When Congress passed the Infrastructure Investment and Jobs Act (IIJA) near the end of 2021, it included a short provision that required the Federal Communications Commission to adopt rules to prevent “digital discrimination.” At the time, it was understood the law intended to prohibit broadband providers from intentionally discriminating in their deployment decisions based on “income level, race, ethnicity, color, religion, or national origin.”
However, the rules the FCC rolled out last year went far beyond that congressional intent. Instead, the agency proposes to regulate virtually every aspect of broadband service, including speeds, pricing, promotions, marketing and advertising. A half-dozen lawsuits have been filed to challenge this dramatic regulatory overreach, which threatens to restrict consumer choice and competition in broadband.
Recently, those cases were consolidated in the 8th U.S. Circuit Court of Appeals. Rather than focusing narrowly on how to prevent intentional discrimination in broadband, the FCC proposes an expansive regime to police even unintentional “disparate impacts” on protected groups in ways that look perilously close to old-style utility rate regulation. The rules would empower the commission to determine whether providers’ prices are “comparable” across income levels and demographic characteristics.
The FCC justifies this regulatory expansion by citing dubious studies purporting to show evidence of pricing and deployment discrimination. Yet, these studies are based on unreliable data and methodologies and need to make more effort to control for obviously relevant factors, such as competition from rival providers.
For example, one study the FCC cites extensively concedes that its approach and data could not produce reliable statistical tests. Another relies on a sample of just 165 households to allege discriminatory pricing in Los Angeles County, which contains nearly 3.4 million households. The FCC has essentially encouraged critics to produce “quick-hit” studies to trigger what may end up being costly and time-consuming investigations.
The FCC’s adoption of a “disparate impact” standard is especially problematic. Well-intentioned providers could face prosecution if their pricing or service offerings are associated with statistically different outcomes across income levels or other protected characteristics. Given that income and demographics are correlated with many nondiscriminatory factors relevant to broadband deployment and pricing — such as population density and computer ownership — such disparities are almost guaranteed to be found, even where there is no intent or ability to discriminate.
This risks creating an endless stream of investigations based on false positives. Providers would then face onerous demands to turn over internal documents to justify normal business practices that serve reasonable consumer demands. They’d also likely be under enormous pressure to settle rather than endure lengthy and unpredictable proceedings.
The result may be reduced broadband investment and innovation, as providers are compelled to run even routine pricing experiments past statisticians and lawyers.
Moreover, none of this will meaningfully address the valid goal of equal broadband access. If regulators are concerned about particular underserved communities, they have tools to address those discrete problems. For example, the FCC runs subsidy programs like the Affordable Connectivity Program and Lifeline to assist low-income consumers. Beyond that, income disparities in broadband access largely reflect underlying factors beyond the FCC’s authority to remedy.
Rather than reduce discrimination, the FCC’s rules are more likely to backfire by curtailing competition. Imposing sweeping, intrusive restrictions across a more than $100 billion dynamic industry is a recipe for unintended harm.
Let’s hope the courts rein in the FCC’s digital-discrimination rules before the broadband infrastructure that Congress meant to promote becomes another victim. The 8th Circuit should affirm that even independent regulators must exercise restraint.
