In announcing the move to utility-style regulation for broadband providers, Federal Communications Commission (FCC) Chairman Tom Wheeler and Commissioner Mignon Clyburn said Title II doesn’t need to lead to rate regulation. They pointed to the 700 small broadband providers in rural America that purportedly offer retail broadband Internet access subject to Title II as an example of how this would work. Fact check. These 700 small companies do NOT offer retail broadband Internet access service pursuant to Title II. They provide broadband service to their customers under Title I as an unregulated service and always have.

This misunderstanding illustrates the lack of clarity and understanding around the debate of Title II being a workable regulatory model for achieving an open and vibrant Internet.

Here is how it works. Because of the hideous complexities of the commission’s approach to regulating the traditional telecom services that these companies provide, they generally have opted to create a special wholesale transport service that they “sell” to themselves as an ingredient of the unregulated (I’ll say it again) Title I broadband service that they provide to people wanting to connect to the Internet. This Title II wholesale service is fully and completely regulated by the commission, including rate regulation, down to the penny.

This creates major headaches for smaller companies and the consumers they want to serve. For example, the commission’s rate regulations force the price of standalone broadband service (that is broadband sold without an accompanying voice service) to unrealistic levels that make the service unnecessarily expensive and completely uncompetitive with cable broadband offerings.

This IS rate regulation that skews competition and harms consumers. These 700 companies also are forced to contribute to the universal service fund, based upon their Title II service revenue, where competing cable and wireless broadband providers do not. Again, skewing competition and raising the price of broadband.

Retail broadband Internet access service — whether provided by large or small companies, cable, telco or wireless — has been a Title I service, and has produced an Internet that works for consumers, businesses, Internet service providers and edge and content companies. Changing to a Title II horse in mid-stream is not likely to work out well if it looks like the 700 small company rate regulation model.

And certainly none of this is a model for clarity whether you are an Internet customer, a provider or apparently, based on inaccurate comments from the FCC, a regulator.