FCC Restores Net Neutrality, Bans Chinese ISPs, Snubs TikTok

The Federal Communications Commission in a busy week resurrected net neutrality rules and ordered three Chinese telecommunications providers to exit the U.S. market.

The FCC on Thursday announced it has broadband service as a Title II telecommunications service. By defining broadband as an essential service, the FCC prohibits internet service providers (ISPs) from "blocking, throttling or engaging in paid prioritization of lawful content."

The FCC also now can monitor internet outages, it said.

At the same time, the regulatory agency ordered four China-based internet services providers to end all broadband services they offer in the U.S. They must leave the market within 60 days of the net neutrality ruling.

Reuters reported the news on Thursday.

The two announcements come to both the disappointment and glee of America's leading ISPs, who strongly supported the 2017 net neutrality repeal and will be happy to see Chinese telcos leave the market.

Net Neutrality Returns

The Republican-controlled FCC repealed net neutrality in 2017, with key national telcos and cable companies backing the vote. The proponents argued that lessening federal oversight would stifle innovation.

Its opponents said consumers and smaller competitors would suffer from big providers exploiting their geographical monopolies and interfering with the content their users accessed. Chief among the concerns was that providers would give prioritized speed and performance to for certain types of internet content over another. At the time, multiple carriers had recently made vertical acquisitions of content providers, like AT&T buying HBO and Verizon buying Yahoo. But those providers eventually sold off those assets.

Commissioners who voted in favor of the bill this week emphasized the limited role the agency would play in regulating internet.

"Through its actions today, the Commission creates a national standard by which it can ensure that broadband internet service is treated as an essential service," a statement from the FCC said. "Today’s vote also makes clear that the Commission will exercise its authority over broadband in a narrowly tailored fashion – without rate regulation, tariffing, or unbundling – to foster continued innovation and investment."

China Ban

The FCC in the second pillar of its net neutrality announcement said it now has the authority to remove authorizations of "foreign-owned entities" that own U.S. broadband networks and "pose a threat to national security."

Specifically, the Commission called out four voice carriers that the Chinese government owns: China Telecom, China Mobile, China Unicom and Pacific Networks' ComNet. The FCC had already revoked these companies' section 214 authorization to provide voice services. The ban has now extended to included fixed and mobile internet services.

It's one event in a long series of regulatory actions against Chinese telcos. The FCC notably banned Hauwei equipment from U.S. mobile networks in 2020.

Moreover, different members of Congress referenced Chinese broadband providers in the lead-up to the U.S. ban of the social media platform TikTok. Proponents of the ban publicly cite concerns of data collection that would favor the Chinese intelligence community.

A new law from the U.S. federal government requires that ByteDance, TikTok's China-based owner, must sell the app within a year.

Customer/Partner Lens

Asked how the ban on Chinese telcos could impact the U.S. telecommunications market, Nitel CEO Margi Shaw said business users might see an impact.

Nitel's Margi Shaw

“We are strong believers that competition among technology providers is critical to driving innovation and delivering choice to customers," Shaw told Channel Futures. "However, the security of our technology infrastructure on a national level must be a priority. While this decision might cause some discomfort for customers in the short term, it underscores the value of working with a network aggregator that is well suited to enable a swift pivot.”

Agents appear to view the Chinese telco ban as a nothing-burger. While companies liked China Telecom hold contracts with different technology services distributors (TSDs), partners say they were already more likely to sell through a U.S.-based ILEC or aggregator.