Preserving the Open Internet, 59192-59235 [2011-24259]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 76, Number 185 (Friday, September 23, 2011)]
[Rules and Regulations]
[Pages 59192-59235]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-24259]



[[Page 59191]]

Vol. 76

Friday,

No. 185

September 23, 2011

Part II





Federal Communications Commission





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47 CFR Parts 0 and 8





Preserving the Open Internet; Final Rule

Federal Register / Vol. 76 , No. 185 / Friday, September 23, 2011 / 
Rules and Regulations

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 0 and 8

[GN Docket No. 09-191; WC Docket No. 07-52; FCC 10-201]


Preserving the Open Internet

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This Report and Order establishes protections for broadband 
service to preserve and reinforce Internet freedom and openness. The 
Commission adopts three basic protections that are grounded in broadly 
accepted Internet norms, as well as our own prior decisions. First, 
transparency: fixed and mobile broadband providers must disclose the 
network management practices, performance characteristics, and 
commercial terms of their broadband services. Second, no blocking: 
fixed broadband providers may not block lawful content, applications, 
services, or non-harmful devices; mobile broadband providers may not 
block lawful Web sites, or block applications that compete with their 
voice or video telephony services. Third, no unreasonable 
discrimination: fixed broadband providers may not unreasonably 
discriminate in transmitting lawful network traffic. These rules, 
applied with the complementary principle of reasonable network 
management, ensure that the freedom and openness that have enabled the 
Internet to flourish as an engine for creativity and commerce will 
continue. This framework thus provides greater certainty and 
predictability to consumers, innovators, investors, and broadband 
providers, as well as the flexibility providers need to effectively 
manage their networks. The framework promotes a virtuous circle of 
innovation and investment in which new uses of the network--including 
new content, applications, services, and devices--lead to increased 
end-user demand for broadband, which drives network improvements that 
in turn lead to further innovative network uses.

DATES: Effective Date: These rules are effective November 20, 2011.

FOR FURTHER INFORMATION CONTACT: Matt Warner, (202) 418-2419 or e-mail, 
matthew.warner@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (Order) in GN Docket No. 09-191, WC Docket No. 07-52, FCC 10-
201, adopted December 21, 2010 and released December 23, 2010. The 
complete text of this document is available on the Commission's Web 
site at https://www.fcc.gov. It is also available for inspection and 
copying during normal business hours in the FCC Reference Information 
Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 
20554. This document may also be purchased from the Commission's 
duplicating contractor, Best Copy and Printing, Inc., 445 12th Street, 
SW., Room CY-B402, Washington, DC 20554, telephone (800) 378-3160 or 
(202) 863-2893, facsimile (202) 863-2898, or via e-mail at https://www.bcpiweb.com.

Synopsis of the Order

I. Preserving the Free and Open Internet

    In this Order the Commission takes an important step to preserve 
the Internet as an open platform for innovation, investment, job 
creation, economic growth, competition, and free expression. To provide 
greater clarity and certainty regarding the continued freedom and 
openness of the Internet, we adopt three basic rules that are grounded 
in broadly accepted Internet norms, as well as our own prior decisions:
    i. Transparency. Fixed and mobile broadband providers must disclose 
the network management practices, performance characteristics, and 
terms and conditions of their broadband services;
    ii. No blocking. Fixed broadband providers may not block lawful 
content, applications, services, or non-harmful devices; mobile 
broadband providers may not block lawful Web sites, or block 
applications that compete with their voice or video telephony services; 
and
    iii. No unreasonable discrimination. Fixed broadband providers may 
not unreasonably discriminate in transmitting lawful network traffic.

We believe these rules, applied with the complementary principle of 
reasonable network management, will empower and protect consumers and 
innovators while helping ensure that the Internet continues to 
flourish, with robust private investment and rapid innovation at both 
the core and the edge of the network. This is consistent with the 
National Broadband Plan goal of broadband access that is ubiquitous and 
fast, promoting the global competitiveness of the United States.
    In late 2009, we launched a public process to determine whether and 
what actions might be necessary to preserve the characteristics that 
have allowed the Internet to grow into an indispensable platform 
supporting our nation's economy and civic life, and to foster continued 
investment in the physical networks that enable the Internet. Since 
then, more than 100,000 commenters have provided written input. 
Commission staff held several public workshops and convened a 
Technological Advisory Process with experts from industry, academia, 
and consumer advocacy groups to collect their views regarding key 
technical issues related to Internet openness.
    This process has made clear that the Internet has thrived because 
of its freedom and openness--the absence of any gatekeeper blocking 
lawful uses of the network or picking winners and losers online. 
Consumers and innovators do not have to seek permission before they use 
the Internet to launch new technologies, start businesses, connect with 
friends, or share their views. The Internet is a level playing field. 
Consumers can make their own choices about what applications and 
services to use and are free to decide what content they want to 
access, create, or share with others. This openness promotes 
competition. It also enables a self-reinforcing cycle of investment and 
innovation in which new uses of the network lead to increased adoption 
of broadband, which drives investment and improvements in the network 
itself, which in turn lead to further innovative uses of the network 
and further investment in content, applications, services, and devices. 
A core goal of this Order is to foster and accelerate this cycle of 
investment and innovation.
    The record and our economic analysis demonstrate, however, that the 
openness of the Internet cannot be taken for granted, and that it faces 
real threats. Indeed, we have seen broadband providers endanger the 
Internet's openness by blocking or degrading content and applications 
without disclosing their practices to end users and edge providers, 
notwithstanding the Commission's adoption of open Internet principles 
in 2005.\1\ In light of these considerations, as well as the limited 
choices most consumers have for broadband service, broadband

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providers' financial interests in telephony and pay television services 
that may compete with online content and services, and the economic and 
civic benefits of maintaining an open and competitive platform for 
innovation and communication, the Commission has long recognized that 
certain basic standards for broadband provider conduct are necessary to 
ensure the Internet's continued openness. The record also establishes 
the widespread benefits of providing greater clarity in this area--
clarity that the Internet's openness will continue, that there is a 
forum and procedure for resolving alleged open Internet violations, and 
that broadband providers may reasonably manage their networks and 
innovate with respect to network technologies and business models. We 
expect the costs of compliance with our prophylactic rules to be small, 
as they incorporate longstanding openness principles that are generally 
in line with current practices and with norms endorsed by many 
broadband providers. Conversely, the harms of open Internet violations 
may be substantial, costly, and in some cases potentially irreversible.
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    \1\ In this Order we use ``broadband'' and ``broadband Internet 
access service'' interchangeably, and ``broadband provider'' and 
``broadband Internet access provider'' interchangeably. ``End user'' 
refers to any individual or entity that uses a broadband Internet 
access service; we sometimes use ``subscriber'' or ``consumer'' to 
refer to those end users that subscribe to a particular broadband 
Internet access service. We use ``edge provider'' to refer to 
content, application, service, and device providers, because they 
generally operate at the edge rather than the core of the network. 
These terms are not mutually exclusive.
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    The rules we proposed in the Open Internet NPRM and those we adopt 
in this Order follow directly from the Commission's bipartisan Internet 
Policy Statement, adopted unanimously in 2005 and made temporarily 
enforceable for certain broadband providers in 2005 and 2007; openness 
protections the Commission established in 2007 for users of certain 
wireless spectrum; and a notice of inquiry in 2007 that asked, among 
other things, whether the Commission should add a principle of 
nondiscrimination to the Internet Policy Statement. Our rules build 
upon these actions, first and foremost by requiring broadband providers 
to be transparent in their network management practices, so that end 
users can make informed choices and innovators can develop, market, and 
maintain Internet-based offerings. The rules also prevent certain forms 
of blocking and discrimination with respect to content, applications, 
services, and devices that depend on or connect to the Internet.
    An open, robust, and well-functioning Internet requires that 
broadband providers have the flexibility to reasonably manage their 
networks. Network management practices are reasonable if they are 
appropriate and tailored to achieving a legitimate network management 
purpose. Transparency and end-user control are touchstones of 
reasonableness.
    We recognize that broadband providers may offer other services over 
the same last-mile connections used to provide broadband service. These 
``specialized services'' can benefit end users and spur investment, but 
they may also present risks to the open Internet. We will closely 
monitor specialized services and their effects on broadband service to 
ensure, through all available mechanisms, that they supplement but do 
not supplant the open Internet.
    Mobile broadband is at an earlier stage in its development than 
fixed broadband and is evolving rapidly. For that and other reasons 
discussed below, we conclude that it is appropriate at this time to 
take measured steps in this area. Accordingly, we require mobile 
broadband providers to comply with the transparency rule, which 
includes enforceable disclosure obligations regarding device and 
application certification and approval processes; we prohibit providers 
from blocking lawful Web sites; and we prohibit providers from blocking 
applications that compete with providers' voice and video telephony 
services. We will closely monitor the development of the mobile 
broadband market and will adjust the framework we adopt in this Order 
as appropriate.
    These rules are within our jurisdiction over interstate and foreign 
communications by wire and radio. Further, they implement specific 
statutory mandates in the Communications Act (``Act'') and the 
Telecommunications Act of 1996 (``1996 Act''), including provisions 
that direct the Commission to promote Internet investment and to 
protect and promote voice, video, and audio communications services.
    The framework we adopt aims to ensure the Internet remains an open 
platform--one characterized by free markets and free speech--that 
enables consumer choice, end-user control, competition through low 
barriers to entry, and the freedom to innovate without permission. The 
framework does so by protecting openness through high-level rules, 
while maintaining broadband providers' and the Commission's flexibility 
to adapt to changes in the market and in technology as the Internet 
continues to evolve.

II. The Need for Open Internet Protections

    In the Open Internet NPRM (FCC 09-93 published at 74 FR 62638, 
November 30, 2009), we sought comment on the best means for preserving 
and promoting a free and open Internet. We noted the near-unanimous 
view that the Internet's openness and the transparency of its protocols 
have been critical to its unparalleled success. Citing evidence of 
broadband providers covertly blocking or degrading Internet traffic, 
and concern that broadband providers have the incentive and ability to 
expand those practices in the near future, we sought comment on 
prophylactic rules designed to preserve the Internet's prevailing norms 
of openness. Specifically, we sought comment on whether the Commission 
should codify the four principles stated in the Internet Policy 
Statement, plus proposed nondiscrimination and transparency rules, all 
subject to reasonable network management.\2\
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    \2\ The Open Internet NPRM recast the Internet Policy Statement 
principles as rules rather than consumer entitlements, but did not 
change the fact that protecting and empowering end users is a 
central purpose of open Internet protections.
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    Commenters agree that the open Internet is an important platform 
for innovation, investment, competition, and free expression, but 
disagree about whether there is a need for the Commission to take 
action to preserve its openness. Commenters who favor Commission action 
emphasize the risk of harmful conduct by broadband providers, and 
stress that failing to act could result in irreversible damage to the 
Internet. Those who favor inaction contend that the Internet generally 
is open today and is likely to remain so, and express concern that 
rules aimed at preventing harms may themselves impose significant 
costs. In this part, we assess these conflicting views. We conclude 
that the benefits of ensuring Internet openness through enforceable, 
high-level, prophylactic rules outweigh the costs. The harms that could 
result from threats to openness are significant and likely 
irreversible, while the costs of compliance with our rules should be 
small, in large part because the rules appear to be consistent with 
current industry practices. The rules are carefully calibrated to 
preserve the benefits of the open Internet and increase certainty for 
all Internet stakeholders, with minimal burden on broadband providers.

A. The Internet's Openness Promotes Innovation, Investment, 
Competition, Free Expression, and Other National Broadband Goals

    Like electricity and the computer, the Internet is a ``general 
purpose technology'' that enables new methods of production that have a 
major impact on the entire economy. The Internet's founders 
intentionally built a network that is open, in the sense that it has no 
gatekeepers limiting innovation and

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communication through the network.\3\ Accordingly, the Internet enables 
an end user to access the content and applications of her choice, 
without requiring permission from broadband providers. This 
architecture enables innovators to create and offer new applications 
and services without needing approval from any controlling entity, be 
it a network provider, equipment manufacturer, industry body, or 
government agency. End users benefit because the Internet's openness 
allows new technologies to be developed and distributed by a broad 
range of sources, not just by the companies that operate the network. 
For example, Sir Tim Berners-Lee was able to invent the World Wide Web 
nearly two decades after engineers developed the Internet's original 
protocols, without needing changes to those protocols or any approval 
from network operators. Startups and small businesses benefit because 
the Internet's openness enables anyone connected to the network to 
reach and do business with anyone else, allowing even the smallest and 
most remotely located businesses to access national and global markets, 
and contribute to the economy through e-commerce \4\ and online 
advertising.\5\ Because Internet openness enables widespread innovation 
and allows all end users and edge providers (rather than just the 
significantly smaller number of broadband providers) to create and 
determine the success or failure of content, applications, services, 
and devices, it maximizes commercial and non-commercial innovations 
that address key national challenges--including improvements in health 
care, education, and energy efficiency that benefit our economy and 
civic life.
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    \3\ The Internet's openness is supported by an ``end-to-end'' 
network architecture that was formulated and debated in standard-
setting organizations and foundational documents. See, e.g., WCB 
Letter 12/10/10, Attach. at 17-29, Vinton G. Cerf & Robert E. Kahn, 
A Protocol for Packet Network Interconnection, COM-22 IEEE 
Transactions of Commc'ns Tech. 637-48 (1974); WCB Letter 12/10/10, 
Attach. at 30-39, J.H. Saltzer et al., End to End Arguments in 
System Design, Second Int'l Conf. on Distributed Computing Systems, 
509-12 (1981); WCB Letter 12/10/10, Attach. at 49-55, B. Carpenter, 
Internet Engineering Task Force (``IETF''), Architectural Principles 
of the Internet, RFC 1958, 1-8 (June 1996), https://www.ietf.org/rfc/rfc1958.txt; Lawrence Roberts, Multiple Computer Networks and 
Intercomputer Communication, ACM Symposium on Operation System 
Principles (1967). Under the end-to-end principle, devices in the 
middle of the network are not optimized for the handling of any 
particular application, while devices at network endpoints perform 
the functions necessary to support networked applications and 
services. See generally WCB Letter 12/10/10, Attach. at 40-48, J. 
Kempf & R. Austein, IETF, The Rise of the Middle and the Future of 
End-to-End: Reflections on the Evolution of the Internet 
Architecture, RFC 3724, 1-14 (March 2004), ftp://ftp.rfc-editor.org/in-notes/rfc3724.txt.
    \4\ Business-to-consumer e-commerce was estimated to total $135 
billion in 2009. See WCB Letter 12/10/10, Attach. at 81-180, Robert 
D. Atkinson et al., The Internet Economy 25 Years After.com, Info. 
Tech. & Innovation Found., at 24 (March 2010), available at https://www.itif.org/files/2010-25-years.pdf.
    \5\ The advertising-supported Internet sustains about $300 
billion of U.S. GDP. See Google Comments at 7.
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    The Internet's openness is critical to these outcomes, because it 
enables a virtuous circle of innovation in which new uses of the 
network--including new content, applications, services, and devices--
lead to increased end-user demand for broadband, which drives network 
improvements, which in turn lead to further innovative network uses. 
Novel, improved, or lower-cost offerings introduced by content, 
application, service, and device providers spur end-user demand and 
encourage broadband providers to expand their networks and invest in 
new broadband technologies.\6\ Streaming video and e-commerce 
applications, for instance, have led to major network improvements such 
as fiber to the premises, VDSL, and DOCSIS 3.0. These network 
improvements generate new opportunities for edge providers, spurring 
them to innovate further.\7\ Each round of innovation increases the 
value of the Internet for broadband providers, edge providers, online 
businesses, and consumers. Continued operation of this virtuous circle, 
however, depends upon low barriers to innovation and entry by edge 
providers, which drive end-user demand. Restricting edge providers' 
ability to reach end users, and limiting end users' ability to choose 
which edge providers to patronize, would reduce the rate of innovation 
at the edge and, in turn, the likely rate of improvements to network 
infrastructure. Similarly, restricting the ability of broadband 
providers to put the network to innovative uses may reduce the rate of 
improvements to network infrastructure.
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    \6\ We note that broadband providers can also be edge providers.
    \7\ For example, the increasing availability of multimedia 
applications on the World Wide Web during the 1990s was one factor 
that helped create demand for residential broadband services. 
Internet service providers responded by adopting new network 
infrastructure, modem technologies, and network protocols, and 
marketed broadband to residential customers. See, e.g., WCB Letter 
12/13/10, Attach. at 250-72, Chetan Sharma, Managing Growth and 
Profits in the Yottabyte Era (2009), https://www.chetansharma.com/yottabyteera.htm (Yottabyte). By the late 1990s, a residential end 
user could download content at speeds not achievable even on the 
Internet backbone during the 1980s. See, e.g., WCB Letter 12/13/10, 
Attach. at 226-32, Susan Harris & Elise Gerich, The NSFNET Backbone 
Service: Chronicling the End of an Era, 10 ConneXions (April 1996), 
available at https://www.merit.edu/networkresearch/projecthistory/nsfnet/nsfnet_article.php. Higher speeds and broadband's ``always 
on'' capability, in turn, stimulated more innovation in 
applications, from gaming to video streaming, which in turn 
encouraged broadband providers to increase network speeds. WCB 
Letter 12/13/10, Attach. at 233-34, Link Hoewing, Twitter, Broadband 
and Innovation, PolicyBlog, Dec. 4, 2010, policyblog.verizon.com/BlogPost/626/TwitterBroadbandandInnovation.aspx.
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    Openness also is essential to the Internet's role as a platform for 
speech and civic engagement. An informed electorate is critical to the 
health of a functioning democracy, and Congress has recognized that the 
Internet ``offer[s] a forum for a true diversity of political 
discourse, unique opportunities for cultural development, and myriad 
avenues for intellectual activity.'' Due to the lack of gatekeeper 
control, the Internet has become a major source of news and 
information, which forms the basis for informed civic discourse. Many 
Americans now turn to the Internet to obtain news,\8\ and its openness 
makes it an unrivaled forum for free expression. Furthermore, local, 
State, and Federal government agencies are increasingly using the 
Internet to communicate with the public, including to provide 
information about and deliver essential services.
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    \8\ See WCB Letter 12/10/10, Attach. at 133-41, Pew Research 
Ctr. for People and the Press, Americans Spend More Time Following 
the News; Ideological News Sources: Who Watches and Why 17, 22 
(Sept. 12, 2010), people-press.org/report/652/ (stating that ``44% 
of Americans say they got news through one or more Internet or 
mobile digital source yesterday''); WCB Letter 12/10/10, Attach. at 
131-32, TVB Local Media Marketing Solutions, Local News: Local TV 
Stations are the Top Daily News Source, https://www.tvb.org/planning_buying/120562 (estimating that 61% of Americans get news 
from the Internet) (``TVB''). However, according to the Pew Project 
for Excellence in Journalism, the majority of news that people 
access online originates from legacy media. See Pew Project for 
Excellence in Journalism, The State of the News Media: An Annual 
Report on American Journalism (2010), https://www.stateofthemedia.org/2010/overview_key_findings.php (``Of news 
sites with half a million visitors a month (or the top 199 news 
sites once consulting, government and information data bases are 
removed), 67% are from legacy media, most of them (48%) 
newspapers.'').
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    Television and radio broadcasters now provide news and other 
information online via their own Web sites, online aggregation Web 
sites such as Hulu, and social networking platforms. Local broadcasters 
are experimenting with new approaches to delivering original content, 
for example by creating neighborhood-focused Web sites; delivering news 
clips via online video programming aggregators, including AOL and 
Google's YouTube; and offering news from citizen journalists. In 
addition, broadcast networks license their full-length entertainment 
programs for downloading or streaming to edge providers such as Netflix 
and Apple.

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Because these sites are becoming increasingly popular with the public, 
online distribution has a strategic value for broadcasters, and is 
likely to provide an increasingly important source of funding for 
broadcast news and entertainment programming.
    Unimpeded access to Internet distribution likewise has allowed new 
video content creators to create and disseminate programs without first 
securing distribution from broadcasters and multichannel video 
programming distributors (MVPDs) such as cable and satellite television 
companies. Online viewing of video programming content is growing 
rapidly.\9\
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    \9\ See Google Comments at 28; Motorola Comments at 5; MPAA 
Comments at 5-6; DISH Reply at 4-5; WCB Letter 12/10/10, Attach. at 
22-23, Online Video Goes Mainstream, eMarketer, Apr. 28, 2010, 
https://www.emarketer.com/Article.aspx?R=1007664 (estimating that 29% 
of Internet users younger than 25 say they watch all or most of 
their TV online, that as of April 2010 67% of U.S. Internet users 
watch online video each month, and that this figure will increase to 
77% by 2014); WCB Letter 12/10/10, Attach. at 20-21, Chris Nuttall, 
Web TVs bigger for manufacturers than 3D, Financial Times, Aug. 29, 
2010, https://www.ft.com/cms/s/2/0b34043a-9fe3-11df-8cc5-00144feabdc0.html (stating that 28 million Internet-enabled TV sets 
are expected to be sold in 2010, an increase of 125% from 2009); WCB 
Letter 12/13/10, Attach. at 291-92, Sandvine, News and Events: Press 
Releases, https://www.sandvine.com/news/pr_detail.asp?ID=288 
(estimating that Netflix represents more than 20% of peak downstream 
Internet traffic). Cisco expects online viewing to exert significant 
influence on future demand for broadband capacity, ranking as the 
top source of Internet traffic by the end of 2010 and accounting for 
91% of global Internet traffic by 2014. WCB Letter 12/10/10, Attach. 
at 40-42, Press Release, Cisco, Annual Cisco Visual Networking Index 
Forecast Projects Global IP Traffic To Increase More than Fourfold 
by 2014 (June 10, 2010), https://www.cisco.com/web/MT/news/10/news_100610.html.
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    In the Open Internet NPRM, the Commission sought comment on 
possible implications that the proposed rules might have ``on efforts 
to close the digital divide and encourage robust broadband adoption and 
participation in the Internet community by minorities and other 
socially and economically disadvantaged groups.'' As we noted in the 
Open Internet NPRM, according to a 2009 study, broadband adoption 
varies significantly across demographic groups.\10\ We expect that open 
Internet protections will help close the digital divide by maintaining 
relatively low barriers to entry for underrepresented groups and 
allowing for the development of diverse content, applications, and 
services.\11\
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    \10\ See Pew Internet & Am. Life Project, Home Broadband 
Adoption (June 2009). Approximately 14 to 24 million Americans 
remain without broadband access capable of meeting the requirements 
set forth in Section 706 of the Telecommunications Act of 1996, as 
amended. Inquiry Concerning the Deployment of Advanced 
Telecommunications Capability to All Americans in a Reasonable and 
Timely Fashion, and Possible Steps to Accelerate Such Deployment 
Pursuant to Section 706 of the Telecommunications Act of 1996, as 
Amended by the Broadband Data Improvement Act et al., Sixth 
Broadband Deployment Report, 25 FCC Rcd 9556, 9557, para. 1 (2010) 
(Sixth Broadband Deployment Report).
    \11\ For example, Jonathan Moore founded Rowdy Orbit IPTV, an 
online platform featuring original programming for minority 
audiences, because he was frustrated by the lack of representation 
of people of color in traditional media. Dec. 15, 2009 Workshop Tr. 
at 39-40, video available at https://www.openinternet.gov/workshops/speech-democratic-engagement-and-the-open-internet.html. The 
Internet's openness--and the low costs of online entry--enables 
businesses like Rowdy Orbit to launch without having to gain 
approval from traditional media gatekeepers. Id. We will closely 
monitor the effects of the open Internet rules we adopt in this 
Order on the digital divide and on minority and disadvantaged 
consumers. See generally ColorOfChange Comments; Dec. 15, 2009 
Workshop Tr. at 52-60 (remarks of Ruth Livier, YLSE); 100 Black Men 
of America et al. Comments at 1-2; Free Press Comments at 134-36; 
Center for Media Justice et al. Comments at 7-9.
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    For all of these reasons, there is little dispute in this 
proceeding that the Internet should continue as an open platform. 
Accordingly, we consider below whether we can be confident that the 
openness of the Internet will be self-perpetuating, or whether there 
are threats to openness that the Commission can effectively mitigate.

B. Broadband Providers Have the Incentive and Ability to Limit Internet 
Openness

    For purposes of our analysis, we consider three types of Internet 
activities: providing broadband Internet access service; providing 
content, applications, services, and devices accessed over or connected 
to broadband Internet access service (``edge'' products and services); 
and subscribing to a broadband Internet access service that allows 
access to edge products and services. These activities are not mutually 
exclusive. For example, individuals who generate and share content such 
as personal blogs or Facebook pages are both end users and edge 
providers, and a single firm could both provide broadband Internet 
access service and be an edge provider, as with a broadband provider 
that offers online video content. Nevertheless, this basic taxonomy 
provides a useful model for evaluating the risk and magnitude of harms 
from loss of openness.
    The record in this proceeding reveals that broadband providers 
potentially face at least three types of incentives to reduce the 
current openness of the Internet. First, broadband providers may have 
economic incentives to block or otherwise disadvantage specific edge 
providers or classes of edge providers, for example by controlling the 
transmission of network traffic over a broadband connection, including 
the price and quality of access to end users. A broadband provider 
might use this power to benefit its own or affiliated offerings at the 
expense of unaffiliated offerings.
    Today, broadband providers have incentives to interfere with the 
operation of third-party Internet-based services that compete with the 
providers' revenue-generating telephony and/or pay-television services. 
This situation contrasts with the first decade of the public Internet, 
when dial-up was the primary form of consumer Internet access. 
Independent companies such as America Online, CompuServe, and Prodigy 
provided access to the Internet over telephone companies' phone lines. 
As broadband has replaced dial-up, however, telephone and cable 
companies have become the major providers of Internet access service. 
Online content, applications, and services available from edge 
providers over broadband increasingly offer actual or potential 
competitive alternatives to broadband providers' own voice and video 
services, which generate substantial profits. Interconnected Voice-
over-Internet-Protocol (VoIP) services, which include some over-the-top 
VoIP services,\12\ ``are increasingly being used as a substitute for 
traditional telephone service,'' \13\ and over-the-top

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VoIP services represent a significant share of voice-calling minutes, 
especially for international calls. Online video is rapidly growing in 
popularity, and MVPDs have responded to this trend by enabling their 
video subscribers to use the Internet to view their programming on 
personal computers and other Internet-enabled devices. Online video 
aggregators such as Netflix, Hulu, YouTube, and iTunes that are 
unaffiliated with traditional MVPDs continue to proliferate and 
innovate, offering movies and television programs (including broadcast 
programming) on demand, and earning revenues from advertising and/or 
subscriptions. Several MVPDs have stated publicly that they view these 
services as a potential competitive threat to their core video 
subscription service. Thus, online edge services appear likely to 
continue gaining subscribers and market significance,\14\ which will 
put additional competitive pressure on broadband providers' own 
services. By interfering with the transmission of third parties' 
Internet-based services or raising the cost of online delivery for 
particular edge providers, telephone and cable companies can make those 
services less attractive to subscribers in comparison to their own 
offerings.
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    \12\ The Commission's rules define interconnected VoIP as ``a 
service that: (1) Enables real-time, two-way voice communications; 
(2) requires a broadband connection from the user's location; (3) 
requires Internet protocol-compatible customer premises equipment 
(CPE); and (4) permits users generally to receive calls that 
originate on the public switched telephone network and to terminate 
calls to the public switched telephone network.'' 47 CFR 9.3. Over-
the-top VoIP services require the end user to obtain broadband 
transmission from a third-party provider, and providers of over-the-
top VoIP can vary in terms of the extent to which they rely on their 
own facilities. See SBC Commc'ns Inc. and AT&T Corp. Applications 
for Approval of Transfer of Control, WC Docket No, 05-65, Memorandum 
Opinion and Order, 20 FCC Rcd 18290, 18337-38, para. 86 (2005).
    \13\ Tel. Number Requirements for IP-Enabled Servs. Providers, 
Report and Order, Declaratory Ruling, Order on Remand, and NPRM, 22 
FCC Rcd 19531, 19547, para. 28 (2007); see also Vonage Comments at 
3-4. In merger reviews and forbearance petitions, the Commission has 
found the record ``inconclusive regarding the extent to which 
various over-the-top VoIP services should be included in the 
relevant product market for [mass market] local services.'' See, 
e.g., Verizon Commc'ns Inc. and MCI, Inc. Application for Approval 
of Transfer of Control, Memorandum Opinion and Order, 20 FCC Rcd 
18433, 18480, para. 89 (2005); see also Petition of Qwest Corp. for 
Forbearance Pursuant to 47 U.S.C. sec. 160(c) in the Phoenix, 
Arizona Metropolitan Statistical Area, Memorandum Opinion and Order, 
25 FCC Rcd 8622, 8650, para. 54 (2010) (Qwest Phoenix Order). In 
contrast to those proceedings, we are not performing a market power 
analysis in this proceeding, so we need not and do not here 
determine with specificity whether, and to what extent, particular 
over-the-top VoIP services constrain particular practices and/or 
rates of services governed by Section 201. Cf. Qwest Phoenix Order, 
25 FCC Rcd at 8647-48, paras. 46-47 (discussing the general approach 
to product market definition); id. at 8651-52, paras. 55-56 
(discussing the need for evidence that one service constrains the 
price of another service to include them in the same product market 
for purposes of a market power analysis).
    \14\ See, e.g., WCB Letter 12/10/10, Attach. at 5763, Ryan 
Fleming, New Report Shows More People Dropping Cable TV for Web 
Broadcasts, Digital Trends, Apr. 16, 2010, available at https://www.digitaltrends.com/computing/new-report-shows-that-more-and-more-people-are-dropping-cable-tv-in-favor-of-web-broadcasts. Congress 
recently recognized these developments by expanding disabilities 
access requirements to include advanced communications services. See 
Twenty-First Century Communications and Video Accessibility Act, 
Public Law 111-260; see also 156 CONG. REC. 6005 (daily ed. July 26, 
2010) (remarks of Rep. Waxman) (this legislation before us * * * 
ensur[es] that Americans with disabilities can access the latest 
communications technology.); id. at 6004 (remarks of Rep. Markey) 
(``[T]he bill we are considering today significantly increases 
accessibility for Americans with disabilities to the indispensable 
telecommunications * * * tools of the 21st century.''); Letter from 
Rick Chessen, NCTA, to Marlene H. Dortch, Secretary, FCC, GN Docket 
No. 09-191 at 2 n.6 (filed Dec. 10, 2010).
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    In addition, a broadband provider may act to benefit edge providers 
that have paid it to exclude rivals (for example, if one online video 
site were to contract with a broadband provider to deny a rival video 
site access to the broadband provider's subscribers). End users would 
be harmed by the inability to access desired content, and this conduct 
could lead to reduced innovation and fewer new services.\15\ Consistent 
with these concerns, delivery networks that are vertically integrated 
with content providers, including some MVPDs, have incentives to favor 
their own affiliated content.\16\ If broadband providers had 
historically favored their own affiliated businesses or those incumbent 
firms that paid for advantageous access to end users, some innovative 
edge providers that have today become major Internet businesses might 
not have been able to survive.
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    \15\ See generally WCB Letter 12/10/10, Attach. at 23-27, Steven 
C. Salop & David Scheffman, Raising Rivals' Cost, 73 Am. Econ. Rev. 
267-71 (1983); WCB Letter 12/10/10, Attach. at 1-23, Steven C. Salop 
& Thomas Krattenmaker, Anticompetitive Exclusion: Raising Rivals' 
Costs to Achieve Power over Price, 96 Yale L.J. 214 (1986). See also 
Andrew I. Gavil et al., Antitrust Law in Perspective: Cases, 
Concepts and Problems in Competition Policy 1153-92 (2d ed. 2008) 
(describing how policies fostering competition spur innovation). To 
similar effect, a broadband provider may raise access fees to 
disfavored edge providers, reducing their ability to profit by 
raising their costs and limiting their ability to compete with 
favored edge providers.
    \16\ See Google Comments at 30-31; Netflix Comments at 7 n.10; 
Vonage Reply at 4; WCB Letter 12/10/10, Attach. at 28-78, Austan 
Goolsbee, Vertical Integration and the Market for Broadcast and 
Cable Television Programming, Paper for the Federal Communications 
Commission 31-32 (Sept. 5, 2007) (Goolsbee Study) (finding that 
MVPDs excluded networks that were rivals of affiliated channels for 
anticompetitive reasons). Cf. WCB Letter 12/10/10, Attach. at 85-87, 
David Waterman & Andrew Weiss, Vertical Integration in Cable 
Television 142-143 (1997) (MVPD exclusion of unaffiliated content 
during an earlier time period); see also H.R. Rep. 102-628 (2d 
Sess.) at 41 (1992) (``The Committee received testimony that 
vertically integrated companies reduce diversity in programming by 
threatening the viability of rival cable programming services.''). 
In addition to the examples of actual misconduct that we provide, 
the Goolsbee Study provides empirical evidence that cable providers 
have acted in the past on anticompetitive incentives to foreclose 
rivals, supporting our concern that these and other broadband 
providers would act on analogous incentives in the future. We thus 
disagree that we rely on ``speculative harms alone'' or have failed 
to adduce ``empirical evidence.'' Baker Statement at * 1, * 4 
(citing AT&T Reply Exh. 2 at 45 (J. Gregory Sidak & David J. Teece, 
Innovation Spillovers and the ``Dirt Road'' Fallacy: The 
Intellectual Bankruptcy of Banning Optional Transactions for 
Enhanced Delivery over the Internet, 6 J. Competition L. & Econ. 
521, 571-72 (2010)). To the contrary, the empirical evidence and the 
misconduct that we describe below validate the economic theories 
that inform our decision in this Order. Moreover, as we explain 
below, by comparison to the benefits of the prophylactic measures we 
adopt, the costs associated with these open Internet rules are 
likely small.
---------------------------------------------------------------------------

    Second, broadband providers may have incentives to increase 
revenues by charging edge providers, who already pay for their own 
connections to the Internet, for access or prioritized access to end 
users. Although broadband providers have not historically imposed such 
fees, they have argued they should be permitted to do so. A broadband 
provider could force edge providers to pay inefficiently high fees 
because that broadband provider is typically an edge provider's only 
option for reaching a particular end user.\17\ Thus broadband providers 
have the ability to act as gatekeepers.\18\
---------------------------------------------------------------------------

    \17\ Some end users can be reached through more than one 
broadband connection, sometimes via the same device (e.g., a 
smartphone that has Wi-Fi and cellular connectivity). Even so, the 
end user, not the edge provider, chooses which broadband provider 
the edge provider must rely on to reach the end user.
    \18\ Also known as a ``terminating monopolist.'' See, e.g., CCIA 
Comments at 7; Skype Comments at 10-11; Vonage Comments at 9-10; 
Google Reply at 8-14. A broadband provider can act as a gatekeeper 
even if some edge providers would have bargaining power in 
negotiations with broadband providers over access or prioritization 
fees.
---------------------------------------------------------------------------

    Broadband providers would be expected to set inefficiently high 
fees to edge providers because they receive the benefits of those fees 
but are unlikely to fully account for the detrimental impact on edge 
providers' ability and incentive to innovate and invest, including the 
possibility that some edge providers might exit or decline to enter the 
market. The unaccounted-for harms to innovation are negative 
externalities,\19\ and are likely to be particularly large because of 
the rapid pace of Internet innovation, and wide-ranging because of the 
role of the Internet as a general purpose technology. Moreover, fees 
for access or prioritized access could trigger an ``arms race'' within 
a given edge market segment. If one edge provider pays for access or 
prioritized access to end users, subscribers may tend to favor that 
provider's services, and competing edge providers may feel that they 
must respond by paying, too.
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    \19\ A broadband provider may hesitate to impose costs on its 
own subscribers, but it will typically not take into account the 
effect that reduced edge provider investment and innovation has on 
the attractiveness of the Internet to end users that rely on other 
broadband providers--and will therefore ignore a significant 
fraction of the cost of foregone innovation. See, e.g., OIC Comments 
at 20-24. If the total number of broadband subscribers shrinks, 
moreover, the social costs unaccounted for by the broadband provider 
could also include the lost ability of the remaining end users to 
connect with the subscribers that departed (foregone direct network 
effects) and a smaller potential audience for edge providers. See, 
e.g., id. at 23. Broadband providers are also unlikely to fully 
account for the open Internet's power to enhance civic discourse 
through news and information, or for its ability to enable 
innovations that help address key national challenges such as 
education, public safety, energy efficiency, and health care. See 
ARL et al. Comments at 3; Google Reply at 39; American Recovery and 
Reinvestment Act of 2009, Public Law 111-5, 123 Stat. 115 (2009).
---------------------------------------------------------------------------

    Fees for access or prioritization to end users could reduce the 
potential profit

[[Page 59197]]

that an edge provider would expect to earn from developing new 
offerings, and thereby reduce edge providers' incentives to invest and 
innovate.\20\ In the rapidly innovating edge sector, moreover, many new 
entrants are new or small ``garage entrepreneurs,'' not large and 
established firms. These emerging providers are particularly sensitive 
to barriers to innovation and entry, and may have difficulty obtaining 
financing if their offerings are subject to being blocked or 
disadvantaged by one or more of the major broadband providers. In 
addition, if edge providers need to negotiate access or prioritized 
access fees with broadband providers,\21\ the resulting transaction 
costs could further raise the costs of introducing new products and 
might chill entry and expansion.\22\
---------------------------------------------------------------------------

    \20\ See, e.g., ALA Comments at 3-4; ColorOfChange Comments at 
3; Free Press Comments at 69; Google Comments at 34; Netflix 
Comments at 4; OIC Comments at 29-30; DISH Reply at 10. Such fees 
could also reduce an edge provider's incentive to invest in existing 
offerings, assuming the fees would be expected to increase to the 
extent improvements increased usage of the edge provider's 
offerings.
    \21\ Negotiations impose direct expenses and delay. See Google 
Comments at 34. There may also be significant costs associated with 
the possibility that the negotiating parties would reach an impasse. 
See ALA Comments at 2 (``The cable TV industry offers a telling 
example of the `pay to play' environment where some cable companies 
do not offer their customers access to certain content because the 
company has not successfully negotiated financial compensation with 
the content provider.''). Edge providers may also bear costs arising 
from their need to monitor the extent to which they actually receive 
prioritized delivery.
    \22\ See, e.g., Google Comments at 34-35; Shane Greenstein 
Notice of Ex Parte, GN Docket No. 09-191, Transaction Cost, 
Transparency, and Innovation for the Internet at 19, available at 
https://www.openinternet.gov/workshops/innovation-investment-and-the-open-internet.html; van Schewick Jan. 19, 2010 Ex Parte Letter, 
Opening Statement at 7 (arguing that the low costs of innovation not 
only make many more applications worth pursuing, but also allow a 
large and diverse group of people to become innovators, which in 
turn increases the overall amount and quality of innovation). There 
are approximately 1,500 broadband providers in the United States. 
See Wireline Competition Bureau, FCC, Internet Access Services: 
Status as of December 31, 2009 at 7, tbl. 13 (Dec. 2010) (FCC 
Internet Status Report), available at https://www.fcc.gov/Daily_Releases/Daily_Business/2010/db1208/DOC-303405A1.pdf. The 
innovative process frequently generates a large number of attempts, 
only a few of which turn out to be highly successful. Given the 
likelihood of failure, and that financing is not always readily 
available to support research and development, the innovation 
process in many sectors of the Internet's edge is likely to be 
highly sensitive to the upfront costs of developing and introducing 
new products. PIC Comments at 50 (``[I]t is unlikely that new 
entrants will have the ability (both financially and with regard to 
information) to negotiate with every ISP that serves the markets 
that they are interested in.'').
---------------------------------------------------------------------------

    Some commenters argue that an end user's ability to switch 
broadband providers eliminates these problems. But many end users may 
have limited choice among broadband providers, as discussed below. 
Moreover, those that can switch broadband providers may not benefit 
from switching if rival broadband providers charge edge providers 
similarly for access and priority transmission and prioritize each edge 
provider's service similarly. Further, end users may not know whether 
charges or service levels their broadband provider is imposing on edge 
providers vary from those of alternative broadband providers, and even 
if they do have this information may find it costly to switch. For 
these reasons, a dissatisfied end user, observing that some edge 
provider services are subject to low transmission quality, might not 
switch broadband providers (though they may switch to a rival edge 
provider in the hope of improving quality).
    Some commenters contend that, in the absence of open Internet 
rules, broadband providers that earn substantial additional revenue by 
assessing access or prioritization charges on edge providers could 
avoid increasing or could reduce the rates they charge broadband 
subscribers, which might increase the number of subscribers to the 
broadband network. Although this scenario is possible,\23\ no broadband 
provider has stated in this proceeding that it actually would use any 
revenue from edge provider charges to offset subscriber charges. In 
addition, these commenters fail to account for the likely detrimental 
effects of access and prioritization charges on the virtuous circle of 
innovation described above. Less content and fewer innovative offerings 
make the Internet less attractive for end users than would otherwise be 
the case. Consequently, we are unable to conclude that the possibility 
of reduced subscriber charges outweighs the risks of harm described 
herein.\24\
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    \23\  Economics literature recognizes that access charges could 
be harmful under some circumstances and beneficial under others. 
See, e.g., WCB Letter 12/10/10, Attach. at 1-62, E. Glen Weyl, A 
Price Theory of Multi-Sided Platforms, 100 Am. Econ. Rev. 1642, 
1642-72 (2010) (the effects of allowing broadband providers to 
charge terminating rates to content providers are ambiguous); see 
also WCB Letter 12/10/10, Attach. at 180-215, John Musacchio et al., 
A Two-Sided Market Analysis of Provider Investment Incentives with 
an Application to the Net-Neutrality Issue, 8 Rev. of Network Econ. 
22, 22-39 (2009) (noting that there are conditions under which ``a 
zero termination price is socially beneficial''). Moreover, the 
economic literature on two-sided markets is at an early stage of 
development. AT&T Comments, Exh. 3, Schwartz Decl. at 16; Jeffrey A. 
Eisenach (Eisenach) Reply at 11-12; cf., e.g., WCB Letter 12/10/10, 
Attach. at 156-79, Mark Armstrong, Competition in Two-Sided Markets, 
37 Rand J. of Econ. 668 (2006); WCB Letter 12/10/10, Attach. at 216-
302, Jean-Charles Rochet & Jean Tirole, Platform Competition in Two-
Sided Markets, 1 J. Eur. Econ. Ass'n 990 (2003).
    \24\ Indeed, demand for broadband Internet access service might 
decline even if subscriber fees fell, if the conduct of broadband 
providers discouraged demand by blocking end user access to 
preferred edge providers, slowing non-prioritized transmission, and 
breaking the virtuous circle of innovation.
---------------------------------------------------------------------------

    Third, if broadband providers can profitably charge edge providers 
for prioritized access to end users, they will have an incentive to 
degrade or decline to increase the quality of the service they provide 
to non-prioritized traffic. This would increase the gap in quality 
(such as latency in transmission) between prioritized access and non-
prioritized access, induce more edge providers to pay for prioritized 
access, and allow broadband providers to charge higher prices for 
prioritized access. Even more damaging, broadband providers might 
withhold or decline to expand capacity in order to ``squeeze'' non-
prioritized traffic, a strategy that would increase the likelihood of 
network congestion and confront edge providers with a choice between 
accepting low-quality transmission or paying fees for prioritized 
access to end users.
    Moreover, if broadband providers could block specific content, 
applications, services, or devices, end users and edge providers would 
lose the control they currently have over whether other end users and 
edge providers can communicate with them through the Internet. Content, 
application, service, and device providers (and their investors) could 
no longer assume that the market for their offerings included all U.S. 
end users. And broadband providers might choose to implement 
undocumented practices for traffic differentiation that undermine the 
ability of developers to create generally usable applications without 
having to design to particular broadband providers' unique practices or 
business arrangements.\25\
---------------------------------------------------------------------------

    \25\ See OIC Comments at 24; Free Press Comments at 45. The 
transparency and reasonable network management guidelines we adopt 
in this Order, in particular, should reduce the likelihood of such 
fragmentation of the Internet.
---------------------------------------------------------------------------

    All of the above concerns are exacerbated by broadband providers' 
ability to make fine-grained distinctions in their handling of network 
traffic as a result of increasingly sophisticated network management 
tools. Such tools may be used for beneficial purposes, but they also 
increase broadband providers' ability to act on incentives to engage in

[[Page 59198]]

network practices that would erode Internet openness.\26\
---------------------------------------------------------------------------

    \26\ See CCIA/CEA Comments at 4; Free Press Comments at 29-30, 
143-46; Google Comments at 32-34; Netflix Comments at 3; OIC 
Comments at 14, 79-82; DISH Reply at 8-9; IPI Reply at 9; Vonage 
Reply at 5. For examples of network management tools, see, for 
example, WCB Letter 12/10/10, Attach. at 1-8, Allot Service Gateway, 
Pushing the DPI Envelope: An Introduction, at 2 (June 2007), 
available at https://www.sysob.com/download/AllotServiceGateway.pdf 
(``Reduce the performance of applications with negative influence on 
revenues (e.g. competitive VoIP services).''); WCB Letter 12/13/10, 
Attach. at 289-90, Procera Networks, PLR, https://www.proceranetworks.com/customproperties/tag/Products-PLR.html; WCB 
Letter 12/13/10, Attach. at 283-88, Cisco, http//:www.cisco.com/en/US/prod/collateral/ps7045/ps6129/ps6133/ps6150/prod_brochure0900aecd8025258e.pdf (marketing the ability of equipment to 
identify VoIP, video, and other traffic types). Vendors market their 
offerings as enabling broadband providers to ``make only modest 
incremental infrastructure investments and to control operating 
costs.'' WCB Letter 12/13/10, Attach. at 283, Cisco.
---------------------------------------------------------------------------

    Although these threats to Internet-enabled innovation, growth, and 
competition do not depend upon broadband providers having market power 
with respect to end users,\27\ most would be exacerbated by such market 
power. A broadband provider's incentive to favor affiliated content or 
the content of unaffiliated firms that pay for it to do so, its 
incentive to block or degrade traffic or charge edge providers for 
access to end users, and its incentive to squeeze non-prioritized 
transmission will all be greater if end users are less able to respond 
by switching to rival broadband providers. The risk of market power is 
highest in markets with few competitors, and most residential end users 
today have only one or two choices for wireline broadband Internet 
access service. As of December 2009, nearly 70 percent of households 
lived in census tracts where only one or two wireline or fixed wireless 
firms provided advertised download speeds of at least 3 Mbps and upload 
speeds of at least 768 Kbps \28\--the closest observable benchmark to 
the minimum download speed of 4 Mbps and upload speed of 1 Mbps that 
the Commission has used to assess broadband deployment. About 20 
percent of households are in census tracts with only one provider 
advertising at least 3 Mbps down and 768 Kbps up. For Internet service 
with advertised download speeds of at least 10 Mbps down and upload 
speeds of at least 1.5 Mbps up, nearly 60 percent of households lived 
in census tracts served by only one wireline or fixed wireless 
broadband provider, while nearly 80 percent lived in census tracts 
served by no more than two wireline or fixed wireless broadband 
providers.
---------------------------------------------------------------------------

    \27\ Because broadband providers have the ability to act as 
gatekeepers even in the absence of market power with respect to end 
users, we need not conduct a market power analysis.
    \28\ See FCC Internet Status Report at 7, fig. 3(a). A broadband 
provider's presence in a census tract does not mean it offers 
service to all potential customers within that tract. And the data 
reflect subscriptions, not network capability.
---------------------------------------------------------------------------

    Including mobile broadband providers does not appreciably change 
these numbers.\29\ The roll-out of next generation mobile services is 
at an early stage, and the future of competition in residential 
broadband is unclear.\30\ The record does not enable us to make a 
predictive judgment that the future will be more competitive than the 
past. Although wireless providers are increasingly offering faster 
broadband services, we do not know, for example, how end users will 
value the trade-offs between the benefits of wireless service (e.g., 
mobility) and the benefits of fixed wireline service (e.g., higher 
download and upload speeds).\31\ We note that the two largest mobile 
broadband providers also offer wireline or fixed service; \32\ this 
could dampen their incentive to compete aggressively with wireline (or 
fixed) services.\33\
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    \29\ In December 2009, nearly 60% of households lived in census 
tracts where no more than two broadband providers offered service 
with 3 Mbps down and 768 Kbps up, while no mobile broadband 
providers offered service with 10 Mbps down and 1.5 Mbps up. Id. at 
8, fig. 3(b). Mobile broadband providers generally have offered 
bandwidths lower than those available from fixed providers. See 
Yottabyte at 13-14.
    \30\ See National Broadband Plan at 40-42. A number of 
commenters discuss impediments to increased competition. See, e.g., 
Ad Hoc Comments at 9; Google Comments, at 18-22; IFTA Comments at 
10-11; see also WCB Letter 12/10/10, Attach. at 9-16, Thomas Monath 
et al., Economics of Fixed Broadband Network Strategies, 41 IEEE 
Comm. Mag. 132, 132-39 (Sept. 2003).
    \31\ See Ad Hoc Comments at 9; Google Comments at 21; Vonage 
Comments at 8; IPI Reply at 14; WCB Letter 12/10/10, Attach. at 56-
65, Vikram Chandrasekhar & Jeffrey G. Andrews, Femtocell Networks: A 
Survey, 46 IEEE Comm. Mag., Sept. 2008, 59, at 59-60 (explaining 
mobile spectrum alone cannot compete with wireless connections to 
fixed networks). We also do not know how offers by a single wireless 
broadband provider for both fixed and mobile broadband services will 
perform in the marketplace.
    \32\ See OIC Comments at 71-72. Large cable companies that 
provide fixed broadband also have substantial ownership interests in 
Clear, the 4G wireless venture in which Sprint has a majority 
ownership interest.
    \33\ OIC Comments at 71-72; Skype Comments at 10. In cellular 
telephony, multimarket conduct has been found to dampen competition. 
See WCB Letter 12/10/10, Attach. at 1-24, P.M. Parker and L.H. 
R[ouml]ller, Collusive conduct in duopolies: Multimarket contact and 
cross ownership in the mobile telephone industry, 28 Rand J. Of 
Econ. 304, 304-322 (Summer 1997); WCB Letter 12/10/10, Attach. at 
25-58, Meghan R. Busse, Multimarket contact and price coordination 
in the cellular telephone industry, 9 J. of Econ. & Mgmt. Strategy 
287, 287-320 (Fall 2000). Moreover, some fixed broadband providers 
also provide necessary inputs to some mobile providers' offerings, 
such as backhaul transport to wireline facilities.
---------------------------------------------------------------------------

    In addition, customers may incur significant costs in switching 
broadband providers \34\ because of early termination fees; \35\ the 
inconvenience of ordering, installation, and set-up, and associated 
deposits or fees; possible difficulty returning the earlier broadband 
provider's equipment and the cost of replacing incompatible customer-
owned equipment; the risk of temporarily losing service; the risk of 
problems learning how to use the new service; and the possible loss of 
a provider-specific e-mail address or Web site.
---------------------------------------------------------------------------

    \34\ ARL et al. Comments at 5; Google Comments at 21-22; Netflix 
Comments at 5; New Jersey Rate Counsel (NJRC) Comments at 17; OIC 
Comments at 40, 73; PIC Comments at 23; Skype Comments at 12; OIC 
Reply at 20-21; Paul Misener (Amazon.com) Comments at 2; see also 
WCB Letter 12/10/10, Attach. at 59-76, Patrick Xavier & Dimitri 
Ypsilanti, Switching Costs and Consumer Behavior: Implications for 
Telecommunications Regulation, 10(4) Info 2008, 13, 13-29 (2008). 
Churn is a function of many factors. See, e.g., WCB Letter 12/10/10, 
Attach. at 1-53, 97-153, AT&T Comments, WT Docket No. 10-133, at 51 
(Aug. 2, 2010). The evidence in the record, e.g., AT&T Comments at 
83, is not probative as to the extent of competition among broadband 
providers because it does not appropriately isolate a connection 
between churn levels and the extent of competition.
    \35\ Google Comments at 21-22. Of broadband end users with a 
choice of broadband providers, 32% said paying termina