Part I of a two-part series.
First, I’d like to ask for a show of hands – how many people knew Dick Moore? Most of us know who he was: the attorney for the United Church of Christ who worked with Everett Parker to desegregate the broadcasting industry in the 1960s, and to make sure broadcast regulation was open and transparent with the full participation of listeners and viewers. I mention him because he is the “Earle K. Moore” for whom the Fellowship I hold at MMTC is named. Dick Moore was David Honig’s mentor. I never had a chance to meet Dick Moore, but I hope he’d be proud of the work we do at MMTC, where we try to walk in his footsteps practicing civil rights law before the Federal Communications Commission.
Today, I am going to address the impact of the Net Neutrality Rules and Open Internet policy on minority consumers and entrepreneurs.
An unrestricted Internet has the potential to do what no other communications service has been able to do before: close the digital divide between technology “haves” and “have nots”. Most scholars would agree that the integration of broadband technology and digital devices and applications into daily lives is essential to one’s ability to achieve first class citizenship in the digital age.
The Open Internet Rules are a beneficial means of achieving this goal if the Rules are used to protect the freedom and limitless possibilities of the Internet and foster entrepreneurship and investment in unserved and underserved communities. What the FCC sought to accomplish with the Rules was highly desirable: a regulatory structure that was flexible enough to stimulate investment, growth, and job creation, ensuring that the Internet remains both open and ubiquitous.
The Rules tackle the issues of fixed broadband providers blocking lawful Internet content, applications, services, or non-harmful devices; mobile broadband providers blocking lawful websites or applications that provide voice or video telephone services; and ensuring competition. The Commission did not want to unduly interfere with an ISP’s autonomy, so it included a reasonableness standard that gives providers the flexibility to run their companies as they see fit, but in a manner that would be “appropriate and tailored to achieving a legitimate network management purpose.”
Wireless broadband has a unique ability to provide a bridge to cross the digital divide, as shown by the wireless adoption rates of minority consumers. In 2010, NTIA reported that the home adoption gap between African Americans and Whites was 20 percentage points – 10 points of which were attributable to race after controlling for differences in socioeconomic factors including education, age, household size, urban-rural location, foreign-born status, disability status, and state of residence. Similarly, the home adoption gap between Hispanics and whites was also 20 percentage points, 14 points of which were attributable to race after controlling for these same socioeconomic factors.
Numerous studies show that, unlike other broadband technologies, minority use of wireless broadband devices outpaces that of white Americans. According to the Pew Internet & American Life Project, while 33 percent of white Americans access the Internet over their cell phones, 46 percent of African Americans and 51 percent of English-speaking Hispanic Americans do so.
The Joint Center reports similar statistics, finding that 50 percent of African Americans and 42 percent of Hispanic Americans access the Internet over cell phones, compared with 30 percent of white Americans. These statistics are highly significant. Due to financial and other considerations, minority households are more likely than others to have only a single, wireless on-ramp to the Internet. Therefore, broadband policy that increases deployment of service is especially important in bridging the digital divide.
Most of the major national civil rights organizations have maintained that the rule governing economic nondiscrimination and specialized services, if misapplied, could harm the interests of minority consumers and entrepreneurs and detract from the FCC’s vital goal of closing the digital divide. From a consumer standpoint, these services could generate revenues to offset the costs of network deployment and maintenance, thereby shifting these costs away from individual consumers or ratepayers. And from the standpoint of entrepreneurs, the ability to partner with carriers to reach niche audiences such as minority and multilingual consumers has been called into doubt by the ambiguity of this Rule.
We therefore believe that the FCC should clarify that Internet access providers may offer enhanced or prioritized services, such as incubation and incentive programs and progressive cost allocation mechanisms, provided that such services are offered in a non-discriminatory manner – i.e. made available to all consumers and businesses regardless of their race, color, religion, national origin, sex, or socioeconomic status. Further, the FCC should reaffirm that classic price differentiation, if transparent and understandable, is presumed to be lawful and is often desirable.
Innovative service offerings and funding sources will be required if broadband network operators are going to develop their networks sufficiently to meet the anticipated surge in demand without raising prices for minority consumers so much as to widen the digital divide. Research shows that due to the deep and persistent racial wealth gap and deep racial disparities in income and unemployment status, minorities are particularly sensitive to increases in the retail prices of broadband services, and such price increases can be enough to dramatically slow the rate of broadband adoption among minorities.
One way to keep minority broadband adoption figures on a track toward closing the digital divide is for broadband providers to explore ways to equitably recover the majority of network deployment costs from the heaviest users. The Commission must take care to preserve the ability of broadband providers to experiment with business models, voluntary arrangements, mentoring, and incubation programs. A recent study by the Phoenix Center revealed that a prohibition on specialized services could result in a loss of 300,000 jobs and that broadband investment would drop by 10 percent, costing the industry $36 billion over five years, plus an additional $100 billion in losses to related fields. Taken together, these consequences would result in perpetuating or widening the digital divide.
As an additional consequence, if the Commission prohibits content, application, and service providers from entering into voluntary arrangements with broadband providers for the paid provision of enhanced or prioritized services, a potential source of funding for additional network deployment will be removed. Many analysts agree that allowing specialized services will result in a significant decrease in the retail price of broadband for ordinary end-user consumers. A 2006 study by Greg Sidak suggests that end-users could save as much as $5 to $10 per month as a result of network costs being subsidized through specialized services agreements. This could lead to a total savings of $3 to $6 billion per year and would result in tens of millions of additional homes subscribing to broadband service, particularly minorities and low-income groups. This probable result cannot and should not be ignored.
Opponents of prioritized services argue that the “true motive beneath ISPs desire to discriminate is not the possibility of earning new third-party revenues, but the protection of legacy voice and video services from the disruptive competition enabled by the open Internet.” Some public interest organizations regard prioritized services as discriminatory practices that would enable ISPs to reduce investment in the core market, and leverage power into the edge markets, further reducing investment there as well. But experience has shown the opposite to be true.
Going forward, the FCC’s principal telecom policy focus should be promoting universal broadband adoption by those who are unserved and underserved. Hopefully, such a shift will help usher in digital equality for all. My co-author, David Honig, will speak to this issue.
Look for David Honig’s following remarks this Sunday on BBSJ!
Latoya Livingston is a Washington, D.C.-based attorney with years of experience working in the public and private sector. Attorney Livingston joins MMTC after performing pro bono work for the organization last year.