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Jun 11, 2018

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Today marks the official end of net neutrality rules. Put in place during the Obama administration, net neutrality rules prevented internet service providers from discriminating when it comes to content by slowing down the delivery of information for some content providers while speeding up others.

After a public comment period that generated over 22 million responses, protests in favor of keeping the rules and polls that showed public backing for net neutrality, the Federal Communication Commission voted along party lines to repeal the rules. FCC Chairman Ajit Pai, who led the effort, said at the time that "The main complaint consumers have about the internet is not and has never been that their internet service provider is blocking access to content. It’s that they don’t have access at all or enough competition. These regulations have taken us in the opposite direction from these consumer preferences."

Ahead of the FCC’s vote to repeal net neutrality rules, internet service providers like Verizon and Comcast issued statements in support of the decision, while other tech companies like Netflix, Amazon and Reddit voiced their opposition to the FCC’s decision.  

Since then, a number of states have proposed legislation that would preserve net neutrality in their borders. In May, the Senate approved a resolution that would overturn the FCC's ruling, but the vote was largely symbolic as the House did not take up the measure. 

Marketplace host Kai Ryssdal sat down with Pai to discuss the FCC's ruling and how it will play out for consumers. 

The following is an edited transcript of their conversation.

Kai Ryssdal: So a funny thing happened this morning. I got up, turned on my computer, went online and the internet was still there.

Ajit Pai: It still works. It's going to be better than ever going forward.

Ryssdal: I'm not going to ask you why you want to do this because it's a classic “elections have consequences” story, right? You are now the chairman of the FCC. You were in dissent when Chairman [Tom] Wheeler instituted what was then called net neutrality. And now we have the open internet. What I want to know is what are you looking for to know whether your idea is working? How you gonna know?

Pai: First and foremost, we want to have a free and open internet going forward. I think that's something that everybody agrees with has produced tremendous consumer benefits over the years. And that is the sine qua non of internet regulation. Secondly, we want to see better, faster, cheaper internet services for consumers across the country, especially for those consumers who are on the wrong side of the digital divide. So we want to see more investment in infrastructure, the building blocks of these networks going up across the country. And when I talk to consumers, that is their No. 1 concern — we don't have access at all or there's insufficient competition. That is where we want to make our mark. Light-touch approach that started the Clinton administration produced tremendous benefits for consumers in terms of better, faster, cheaper networks. That's what we want to see going forward.

Ryssdal: Yeah, but give me a sense of timing, right, because what's going to happen here is not, as I said, that the internet is going to go away tomorrow. It's not going to slow down tomorrow. Companies are going to start charging fast lanes tomorrow. But there are things that will happen in a free and open market as you have now put into place, and I want to know what you're looking for.

Pai: I think, again, we're looking for a free and open internet with more infrastructure investment, more services being developed that ride over these networks, and ultimately, I think the proof is going to be in the pudding in terms of how consumers use the internet. You know, back in 1996, when President Clinton made the decision to have a market-based approach to regulating this new dynamic technology, I think a lot of people thought, “Well, why don't we regulate it like we did the slow-moving Ma Bell telephone monopoly or a water company or an electric company?” And he thought, and I think rightly, that we want to have a more market-based approach because these networks are very hard and expensive to build, especially in lower income or rural areas, and to have a more market-based approach provides the incentives for companies to build these networks, for other companies to innovate on top of those networks and for consumers to benefit from them.

Ryssdal: Here's the thing though, these companies, right — and let's be clear, we're talking about three or four big companies — I mean, you talk a lot in your speeches and your presentations, and you said at the time this rule was passed in December, you know, you're looking out for the small companies who want to get into this market, but the fact is there are three or four sort of quasi-monopolies here, right? They are big, they are for profit, they are not charities and they have certain incentives.

Pai: First, I would dispute that completely. There are thousands of internet service providers —

Ryssdal: Oh, come on, sir, really?

Pai: Absolutely. Two weeks ago, I was in Dahlonega, Georgia, and I met a company that runs the Paladin Wireless in small-town Royston, Georgia. He told me himself that these regulations had made it, forced him to spend over a $8,000 on compliance, and that’s a number of different households in a place, small-town Georgia. A company calledVTel in Vermont just submitted a letter to the Senate saying, “We are now investing $4 million in upgrading our 4G LTE service around Vermont, upgrading our fiber service because of these new regulatory approaches.”

Ryssdal: So here's some other company names: AT&T, Comcast, Spectrum, right? Those are the giants. Those are the ones who have the infrastructure in place. Those are the ones who in theory will benefit from this lighter touch that you say you want. How do you respond to critics who say, “Look, you're doing this for the big ones.”

Pai: Two different points. No. 1, going forward, the FTC, the Federal Trade Commission, is empowered to take targeted action against any company in the internet economy that behaves in an anti-competitive way. Secondly —

Ryssdal: Wait, let's take them one by one, because the Federal Trade Commission, while they’re lovely people and hard-serving civil servants and we appreciate all they do, they are overworked, they focus not solely on telecommunications and the injury has to happen first and then they can fix it after the fact.

Pai: That's completely untrue. Chairman [Joseph] Simons the new chairman of the FTC, recently testified before the Senate, and he said they would aggressively use their Section 5 authority to take action against any unfair deceptive trade practice or any unfair method of competition.

Ryssdal: But still you leave it to the consumer to bring the complaint.

Pai: No, that's not true. The FTC can and has taken action, enforcement action against companies on its own.

Ryssdal: OK. To your second point. Go ahead. I interrupted.

Pai: The second point is, again, the complaint that consumers have about the internet is that there's not enough access and competition. Having these heavy-handed regulations squeezes out the smaller companies that are necessary to provide a more competitive marketplace. Those big companies you mentioned are not going to invest in places like Royston, Georgia, or small-town Vermont or the Rosebud Sioux Reservation in South Dakota. I've visited these places, and I know that the business case is hard. We need to incentivize the smaller companies to provide a competitive alternative. You can't do that with these heavy-handed regulations.

Ryssdal: The company in Dahlonega, Georgia, though, sir, is not competing with AT&T, right, because AT&T’s not in that space because there's no market for it.

Pai: So in that case, it's the question of who's going to provide access. In the bigger markets, for example, where AT&T and Comcast are competing, how do you want incentivize more competition? And I would argue the utility-style regulations are the last thing that are going to incentivize a new company to say, “You know what, let's raise the capital and build these networks even though it's more heavily regulated.”

Ryssdal: Since you mentioned it — and I don't want to get too wonky here in Title I and Title II and what's an information service and what's a utility— but one of the things you have done is to take internet service providers out of what is called Title II, right, which lets you regulate them as utilities, and put them back in Title I, which lets them be regulated as information providers, information services.

Pai: Correct.

Ryssdal: The internet of today is not the internet of 1996, to which you very frequently refer, right? You just did it at the beginning of this interview. It is the backbone of this economy. It is that thing without which nothing else can happen. It is like turning on the lights. Why should it not be regulated in that way?

Pai: From 1996 until 2015, we had a light-touch approach under Democratic and Republican administrations.

Ryssdal: Sorry, let me interrupt you again because you do have a tendency to go item one, item two, item three, and I don't want to let things blow by. On that phrase “light touch,” you use light touch, Chairman Wheeler, your predecessor, used light touch. So can we just agree that it's a matter of perspective on what's a light touch and what's not?

Pai: In this case, I don't think we can because there is no — under Title II, utility-style regulation, there is no such thing as a light touch, treating everything like a common carrier, heavily regulating it under 1934 rules that were designed for the telephone monopoly of Ma Bell. The entire purpose of Title II was to put the government, not technologists and engineers and businessmen, at the center of how this new technology was supposed to operate.

Ryssdal: But if the internet is like turning on the lights, why should not be regulated like a utility?

Pai: Because internet networks are very hard and expensive to build. It is not something, for example, that you can simply raise money by going to the bank and saying, “Hey, I want to build an internet network.” It's very high, upfront capital expenditures, requires a lot of money to maintain and improve these networks. Moreover, the way we use the internet is very different. It's not like water or electricity, where we're using generally a consistent amount of it from year to year. Internet traffic is exploding. And accordingly the networks need to expand to take advantage of, to be able to accommodate all that increased traffic. And again, networks don't have to be built, capital doesn't have to be raised, risks don't have to be taken, crews don't have to be hired to lay fiber lines and to build wireless networks and the like. And so the heavier the regulatory burden is, the less likely it is that companies big and small are going to take the risk to build these networks. And so going forward, we obviously recognize that the internet is increasingly essential in American life — everything from telemedicine to educating kids to starting a business. But those networks have to be able to expand to accommodate this increasing traffic. And the argument is utility-style regulation was not designed for that kind of internet economy. It was designed for a slow-moving monopoly that essentially wasn't going to innovate. And that was the deal with Ma Bell in 1934. We'll give you the monopoly. We'll just heavily regulate you. And as a result, we didn't see a lot of competition and innovation in the telephone networks for many years.

Ryssdal: I think a lot of observers, most observers probably, will say, “Look, we're not going to have these internet service providers blocking traffic. That would be a semi-suicidal business model.” Right? But they will, because the ability to price discriminate is the definition of competition, they will almost certainly offer packages and bundles where you can get paid prioritization and those other things that come with more money and more profit. If you see that happening, will you intervene?

Pai: So both at the FCC, we have a robust transparency rule. They would have to disclose any business practice like that.

Ryssdal: Sorry, when you say robust transparency rule, you mean like a privacy terms of service or a cell phone bill that's 42 pages long in pica type?

Pai: No, not at all. In fact, they have to disclose on their own publicly accessible website and or at the FCC website in plain English a list of the business practices that they're engaging in in terms of how they manage their networks and the like. And on the back end of the Federal Trade Commission, again the FTC is expressly empowered and under the current chairman has expressed — sorry, go ahead.

Ryssdal: No, no, no. Go ahead.

Pai: They will take targeted action against any company that behaves in any potentially anti-competitive way.

Ryssdal: OK, but if a company says in its terms of service and makes it transparent both to the FCC and to the Federal Trade Commission, “Look, we're going to do this,” what's the consumer's recourse other than to pay more money?

Pai: So several different aspects of it. For example, if it's a wireless company that does that, consumers have the ability to switch there are four national providers or regional providers. Secondly, the public scrutiny would be tremendous. I'm quite confident that Marketplace would be more than happy to target any company saying, “Look, they are engaging in something that we think is bad for consumers.” Additionally, that would signal to the Federal Trade Commission here's a potentially unfair deceptive trade practice, we might want to take a look at this.

Ryssdal: Let me drill down on that, because I don't, if they say it in their materials and they posted online, it's not a deceptive trade practice. They're saying, “Listen, you want this service? You got to pay ten bucks more a month.”

Pai: No, not at all. So there are potentially Section 5 FTC authority. The FTC has the ability to go after unfair trade practices or unfair methods of competition. And so again, if consumers are being harmed, if a company is acting in an anti-competitive way, that's exactly what the FTC is empowered to take action on.

Ryssdal: I don't want to make this about you. But I think it's important here to talk about the level of animosity and vitriol that this decision has resulted in millions and millions of comments and pages and op eds and all kinds of things. But I think it's important to get on the record that you personally have been threatened, death threats. You've canceled public appearances. And I just want to get your response to that on the record.

Pai: I just think it's disgusting. The one thing that is distinctive about America historically has been the fact that we are all able to engage in public discourse without the political becoming personal. And that is one of the unfortunate aspects of this debate I think is that people are less willing to look at the facts and agree that there are reasonable differences of opinion on this and they're willing to go beyond, I think, what I think the limits of civil discourse in this country should be. And I hope it would change, but nonetheless that is where we are.

Ryssdal: I mention that because this is not a popular decision. Millions of people have written in opposition to it. Public opinion polling shows most Americans favor net neutrality, not your open internet rule. And I wonder why you're doing this then? If public opinion is against you, what are you doing?

Pai: First of all, public opinion is not against us. If you look at some of the polls —

Ryssdal: No, it is, sir, come on.

Pai: If you look at some of the polling, if you dig down and see how these polls were constructed, it was clearly designed to reach a particular result. But even beyond that —

Ryssdal: It's not just one, there are many surveys, sir.

Pai: The FCC’s job is not to put a finger in the wind and decide which way the winds are blowing, it's to look at the facts and make a sober judgment based on what the law is. And that is exactly what we've done here. Moreover, the long-term interest is in building better, faster, cheaper internet access. That is what consumers say when I travel around the country, and I’ve have spoken to consumers in Los Angeles to the reservation in South Dakota, places like Dahlonega, Georgia. That is what is on consumers’ minds. That is what this regulatory framework is going to deliver.

Ryssdal: Let me get away from the public, then, to the politicians. The Senate, as you know, has used its prerogative to pass an act to repeal your repeal of net neutrality, if we can get a lot more complicated, the House has not, and the president would have to sign it. Several states have passed their own versions of net neutrality. California among them, the most populous state. Why not, since this is a case of such public interest, let the legislative process do it?

Pai: This is an argument I made in 2014 when the D.C. Circuit Court of Appeals issued its decision. I said, “Look we need to turn to Congress —”

Ryssdal: In a prior case by Chairman Wheeler on the FCC in which they said, “No, you can't do what you want to do.”

Pai: Correct. And so that was the argument I made, that Congress should update the rules of the digital era so to speak and tell the FCC, tell the American public how do you want to regulate this thing called the internet? So the FCC, having disregarded that admonition back in 2015, it was up to us to restore the light-touch approach that started, that served us pretty well for 20 years. And now if Congress decides to take a different approach, that's entirely up to Congress. I defer to our elected officials to say what the law should be.

Ryssdal: And yet, if I remember the rule from December correctly, you prevented states from passing their own net neutrality statutes.

Pai: So the internet is inherently an interstate service. If I send an email to you right now in this very room, the chances are that it traverses state boundaries. That is something that inherently has to be regulated by the federal government and the federal government having decided under this administration to have a more market-based deregulatory approach. You can't have a patchwork of 50 different states and any number of local jurisdictions taking a different bite of the regulatory apple, otherwise it's a recipe for chaos.

Ryssdal: Let me get you back to how you're going to keep an eye on this thing because it's what's going to happen is going to happen over time. Right. As we said it's not going to happen tomorrow it's going to happen over over over years probably. Is there a threshold at which you will step in and say “can't do that?”

Pai: Again with the transparency rule to be enforced starting today, June 11th and going forward we want to make sure that both at the FCC and the FTC that consumers are protected from any anti-competitive behaviour of whatever kind emerges in the internet economy.

Ryssdal: You and your Republican colleagues on the Federal Communications Commission have overturned a decision that Chairman Wheeler and his Democratic colleagues on the Federal Communications Commission made in 2015. First of all your thoughts on the partisan nature of telecommunications policy in this country.

Pai: It's unfortunate because I think at the end of the day there's actually a lot of consensus on this issue that the polling we described earlier obscures a lot of people don't understand net neutrality the core workings of Title I versus Title II.

Ryssdal: It's crazy complicated and boring.

Pai: What they do understand and what I agree with, I think Democrats and Republicans in Congress would even agree with, we all have an interest in getting everyone internet access. We all have an interest in an open internet. And I think there's a lot of things the FCC is doing in terms of getting more federal subsidies to unserved areas, bringing more competition to areas by introducing satellite and wireless competition. That is where we can all agree on. But unfortunately I would agree that in on this issue in particular there's been more politicization that has been a frankly a distraction from our common goals here.

Ryssdal: As a follow on then how concerned are you that in 2020 or 2024 or 2028, whenever the political tide turns, this rule will be overturned by a Democratically controlled Federal Communications Commission and then businesses will throw up their hands and go “You guys make up your mind you're talking about uncertainty in telecommunications policy and we want to invest billions of dollars.”

Pai: That is up to a future FCC, but I think it also underscores the importance of Congress in a bipartisan way putting principles of an open internet on the page. Ultimately, we don't want to have this kind of regulatory ping pong back and forth, we want to provide certainty to consumers and to companies that build on the reliance of what the rules are going to be. And so I think ultimately, that is the solution is for a bipartisan approach that allows us to find that common ground and then let's focus on getting more access and competition to everyone in this country.

Ryssdal: Let's say this sticks, that Ajit Pai goes down in history as the guy who gave us the internet as we know it 50 years from now, 25. What does broadband look like in this country? Because let's not talk about the internet, the amorphous thing, right? Let's talk about broadband access and capability in this country. What does it look like?

Pai: I think it's going to look, well, first I think the U.S. is going to have a leadership role in terms of promoting innovation and investment in the internet economy. As we enter the 5G era, the next generation of wireless connectivity, as we look at massive fiber deployment that's necessary to support these new applications like virtual reality and augmented reality, we are going to have to have a regulatory framework that promotes network investment, and that is exactly what our networks, our regulatory approach is designed to do.

Ryssdal: OK, so here comes the poke in the eye on the way out the door. What if you're wrong?

Pai: Then it's up to regulators and elected office holders to make the appropriate decision but I would turn it around and say what evidence would be necessary for the fear mongers who've proclaimed that the end of the internet as we know it, what evidence would it be necessary for them to agree that our regulatory approach is the right one? I've got 20 years of history on my side. For those who have said this is the end of the internet starting today, what evidence would it be necessary for them to be able to concede you know maybe Ajit did have a point that we actually do want the internet networks to ramp up to accommodate this traffic. Is there anything that would persuade them and if not then we're obviously having more of a political debate as opposed to a policy one.