Morning Consult

When the Federal Communications Commission unveiled a new regulation to regulate the $45 billion “business data services” market, many in the industry were surprised the rules didn’t include price caps on newer, Ethernet-based technology. A nonbinding agreement reached summer 2016 between two key players — incumbent carrier Verizon and the competitive-carrier trade group INCOMPAS — included Ethernet price caps. The goal for both the FCC and some in the industry is to curb anti-competitive pricing of the bulk data connections that power ATMs, retail transactions and cell phone towers. Most observers — including some inside the FCC itself — expected the commission’s final rule to track closely to the Verizon/INCOMPAS deal. The rule, which is actually quite different from that agreement, is currently on circulation among the five commissioners. A vote on it could come at any time, but it has not been included on the docket for the commission’s open meeting on Oct 27.

There are competing reasons why the commission excluded Ethernet price caps in the rule, apparently. The main reason is that a thorough examination of its marketplace data showed insufficient evidence that the Ethernet market was noncompetitive. Recent data revealed an uptick in Ethernet competition, driven in part by the entrance of cable companies into the bulk data marketplace. It would be premature to regulate the price at this point. Apparently, there are additional reasons, beyond the main argument about inconclusive data, that explain why the commission didn’t include Ethernet price caps in its latest version. The FCC lacked the pricing data that would make the caps capable of effectively withstanding a legal challenge. In addition, apparently some regulators were concerned by unworkable provisions in the Verizon/INCOMPAS proposal to cap Ethernet prices by census blocks. What’s more, apparently regulators were worried about industry reaction to earlier FCC orders that exempted some bulk data providers from regulation.

Privacy advocates are hitting hard at the government process that likely led Yahoo Inc. to create software and scan all of its users’ incoming e-mails on behalf of US intelligence agencies. The reaction was immediate to a report that said a classified government order directed the Internet company to scan hundreds of millions of Yahoo Mail accounts searching for a specific “set of characters.” Advocates agree that many questions remain unanswered about the case.

Still, the Washington (DC) backlash coalesces around a foreign surveillance law, set to expire at the end of 2017, that privacy-minded lawmakers want to change. Privacy advocates are zeroing in on a controversial provision of the 2008 Foreign Intelligence Surveillance Amendments Act as the likely avenue that brought forth the government order. Provisions in the law allow US intelligence officials to request consumer data from phone and Internet firms to spy on targets believed to be outside the US. Even before the Yahoo report, lawmakers and civil liberties advocates were pushing for changes to that provision, Section 702. They say US intelligence agencies abuse it, conducting mass surveillance on Americans that shouldn’t be targeted in the first place. In the wake of the Yahoo news, these advocates say the administration now has a duty at least to tell people if it is conducting mass searches.

Telecommunication companies Sprint, Frontier Communications and Windstream Services released a joint filing to the Federal Communications Commission expressing their support for upcoming FCC rules that may place price caps on the data services that power transactions at retail outlets and ATMs. They simultaneously urged the commission to adopt a tiered approach to the new rules for business data services, or BDS, that would favor smaller carriers.

The filing marked an about-face for Frontier, which has long resisted changing the market in which bulk data connections are sold directly to businesses from phone companies. Frontier said the latest agreement is satisfactory. “Yesterday’s filing by Frontier, Windstream, and Sprint reflects a consensus approach which affords the smaller price-cap carriers a reasonable transition period to adjust to potential reductions to BDS rates,” spokesman John Puskar said in a statement.

Federal Communications Commission Chairman Tom Wheeler has an ambitious agenda ahead of him as the agency eyes rules in three telecommunications areas that face staunch opposition from large factions of the private sector. Chairman Wheeler wants the FCC to set price caps on business data services, open the cable set-top box marketplace, and implement privacy regulations on Internet service providers. He told reporters he aims to complete all those items before the end of the year. The stars will have to align perfectly for this to happen.

David Edelman, special assistant to the president for economic and technology policy at the National Economic Council, said technology areas like cybersecurity, privacy, and network neutrality are winners in the international community.

Edelman said that the core principles behind the net neutrality rules — ones that some industry lobbyists and Republicans fought so vehemently in the United States — were widely adopted in other major economies. “Something was happening under our noses that I think wasn’t truly recognized in an international forum until this G20 [summit],” Edelman said. “The vast majority of G20 economies already had open internet protection on the books.” Republicans and some industry executives say the rules are an overreach that will squelch broadband innovation. Edelman disagrees. “As it turns out, the principles that were so controversial domestically were ones that had surprising international consensus,” he said, noting that Brazil, India and the European Union were all in the process of drafting open internet rules as policymakers in the United States debated the validity of the rules put forward by the Federal Communications Commission. “This is a remarkable evolution in a debate that reflected and became a part of the global consensus, certainly well before any would have said the issue is resolved domestically,” he added. The issue of privacy also reflects an area where, despite differences, the U.S. has been able to strike key agreements with allies because of domestic policy, Edelman said.

The Federal Communications Commission’s proposed privacy rules for Internet service providers have ruffled the feathers in the tech industry since the agency passed the proposal in March. A key question as the agency moves forward to a final rule will be how the FCC’s entrance into privacy rules would interfere (or coexist) with the regime currently enforced by the Federal Trade Commission.

The details will come into focus in the coming weeks, as FCC Chairman Tom Wheeler wants to finalize the proposal by the end of 2016. “It’s a turf war. Let’s be honest. It’s a turf war,” said Tim Sparapani, senior policy counsel at CALinnovates, a technology advocacy coalition. “We really need a do-over.” Sparapani was speaking at a privacy briefing Tuesday sponsored by CALinnovates. Just hours earlier in the same building on Capitol Hill, all three commissioners of the FTC testified before the Senate Commerce Committee. They offered a lukewarm endorsement of the FCC’s privacy endeavors. “In our initial bipartisan comment to the FCC, we were very supportive of their proposed rule in this area,” FTC Commissioner Terrell McSweeny said at the hearing. “We do believe that like the FTC, the FCC shares our goals of transparency, consumer choice, and security and that they have an important role to play in protecting consumer privacy.” Sparapani said the FCC is only confusing matters. “As communications services continue to evolve, and these kinds of companies begin to merge more and more across traditional silos of industry, none of this is going to make any sense,” he said.

[Commentary] The pending transition of the Internet Corporation for Assigned Names and Numbers (ICANN) away from US government oversight has involved in-depth discussion about how to maintain an open Internet free from government control. What has received considerably less attention in these discussions is how ICANN has performed while under US oversight—especially as a regulator. This lack of attention can partly be attributed to ICANN’s insistence that, as its president Göran Marby said at a Senate hearing recently, “ICANN is not a regulator.” Perhaps not officially, but what ICANN actually does is indistinguishable from a regulatory agency.

ICANN, however, is a regulator with a difference. It is not a government agency, but rather a private-sector corporation that is and will continue to be subject to US antitrust laws whether or not its tie to the US government ends. The presence of antitrust oversight is a good thing. So, as the clock winds down on ICANN’s contractual relationship with the US government, it is important to ask how well ICANN is performing its regulatory functions. Using the standard criterion for regulation—promoting competition and consumer welfare—it would appear that the US antitrust agencies could provide ICANN some beneficial oversight.

[Thomas M. Lenard is a senior fellow and president emeritus at the Technology Policy Institute. Lawrence J. White is professor of economics at the NYU Stern School of Business.]

A tangled mess of two stalled telecommunication bills and the pending nomination of a well-liked tech regulator won’t be resolved until a lame-duck session of Congress, if at all, a top Senate Republican said. At issue is the confirmation of Commissioner Jessica Rosenworcel of the Federal Communications Commission, a Democrat, for a second term at the agency. If the Senate doesn’t vote before the end of 2016, she’s out. Her term will be up, and there will be no way to extend her tenure, even though she is highly regarded by both Republicans and Democrats.

The standoff over Rosenworcel in the Senate, with several Republican objections to her nomination, has also tied up a bill to strengthen spectrum allocation and a long-overdue measure to reauthorize the FCC. “I don’t think this happens before Nov 8th, but I think when we get back in a lame-duck, I hope that we can bust some things loose and perhaps one of those will be the nomination,” Senate Commerce Committee Chairman John Thune (R-SD) said after a lengthy oversight hearing on the FCC. Democratic lawmaekrs say that in Dec 2014, then-Minority Leader Mitch McConnell (R-KY), promised Senate Democrats that if they voted to confirm Republican FCC Commissioner Michael O’Rielly, the GOP would move swiftly to confirm Rosenworcel at the start of the 114th Congress in January 2015. That’s also when McConnell became majority leader. The Senate Commerce Committee approved her renomination in December, but the floor vote to confirm Rosenworcel has yet to come because of a few GOP objections. Senate Minority Leader Harry Reid (D-NV), has blocked two telecom measures reported out of Senate Commerce, both with strong bipartisan support, in retaliation for McConnell’s unwillingness to force the nomination through. Chairman Thune suggested recently that if FCC Chairman Tom Wheeler were to step down following the November elections, it could help free up Rosenworcel’s confirmation vote.

Senate Commerce Committee Chairman John Thune (R-SD) said he “expects” language that would halt the transition of an Internet governing body away from US government control to make it into the upcoming continuing resolution (CR) to fund the federal government. “Right now they’re trying to work out what that would look like, what would be effective in terms of putting the brakes on this,” he said. “I don’t think that anybody feels that we’re ready yet for that transition to take place, and so the question is how do you make that happen?”

Chairman Thune said that he expects the planned transition of the Internet Assigned Numbers Authority to be one of several issues that could push negotiations with Democratic Sens over the CR into next week. Meanwhile, the squabble over whether the US should follow through on the transition heated up Sept 13 as a report from the Government Accountability Office found that the upcoming transfer of power wouldn’t violate constitutional law.

House Communications Subcommittee approved two measures: one aimed at improving call reliability in rural areas and another that would make it illegal for anyone outside the country to fake their caller identification information when texting someone inside the US. The subcommittee advanced both bills by voice vote. The measures now await consideration by the full committee. The rural call reliability legislation (HR 2566), advanced after the panel approved a substitute amendment that brought the bill in line with a similar measure in the Senate (S 827). The House bill would require intermediate providers to register with the Federal Communications Commission, which in turn would create standards aimed at ensuring better phone call quality in rural areas. The substitute amendment was adopted in an effort to give the bill a better chance at becoming law, according to Subcommittee Chairman Greg Walden (R-OR). “In addition to improving the substance of this bill, this amendment will also bring our legislation in line with the language of the bill currently making its way through the Senate,” Chairman Walden said at the markup. “It is a priority that we get this legislation passed into law, and by mirroring the text of the Senate that they’ve adopted coming out of committee, we’ve very much increased our odds that this will happen.” The Senate Commerce Committee in June advanced the version sponsored by Sen. Amy Klobuchar (D-MN). That measure awaits action from the full Senate.

The second bill (HR 2669) would make it illegal for individuals or entities abroad to send text messages with fraudulent caller identification information to someone in the US. Currently, it’s illegal only for text messages that originate in the US.