Business

Column: After a years-long pause, the FCC resurrects 'network neutrality,' a boon for consumers

Published

9 months ago

April 26, 2024

Column: After a years-long pause, the FCC resurrects 'network neutrality,' a boon for consumers

In the midst of its battle to extinguish the Mendocino Complex wildfire in 2018, the Santa Clara County Fire Department discovered that its internet connection provider, Verizon, had throttled their data flow virtually down to zero, cutting off communications for firefighters in the field. One firefighter died in the blaze and four were injured.

Verizon refused to restore service until the fire department signed up for a new account that more than doubled its bill.

That episode has long been Exhibit A in favor of restoring the Federal Communications Commission’s authority to regulate broadband internet service, which the FCC abdicated in 2017, during the Trump administration.

This is an industry that requires a lot of scrutiny.

— Craig Aaron, Free Press, on the internet service industry

Now that era is over. On Thursday, the FCC — now operating with a Democratic majority — reclaimed its regulatory oversight of broadband via an order that passed on party lines, 3-2.

The commission’s action could scarcely be more timely.

“Four years ago,” FCC Chair Jessica Rosenworcel observed Thursday as the commission prepared to vote, “the pandemic changed life as we know it. … Much of work, school and healthcare migrated to the internet. … It became clear that no matter who you are or where you live, you need broadband to have a fair shot at digital age success. It went from ‘nice to have’ to ‘need to have.’ ”

Yet the commission in 2017 had thrown away its own ability to supervise this essential service. By categorizing broadband services as “information services,” it relinquished its right to address consumer complaints about crummy service, or even collect data on outages. It couldn’t prevent big internet service providers such as Comcast from favoring their own content or websites over competitors by degrading the rivals’ signals when they reached their subscribers’ homes.

“We fixed that today,” Rosenworcel said.

The issue the FCC addressed Thursday is most often viewed in the context of “network neutrality.” This core principle of the open internet means simply that internet service providers can’t discriminate among content providers trying to reach your home or business online — they can’t block websites or services, or degrade their signal, slow their traffic or, conversely, provide a better traffic lane for some rather than others.

The principle is important because their control of the information highways and byways gives ISPs tremendous power, especially if they control the last mile of access to end users, as do cable operators such as Comcast and telecommunications firms such as Verizon. If they use that power to favor their own content or content providers that pay them for a fast lane, it’s consumers who suffer.

Net neutrality has been a partisan football for more than two decades, or ever since high-speed broadband connections began to supplant dial-up modems.

In legal terms, the battle has been over the classification of broadband under the Communications Act of 1934 — as Title I “information services” or Title II “telecommunications.” The FCC has no jurisdiction over Title I services, but great authority over those classified by Title II as common carriers.

The key inflection point came in 2002, when a GOP-majority FCC under George W. Bush classified cable internet services as Title I. In effect, the commission stripped itself of its authority to regulate the nascent industry. (Then-FCC Chair Michael Powell subsequently became the chief Washington lobbyist for the cable industry, big surprise.)

Not until 2015 was the error rectified, at the urging of President Obama. Broadband was reclassified under Title II; then-FCC Chair Tom Wheeler was explicit about using the restored authority to enforce network neutrality.

But that regulatory regime lasted only until 2017, when a reconstituted FCC, chaired by a former Verizon executive Ajit Pai, reclassified broadband again as Title I in deference to President Trump’s deregulatory campaign. The big ISPs would have geared up to take advantage of the new regime, had not California and other states stepped into the void by enacting their own net neutrality laws.

A federal appeals court upheld California’s law, the most far-reaching of the state statutes, in 2022. And although the FCC’s action could theoretically preempt the state law, “what the FCC is doing is perfectly in line with what California did,” says Craig Aaron, co-CEO of the consumer advocacy organization Free Press.

The key distinction, Aaron told me, is that the FCC’s initiative goes well beyond the issue of net neutrality — it establishes a single federal standard for broadband and reclaims its authority over the technology more generally, in ways that “safeguard national security, advance public safety, protect consumers and facilitate broadband deployment,” in the commission’s own words.

Although Verizon’s actions in the 2018 wildfire case did not violate the net neutrality principle, for instance, the FCC’s restored regulatory authority might have enabled it to set forth rules governing the provision of services when public safety is at stake that might have prevented Verizon from throttling the Santa Clara Fire Department’s connection in the first place.

Until Thursday, the state laws functioned as bulwarks against net neutrality abuses by ISPs. “California helped discourage companies from trying things,” Aaron says. Indeed, provisions of the California law are explicit enough that state regulators haven’t had to bring a single enforcement case. “It’s been mostly prophylactic,” he says — “telling the industry what it can and can’t do. But it’s important to have set down the rules of the road.”

None of this means that the partisan battle over broadband regulation is over. Both Republican FCC commissioners voted against the initiative Thursday. A recrudescence of Trumpism after the November election could bring a deregulation-minded GOP majority back into power at the FCC.

Indeed, in a lengthy dissenting statement, Brendan Carr, one of the commission’s Republican members, repeated all the conventional conservative arguments presented to justify the repeal of network neutrality in 2017. Carr painted the 2015 restoration of net neutrality as a liberal plot — “a matter of civic religion for activists on the left.”

He asserted that the FCC was then goaded into action by President Obama, who was outspoken on the need for reclassification and browbeat Wheeler into going along. Leftists, he said, “demand that the FCC go full-Title II whenever a Democrat is president.”

Carr also depicted network neutrality as a drag on profits and innovation in the broadband sector. “Broadband investment slowed down after the FCC imposed Title II in 2015,” he said, “and it picked up again after we restored Title 1 in 2017.”

Carr chose his time frame very carefully. Examine the longer period in which net neutrality has been debated at the FCC, and one finds that broadband investment crashed after a Republican-led FCC reclassified broadband as an information service in 2002, falling to $57 billion in 2003 from $111.5 billion in 2001.

Investment did decline between 2015, when net neutrality rules were reinstated, and 2017, when they were rescinded — by a minuscule 0.8%. It hasn’t been especially robust since then — as of 2002 it was still running at only about 92% of what it had been two decades earlier.

As the FCC observed in Thursday’s order, “regulation is but one of several factors that drive investment and innovation in the telecommunications and digital media markets.”

The commission cited consumer demand and the arrival of new technologies, among others. Strong, consistent regulation, moreover, opens the path for new competitors with new ideas and innovations — and can bring prices down for users in the process.

The truth is that network neutrality has been heavily favored by the public, in part because examples of ISPs abusing their power were not hard to find. In 2007, Comcast was caught degrading traffic from the file-sharing service BitTorrent, which held contracts to distribute licensed content from Hollywood studios and other sources in direct competition with Comcast’s pay-TV business.

In 2010, Santa Monica-based Tennis Channel complained to the FCC that Comcast kept it isolated on a little-watched sports tier while giving much better placement to the Golf Channel and Versus, two channels that compete with it for advertising, and which Comcast happened to own. The FCC sided with the Tennis Channel but was overruled by federal court.

Even barring a change at the White House, the need for vigilant enforcement will never go away; ISPs will always be looking for business models and manipulative practices that could challenge the FCC’s oversight capabilities, especially as cable and telecommunications companies consolidate into bigger and richer enterprises and combine content providers with their internet delivery services.

“This is an industry,” Aaron says, “that requires a lot of scrutiny.”

Business

As Delta Reports Profits, Airlines Are Optimistic About 2025

Published

8 hours ago

January 11, 2025

Press Room

As Delta Reports Profits, Airlines Are Optimistic About 2025

This year just got started, but it is already shaping up nicely for U.S. airlines.

After several setbacks, the industry ended 2024 in a fairly strong position because of healthy demand for tickets and the ability of several airlines to control costs and raise fares, experts said. Barring any big problems, airlines — especially the largest ones — should enjoy a great year, analysts said.

“I think it’s going to be pretty blue skies,” said Tom Fitzgerald, an airline industry analyst for the investment bank TD Cowen.

In recent weeks, many major airlines upgraded forecasts for the all-important last three months of the year. And on Friday, Delta Air Lines said it collected more than $15.5 billion in revenue in the fourth quarter of 2024, a record.

“As we move into 2025, we expect strong demand for travel to continue,” Delta’s chief executive, Ed Bastian, said in a statement. That put the airline on track to “deliver the best financial year in Delta’s 100-year history,” he said.

The airline also beat analysts’ profit estimates and said it expected earnings per share, a measure of profitability, to rise more than 10 percent this year.

Delta’s upbeat report offers a preview of what are expected to be similarly rosy updates from other carriers that will report earnings in the next few weeks. That should come as welcome news to an industry that has been stifled by various challenges even as demand for travel has rocketed back after the pandemic.

“For the last five years, it’s felt like every bird in the sky was a black swan,” said Ravi Shanker, an analyst focused on airlines at Morgan Stanley. “But it appears that this industry does have its ducks in a row.”

That is, of course, if everything goes according to plan, which it rarely does. Geopolitics, terrorist attacks, air safety problems and, perhaps most important, an economic downturn could tank demand for travel. Rising costs, particularly for jet fuel, could erode profits. Or the industry could face problems like a supply chain disruption that limits availability of new planes or makes it harder to repair older ones.

Early last year, a panel blew off a Boeing 737 Max during an Alaska Airlines flight, resurfacing concerns about the safety of the manufacturer’s planes, which are used on most flights operated by U.S. airlines, according to Cirium, an aviation data firm.

The incident forced Boeing to slow production and delay deliveries of jets. That disrupted the plans of some airlines that had hoped to carry more passengers. And there was little airlines could do to adjust because the world’s largest jet manufacturer, Airbus, didn’t have the capacity to pick up the slack — both it and Boeing have long order backlogs. In addition, some Airbus planes were afflicted by an engine problem that has forced carriers to pull the jets out of service for inspections.

There was other tumult, too. Spirit Airlines filed for bankruptcy. A brief technology outage wreaked havoc on many airlines, disrupting travel and resulting in thousands of canceled flights in the heart of the busy summer season. And during the summer, smaller airlines flooded popular domestic routes with seats, squeezing profits during what is normally the most lucrative time of year.

But the industry’s financial position started improving when airlines reduced the number of flights and seats. While that was bad for travelers, it lifted fares and profits for airlines.

“You’re in a demand-over-supply imbalance, which gives the industry pricing power,” said Andrew Didora, an analyst at the Bank of America.

At the same time, airlines have been trying to improve their businesses. American Airlines overhauled a sales strategy that had frustrated corporate customers, helping it win back some travelers. Southwest Airlines made changes aimed at lowering costs and increasing profits after a push by the hedge fund Elliott Management. And JetBlue Airways unveiled a strategy with similar aims, after a less contentious battle with the investor Carl C. Icahn.

Those improvements and industry trends, along with the stabilization of fuel, labor and other costs, have created the conditions for what could be a banner 2025. “All of this is the best setup we’ve had in decades,” Mr. Shanker said.

That won’t materialize right away, though. Travel demand tends to be subdued in the winter. But business trips pick up somewhat, driven by events like this week’s Consumer Electronics Show in Las Vegas.

The positive outlook for 2025 is probably strongest for the largest U.S. airlines — Delta, United and American. All three are well positioned to take advantage of buoyant trends, including steadily rebounding business travel and customers who are eager to spend more on better seats and international flights.

But some smaller airlines may do well, too. JetBlue, Alaska Airlines and others have been adding more premium seats, which should help lift profits.

While he is optimistic overall, Mr. Shanker acknowledged that the industry was vulnerable to a host of potential problems.

“I mean, this time last year you were talking about doors falling off planes,” he said. “So who knows what might happen.”

Business

Insurance commissioner issues moratorium on home policy cancellations in fire zones

Published

9 hours ago

January 11, 2025

Press Room

Insurance commissioner issues moratorium on home policy cancellations in fire zones

California Insurance Commissioner Ricardo Lara has issued a moratorium that bars insurers from canceling or non-renewing home policies in the Pacific Palisades and the San Gabriel Valley’s Eaton fire zones.

The moratorium, issued Thursday, protects homeowners living within the perimeter of the fire and in adjoining ZIP codes from losing their policies for one year, starting from when Gov. Gavin Newsom declared a state of emergency on Wednesday.

The moratoriums, provided for under state law, are typically issued after large fires and apply to all policyholders regardless of whether they have suffered a loss.

Lara also urged insurers to pause for six months any pending non-renewals or cancellations that were issued up to 90 days before Jan. 7 that were to take effect after the start of the fires — something he does not have authority to prohibit.

“I call upon all property insurance companies to halt these non-renewals and cancellations and provide essential stability for our communities, allowing consumers to focus on what’s important at the moment — their safety and recovery,” said Lara on Friday during a press conference in downtown Los Angeles.

Insurance companies in California have wide latitude to not renew home policies after they expire, though they must provide at least 75 days’ notice. However, policies in force can be canceled only for reasons such as non-payment and fraud.

Insurers have dropped hundreds of thousands of policyholders across California in recent years citing the increasing risk and severity of wind-driven wildfires attributed to climate change. The insurance department said residents living in fire zones can be subject to sudden non-renewals, prompting the need for the moratoriums.

In addition, Lara asked insurers to extend to policyholders affected by the fires time to pay their premiums that go beyond the existing 60-day grace period that is mandatory under state law.

It’s not clear how many homeowners in Pacific Palisades and elsewhere might not have had coverage, but many homeowners reported that insurers had not renewed their policies before the disaster struck. State Farm last year told the Department of Insurance it would not renew 1,626 policies in Pacific Palisades when they expired, starting last July.

Residents can visit the Department of Insurance website at insurance.ca.gov to see if their ZIP codes are included in the moratorium. They can also contact the department at (800) 927-4357 or via chat or email if they think their insurer is in violation of the law.

The Pacific Palisades fire, the most destructive fire in Los Angeles history, as of Friday morning had grown to more than 20,000 acres, burning more than 5,000 homes, businesses and other buildings. It was 6% contained.

The Eaton fire, which has burned many structures in Altadena and Pasadena, has spread to nearly 14,000 acres and was 3% contained as of early Friday. Ten people have died in the fires.

Business

In Los Angeles, Hotels Become a Refuge for Fire Evacuees

Published

20 hours ago

January 10, 2025

Press Room

In Los Angeles, Hotels Become a Refuge for Fire Evacuees

The lobby of Shutters on the Beach, the luxury oceanfront hotel in Santa Monica that is usually abuzz with tourists and entertainment professionals, had by Thursday transformed into a refuge for Los Angeles residents displaced by the raging wildfires that have ripped through thousands of acres and leveled entire neighborhoods to ash.

In the middle of one table sat something that has probably never been in the lobby of Shutters before: a portable plastic goldfish tank. “It’s my daughter’s,” said Kevin Fossee, 48. Mr. Fossee and his wife, Olivia Barth, 45, had evacuated to the hotel on Tuesday evening shortly after the fire in the Los Angeles Pacific Palisades area flared up near their home in Malibu.

Suddenly, an evacuation alert came in. Every phone in the lobby wailed at once, scaring young children who began to cry inconsolably. People put away their phones a second later when they realized it was a false alarm.

Similar scenes have been unfolding across other Los Angeles hotels as the fires spread and the number of people under evacuation orders soars above 100,000. IHG, which includes the Intercontinental, Regent and Holiday Inn chains, said 19 of its hotels across the Los Angeles and Pasadena areas were accommodating evacuees.

The Palisades fire, which has been raging since Tuesday and has become the most destructive in the history of Los Angeles, struck neighborhoods filled with mansions owned by the wealthy, as well as the homes of middle-class families who have owned them for generations. Now they all need places to stay.

Many evacuees turned to a Palisades WhatsApp group that in just a few days has grown from a few hundred to over 1,000 members. Photos, news, tips on where to evacuate, hotel discount codes and pet policies were being posted with increasing rapidity as the fires spread.

At the midcentury modern Beverly Hilton hotel, which looms over the lawns and gardens of Beverly Hills, seven miles and a world away from the ash-strewed Pacific Palisades, parking ran out on Wednesday as evacuees piled in. Guests had to park in another lot a mile south and take a shuttle back.

In the lobby of the hotel, which regularly hosts glamorous events like the recent Golden Globe Awards, guests in workout clothes wrestled with children, pets and hastily packed roll-aboards.

Many of the guests were already familiar with each other from their neighborhoods, and there was a resigned intimacy as they traded stories. “You can tell right away if someone is a fire evacuee by whether they are wearing sweats or have a dog with them,” said Sasha Young, 34, a photographer. “Everyone I’ve spoken with says the same thing: We didn’t take enough.”

The Hotel June, a boutique hotel with a 1950s hipster vibe a mile north of Los Angeles International Airport, was offering evacuees rooms for $125 per night.

“We were heading home to the Palisades from the airport when we found out about the evacuations,” said Julia Morandi, 73, a retired science educator who lives in the Palisades Highlands neighborhood. “When we checked in, they could see we were stressed, so the manager gave us drinks tickets and told us, ‘We take care of our neighbors.’”

Hotels are also assisting tourists caught up in the chaos, helping them make arrangements to fly home (as of Friday, the airport was operating normally) and waiving cancellation fees. A spokeswoman for Shutters said its guests included domestic and international tourists, but on Thursday, few could be spotted among the displaced Angelenos. The heated outdoor pool that overlooks the ocean and is usually surrounded by sunbathers was completely deserted because of the dangerous air quality.

“I think I’m one of the only tourists here,” said Pavel Francouz, 34, a hockey scout who came to Los Angeles from the Czech Republic for a meeting on Tuesday before the fires ignited.

“It’s weird to be a tourist,” he said, describing the eerily empty beaches and the hotel lobby packed with crying children, families, dogs and suitcases. “I can’t imagine what it would feel like to be these people,” he said, adding, “I’m ready to go home.”

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