Broadband Cable Association of Pennsylvania

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May 23, 2014

Federal Communications Commission Chairman Tom Wheeler is in a pickle. Since a federal appeals court in January struck down the commission's "net neutrality" rules-which precluded Internet service providers (ISPs) from charging Web content sites for faster delivery or "paid prioritization"-Mr. Wheeler and his Democratic colleagues on the commission have been trying to find a way to reinstate the rule without hurting ISP investment in broadband.

Last week the FCC voted 3-2 on a proposal that would ban ISPs from slowing traffic at all Web sites while being free to make deals for faster access (yes, the two ideas seem to conflict). The commission is accepting public comment on the proposal, which could subject ISPs to "common carrier" regulation, or treat them like public utilities, which might involve price regulation and could let the commission bar ISPs from engaging in paid prioritization. Here are a few possible outcomes:

  • Mr. Wheeler could drop his hesitation to classifying ISPs as common carriers. Although that approach could probably pass the commission, it would almost certainly be challenged in court, where the ISPs are likely to argue that subjecting Internet service providers to monopoly-style price regulation would stunt investment in broadband. They would have a separate opinion by a judge in the January case (among other sources) to cite for this concern. The counterargument is that the majority ruling in the January case essentially invited the FCC to reissue its net neutrality rules once ISPs were reclassified. A final legal outcome could take years, but a vote for common carriage would please many in tech and consumer advocacy in the meantime.
  • At the other extreme, Mr. Wheeler could stick with the May 15 proposal allowing paid prioritization but drop the "common carriage" plan. The FCC's two Democratic commissioners might not go along, leaving the panel with no net neutrality substitute rule, most likely for the rest of President Obama's second term. This would probably enrage proponents of net neutrality, though it would satisfy the FCC's two Republicans, who oppose such regulation. It's unclear why the FCC's Republican members were not more willing to support the chairman's initial proposal. Failure to compromise runs the risk of pushing Mr. Wheeler to do precisely what they don't want: Subject ISPs to strict regulation-with a good chance that the decision would be upheld by the courts if challenged.
  • The chairman could try to reach a compromise that would reclassify ISPs as common carriers but with an important qualification: that the final rule would still permit paid prioritization. He could point to the prevalence of charging for faster or better service elsewhere in the economy, as well as the fact that even when it was a monopoly, the U.S. Postal System charged more for air than ground delivery. An open question is whether a qualified designation of common carrier would persuade ISPs to forgo a court challenge. One or more might sue, worried that a future FCC could drop the qualification permitting higher charges for faster delivery.

Whatever Mr. Wheeler decides, he is unlikely to act before Election Day. For one thing, the outcome in November should reflect the mood of the country and, in particular, the strength of Republicans in Congress, which oversees the FCC. And a delay until the midterms would not alienate the administration's tech supporters, some of whom may be instrumental in helping Democratic candidates, directly or indirectly. Wall Street Journal

Cox Communications Inc. became the biggest U.S. cable operator to commit to rolling out a gigabit-speed broadband offering to all its residential customers, starting this year, the latest sign that the push for ultrafast broadband speeds sparked by Google Inc. is gaining traction throughout the industry.

Cox will invest "hundreds of millions of dollars" on the gigabit rollout, said Cox President Pat Esser in an interview. Cox said it will start upgrading its network in Phoenix, Las Vegas and Omaha, Neb., with gigabit speeds available to the first residential customers in the fourth quarter. Cox, a unit of closely held Cox Enterprises Inc., is the third-biggest U.S. cable operator, after Comcast Corp. and Time Warner Cable Inc. Cox Communications serves nearly six million customers.

While many cable operators offer gigabit broadband service to businesses, the fastest residential speed offered by a major U.S. cable operator is 505 megabits a second-roughly half a gigabit-although most households get far lower speeds. According to an April report from network operator Akamai Technologies Inc., the average speed of broadband connectivity in the U.S. was about 10 mbps as of the end of last year. Two years ago Google began a push for gigabit speeds by launching an all-fiber network in Kansas City, in a move to accelerate the deployment of faster networks.

Since then, Google has announced plans to enter more markets while phone company AT&T Inc. and city governments working with private providers have committed to roll out gigabit speeds in several cities. But the cable industry, which is the dominant provider of broadband in the U.S., has held back, citing uncertainties about whether consumers want such speedsand whether applications exist today to warrant them. Cox isn't the first cable operator to make such a commitment. Small Alaskan operator General CommunicationInc. has previously done so while Bright House Networks LLC, a midsize operator owned by the Newhouse family, said in March it would roll out gigabit speeds to a small area of Tampa, Fla.

Mr. Esser said gigabit speeds have been on Cox's road map for "a long time." Recent advances in cable technology have paved a path to provide gigabit speeds for less cost than previously imagined, and Mr. Esser further said Cox has been "deploying fiber deeper and deeper" for some time now. Mr. Esser said Cox is "trying to stay ahead of our customers' needs" and sees a future of a "connected home" where families might be using 10 devices connected to the Internet at the same time. Cox's gigabit-speed services will be "competitively priced," although he said retail pricing will be announced at a later date. Google sells its stand-alone gigabit service for $70 a month.

He said Cox's plan isn't contingent on whether towns and cities offer any sweeteners to Cox to make the rollout easier. Two years ago, Google's ability to get discounted and free services from Kansas City as it constructed its fiber service raised the hackles of local incumbent operators, including Time Warner Cable and AT&T. AT&T has indicated it is interested in getting similar concessions from towns as it rolls out its gigabit speeds. Wall Street Journal

U.S. Rep. Allyson Schwartz's primary election-night concession message to supporters lamented that "the political pundits, the media, the Harrisburg establishment couldn't believe a woman could serve as governor - couldn't even imagine it." She claimed - incorrectly - in that email to have performed in the primary "better than any Democratic woman running for governor has ever done in Pennsylvania history." The late Catherine Baker Knoll, then state Treasurer, in 1994 took 20 percent of the Democratic votes in a seven-way primary election for governor won by Lt. Gov. Mark Singel. Schwartz on Tuesday won 17.6 percent of the vote.

A Schwartz spokesman yesterday said the email was sent before the final votes were tallied. He also cited stories in the Daily News and Philadelphia magazine to justify Schwartz's claims that the media could not imagine a woman as governor. Those stories explored the use of gender by Schwartz, who spoke frequently about the "good ol' boy" network and her foes. They didn't question whether a woman could do the job. Philadelphia Daily News

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