TRAIL GUIDE
Our experts score the debate: How Clinton beat Trump, round-by-round
BUSINESS

FCC chief cites wireless industry as precedent in net neutrality proposal

The history of wireless regulation offers a playbook for how the FCC could expand its oversight to broadband

The first Internet browser had just been launched, people were experimenting with a new form of letter-writing called email and the cellular telephone was evolving from a bulky luxury to a mass-market convenience.

The communications landscape was shifting rapidly in 1993 when Congress made a little-noticed change that classified mobile voice calling as a utility yet freed it from onerous utility regulation — part of an initiative to spur competition in the young wireless industry.

Federal Communications Commission Chairman Tom Wheeler now cites that move as a key precedent for the controversial net neutrality proposal that the agency is expected to approve Thursday.

His plan would impose federal oversight of online traffic to ensure that Internet providers don't give preference to video and other content from some websites over others. But he promised that the FCC wouldn't use the new authority to regulate rates or take other steps that would hinder investment in expanding fiber and wireless networks.

Instead, the FCC would use the same light-touch approach that came after the 1993 legislation and that "went hand-in-hand with massive investment" in wireless networks, said Wheeler, a Democrat who was a top industry lobbyist at the time.

"Under that, for the last 20 years, the wireless industry has been monumentally successful," Wheeler said in a speech last month in Las Vegas.

The early history of wireless regulation offers a playbook for how the FCC could expand its oversight to broadband without disrupting the Internet economy, said supporters of tough net neutrality rules.

"We have 20 years of experience with wireless that tells us that [that type of] regulation does not prevent investment," said Harold Feld, senior vice president at Public Knowledge, a digital rights group. "We went from having virtually no wireless coverage in this country … to something that everybody had everywhere."

Critics of Wheeler's plan said he's proposing something much different than what Congress and the FCC did in 1993 — and opening the door to potentially onerous regulations.

"Wall Street analysts, economists and certainly folks in the industry … are very concerned about where this will lead," said former FCC Commissioner Robert McDowell, a Republican and senior fellow at the Hudson Institute. "They don't trust the FCC to stop where it says it's going to stop."

For two decades, however, the FCC has shown restraint.

Cellphones were gaining popularity in 1993 — subscribers had tripled to about 16 million over the previous three years — but service and offerings still were limited, and the industry was subject to a patchwork of state regulations. Congress and the Clinton administration sought to boost coverage, improve competition and spur innovation by making more wireless airwaves available and auctioning them to allow new players.

As part of a budget bill, lawmakers created the first auctions, as well as clarified regulations that covered the wireless industry, including barring state and local governments from setting rates.

And most significantly, for net neutrality supporters, Congress told the FCC to oversee mobile voice calling under the section of the telecommunications law — Title 2 — that covered conventional, highly regulated telephone companies. The new measure limited the provisions of Title 2 that applied to the wireless industry.

In 1994, the FCC exempted wireless voice calling from some of the most onerous parts of those provisions, particularly rate regulation. And the following year, the agency rejected petitions from California and six other states to continue regulating rates under exemptions allowed by the law.

"The rules that we adopted for wireless were new and different," said Reed Hundt, who was FCC chairman at the time. "By saying that the government was out of the price-regulation business, we opened the door to the market innovation that you experience today."

Cumulative investments by wireless companies in their networks and services jumped from $14 billion at the end of 1993 to $146 billion a decade later, according to data from CTIA-The Wireless Assn. trade group.

Growth during that period was driven primarily by voice calling. The popularity of smartphones, with demand for Internet access, sent total cumulative spending to nearly $400 billion by the end of 2013.

Wheeler's plan would put wired and wireless broadband providers under Title 2 to give the FCC maximum authority to enforce new net neutrality rules. But just as in the mid-1990s, he said, the agency wouldn't use most of the powers under the provision so it could avoid stunting the industry's growth.

"We will forgo sections of Title 2 that pose a meaningful threat to network investment," Wheeler said during a Feb. 9 speech in Boulder, Colo. "That means no rate regulation.... No tariffs or new taxes."

But some wireless industry officials said equating regulation of wireless voice calling and mobile broadband is like comparing apples and oranges.

"That framework, while it might have worked for voice, doesn't capture the more dynamic and multifaceted aspects of the mobile broadband marketplace," said Scott Bergmann, CTIA's vice president for regulatory affairs.

In addition, Wheeler plans on subjecting Internet providers to additional provisions of Title 2 that were not part of the 1993 action, he said. That could lead the FCC to take tougher steps — including regulating rates — in the future, particularly if pressured by public interest groups, he said.

The FCC faces an additional problem with wireless broadband: The 1993 law specifically exempted services other than mobile voice calling — which later included wireless Internet access — from Title 2 regulation, Bergmann said.

That distinction helped mobile broadband flourish in recent years outside of even light-touch FCC regulation, according to critics of Wheeler's plan.

"There is no question, if you look at the investment patterns, especially since the introduction of smartphones in 2007 and thereafter, that mobile broadband investment is what is driving tremendous benefits that wireless consumers have been seeing in recent years," said FCC member Ajit Pai, a Republican and outspoken opponent of Wheeler's proposal.

Meredith Attwell Baker, CTIA's president, said last month that the wireless industry "will have no choice but to look to the courts" if the FCC changes the regulatory designation for mobile broadband.

FCC officials said Wheeler, in arguing that the agency can subject mobile broadband to tougher Title 2 oversight, noted that Congress gave the FCC the authority to update regulatory definitions to reflect marketplace changes.

The wireless experience, they said, shows that an update to categorize a service as a utility does not have to lead to heavy-handed government regulation.

jim.puzzanghera@latimes.com

Copyright © 2016, Los Angeles Times
81°