this from the perspective of the user from the provider or through some other lens 28 In the Cable Modem Order the Commission recognized that broadband Internet users often used services from third parties “ S ubscribers by ‘click-through’ access may obtain many functions from companies with whom the cable operator has not even a contractual relationship For example a subscriber to Comcast’s cable modem service may bypass that company’s web browser proprietary content and email The subscriber is free to download and use instead for example a web browser from Netscape content from Fox News and e-mail in the form of Microsoft’s ‘Hotmail ’”69 It nonetheless found the classification appropriate “regardless of whether subscribers use all of the functions provided as part of the service such as e-mail or web-hosting and regardless of whether every cable modem service provider offers each function that could be included in the service ”70 In the Title II Order the Commission in turn found that “consumers are very likely to use their high-speed Internet connections to take advantage of competing services offered by third parties”71 and asserted the service “is useful to consumers today primarily as a conduit for reaching modular content applications and services that are provided by unaffiliated third parties ”72 We seek comment on how consumers are using broadband Internet access service today It appears that as in 2002 and 2013 broadband Internet users “obtain many functions from companies” other than their Internet service provider It also appears that many broadband Internet users rely on services such as Domain Name Service DNS and email from 65 47 U S C § 153 24 66 47 U S C § 153 53 67 47 U S C § 153 50 68 47 U S C § 153 24 69 Cable Modem Order 17 FCC Rcd at 4816 para 25 70 Id at 4822–23 para 38 footnote omitted 71 Title II Order 30 FCC Rcd at 5753 para 347 72 Id at 5755 para 350 9 Federal Communications Commission FCC-CIRC1705-05 their ISP Is that correct If not what services are broadband Internet users accessing from what providers More generally we seek comment on the relevance of this analysis The definition of “information service” speaks to the “capability” to perform certain functions Is a consumer capable of accessing these online services without Internet access service Could a consumer access these online services using traditional telecommunications services like telephone service or point-to-point special access73 Or are we correct that offering Internet access is precisely what makes the service capable of “generating acquiring storing transforming processing retrieving utilizing or making available information” to consumers 29 In contrast Internet service providers do not appear to offer “telecommunications ” i e “the transmission between or among points specified by the user of information of the user’s choosing without change in the form or content of the information as sent and received ” to their users For one broadband Internet users do not typically specify the “points” between and among which information is sent online Instead routing decisions are based on the architecture of the network not on consumers’ instructions and consumers are often unaware of where online content is stored Domain names must be translated into IP addresses and there is no one-to-one correspondence between the two Even IP addresses may not specify where information is transmitted to or from because caching servers store and serve popular information to reduce network loads In short broadband Internet users are paying for the access to information “with no knowledge of the physical location of the server where that information resides ”74 We believe that consumers want and pay for these functionalities that go beyond mere transmission—and that they have come to expect them as part and parcel of broadband Internet access service We seek comment on our analysis How are broadband Internet users’ requests for information handled by Internet service providers today What functionalities beyond mere transmission do Internet service providers incorporate into their broadband Internet access service We particularly seek comment on the Title II Order’s assertion that the phrase “points specified by the user” is ambiguous75—how should we interpret that phrase so that it carries with it independent meaning and is not mere surplusage Is it enough as the Title II Order asserted for a broadband Internet user to specify the information he is trying to access but not the “points” between or among which the information will be transmitted Does it matter that the Internet service provider specifies the points between and among which information will be transmitted 76 30 For another Internet service providers routinely change the form or content of the information sent over their networks—for example by using firewalls to block harmful content or using protocol processing to interweave IPv4 networks with IPv6 networks The Commission has acknowledged that broadband Internet networks must be reasonably managed since at least the 2005 Internet Policy Statement 77 We believe that consumers want and pay for these functionalities that go 73 In the past rate-of-return carriers have offered broadband Internet access transmission service as a commoncarriage last-mile service that transmits data between and end user and an ISP Wireline Broadband Classification Order 20 FCC Rcd at 14899–900 paras 86–88 Absent an ISP at the other end however broadband Internet access transmission service only transmits data to a carrier’s central office or other aggregation point as it does not itself offer the capabilities that come with Internet access 74 Stevens Report 13 FCC Rcd at 11532 para 64 75 Title II Order 30 FCC Rcd at 5761–62 para 361 We note that the Title II Order asserted that “It is not uncommon in the toll-free arena for a single number to route to multiple locations and such a circumstance does not transform that service to something other than telecommunications ” Title II Order 30 FCC Rcd at 5761–62 para 361 Despite that assertion the Commission has expressly found that the management of toll-free numbers is “not a common carrier service” and that providers that manage toll-free numbers “do not need to be carriers ” 800 Data Base Access Tariffs and the 800 Service Management System Tariff Provision of 800 Services CC Docket Nos 93-129 86-10 Report and Order 11 FCC Rcd 15227 15248–49 paras 44–45 1996 76 77 Internet Policy Statement 20 FCC Rcd at 14987 para 5 n 5 10 Federal Communications Commission FCC-CIRC1705-05 beyond mere transmission—and that they have come to expect them as part and parcel of broadband Internet access service We seek comment on our analysis What constitutes a “change in the form” of information If not the protocol-processing for internetworking—considered an enhanced service under the Computer Inquiries—how should we interpret this phase so it carries with it independent meaning and is not mere surplusage How could we plausibly conclude that it is not a “change in the content” to use of firewalls and other reasonable network management tools to shield broadband Internet users from unwanted intrusions and thereby alter what information reaches the user for the user’s benefit We seek comment on other ways in which Internet service providers change the form or content of information to facilitate a broadband Internet user’s experience on line 31 Other provisions of the Act appear to confirm our analysis that broadband Internet access services should be classified as information services For instance section 230 defines an interactive computer service to mean “any information service system or access software provider that provides or enables computer access by multiple users to a computer server including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions ”78 On its face the plain language of this provision deems Internet access service an information service We seek comment on this analysis on the language of section 230 and on how it should impact our classification of broadband Internet access service 32 Section 231 is even more direct It expressly states that “Internet access service” “does not include telecommunications services ” And it defines Internet access service as one offering many capabilities like an information service “a service that enables users to access content information electronic mail or other services offered over the Internet and may also include access to proprietary content information and other services as part of a package of services offered to consumers ”79 Although inserted into the Communications Act one year after the Telecommunications Act’s passage80 and previously interpreted to “clarify that section 231 was not intended to impair our or a state commission’s ability to regulate basic telecommunications services ”81 this language on its face makes clear that Internet access service is not a telecommunications service We seek comment on this analysis on the language of section 231 and on how it should impact our classification of broadband Internet access service 33 The structure of Title II appears to be a poor fit for broadband Internet access service In the Title II Order the Commission on its own motion forbore either in whole or in part on a permanent or temporary basis from 30 separate sections of Title II as well as from other provisions of the Act and Commission rules 82 The significant forbearance the Commission granted in in the Title II Order suggests the highly prescriptive regulatory framework of Title II is unsuited for the dynamic broadband Internet access service marketplace We seek comment on this analysis and on what weight we should give this analysis in examining the future of this model of regulation 34 The purposes of the Telecommunications Act appear to be better served by classifying broadband Internet access service as an information service Congress passed the Telecommunications 78 47 U S C § 230 f 2 79 47 U S C § 231 e 4 80 Child Online Protection Act Pub L No 105-277 112 Stat 2681–736 § 1403 codified at 47 U S C § 231 81 Cable Modem Order 17 FCC Rcd at 4799 para 1 n 2 82 See Title II Order 30 FCC Rcd at 5834 para 486 sections 254 d g and k 5825 para 470 section 225 d 3 B 5835 para 488 section 254 d ’s first sentence 5841 para 497 section 203 5845 para 505 section 204 5845 para 506 section 205 5846 para 508 sections 211 213 215 218 219 220 5847 para 509–12 section 214 except for subsection e 5849 para 513 section 251 except for subsection a 2 section 256 5852 para 515 section 258 11 Federal Communications Commission FCC-CIRC1705-05 Act to “promote competition and reduce regulation”83 and “ n othing in the 1996 Act or its legislative history suggests that Congress intended to alter the current classification of Internet and other information services or to expand traditional telephone regulation to new and advanced services ”84 Or as Senator John McCain put it “ i t certainly was not Congress’s intent in enacting the supposedly pro-competitive deregulatory 1996 Act to extend the burdens of current Title II regulation to Internet services which historically have been excluded from regulation ”85 Or as Congress codified its intent in section 230 It is the policy of the United States “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services unfettered by Federal or State regulation ”86 An information service classification would “reduce regulation” and preserve a free market “unfettered by Federal or State regulation”—but a telecommunications service classification would not We seek comment on this analysis as well as whether there are any other provisions of the Communications Act or Telecommunications Act that establish congressional intent with respect the appropriate regulatory framework for broadband Internet access services 35 More broadly we seek comment on the text structure and purposes of the Communications Act and the Telecommunications Act as well as any additional facts about what Internet service providers offer how broadband Internet access service works and what broadband Internet users expect that might inform our analysis 36 We seek special comment on two aspects of the Title II Order’s interpretation of the Act First the Title II Order claimed its interpretation sprang in part from a change in “broadband providers’ marketing and pricing strategies which emphasize speed and reliability of transmission separately from and over the extra features of the service packages they offer ”87 It claimed this marketing “leaves a reasonable consumer with the impression that a certain level of transmission capability—measured in terms of ‘speed’ or ‘reliability’—is being offered in exchange for the subscription fee even if complementary services are also included as part of the offer ”88 We note that even before the Cable Modem Order the Commission recognized that Internet service providers marketed the speed of their connections 89 We seek comment on whether Internet service providers’ marketing has decidedly changed in recent decades 90 More generally we seek comment on the relevance of this argument Neither statutory service definition speaks of speed or reliability and there is little reason to think consumers might want a fast or reliable “transmission of information” but not a fast or reliable “capability for generating acquiring storing transforming processing retrieving utilizing or making available information ” Indeed many of the advertisements discussed by the Title II Order speak directly to the capabilities offered through high-speed service 91 We seek comment on this analysis and on any 83 Preamble Telecommunications Act of 1996 84 Five Senators Letter at 1 85 Stevens Report 13 FCC Rcd at 11519 para 37 quoting Letter from Senator John McCain to the Honorable William E Kennard Chairman FCC 86 47 U S C § 230 b 1 87 Title II Order 30 FCC Rcd at 5743 para 330 88 Id at 5757 para 354 89 See e g Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996 CC Docket No 98-146 Second Report 15 FCC Rcd 20913 20931 paras 36–37 2000 90 We note that in conducting its review of the changed circumstances the D C Circuit concluded that there was no need to decide whether there really was anything new because the Commission in the Title II Order “concluded that changed factual circumstances were not critical to its classification decision ” USTelecom 825 F 3d at 709 91 See e g Title II Order 30 FCC Rcd at 5756 para 352 12 Federal Communications Commission FCC-CIRC1705-05 other relevant facts regarding whether broadband Internet users receive the capabilities of an information service or the mere transmission between points of a user’s choosing of a telecommunications service 37 Second the Title II Order found that DNS92 and caching93 used in broadband Internet access service were just used “for the management control or operation of a telecommunications system or the management of a telecommunications service ”94 The Commission has previously held this category applies to “adjunct-to-basic” functions that are “incidental” to a telecommunications service’s underlying use and “do not alter its fundamental character ”95 As such these functions generally are not “useful to end users rather than carriers ”96 We seek comment on how DNS and caching functions are now used whether they benefit end users Internet service providers or both and whether they fit within the adjunct-to-basic exception How would broadband Internet access service work without DNS or caching Would removing DNS have a merely incidental effect on broadband Internet users or would it fundamentally change their online experience Absent caching would broadband Internet users that now expect high-quality video streaming see only incidental changes or more fundamental changes Are there other ways that DNS or caching are used for “for the management control or operation of a telecommunications system” 2 Commission Precedent Supports Classification as an Information Service 38 Our proposed classification of broadband Internet access service as an information service is firmly rooted in Commission precedent For two decades a consistent bipartisan framework supported a free and open Internet That same consensus led to six separate Commission decisions confirming that Internet access service is an information service subject to Title I Chairman Kennard first led the FCC in determining that Internet access service is an information service in the Stevens Report 97 Chairman Powell led the Commission to classify broadband Internet access service over cable systems as an information service in the Cable Modem Order 98 Chairman Martin led the Commission to classify several broadband Internet access services as information services in the Wireline Broadband Classification Order 99 the BPL-Enabled Broadband Order 100 and the Wireless Broadband Internet Access Order 101 Finally Chairman Genachowski declined to reclassify broadband Internet access Title II Order 30 FCC Rcd at 5758 para 356 n 972 defining DNS as services “most commonly used to translate domain names into numerical IP addresses that are used by network equipment to locate the desired content” 92 Id at 5757–58 para 356 n 973 defining caching as “the storing of copies of content at locations in a network closer to subscribers than the original source of the content which enables more rapid retrieval of information from websites that subscribers wish to see most often” 93 94 47 U S C § 153 24 Title II Order 30 FCC Rcd at 5765–66 para 366 95 See North American Telecommunications Association Petition for Declaratory Ruling Under §64 702 of the Commission’s Rules Regarding the Integration of Centrex Enhanced Services and Customer Premises Equipment 101 FCC 2d 349 359–61 paras 24 27 28 1985 96 Petitions for Forbearance from the Application of Section 272 of the Communications Act of 1934 As Amended to Certain Activities Bell Operating Companies CC Docket No 96-149 Memorandum Opinion and Order 13 FCC Rcd 2627 2639 para 18 Com Car Bur 1998 97 See Stevens Report 13 FCC Rcd at 11503 para 3 98 See Cable Modem Order 17 FCC Rcd at 4802 para 7 99 Wireline Broadband Classification Order 20 FCC Rcd 14853 100 BPL-Enabled Broadband Order 21 FCC Rcd at 13281 101 Wireless Broadband Internet Access Order 25 FCC Rcd 5901 13 Federal Communications Commission FCC-CIRC1705-05 services in the Open Internet Order 102 39 We believe the Commission under Democratic and Republican leadership alike was correct in these decisions to classify broadband Internet access service as an information service and that 20 years after the passage of the Telecommunications Act we should be reluctant to second-guess the interpretations of those more likely to understand the contemporary meaning of the terms of the Telecommunications Act We seek comment on our assessment Did the Commission’s historical information service classification better enable flexibility in marketplace offerings 103 Did the regulatory certainty of maintaining the same regulatory environment for approximately three decades since the Computer Inquiries foster additional investment or innovative business models to benefit consumers How should we evaluate the prior Commissions’ predictions of intermodal competition given the 4 462 Internet service providers now in the market How many providers would likely have entered the market if traditional Title II regulation had been the norm What actual harms if any resulted from light-touch regulation 40 The Commission has previously concluded that Congress formally codified information services and telecommunications services as two mutually exclusive types of services in the Telecommunications Act 104 The Title II Order did not appear to disagree with this analysis finding that broadband Internet access service was a telecommunications service and not an information service 105 We believe this conclusion regarding mutual exclusivity is correct based on the text and history of the Act We seek comment on this analysis 41 The Commission has previously found that Congress intended the definitions of information service and telecommunications service in the Act to parallel those definitions in the MFJ and in the Computer Inquiries 106 The Title II Order apparently accepted these parallels 107 We thus seek comment on any evidence that the court in the MFJ thought that Internet access service was a telecommunications service Did the court and the Department of Justice intend to exclude Internet access services from the prohibitions on what Bell Operating Companies could offer Did the court and the Department of Justice intend for Internet access services to be regulated via tariff as other telecommunications services were We similarly seek comment on any evidence that the Commission in the Computer Inquiries thought that Internet access service was a basic service Did the Commission intend for facilities-based carriers to offer Internet access service without the protections of the Computer Inquiries as they could for basic services The Supreme Court has said that statutory interpretation “must be guided to a degree by common sense as to the manner in which Congress is likely to delegate a policy decision of such economic and political magnitude to an administrative agency ”108 How is that canon relevant here 42 102 Finally the Title II Order deviated further from Commission precedent to extend its Open Internet Order 25 FCC Rcd at 17933 paras 47-48 103 See e g Wireline Broadband Internet Access Services Order 20 FCC Rcd at 14891-92 para 72 eliminating the Computer Inquiries requirement to offer broadband transmission on a common carrier basis “will make it more likely that wireline network operators will take more risks in investing in and deploying new technologies than they are willing and able to take under the existing regime” Stevens Report 13 FCC Rcd at 11524 para 46 “the Commission concluded in Computer II” that “regulatory freedom was important to the healthy and competitive development of the enhanced-services industry” 104 See Stevens Report 11 FCC Rcd at 11522–23 para 43 see also Telecommunications Act of 1996 Pub L No 104-104 110 Stat 56 1996 as amended 105 Title II Order 30 FCC Rcd at 5763–64 paras 363–65 106 Stevens Report 11 FCC Rcd at 11521–22 para 42 107 Title II Order 30 FCC Rcd at 5736 para 312 108 FDA v Brown Williamson Tobacco Corp 529 U S 120 133 2000 14 Federal Communications Commission FCC-CIRC1705-05 authority to Internet traffic exchange or “interconnection ”109 an area historically unregulated and beyond the Commission’s reach We believe Internet traffic exchange premised on privately negotiated agreements or case-by-case basis is not a telecommunications service Moreover we find nothing in the Act that would extend our jurisdiction as previously suggested by the Title II Order We further do not believe there exists any non-Title II basis for the Commission to exercise ongoing regulatory oversight over Internet traffic exchange We accordingly propose to relinquish any authority over Internet traffic exchange We seek comment on the consequences and implications of the relinquishing the Commission’s regulatory authority in this manner 43 We note that the Commission’s Title II Order also went well beyond agency precedent in important ways For instance the Commission did not limit its analysis to the “last mile” connections at issue in the Brand X and the FCC’s underlying proceeding in that case Rather the Commission’s Title II Order defined Internet access service as extending far deeper into the network We seek comment on the significance of this expansive departure from agency precedent 3 Public Policy Supports Classification as an Information Service 44 The Commission’s decision to reclassify broadband Internet access service as a telecommunications service subject to Title II regulation has resulted in negative consequences for American consumers—including depressed broadband investment and reduced innovation because of increased regulatory burdens and regulatory uncertainty stemming from the rules adopted under Title II As providers have devoted more resources to complying with new regulations the threat of regulatory enforcement of vague rules and standards has dampened providers’ incentive to invest and innovate Additionally although reclassifying broadband Internet access service as a telecommunications service has led to significant regulatory burdens it has not solved any discrete identifiable problems Restoring broadband Internet access service to its previous status as an information service subject to Title I is in the public interest because it will alleviate the harms caused by Title II reclassification We seek detailed comment on this analysis below 45 Following the 2014 Notice and in the lead up to the Title II Order Internet service providers stated that the increased regulatory burdens of Title II classification would lead to depressed investment 110 Recent data indicate how accurate those predictions were A recent study indicates that capital expenditure from the nation’s twelve largest Internet service providers has fallen by $3 6 billion a 5 6% decline relative to 2014 levels 111 Another study indicated that between 2011 and 2015 the threat of reclassification reduced telecommunications investment by about 20–30% or about $30–40 billion 109 Title II Order 30 FCC Rcd at 5960–61 63 paras 200 203 110 See e g ACA Comments at 60–66 Alcatel-Lucent Comments at 2 AT T Comments at 51-53 CenturyLink Comments at 5-6 Charter Comments at 13 15-16 Cisco Comments at 27 Comcast Comments at 46-50 Cox Comments at 34-36 CTIA Comments at 46-48 Ericsson Comments at 12 Frontier Comments at 2-4 Qualcomm Comments at 4-7 Verizon Comments at 57 Letter from Matthew A Brill Counsel for National Cable Telecommunications Association to Marlene H Dortch Secretary FCC GN Docket Nos 14-28 10-127 at 3-5 Dec 23 2014 Letter from Patrick S Brogan USTelecom to Marlene Dortch Secretary FCC GN Docket No 1428 Nov 19 2014 attaching Kevin A Hassett Robert J Shapiro Sonecon The Impact of Title II Regulation of Internet Providers on Their Capital Investment Nov 2014 Letter from Laurence Brett Glass d b a LARIAT to Marlene H Dortch Secretary FCC GN Docket No 14-28 at 1 Jan 9 2015 Letter from John Mayo Exec Director Georgetown Center for Business and Public Policy to Marlene H Dortch Secretary FCC GN Docket No 14-28 Jan 16 2015 attaching Anna-Maria Kovacs Regulatory Uncertainty The FCC’s Open Internet Docket Jan 2015 Martin H Thelle Dr Bruno Basalisco Copenhagen Economics Europe Can Catch Up With the US A Contrast of Two Contrary Broadband Models June 2013 available at http bit ly 1zJritJ 111 Hal Singer 2016 Broadband Capex Survey Tracking Investment in the Title II Era Mar 1 2016 https haljsinger wordpress com 2017 03 01 2016-broadband-capex-survey-tracking-investment-in-the-title-ii-era 15 Federal Communications Commission FCC-CIRC1705-05 annually 112 Other sources also explain that other countries’ experiences should caution the United States that ongoing utility-style regulation should be expected to have even more dramatic impacts on investment beyond what has already occurred 113 Other interested parties have come to different conclusions 114 46 We believe that these reduced expenditures are a direct and unavoidable result of Title II reclassification and exercise our predictive judgment that reversing the Title II classification and restoring broadband Internet access service to a Title I service will increase investment Among other things Internet service providers have finite resources and requiring providers to divert some of those resources to newly imposed regulatory requirements adopted under Title II will unsurprisingly reduce expenditures that benefit consumers We seek comment on how the burdens associated with Title II regulation have impacted broadband investment and as a result consumers Has the Commission’s increased regulation of broadband adversely impacted broadband investment and innovation What impact has Title II reclassification had on providers’ business models including any lost opportunity costs and how has this impact has been passed on to consumers Is there any evidence that increased regulation has promoted broadband investment as some claim What are the long-term implications of utility-style regulation respect to capital expenditures on high-speed networks 47 We also seek specific comment on how the classification of broadband Internet access service as a telecommunications service has impacted smaller broadband Internet access service providers many of whom lack the dedicated compliance staffs and financial resources of the nation’s largest providers Before the Commission adopted the Title II Order many small providers made it clear that reclassification would harm their businesses and the customers they serve 115 Since reclassification small providers have been forced to reduce their investment and halt the expansion of their networks and slow if not delay the development and deployment of innovative new offerings 116 For example one 112 See George S Ford Net Neutrality Reclassification and Investment A Counterfactual Analysis Phoenix Center for Advanced Legal Economic Public Policy Studies Perspectives 17-02 at 2 http www phoenixcenter org perspectives Perspective17-02Final pdf 113 Patrick Brogan USTelecom Utility Regulation and Broadband Network Investment The EU and US Divide Research Brief Apr 25 2017 available at https www ustelecom org sites default files documents Utility%20Regulation%20and%20Broadband%20Investme nt pdf See e g Free Press Internet Service Providers’ Capital Expenditures Feb 28 2017 https www freepress net sites default files resources internet_service_providers_capital_expenditures_20132016_reported_as_of_2_27_17 pdf noting a decrease in investment from 2015 to 2016 but claiming an increase in investment in the 2-year period of 2015–16 compared to 2013–14 We observe however that these figures showing increased investment do not incorporate the generally accepted accounting practice of maintaining consistency over time as they include AT T’s foreign capital expenditures in Mexico as well as expenditures related to DirectTV see Hal Singer Tracing AT T’s Capital Expenditures Over Time https haljsinger wordpress com 2017 02 10 tracing-atts-capital-expenditure-over-time and do not adjust for Sprint’s changed accounting treatment of leased handset devices from an operating expense to a capital expense See Hal Singer 2016 Broadband Capex Survey Tracking Investment in the Title II Era https haljsinger wordpress com 2017 03 01 2016-broadband-capex-survey-tracking-investment-in-the-title-ii-era 114 115 Letter from Barbara S Esbin Counsel American Cable Association to Marlene H Dortch Secretary FCC WC Docket No 14-28 at 2–5 filed Feb 2 2015 Detailing how smaller Internet providers such as Cedar Falls IA Utility already abided by Open Internet principles but the added cost of defending its “ practices rates terms and conditions of service” would be prohibitively expensive ACA Ex Parte Letter from 43 Small ISPs to Chairman Wheeler GN Docket Nos 14-28 10-127 at 1–2 filed Feb 10 2015 explaining that Title II regulation will raise costs and hinder broadband deployment and create “deep and lasting regulatory uncertainty” 116 See e g Letter from Herb Longware President Cable Communications of Willsboro Inc et al to Hon Ajit Pai Chairman FCC GN Socket No 14-28 WC Docket No 16-106 at 2 filed Apr 25 2017 Letter from 22 Small ISPs Petition of American Cable Association and National Cable Telecommunications Association For Stay 16 Federal Communications Commission FCC-CIRC1705-05 small ISP had planned to “triple the number of new base stations” that would be deployed each month to provide fixed wireless broadband service to new customers but put those plans on hold as a result of the Commission’s reclassification decision had for to put those plans on hold 117 Other small providers have had to modify or abandon altogether past business models to account for increased compliance costs and depressed investment from outside investors 118 This depressed investment has had particularly strong impacts on the deployment of broadband to previously unserved and rural areas 119 What other impacts have small providers felt as a result of reclassification Have there been any corresponding benefits for small providers 48 In addition to imposing significant regulatory costs on Internet service providers Title II reclassification created significant regulatory uncertainty USTelecom specifically identified “regulatory uncertainty” as one of the causes of reduced investment 120 Regulatory uncertainty may have particularly significant effects on small Internet service providers which may be poorly equipped to address the legal technical and financial burdens associated with an uncertain regulatory environment 121 That uncertainty has directly led to reduced investment which has harmed consumers 122 We seek comment on what other effects regulatory uncertainty has had on broadband Internet access service providers’ investment decisions 49 We also seek comment on other consumer benefits that would result from restoring broadband Internet access service classification to an information service rather than subjecting these Pending Judicial Review GN Docket No 14-28 Attach 4 at 1–2 Declaration of Michael Jensen General Manager of Bagley MN Public Utilities noting that Bagley Utilities offers broadband Internet access service to about 450 customers and it has 7 full-time employees and stating that in the past 3 years the company had invested approximately $400 000 in its network but that those investments are now likely to be curtailed due to the effects of Title II reclassification 117 See e g Joint Petition For Stay of United States Telecom Association CTIA AT T Inc Wireless Internet Service Providers Association and CenturyLink GN Docket No 14-28 Exh 1 at 5–6 Declaration of Nathan Stooke Founder and CEO of Wisper ISP Inc filed May 1 2015 Joint Stay Petition 118 See Letter from 22 Small ISPs at 2 explaining that the mere threat that the Commission may impose rate regulation affects small ISPs’ ability to obtain financing Joint Stay Petition Exh 5 at 4 Declaration of Clay Stewart CEO of SCS Broadband explaining that investors have already told SCS Broadband a small ISP that “projects that were viable investments under the regime that existed before the Title II Order will no longer provide the necessary returns to justify the investment” Joint Stay Petition Exh 6 at 4 Declaration of Forbes H Mercy President of Washington Broadband Inc explaining that the Title II Order has forced Washington Broadband Inc a small ISP to give up its existing business model of constructing new towers that cover small areas based on a return on investment model of light density return 119 Joint Stay Petition Exh 2 at 6 Declaration of L Elizabeth Bowles President and Chairman of Aristotle Inc explaining that Aristotle Inc a small ISP in Arkansas dialed back its plans to triple its customer base and expand service into unserved areas of rural Arkansas as a result of the Title II Order Joint Stay Petition Exh 6 at 4 Declaration of Forbes H Mercy President of Washington Broadband Inc explaining that the Title II Order has forced Washington Broadband Inc a small ISP to scale back expansion to new unserved or underserved areas 120 US Telecom Broadband Investment Remains Large but Ticked Down in 2015 Dec 14 2016 https www ustelecom org news press-release broadband-investment-remains-large-ticked-down-2015 121 See e g Petition of American Cable Association and National Cable Telecommunications Association For Stay Pending Judicial Review GN Docket No 14-28 Attach 1 at 1 Declaration of William D Bauer CEO of WinDBreak Cable noting that WinDBreak offers BIAS to about 440 customers and it has 10 employees filed May 1 2015 ACA Stay Petition 122 See e g Joint Stay Petition Exh 1 at 5–6 Declaration of Nathan Stooke Founder and CEO of Wisper ISP Inc noting that Wisper had planned to “triple the number of new base stations” that would be deployed each month to provide fixed wireless broadband service to new customers but the Commission’s reclassification decision had forced Wisper to put those plans on hold 17 Federal Communications Commission FCC-CIRC1705-05 services to utility-style regulation We note that increased investment is likely to lead to a faster closing of the digital divide for rural and low-income consumers higher speeds and more competition for all consumers as well as more affordable prices We seek comment on the magnitude of these effects and what further steps the Commission should take to maximize facilities-based investment and competition Specifically we seek comment on the trade-offs from changing the classification status We also seek comment more broadly on the effects on innovation of regulatory uncertainty and other examples of reduced innovation from Internet service providers as a result of the Title II classification 50 We also seek comment on specific ways in which consumers were harmed under the light-touch regulatory framework that existed before the Commission’s Title II Order Much of the Title II Order focused extensively on hypothetical actions Internet service providers “might” take and how those actions “might” harm consumers 123 but the Title II Order only articulated four examples of actions Internet service providers arguably took to justify its adoption of the Internet conduct standard under Title II 124 Do these isolated examples justify the regulatory shift that Title II reclassification entailed Do such isolated examples constitute market failure sufficient to warrant pre-emptive industry-wide regulation Were pre-existing federal and state competition and consumer protection regimes in addition to private sector initiatives insufficient to address such isolated examples and if so why What are the costs and benefits of pre-emptive industry-wide regulation in such circumstances In particular does that approach deter competition and competitive entry and does it have unintended consequences with respect to infrastructure investment Do those unintended consequences outweigh any purported benefits in addressing such isolated cases pre-emptively Is there evidence of actual harm to consumers sufficient to support maintaining the Title II telecommunications service classification for broadband Internet access service Is there any evidence that the likelihood of these events occurring decreased with the shift to Title II 51 Conversely what if any changes have been made as a result of Title II reclassification that have had a positive impact on consumers Was Title II reclassification necessary for any of those changes to occur Is there any evidence for example that consumers’ online experiences and Internet access have improved due to policies adopted in the Title II Order 4 The Commission has Legal Authority to Classify Broadband Internet Access Service as an Information Service 52 As the D C Circuit has held “ i t is axiomatic that administrative agencies may issue regulations only pursuant to authority delegated to them by Congress ”125 And that authority is not unbounded The Commission has authority as the Supreme Court recognized in Brand X to interpret the Communications Act including ambiguous definitional provisions 126 However when interpreting a statute it administers the Commission like all agencies “must operate ‘within the bounds of reasonable interpretation ’ And reasonable statutory interpretation must account for both ‘the specific context in which language is used’ and ‘the broader context of the statute as a whole ’”127 See e g Title II Order 30 FCC Rcd at 5652 para 121 “the no-blocking rule will not be as effective because broadband providers might otherwise engage in conduct that harms the open Internet but falls short of outright blocking” at 5656 para 127 “because of the very real concerns about the chilling effects that preferential treatment arrangements could have on the virtuous cycle of innovation consumer demand and investment we adopt a bright-line rule banning paid prioritization arrangements” 123 124 See Title II Order 30 FCC Rcd at 5620 5628 para 65 n 69 discussing the Comcast and Madison River proceedings para 79 n 123 discussing AT T blocking FaceTime and Comcast exempting its video service from data caps when streamed over an Xbox 125 American Library Ass’n v FCC 406 F 3d 689 691 D C Cir 2005 126 Brand X 545 U S at 980-81 127 Utility Air Regulatory Group v EPA 134 S Ct 2427 2442 2014 Utility Air 18 Federal Communications Commission FCC-CIRC1705-05 53 An agency also is free to change its approach to interpreting and implementing a statute so long as it acknowledges that it is doing so and justifies the new approach 128 Evaluating the change in regulatory approach in the Title II Order the D C Circuit majority in USTelecom applied a “highly deferential standard” to the agency’s predictive judgments regarding the investment effects of reclassification 129 and deferred to the Commission’s “‘evaluat ion of complex market conditions’” underlying its rejection of providers’ reliance interests in the prior classification 130 D C Circuit precedent also recognizes however that should the Commission’s predictions “prove erroneous the Commission will need to reconsider” the associated regulatory actions “in accordance with its continuing obligation to practice reasoned decision-making ”131 We believe that the Commission’s predictions and expectations regarding broadband investment and the nature and effects of reclassification on the operation of the marketplace were mistaken and have not been borne out by subsequent events Moreover we believe that a restoration of the information-service classification for broadband Internet access service is likely to increase infrastructure investment In such a case principles of administrative law give us more than ample latitude to revisit our approach We seek comment on this overall approach and we seek comment on these specific issues in the sections below 54 Even more fundamentally we believe that the Commission’s statutory interpretation in the Title II Order did not adequately reflect proper standards of statutory construction and that classifying broadband Internet access service as an information service is the better reading of the statute independent of the factual developments subsequent to the Title II Order We note that the Supreme Court has expressly upheld the Commission’s prior information service classification 132 We seek comment on this analysis Although the Title II Order’s telecommunications service classification was upheld in USTelecom the court emphasized that it “‘sit s to resolve only legal questions presented and argued by the parties ’” and not “‘arguments a party could have made but did not ’”133 Many arguments as to why an information service classification of broadband Internet access service reflects the better reading of ambiguous provisions of the Act were not addressed by the court because the arguments were raised in support of a claim that the Act unambiguously required a particular service classification 134 Thus although we are in any case free to revisit previously affirmed interpretations of ambiguous statutory language we note that the USTelecom decision did not reach many aspects of the statutory analysis we propose here We seek comment on this analysis and on our reasoning that the statutory 128 See e g FCC v Fox Television Stations Inc 556 U S 502 515-16 2009 Fox Mary V Harris Found v FCC 776 F 3d 21 24-25 D C Cir 2015 129 USTelecom 825 F 3d at 707 130 Id at 710 quoting Gas Transmission Northwest Corp v FERC 504 F 3d 1318 1322 D C Cir 2007 Aeronautical Radio v FCC 928 F 2d 428 445 D C Cir 1991 See also e g American Family Ass’n v FCC 365 F 3d 1156 1166 D C Cir 2004 “ T he FCC’s ‘necessarily wide latitude to make policy based on predictive judgments deriving from its general expertise implies a correlative duty to evaluate its policies over time to ascertain whether they work—that is whether they actually produce the benefits the Commission originally predicted they would ’” quoting Bechtel v FCC 10 F 3d 875 880 D C Cir 1993 131 132 Brand X 545 U S at 986 133 USTelecom 825 F 3d at 697 citations omitted 134 Or in other cases they were not addressed at all See e g id at 701–04 rejecting arguments that information service classification was unambiguously required based on the text structure and purpose of the Act id at 710–11 highlighting the limited ways in which USTelecom challenged the Title II Order for failing to demonstrate that the NARUC test from common carriage was met id at 717–18 rejecting arguments that the statute completely precludes the Commission from defining “public switched network” more broadly than the public switched telephone network id at 721 rejecting arguments that the statute necessarily compels the Commission to distinguish between “mobile broadband alone enabling a connection” and “mobile broadband enabling a connection through use of adjunct applications such as VoIP” 19 Federal Communications Commission FCC-CIRC1705-05 interpretation proposed in this Notice more faithfully adheres to the Act and reflects the better reading of the relevant provisions than the views adopted in the Title II Order B Reinstating the Private Mobile Service Classification of Mobile Broadband Internet Access Service 55 We propose to classify all broadband Internet access services—both fixed and mobile— as information services With respect to mobile broadband Internet access service we further propose to return it to its original classification as a private mobile service and in conjunction to revisit the elements of the Title II Order that modified or reinterpreted key terms in section 332 of the Act and our implementing rules We seek comment on that proposal including on the specific issues discussed below We also generally seek comment on whether certain and if so which aspects of the D C Circuit’s analysis of mobile broadband Internet access service in USTelecom necessitate modifications or additions to the Commission’s proposals with respect to mobile broadband Internet access service here 135 56 We propose to restore the meaning of “public switched network” under section 332 d 2 to its pre-Title II Order focus on the traditional public switched telephone network 136 We find persuasive the Commission’s reasoning when originally adopting the prior definition 137 which also appears more consistent with the historical usage of the term “public switched network ”138 appears to better accord with the text of section 332 d 2 by clearly covering only a single integrated network 139 and was not disturbed by Congress in amendments to section 332 of the Act 140 We seek comment on this analysis and our proposed approach 57 We also propose to return to our prior definition of “interconnected service” by restoring the word “all” in the codified definition 141 Although the court in USTelecom found the deletion of “all” to be “of no consequence” to the reclassification of mobile broadband Internet access service it did so based on an argument that the Commission never mentioned in its brief—namely that mobile broadband users can reach telephone customers “via VoIP” and that this determination is sufficient regardless of the deletion of the word “all” to render mobile broadband Internet access service interconnected with the public switched network 142 We seek comment on that view and whether the Commission erred in 2015 by modifying the definition based on the view that two separate networks can be interconnected if they do not allow all users to communicate with each other The FCC’s prior decision in this respect appears to run contrary to the focus on a single integrated network that we believe Congress likely intended in See generally USTelecom 825 F 3d at 716–26 addressing arguments regarding the Title II Order’s treatment of mobile broadband Internet access service 135 136 See 47 CFR § 20 3 2014 defining “public switched network” 137 See e g Implementation of Sections 3 n and 332 of the Communications Act Regulatory Treatment of Mobile Services Second Report and Order 9 FCC Rcd 1411 1434 1436–37 paras 53 59 1994 138 See e g Applications of Winter Park Tel Co Memorandum Opinion and Order 84 FCC 2d 689 690 para 2 n 3 1981 Ad Hoc Telecommunications Users Committee v FCC 680 F 2d 790 793 D C Cir 1982 Amendment of Part 22 of the Commission’s Rules Relating to License Renewals in the Domestic Public Cellular Radio Telecommunications Service Report and Order 7 FCC Rcd 719 720 para 9 1992 Provision of Access for 800 Service Memorandum Opinion and Order on Reconsideration and Second Supplemental Notice of Proposed Rulemaking 6 FCC Rcd 5421 5421 n 3 1991 Telecommunications Services for Hearing-Impaired and SpeechImpaired Individuals and the Americans with Disabilities Act of 1990 Notice of Proposed Rulemaking 5 FCC Rcd 7187 7190 para 20 1990 139 See 47 U S C § 332 d 2 referring to “the” public switched network 140 See e g Telecommunications Act of 1996 Pub L No 104-104 § 704 b 1996 amending section 332 of the Communications Act 141 See 47 CFR § 20 3 2014 defining “interconnected service” 142 See USTelecom 825 F 3d at 718–27 20 Federal Communications Commission FCC-CIRC1705-05 section 332 d 2 143 We seek comment on these views In the Title II Order the Commission noted that the prior definition of “interconnected service” would encompass a service that “provides general access to points on the PSN but also restricts calling in certain limited ways” such as blocking of 900 numbers but cited no evidence that the prior definition led to any confusion 144 We question the need for changes to the prior definition to account for that nuance but nonetheless seek comment on whether modified rule language is warranted and if so what language targeted narrowly to that issue should be incorporated 58 We also seek comment on whether any other interpretations of section 332 or our implementing rules from the Title II Order should be revisited here in connection with our proposed classification of mobile broadband Internet access service For example would a narrower interpretation of “capability” for purposes of the definition of “interconnected service” under our rules be warranted based on the Act or the regulatory history of that language Are there other interpretations that should be reconsidered In addition to the changes to the definitions in section 20 3 of the rules discussed above would any additional changes to our codified rules be warranted 59 In applying the definitions and interpretations of key terms in section 332 and our implementing rules under the proposals above we also propose to reach the same conclusions regarding the application of those terms to mobile broadband Internet access service as we did in the Wireless Broadband Order 145 We seek comment on that proposal and whether there have been any material changes in technology the marketplace or other facts that would warrant refinement or revision of any of that analysis 60 Furthermore insofar as mobile broadband Internet access service is best interpreted to be an information service we believe that likely also would counsel in favor of classifying it as a private mobile service to avoid the inconsistency of the service being both an information service and a common carrier service The Commission explained this reasoning when originally classifying mobile broadband Internet access service as both an information service and a private mobile service and we propose to apply that same reasoning again here 146 We seek comment on this proposal 61 We also tentatively conclude that mobile broadband Internet access service is not the “functional equivalent” of commercial mobile service and seek comment on that view The Commission previously has observed in light of Congress’s determinations in section 332 that “very few mobile services that do not meet the definition of CMRS will be a close substitute for a commercial mobile radio service ”147 By contrast we are concerned that the Title II Order’s test which focuses on whether the service merely “enables ubiquitous access to the vast majority of the public ” would eviscerate the statutory scheme 148 We believe that the standard for demonstrating functional equivalency under our rules is instead more likely to properly implement section 332 d 3 of the Act and we thus propose to Had all the elements of the Title II Order’s mobile broadband Internet access service classification remained a future Commission might have incentives to adopt such an approach to avoid the potentially absurd result that traditional wireless voice service no longer constituted commercial mobile service While not finding it a sufficient basis to reject the Title II Order’s treatment of mobile broadband Internet access service the D C Circuit acknowledged the possibility that the revised definition of public switched network raised questions about whether traditional wireless voice service was sufficiently interconnected with the public switched network to still constitute a commercial mobile service See USTelecom 825 F 3d at 722 143 144 Title II Order 30 FCC Rcd at 5787 para 402 n 1172 internal quotations and citation omitted 145 Wireless Broadband Order 22 FCC Rcd at 5915–18 paras 37–45 146 Id at 5919–21 paras 48–56 147 CMRS Second Report and Order 9 FCC Rcd at 1447 para 79 148 See Title II Order 30 FCC Rcd at 5790 para 407 21 Federal Communications Commission FCC-CIRC1705-05 reconsider the Title II Order’s position that the Commission is free to depart from that standard 149 In addition the Title II Order made no claim that the functional equivalency standard in our rules was met by mobile broadband Internet access service and we similarly propose here that it does not meet that standard We seek comment on these proposals 62 Given the apparent historical success of the wireless marketplace prior to the Title II Order we anticipate that returning mobile broadband Internet access service to its original classification of private mobile service and restoring prior definitions and interpretations of key concepts in section 332 is likely to substantially benefit the wireless marketplace and consumers and have few if any policy disadvantages We seek comment on this view To the extent any commenters believe that these proposals will have negative policy consequences we seek specific information regarding the scope or significance of any such consequences and whether they can be mitigated in whole or in part through modifications to our proposals C Effects on Regulatory Structures Created by the Title II Order 63 The Title II Order imposed additional regulatory frameworks under Title II including forbearance and privacy We seek comment on how we should treat those structures and proceedings moving forward 64 Forbearance If we adopt our lead proposal to remove the Title II reclassification of broadband Internet access service what effect does that action have on the provisions of the Act from which the Commission forbore in the Title II Order We believe that restoring the classification status of broadband Internet access service to an information service will render any additional forbearance moot in most cases We seek comment on this analysis At the same time we seek comment on whether with respect to broadband Internet access service the Commission should maintain and extend forbearance to even more provisions of Title II as a way of further ensuring that our decision in this proceeding will prove to reduce regulatory burdens 65 We also seek comment on the effect of reinstating an information service classification on providers that voluntarily offered broadband transmission on a common carrier basis under the Wireline Broadband Classification Order framework 150 The Title II Order allowed such providers to opt-in to the Title II Order’s forbearance framework 151 Should providers voluntarily electing to offer broadband transmission on a common carrier basis be able to do so under the Title II Order’s forbearance framework if we reclassify broadband Internet access service as an information service If not what transition mechanisms are required for such providers that opted-in to the Title II Order’s forbearance framework to enable them to revert back to the Wireline Broadband Classification Order framework Should we extend forbearance to any other rules or statutory provisions for carriers that choose to offer broadband transmission on a common carrier basis 66 Section 222 Regulations Historically the Federal Trade Commission FTC protected the privacy of broadband consumers policing every online company’s privacy practices consistently and initiating numerous enforcement actions 152 When the Commission reclassified broadband Internet access service as a common carriage telecommunications service in 2015 however that action stripped FTC authority over Internet service providers because the FTC is prohibited from regulating common 149 47 CFR § 20 9 a 14 150 Wireline Broadband Classification Order 20 FCC Rcd at 14900-03 paras 89-95 151 Title II Order 30 FCC Rcd at 5819 para 460 n 1378 152 See 15 U S C § 45 a 1 prohibiting unfair or deceptive acts or practices in or affecting commerce Protecting the Privacy of Customers of Broadband and Other Telecommunications Services WC Docket No 16-106 Report and Order 31 FCC Rcd 13911 13945 para 87 2016 2016 Privacy Order “the FTC has brought over 500 cases protecting the privacy and security of consumer information” 22 Federal Communications Commission FCC-CIRC1705-05 carriers 153 To address the gap created by the Commission’s reclassification of broadband Internet access service as a common carriage service the Title II Order called for a new rulemaking to apply section 222’s customer proprietary network information provisions to Internet service providers 154 In October 2016 the Commission adopted rules governing Internet service provider’s privacy practices and applied the rules it adopted to other providers of telecommunications services 155 In March 2017 Congress voted under the Congressional Review Act CRA to disapprove the Commission’s 2016 Privacy Order which prevents us from adopting rules in substantially the same form 156 67 We propose to return jurisdiction over Internet service providers’ privacy practices to the FTC with its decades of experience and expertise in this area 157 We seek comment on this proposal 68 Lifeline We propose to maintain support for broadband in the Lifeline program after reclassification In the Universal Service Transformation Order the Commission recognized that “ s ection 254 grants the Commission the authority to support not only voice telephony service but also the facilities over which it is offered”158 and “allows us to require carriers receiving federal universal service support to invest in modern broadband-capable networks ”159 Accordingly as the Commission did in the Universal Service Transformation Order we propose requiring Lifeline carriers to use Lifeline support “for the provision maintenance and upgrading” of broadband facilities capable of providing supported services 160 We seek comment on this proposal We also seek comment on any rule changes necessary to effectuate this change in our underlying authority to support broadband for low-income individuals and families 69 Other Beyond the issues raised above we seek comment on the impact of reclassification on other Commission proceedings and proposals For instance how should we take into account our proposed reclassification in our proposals with respect to pole attachments and our inquiries See 15 U S C §§ 45 a 2 exempting “common carriers subject to the Acts to regulate commerce” 44 defining “Acts to regulate commerce” as including “the Communications Act of 1934 and all Acts amendatory thereof and supplementary thereto” 47 U S C § 153 51 providing that “ a telecommunications carrier shall be treated as a common carrier under the Communications Act only to the extent that it is engaged in providing telecommunications services” One Ninth Circuit case has held that the common carrier exemption precluded FTC oversight of BIAS providers that otherwise were common carriers with respect to non-BIAS services See FTC v AT T Mobility LLC 835 F 3d 993 9th Cir 2016 The FTC has sought rehearing of that case en banc which the Commission has supported See Amicus Curiae Brief of the Federal Communications Commission In Support of the Federal Trade Commission’s Petition For Rehearing En Banc FTC v AT T Mobility LLC No No 3 14-cv-04785EMC 9th Cir filed Oct 24 2016 Letter Pursuant to Fed R App P 28 j of amicus FCC FTC v AT T Mobility LLC No 15-16585 9th Cir Apr 21 2017 To the extent that issue ultimately were resolved favorably for the FTC the Commission’s reclassification of broadband Internet access service as a common carrier would remain a constraint on the extent to which the FTC could oversee the conduct of Internet service providers 153 154 Title II Order 30 FCC Rcd at 5820 para 462 155 Protecting the Privacy of Customers of Broadband and Other Telecommunications Services WC Docket No 16106 Report and Order 31 FCC Rcd 13911 2016 2016 Privacy Order 5 U S C §801 b 2 “A rule that was disapproved under the CRA may not be reissued in substantially the same form and a new rule that is substantially the same as such a rule may not be issued unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule” 156 157 See 5 U S C § 801 Protecting the Privacy of Customers of Broadband and Other Telecommunications Services Pub L No 115-22 131 Stat 88 enacting S J Res 34 115 th Cong 2017 158 Connect America Fund 26 FCC Rcd 17663 17685 para 64 2011 Universal Service Transformation Order 159 Id at 17686 para 65 160 See 47 U S C § 254 e 23 Federal Communications Commission FCC-CIRC1705-05 with respect to preemption under Section 253 of the Act 161 How should the Broadband Deployment Advisory Committee factor in the reduced regulatory burdens and increased investment that we anticipate will flow from reclassification 162 We encourage commenters to offer specific recommendations as to how we can leverage our proposed reclassification in other proceedings to further encourage broadband deployment to all Americans IV A LIGHT-TOUCH REGULATORY FRAMEWORK 70 Proposing to restore broadband Internet access service to its long-established classification as an information service reflects our commitment to a free and open Internet Indeed our lead proposal reaffirms the long-standing bipartisan consensus begun in the Clinton Administration by restoring the Internet to the dynamic state that allowed it to flourish prior to the Title II Order To determine how to best honor our commitment to restoring the free and open Internet we propose reevaluating the Commission’s existing rules and enforcement regime to analyze whether ex ante regulatory intervention in the market is necessary To the extent we decide to retain any of the Commission’s ex ante regulations we seek comment on whether and how we should modify them specifically considering different approaches such as self-governance or ex post enforcement that may effectuate our goals better than across-the-board rules Finally we discuss the Commission’s legal authority to adopt rules governing Internet service provider practices A Re-evaluating the Existing Rules and Enforcement Regime 71 Below we explore the best method to restore the long-standing consensus under both Democratic and Republican-led Commissions represented by the four Internet Freedoms that consumers should have access to the content applications and devices of their choosing as well as meaningful information about their service all without deterring the investment and innovation that has allowed the Internet to flourish We examine these freedoms and the Commission’s current rules related to them and for each ask whether we should keep modify or eliminate them 1 Eliminating the Internet Conduct Standard 72 In the Title II Order the Commission created a catch-all standard intended to prohibit “current or future practices that cause the type of harms the Commission’s rules are intended to address ”163 This standard allows the Commission to prohibit practices that it determines unreasonably interfere with or unreasonably disadvantage the ability of consumers to reach the Internet content services and applications of their choosing or of online content applications and service providers to access consumers 164 This standard also gives the Commission discretion to prohibit any Internet service provider practice that it believes violates any one of the non-exhaustive list of factors adopted in the Title II Order 165 73 We propose eliminating this Internet conduct standard and the non-exhaustive list of factors intended to guide application of the rule and we seek comment on this proposal What are the 161 See Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment WC Docket No 17-84 Notice of Proposed Rulemaking Notice of Inquiry and Request for Comment FCC 17-37 rel Apr 21 2017 162 See FCC Broadband Deployment Advisory Committee https www fcc gov broadband-deployment-advisorycommittee 163 Title II Order 30 FCC Rcd at 5659 para 135 164 Id Title II Order 30 FCC Rcd at 5661–64 paras 138–45 listing seven “non-exhaustive” factors to guide the application of the Internet conduct standard including end-user control competitive effects consumer protection effect on innovation investment or broadband deployment free expression application use-agnostic and standard practices 165 24 Federal Communications Commission FCC-CIRC1705-05 costs of the present Internet conduct standard and implementing factors Do the standard and its implementing factors provide carriers with adequate notice of what they are and are not allowed to do 166 Does the standard benefit consumers in any way and if so how We believe that eliminating the Internet conduct standard will promote network investment and service-related innovation by eliminating the uncertainty caused by vague and undefined regulation Do commenters agree 74 Because the Internet conduct standard is premised on theoretical problems that will be adjudicated on an individual case-by-case basis Internet service providers must guess at what they are permitted and not permitted to do 167 The now-retracted so-called Zero Rating Report issued by the Wireless Telecommunications Bureau illustrates the dilemma providers experience under a Title II regulatory regime 168 After a thirteen-month investigation the Report did not specifically call for an end to any provider’s practices or identify any particular harm from offering consumers free data Instead it stated that the free-data plans “may raise” economic and public policy issues that “may harm consumers and competition ”169 It then reiterated that any determination about the harm from free data offerings would be made by the Commission on a “case-by-case” basis using a “non-exhaustive list of factors ”170 Instead of giving providers clear rules of the road to govern future conduct this report put a provider on notice that an enforcement action could be just around the corner The report and the investigation that preceded it left Internet service providers with two options either wait for a regulatory enforcement action that could arrive at some unspecified future point or stop providing consumers with innovative offerings We seek comment on whether this roaming mandate has impacted innovation and what impact that has had on consumers We seek comment on whether eliminating this vague standard will spur innovation and benefit consumers 75 We propose not to adopt any alternatives to the Internet conduct rule and we seek comment on this proposal Is there a need for any general non-discrimination standard in today’s Internet marketplace If so what would that general non-discrimination standard be The 2014 Notice proposed prohibiting “commercially unreasonable practices ”171 Should we consider that alternative Or should we consider another general rule and framework such as Commission adjudication of non-discrimination complaints If we adopt our proposals to eliminate the Internet conduct standard and not to adopt any alternative general requirement we seek comment on how we can encourage innovative business models that give consumers more choices and lower prices while also promoting consumer freedom on the Internet 2 Determining the Need for the Bright Line Rules and the Transparency Rule 76 In the Title II Order despite virtually no quantifiable evidence of consumer harm the Commission nevertheless determined that it needed bright line rules banning three specific practices by providers of both fixed and mobile broadband Internet access service blocking throttling and paid Id at 5659 para 135 stating that the Commission could investigate and prohibit “on a case-by-case basis practices that unreasonably interfere with or unreasonably disadvantage the ability of consumers to reach the Internet content services and applications of their choosing or of edge providers to access consumers using the Internet” Zero Rating Report at 3–5 setting out 16 discrete criteria the Commission could use to evaluate offerings on a case-by-case basis 166 See Letter from 22 Small ISPs at 2 asserting that the general conduct rules is “so vague and open-ended that we are concerned that the Commission would invoke it to sanction conduct for which we have no advance warning” 167 Wireless Telecommunication Bureau Policy Review of Mobile Broadband Operators’ Sponsored Data Offerings for Zero Rated Content and Services Jan 11 2017 http transition fcc gov Daily_Releases Daily_Business 2017 db0111 DOC-342987A1 pdf Zero Rating Report 168 169 Id at 17 170 Id at 10 171 2014 Notice 29 FCC Rcd at 5602 para 116 25 Federal Communications Commission FCC-CIRC1705-05 prioritization 172 The Commission also “enhanced” the transparency rule by adopting additional disclosure requirements 173 Today we revisit these determinations and seek comment on whether we should keep modify or eliminate the bright line and transparency rules 77 At the outset of our review of the Commission’s existing rules we seek comment on whether ex ante regulatory intervention in the market is necessary in the broadband context Beyond the few scattered anecdotes cited by the Title II Order have there been additional concrete incidents that threaten the four Internet Freedoms sufficient to warrant adopting across-the-board rules Is there any evidence of market failure or is there likely to be sufficient to warrant pre-emptive comprehensive regulation How have marketplace developments impacted the incentive and ability if any of broadband Internet access service providers to engage in conduct that is contrary to the four Internet Freedoms Must we find that market power exists to retain rules in this space and if so must the rules only apply to providers that have market power Further should any approach we adopt—whether ex ante rules expectations regarding industry self-governance or ex post enforcement practices—vary based on the size financial resources customer base of the broadband Internet access service provider and or other factors Specifically we seek comment on whether rules are necessary for or burdensome on smaller providers 78 The Commission partially justified the 2015 rules on the theory that the rules would prevent anti-competitive behavior by broadband Internet access providers’ seeking to advantage affiliated content 174 With the existence of antitrust regulations aimed at curbing various forms of anticompetitive conduct such as collusion and vertical restraints under certain circumstances we seek comment on whether these rules are unnecessary in light of these other regulatory regimes 175 Could the continued existence of these rules negatively impact future innovative pro-competitive business deals that would not by themselves run afoul of merger conditions or established antitrust law 79 Need for the No-Blocking Rule We emphasize that we oppose blocking lawful material The Commission has repeatedly found the need for a no-blocking rule on principle asserting that “the freedom to send and receive lawful content and to use and provide applications and services without fear of blocking is essential to the Internet’s openness ”176 We merely seek comment on the appropriate means to achieve this outcome consistent with the goals of maintaining Internet freedom maximizing investment and respecting the rule of law We seek comment on whether a codified no-blocking rule is needed to protect such freedoms For example prior to 2015 many large Internet service providers voluntarily abided by the 2010 no-blocking rule in the absence of a regulatory obligation to do so 177 Do we have reason to think providers would behave differently today if the Commission were to eliminate 172 Title II Order 30 FCC Rcd at 5660 para 137 See 47 U S C §§ 201 202 208 173 Title II Order 30 FCC Rcd at 5672 paras 162–71 Title II Order 30 FCC Rcd at 5652 para 123 stating that “if a broadband provider and an unaffiliated entity both offered over-the-top applications the no-throttling rule would prohibit broadband providers from constraining bandwidth for the competing over-the-top offering to prevent it from reaching the broadband provider’s end user in the same manner as the affiliated application ” 174 See generally 47 U S C § 152 b “ N othing in this Act shall be construed to modify impair or supersede the applicability of any of the antitrust laws ” The Title II Order stated that it did not “preclude the Antitrust Division of the Department of Justice or the Commission itself from fulfilling their respective responsibilities under Section 7 of the Clayton Act 15 U S C §18 or the Commission’s public interest standard as it assesses prospective transactions ” Hazlett Thomas W and Wright Joshua D The Law and Economics of Network Neutrality September 12 2011 George Mason Law Economics Research Paper No 11-36 available at http dx doi org 10 2139 ssrn 1917587 175 176 Title II Order 30 FCC Rcd at 5647–48 para 111 2014 Notice 29 FCC Rcd at 5593 para 89 Open Internet Order 25 FCC Rcd at 17941–42 para 62 177 Title II Order 30 FCC Rcd at 5648 para 112 n 248 26 Federal Communications Commission FCC-CIRC1705-05 the no-blocking rule Is the no-blocking rule is necessary for or burdensome on smaller providers 80 We seek comment on the continuing need for a no-blocking rule The no-blocking rule originally adopted in 2010 invalidated by the Verizon court and re-adopted in the Title II Order prohibits Internet service providers from blocking competitors’ content by mandating that a customer has a right to access lawful content applications services and to use non-harmful devices subject to reasonable network management 178 81 If we determine that a no-blocking rule is indeed necessary to ensure a free open and dynamic Internet what are the best means to achieve this outcome consistent with the goals of maintaining Internet freedom and maximizing investment Should we consider modifying the existing no-blocking rule to better align with our proposed legal classification of broadband Internet access service as an information service The Verizon court made clear that the Commission’s 2010 no-blocking rule impermissibly subjected Internet service providers to common-carriage regulation 179 We seek comment on whether there are other formulations of a no-blocking rule that are consistent with our proposed legal classification of broadband Internet access service as an information service and for which we would have legal authority 82 Need for the No-Throttling Rule In the Title II Order the Commission concluded that throttling was a sufficiently severe and distinct threat that it required its own separate codified rule 180 The no-throttling rule mirrors the no-blocking rule and bans the impairment or degradation of lawful Internet traffic or use of a non-harmful device subject to reasonable network management practices 181 We seek comment on whether this rule is still necessary particularly for smaller providers How does the rule benefit consumers and what are its costs When is “throttling” harmful to consumers Does the nothrottling rule prevent providers from offering broadband Internet access service with differentiated prioritization that benefits consumers Does the no-throttling rule harm latency-sensitive applications and content Does it prevent product differentiation among broadband Internet access service providers If we eliminate the no-blocking rule should we also eliminate the no-throttling rule If we determine that a no-throttling rule is indeed necessary to ensure a free open and dynamic Internet are there ways in which we could modify the no-throttling rule so it aligns with our proposed legal classification of broadband Internet access service as an information service and for which we would have legal authority 83 The Commission justified the separate codified no-throttling rule on the theory of preventing anti-competitive behavior for broadband Internet access providers’ affiliated content 182 With the existence of antitrust and other regulations aimed at curbing collusion we seek comment on whether a no-throttling rule is duplicative of these other regulatory regimes 183 Could the continued existence of this 47 CFR § 8 5 Title II Order 30 FCC Rcd at 5648-49 paras 112-13 “A person engaged in the provision of broadband Internet access service insofar as such person is so engaged shall not block lawful content applications services or non-harmful devices subject to reasonable network management ” 178 179 Verizon 740 F 3d at 658 47 CFR § 8 7 “A person engaged in the provision of broadband Internet access service insofar as such person is so engaged shall not impair or degrade lawful Internet traffic on the basis of Internet content application or service or use of a non-harmful device subject to reasonable network management ” Title II Order 30 FCC Rcd at 5652 para 121 180 181 Title II Order 30 FCC Rcd at 5651–52 para 120 182 Title II Order 30 FCC Rcd at 5652 para 123 See generally 47 U S C § 152 b “ N othing in this Act shall be construed to modify impair or supersede the applicability of any of the antitrust laws ” The Title II Order stated that it did not “preclude the Antitrust Division of the Department of Justice or the Commission itself from fulfilling their respective responsibilities under Section 7 of the Clayton Act 15 U S C §18 or the Commission’s public interest standard as it assesses prospective transactions ” Hazlett Thomas W and Wright Joshua D The Law and Economics of Network Neutrality Sept 12 2011 George Mason Law Economics Research Paper No 11-36 available at 183 27 Federal Communications Commission FCC-CIRC1705-05 rule negatively impact future innovative pro-competitive business deals that would not by themselves run afoul of merger conditions or established antitrust law 84 Need for the No Paid Prioritization Rule The Commission concluded in the Title II Order that “fast lanes” or “paid prioritization” practices “harm consumers competition and innovation as well as create disincentives to promote broadband deployment ”184 The Commission adopted this ex ante flat ban on individual negotiations to address an apparently nonexistent problem The ban on paid prioritization did not exist prior to the Title II Order and even then the record evidence confirmed that no such rule was needed since several large Internet service providers made it clear that that they did not engage in paid prioritization185 and had no plans to do so 186 We seek comment on the continued need for such a rule and our authority to retain it 85 What are the trade-offs in banning business models dependent on paid prioritization versus allowing them to occur when overseen by a regulator or industry actors Is there a risk that banning paid prioritization suppresses pro-competitive activity For example could allowing paid prioritization give Internet service providers a supplemental revenue stream that would enable them to offer lower-priced broadband Internet access service to end-users What would be the impacts on new startups and innovation Does a no-paid-prioritization rule harm the development of real-time or interactive services 187 Could allowing paid prioritization enable certain critical information such as consumers’ health care vital signs that are being monitored remotely to be transmitted more efficiently or reliably What other considerations mitigate any potential negative impacts from business models like paid prioritization Should the Commission impose restrictions on these business models at all 86 We seek comment on current traffic delivery arrangements online How do content application and service providers host their data online Do they rely on installing their own servers in data centers content delivery networks or cloud-based hosting What are the varying service characteristics of these options and their varying costs It appears that some larger online content providers like Netflix host their own data centers and interconnect directly with Internet service providers 188 Is that still true What are the service characteristics and costs of this option How should the existence of these arrangement impact our evaluation of whether Internet service providers should be able to offer an alternative delivery option such paid prioritization 87 For those parties that believe an ex ante flat ban on paid prioritization is necessary are there other formulations of a no-paid-prioritization rule that are consistent with our proposed legal classification of broadband Internet access service as an information service and for which we would have legal authority Are there any other formulations that are consistent with allowing pro-competitive or pro-consumer paid prioritization arrangements Would we need to modify the rule and if so how 88 Need for the Transparency Rule We seek comment on whether to keep modify or eliminate the transparency rule 189 When the Commission adopted the transparency rule in 2010 and enhanced it in 2015 it found that “effective disclosure of Internet service providers’ network management practices performance and commercial terms of service promotes competition innovation investment http dx doi org 10 2139 ssrn 1917587 184 47 CFR § 8 9 Title II Order 30 FCC Rcd at 5653 para 125 185 See Title II Order 30 FCC Rcd at 5656 para 127 n 301 listing commenters that do not engage in paid prioritization 186 See id at 5656 para 127 n 302 listing commenters that did not plan to engage in paid prioritization Brent Skorup The FCC’s Misguided Paid Priority Ban The Technology Liberation Front Apr 13 2017 https techliberation com 2017 04 13 the-fccs-misguided-paid-priority-ban 187 188 See e g Title II Order 30 FCC Rcd at 200 n 504 189 47 CFR § 8 8 28 Federal Communications Commission FCC-CIRC1705-05 end-user choice and broadband adoption ”190 We continue to support these objectives and seek comment on whether the existing transparency rule is the best way to accomplish them or if there are other methods we can employ to achieve the goals of competition innovation investment end-user choice and broadband adoption 89 Although we agree that the disclosure requirements were among some of the least intrusive regulatory measures imposed by the Title II Order 191 we seek comment on whether the additional reporting obligations from that rule remains necessary in today’s competitive broadband marketplace What are the benefits and drawbacks of those additional reporting obligations Is the length of time necessary to obtain approval of these rules first adopted in February 2015 and yet not going into effect until nearly two years later illustrative of just how burdensome the new enhancements are in comparison to the 2010 rule 192 Would the original transparency rule which has been continuously operational since it came into effect following adoption of the Open Internet Order be sufficient to protect consumers Although the Verizon court upheld the 2010 transparency rule we seek comment on our authority to retain the 2015 “enhancements” or to modify the transparency rule in a manner distinct from the Open Internet Order or Title II Order For example does the full and accurate disclosure of service plan information to consumers carry with it most of the benefits of the rule How often do nonconsumers rely on the additional disclosures required by the transparency rule Are those additional benefits worth the additional cost of compliance especially for small businesses 90 Assuming we find a transparency rule necessary how should we treat the additional guidance related to the transparency rule For example should we continue to enforce guidance from the Commission’s Chief Technology Officer regarding acceptable methodologies for disclosure of network performance to satisfy the enhanced transparency rule 193 Is there merit in continuing to promote the broadband consumer labels that provided ISPs with a safe harbor—or do those standardized notices harm consumers by preventing them from obtaining additional information 194 Does the repeated need for advisory guidance following the original 2010 transparency rule indicate that the rule itself is too openended 195 3 Additional Considerations Applicable to Existing Rules 91 Should we decide to keep or modify any of our existing open Internet rules we propose and seek comment on several issues related to their continued operation 92 Scope Should we keep any of the existing bright-line rules or the transparency rule we propose maintaining the definitions of the services applicable to the rules and the exception for reasonable 190 Title II Order 30 FCC Rcd at 5670 para 157 Open Internet Order 25 FCC Rcd at 17938–39 para 56 191 See Title II Order 30 FCC Rcd at 5669 para 154 2014 Notice 29 FCC Rcd at 5585 para 66 192 See Notice of OMB Approval of the 2015 Enhancements to the Open Internet Transparency Requirements 31 FCC Rcd 13218 Public Notice CGB 2016 193 See Guidance on Open Internet Transparency Rule Requirements Public Notice 31 FCC Rcd 5330 2016 2016 Advisory Guidance 194 See Consumer Governmental Affairs Wireline Competition Wireless Telecommunications Bureaus Approve Open Internet Broadband Consumer Labels Public Notice 31 FCC Rcd 3358 CGB 2016 Our seeking comment on the policy implications of the continued use of the broadband labels is not a reflection on the significant resource commitments from industry and consumer group representatives through the Commission’s Consumer Advisory Committee whose dedication and work on a variety of issues we value and appreciate 195 FCC Enforcement Bureau and Office of General Counsel Issue Advisory Guidance for Compliance with Open Internet Transparency Rule GN Docket No 09-191 WC Docket No 07-52 Public Notice 26 FCC Rcd 9411 2011 2011 Advisory Guidance FCC Enforcement Advisory Open Internet Transparency Rule Broadband Providers Must Disclose Accurate Information to Protect Consumers Public Notice 29 FCC Rcd 8606 8607 2014 2014 Advisory Guidance 29 Federal Communications Commission FCC-CIRC1705-05 network management adopted in the Title II Order 196 Reasonable network management “allow s service providers the freedom to address legitimate needs such as avoiding network congestion and combating harmful or illegal content” without running afoul of the rules 197 With respect to the definition of “reasonable network management ” we seek comment on whether we should eliminate the restriction imposed by the Title II Order that the exception will only be considered if used for a “technical management justification rather than other business justifications ”198 or if we should return to the 2010 definition of “reasonable network management” that did not contain that qualifier 199 93 For the reasonable network management exception and definition of non-broadband Internet access service data services that fall outside the scope of the rules we seek comment on how we should view any additional guidance explaining those terms as set forth in the Title II Order but not codified as part of the rules 200 Should we follow the case-by-case approach taken for evaluating reasonable network management 201 For non-broadband Internet access service data services should we adhere to the characteristics of non-broadband Internet access service data services described in the Title II Order 202 Or should we revert to the general concept of non-broadband Internet access service data services discussed in the Open Internet Order and then known as “specialized services” Further for non-broadband Internet access service data services should we eliminate the guidance that if nonbroadband Internet access service data services “are undermining investment innovation competition and end-user benefits ” then the Commission will take enforcement action—including the particularized focus on ensuring that “over-the-top services offered over the Internet are not impeded in their ability to compete with other data services ”203 94 Application to Mobile To the extent we keep or modify any of the existing rules we seek comment on whether mobile broadband should be treated differently from fixed broadband The Title II Order applied the Internet openness rules equally to both fixed and mobile broadband Internet access services 204 This approach departed from the Open Internet Order’s framework which adopted a different no-blocking standard for mobile broadband Internet access service and excluded mobile from 196 47 CFR § 8 2 Title II Order 30 FCC Rcd at 5696–99 paras 207–13 197 Title II Order 30 FCC Rcd at 5622 para 69 Id at 5670 para 216 describing a non-technical management justification to be “a practice that permits different levels of network access for similarly situated users based solely on the particular plan to which the user has subscribed” 198 Compare 47 CFR § 8 2 defining a reasonable network management practice as “a practice that has a primarily technical network management justification but does not include other business practices ” which is “reasonable if it is primarily used for and tailored to achieving a legitimate network management purpose taking into account the particular network architecture and technology of the broadband Internet access service” with 47 CFR § 8 11 2012 defining a reasonable network management practice as a practice that “is primarily used for and tailored to achieving a legitimate network management purpose taking into account the particular network architecture and technology of the broadband Internet access service” 199 200 Title II Order 30 FCC Rcd at 5701–04 paras 218–24 201 Open Internet Order 25 FCC Rcd at 17952 para 83 202 Title II Order 30 FCC Rcd at 5696–97 para 208 see also Open Internet Advisory Committee 2013 Annual Report Aug 20 2013 at 69 http transition fcc gov cgb oiac oiac-2013-annual-report pdf 2013 OIAC Annual Report these characteristics include that non-BIAS data services are not used to reach large parts of the Internet not a generic platform—but rather a specific “application level” service and use some form of network management to isolate the capacity used by these services from that used by broadband Internet access services 203 Title II Order 30 FCC Rcd at 5697 para 210 204 Title II Order 30 FCC Rcd at 5635–43 5650 paras 88–101 117 30 Federal Communications Commission FCC-CIRC1705-05 the no unreasonable discrimination rule 205 Are there legal technical economic and or policy reasons to distinguish mobile and fixed broadband with respect to rules in this context and if so how should we differentiate the two in any rules that we keep or modify For instance several mobile providers who opposed application of the broader rules in 2015 argued that additional rules were unnecessary because competition for mobile broadband service adequately restrained the behavior of mobile Internet service providers 206 We seek comment on whether this contention is correct in today’s marketplace 4 Enforcement Regime 95 Should we keep or modify any of the Commission’s existing rules discussed above we seek comment on how we should enforce them In the Open Internet Order the Commission set forth procedures for filing both informal207 and formal208 complaints Commission rules currently provide for filing fees in the case of complaints to enforce Part 8 rules governing broadband Internet access service and in the case of data roaming complaints 209 Would those rules need to be modified in the event that we reclassify broadband Internet access service Could some rules subject to those complaint procedures remain Are there other similar issues the Commission would need to address The Title II Order also allowed the Enforcement Bureau to issue advisory opinions210 and enforcement advisories 211 and it created an ombudsperson position to provide effective access to dispute resolution 212 We seek comment on whether advisory opinions or enforcement advisories have benefitted consumers or broadband Internet access service providers If we restore the broadband Internet access service classification to an information service should that alter our complaint and enforcement process in this context 96 Additionally we seek comment on streamlining future enforcement processes For instance we propose eliminating the ombudsperson role Is the role of an ombudsperson necessary to protect consumer business and other organizations’ interests when the Commission has a Bureau—the Consumer and Governmental Affairs Bureau CGB —dedicated to protecting consumer interests 213 Our experience suggests that consumers are comfortable working with CGB and typically did not call on the ombudsperson specifically Has the ombudsperson been called to action to assist in circumstances that otherwise could not have been handled by CGB 97 What have been the benefits and drawbacks of the complaint procedures instituted in 2010 and 2015 Since these rules were formally codified in 2010 no formal complaints have been filed under them Can we infer that parties heeded the Commission’s encouragement to “resolve disputes through informal discussions and private negotiations” without Commission involvement except through the informal complaint process 214 Does the lack of formal complaints indicate that dedicated formal enforcement procedures are unwarranted If we restore broadband Internet access service’s classification as an information service should that alter our complaint and enforcement process in this context If so in what way should the processes be altered Are there methods other than formal complaints we can 205 Open Internet Order 25 FCC Rcd at 17956–57 17959–60 paras 94–95 99 206 Title II Order 30 FCC Rcd at 5638 para 93 207 Open Internet Order 25 FCC Rcd at 17986–87 para 153 208 Id at 17987–89 paras 154–59 209 47 CFR §§ 8 13 b 20 12 e 2 210 Title II Order 30 FCC Rcd at 5706 para 229 211 Id at 5709–10 para 240 212 Id at 5714 para 254 213 See Title II Order 30 FCC Rcd at 5714–15 paras 254–56 214 Title II Order 30 FCC Rcd at 5704 para 224 citing 2014 Notice 29 FCC Rcd at 5618 para 161 Open Internet Order 25 FCC Rcd at 17986 para 15 31 Federal Communications Commission FCC-CIRC1705-05 employ to ensure a free and open Internet 98 In addition to the enforcement regime the Title II Order delegated authority to several Bureaus and Offices to make further decisions involving the rules following their adoption For example the Title II Order delegated authority to the Chief Technologist to provide guidance under the transparency rule and further delegated authority to several Bureaus to determine whether the safe harbor disclosures under the transparency rule aligned with the Commission’s expectations 215 If we determine there is no need for the existing transparency rule or enforcement regime then we believe that the technological and safe harbor guidance would become irrelevant We also believe that the safe harbor disclosure guidance would be rendered moot We seek comment on this analysis and on whether there nonetheless are any affirmative steps the Commission should take with respect either to those delegations of authority or to actions already taken in reliance on that delegated authority B Legal Authority to Adopt Rules 99 We seek comment on the legal authority that the Commission would have in this area if we adopted our lead proposal to classify broadband Internet access service as an information service 100 Section 706 We seek comment on whether section 706 a and b of the 1996 Act are best interpreted as hortatory rather than as delegations of regulatory authority Such an interpretation generally is reflected in the Commission’s approach to section 706 prior to 2010 216 The text of these provisions also appears more naturally read as hortatory particularly given the lack of any express grant of rulemaking authority authority to prescribe or proscribe the conduct of any party or to enforce compliance Although some courts have held that the Commission’s post-2010 interpretation of section 706 a and or b as a grant of regulatory authority was not unreasonable we seek comment on whether interpreting those provisions as hortatory nonetheless is the better reading 217 Or should we maintain our post-2010 interpretation of these provisions Alternatively we seek comment whether section 706 reflects a “deregulatory bent ”218 and if so how we should interpret that with respect to obligations for regulated entities If section 706 reflects a deregulatory emphasis what authority does it give the Commission particularly in situations in which capital expenditures by Internet service providers have slowed as they have in the past year under Title II regulation If we interpret section 706 a as a grant of authority does that mean state commission would have coequal authority If we interpret section 706 b as a grant of authority what would happen to any rules adopted using that authority if the Commission later found that advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion Are there other interpretations of section 706 of the 1996 Act that we should consider 101 Section 230 We also seek comment on whether section 230 gives us the authority to retain any rules that were adopted in the Title II Order In Comcast the D C Circuit observed that the 215 Title II Order 30 FCC Rcd at 5673–75 80–81 paras 166 180 216 See e g Comcast Corp v FCC 600 F 3d 642 658-59 D C Cir 2010 Comcast discussing Deployment of Wireline Servs Offering Advanced Telecommunications Capability 13 FCC Rcd 24012 24048 para 77 1998 217 See e g Verizon 740 F 3d at 636–42 rejecting arguments that it was unreasonable for the Commission to interpret Sections 706 a and b as granting regulatory authority In re FCC 11-161 753 F 3d 1015 10th Cir 2014 rejecting arguments that it was unreasonable for the Commission to interpret Section 706 b as granting regulatory authority USTelecom 825 F 3d at 733–34 reaffirming the holding in Verizon regarding Section 706 218 See e g Dissenting Statement of Commissioner Robert McDowell Inquiry Concerning the Deployment of Advanced Telecommunications Capability To All Americans In A Reasonable and Timely Fashion and Possible Steps To Accelerate Such Deployment Pursuant To Section 706 of the Telecommunications Act of 1996 As Amended By the Broadband Data Improvement Act GN Docket Nos 09-137 09-51 Sixth Broadband Deployment Report 25 FCC Rcd 9556 9693 “The plain language of Section 706 was written with a deregulatory bent but I am concerned that regulating with a light touch is not what this current Report will be used for in the future ” 32 Federal Communications Commission FCC-CIRC1705-05 Commission there “acknowledge d that section 230 b ” is a “statement of policy that itself delegate s no regulatory authority ”219 Are there grounds for the Commission to revisit that interpretation or otherwise invoke section 230 here For example the D C Circuit in Comcast speculated that “ p erhaps the Commission could use section 230 b to demonstrate a connection” to an “express statutory delegation of authority ” although it had not done so there 220 If the Commission were to demonstrate a connection to an express statutory delegation of authority what would such a demonstration look like What if any express statutory delegations of authority over broadband Internet access service exist 102 Other Sources of Legal Authority Should we determine rules are indeed necessary in this space we seek comment on any other sources of independent legal authority we might use to support such rules For example we seek comment on the Communications Act authority cited by the Commission in its Open Internet Order 221 If any other sources of legal authority exist to what extent could they be used And what are the trade-offs including the advantages and disadvantages of using any of these other sources of legal authority in lieu of Title II provisions that depend on the classification of BIAS as a telecommunications service and or section 706 of the 1996 Act 103 Constraints on our Legal Authority The Commission has repeatedly recognized that adopting rules like these raises constitutional concerns 222 For example some petitioners in the USTelecom v FCC case argued that compelling an Internet service provider to carry all speech violates the First Amendment 223 Others have argued that “ t here is no principled basis for distinguishing the speech of broadband providers from other speakers using older technologies ”224 The D C Circuit Court of Appeals disagreed finding that “the First Amendment poses no bar to the rules ”225 We seek comment on whether the First Amendment or any other constitutional provision or any other federal law would constrain the Commission from adopting rules here If a rule proposes serious constitutional concerns how should we modify it Does the continued classification of broadband Internet access service as a common-carriage service itself raise any constitutional concerns C Cost Benefit Analysis 104 We propose as part of this proceeding to conduct a cost-benefit analysis CBA We propose to compare the costs and the benefits of maintaining the classification of broadband Internet access service as a telecommunications service i e Title II regulation 226 maintaining the Internet conduct rule maintaining the no blocking rule maintaining the no throttling rule maintaining the ban on paid prioritization maintaining the transparency rules and acting on the other interpretive and policy changes for which we seek comment above We seek comment on how the CBA should be conducted to appropriately separate or combine the analyses of each piece discussed above We also seek comment 219 Comcast 600 F 3d at 652 220 See e g id at 654–55 221 See Open Internet Order 25 FCC Rcd at 17972–80 17981 paras 124–35 137 222 See e g 2014 Notice 29 FCC Rcd at 5617 para 159 223 See Joint Brief for Petitioners Alamo Broadband Inc and Daniel Berninger USTelecom v FCC Case No 151063 at 4–9 July 30 2015 citing Pac Gas Elec Co v Pub Utils Comm’n 475 U S 1 9 1986 Miami Herald Publ’g Co v Tornillo 418 U S 241 257 1974 among other cases 224 Harold Furchtgott-Roth Net Neutrality Violates First Amendment Hudson Institute Nov 23 2015 https hudson org research 11977-net-neutrality-violates-first-amendment 225 USTelecom 825 F 3d at 739 226 Throughout this section when discussing maintaining broadband Internet access service as a telecommunication service we mean as actually implemented by the Title II Order where the Commission forbore from applying some sections of the Act 33 Federal Communications Commission FCC-CIRC1705-05 generally on the importance of conducting a CBA as well as the interaction between the Commission’s public interest standard and a weighing of the costs and benefits 105 Given the size of the economic impacts due to our decisions in this proceeding it is especially important to evaluate whether the decision will have net positive benefits Our presumption is that the effects of the decision would have an annual effect on the economy of at least $100 million which is the Federal government’s standard threshold for requiring agencies covered by Executive Order 12866 to conduct a regulatory analysis 227 Executive Order 12866 indicates regulatory actions are economically significant if they “ h ave an annual effect on the economy of $100 million or more or adversely affect in a material way the economy a sector of the economy productivity competition jobs the environment public health or safety or State local or tribal governments or communities ”228 While the Commission is not required by law to comply with this Executive Order we believe the $100 million threshold provides a helpful guideline for when a CBA is clearly appropriate 229 We seek comment on our assertion that conducting a CBA is appropriate and that the decision is likely to be economically significant 106 In conducting the CBA we propose to follow standard practices employed by the federal government Specifically we propose to follow the guidelines in Section E “Identifying and Measuring Benefits and Costs” of the Office of Management and Budget’s Circular A-4 230 This publication provides guidelines which an agency can follow for identifying and quantifying costs and benefits associated with regulatory decisions while allowing for appropriate latitude in how the analysis is conducted for a particular regulatory situation We seek comment on following Circular A-A generally We also seek comment on any specific portions of Circular A-4 where the Commission should diverge from the guidance provided Commenters should explain why particular guidance in Circular A-4 should not be followed in this circumstance and should propose alternatives 107 Any CBA should be conducted by comparing the costs and benefits relative to the “baseline” scenario As OMB Circular A-4 explains “ t his baseline should be the best assessment of the way the world would look absent the proposed action ” Care should be taken to recognize that in certain cases repealing or eliminating a rule does not result in a total lack of regulation but instead means that other regulations continue to operate or other regulatory bodies will have authority For example as we evaluate the costs and benefits of maintaining the current classification of broadband Internet access service as a telecommunications service the CBA should recognize that changing the classification of broadband Internet access service to an information service would result in the FTC having jurisdiction over certain aspects of such services Therefore the benefits and costs of the FCC maintaining Title II jurisdiction over broadband Internet access service should be calculated with FTC enforcement as the appropriate baseline In this example the benefits of maintaining the Commission’s Title II classification are those benefits that exist over and above the “baseline” scenario of FTC jurisdiction and FCC Title I protections Likewise the costs of maintaining Title II should be estimated as those costs of ex ante FCC regulation relative to FTC ex post regulation We seek comment on the appropriate baseline scenarios that should be used and on our proposed course of action above A “regulatory analysis” has three key components 1 a statement of the need for a proposed action 2 an examinations of alternative approaches and 3 an evaluation of the benefits and the costs See Office of Management and Budget Circular A-4 https obamawhitehouse archives gov omb circulars_a004_a-4 #a The other parts of the Order effectively seek comment on the first and second pieces of the regulatory analysis 227 228 For entities covered by Executive Order 12866 Regulatory actions deemed economically significant must undergo review by the Office of Information and Regulatory Affairs OIRA and this review will typically require an accounting of the costs and benefits See https www reginfo gov public jsp Utilities faq jsp 229 While we believe it is clearly appropriate for actions in excess of $100 million we make no suggestion here about whether the Commission should conduct CBAs below that threshold 230 Office of Management and Budget Circular A-4 https obamawhitehouse archives gov omb circulars_a004_a4 #a 34 Federal Communications Commission FCC-CIRC1705-05 108 In weighing the costs and benefits of any policy there always exists an element of uncertainty As commenters suggest costs and benefits the Commission should consider we ask that to the extent possible information could also be provided about the level of certainty surrounding a scenario or particular value Also various costs and benefits are likely to occur at different points in time When suggesting costs and benefits we seek comment on the timing of those costs and benefits 231 We also seek comment on how uncertainty around and timing of costs and benefits should interact in the analysis 109 Costs There is evidence that the actions taken by the Commission in the Title II Order have reduced investments by ISPs 232 We presume that maintaining those actions would depress investment relative to the baseline Many of the costs of lower or misallocated investment in networks and in other sectors of the digital economy will be due to consumers and businesses having less broadband Internet access service coverage and lower quality of service Since the networks built with capital investments are only a means to an end we believe that the private costs borne by consumers and businesses of maintaining the status quo result from decreased value derived from using the networks We seek comment on this analysis What approaches should we use to capture these costs We seek comments on particular methods and data sources we might use to estimate the private costs of forgoing the building maintaining or upgrading of these networks 110 In addition to the private costs discussed above foregone networks may also impose additional societal costs In particular fewer network effects created by increased connectivity will occur As another example society will not realize some efficiencies and savings from governments delivering services over the networks Additionally there are likely long run costs due to forgoing better connectivity that would allow new products and services to be created We seek comment on this analysis How should our CBA incorporate these types of cost into the analysis What other ancillary costs might exist What data is appropriate to use 111 It is also likely that the foregone investment per se results in economic costs e g fewer network construction jobs and we seek comment on how the Commission should incorporate any such these costs into the analysis For example should the Commission use a multiplier to account for economic activity missed due to tempered investment If so what are the appropriate multipliers to use Commenters should provide sources to justify recommendations for multiplier values 112 Lastly there may be other costs that are not directly the result of decreased investment in networks Maintaining current policies may prevent new business models or new product and services from being viable and ultimately delivering value to society We seek comment on such costs and how we may incorporate them into our analysis 113 Benefits There are various theoretical possibilities for economic benefits created by the current policies We therefore seek comment on these benefits Commenters should identify these benefits relative to an appropriate baseline not relative to a situation where there is no regulation or statute to govern behavior For example if the ban on paid prioritization is maintained but broadband Internet access service is classified as an information service then commenters should identify the benefits a blanket ban on paid prioritization carries over the FTC’s authority to police anticompetitive conduct 114 We particularly seek comments that attempt to quantify the benefits rather than merely suggest the existence of benefits without any indication of its magnitude We also ask commenters to particularly highlight benefits where actual misconduct has been observed To the extent the baseline scenario allows any market failures to go unregulated commenters should clearly identify the market 231 As explained in OMB Circular A-4 the timing of costs and benefits is important because ultimately the CBA will need to discount future costs and benefits for the purpose of calculating net present benefits 232 See e g Hal Singer 2016 Broadband Capex Survey Tracking Investment in the Title II Era Mar 1 2016 https haljsinger wordpress com 2017 03 01 2016-broadband-capex-survey-tracking-investment-in-the-title-ii-era 35 Federal Communications Commission FCC-CIRC1705-05 failure and the estimated economic benefit associated with addressing through maintenance of current policies V PROCEDURAL MATTERS A Initial Regulatory Flexibility Analysis 115 As required by the Regulatory Flexibility Act of 1980 RFA 233 the Commission has prepared an Initial Regulatory Flexibility Analysis IRFA for this Notice of Proposed Rulemaking of the possible significant economic impact on small entities of the policies and rules addressed in this document The IRFA is set forth in Appendix B Written public comments are requested on this IRFA Comments must be identified as responses to the IRFA and must be filed on or before the dates on the first page of this Notice of Proposed Rulemaking The Commission’s Consumer and Governmental Affairs Bureau Reference Information Center will send a copy of this Notice of Proposed Rulemaking including the IRFA to the Chief Counsel for Advocacy of the Small Business Administration SBA 234 B Initial Paperwork Reduction Act Analysis 116 This document contains proposed modified information collection requirements The Commission as part of its continuing effort to reduce paperwork burdens invites the general public and the Office of Management and Budget “OMB” to comment on the information collection requirements contained in this document as required by the Paperwork Reduction Act of 1995 Public Law 104-13 In addition pursuant to the Small Business Paperwork Relief Act of 2002 Public Law 107-198 see 44 U S C § 3506 c 4 we seek specific comment on how we might further reduce the information collection burden for small business concerns with fewer than 25 employees 117 This document does not contain proposed information collection s subject to the Paperwork Reduction Act of 1995 PRA Public Law 104-13 In addition therefore it does not contain any new or modified information collection burden for small business concerns with fewer than 25 employees pursuant to the Small Business Paperwork Relief Act of 2002 Public Law 107-198 see 44 U S C 3506 c 4 C Other Procedural Matters 1 Ex Parte Rules – Permit-But-Disclose 118 The proceeding this NPRM initiates shall be treated as a “permit-but-disclose” proceeding in accordance with the Commission’s ex parte rules 235 Persons making ex parte presentations must file a copy of any written presentation or a memorandum summarizing any oral presentation within two business days after the presentation unless a different deadline applicable to the Sunshine period applies Persons making oral ex parte presentations are reminded that memoranda summarizing the presentation must 1 list all persons attending or otherwise participating in the meeting at which the ex parte presentation was made and 2 summarize all data presented and arguments made during the presentation If the presentation consisted in whole or in part of the presentation of data or arguments already reflected in the presenter’s written comments memoranda or other filings in the proceeding the presenter may provide citations to such data or arguments in his or her prior comments memoranda or other filings specifying the relevant page and or paragraph numbers where such data or arguments can be found in lieu of summarizing them in the memorandum Documents shown or given to Commission staff during ex parte meetings are deemed to be written ex parte presentations and must be filed consistent with rule 1 1206 b In proceedings governed by rule 1 49 f or for which the Commission has made available a method of electronic filing written ex parte presentations and memoranda summarizing oral ex parte presentations and all attachments thereto must be filed through the electronic comment 233 See 5 U S C § 603 234 See 5 U S C § 603 a 235 47 CFR §§ 1 1200 et seq 36 Federal Communications Commission FCC-CIRC1705-05 filing system available for that proceeding and must be filed in their native format e g doc xml ppt searchable pdf Participants in this proceeding should familiarize themselves with the Commission’s ex parte rules 2 Comment Filing Procedures 119 Pursuant to sections 1 415 and 1 419 of the Commission’s rules 47 CFR §§ 1 415 1 419 interested parties may file comments and reply comments on or before the dates indicated on the first page of this document Comments may be filed using the Commission’s Electronic Comment Filing System “ECFS” See Electronic Filing of Documents in Rulemaking Proceedings 63 FR 24121 1998 120 Electronic Filers Comments may be filed electronically using the Internet by accessing the ECFS http fjallfoss fcc gov ecfs2 121 Paper Filers Parties who choose to file by paper must file an original and one copy of each filing If more than one docket or rulemaking number appears in the caption of this proceeding filers must submit two additional copies for each additional docket or rulemaking number 122 Filings can be sent by hand or messenger delivery by commercial overnight courier or by first-class or overnight U S Postal Service mail All filings must be addressed to the Commission’s Secretary Office of the Secretary Federal Communications Commission 123 All hand-delivered or messenger-delivered paper filings for the Commission’s Secretary must be delivered to FCC Headquarters at 445 12th St SW Room TW-A325 Washington DC 20554 The filing hours are 8 00 a m to 7 00 p m All hand deliveries must be held together with rubber bands or fasteners Any envelopes and boxes must be disposed of before entering the building 124 Commercial overnight mail other than U S Postal Service Express Mail and Priority Mail must be sent to 9300 East Hampton Drive Capitol Heights MD 20743 125 U S Postal Service first-class Express and Priority mail must be addressed to 445 12th Street SW Washington DC 20554 126 Availability of Documents Comments reply comments and ex parte submissions will be publically available online via ECFS 236 These documents will also be available for public inspection during regular business hours in the FCC Reference Information Center which is located in Room CYA257 at FCC Headquarters 445 12th Street SW Washington DC 20554 The Reference Information Center is open to the public Monday through Thursday from 8 00 a m to 4 30 p m and Friday from 8 00 a m to 11 30 a m 127 People with Disabilities To request materials in accessible formats for people with disabilities braille large print electronic files audio format send an e-mail to fcc504@fcc gov or call the Consumer Governmental Affairs Bureau at 202-418-0530 voice 202-418-0432 tty VI ORDERING CLAUSES 128 Accordingly IT IS ORDERED that pursuant to sections 3 10 201 b 230 254 e 303 r and 332 of the Communications Act of 1934 as amended and section 706 of the Telecommunications Act of 1996 as amended 47 U S C §§ 153 160 201 b 254 e 303 r 332 1302 this Notice of Proposed Rulemaking IS ADOPTED 129 IT IS FURTHER ORDERED that pursuant to applicable procedures set forth in Sections 1 415 and 1 419 of the Commission’s Rules 47 CFR §§ 1 415 1 419 interested parties may file comments on this Notice of Proposed Rulemaking on or before July 17 2017 and reply comments on or before August 16 2017 130 236 IT IS FURTHER ORDERED that the Commission’s Consumer Governmental Affairs Documents will generally be available electronically in ASCII Microsoft Word and or Adobe Acrobat 37 Federal Communications Commission FCC-CIRC1705-05 Bureau Reference Information Center SHALL SEND a copy of this Notice of Proposed Rulemaking including the Initial Regulatory Flexibility Analysis to the Chief Counsel for Advocacy of the Small Business Administration FEDERAL COMMUNICATIONS COMMISSION Marlene H Dortch 38 Federal Communications Commission FCC-CIRC1705-05 APPENDIX A Proposed Rules Part 20 of the Commission’s rules is amended as follows PART 20 COMMERCIAL MOBILE SERVICES 1 Section 20 3 is amended to read as follows § 20 3 Definitions Commercial mobile radio service b The functional equivalent of such a mobile service described in paragraph a of this section Interconnected Service A service a That is interconnected with the public switched network or interconnected with the public switched network through an interconnected service provider that gives subscribers the capability to communicate to or receive communication from all other users on the public switched network or b Public Switched Network Any common carrier switched network whether by wire or radio including local exchange carriers interexchange carriers and mobile service providers that use the North American Numbering Plan in connection with the provision of switched services 2 Section 8 11 is repealed and reserved 39 Federal Communications Commission FCC-CIRC1705-05 APPENDIX B Initial Regulatory Flexibility Analysis 1 As required by the Regulatory Flexibility Act of 1980 as amended RFA 1 the Commission has prepared this Initial Regulatory Flexibility Analysis IRFA of the possible significant economic impact on a substantial number of small entities from the policies and rules proposed in this Notice of Proposed Rulemaking Notice The Commission requests written public comment on this IRFA Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the Notice provided on the first page of the Notice The Commission will send a copy of the Notice including this IRFA to the Chief Counsel for Advocacy of the Small Business Administration SBA 2 In addition the Notice and IRFA or summaries thereof will be published in the Federal Register 3 A Need for and Objectives of the Proposed Rules 2 With this Notice the Commission initiates a new rulemaking that proposes to restore the market-based policies necessary to preserve the future of Internet Freedom and to reverse the decline in infrastructure investment innovation and options for American consumers put into motion by the Commission in 2015 The Commission’s Title II Order has put at risk online investment and innovation threatening the very open Internet it purported to preserve Investment in broadband networks declined Internet service providers ISPs have pulled back on plans to deploy new and upgraded infrastructure and services to consumers This is particularly true of the smallest Internet service providers that serve consumers in rural low-income and other underserved communities This rulemaking continues the critical work to promote broadband deployment to rural consumers and infrastructure investment throughout our nation to brighten the future of innovation both within networks and at their edge and to close the digital divide 3 The Notice sets forth the following three main proposals returning broadband Internet access service to its previously-settled classification as an information service restoring the definition of “public switched telephone network” to its original meaning and eliminating the Internet conduct standard The Notice also seeks comment on a variety of issues relating to the effects of the Commission’s Title II Order including the burdens imposed by the Title II Order that have led to decreased investment and reduced innovation and have been felt by Internet service providers ISPs and consumers Additionally the Notice seeks comment on the effects of reclassifying broadband Internet access service as an information service on the existing enforcement regime and the necessity of the other rules adopted in the Title II Order 4 First the Notice proposes to return broadband Internet access service to its classification as an information service The Notice seeks comment on the text of the 1996 Act and whether the language of the Act indicates that broadband Internet access is service is properly classified as an information service Addition the Notice seeks comment on whether and to what extent Commission precedent classifying broadband Internet access service as an information service should continue to govern broadband Internet access service in the future Second the Notice proposes returning the definition of “public switched telephone network” to its classification as it existed before the Title II Order as an information service Third the Notice seeks comments on what effects if any returning broadband Internet access service to its original classification as an information service would have on the 1 See 5 U S C § 603 The RFA see 5 U S C §§ 601-12 has been amended by the Small Business Regulatory Enforcement Fairness Act of 1996 SBREFA Pub L No 104-121 Title II 110 Stat 857 1996 2 See 5 U S C § 603 a 3 Id 40 Federal Communications Commission FCC-CIRC1705-05 regulatory structures created by the Title II Order 5 Next the Notice proposes re-evaluating the existing rules and regulations imposed on ISPs The Notice proposes eliminating the Internet conduct standard and it seeks comment on the usefulness and necessity of the no-blocking rule the no-throttling rule the no paid prioritization rule and the transparency rule The Notice also seeks comment on what an effective enforcement regime would look like if broadband Internet access service is classified as an information service B Legal Basis 6 The legal basis for any action that may be taken pursuant to the Notice is contained in sections 3 10 201 b 230 254 e 303 r 332 of the Communications Act of 1934 as amended and section 706 of the Telecommunications Act of 1996 as amended 47 U S C §§ 153 160 201 b 254 e 303 r 332 1302 C Description and Estimate of the Number of Small Entities to Which the Rules Would Apply 7 The RFA directs agencies to provide a description of and where feasible an estimate of the number of small entities that may be affected by the proposed rules if adopted 4 The RFA generally defines the term “small entity” as having the same meaning as the terms “small business ” “small organization ” and “small governmental jurisdiction ”5 In addition the term “small business” has the same meaning as the term “small-business concern” under the Small Business Act 6 A small-business concern” is one which 1 is independently owned and operated 2 is not dominant in its field of operation and 3 satisfies any additional criteria established by the SBA 7 1 Total Small Entities 8 Our proposed action if implemented may over time affect small entities that are not easily categorized at present We therefore describe here at the outset three comprehensive statutory small entity size standards 8 First nationwide there are a total of approximately 28 2 million small businesses according to the SBA 9 In addition a “small organization” is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field ”10 Nationwide as of 2007 there were approximately 1 621 315 small organizations 11 Finally the term “small governmental jurisdiction” is defined generally as “governments of cities towns townships villages school districts or special districts with a population of less than fifty thousand ”12 Census Bureau data 4 See 5 U S C § 603 b 3 5 See 5 U S C § 601 6 See 5 U S C § 601 3 incorporating by reference the definition of “small-business concern” in the Small Business Act 15 U S C § 632 Pursuant to 5 U S C § 601 3 the statutory definition of a small business applies “unless an agency after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition s in the Federal Register ” 6 7 See 15 U S C § 632 8 See 5 U S C §§ 601 3 - 6 See SBA Office of Advocacy “Frequently Asked Questions ” http www sba gov sites default files FAQ_March_2014_0 pdf last accessed Apr 28 2014 9 10 5 U S C § 601 4 11 Indep Sector The New Nonprofit Almanac and Desk Reference 2010 12 5 U S C § 601 5 41 Federal Communications Commission FCC-CIRC1705-05 for 2007 indicate that there were 89 476 local governmental jurisdictions in the United States 13 We estimate that of this total as many as 88 761 entities may qualify as “small governmental jurisdictions ”14 Thus we estimate that most governmental jurisdictions are small 2 Broadband Internet Access Service Providers 9 The proposed rules would apply to broadband Internet access service providers BIAS providers The Economic Census places these firms whose services might include Voice over Internet Protocol VoIP in either of two categories depending on whether the service is provided over the provider’s own telecommunications facilities e g cable and DSL ISPs or over client-supplied telecommunications connections e g dial-up ISPs The former are within the category of Wired Telecommunications Carriers 15 which has an SBA small business size standard of 1 500 or fewer employees 16 These are also labeled “broadband ” The latter are within the category of All Other Telecommunications 17 which has a size standard of annual receipts of $25 million or less 18 These are labeled non-broadband According to Census Bureau data for 2007 there were 3 188 firms in the first category total that operated for the entire year 19 Of this total 3144 firms had employment of 999 or fewer employees and 44 firms had employment of 1000 employees or more 20 For the second category the data show that 1 274 firms operated for the entire year 21 Of those 1 252 had annual receipts below $25 million per year Consequently we estimate that the majority of broadband Internet access service provider firms are small entities 10 The broadband Internet access service provider industry has changed since this definition was introduced in 2007 The data cited above may therefore include entities that no longer provide broadband Internet access service and may exclude entities that now provide such service To ensure that this IRFA describes the universe of small entities that our action might affect we discuss in turn several 13 U S Census Bureau Statistical Abstract of the United States 2012 Section 8 page 267 tbl 429 https www census gov compendia statab 2012 tables 12s0429 pdf data cited therein are from 2007 14 The 2007 U S Census data for small governmental organizations are not presented based on the size of the population in each such organization There were 89 476 local governmental organizations in 2007 If we assume that county municipal township and school district organizations are more likely than larger governmental organizations to have populations of 50 000 or less the total of these organizations is 52 095 As a basis of estimating how many of these 89 476 local government organizations were small in 2011 we note that there were a total of 715 cities and towns incorporated places and minor civil divisions with populations over 50 000 City and Town Totals Vintage 2011 – U S Census Bureau http www census gov popest data cities totals 2011 index html If we subtract the 715 cities and towns that meet or exceed the 50 000 population threshold we conclude that approximately 88 761 are small U S Census Bureau Statistical Abstract of the United States 2012 Section 8 page 267 tbl 429 https www census gov compendia statab 2012 tables 12s0429 pdf data cited therein are from 2007 U S Census Bureau 2012 NAICS Definitions “517110 Wired Telecommunications Carriers ” http www census gov cgi-bin sssd naics naicsrch code 517110 search 2012%20NAICS%20Search 15 16 13 CFR § 121 201 NAICS code 517110 U S Census Bureau 2012 NAICS Definitions “517919 All Other Telecommunications ” http www census gov cgi-bin sssd naics naicsrch code 517919 search 2012%20NAICS%20Search 17 18 13 CFR § 121 201 NAICS code 517919 U S Census Bureau 2007 Economic Census Subject Series Information Table 5 “Establishment and Firm Size Employment Size of Firms for the United States 2007 NAICS Code 517110” 2010 19 20 See id U S Census Bureau 2007 Economic Census Subject Series Information “Establishment and Firm Size ” NAICS code 5179191 2010 receipts size 21 42 Federal Communications Commission FCC-CIRC1705-05 different types of entities that might be providing broadband Internet access service We note that although we have no specific information on the number of small entities that provide broadband Internet access service over unlicensed spectrum we include these entities in our Initial Regulatory Flexibility Analysis 3 Wireline Providers 11 Wired Telecommunications Carriers The SBA has developed a small business size standard for Wired Telecommunications Carriers which consists of all such companies having 1 500 or fewer employees 22 According to Census Bureau data for 2007 there were 3 188 firms in this category total that operated for the entire year 23 Of this total 3 144 firms had employment of 999 or fewer employees and 44 firms had employment of 1000 employees or more 24 Thus under this size standard the majority of firms can be considered small 12 Local Exchange Carriers LECs Neither the Commission nor the SBA has developed a size standard for small businesses specifically applicable to local exchange services The closest applicable size standard under SBA rules is for Wired Telecommunications Carriers Under that size standard such a business is small if it has 1 500 or fewer employees 25 According to Commission data 1 307 carriers reported that they were incumbent local exchange service providers 26 Of these 1 307 carriers an estimated 1 006 have 1 500 or fewer employees and 301 have more than 1 500 employees 27 Consequently the Commission estimates that most providers of local exchange service are small entities that may be affected by rules adopted pursuant to the Notice 13 Incumbent Local Exchange Carriers Incumbent LECs Neither the Commission nor the SBA has developed a small business size standard specifically for incumbent local exchange services The closest applicable size standard under SBA rules is for the category Wired Telecommunications Carriers Under that size standard such a business is small if it has 1 500 or fewer employees 28 According to Commission data 29 1 307 carriers reported that they were incumbent local exchange service providers 30 Of these 1 307 carriers an estimated 1 006 have 1 500 or fewer employees and 301 have more than 1 500 employees 31 Consequently the Commission estimates that most providers of incumbent local exchange service are small businesses that may be affected by our proposed rules 14 Competitive Local Exchange Carriers Competitive LECs Competitive Access Providers CAPs Shared-Tenant Service Providers and Other Local Service Providers Neither the Commission 22 13 CFR § 121 201 NAICS code 517110 U S Census Bureau 2007 Economic Census Information Subject Series – Establishment and Firm Size Table 5 “Employment Size of Firms for the United States 2007 NAICS Code 517110 ” http factfinder2 census gov bkmk table 1 0 en ECN 2007_US 51SSSZ1 naics 517110 last visited July 10 2015 23 24 See id 25 13 CFR § 121 201 NAICS code 517110 26 Federal Communications Commission Wireline Competition Bureau Industry Analysis and Technology Division Trends in Telephone Service tbl 5 3 Sept 2010 https apps fcc gov edocs_public attachmatch DOC301823A1 pdf Trends in Telephone Service 27 See id 28 13 CFR § 121 201 NAICS code 517110 29 FCC Wireline Competition Bureau Industry Analysis and Technology Division Trends in Telephone Service tbl 5 3 2010 Trends in Telephone Service 30 See Trends in Telephone Service at tbl 5 3 31 See id 43 Federal Communications Commission FCC-CIRC1705-05 nor the SBA has developed a small business size standard specifically for these service providers The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers Under that size standard such a business is small if it has 1 500 or fewer employees 32 According to Commission data 1 442 carriers reported that they were engaged in the provision of either competitive local exchange services or competitive access provider services 33 Of these 1 442 carriers an estimated 1 256 have 1 500 or fewer employees and 186 have more than 1 500 employees 34 In addition 17 carriers have reported that they are Shared-Tenant Service Providers and all 17 are estimated to have 1 500 or fewer employees 35 In addition 72 carriers have reported that they are Other Local Service Providers 36 Of the 72 seventy have 1 500 or fewer employees and two have more than 1 500 employees 37 Consequently the Commission estimates that most providers of competitive local exchange service competitive access providers Shared-Tenant Service Providers and other local service providers are small entities that may be affected by our proposed rules 15 We have included small incumbent LECs in this present RFA analysis As noted above a “small business” under the RFA is one that inter alia meets the pertinent small business size standard e g a telephone communications business having 1 500 or fewer employees and “is not dominant in its field of operation ”38 The SBA’s Office of Advocacy contends that for RFA purposes small incumbent LECs are not dominant in their field of operation because any such dominance is not “national” in scope 39 We have therefore included small incumbent LECs in this RFA analysis although we emphasize that this RFA action has no effect on Commission analyses and determinations in other non-RFA contexts 16 Interexchange Carriers Neither the Commission nor the SBA has developed a small business size standard specifically for providers of interexchange services The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers Under that size standard such a business is small if it has 1 500 or fewer employees 40 According to Commission data 41 359 carriers have reported that they are engaged in the provision of interexchange service Of these an estimated 317 have 1 500 or fewer employees and 42 have more than 1 500 employees Consequently the Commission estimates that the majority of IXCs are small entities that may be affected by our proposed rules 17 Operator Service Providers OSPs Neither the Commission nor the SBA has developed a small business size standard specifically for operator service providers The appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers Under that size standard such a 32 13 CFR § 121 201 NAICS code 517110 33 See Trends in Telephone Service at tbl 5 3 34 See id 35 See id 36 See id 37 See id 38 5 U S C § 601 3 39 Letter from Jere W Glover Chief Counsel for Advocacy SBA to William E Kennard Chairman Federal Communications Commission filed May 27 1999 The Small Business Act contains a definition of “small business concern ” which the RFA incorporates into its own definition of “small business ” 15 U S C § 632 a 5 U S C § 601 3 SBA regulations interpret “small business concern” to include the concept of dominance on a national basis 13 CFR § 121 102 b 40 13 CFR § 121 201 NAICS code 517110 41 Trends in Telephone Service tbl 5 3 44 Federal Communications Commission FCC-CIRC1705-05 business is small if it has 1 500 or fewer employees 42 According to Commission data 33 carriers have reported that they are engaged in the provision of operator services Of these an estimated 31 have 1 500 or fewer employees and two have more than 1 500 employees 43 Consequently the Commission estimates that the majority of OSPs are small entities that may be affected by our proposed rules 18 Other Toll Carriers Neither the Commission nor the SBA has developed a size standard for small businesses specifically applicable to Other Toll Carriers This category includes toll carriers that do not fall within the categories of interexchange carriers operator service providers prepaid calling card providers satellite service carriers or toll resellers The closest applicable size standard under SBA rules is for Wired Telecommunications Carriers Under that size standard such a business is small if it has 1 500 or fewer employees 44 According to Commission data 284 companies reported that their primary telecommunications service activity was the provision of other toll carriage 45 Of these an estimated 279 have 1 500 or fewer employees and five have more than 1 500 employees 46 Consequently the Commission estimates that most Other Toll Carriers are small entities that may be affected by rules adopted pursuant to the Notice 4 Wireless Providers – Fixed and Mobile 19 The broadband Internet access service provider category covered by these proposed rules may cover multiple wireless firms and categories of regulated wireless services Thus to the extent the wireless services listed below are used by wireless firms for broadband Internet access service the proposed actions may have an impact on those small businesses as set forth above and further below In addition for those services subject to auctions we note that as a general matter the number of winning bidders that claim to qualify as small businesses at the close of an auction does not necessarily represent the number of small businesses currently in service Also the Commission does not generally track subsequent business size unless in the context of assignments and transfers or reportable eligibility events unjust enrichment issues are implicated 20 Wireless Telecommunications Carriers except Satellite Since 2007 the Census Bureau has placed wireless firms within this new broad economic census category 47 Under the present and prior categories the SBA has deemed a wireless business to be small if it has 1 500 or fewer employees 48 For the category of Wireless Telecommunications Carriers except Satellite census data for 2007 show that there were 1 383 firms that operated for the entire year 49 Of this total 1 368 firms had employment of 999 or fewer employees and 15 had employment of 1000 employees or more 50 Since all firms with fewer than 1 500 employees are considered small given the total employment in the sector we estimate that the vast majority of wireless firms are small 42 13 CFR § 121 201 NAICS code 517110 43 Trends in Telephone Service tbl 5 3 44 See 13 CFR § 121 201 NAICS code 517110 45 See Trends in Telephone Service at tbl 5 3 46 See id U S Census Bureau 2012 NAICS Definitions “517210 Wireless Telecommunications Categories Except Satellite ” http www census gov cgi-bin sssd naics naicsrch code 517210 search 2012%20NAICS%20Search 47 48 13 CFR § 121 201 NAICS code 517210 2012 NAICS The now-superseded pre-2007 CFR citations were 13 CFR § 121 201 NAICS codes 517211 and 517212 referring to the 2002 NAICS U S Census Bureau Subject Series Information Table 5 “Establishment and Firm Size Employment Size of Firms for the United States 2007 NAICS Code 517210” issued Nov 2010 49 50 See id 45 Federal Communications Commission FCC-CIRC1705-05 21 Wireless Communications Services This service can be used for fixed mobile radiolocation and digital audio broadcasting satellite uses The Commission defined “small business” for the wireless communications services WCS auction as an entity with average gross revenues of $40 million for each of the three preceding years and a “very small business” as an entity with average gross revenues of $15 million for each of the three preceding years 51 The SBA has approved these definitions 52 22 1670–1675 MHz Services This service can be used for fixed and mobile uses except aeronautical mobile 53 An auction for one license in the 1670–1675 MHz band was conducted in 2003 One license was awarded The winning bidder was not a small entity 23 Wireless Telephony Wireless telephony includes cellular personal communications services and specialized mobile radio telephony carriers As noted the SBA has developed a small business size standard for Wireless Telecommunications Carriers except Satellite 54 Under the SBA small business size standard a business is small if it has 1 500 or fewer employees 55 According to Commission data 413 carriers reported that they were engaged in wireless telephony 56 Of these an estimated 261 have 1 500 or fewer employees and 152 have more than 1 500 employees 57 Therefore a little less than one third of these entities can be considered small 24 Broadband Personal Communications Service The broadband personal communications services PCS spectrum is divided into six frequency blocks designated A through F and the Commission has held auctions for each block The Commission initially defined a “small business” for C- and F-Block licenses as an entity that has average gross revenues of $40 million or less in the three previous calendar years 58 For F-Block licenses an additional small business size standard for “very small business” was added and is defined as an entity that together with its affiliates has average gross revenues of not more than $15 million for the preceding three calendar years 59 These small business size standards in the context of broadband PCS auctions have been approved by the SBA 60 No small businesses within the SBA-approved small business size standards bid successfully for licenses in Blocks A and B There were 90 winning bidders that claimed small business status in the first two C-Block auctions A total of 93 bidders that claimed small business status won approximately 40 percent of the 1 479 licenses in the first auction for the D E and F Blocks 61 On April 15 1999 the Commission Amendment of the Commission’s Rules to Establish Part 27 the Wireless Communications Service WCS Report and Order 12 FCC Rcd 10785 10879 para 194 1997 51 52 See Letter from Aida Alvarez Administrator SBA to Amy Zoslov Chief Auctions and Industry Analysis Division Wireless Telecommunications Bureau FCC filed Dec 2 1998 Alvarez Letter 1998 53 47 CFR § 2 106 see generally 47 CFR §§ 27 1-27 70 54 13 CFR § 121 201 NAICS code 517210 55 Id 56 Trends in Telephone Service tbl 5 3 57 Id See Amendment of Parts 20 and 24 of the Commission’s Rules – Broadband PCS Competitive Bidding and the Commercial Mobile Radio Service Spectrum Cap Amendment of the Commission’s Cellular PCS Cross-Ownership Rule Report and Order 11 FCC Rcd 7824 7850-52 paras 57-60 1996 PCS Report and Order see also 47 CFR § 24 720 b 58 59 See PCS Report and Order 11 FCC Rcd at 7852 para 60 60 See Alvarez Letter 1998 61 See Broadband PCS D E and F Block Auction Closes Public Notice Doc No 89838 rel Jan 14 1997 46 Federal Communications Commission FCC-CIRC1705-05 completed the reauction of 347 C- D- E- and F-Block licenses in Auction No 22 62 Of the 57 winning bidders in that auction 48 claimed small business status and won 277 licenses 25 On January 26 2001 the Commission completed the auction of 422 C and F Block Broadband PCS licenses in Auction No 35 Of the 35 winning bidders in that auction 29 claimed small business status 63 Subsequent events concerning Auction 35 including judicial and agency determinations resulted in a total of 163 C and F Block licenses being available for grant On February 15 2005 the Commission completed an auction of 242 C- D- E- and F-Block licenses in Auction No 58 Of the 24 winning bidders in that auction 16 claimed small business status and won 156 licenses 64 On May 21 2007 the Commission completed an auction of 33 licenses in the A C and F Blocks in Auction No 71 65 Of the 12 winning bidders in that auction five claimed small business status and won 18 licenses 66 On August 20 2008 the Commission completed the auction of 20 C- D- E- and F-Block Broadband PCS licenses in Auction No 78 67 Of the eight winning bidders for Broadband PCS licenses in that auction six claimed small business status and won 14 licenses 68 26 Specialized Mobile Radio Licenses The Commission awards “small entity” bidding credits in auctions for Specialized Mobile Radio SMR geographic area licenses in the 800 MHz and 900 MHz bands to firms that had revenues of no more than $15 million in each of the three previous calendar years 69 The Commission awards “very small entity” bidding credits to firms that had revenues of no more than $3 million in each of the three previous calendar years 70 The SBA has approved these small business size standards for the 900 MHz Service 71 The Commission has held auctions for geographic area licenses in the 800 MHz and 900 MHz bands The 900 MHz SMR auction began on December 5 1995 and closed on April 15 1996 Sixty bidders claiming that they qualified as small businesses under the $15 million size standard won 263 geographic area licenses in the 900 MHz SMR band The 800 MHz SMR auction for the upper 200 channels began on October 28 1997 and was completed on December 8 1997 Ten bidders claiming that they qualified as small businesses under the $15 million size standard won 38 geographic area licenses for the upper 200 channels in the 800 MHz SMR band 72 A 62 See C D E and F Block Broadband PCS Auction Closes Public Notice 14 FCC Rcd 6688 WTB 1999 Before Auction No 22 the Commission established a very small standard for the C Block to match the standard used for F Block Amendment of the Commission’s Rules Regarding Installment Payment Financing for Personal Communications Services PCS Licensees Fourth Report and Order 13 FCC Rcd 15743 15768 para 46 1998 63 See C and F Block Broadband PCS Auction Closes Winning Bidders Announced Public Notice 16 FCC Rcd 2339 2001 64 See Broadband PCS Spectrum Auction Closes Winning Bidders Announced for Auction No 58 Public Notice 20 FCC Rcd 3703 2005 65 See Auction of Broadband PCS Spectrum Licenses Closes Winning Bidders Announced for Auction No 71 Public Notice 22 FCC Rcd 9247 2007 66 Id 67 See Auction of AWS-1 and Broadband PCS Licenses Closes Winning Bidders Announced for Auction 78 Public Notice 23 FCC Rcd 12749 WTB 2008 68 Id 69 47 CFR § 90 814 b 1 70 Id 71 See Letter from Aida Alvarez Administrator SBA to Thomas Sugrue Chief Wireless Telecommunications Bureau Federal Communications Commission filed Aug 10 1999 Alvarez Letter 1999 See Correction to Public Notice DA 96-586 “FCC Announces Winning Bidders in the Auction of 1020 Licenses to Provide 900 MHz SMR in Major Trading Areas ” Public Notice 18 FCC Rcd 18367 WTB 1996 72 47 Federal Communications Commission FCC-CIRC1705-05 second auction for the 800 MHz band was held on January 10 2002 and closed on January 17 2002 and included 23 BEA licenses One bidder claiming small business status won five licenses 73 27 The auction of the 1 053 800 MHz SMR geographic area licenses for the General Category channels began on August 16 2000 and was completed on September 1 2000 Eleven bidders won 108 geographic area licenses for the General Category channels in the 800 MHz SMR band and qualified as small businesses under the $15 million size standard 74 In an auction completed on December 5 2000 a total of 2 800 Economic Area licenses in the lower 80 channels of the 800 MHz SMR service were awarded 75 Of the 22 winning bidders 19 claimed small business status and won 129 licenses Thus combining all four auctions 41 winning bidders for geographic licenses in the 800 MHz SMR band claimed status as small businesses 28 In addition there are numerous incumbent site-by-site SMR licenses and licensees with extended implementation authorizations in the 800 and 900 MHz bands We do not know how many firms provide 800 MHz or 900 MHz geographic area SMR service pursuant to extended implementation authorizations nor how many of these providers have annual revenues of no more than $15 million One firm has over $15 million in revenues In addition we do not know how many of these firms have 1 500 or fewer employees which is the SBA-determined size standard 76 We assume for purposes of this analysis that all of the remaining extended implementation authorizations are held by small entities as defined by the SBA 29 Lower 700 MHz Band Licenses The Commission previously adopted criteria for defining three groups of small businesses for purposes of determining their eligibility for special provisions such as bidding credits 77 The Commission defined a “small business” as an entity that together with its affiliates and controlling principals has average gross revenues not exceeding $40 million for the preceding three years 78 A “very small business” is defined as an entity that together with its affiliates and controlling principals has average gross revenues that are not more than $15 million for the preceding three years 79 Additionally the lower 700 MHz Service had a third category of small business status for Metropolitan Rural Service Area MSA RSA licenses—“entrepreneur”—which is defined as an entity that together with its affiliates and controlling principals has average gross revenues that are not more than $3 million for the preceding three years 80 The SBA approved these small size standards 81 An auction of 740 licenses one license in each of the 734 MSAs RSAs and one license in each of the six Economic Area Groupings EAGs commenced on August 27 2002 and closed on September 18 2002 Of the 740 licenses available for auction 484 licenses were won by 102 winning bidders Seventy-two of the winning bidders claimed small business very small business or entrepreneur 73 See Multi-Radio Service Auction Closes Public Notice 17 FCC Rcd 1446 WTB 2002 74 See 800 MHz Specialized Mobile Radio SMR Service General Category 851–854 MHz and Upper Band 861– 865 MHz Auction Closes Winning Bidders Announced Public Notice 15 FCC Rcd 17162 2000 75 See 800 MHz SMR Service Lower 80 Channels Auction Closes Winning Bidders Announced Public Notice 16 FCC Rcd 1736 2000 76 See generally 13 CFR § 121 201 NAICS code 517210 77 See Reallocation and Service Rules for the 698–746 MHz Spectrum Band Television Channels 52–59 Report and Order 17 FCC Rcd 1022 2002 Channels 52–59 Report and Order 78 See id at 1087-88 para 172 79 See id 80 See id at 1088 para 173 81 See Alvarez Letter 1999 48 Federal Communications Commission FCC-CIRC1705-05 status and won a total of 329 licenses 82 A second auction commenced on May 28 2003 closed on June 13 2003 and included 256 licenses 5 EAG licenses and 476 Cellular Market Area licenses 83 Seventeen winning bidders claimed small or very small business status and won 60 licenses and nine winning bidders claimed entrepreneur status and won 154 licenses 84 On July 26 2005 the Commission completed an auction of 5 licenses in the Lower 700 MHz band Auction No 60 There were three winning bidders for five licenses All three winning bidders claimed small business status 30 In 2007 the Commission reexamined its rules governing the 700 MHz band in the 700 MHz Second Report and Order 85 An auction of 700 MHz licenses commenced January 24 2008 and closed on March 18 2008 which included 176 Economic Area licenses in the A Block 734 Cellular Market Area licenses in the B Block and 176 EA licenses in the E Block 86 Twenty winning bidders claiming small business status those with attributable average annual gross revenues that exceed $15 million and do not exceed $40 million for the preceding three years won 49 licenses Thirty three winning bidders claiming very small business status those with attributable average annual gross revenues that do not exceed $15 million for the preceding three years won 325 licenses 31 Upper 700 MHz Band Licenses In the 700 MHz Second Report and Order the Commission revised its rules regarding Upper 700 MHz licenses 87 On January 24 2008 the Commission commenced Auction 73 in which several licenses in the Upper 700 MHz band were available for licensing 12 Regional Economic Area Grouping licenses in the C Block and one nationwide license in the D Block 88 The auction concluded on March 18 2008 with 3 winning bidders claiming very small business status those with attributable average annual gross revenues that do not exceed $15 million for the preceding three years and winning five licenses 32 700 MHz Guard Band Licensees In 2000 in the 700 MHz Guard Band Order the Commission adopted size standards for “small businesses” and “very small businesses” for purposes of determining their eligibility for special provisions such as bidding credits and installment payments 89 A small business in this service is an entity that together with its affiliates and controlling principals has average gross revenues not exceeding $40 million for the preceding three years 90 Additionally a very small business is an entity that together with its affiliates and controlling principals has average gross 82 See Lower 700 MHz Band Auction Closes Public Notice 17 FCC Rcd 17272 WTB 2002 83 See id 84 See id Service Rules for the 698–746 747–762 and 777–792 MHz Band Revision of the Commission’s Rules to Ensure Compatibility with Enhanced 911 Emergency Calling Systems Section 68 4 a of the Commission’s Rules Governing Hearing Aid-Compatible Telephones Biennial Regulatory Review—Amendment of Parts 1 22 24 27 and 90 to Streamline and Harmonize Various Rules Affecting Wireless Radio Services Former Nextel Communications Inc Upper 700 MHz Guard Band Licenses and Revisions to Part 27 of the Commission’s Rules Implementing a Nationwide Broadband Interoperable Public Safety Network in the 700 MHz Band Development of Operational Technical and Spectrum Requirements for Meeting Federal State and Local Public Safety Communications Requirements Through the Year 2010 Declaratory Ruling on Reporting Requirement under Commission’s Part 1 Anti-Collusion Rule Second Report and Order 22 FCC Rcd 15289 15359 n 434 2007 700 MHz Second Report and Order 85 86 See Auction of 700 MHz Band Licenses Closes Public Notice 23 FCC Rcd 4572 WTB 2008 87 700 MHz Second Report and Order 22 FCC Rcd 15289 88 See Auction of 700 MHz Band Licenses Closes Public Notice 23 FCC Rcd 4572 WTB 2008 See Service Rules for the 746–764 MHz Bands and Revisions to Part 27 of the Commission’s Rules Second Report and Order 15 FCC Rcd 5299 2000 746–764 MHz Band Second Report and Order 89 90 See id at 5343 para 108 49 Federal Communications Commission FCC-CIRC1705-05 revenues that are not more than $15 million for the preceding three years 91 SBA approval of these definitions is not required 92 An auction of 52 Major Economic Area licenses commenced on September 6 2000 and closed on September 21 2000 93 Of the 104 licenses auctioned 96 licenses were sold to nine bidders Five of these bidders were small businesses that won a total of 26 licenses A second auction of 700 MHz Guard Band licenses commenced on February 13 2001 and closed on February 21 2001 All eight of the licenses auctioned were sold to three bidders One of these bidders was a small business that won a total of two licenses 94 33 Air-Ground Radiotelephone Service The Commission has previously used the SBA’s small business size standard applicable to Wireless Telecommunications Carriers except Satellite i e an entity employing no more than 1 500 persons 95 There are approximately 100 licensees in the AirGround Radiotelephone Service and under that definition we estimate that almost all of them qualify as small entities under the SBA definition For purposes of assigning Air-Ground Radiotelephone Service licenses through competitive bidding the Commission has defined “small business” as an entity that together with controlling interests and affiliates has average annual gross revenues for the preceding three years not exceeding $40 million 96 A “very small business” is defined as an entity that together with controlling interests and affiliates has average annual gross revenues for the preceding three years not exceeding $15 million 97 These definitions were approved by the SBA 98 In May 2006 the Commission completed an auction of nationwide commercial Air-Ground Radiotelephone Service licenses in the 800 MHz band Auction No 65 On June 2 2006 the auction closed with two winning bidders winning two Air-Ground Radiotelephone Services licenses Neither of the winning bidders claimed small business status 34 AWS Services 1710–1755 MHz and 2110–2155 MHz bands AWS-1 1915–1920 MHz 1995–2000 MHz 2020–2025 MHz and 2175–2180 MHz bands AWS-2 2155–2175 MHz band AWS3 For the AWS-1 bands 99 the Commission has defined a “small business” as an entity with average annual gross revenues for the preceding three years not exceeding $40 million and a “very small business” as an entity with average annual gross revenues for the preceding three years not exceeding $15 million For AWS-2 and AWS-3 although we do not know for certain which entities are likely to apply 91 See id 92 See id at 5343 para 108 n 246 for the 746–764 MHz and 776–794 MHz bands the Commission is exempt from 15 U S C § 632 which requires Federal agencies to obtain SBA approval before adopting small business size standards 93 See 700 MHz Guard Bands Auction Closes Winning Bidders Announced Public Notice 15 FCC Rcd 18026 WTB 2000 94 See 700 MHz Guard Bands Auction Closes Winning Bidders Announced Public Notice 16 FCC Rcd 4590 WTB 2001 95 13 CFR § 121 201 NAICS codes 517210 Amendment of Part 22 of the Commission’s Rules to Benefit the Consumers of Air-Ground Telecommunications Services Biennial Regulatory Review—Amendment of Parts 1 22 and 90 of the Commission’s Rules Amendment of Parts 1 and 22 of the Commission’s Rules to Adopt Competitive Bidding Rules for Commercial and General Aviation Air-Ground Radiotelephone Service Order on Reconsideration and Report and Order 20 FCC Rcd 19663 paras 28-42 2005 96 97 Id 98 See Letter from Hector V Barreto Administrator SBA to Gary D Michaels Deputy Chief Auctions and Spectrum Access Division Wireless Telecommunications Bureau Federal Communications Commission filed Sept 19 2005 99 The service is defined in section 90 1301 et seq of the Commission’s Rules 47 CFR § 90 1301 et seq 50 Federal Communications Commission FCC-CIRC1705-05 for these frequencies we note that the AWS-1 bands are comparable to those used for cellular service and personal communications service The Commission has not yet adopted size standards for the AWS-2 or AWS-3 bands but proposes to treat both AWS-2 and AWS-3 similarly to broadband PCS service and AWS-1 service due to the comparable capital requirements and other factors such as issues involved in relocating incumbents and developing markets technologies and services 100 35 3650–3700 MHz band In March 2005 the Commission released a Report and Order and Memorandum Opinion and Order that provides for nationwide non-exclusive licensing of terrestrial operations utilizing contention-based technologies in the 3650 MHz band i e 3650–3700 MHz As of April 2010 more than 1270 licenses have been granted and more than 7433 sites have been registered The Commission has not developed a definition of small entities applicable to 3650–3700 MHz band nationwide non-exclusive licensees However we estimate that the majority of these licensees are Internet Access Service Providers ISPs and that most of those licensees are small businesses 36 Fixed Microwave Services Microwave services include common carrier 101 privateoperational fixed 102 and broadcast auxiliary radio services 103 They also include the Local Multipoint Distribution Service LMDS 104 the Digital Electronic Message Service DEMS 105 and the 24 GHz Service 106 where licensees can choose between common carrier and non-common carrier status 107 At present there are approximately 36 708 common carrier fixed licensees and 59 291 private operationalfixed licensees and broadcast auxiliary radio licensees in the microwave services There are approximately 135 LMDS licensees three DEMS licensees and three 24 GHz licensees The Commission has not yet defined a small business with respect to microwave services For purposes of the IRFA we will use the SBA’s definition applicable to Wireless Telecommunications Carriers except satellite —i e an entity with no more than 1 500 persons 108 Under the present and prior categories the SBA has deemed a wireless business to be small if it has 1 500 or fewer employees 109 The Commission does not have data specifying the number of these licensees that have more than 1 500 employees and thus is unable at this time to estimate with greater precision the number of fixed microwave service 100 See Service Rules for Advanced Wireless Services in the 1 7 GHz and 2 1 GHz Bands Report and Order 18 FCC Rcd 25162 Appx B 2003 modified by Service Rules for Advanced Wireless Services in the 1 7 GHz and 2 1 GHz Bands Order on Reconsideration 20 FCC Rcd 14058 Appx C 2005 Service Rules for Advanced Wireless Services in the 1915–1920 MHz 1995–2000 MHz 2020–2025 MHz and 2175–2180 MHz Bands Service Rules for Advanced Wireless Services in the 1 7 GHz and 2 1 GHz Bands Notice of Proposed Rulemaking 19 FCC Rcd 19263 Appx B 2005 Service Rules for Advanced Wireless Services in the 2155–2175 MHz Band Notice of Proposed Rulemaking 22 FCC Rcd 17035 Appx 2007 101 See 47 CFR Part 101 Subparts C and I 102 See 47 CFR Part 101 Subparts C and H Auxiliary Microwave Service is governed by Part 74 of Title 47 of the Commission’s Rules See 47 CFR Part 74 Available to licensees of broadcast stations and to broadcast and cable network entities broadcast auxiliary microwave stations are used for relaying broadcast television signals from the studio to the transmitter or between two points such as a main studio and an auxiliary studio The service also includes mobile TV pickups which relay signals from a remote location back to the studio 103 104 See 47 CFR Part 101 Subpart L 105 See 47 CFR Part 101 Subpart G 106 See id 107 See 47 CFR §§ 101 533 101 1017 108 13 CFR § 121 201 NAICS code 517210 109 13 CFR § 121 201 NAICS code 517210 2007 NAICS The now-superseded pre-2007 CFR citations were 13 CFR § 121 201 NAICS codes 517211 and 517212 referring to the 2002 NAICS 51 Federal Communications Commission FCC-CIRC1705-05 licensees that would qualify as small business concerns under the SBA’s small business size standard Consequently the Commission estimates that there are up to 36 708 common carrier fixed licensees and up to 59 291 private operational-fixed licensees and broadcast auxiliary radio licensees in the microwave services that may be small and may be affected by the rules and policies adopted herein We note however that the common carrier microwave fixed licensee category includes some large entities 37 Broadband Radio Service and Educational Broadband Service Broadband Radio Service systems previously referred to as Multipoint Distribution Service MDS and Multichannel Multipoint Distribution Service MMDS systems and “wireless cable ” transmit video programming to subscribers and provide two-way high speed data operations using the microwave frequencies of the Broadband Radio Service BRS and Educational Broadband Service EBS previously referred to as the Instructional Television Fixed Service ITFS 110 In connection with the 1996 BRS auction the Commission established a small business size standard as an entity that had annual average gross revenues of no more than $40 million in the previous three calendar years 111 The BRS auctions resulted in 67 successful bidders obtaining licensing opportunities for 493 Basic Trading Areas BTAs Of the 67 auction winners 61 met the definition of a small business BRS also includes licensees of stations authorized prior to the auction At this time we estimate that of the 61 small business BRS auction winners 48 remain small business licensees In addition to the 48 small businesses that hold BTA authorizations there are approximately 392 incumbent BRS licensees that are considered small entities 112 After adding the number of small business auction licensees to the number of incumbent licensees not already counted we find that there are currently approximately 440 BRS licensees that are defined as small businesses under either the SBA or the Commission’s rules 38 In 2009 the Commission conducted Auction 86 the sale of 78 licenses in the BRS areas The Commission offered three levels of bidding credits i a bidder with attributed average annual gross revenues that exceed $15 million and do not exceed $40 million for the preceding three years small business received a 15 percent discount on its winning bid ii a bidder with attributed average annual gross revenues that exceed $3 million and do not exceed $15 million for the preceding three years very small business received a 25 percent discount on its winning bid and iii a bidder with attributed average annual gross revenues that do not exceed $3 million for the preceding three years entrepreneur received a 35 percent discount on its winning bid 114 Auction 86 concluded in 2009 with the sale of 61 licenses 115 Of the ten winning bidders two bidders that claimed small business status won 4 licenses one bidder that claimed very small business status won three licenses and two bidders that claimed entrepreneur status won six licenses 113 39 In addition the SBA’s Cable Television Distribution Services small business size Amendment of Parts 21 and 74 of the Commission’s Rules with Regard to Filing Procedures in the Multipoint Distribution Service and in the Instructional Television Fixed Service and Implementation of Section 309 j of the Communications Act—Competitive Bidding Report and Order 10 FCC Rcd 9589 9593 para 7 1995 110 111 47 CFR § 21 961 b 1 112 47 U S C § 309 j Hundreds of stations were licensed to incumbent MDS licensees prior to implementation of Section 309 j of the Communications Act of 1934 47 U S C § 309 j For these pre-auction licenses the applicable standard is SBA’s small business size standard of 1500 or fewer employees 113 Auction of Broadband Radio Service BRS Licenses Scheduled for October 27 2009 Notice and Filing Requirements Minimum Opening Bids Upfront Payments and Other Procedures for Auction 86 Public Notice 24 FCC Rcd 8277 2009 114 Id at 8296 para 73 115 Auction of Broadband Radio Service Licenses Closes Winning Bidders Announced for Auction 86 Down Payments Due November 23 2009 Final Payments Due December 8 2009 Ten-Day Petition to Deny Period Public Notice 24 FCC Rcd 13572 2009 52 Federal Communications Commission FCC-CIRC1705-05 standard is applicable to EBS There are presently 2 436 EBS licensees All but 100 of these licenses are held by educational institutions Educational institutions are included in this analysis as small entities 116 Thus we estimate that at least 2 336 licensees are small businesses Since 2007 Cable Television Distribution Services have been defined within the broad economic census category of Wired Telecommunications Carriers that category is defined as follows “This industry comprises establishments primarily engaged in operating and or providing access to transmission facilities and infrastructure that they own and or lease for the transmission of voice data text sound and video using wired telecommunications networks Transmission facilities may be based on a single technology or a combination of technologies ”117 The SBA has developed a small business size standard for this category which is all such firms having 1 500 or fewer employees To gauge small business prevalence for these cable services we must however use the most current census data that are based on the previous category of Cable and Other Program Distribution and its associated size standard that size standard was all such firms having $13 5 million or less in annual receipts 118 According to Census Bureau data for 2007 there were a total of 996 firms in this category that operated for the entire year 119 Of this total 948 firms had annual receipts of under $10 million and 48 firms had receipts of $10 million or more but less than $25 million 120 Thus the majority of these firms can be considered small 5 Satellite Service Providers 40 Satellite Telecommunications Providers Two economic census categories address the satellite industry The first category has a small business size standard of $30 million or less in average annual receipts under SBA rules 121 The second has a size standard of $30 million or less in annual receipts 122 41 The category of Satellite Telecommunications “comprises establishments primarily engaged in providing telecommunications services to other establishments in the telecommunications and broadcasting industries by forwarding and receiving communications signals via a system of satellites or reselling satellite telecommunications ”123 For this category Census Bureau data for 2007 show that there were a total of 570 firms that operated for the entire year 124 Of this total 530 firms had annual receipts of under $30 million and 40 firms had receipts of over $30 million 125 Consequently we estimate that the majority of Satellite Telecommunications firms are small entities that might be affected by our action 42 The second category of Other Telecommunications comprises inter alia “establishments The term “small entity” within SBREFA applies to small organizations nonprofits and to small governmental jurisdictions cities counties towns townships villages school districts and special districts with populations of less than 50 000 5 U S C §§ 601 4 - 6 We do not collect annual revenue data on EBS licensees 116 U S Census Bureau 2012 NAICS Definitions “517110 Wired Telecommunications Carriers ” partial definition http www census gov cgi-bin sssd naics naicsrch code 517110 search 2012 117 118 13 CFR § 121 201 NAICS code 517110 119 U S Census Bureau 2007 Economic Census Subject Series Information Receipts by Enterprise Employment Size for the United States 2007 NAICS code 517510 rel Nov 19 2010 120 Id 121 13 CFR § 121 201 NAICS Code 517410 122 13 CFR § 121 201 NAICS Code 517919 U S Census Bureau 2012 NAICS Definitions “517410 Satellite Telecommunications ” http www census gov cgi-bin sssd naics naicsrch code 517410 search 2012 123 U S Census Bureau 2007 Economic Census Subject Series Information “Establishment and Firm Size ” NAICS code 517410 released Nov 19 2010 124 125 Id 53 Federal Communications Commission FCC-CIRC1705-05 primarily engaged in providing specialized telecommunications services such as satellite tracking communications telemetry and radar station operation This industry also includes establishments primarily engaged in providing satellite terminal stations and associated facilities connected with one or more terrestrial systems and capable of transmitting telecommunications to and receiving telecommunications from satellite systems ”126 For this category Census Bureau data for 2007 show that there were a total of 1 274 firms that operated for the entire year 127 Of this total 1 252 had annual receipts below $25 million per year 128 Consequently we estimate that the majority of All Other Telecommunications firms are small entities that might be affected by our action 6 Cable Service Providers 43 Because section 706 requires us to monitor the deployment of broadband using any technology we anticipate that some broadband service providers may not provide telephone service Accordingly we describe below other types of firms that may provide broadband services including cable companies MDS providers and utilities among others 44 Cable and Other Program Distributors Since 2007 these services have been defined within the broad economic census category of Wired Telecommunications Carriers that category is defined as follows “This industry comprises establishments primarily engaged in operating and or providing access to transmission facilities and infrastructure that they own and or lease for the transmission of voice data text sound and video using wired telecommunications networks Transmission facilities may be based on a single technology or a combination of technologies ”129 The SBA has developed a small business size standard for this category which is all such firms having 1 500 or fewer employees To gauge small business prevalence for these cable services we must however use current census data that are based on the previous category of Cable and Other Program Distribution and its associated size standard that size standard was all such firms having $13 5 million or less in annual receipts 130 According to Census Bureau data for 2007 there were a total of 2 048 firms in this category that operated for the entire year 131 Of this total 1 393 firms had annual receipts of under $10 million and 655 firms had receipts of $10 million or more 132 Thus the majority of these firms can be considered small 45 Cable Companies and Systems The Commission has also developed its own small business size standards for the purpose of cable rate regulation Under the Commission’s rules a “small cable company” is one serving 400 000 or fewer subscribers nationwide 133 Industry data shows that U S Census Bureau 2012 NAICS Definitions “517919 All Other Telecommunications ” http www census gov cgi-bin sssd naics naicsrch code 517919 search 2012 126 U S Census Bureau 2007 Economic Census Subject Series Information “Establishment and Firm Size ” NAICS code 517410 released Nov 19 2010 127 128 Id U S Census Bureau 2012 NAICS Definitions “517110 Wired Telecommunications Carriers ” partial definition http www census gov cgi-bin sssd naics naicsrch code 517110 search 2012 129 130 13 CFR § 121 201 NAICS code 517110 U S Census Bureau 2007 Economic Census Subject Series Information “Establishment and Firm Size ” NAICS code 517110 released Nov 19 2010 131 132 Id 133 47 CFR § 76 901 e The Commission determined that this size standard equates approximately to a size standard of $100 million or less in annual revenues Implementation of Sections of the 1992 Cable Act Rate Regulation Sixth Report and Order and Eleventh Order on Reconsideration 10 FCC Rcd 7393 7408 1995 54 Federal Communications Commission FCC-CIRC1705-05 there were 1 141 cable companies at the end of June 2012 134 Of this total all but ten cable operators nationwide are small under this size standard 135 In addition under the Commission’s rules a “small system” is a cable system serving 15 000 or fewer subscribers 136 Current Commission records show 4 945 cable systems nationwide 137 Of this total 4 380 cable systems have less than 20 000 subscribers and 565 systems have 20 000 or more subscribers based on the same records Thus under this standard we estimate that most cable systems are small entities 46 Cable System Operators The Communications Act of 1934 as amended also contains a size standard for small cable system operators which is “a cable operator that directly or through an affiliate serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250 000 000 ”138 The Commission has determined that an operator serving fewer than 677 000 subscribers shall be deemed a small operator if its annual revenues when combined with the total annual revenues of all its affiliates do not exceed $250 million in the aggregate 139 Based on available data we find that all but ten incumbent cable operators are small entities under this size standard 140 We note that the Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million 141 and therefore we are unable to estimate more accurately the number of cable system operators that would qualify as small under this size standard 7 All Other Telecommunications 47 Electric Power Generators Transmitters and Distributors The Census Bureau defines this industry as including “establishments primarily engaged in providing specialized telecommunications services such as satellite tracking communications telemetry and radar station operation This industry 134 NCTA Industry Data Number of Cable Operating Companies June 2012 http www ncta com Statistics aspx visited Sept 28 2012 Depending upon the number of homes and the size of the geographic area served cable operators use one or more cable systems to provide video service See Annual Assessment of the Status of Competition in the Market for Delivery of Video Programming MB Docket No 12-203 Fifteenth Report 28 FCC Rcd 10496 10505-06 para 24 2013 15th Annual Competition Report See SNL Kagan “Top Cable MSOs – 12 12 Q” http www snl com InteractiveX TopCableMSOs aspx period 2012Q4 sortcol subscribersbasic sortorder desc We note that when applied to an MVPD operator under this size standard i e 400 000 or fewer subscribers all but 14 MVPD operators would be considered small See NCTA Industry Data Top 25 Multichannel Video Service Customers 2012 http www ncta com industry-data The Commission applied this size standard to MVPD operators in its implementation of the CALM Act See Implementation of the Commercial Advertisement Loudness Mitigation CALM Act MB Docket No 11-93 Report and Order 26 FCC Rcd 17222 17245-46 para 37 2011 CALM Act Report and Order defining a smaller MVPD operator as one serving 400 000 or fewer subscribers nationwide as of December 31 2011 135 136 47 CFR § 76 901 c The number of active registered cable systems comes from the Commission’s Cable Operations and Licensing System COALS database on Aug 28 2013 A cable system is a physical system integrated to a principal headend 137 138 47 U S C § 543 m 2 see 47 CFR § 76 901 f nn 1-3 139 47 CFR § 76 901 f see FCC Announces New Subscriber Count for the Definition of Small Cable Operator Public Notice 16 FCC Rcd 2225 Cable Services Bureau 2001 140 See NCTA Industry Data Top 25 Multichannel Video Service Customers 2012 http www ncta com industrydata 141 The Commission does receive such information on a case-by-case basis if a cable operator appeals a local franchise authority’s finding that the operator does not qualify as a small cable operator pursuant to § 76 901 f of the Commission’s rules See 47 CFR § 76 909 b 55 Federal Communications Commission FCC-CIRC1705-05 also includes establishments primarily engaged in providing satellite terminal stations and associated facilities connected with one or more terrestrial systems and capable of transmitting telecommunications to and receiving telecommunications from satellite systems Establishments providing Internet services or Voice over Internet Protocol VoIP services via client-supplied telecommunications connections are also included in this industry ”142 The SBA has developed a small business size standard for this category that size standard is $32 5 million or less in average annual receipts 143 According to Census Bureau data for 2007 there were 2 383 firms in this category that operated for the entire year 144 Of these 2 346 firms had annual receipts of under $25 million and 37 firms had annual receipts of $25 million or more 145 Consequently we estimate that the majority of these firms are small entities that may be affected by rules adopted pursuant to the Notice D Description of Projected Reporting Recordkeeping and Other Compliance Requirements for Small Entities 48 As indicated above the Notice seeks comment on modifications to the Commission’s existing no-blocking rule no-throttling rule no paid prioritization rule and transparency rule and it proposes eliminating the Internet conduct standard While we anticipate that the removal or modification of burdensome regulations will lead to a long-term reduction in reporting recordkeeping or other compliance requirements on some small entities the potential modifications if adopted could initially impose additional reporting recordkeeping or other compliance requirements on some small entities 146 E Steps Taken to Minimize the Significant Economic Impact on Small Entities and Significant Alternatives Considered 49 The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach which may include among others the following four alternatives 1 the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities 2 the clarification consolidation or simplification of compliance or reporting requirements under the rule for small entities 3 the use of performance rather than design standards and 4 an exemption from coverage of the rule or any part thereof for small entities 147 We expect to consider all of these factors when we have received substantive comment from the public and potentially affected entities 50 The Commission expects to consider the economic impact on small entities as identified in comments filed in response to the Notice and this IRFA in reaching its final conclusions and taking action in this proceeding 51 We seek comment here on the effect the various proposals described in the Notice and summarized above will have on small entities and on what effect alternative rules would have on those entities How can the Commission achieve its goal of protecting and promoting an open Internet while also imposing minimal burdens on small entities What specific steps could the Commission take in this regard 142 U S Census Bureau 2012 NAICS Definitions 517919 All Other Telecommunications http www census gov cgi-bin sssd naics naicsrch code 517919 search 2012 last visited July 16 2015 143 See 13 CFR § 121 201 NAICS code 517919 U S Census Bureau 2007 Economic Census Information Subject Series – Establishment and Firm Size Table 4 “Receipts Size of Firms for the United States 2007 NAICS Code 517919 ” http factfinder2 census gov bkmk table 1 0 en ECN 2007_US 51SSSZ4 naics 517919 last visited July 16 2015 144 145 See id 146 See Notice Section III 147 5 U S C § 603 c 56 Federal Communications Commission FCC-CIRC1705-05 F Federal Rules that May Duplicate Overlap or Conflict with the Proposed Rules 52 None 57