The Federal Communications Commission has set its sights on Internet service providers. In a nutshell, Chairman Tom Wheeler plans to introduce a number of proposals at the agency's Feb. 26 meeting that are not pleasing to the Internet providers.
The proposal that has drawn the most attention is Wheeler's plan to use Title II of the Telecommunications Act to regulate ISPs as utilities. This type of regulatory control might change how your Internet service provider acts, but unfortunately it's unlikely to lead to greater ISP choice.
A second Wheeler proposal, though, could lead to greater competition, something the ISPs perhaps oppose even more than they do regulation under Title II.
What Wheeler is proposing
The FCC is drafting a decision to intervene against state laws in Tennessee and North Carolina that limit Internet access operated and sold by cities, a senior FCC official told The Washington Post. The draft is expected to be handed out to commissioners prior to public meeting on Feb. 26, where it would be voted on.
"If approved, the FCC would find that the states have erected barriers to the timely and reasonable deployment of high-speed Internet access in Chattanooga, Tenn. and Wilson, N.C.," according to the Post.
The new proposal, if approved, would eliminate state laws that stop the cities from building competitors to Comcast (NASDAQ:CMCSA), Time Warner Cable (UNKNOWN:TWC.DL), Verizon (NYSE:VZ), and others. The Post cited a number of ways laws are used to keep city-run ISPs from competing:
- Tennessee has passed rules forbidding cities from building high-capacity networks beyond a certain geographic area.
- Publicly run broadband in North Carolina may not offer service at prices below what a private carrier offers.
Roughly 20 states have similar laws, according to the paper, and overturning these rules in Tennessee and North Carolina would pave the way for cities in other states to have their laws changed. A FCC decision in favor of municipalities would bring more choice at least for some consumers, along with the possibility of lower prices.
Can the FCC do this?
The FCC has broad, but vague, powers under Section 706 of the Communications Act to promote the deployment of broadband in the United States. Using those powers, the FCC can determine the state laws represent a barrier to its mission to ensure "advanced telecommunications capability [i.e., broadband or high-speed access] is being deployed to all Americans in a reasonable and timely fashion."
But some Republicans in Congress and some right-leaning members of the FCC itself question whether the agency can intervene between a state and the cities under its jurisdiction. A bill sponsored by Senate Commerce Committee Chairman John Thune, a South Dakota Republican, and Michigan Republican Fred Upton, who chairs the House Energy and Commerce Committee, would restrict the FCC's authority under Section 706, preventing the agency from using that portion of the law as a regulatory tool for broadband.
Will it happen?
Wheeler has shown a surprising willingness to take on the ISPs, and he is likely to push a decision through that challenges the laws in Tennessee and North Carolina. Congress is unlikely to act fast enough to pass the Thune/Upton bill before the FCC takes action. In addition, President Barack Obama would likely veto the bill if it passes.
FCC action, however, would likely set off a flood of legal proceedings. Thune and Upton, who have been critics of Wheeler on Title II, will likely try to get a bill passed, and other cities will use the FCC decision to seek to overturn rules restricting them from competing with ISPs.
There will be no quick resolution to this issue, but Wheeler has set the ball in motion to end laws that benefit the ISPs at the expense of American citizens.
Daniel Kline has no position in any stocks mentioned. He wonders if Chairman Wheeler's friends call him "Wheels." The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.