Last year, we released a paper entitled Justifying the Ends:  Section 706 and the Regulation of Broadband (and forthcoming, Journal of Internet Law) where we demonstrated how the Federal Communications Commission deliberately ignored its own evidence to support expanded regulatory jurisdiction over IP-based services.  With the release of its new Measuring Broadband America Report last week, the FCC once again undermines its factual predicate for Internet regulation.  Let me explain.

Over the last several years, we have seen the Federal Communications Commission put forth a rather clever argument to expand its regulatory authority over broadband services.  Under Section 706(a) of the Communications Act, the Commission “shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans … by utilizing … price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.”  If the agency determines that broadband capability is not “being deployed to all Americans in a reasonable and timely fashion,” then “the Commission shall take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications markets.”  (Emphasis supplied.)  So, stating it plainly, if the Commission reasons that deployment is not “reasonable and timely”, then the agency reasons it has the legal authority to impose broad-reaching regulation over advanced services.

For the first five Section 706 Reports, the agency refused to take the bait and concluded that broadband deployment, though not ubiquitous, was nonetheless “reasonable and timely.”  Chairman Julius Genachowski, however, couldn’t resist the temptation.  In 2010, the FCC reversed this pattern and concluded that broadband deployment was not “reasonable and timely.”  The Commission’s determination hung on the standard of universal broadband availability, and since “we have not achieved this goal today,” the agency declared that deployment is not “reasonable and timely.”  Following its interpretation of Section 706, the agency has since used this determination to motivate implementation of the National Broadband Plan and to justify the regulation of broadband services in such major policy initiatives as the Open Internet Rules.  And, as much of the current FCC’s aggressive regulatory agenda hangs on this determination, the FCC’s Eighth Section 706 Report (released last August) again finds that broadband deployment was not reasonable and timely.

As noted above, soon after the Eighth Section 706 Report came out, we released a paper entitled Justifying the Ends:  Section 706 and the Regulation of Broadband, where we the first to demonstrate how the Commission deliberately ignored its own evidence to support expanded regulatory jurisdiction over IP-based services.  Specifically, we showed how the FCC ignored its own financial analysis conducted as part of its National Broadband Plan which found that ubiquitous availability using wireline or terrestrial wireless services is unreasonably costly.  By the agency’s own calculations, for the most costly 250,000 homes, the average subsidy required to provide service averages $56,000 per home, with many homes costly far more than that amount (and many not even buying the service once available).  To quote the Plan, “approximately $14 billion of the total investment gap [goes] to serve the last two-tenths of 1% of all housing units (p. 150).”  No plausible cost-benefit analysis would justify such expenditure.  As such, ubiquitous availability today using terrestrial technologies is an unreasonable expectation and an unreasonable goal.

The cost-benefit analysis of ubiquitous broadband was not lost on the authors of the National Broadband Plan.  Specifically, the Plan observes, “[t]he FCC should consider alternative approaches, such as satellite broadband, for addressing the most costly areas of the country to minimize the contribution burden on consumers across America (p. 37).”  Additionally, Blair Levin, the director of the National Broadband Plan, observed: “Ultimately, it will be too expensive to provide service to the last .2 percent of homes, so those homes should be served by satellite broadband.”

Using satellite for very high-cost areas seems to be a reasonable if not necessary option, and one explicitly proposed by the National Broadband Plan team.  However, since the Plan also recognizes that satellite broadband is already ubiquitously available (“Satellite has the advantage of being [] ubiquitous (p. 137)”), the Commission had to reject satellite services as a valid broadband option in order to further its regulatory agenda—and did exactly that.  According to the Commission’s most recent Section 706 Report, it continues to reject satellite for two reasons:  First, the agency found that according to its most recent investigation, “there was not a commercially available satellite offering that could provide 4 Mbps/1 Mbps broadband service to consumers.”  (Eighth Section 706 Report at ¶ 41).  Second, the Commission found that “[s]atellite service generally has latency over 100 milliseconds and latency may affect a user’s ability to ‘to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology,’ as required by section 706.” (Id. at ¶ 42).

Well guess what?  With the release of its Measuring Broadband America Report last week, the FCC has now officially shot down the very factual foundation for its aggressive regulatory agenda where it expressly states:

Starting in 2011, the consumer broadband satellite industry began launching a new generation of satellites which have greatly improved overall performance.  As relevant here, the high capacity of ViaSat’s ViaSat-1 satellite, which at the time of launch surpassed the total capacity of all current Ku-, Ka-, and C-band satellites over North America, together with other technological improvements discussed below, have decreased latency and improved the quality of satellite broadband service available to subscribers.  In our testing, we found that during peak periods 90 percent of ViaSat consumers received 140 percent or better of the advertised speed of 12 Mbps.  In addition, both peak and non-peak performance was significantly higher than advertised rates.  While latency for satellites necessarily remains much higher than for terrestrial services, with the improvements afforded by the new technology we find that it will support many types of popular broadband services and applications.  (Measuring Broadband America at p. 7 and emphasis supplied).

Indeed, WildBlue, a satellite broadband provider, offers a 12 Mbps downstream and 3 Mbps upstream service in most areas of the United States.  According to the FCC’s report, satellite broadband customers are receiving 137% of advertising download and 162.5% of advertised upload speeds, thereby clearly satisfying the agency’s definition of broadband service (4 Mbps/1 Mbps).

So, with the Commission’s new admission that satellite will, in fact, now “support many types of popular broadband services and applications”, the FCC has plainly conceded that the major factual predicate for its invocation of Section 706 as an independent source of legal authority over advanced services is no longer true.

The ball is in your court, Mr. Chairman.