Net Neutrality Is Setting The Stage For Internet Taxes

13 Mar 2015 | Author: | No comments yet »

Breaking down the controversial FCC clause that no one’s talking about.

The Federal Communications Commission has released its long-awaited Open Internet Order, a seemingly simple set of rules designed to insure that consumers get access to the websites they want and businesses get access to consumers without paying tolls to broadband providers on the way. In the FCC’s newly released Net Neutrality Order, it includes a supplemental document on so-called mythsfrom classifying broadband as a Title II regulated telecommunications service.According to a raft of recent national polls, Republican voters approve of government action to ensure that Internet service providers treat all web content the same.

So, not surprisingly, the prospect of a tax increase was a prominent card played by conservatives opposed to net neutrality, the idea of equal treatment for all Internet content. A November 2014 University of Delaware survey, for example, found that 85% of Republicans (and 81% of Democrats) were opposed to allowing ISPs to charge web companies a fee to deliver their content to customers more quickly—an arrangement they call “Internet fast lanes.” Yet five likely Republican presidential contenders have come out against net neutrality in no uncertain terms.

The most important news from the decision has been net neutrality — it’s now illegal to prioritize certain kinds of web traffic for money — but there’s a separate, more obscure provision that had raised the alarm for many network engineers, and the new rules put it in a radically different light. Opponents say the regulations are an illegal bureaucratic power grab, and that if they are allowed to stand in court they will do harm. “The consequences: higher broadband prices, slower speeds… less innovation, and fewer options for American consumers,” Ajit Pai, a commissioner at the FCC, said in his dissent.

The order, released Thursday in the wake of the commission’s vote to approve net neutrality rules in late February, establishes “clear and enforceable rules” to protect consumers, an FCC official said. Through 313 dense pages of regulations and explanations, the FCC never explains why it needs to pull a 180-degree shift in how it oversees the Internet, from treating it as an “information service” exempt from utility-style regulation, to a “telecommunications service” falling under the 1934 law written to control telephone monopolies. “The real question is, will a court defer to the FCCs view of the facts?” said John Beahn, counsel in Skadden’s Washington office focusing on telecommunications law. “There are going to be a lot of billable hours spent on that.” The rules, as I said, appear simple.

The regulations talk about a new tax on Internet providers in a positive light, noting it could add “to the stability of the universal service fund,” which subsidizes building connections in unprofitable areas. Moreover, even if your monthly bill does rise a few pennies, the money would go toward expanding broadband service nationwide — and that’s a good thing, as just about every study of the economic and social benefits of broadband has shown. While the order is long, the actual changes to the Code of Federal Regulations that the FCC approved amount to eight pages, running from pages 283 to 290 in Appendix A of the order. The idea behind the move is simple: if Comcast lists less packet loss than Optimum, say, you might be more inclined to use their service, anticipating fewer hiccups in your data feed.

While its order does not explicitly impose new taxes, it does open to the door for others to tax the Internet for the first time under existing state and local laws, and will likely lead to further expansion of taxes in years to come. Jeb Bush, the frontrunner for the Republican presidential race in 2016, said the FCC’s plan to ensure net neutrality was “one of the craziest ideas I’ve ever heard.” 1) It’s All About Obama. Internet protocols are built to withstand packet loss, the same way a car won’t stop because of a few bumps in the pavement, but extremely high loss can still slow or stop streaming and browsing. In other words, an ISP, such as Comcast or Verizon, for example, can’t take action to keep ordinary customers away from certain websites (or stop them from downloading certain movies or music, for that matter), unless the content in question and the act of obtaining it is otherwise illegal.

The FCC order includes a history of net neutrality efforts at the agency as well as a lengthy justification for the rules and an analysis of potential legal issues. If another wants to upgrade the bandwidth of its routers at the cost of some latency, the FCC may block it.” The regulations include “net neutrality” rules – which were the main impetus for the new policies. The collapse of reasoned discussion about net neutrality into partisan bickering is yet another example of why it’s so hard to get things done in this country.

He blamed the change on pressure from the White House, which was dissatisfied with earlier proposals that stopped short of regulating broadband providers as common carriers under Title II of the Telecommunications Act. By reclassifying Internet services as common carrier telecommunications services, states that tax the tangible property and equipment of public utilities and regulated telecommunications services can now tax the property of broadband service providers.

Packet loss is also a good measure for the kind of service decline you’d see if you were stuck in an internet slow lane, so groups from the EFF to the AARP had called for better reporting on the metric. We believe that this approach will allow broadband providers to honor their service commitments to their subscribers without requiring a specified level of service to those subscribers or edge providers under the no-blocking rule,” the agency says. Public utilities are taxed at a much higher rate than other property taxes, which means that broadband costs and prices will increase with states never having to pursue the more challenging course of securing legislative change. David Edelman – saw reclassification of the Internet as the key to getting past unfavorable court decisions striking down the FCC’s previous Open Internet orders. The problem is, packet loss isn’t the best measure of a good network, and a system designed entirely to minimize packet loss might simply add more buffering, cratering latency and incentivizing slower networks overall.

Pollsters have found that Republican voters often say they don’t like “net neutrality,” but they say they like it when the issue is explained instead. That led the National Cable and Television Association (already outspoken opponents of Title II) to label the packet loss provision as “a new rule that could degrade internet performance.” But now that we’ve got the full text of the FCC rules, the situation seems to have gone up in smoke. It also stops cable companies from blocking legal Internet content the carrier might not like. “Today’s FCC decision will protect innovation and create a level playing field for the next generation of entrepreneurs,” he said, noting that some 4 million Americans had written in asking for this regulation. “Why is the FCC turning its back on Internet freedom? Similarly, the FCC’s new rules also say that internet providers can’t decide to speed-up and slow-down the delivery to customers of online content at an ISP’s own discretion. They might simply designate all of the firm’s property as “mixed use” and subject it to the full taxation as regulated telecommunications property.

The FCC’s initial press releases had stoked fears by only mentioning packet loss, but the full regulations describe packet loss metrics being integrated into existing requirements on average latency and bandwidth. Therefore, broadband providers that provide video services, information services and other lines of business (such as applications and cloud computing services) could have their tangible and intangible property for other lines of businesses taxed at higher rates and under a broader base, exposing the entire business to these higher costs.

While the FCC says that federal universal service fees will not apply to broadband services, the Chairman’s later notes that reclassifying “bolsters universal service fund support for broadband service in the future through partial application of Section 254.” The current fund uses total interstate telecommunications revenues as its tax base, which means broadband (an interstate service) would eventually be subject to these fees. Customers may not understand all the new metrics, but ISPs will be charged with balancing the three numbers, which should fend off the nightmare scenario the NCTA was worried about. Cable and telecom companies, after all, oppose net neutrality and pour tens of millions of dollars every year on politicians’ campaign coffers, PACs and philanthropic projects and spend tens of millions more on lobbyists and letters and advertisements on the subject. To name one example, Comcast spent more on lobbying members of Congress in 2012 than any other company in the entire country, except Northrop Grumman, the defense contractor that makes the B-2 bomber. Yet while paid prioritization and “fast lanes” became a central argument to the net neutrality debate, the FCC has included language in its report that doesn’t outright ban that concept 100 percent.

But those contributions go pretty equally to Republicans and Democrats, and there’s a counterbalance from tech companies such as Google, Amazon and Netflix that are spending gobs of money, sometimes on the same politicians. 3) It’s the Means, Not the Ends. No one knows… businesses will have to decide for themselves — with… high-priced attorneys and accountants — whether to take a risk.” “Now we shall remain mired in endless lawsuits,” Wayne Crews, vice president of policy at the libertarian Competitive Enterprise Institute, told Crucially, they’ll still have control over their own networks, but it’s still conceivable that network operators will overreact to the new provisions, even if they’ll have less reason to. According to the report, broadband providers have obligations under statutes such as the Communications Assistance for Law Enforcement Act (CALEA), the Foreign Intelligence Surveillance Act (FISA) and the Electronic Communications Privacy Act (ECPA) that “could in some circumstances intersect with open Internet protections,” given that access must always be prioritized “in order to coordinate disaster relief and other emergency response efforts, or for other emergency communications.” Privacy advocates have raised questions in recent years about the scope of laws like CALEA, FISA and ECPA, however, especially given statements from government officials concerning ways in which authorities may rely on certain legislation to conduct online eavesdropping. RT reported at the time that a Justice Department attorney said in 2013 that the government wants to use CALEA to monitor the online conversations of suspected criminals in real time, and disclosures that same year from former intelligence contractor Edward Snowden revealed that the government uses Section 702 of FISA to authorize digital surveillance on foreign persons – the likes of which, tech experts have argued, has involved exploiting security weaknesses on behalf of the government and, as a result, secretly undermining the protocols meant to protect online activity.

The fee — conservatives are calling it a tax — was established in 1997 and raises billions of dollars annually to defray phone companies’ costs for running lines to far-flung areas. That could lead to a whole host of new state taxes and state traffic studies on broadband providers, not unlike those imposed in the days of “Ma Bell.” It’s time for the FCC to fess up.

The language in the report doesn’t provide any new powers to law enforcement, but rather clarifies that open internet provisions shouldn’t in any way preclude the authorities’ already established abilities. The 1998 law bans new taxes — but not fees — on Internet service. “This is essentially a massive tax increase on the middle class being passed in the dead of night without the American public really being made aware of what is going on,” Sen.

The commission will address mobile data caps on a case-by-case basis. [Pages 66 to 68.] — So-called specialized services that do not provide Internet access, including some VoIP services, online heart monitors and energy consumption sensors, are not covered by the rules. [Page 11. paragraph 35.] This is an attempt by federal authorities to protect Internet users from telecom giants that say you can trust them to do what’s right but have a mighty poor track record in that regard. In the case of broadband, however, we all benefit from its expansion by improved commerce, education, healthcare, entertainment, security and a host of other aspects of daily life.

But it’s rare for the agency to bundle the order on remand, or request for reconsideration, with the declaratory ruling stating stating broadband internet is a telecommunications service and a third ruling detailing forbearance from hundreds of regulations. To get to the point: Could someone reading the Notice have anticipated the FCC might reject its past proposals and tentative conclusions and instead pursue reclassification? It also rejects the idea that consumers might consent to paid prioritization, as is done in other two-sided markets, whether it is television subsidized by advertising or credit card “rewards” paid for by merchant fees and usurious interest rates charged to cardholders who don’t pay off their balance each month. “Given the dangers, there is no room for a blanket exception for instances where consumer permission is buried in a service plan—the threats of consumer deception and confusion are simply too great,” the order says. Iowa Utilities Board in 1999, saying the FCC had “irrationally refused” to consider whether a competing carrier could build its own local network or lease one from another party.

The agency also overstepped by considering any price increase to be an “impairment.” The agency came back with a new standard defining impairment as anything that “materially diminishes” a carrier’s “ability to provide the services it seeks to offer.” The D.C. The court criticized the agency’s “broad and analytically insubstantial concept of impairment” that failed to seek a balance between the benefits of unbundling and the costs in the form of discouraging investment in the network. And it vacated the FCC’s order requiring local carriers to lease their lines to competitors because the agency refused to consider alternatives like cable companies. Then-FCC Chairman Michael Powell, who like Pai today had dissented vociferously from the previous attempts to regulate local access, said this of the whole drama: For eight years, the effort to establish viable local unbundling rules has been a litigation roller coaster. Regrettably, years of fierce battles to bend the rules entirely toward one sector or another without proper respect for the legal constraint s have contributed to a prolonged period of uncertainty and market stagnation.

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