'Exaggeration' To Say Net Neutrality Order Creates Small Business Burdens, Eshoo Says

Both bills drew concerns from Democrats and Public Knowledge Senior Vice President Harold Feld and caused much debate over the true burden of net neutrality order enhanced transparency requirements on small businesses, what should be considered a small business and the effects of codifying a prohibition on broadband rate regulation. Discussions largely ignored the other two bills on deck, the Amateur Radio Parity Act (HR-1301) and Anti-Spoofing Act (HR-2669).

Subcommittee ranking member Anna Eshoo, D-Calif, questioned the burdens that Aristotle President Elizabeth Bowles described in her testimony on behalf of the Wireless Internet Service Providers Association. “Some have told me" that the enhanced transparency requirements "would require annual expenditures of 16-24 hours,” Eshoo told Bowles, doubting Bowles' own accounts of possible hardships. “I don’t know what other word to use -- it sounds like an exaggeration to me.” Eshoo said the figures she heard would amount to “about 2.9 seconds a day per year” and she wants to ensure consumers “don’t end up being screwed somehow, in plain English.”

Subcommittee Chairman Greg Walden, R-Ore., asked Bowles “fundamentally, what does it mean” if Bowles has to comply with new transparency rules. Walden offered the draft bill exempting small businesses from those requirements and co-sponsored HR-2666.

“We have to get our arms around what the regulations actually require us to do,” Bowles said, unsure due to the nature of Communications Act Title II reclassification of broadband of the order. Members of WISPA “don’t actually understand what the regulation means” and may have to decide between spending $40,000 on deploying a tower and hiring regulatory counsel, she said. She pointed to possible expense in hiring guidance on what the rules mean, compliance costs and costs addressing threat of litigation. Bowles said “spending 80 hours a year on an attorney ... is expensive for a business of my size.”

Former Commissioner Robert McDowell, now with Wiley Rein, criticized the lack of cost-benefit analysis in developing the order. “If it’s going to be a temporary exemption, why not a permanent exemption?” McDowell asked lawmakers. The larger definition of a small business in the Small Business Broadband Deployment Act “is actually the federal government’s definition of a small business,” Walden said. “We ought to have one standard, is the theory here. Government already sets that standard.” But Feld said there’s no single definition for the federal government, and policymakers always zero in on particular sectors.

“Addressing the impact of rules after the fact effectively sets up a second proceeding before OMB to challenge burden estimates that the FCC concedes have not been substantiated,” FCC Commissioners Ajit Pai and Mike O’Rielly told House Republican lawmakers in a letter this week on what they considered flaws in how the FCC handled the temporary small business exemption. “That is not how the process is designed to work, and creates further uncertainty as the Commission may have to modify its rules if its baseless burden estimates turn out to be inaccurate. Moreover, this admission that the FCC has not yet fully assessed the impact of the rules on small business is inconsistent with the FCC' s representations under the Regulatory Flexibility Act that it completed the required economic analysis.”

Feld and Hill Democrats worried of the consequences of the rate regulation codification bill, despite many saying they agreed in principle with no rate regulation. Rep. Adam Kinzinger, R-Ill., introduced that measure last year. FCC Chairman Tom Wheeler and President Barack Obama have said they don't want to regulate rates, and forbearance keeps the agency from exercising that authority. “My position is very bipartisan,” Kinzinger said Tuesday, citing his alignment with those figures despite the lack of any Democrats backing his bill.

The rate regulation legislation will pre-empt the FCC’s broader push to overhaul USF and may cause other problems, Feld argued. “As written, I believe it will bring everything to a crashing halt” and “may force the process to be discontinued altogether,” Feld told Rep. Mike Doyle, D-Pa., who asked about the effects on the agency’s special access proceeding. Doyle mentioned concern about companies zero rating their own services -- “It seems blatantly anti-competitive to me,” he said -- and companies using the “guise” of zero rating to throttle types of content. He asked if the rate regulation bill would affect the FCC’s ability to police such behavior, prompting Feld to mention his own strong concerns. Feld said Rep. Doris Matsui, D-Calif., is right for worrying that the bill may affect the order’s power over paid prioritization deals. McDowell urged “friendly” amendments to the rate regulation bill and said he’s hopeful consensus can be reached. Eshoo agreed the lawmakers should work on this “relative to Mr. Kinzinger’s legislation.”

Commerce Committee Vice Chairwoman Marsha Blackburn, R-Tenn., slammed the possibility of rate regulation “sitting out there, undefined, not being corralled, if you will” and the effect on investment. McDowell said investors and market analysts in 2010 feared rate regulation would “squelch” investment” and cited fears of losses “potentially in the tens of billions of dollars” due to concerns. “This could be a slow grinding halt,” McDowell said. “It’s not like one day this falls off a cliff.”

“Some have been critical of this bill, seeking to change the language to preclude the use of tariff authority -- an authority the FCC has already forborne from using -- while leaving the Commission and its enforcement bureau free to use enforcement authority to regulate rates,” Walden said in his opening statement. “Rate regulation by after-the-fact second guessing is rate regulation nonetheless. We should ensure that the specter of rate regulation of broadband is off the table, permanently.”