New Fast Lane in Open Internet Proceeding

FCC provides “bulk upload” option for adding even more comments to the million-plus already on file – now who’s going to read them all?

When last we took a sounding of the rising floodwaters of net neutrality comments, they were 1.1 million deep and more were pouring in. That was a month ago and, we’re pleased to report, the levees have apparently held. At least we assume that to be the case because the FCC has just announced, in effect, that it’s opening the dam upstream in an apparent effort to increase the flow of incoming comments.

In a blog post on the FCC’s website, the Commission’s Chief Information Officer advises that

[i]n the Commission’s embrace of Open Data and a commitment to openness and transparency throughout the Open Internet proceedings, the FCC is making available a Comma Separated Values (CSV) file for bulk upload of comments given the exceptional public interest.

If we’re understanding that correctly, the Commission is offering an express lane for the simultaneous submission of multiple comments (i.e., “bulk uploads”) to get them in the door even faster than might otherwise be the case. The need for that express lane isn’t immediately obvious: a quick spot-check in ECFS indicates that, since mid-August, comments have been flowing in smoothly, generally several thousand (occasionally more than 10,000) a day. With bulk uploads now available, we can look for that to increase.

But necessary or not, this development brings us back to something we have addressed before.

In our last post about Open Internet comments, we observed that it would take more than 40 years for an individual – working 52 40-hour weeks per year, and processing one comment every five minutes – to review the 1.1 million comments that had already come in. (Of course, even if such an individual could be found, conventional limits imposed by the Eighth and Thirteenth Amendments make that scenario unlikely in the extreme.)

But it now occurs to us that, in addition to being unrealistic, our calculation came at the problem all wrong.

That’s because we were assuming an open-ended time frame for completing the review. But as we all know, Chairman Wheeler would like to wrap up the Open Internet proceeding before the end of the year. So the variable to solve for is not the total time it would take; rather, the variable is the number of people it will take to complete the review in time to get an order adopted and released by December 31.

Time to bring out the CommLawBlog abacus!

Let’s assume that review of the comments has to be completed by November 30, which would leave a month for the FCC’s wordsmiths to crank out the item and for the Commission to adopt it by year's end. Let’s also assume that review of the comments began on June 1, a couple of weeks after the Open Internet NPRM was released. And finally, let’s assume that, when all is said and done, a total of 1,250,000 comments will need to get reviewed, indexed, catalogued and contemplated, with each comment requiring an average of five minutes to process.

With 183 days from June through November, there would be just under 88,000 minutes during which 1,250,000 comments would need to get processed at our estimated five minutes per. No problem – all it would take would be to assign 70+ staffers to do nothing but review comments, full-time, eight hours a day, seven days a week (no weekends, no holidays).

Let’s put that in context. If you assemble all of the staffs of all of the Commissioners – including the Commissioners themselves – you’ve got about half the people necessary. If the Eighth Floor doesn’t want to get its hands dirty (or isn’t inclined to commit the requisite holidays and weekends), it could simply assign more than 10% of all the attorneys in all the FCC’s various offices and bureaus to take on the chore. Any way you slice it, the Commission would have to make a substantial commitment of staff to get the job done.

Has it done that? We don’t know. Even though we raised that question a couple of months ago, the Commission hasn’t bothered to clue us – or anybody else, as far as we know – in as to the process it’s using to review all the comments that are rolling in. The Commission touts its commitment to “transparency”, and has expressly assured that all comments will be reviewed. Given that commitment and those assurances, we figure that the Commission should be more than happy to describe how it’s reviewing all the incoming comments so that they will all be considered in the Commission’s final decision. We’ll let you know if we hear anything.

Update: Reply Comment Deadline Extended in Net Neutrality Proceeding

The comment total is already past 1,100,000, but who’s counting?

Really, would it be possible to get too many net neutrality comments? As if.

So we’re pleased to report that the FCC has extended the deadline for filing reply comments by five days. The new deadline is September 15, 2014.

The original reply deadline was September 10, but the Commission was concerned because, as we all remember, the initial comment deadline got extended from July 15 to July 18 (because the Commission’s online filing system was, um, choking a bit on the volume of comments being filed). Since initial commenters got an extra three days, figured the FCC, reply commenters should get the same. And since a three-day extension would plunk the deadline onto a Saturday, everybody gets an extra two days, taking the deadline to the following Monday.

So if you were sweating about getting your reply wrapped up in time, you can totally chill.

And don’t think any replies filed at the very last minute will go unread. One of Chairman Wheeler’s Special Counsels has assured us all that “every comment will be reviewed as part of the official record of this proceeding” – and yes, the boldface italics on “every” are in her original, so she must really mean it.

They’d better get cracking on that review, though. As of August 4 the Commission had received more than 1,100,000 comments in the Open Internet (a/k/a net neutrality) docket. Updating our earlier projection about the time necessary to review incoming comments, let’s run the numbers.

Remember, our working assumption is that one FCC staffmember doing nothing but net neutrality comment review for 52 40-hour weeks per year, and processing one comment every five minutes, can process approximately 25,000 comments in a year. So every additional 100,000 comments add four more years to the project. When we did our last calculation, the comment total was hovering around 1,000,000 – meaning our imaginary staffer would need 40 years to wade through all the comments. With the comment total up to 1,100,000, we’re looking at 44 years now.

And that number is going nowhere but up. With an extra five days to go before the door slams closed on reply comments, we can probably expect another several hundred thousand, minimum, and possibly a lot more than that. Keep your calculators handy.

One in a Million: Coming Clean in the Net Neutrality Proceeding

Open Internet comments have passed the seven-figure mark, but one in particular sticks out.

Update: Word is that the total number of comments filed in the net neutrality proceeding leapt from around 650,000 the day before the original comment deadline, to more than 1,000,000 by the end of the extended comment period.

First, congrats to those of you who guessed right in your office’s over/under on the comment total – but don’t get too cocky. There are still a couple of months’ worth of reply comments yet to show up, so be sure to read the fine print on your internal office pool rules before you claim any prizes.

Second, with the new total, we have to revise the estimates we laid out in our earlier post. At that point, we estimated (based on then-available numbers) that, if 650,000 comments had been filed, one FCC staffmember doing nothing but net neutrality comment review for 52 40-hour weeks per year, and processing one comment every five minutes, would take more than 26 years to complete the job. With 1,000,000+ comments now in hand, let’s re-calculate. Under the conditions we are positing – and now also assuming that the hypothetical staffer would be willing to work beyond the usual retirement age – he or she would require 40 years to complete review of 1,000,000 comments.

And third, we want to highlight one particular submission which arrived in the FCC’s ECFS system on July 16. Filed by one Kurt Schaake (of Lawrence, Kansas), these comments consist, in toto, of a copy of the user instructions for a Whirlpool Dishwasher. True fact – you can find them for yourself by searching ECFS in Docket No. 14-28 (the Open Internet proceeding) or you can just click here to get there more quickly.

We’re frankly at a loss to understand what exactly Mr. Schaake is trying to say with his comments, but it could be a profound commentary about net neutrality. Is it intended to suggest that the FCC needs to come clean in some sense? Possibly the reference to “whirlpool” is meant to summon images straight from Poe’s A Descent into the Maelstrom, the implication being that the Commission is being sucked to the bottom of an unimaginably chaotic vortex from which the only escape is to abandon ship. (There’s a bright side there, though: the narrator in Poe’s story did survive.)

Maybe the message is that the FCC should not try to impose net neutrality regulations – after all, the “important safety instructions” ominously caution “do not tamper with controls”.

Elsewhere, the instructions inform that “[e]fficient dishwashers run longer to save water and energy, just as driving a car slower saves on gas.” Could that be a metaphor for Internet speeds? Apropos of speed, we are also told that “[h]eavier cycles and options affect cycle length” – isn’t that one of the primary complaints about heavy Internet traffic generators, like Netflix? But we are then told that “[y]ou can customize your cycles by pressing the options desired” – does that reflect a preference for a “fast line/slow lane” approach to net neutrality?

Obviously, more study is in order here. We suspect it will take more than five minutes to fully grasp the implications. We invite readers to let us know what you think Mr. Schaake’s comments mean.

[Blogmeister’s Note: Props to the folks at TechDirt.com, which is where we learned of Mr. Schaake’s filing.]

INCOMING! Commission's Net Neutrality Comment Conundrum

As comments pile up in the Open Internet proceeding, straining the FCC’s systems, a post on the Commission’s blog got us thinking about transparency.

On July 14, 2014 – the day before the original deadline for initial comments in the Open Internet (a/k/a Net Neutrality) proceeding – in the spirit of transparency the FCC’s Chief Information Officer took to the Commission’s blog to tout the agency’s ability to track the numbers of comments flooding in over the transom. According to a couple of files linked in his post, the Commission had received nearly 170,000 Net Neutrality comments submitted electronically through ECFS (the FCC's online filing system), and another 442,000 or so by email. Those numbers are a moving target, though, and the target is only moving up: according to a post on ArsTechnica, by 11:00 a.m. on July 15, the tally was up to about 670,000.

It will doubtless go well beyond that, once ECFS comes back to life. The ArsTechnica post indicates that ECFS had crashed; our own observations here in the CommLawBlog bunker lent credence to that report, although the FCC conceded only that the “overwhelming surge” in traffic has “ma[de] it difficult” for some folks to file. As a result, the deadline for filing Net Neutrality comments has been extended to “midnight Friday, July 18”. (BTW – we confirmed with the FCC that they mean 11:59 p.m. (ET) on July 18.)

Keeping track of the influx of comments is presumably useful at some level, and the FCC’s ability to do so – apparently even on an hour-by-hour basis – is to be commended. But that ability is of, at best, secondary interest. When Katrina struck New Orleans, local residents may have been interested in precisely how much water was coming over the levees, whether by the minute or the hour or the day. But they were certainly more interested in how that water, however much water there was, was going to be disposed of.

Which brings us to some back-of-the-hand calculations.

Let’s assume, for round number purposes, that the FCC currently has received 650,000 Net Neutrality comments. (It’s an odds-on mortal lock that the number will soar well beyond that, but we’ll be conservative here.) Let’s also assume that it will take a reasonably diligent FCC staffmember, on average, at least five minutes to review each of those comments, assess the points being made, catalogue them in some manner for later retrieval and analysis, make whatever bureaucratic notations may be necessary or appropriate, etc. Again, we know that some comments – the really short ones, probably written WITH THE CAPS LOCK ON, possibly with  expletives galore for emphasis – may take even less than five minutes to read, but they will still need to be processed somehow, which will take time. And we’re confident that there will be a large number of gazillion-page tomes that will take hours to fully digest. For our purposes here, we’re going to go with five minutes per as a relatively conservative estimate. [Note: If the FCC advises us that they expect to spend less than five minutes per comment, we’ll let you know.]

So, if one comment takes five minutes to process, the staffer should be able to process 12 in an hour. Working a 40-hour week, the staffer could process 480 in a week. Working a 52-week year (no vacations or holidays or sick days, thank you very much – after all, the future of the Internet is at stake here), the staffer should be able to knock out 24,960 in a year. At that rate, the staffer should have completed the initial review of the 650,000 comments in slightly over 26 years. (Feel free to check the math. There’s a reason this particular blogger didn’t pursue a career in the sciences.)

Of course, the work could be spread around, but even if the Commission were to detail 26 staffers to work on nothing but Net Neutrality comment review, it would still take a full year to weed through the comments already on file. (Reality check: The Commission’s urgent efforts to get the spectrum incentive auctions ready to roll by sometime in 2015 are already eating up a bunch of staff time across multiple bureaus, so it’s unclear whether there are 26 folks available to take this on in any event.) And, since the comments are still rolling in, and the reply comment period hasn’t even started, it’s likely that our 650,000 working estimate for total comments will turn out to be low by a long shot.

But let’s just say that some way, somehow, the initial review gets done. Then what? With all due respect, the staff members who perform the digesting and cataloguing of the comments are well down the decision-making food chain. The responsibility for resolving the essential regulatory issues here lies with the five Commissioners themselves. And before they can begin that chore, they will have to familiarize themselves with the record before the agency – i.e., the comments that have poured in. Even the most compact condensation of 650,000 comments should require a boatload of time to sift through.

Might the Commissioners maybe cut some corners and focus only on some comments to the exclusion of others? An inclination to find short cuts would be understandable, given the enormity of the project. But let’s not forget that, in reaching its final decision, the FCC must not only read, but is “obligate[d] . . . to respond to all significant comments” because “the opportunity to comment is meaningless unless the agency responds to significant points raised by the public”. (Those are the D.C. Circuit’s words, as quoted by U.S. Supreme Court Justice Stephen Breyer in 2009, with an added emphasis by us.)  A failure to meet that obligation could lead to reversal on appeal – which could bring us all back to Square One a few years from now.

The Commission is in a dilemma created by the confluence of several factors. The Administrative Procedure Act requires it to invite public comment and then consider the comments filed in response. Lots of people have developed an intense interest in this particular proceeding and have thus been inclined to take the FCC up on its invitation. And the Internet has simplified the mechanics of filing comments to the point that anyone can do it from the comfort of their homes – or from anywhere, on their phones.

The result? An overwhelming record whose size alone could threaten the FCC’s ability to reach a defensible resolution in a reasonable time frame.

While (as we noted at the top of this post) we admire “transparency” about the Commission’s ability to keep track of the numbers of comments arriving at its door, we would probably all be better served if the FCC shared with us instead its plans for dealing with those comments once they’re in the door. How will they be processed, by whom, on what schedule? The transparency of that end of things is far more important to the outcome than the raw hourly numbers of incoming comments. To review the substance of all those comments and confidently identify all the significant ones, and respond to those – not an easy chore when you’re dealing with mere hundreds of comments – is vastly more demanding when you’re dealing with hundreds of thousands. Ideally the Commission has a plan for that. We’d love to know what it is. Wouldn’t you?

Upcoming Webinar: Paul Feldman on Net Neutrality

On the agenda: The implications of the FCC’s Open Internet decision

Few issues in the recent past have attracted as much attention as net neutrality. Everybody’s got something to say about it: industry representatives, public interest advocates, pundits on all sides of the political spectrum, even late night humor shows.

But how many of them have actually read the FCC’s decision and thought through its obvious, and not so obvious, implications?

FHH telecom guru Paul Feldman has, and he’s set to share his thoughts in a FREE webinar on Thursday, June 19, 2015 at 1:00 p.m. (ET).

Join Paul as he analyzes the current state of net neutrality and the prospects for further developments – at the FCC, in the courts, and in the real world.

This is a production of Team Lightbulb. You can register here.

Net Neutrality 2014: The Regulators Strike Back

Trying to meet conflicting demands of court, Congress and constituency, Chairman Wheeler is on the horns of a dilemma.

The FCC’s May, 2014 monthly meeting was not ordinary. Protestors camped outside the Commission’s headquarters and shouted slogans in its meeting room. Democratic Commissioners showed signs of open rebellion against their Chairman. Republican Commissioners stood in blunt opposition to the Chairman. And everyone, including the Chairman, urged fervently that “the future of the Internet” was at stake.

Against this backdrop, Chairman Wheeler announced the FCC’s latest proposal for Open Internet rules. Caught between the demands of his political constituency and legal requirements set by the U.S. Court of Appeals for the D.C. Circuit, he attempted to walk a narrow and difficult path.

And by a 3-2 vote (with two of the three Commissioners in the majority expressing serious reservations), the FCC followed the Chairman on that path: it adopted a Notice of Proposed Rulemaking (NPRM) soliciting comments on the latest approach to “net neutrality” regulation.

Highlights of the NPRM include proposals to:

  • continue the “no-blocking” rule, first adopted in 2010, prohibiting Internet service providers (ISPs)from blocking subscribers’ access to certain content. But that rule would now be supplemented to allow ISPs some opportunity to provide content providers (e.g., Netflix, Amazon) enhanced, higher speed access to subscribers, presumably for a fee;
  • prohibit only “commercially unreasonable” practices in the ways ISPs treat different content on their networks differently. The previous version of this rule flatly prohibited ISPs from “unreasonably discriminating” among content providers;
  • continue to look to Section 706 of the Communications Act for the statutory authority to adopt net neutrality rules. The Commission does, however, ask whether it should instead rely on Title II of the Act to support the reclassification of broadband Internet access service, and possibly ISP service to content providers, as telecommunications services subject to common carriage regulation.

A Brief History of Net Neutrality

Some historical background may be useful before we delve into the NPRM in greater detail.

In 2002, the FCC declared cable broadband ISPs to be free of Title II/common carrier-based regulation; it did the same for telephone broadband ISPs in 2005.

Also in 2005, the FCC adopted an Internet Policy Statement  setting out four “principles” designed to “preserve and promote” an Open Internet.

The 2005 Policy Statement got its first test in 2008, when the Commission found that Comcast had deliberately and maliciously interfered with some customers’ usage of Internet peer-to-peer applications. The FCC claimed that Section 706 of the Act authorized it to take this action. Earlier, however, in 1998, the FCC had expressly held that Section 706 did not constitute an independent grant of authority. Comcast appealed to the D.C. Circuit. In 2010, the court struck down the FCC’s action against Comcast, holding that, having never veered from its 1998 view of Section 706’s limits, the Commission could not without explanation suddenly rely on Section 706 as authority to regulate the management of broadband Internet traffic by ISPs.

In December of 2010, the Commission responded to the court’s Comcast decision by adopting an Open Internet Orderannouncing three basic rules:

  • a transparency rule requiring both fixed and mobile ISPs to “publicly disclose accurate information regarding the network management practices, performance, and commercial terms” of their broadband Internet access services;
  • an anti-blocking requirements barring (a) fixed ISPs from blocking “lawful content, applications, services, or non-harmful devices subject to reasonable network management” and (b) mobile ISPs from blocking access to lawful websites or “applications that compete with the provider’s voice or video telephony services,” subject to “reasonable network management”; and
  • an anti-discrimination rule for fixed providers, barring them, also subject to “reasonable network management, from “unreasonably discriminat[ing] in transmitting lawful network traffic.”

The FCC again relied on Section 706 as the statutory authority for its 2010 Open Internet rules. But this time it acknowledged its earlier contrary view and explained its change of mind: Section 706(a) generally urges the FCC to “encourage” the deployment of advanced (broadband) capability through regulatory or de-regulatory measures to promote competition or remove barriers to investment; and Section 706(b) requires the FCC to take similar regulatory actions concerning the availability of advanced telecommunications if, after appropriate inquiries, it finds that such advanced services are not being deployed in a timely manner. Since the net neutrality rules are supposed to be encouraging broadband deployment and increasing the availability of advanced telecommunications, the FCC reasoned, Section 706 gives it the necessary authority.

Verizon appealed the 2010 Open Internet Order, arguing that Section 706 did not supply the required statutory authority to the FCC.

The good news for the Commission: in its January, 2014 decision the court concurred with the FCC, agreeing that it could find a grant of authority there.

The bad news for the Commission: the Court held that Section 706 does not allow the FCC to impose common carrier-like regulations on entities – such as ISPs – that the FCC had previously declared not to be common carriers. Because the 2010 anti-blocking and anti-discrimination rules effectively treated ISPs like common carriers, the court struck down the rules. (It did allow the transparency rule to stand.)

The court’s bottom line: the FCC must allow ISPs to negotiate with content providers and enter into “commercially reasonable” agreements that could include, by implication, paid prioritization.

What is paid prioritization, you ask? Hard to say for sure, since that hadn’t been an option before the court’s decision and no agreements between ISPs and content providers attempting to achieve such a thing have yet surfaced (if any exist at all). But one could imagine an Internet content provider – like, say, Amazon – agreeing to pay an ISP – Verizon, for instance – to enhance the speed or other technical characteristics of Amazon traffic to Verizon’s subscribers. That could give Amazon an advantage over its competitors, an advantage net neutrality supporters refer to – perhaps pejoratively, perhaps enviously – as a “fast lane.” They argue that Internet traffic not enjoying such “fast lanes” will necessarily be relegated to the “slow lane.” That, in turn (so the argument goes), would degrade consumers’ experience in accessing non-fast lane content providers, thereby competitively disadvantaging content providers unable to pay for the enhancement. 

The NPRM

In the wake of the Verizon decision, Wheeler (who had arrived at the Commission only about ten weeks earlier) had two options: get out of the net neutrality business (as the Republican Commissioners urged) or try again. While most observers expected him to try again, the Verizon court had obviously complicated that option, leaving the Chairman with a dilemma. Yes, the court had said that the FCC could rely on Section 706 to regulate net neutrality but, in doing so, could not treat ISPs like common carriers. Importantly, that meant the FCC would have to let ISPs enter into “commercially reasonable” agreements with content providers, agreements that might include paid prioritization.

When Wheeler suggested (in one blog, then another) that he was open to that approach, the Internet “street” blew up, with even his fellow Democratic Commissioners rebelling publicly. So in the days leading up to the FCC’s vote on the NPRM, he revised his proposal to follow the court’s “road map”, while simultaneously threatening to move the Commission toward a Title II-based common carrier approach that could prohibit paid prioritization.

While reliance on Title II would provide a stronger statutory basis for Open Internet rules, there is considerable resistance to that approach. Reclassifying ISPs as telecommunications carriers could potentially expose them to hundreds of pages of full-blown Title II telecommunications regulation, a prospect that runs against the grain of both Internet history and the free-wheeling Internet ethos. In the view of some (including many ISPs), it would also discourage the investment and innovation in the facilities that drive the Internet. And it would almost certainly trigger massive political and legal resistance from ISPs and Republican members of the House and Senate. Of course, if ISPs were treated as common carriers, they might be relieved of some telecom regulatory burdens through the forbearance process set out in Section 10 of the Communications Act. But forbearance would not provide much regulatory certainty to ISPs, who might fear that a future FCC could un-do any grant of forbearance.

Wheeler’s dilemma can be seen in the NPRM’s discussions of the no-blocking rule and the prohibition on commercially unreasonable practices. 

The No-Blocking Rule  

Even though the court struck down the 2010 version of the no-blocking rule, the NPRM proposes retention of that rule, but with a “clarification”. While “blocking” would be prohibited, ISPs and content providers would still be permitted to bargain for provision of enhanced service (e.g., prioritization) above a minimum level of access to the ISP’s subscribers. This would be consistent with the individualized bargaining approach suggested by the court as an alternative to per se common carriage treatment. And, similarly consistent with the court’s analysis, under the clarified rule the terms of such service would have to be “commercially reasonable”. The evaluation of “commercial reasonableness” would involve multiple factors, including the impact of the practice on competition, consumers, and “speech and civic engagement.” Yet as an alternative, the NPRM seeks comment on whether the FCC should adopt a no-blocking rule that either itself prohibits ISPs from entering into priority agreements with content providers, or acts in combination with a separate rule prohibiting such conduct.

It is surprising that the Commission would propose to adopt a rule identical to one struck down just months earlier. And while the Commission’s proposed “clarification” would allow prioritization agreements, the specific language of the rule as proposed does not include any reference to that “clarification”. Instead, the “clarification” about prioritization is simply a supplemental interpretation outside the text of the rule itself. It is far from clear that this will be sufficient to protect the rule in a court challenge. Notably, future Commissioners could modify the interpretation of the rule, without having to modify the rule itself – and, indeed, Chairman Wheeler has already told Congress that, in his view, paid prioritization would interfere with the Internet’s “virtuous cycle” and, as a result, be “commercially unreasonable”.

Furthermore, if the FCC wished to prohibit any and all prioritization, theVerizon case indicates that it would presumably have to classify ISPs as telecommunications carriers to be regulated under Title II. Yet ISPs such as AT&T have already made a case that Title II does not itself require an absolute bar to disparate treatment of content providers. Rather, it prohibits only “unjust and unreasonable” discrimination or prioritization. That is, Title II allows telecommunications carriers to offer different terms and conditions to different customers (for instance, content providers) as long as those terms and conditions are made available to similarly situated customers. A blanket bar on prioritization would go beyond even the mandate of Title II.

Prohibition on Commercially Unreasonable Practices

The rules struck down in the Verizon case flatly prohibited ISPs from “unreasonably discriminating” in their treatment of different content carried over their networks. The NPRM proposes a new more “flexible” rule prohibiting only “commercially unreasonable” practices resulting in disparate treatment of different content. This would act both as a factor in evaluating violations of the no-blocking rule and, separately, as a supplemental protection in cases where a practice complies with the no-blocking rule but still may be deemed harmful. While the NPRM seeks comments on factors to be used in evaluating the commercial reasonableness of a prioritization practice (impact on competition and consumers, consistency with industry practice), it also seeks comments on whether prioritization agreements should be flatly banned under this rule. The NPRM concedes that such a ban would require regulating ISPs under Title II – illustrating that the “commercially unreasonable” provision is subject to essentially the same conundrum as the proposed no-blocking rule.

The Transparency Rule

In addition to the proposed rules regarding no-blocking and unreasonable commercial practices, the Commission is proposing to enhance the transparency rule that the Verizon court upheld. That rule currently requires ISPs to:

publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding the use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.

The NPRM would expand that to require disclosure of specific data regarding transmission speed, latency and packet loss. This is apparently in response to a common consumer complaint that some ISP-advertised speeds seem faster than the speeds actually delivered. The NPRM also asks whether there is additional information that ISPs should have to disclose both to content providers and to the carriers between the content provider and the ISP.

To enforce the new rules, the FCC is considering a requirement that ISPs annually certify compliance. In addition, the Commission asks whether it should create an FCC “ombudsperson” to whom complaints (from consumers and “Internet entrepreneurs”, including mainly small start-ups and edge providers) could be addressed and who could, where warranted, “investigate and represent [the complainants’] case.”

  

The FCC’s meeting, and the NPRM and accompanying statements that emerged from that meeting, reflect deep divisions within the Commission and, indeed, across the public. The only point everyone seemed to agree on: the hyperbolic rhetoric that what’s at stake in this Open Internet proceeding is nothing less than “the future of the Internet.” Historically, the Internet has managed to survive and thrive despite similar overwrought claims, and it’s doubtful – at least to this blogger – that the fate of the Internet hangs on this decision. Of course, new FCC rules will have real consequences, but unquestionably, emotions and political rhetoric have been elevated to an extraordinary level in this proceeding. We expect more of the same as it progresses.

Comments in response to the NPRM are due no later than July 15, 2014; reply comments are due by September 15. Comments may be uploaded to the FCC’s ECFS filing website; use Proceeding No. 14-28. Please contact us if you have any questions or are considering participating in this proceeding.

 

FCC Requests Ideas for New Net Neutrality Effort

Effort follows recent loss in court.

You have to feel sorry for the FCC, trying to write net neutrality rules despite a court order that pretty much rules out “neutrality.”

A month after the D.C. Circuit rejected the FCC’s approach to net neutrality, the FCC has announced it will not appeal that decision. While three of the commissioners remain determined to craft some type of net neutrality constraints, the FCC has put out a curious announcement that sheds no light on what, if any, alternatives it may have in mind to address a problem the court just made a lot more difficult.

The sad part, though, is that the FCC’s dilemma is entirely self-imposed.

Back in the dial-up days, the FCC distinguished between transporting Internet content and providing that content. It regulated the transport component of Internet service as common carriage, while leaving the provision and processing of content unregulated.

With the advent of broadband, the FCC made a key change. It decided to treat the transport and provision components together as a single service, and deregulated all of it. Those rulings relinquished its common carrier authority over the transport component, a step that led directly to the D.C. Circuit’s striking down the FCC’s net neutrality rules.

To be sure, the court agreed with the FCC that Section 706 of the Communications Act, while on its face merely telling the FCC to “encourage” broadband deployment, nonetheless provides “affirmative authority” to impose “rules governing broadband providers’ treatment of Internet traffic.” But the court balked at the non-discrimination provisions the FCC had written into its rules. Non-discrimination, said the court, is a hallmark of common carrier regulation. The FCC cannot impose such rules on companies it has specifically declared not to be common carriers.

The FCC said it will not appeal this ruling; instead it will try to craft new net neutrality rules that comport with the court’s decision. To do that, it will have to find language that imposes a non-discrimination requirement on Internet service providers (ISPs) while still avoiding the non-discrimination wording that characterizes common carrier rules. Since the potential discrimination by ISPs that concerns the FCC is almost the same behavior as is barred to common carriers, we don’t see how the FCC expects to pull off this linguistic feat.

The two Republicans on the five-member Commission are opposed to the rewrite attempt, preferring to leave the broadband ISPs unregulated.

The FCC has another option: it can “reclassify” the transport component broadband of ISP service as common carriage. The legal obstacles are probably surmountable, but the political barriers may be higher. Successive FCC chairmen have ruled out the possibility – although the current Chairman Wheeler recently backed off somewhat from this commitment, reminding us that the Commission still has the authority to reclassify Internet service if warranted. Yet that authority comes from Congress, where some have warned that they will step in to overrule the FCC if it tries to reclassify. We expect the anti-reclassification forces will have support from the telephone and cable companies who serve most of the country’s broadband Internet users and who prompted deregulation in the first place.

Having stared at this problem for several years, the FCC is surely familiar with its available options. It is thus noteworthy that the FCC declined to suggest a preferred course (through the issuance of a Notice of Proposed Rulemaking) or even to lay out the known options (through a Notice of Inquiry). Rather, it has essentially shrugged in bewildered puzzlement and opened up the call-in lines to anybody anywhere who might have some thoughts, any thoughts, on the matter. After briefly summarizing the history of net neutrality to date, the FCC announces:

[W]e establish a new docket in which to consider the court’s decision and what actions the Commission should take, consistent with our authority under section 706 and all other available sources of Commission authority, in light of the court’s decision.

We welcome comments from interested parties.

This total lack of direction might suggest that the FCC is adrift in a rudderless boat with no compass and only the D.C. Circuit’s decision as a very rough map. Or possibly the very smart people who work there have something up their sleeve they are not ready to disclose.

You can make the reclassification dispute unnecessary and help guide the FCC to safer waters by telling it how to write network neutrality rules that accord with the recent court decision. Read the public notice; then browse to this link and enter your suggestions in Proceeding Number 14-28. Comments submitted by March 21, 2014 will be especially helpful, says the FCC. Please be polite.

In the Wake of Verizon v. FCC: How the FCC Can Achieve Net Neutrality and Save the Internet

The FCC should do the right thing and fix its old mistake that led to the present situation.

[Blogmeister’s Note: This is an op-ed piece, emphasis on the “op”, or “opinion”, element. It reflects Mitchell’s personal assessment of net neutrality following the D.C. Circuit’s recent decision. The views expressed are the author’s; they do not represent the editorial views of CommLawBlog or Fletcher Heald & Hildreth. They do not necessarily represent the views of any of our clients, and they certainly differ from those of some of Mitchell’s colleagues. We welcome debate here, so readers who disagree with Mitchell’s take on the situation are encouraged to post comments to it.]

We all know the U.S. Court of Appeals for the D.C. Circuit has struck down the FCC’s key effort to craft “net neutrality” rules. See the court’s opinion here, and Paul Feldman’s explanatory piece here.

The invalidated rules would have required fixed broadband Internet service providers (ISPs) to treat content providers even-handedly. A cable TV company, in its role as Internet provider, could not intentionally slow Netflix while putting through its own video downloads at full speed. Nor could an ISP accept fees from a retail site in exchange for favoring that company’s traffic over that of rival retail sites.

Now, after the court’s action, such discriminatory activities are probably legal. 

Many conservatives, along with the FCC’s two Republican commissioners, are delighted. Many believe Internet companies should be subject to regulation only by the free market and not by the FCC.

But the free market requires a market. There is not much of one for ISP service.

Most consumers have little choice among broadband providers. Most neighborhoods have at most two options: telephone (or FIOS) and cable. The complications of switching from one to the other are huge and often prohibitive. Mobile 4G service is a poor substitute, due to data caps. Fixed wireless ISP service is limited mostly to rural areas. Satellite service is slow and expensive. Costs of entry for would-be new providers are high; no new competition is coming any time soon.

The service in many places is not even very good. The free market has given Americans some of the slowest and most expensive broadband anywhere in the developed world. The lack of alternatives keeps customers locked in. If an ISP throttles back a customer’s preferred content, there is not much the customer can do.

It is not just the customer who suffers. If Facebook and Amazon pay the ISPs large amounts of cash for priority access, then the next Facebook and the next Amazon start off at a huge disadvantage. The Internet remade society by giving anyone with a good idea an equal chance to reach the rest of us. The court decision now invites large, established companies to use their cash to shoulder aside new competition by muscling their way to a permanent position at the front of the line – and, of course, to pass on the extra costs to their captive customers.

The FCC sees the problem, but it has limited options. It can accept the court decision. It can appeal the decision, but without much chance of success; the court did a good job of buttressing its positions. It can try another set of net neutrality rules, but has no obvious path that avoids similar court challenges.

Or the FCC can do the right thing and fix its old mistake that led to the present situation.

To see how that works, we need a bit of history. Get comfortable.

Since the 1970s – long before the Internet – the FCC has distinguished between the transport of content and the provision of content. Today we call these functions “telecommunications service” and “information service,” respectively. For 30 years, the FCC regulated data transport as a common carrier service, in the same category as traditional voice telephone. Yet it completely forbore from regulating information service: hands off the content itself. The early Internet arose and thrived under these principles.

Importantly to the present discussion, the FCC’s Computer III regime, starting in the late 1980s, required large phone companies that provided dial-up ISP service – all of them did – to lease capacity on their lines and equipment to competing ISPs. The result: thousands of ISPs, large and small, working hard to please their customers and attract other ISPs’ customers. A dissatisfied user could switch ISPs in minutes, with just a phone call. In those days, an ISP that threatened to impair content would not stay in business for long.

Then broadband arrived, and with it, the FCC’s big mistake. A 2002 order declared all components of cable broadband Internet service – transport as well as content provision – to be an information service, and thus free from regulation. That meant a cable company ISP did not have to accommodate other ISPs on its wires. Having gone that far, the FCC had little choice but to level the playing field by extending the same treatment to the telephone company ISPs. That is why, if you have broadband Internet service, your ISP is probably Comcast or Verizon, or their equivalents in your area. That is why, if you are unhappy with the service, you don’t have a lot of other ISP options.

The FCC made these rulings at the request of the cable and telephone companies. If we have to share our broadband facilities, the companies said, we won’t have the incentive to build them, so the nation will have to go without broadband. Some other countries see Internet access as a vital public resource, like highways and airports, and fund it accordingly. But not the United States. The FCC took the cable and telephone companies at their word, and gave them what amounts to an unregulated duopoly. Now the court has said the companies can exploit their privileged position.

The fix is simple, in principle, although hard to pull off. Long-time readers – both of you – may have seen this proposal before. Now the court decision has made it urgent.

First – this is the hard part – the FCC has to reverse the 2002 and 2005 decisions. It must declare that broadband data transport (but not content) is once again a common carrier service. This is “reclassification,” in Washington-speak. The broadband ISPs would object, to put it mildly. Those in Congress who favor a free market in principle, even where there is none in practice, would likewise object. So, probably, would the two Republican commissioners. If it can take the political heat, though, the FCC is legally free to change its mind. It can especially do so here, where broadband transport arguably falls into the definition of a common carrier telecommunications service. True, the Supreme Court upheld the FCC decision that made cable transport an information service. But it really just upheld the FCC’s discretion to make the call, so a contrary decision would likely receive the same green light.

But wait: how would regulating transport address the problem of net neutrality, which relates solely to content?

The FCC would exercise its newly reclaimed right to regulate broadband data transport in only one narrow respect: it would impose Computer III type rules as to broadband. Comcast, Verizon et al. would have to lease capacity on their wires to competing ISPs. They could charge lease rates that fairly reflect the costs of building out and maintaining the facilities, plus a reasonable profit. But they would no longer be the sole ISPs in the neighborhoods they serve.

Then, suddenly, there really would be a functioning market for ISP service. A customer who did not like having particular content impaired – or could not get through on the phone, or had any other complaint about the service – could easily switch to a different ISP, without having to change the physical connection to his home. The facilities-based providers, like Comcast and Verizon, would be steered by competition, rather than regulation. Those that did not offer unimpaired access to content would lose business to other ISPs.

The result would be real net neutrality, without any rules to require it.

As a side benefit, consumers could sign up with specialized ISPs that provide only family-friendly content, or offer support for older people, or shut off at 11 p.m. on school nights – pretty much anything having enough demand. Yet all decisions on content would ultimately rest with the customer, not with one or two ISPs.

Will the FCC actually do this? Probably not. Reclassification is such a political third rail that successive FCC chairmen have assured Congress it is off the table. But the court has now closed off every other realistic route toward net neutrality. The FCC can either straighten up and take on a hostile Congress, or it can stand back and watch the Internet devolve into the profit-making tool of a few powerful companies. This blogger just doesn’t see a third alternative.

Net Neutrality 2014: D.C. Circuit Tosses Most of the FCC's "Open Internet" Rules

Court affirms FCC’s authority to engage in some Internet regulation, but FCC faces complex choices on next moves.

 In the war over how, if at all, the Internet will be regulated, a major battle has been decided. Both sides can claim victory to some degree, but no knockout punch was landed: the war wages on. 

The U.S. Court of Appeals for the District of Columbia has struck down the core “anti-blocking” and “anti-discrimination” elements of the FCC’s Open Internet rules. At the same time, the Court agreed with a crucial aspect of the FCC’s strategy: the Court held that the FCC does have the authority to regulate Internet traffic management under Section 706 of the Communications Act. While that affords the Commission at least a ray of hope going forward, how the FCC might utilize that authority remains to be seen.

The FCC now has some choices to make as it contemplates its next step. In the meantime, broadband Internet Service Providers (ISPs) will be able to experiment with new traffic management techniques and business models.

In late 2010 the FCC adopted its “Open Internet” rules. The Commission was concerned that Internet service providers (ISPs) could, in the position of “gatekeepers” controlling access to the Internet, unfairly bar some Internet content providers (edge providers) or at least disadvantage some edge providers relative to others. Accordingly, to assure a level Internet-access playing field, the FCC stepped in, adopting three primary measures:

  • A prohibition against blocking of content, applications, services, or non-harmful devices, applied to both fixed and mobile ISPs (the “Anti-Blocking Rule”);
  • A prohibition against “unreasonable discrimination” among lawful network traffic, applied to fixed ISPs only (the “Anti-Discrimination Rule”); and
  • Mandatory requirements for ISPs to disclose transmission performance and  traffic management practices to end users, applicable to both fixed and mobile providers (the ”Transparency Rule”).

“Fixed” ISPs here include telephone, cable, and fiber wireline providers, and also satellite and wireless ISP service to particular premises.

ISPs would still be permitted to undertake “reasonable management” of traffic on their networks to remedy congestion or prevent spamming. However, the FCC made clear that anti-competitive behavior would likely be deemed unreasonable under any circumstances. Such behavior could involve, for instance, offering to let an edge provider pay the ISP to prioritize delivery of its content to end users, or hindering services that compete with some other part of the ISP’s business.

For a more detailed discussion of what the FCC did in 2010, read our post here.

The Commission asserted that Section 706 of the Communications Act (47 U.S.C. §1302) authorizes it to regulate along these lines. Unfortunately for the FCC, its previous claim that Section 706 gave it that authority had run aground in the same court.

In 2008, reacting to attempts by Comcast to limit consumer use of peer-to-peer transmissions, the Commission declared such activities contrary to federal policy. The FCC said Section 706 gave it the authority to take that step. In its 2010 decision in Comcast Corp. v. FCC, however, the D.C. Circuit disagreed, holding that the FCC failed to demonstrate that it had the statutory authority to regulate Internet network management practices.

Several months later, in response to the Comcast decision, the FCC issued its Open Internet rules, relying on a revised rationale regarding its statutory authority under Section 706 of the Communications Act. That FCC action was the subject of the Court’s most recent decision. 

As it had in its 2008 Comcast ruling, the FCC relied heavily on Section 706 as the jurisdictional basis for its Open Internet rules. Section 706(a) generally urges the FCC to “encourage” the deployment of “advanced telecommunications capability” (i.e., broadband capability) by using various regulatory or de-regulatory measures to promote competition or remove barriers to infrastructure investment. Section 706(b) requires the FCC to conduct inquiries concerning the availability of advanced telecommunications; if it finds that service is not being deployed in a timely manner, it must “take immediate action” to accelerate deployment by removing barriers to infrastructure investment and promoting competition in the telecommunications market.

In the Open Internet Order, the FCC found that broadband Internet was not being deployed in a sufficiently timely manner, and that enactment of Open Internet rules would promote competition and accelerate deployment through 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.” 

Challenging the Open Internet rules, Verizon argued that Section 706 was merely a statement of policy, not a substantive grant of authority to enact rules. Indeed, the FCC had asserted that same position back in 1998, a fact that came back to haunt it in the Comcast case: observing that the Commission had not even questioned, let alone overruled, its 1998 interpretation of Section 706, the Comcast Court held that Section 706 as interpreted by the FCC did not give the agency the authority to regulate Comcast’s behavior.

Having lost the Comcast decision on the basis of its earlier reading of Section 706, the Commission took another look at the statute in its 2010 Order, and lo and behold, concluded that Section 706 in fact did grant substantive authority to the FCC! And this time around, under established case precedent directing courts to defer to an agency’s reasonable interpretation of an ambiguous statute, the Court concurred: the Commission could change its mind, turn its back on its 1998 interpretation of Section 706, and now find that that section does indeed constitute a grant of authority to impose some Internet regulation.

The Court warned, however, that that the FCC’s authority is limited. First, the Commission may regulate only the “wire” and “radio” aspects of Internet communications, not the content of Internet transmissions. In addition, any FCC regulation of the Internet must have the sole purpose of encouraging reasonable and timely deployment of “advanced telecommunications services” (i.e., broadband). Nevertheless, the Court found that the FCC’s “virtuous circle” theory supported the use of Section 706 authority to enact some sort of Internet traffic management rules.

So far, so good for the FCC, right?  

Not so fast.

While the new interpretation of Section 706 generally authorizes the FCC to enact some rules, it does not permit the Commission to enact rules that contravene other provisions of the Communications Act. Section 153(51) of the Act states that “providers of telecommunications services” may be treated as common carriers only to the extent that they are providing telecommunications services. But the Court found that the Anti-Blocking and Anti-Discrimination Rules treated Internet service like common carriage. This is a major problem for the FCC because a decade earlier the Commission changed the classification of broadband Internet service, labeling it an unregulated “information service” and not a common carrier telecommunications service. And if broadband Internet service is not a common carrier telecommunications service, the Act says that it cannot be subjected to common carrier regulation – including the Anti-Blocking and Anti-Discrimination Rules.

Whoops.

The FCC tried to argue that its Open Internet rules did not impose common carrier obligations, but the Court wasn’t buying it. Rather, the Court held that the Anti-Blocking and Anti-Discrimination Rules are barred by the Act. (Generously, the Court found that the Transparency Rule could be “severed” from the other Open Internet rules and, because that rule does not regulate ISPs like common carriers, it can stand.)

So where does the FCC go from here?

Chairman Wheeler now has a chance to establish his own legacy on Net Neutrality. His comments on Net Neutrality have been ambiguous: he has expressed willingness to allow some level of pricing experimentation by ISPs, but in response to the recent court decision he stated that he is considering a court appeal of the Circuit’s order.  

Taking the Open Internet litigation to the next level – either by a petition for rehearing (whether to the three-judge panel or to the D.C. Circuit en banc) or by a petition for certiorari to the Supreme Court – presents risks. While the FCC might hope for a ruling that its Anti-Blocking and Anti-Discrimination Rules do not amount to common carrier regulations, such a result does not appear likely. And, by seeking review of the Circuit’s decision, the FCC would risk a reversal of the valuable holding that Section 706 gives the FCC some degree of substantive regulatory authority. (That is a non-frivolous risk: Judge Silberman, dissenting in part from the Circuit’s decision, opined that the FCC had not made a sufficient case for substantive Section 706 authority.)

From a practical perspective, the appeal process is not a quick one. An appeal would prolong the uncertain status of the Open Internet rules, contrary to the FCC’s years-long effort to resolve that status. 

A more attractive option for the FCC might be to try to craft new Open Internet rules.   The Circuit has now given the FCC some clues as to how that might be done. For example, a more robust opportunity for ISPs to engage in “reasonable network management” might reduce the common carrier like impact of the Anti-Discrimination Rule. The Anti-Blocking rule might be more difficult to preserve in any form. The Court did suggest that a rule requiring ISPs to provide a certain minimal level of service to all edge providers, while allowing individual bargaining to charge others for a higher level of service, might pass muster. That, however, would require elimination (or at least substantial modification) of the Anti-Discrimination Rule.

A simpler alternative for the FCC could be to re-classify broadband Internet service as common carriage. However, any such attempt would trigger aggressive opposition from ISPs, from many members of Congress, and from Commissioners Pai and O’Rielly, both of whom urged their colleagues to accept the Circuit’s decision and get out of the Net Neutrality business.   

In the meantime, what can we expect from ISPs?  

At least for now, the Anti-Discrimination and Anti-Blocking rules have been vacated by the Court and, in effect, no longer exist (except for Comcast, which committed to follow those rules though 2018 as a condition of approval of its merger with NBC). As a result, most ISPs are free to begin experimenting with “two-sided” business models in which ISPs might boldly begin offering paid prioritization to edge providers. (One possible model: AT&T Wireless’s recently announced plan by which edge providers can sponsor free data downloads to end users.) The market may well reveal whether such prioritizations have a pro- or anti-competitive effect, or both.  

But moderation would be a wise approach in any new traffic management or business models, and statements from the major ISPs reflect their understanding of that. Seemingly abusive or blatantly anti-competitive practices could trigger negative reactions from consumers, who have strong feelings about their Internet service. Similarly, such practices could trigger enforcement actions from the Department of Justice (perhaps invoking the anti-trust laws) or the Federal Trade Commission (acting to end unfair or deceptive trade practices) or state regulators. 

The Net Neutrality war continues, and we here at CommlawBlog will keep you informed of its progress.

Net Neutrality 2013: The D.C. Circuit Hears the Arguments

Three-judge panel grills opposing counsel for two hours, seems to signal doubts about FCC’s Open Internet rules.

It’s been almost two years since net neutrality was the Big Issue here – and now it’s back! On September 9 the U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments in Verizon’s appeal of the FCC’s effort, dating back to late 2010, to impose “open Internet” rules on broadband providers. The importance of the argument could be seen from the turn-out at the court: it was SRO in the D.C. Circuit’s main courtroom, forcing the marshals to herd the overflow into a separate courtroom where they piped in the audio of the argument.

As we have repeatedly cautioned, trying to guess the result in a case based on oral argument is an iffy proposition. Judges are adept at keeping their cards close to their robes. But still and all, it sure sounded to us like the Commission’s net neutrality effort – or at least much of it – is skating on very thin ice. In particular, at least two of the three judges on the panel (Judges David Tatel and Laurence Silberman) seemed especially “dubious” – to use a term that popped up during the argument – of the anti-discrimination component of the Open Internet rules. And whether the remaining anti-blocking provision could survive in the absence of its companion anti-discrimination provision was far from clear (although at one point Judge David Tatel seemed to suggest that there might be some way to preserve the former without the latter). Judge Silberman, on the other hand, seemed convinced that the anti-blocking provision is also a goner.  (The third judge -- Judge Judith Rogers -- asked significantly fewer questions than her confreres.)

With respect to Verizon’s argument concerning the FCC’s lack of clear statutory authority for its Net Neutrality rules, Judge Silberman jokingly suggested that the Commission’s authority derives from “emanations from a penumbra” of some statutory language – which seemed to some observers, at least, to indicate that he may be more than a little sympathetic to Verizon on this point as well.  Tatel, on the other hand, seemed at times to suggest that he could see some statutory basis for the FCC.

In our post about the recent Ninth Circuit argument about Aereokiller, we observed that, in that argument, at least, the Ninth Circuit wasn’t particularly chatty. That was not a problem in the net neutrality argument. Although each side was originally allotted a total of 20 minutes of argument time, the whole affair ended up taking two hours – much of it because of extensive probing by the judges. But don’t take our word for that – listen yourself. As it turns out, effective September 9, the D.C. Circuit is now posting recordings of oral arguments on its website! Here is a link to the argument in the Verizon net neutrality appeal. Grab some popcorn and a drink and prepare to be entertained for 120 minutes.

Conventionally the D.C. Circuit takes at least a couple of months to prepare its opinions following oral argument. Because of the complexities of the net neutrality case, it may take the court longer to crank out its decision. You never know. Check back here for updates.

Court Upholds FCC Role as Data Roamin' Umpire

But the opinion may indirectly threaten survival of the FCC’s “network neutrality” rule

The FCC can require mobile data providers to offer roaming arrangements, says the U.S. Court of Appeals for the D.C. Circuit. But in so ruling (in a case titled Cellco Partnership v. FCC), the court may have threatened survival of the FCC’s network neutrality rules. We’ll come back to that.

“Roaming” arrangements make it possible to use your cell phone outside your own provider’s service area. We take it for granted that a cell phone will work anywhere in the country, and usually it does. If your own provider has a tower in the vicinity, it will take the call. Otherwise, one of the local cell companies will handle the call and send the bill to your provider, which (of course) will pass the bill on you.

As to voice calls, the FCC has required roaming capabilities since the dawn of the cell phone era. No one questions its authority over voice-call roaming. But the FCC’s jurisdiction over roaming for mobile data usage – such as email, Facebook, and web browsing on smartphones and tablets – has been a matter of debate, at least until this court ruling.

Why the difference? After all, voice calls are transmitted in digital form. The technologies for handling voice and data are very similar. Why would anyone think the regulatory schemes might be different?

The answer: common carriage.

“Common carriage” is a legal concept that’s been around for several centuries. It initially applied to services that involved physically transporting, or carrying, goods or people from one place to another; hence the concept of “carriage.” Think shipping or railroads or pipelines. A company designated as a “common carrier” had to make its transportation-related facilities available to any and all customers subject to standard rates and terms, which in turn were subject to considerable government regulation and oversight. This prevented the carrier from unfairly discriminating in favor of its friends and affiliates, and against its enemies.

In the 1930s, when telephone service was becoming essential to commerce, Congress required the FCC to regulate the phone companies as common carriers.  It was not a perfect match, since telephone companies don’t actually carry anything (or anybody) from Point A to Point B, but it was close enough. Those companies did, after all, cause communications to be delivered to remote destinations, so some kind of “carriage” was arguably at work; and besides, there was precedent in the common carrier regulation of telegraph companies. Consistent with traditional common carrier notions, Congress specified that telephone rates must be “just and reasonable”; it prohibited “unjust or unreasonable discrimination” among prospective customers; and so on. For the next 40 years, under Congress’s watchful eye, the FCC kept tight control over every aspect of phone service.

Fast forward several decades to the 1980s, to the time of the first cell phones. Those handled only voice calls, using analog technology similar in some ways to conventional landlines, and they connected through the same switches as landline calls. It seemed natural for the FCC to impose the same core common carrier obligations on cell providers – half of whom, at the outset, were the incumbent wireline phone companies. Requiring cell providers to make roaming arrangements came well within the FCC’s common carrier authority, and was not that different from the long-standing requirement that local landline and long-distance phone companies interconnect with each other.

In the meantime, those same landline companies had begun carrying data over conventional phone lines. The FCC, in a prescient 1976 order, continued to regulate the transmission of 1s and 0s in data calls as common carriage, but it left unregulated the processing of those 1s and 0s. In classic common carrier terms, a phone company in the act of simply transmitting, or carrying, a customer’s message from one point to another was behaving as a carrier. But when the company also involved itself with the content by engaging in some form of processing, then the company was acting outside its role as a common carrier and those activities were not to be subjected to the stringencies of common carrier regulation. So reasoned the FCC.

The dial-up Internet emerged a few years later into this preexisting environment. The result was a completely unregulated Internet running over fully regulated phone lines. The explosive growth of the Internet, during the dial-up years, is good evidence the FCC’s 1976 decision got it right.

But the FCC walked away from that decision soon after the advent of broadband Internet service, which initially reached consumers over both cable systems and phone lines. Cable systems had never been common carriers; the FCC ruled their provision of broadband Internet service did not change that status. To help even up the competition, it likewise ruled that a telephone company providing broadband Internet service was not functioning as a common carrier, even as to the transmission component.

Then smartphones arrived. Suddenly cell phone carriers were offering broadband Internet access along with voice service. The voice and Internet content came over the same handheld device, were covered by the same contract, and were paid for with the same monthly check. As far as consumers can tell, they are accessing a single, indivisible service that combines voice and data. 

But from the perspectives of the FCC and the cell phone carrier, that service consists of two separate and distinct elements, each subject to its own separate and distinct regulations. The voice component remains common carriage. The Internet-based services, by contrast, are not common carriage, and until recently, had not been subject to any significant regulation . . . not until last year, when the FCC, on a 3-2 vote, adopted a rule that requires mobile data providers to enter into roaming agreements on “commercially reasonable terms and conditions.” 

But wait – that sounds like common carrier talk, which mandates “just and reasonable” conduct. Verizon (under its corporate name, “Cellco Partnership”) hastened to court, seeking to have the roaming obligation for mobile data overturned.   Verizon argued that the FCC has no authority to treat mobile data providers as common carriers – a point the FCC conceded. And since the new regulation of mobile data looks for all the world like common carrier regulation, Verizon argued, that regulation could not survive.

The court disagreed.

While acknowledging that the FCC cannot treat mobile data providers as common carriers, the court observed that the FCC has additional and very broad powers, beyond its authority over common carriers – namely, to regulate the use of radio. Mobile data services, by definition, use radio spectrum. So the FCC can regulate mobile data providers, even if they are not also common carriers. And the court accepted the FCC’s claims that its data roaming rules fall short of common carrier regulation. The court pointed out, for example, that common carriers are held to “just and reasonable” conduct, while mobile data providers are subject only to “commercially reasonable” obligations. Sure, those terms have a similar ring, but according to the FCC, the latter gives mobile data providers “more freedom” than the former affords to common carriers.

Verizon objected, arguing that the FCC’s claims of greater permissiveness are just so much bureaucratic mumbo-jumbo (or, in the words of Helgi Walker, Verizon’s counsel, “smoke and mirrors” – well played, Ms. Walker!).  According to Verizon, regardless of how much lipstick the FCC might apply to the pig, the net result is the same: the FCC is treating mobile data providers as common carriers, which it cannot do.

This argument gave the court some difficulty; it agreed the roaming rule “plainly bears some marks of common carriage.” But in the court’s view, non-common carriers may be subject to some regulations characteristic of common carriers without thereby actually becoming common carriers. There is a “gray area,” said the court, in which similar regulatory obligations may be imposed on both common carriers and non-common carriers alike. Within that gray area, the FCC’s position – that, despite common carrier-like characteristics, the data roaming rule does not itself constitute common carriage regulation – was entitled to deference.

This may not be the last word, though. Verizon opted to mount a “facial” challenge to the rule; that is, it attacked the rule “on its face” rather than as specifically applied to Verizon. The court deliberately left the door wide open for Verizon to come back in the event that the FCC, in implementing the rule, treats Verizon as a common carrier. And the court wagged its judicial finger at the FCC, cautioning the agency to make sure the supposed non-common carrier aspects “carved out in the rule’s text remain[ ] carved out in fact.”

In other words, the FCC must implement the roaming rule without crossing the line into common carrier regulation. But thanks to this opinion, the precise location of that line is harder to find than ever.

Postscript: The day after the court’s opinion was released, the same court suspended briefing in a different case, one challenging the FCC’s network neutrality rules. The court did not say why. Very possibly, though, it will ask the lawyers to rethink their arguments in the net neutrality case in light of the Verizon decision. If the net neutrality rules amount to common carrier regulation, then the Verizon case may be a fatal blow. The FCC’s authority over radio is no help to the agency in defending the net neutrality rules, as those rules apply with full force only to non-mobile providers. It remains to be seen whether the FCC can demonstrate some basis, other than radio or common carriage, for asserting jurisdiction adequate to satisfy the court.

Net Neutrality Update: The D.C. Circuit Goes Through the Motions

Court resists FCC efforts to delay judicial review.

It’s been several months since that Hot Topic Of All Hot Topics, net neutrality, graced our space here. When last we reported on the subject, the net neutrality order had finally made it into the Federal Register, a number of parties had sought judicial review in a number of federal courts of appeals, the D.C. Circuit had been picked as the lucky court that will hear arguments on the matter, and a lone petition for reconsideration of the order had been filed with the Commission.

Then things got quiet.

It turns out that, despite the silence, things have been happening down at the D.C. Circuit. Earlier this month the court acted on a couple of FCC motions. While the court’s order consists of a whopping three sentences, it at least provides some tea leaves for us to study while we wait for further developments.

At issue were (a) the FCC motion to dismiss Verizon’s “notice of appeal” and (b) an FCC motion to have the court hold the case in abeyance while the Commission addresses the one petition for reconsideration of the net neutrality decision that was filed with the agency. [Spoiler alert: the court denies the abeyance request, but leaves the motion to dismiss in limbo.]

You can find the background on the Verizon notice of appeal in this series of posts from last year. As we indicated back then, Verizon filed both a “notice of appeal” (pursuant to Section 402(b) of the Communications Act) and a “petition for review” (pursuant to Section 402(a)) in an apparent effort to boost the chances that the D.C. Circuit would be the U.S. Court of Appeals to decide the fate of net neutrality. The Commission moved to dismiss the former almost immediately, presumably in the hope that, if the Verizon appeal were dismissed, the case might ultimately land in some other circuit.

Before Verizon even got a chance to oppose the FCC’s motion last fall, the Joint Panel on Multidistrict Litigation (JPML) had selected the D.C. Circuit to hear the case, so the Commission’s motion was moot.

Or maybe not.

Once the D.C. Circuit had jurisdiction of the case (that is, after the JPML had pulled the D.C. Circuit’s ping pong ball out of the official drum), we expected (a) the FCC to withdraw its motion and/or (b) Verizon to withdraw its “notice of appeal”. Neither of those things happened. 

Instead, Verizon filed an opposition to the FCC’s motion to dismiss, and the FCC replied. In its reply the FCC acknowledged that the jurisdictional issue the two parties were bickering over “will have little practical effect” on the case. Nevertheless, both sides pressed the Court for resolution of an issue that both seemed to agree was no longer important.

Which brings us to the court’s recent order. Rather than toss the Commission’s motion to dismiss as moot, the court has referred that motion to the panel of judges who will be assigned to hear the case. Most importantly, the court has directed the FCC and Verizon “to address in their briefs the issues presented” in the motion to dismiss; the parties are specifically ordered not simply to incorporate their previous arguments by reference.

Our guess is that, by taking incorporation by reference off the table, the court is calling the FCC’s bluff. If the FCC really still thinks that it’s important for the court to address the jurisdictional arguments presented in the motion to dismiss, then the FCC is going to have to dedicate precious space in its brief to those arguments. 

Contrary to what some readers may think, appellate briefs are subject to tight length limitations. Cases involving major league issues (like net neutrality) can easily require all the permitted space (probably with considerable squeezing to meet the court-imposed limits). Under such circumstances, a party would normally be reluctant to chew up valuable space tilting at unnecessary windmills. So it will be interesting to see if, in its brief, the Commission chooses to pursue the question of whether Verizon’s notice of appeal should have been dismissed. (Our guess is that the issue will be dropped by all concerned.)

And the FCC’s motion to hold the case in abeyance? The court denied the motion without discussion. The Commission had argued that, because the one and only petition for reconsideration of the net neutrality order is still pending, the whole proceeding is still technically in flux, and the court might want to hold off on wading into it until the FCC has acted on the pending recon.

That’s a classic argument, one the Commission has presented, successfully, many times before. And it often makes sense. Why, after all, should the court start to review an order which is still subject to change? No point in trying to hit a moving target.

But here, the single petition for reconsideration involves a very limited aspect of the overall net neutrality decision. (It seeks clarification of the “special services” aspect of the order.) By contrast, Verizon is challenging the most fundamental aspects of the decision, including particularly whether the FCC has the necessary authority to engage in net neutrality regulation. 

In its opposition to the Commission’s abeyance motion, Verizon argued that, given the limited nature of the matters still before the Commission, resolution of the petition for reconsideration will not affect the core issue already before the court. In other words, the real target of Verizon’s challenge will not be moving around at all.

If the court had any reluctance at all about diving into the net neutrality morass sooner rather than later, it could have granted the Commission’s motion. That would likely have delayed the judicial review process for months at least, maybe years. But the court declined that opportunity. Court to parties: bring it on . . . now.

Of course, the court still had not, at last check, announced a briefing schedule for the case, much less an argument date. But the denial of the abeyance motion seems a pretty good indication that the court intends to keep its review of net neutrality moving as quickly as possible.

Be sure to check back with CommLawBlog for updates.

Net Neutrality Update: One Lonely Reconsideration Petitioner

Could a single petition for reconsideration delay judicial review?

The Commission has announced that it has received one – and, apparently, only one – petition for reconsideration of its Open Internet order released last December (but not published in the Federal Register until September). For the curious among you, the seven-page petition – which is actually titled "Petition for Clarification or Reconsideration" – may be found here.  (It asks the Commission to clarify the "special services" aspect of the net neutrality order, particularly as that aspect would affect "enterprise customers".)

The import of this filing lies not so much in the substance of the arguments it presents, but rather in the effect that it might have on the timing of judicial review. As we have previously reported, multiple petitions for review of the Open Internet order have been filed with various federal courts of appeals */; all those petitions are set to be heard in a consolidated proceeding before the U.S. Court of Appeals for the D.C. Circuit. So the train heading toward Judicial Resolution is loaded up and ready to leave the station. 

But with the filing of the recon petition, there is now a lingering bit of business still pending before the Commission.  Theoretically, the FCC’s disposition of the petition for reconsideration could alter – maybe even eliminate – some arguments that might otherwise have to be resolved by the court on appeal. When such circumstances arise, it is routine – but not absolutely required – for the court to hold its processes in abeyance pending agency action on the reconsideration issues. The abeyance approach often seems the most efficient way of handling such situations.  Indeed, if the court steps in and tries to rule before the agency's action has stopped moving around, the result can be (and, in some cases has been) far more disruptive than if the court had chosen to wait.  It will be interesting to see whether the FCC (or some other party) files a request for the Court to hold the appeal in abeyance in light of the petition for reconsideration.

In dealing with the recon petition, the Commission will next publish a notice in the Federal Register, alerting the public to the filing of the petition and inviting responses to it. What with the time it will likely take to get that notice into the Register, and then the additional time for responses and replies, the matter won’t be ready for the Commission even to begin to think about it until early next year, at the soonest.

Whether the single petition for reconsideration in the Open Internet proceeding will slow down – or stop entirely – the appellate process is not clear. It’s hard to imagine that a relatively terse recon effort can, or should, delay judicial resolution of the broad range of issues likely to be presented on appeal. But stranger things have been known to happen. We’ll try to keep an eye on things, so check back here for updates.

*/  Speaking of those multiple petitions for review filed in multiple circuits, we note that three of the petitioners are bailing out of the proceeding.  The three – People's Production House, Media Mobilizing Project and Mountain Area information Network – had filed their petitions in the 2d, 3d and 4th Circuits, respectively.  On October 28, each filed a Motion for Voluntary Dismissal asking the D.C. Circuit to dismiss its respective petition.  No reason for the early departures was given (and, truth be told, the Court's rules do not require any such explanation).  Suspicious minds might guess that these petitioners filed their initial petitions largely, if not exclusively, in an effort to keep the case out of the D.C. Circuit – but as they hustle out the door now, we'll probably never know for sure.

Net Neutrality: Verizon Lucks Out in Circuit Lottery

Leaving the gate at five-to-one odds, D.C. Circuit lands in Victory Lane

The Joint Panel on Multidistrict Litigation (JPML) wasted no time in conducting a circuit lottery with respect to the FCC’s net neutrality order and the winner is (drum roll, please) – the D.C. Circuit! As we reported yesterday, petitions for review of that order were filed in six different U.S. circuit courts of appeals. And as was common knowledge, Verizon was doing everything it could to make sure that the case landed in the D.C. Circuit – up to and including filing a Section 402(b) notice of appeal as well as a Section 402(a) petition for review there. 

Turns out Verizon needn’t have worried. Lady Luck was smiling on it when the JPML folks reached into their drum, pulled one of the six entries, and came up with D.C.  Sorry to the First, Second, Third, Fourth and Ninth Circuits -- better luck next time.

Presumably this will obviate the need for Verizon to respond to the FCC’s motion to dismiss Verizon’s 402(b) notice of appeal, but who knows?

The moral of this story is simple. If you’re standing behind Verizon in the line to buy a Powerball ticket, take a look over its shoulder and be sure to buy the same numbers that it does.

Net Neutrality: The Circuits are Jammed!

Verizon’s Plan C? Plan A Redux!

Judicial junkies and appellate aficionados everywhere, rejoice! The next round in the net neutrality donnybrook has started, and it’s already delivering the kind of rock ‘em/sock ‘em litigation observers could have expected. 

Leading the action is Verizon, which picked up where it left off last April . . . literally. As readers will recall, in January – just weeks after the FCC released the full text of its net neutrality order – Verizon lobbed a “notice of appeal” relative to that order into the U.S. Court of Appeals for the D.C. Circuit. (It also filed a separate motion asking that a specific three-judge panel – the same panel that had trashed the FCC in the 2010 Comcast decision – be appointed to hear its appeal.) This was an effort to secure a kind of home-court advantage, since Verizon obviously figures that the D.C. Circuit is likely to be receptive to its arguments.

But the D.C. Circuit rejected that ploy. In a terse order, the Court noted that the net neutrality order was a “rulemaking document” that, under the fine print of the FCC’s own procedural rules, could not be deemed to have been “released” until published in the Federal Register. Since the right to seek judicial review of any FCC order generally doesn’t kick in until the agency’s decision has been “released”, Verizon’s notice of appeal was premature. Court to Verizon: Concentrate and ask again later.  The Court left open – sort of – the question of whether review of the net neutrality order could or should be sought under Section 402(a) or 402(b) of the Communications Act.

That last question is of crucial importance, at least as far as Verizon and the FCC seem to think.

If an FCC action fits into certain relatively narrow categories (mainly involving exercise of the FCC’s licensing authority), anyone challenging that action can file a “notice of appeal” under Section 402(b) – BUT the only court that can hear such an appeal is the D.C. Circuit. Review of all other FCC actions can be sought in any of the federal courts of appeal (except, apparently, the Federal Circuit) under Section 402(a). Since Verizon wants the D.C. Circuit to take the case, Verizon figured that, by claiming that net neutrality falls under Section 402(b), it could lock in D.C. Circuit jurisdiction.

As noted, Verizon’s first try to tie down D.C. jurisdiction came up short. But if at first you don’t succeed, try, try again. And that’s just what Verizon has done. Now that the net neutrality order has made it to the Federal Register, Verizon has filed a second notice of appeal with the D.C. Circuit, asserting again that this is a Section 402(b) case that can be heard only by that court.

How important is this? Very, it seems. The FCC wasted no time in whacking back at Verizon’s cute little four-page notice of appeal with a rough and tough 19-page motion to dismiss (a full three pages of which are devoted to distinguishing a 53-year-old case mentioned only once in Verizon’s notice). Apparently underscoring the urgency that the FCC attaches to the jurisdictional question, the Commission’s motion was filed a scant five days after Verizon’s notice went in – even though the court’s rules give the FCC 45 days. Take that, Verizon.

Verizon will doubtless respond, and eventually the Court will rule. While the Court’s April order parrying Verizon’s first lunge strongly hinted that net neutrality may be a 402(a) matter and not a 402(b) matter (quoth the Court: the net neutrality order “is not a licensing decision ‘with respect to specific parties.’”), there’s probably little downside to Verizon’s strategy.

Meanwhile, like any prudent litigator, Verizon hedged its bets by filing, along with its notice of appeal, a separate “protective petition for review” pursuant to Section 402(a). This is a variation of what law professors call “pleading in the alternative”. (Example: I didn’t run your dog over, and anyway it was an accident, and the dog deserved it.) The goal is to cover all your bases.

Good thing that it did. It turns out that five other petitions for review of the net neutrality order were filed, none of them in the D.C. Circuit. (Other filers picked the First, Second, Third, Fourth and Ninth Circuits.) That means that, if the courts finally determine that this is a 402(a) matter rather than a 402(b) matter – and, therefore, available to any of the circuits – the question of which circuit gets the case falls to the Judicial Panel on Multidistrict Litigation (JPML). And the rules for getting into the JPML Circuit Lottery are a bit unusual. 

The deadline for petitions for review of a rulemaking order is 60 days from Register publication, so there’s still plenty of time for anyone wanting to file his or her own petition for review of the net neutrality order. But if you had a preferred court of appeals and you therefore wanted it to be in the running should a judicial lottery be necessary, you had to file your petition within 10 days of Register publication and then (still within those 10 days) have a copy of the petition (showing the court’s receipt date stamp), along with a request to be included in any judicial lottery, hand-delivered to the General Counsel’s office. 

If petitions addressed to more than one circuit roll in during the 10-day period – as, indeed, turned out to be the case – the JPML is notified, and it conducts a lottery.   (While the JPML’s rules do not appear to dictate how quickly an agency is supposed to file its notification, the FCC shipped off its notice to the JPML less than a week after the close of the 10-day period.)  The precise physical mechanism of that lottery is not entirely clear. The panel’s rules refer to pulling the winning entry “from a drum”, with each qualifying court gets only one entry/ping pong ball in the drum. So with six circuits in the running, Verizon still has a one-in-six chance of getting to the D.C. Circuit even if its Section 402(b) approach gets tossed again.

With this much excitement in just the first two weeks since the net neutrality made it into the Federal Register, you can count on a lot more to come. Check back here for updates.

Net Neutrality Rules Make It to Federal Register

As predicted on CommLawBlog, effective date is November 20, 2011 . . . but don’t hold your breath

It’s official! The Commission’s Report and Order on the “Open Internet” – a/k/a the net neutrality order – has finally been published in the Federal Register. As we indicated in our post yesterday, the effective date of the new rules is November 20, 2011.

For a refresher course on just what the order includes, check out our posts here, here and here, for starters.

To paraphrase Churchill, Federal Register publication is neither the end nor even the beginning of the end, but it may be the end of the beginning. The scene will now shift to one or another U.S. Court of Appeals, although not necessarily right away: it’s possible that some parties may go back to the Commission for reconsideration of some aspects of the order. That latter scenario could complicate matters, as the courts might be inclined to hold off on considering challenges to the new rules if any administrative reconsideration might lead to changes in the rules. Courts in general prefer not to have to deal with moving targets, and can you blame them? Plus, the Commission would likely prefer to have the courts hold off while the Commission tries to smooth out any rough edges in the rules through the reconsideration process, so you can probably expect the FCC to try to discourage the courts from moving forward pending agency reconsideration if reconsideration is sought. But even one or more parties does petition for reconsideration, the judicial review might still proceed apace. You never know.

Another possible complication could arise if any party seeks a stay of the rules’ effectiveness pending judicial review. It is notoriously difficult to convince either the Commission or the courts to issue stays, but in a hotly contested proceeding of national importance like net neutrality, it might make the most sense to maintain the status quo until the legal issues have been resolved. While there are deadlines for filing for reconsideration (30 days from Federal Register publication of the rules -- but heads up -- in this case it'll be 31, because the 30th day falls on a Sunday) and judicial review (60 days from publication), there is no technical deadline for seeking a stay. As a result, a stay request could be filed pretty much any time – although it would obviously make the most sense to file it far enough in advance of the effective date (November 20) to give the Commission or (more likely) the courts enough time to complete their review of the stay arguments and act before that date.

Stay tuned to CommLawBlog for updates on further developments.

Net Neutrality: Effective November 20?

It looks like Federal Register publication of the net neutrality rules is set for September 23.

A couple of days ago we confirmed some movement on the net neutrality front, and also noted trade press reports that final publication of the FCC’s magnum opus on the “open Internet” might be coming up soon. Sure enough – CommLawBlog understands that Federal Register publication of the net neutrality order has been teed up for tomorrow, September 23, with an effective date of November 20, 2011 for the new rules. Of course, nothing will be official until the actual publication occurs, but it’s looking like tomorrow will be the day.

Whenever Federal Register publication does occur, it will mark the beginning (but only the beginning) of the next phase of the process. Publication is the starting gun for petitions for reconsideration (due at the FCC within 30 days of Federal Register publication) and initiation of appellate review (due at any U.S. Court of Appeals within 60 days of publication). It’s also possible that some parties may seek a stay of the effectiveness of the rules – obviously, those efforts would have to be cranked up prior to the effective date.

We know for sure that Verizon is likely to take the rules to court. It already tried back in January, 2011 – but found itself on the outside looking in when the D.C. Circuit dismissed its initial notice of appeal as premature. And given the loud and extended debate about the question of governmental regulation of the Internet – a debate ably addressed and, to a degree, deflated by our colleague Mitchell Lazarus last January – the odds are good that Verizon will not be alone.

As we have previously pointed out, there’s also a good chance that petitions for judicial review will be filed with a number of different circuits. Anyone planning on filing such a petition should be sure to review the helpful public notice issued by the FCC’s General Counsel back in January, laying out the important steps to be taken to assure that your entry is included in any judicial lottery that might have to be conducted to pick the circuit that will ultimately hear the appeal. (Call us crazy, but we suspect that that notice was issued in anticipation of multiple petitions going to multiple circuits with respect to the net neutrality order.)

Check back with us here at CommLawBlog for further developments on the net neutrality front.

OMB: Thumbs Up for Net Neutrality Provisions

After months of quiescence, net neutrality is on the move

The net neutrality rules have cruised past another hurdle: the Office of Management and Budget (OMB) has approved the two “information collection” aspects of the “open Internet” rules that the FCC shipped over there last July (as required by the Paperwork Reduction Act). While OMB approved those aspects almost two weeks ago (on September 9), the official announcement of the approval didn’t make it into the Federal Register until September 21.

OMB approval often marks the end of the rulemaking process in many instances; not so here. New rules generally cannot take effect until their full text has been published in the Federal Register. In many other rulemakings, the Commission takes care of that full-text publication first, and then follows up with getting OMB approval for any incidental “information collections” that may be involved.  As a result, OMB approval of such collections is often the last development in the rulemaking process.

It hasn’t gone down that way with net neutrality.

Instead, the Commission went first to OMB to get preliminary clearance for the “information collection” components of the rules. Meanwhile, the FCC has held tight onto the full text of the rules. While that approach has prevented the net neutrality rules from taking effect, it has also prevented any would-be challengers from seeking judicial review of the rules. Federal Register publication of new rules is the starting gun for the appellate process. Until that publication happens, the courts don’t get involved. (Verizon was reminded of that when its initial appeal was tossed by the D.C. Circuit as premature.) 

According to various trade press reports, the Commission has sent the full text of the rules to the Government Printing Office for publication in the Register in the next couple of weeks. (Note that we heard similar reports months ago and they didn’t pan out – so you might not want to bet the farm on this.) Once the rules are published, we can expect a stampede of appellate litigators heading toward their preferred U.S. Court of Appeals. (Any of the federal circuit courts of appeals are permitted to take this kind of case.) The smart money figures that petitions for review will be filed with a number of circuits. When that happens, the courts draw straws to decide which court gets it. That’s an oversimplification, of course – they don’t draw straws; they pull an entry out of a drum. Actually, the various cases are referred to the Judicial Panel on Multidistrict Litigation, which then does indeed pull a lucky entry out of a drum to determine which court gets the case. (The Commission has released a detailed notice explaining how to assure proper participation in such a lottery.)

In any event, after months of quiescence, it looks like net neutrality is on the move. Check back here for updates.

Net Neutrality Lands at OMB

Next round of Paperwork Reduction Act review of the “open Internet” information collection requirements starts at OMB.

We have progress to report on the net neutrality front!  Well, sort of.

The Commission has shipped two “information collection” aspects of the “open Internet” rules over to the Office of Management and Budget for its review. Yes, we know that we expected the Commission was going to take care of this chore a couple of months ago – but let’s get past that. The fact is: OMB review of net neutrality has begun, as required by the Paperwork Reduction Act (PRA).

(If you’re confused about the whole OMB review process and how it fits into the plan to effectuate the net neutrality rules, check out our earlier post addressing such things.)

Interested parties may submit their comments on either the net neutrality formal complaint process and/or the mandatory disclosure of network management practices, performance and commercial terms of access. You can find directions on how to do so in the notices (linked in the preceding sentence) published in the Federal Register. This round of comments will go to OMB, rather than the Commission (which fielded the last round of such comments starting back in February). You’ve got until August 8, 2011 to fill the OMB in on your views.

When the PRA review process started back in February, we observed that the information the FCC had made available up to that point provided less than clear guidance about just what the various new net neutrality requirements will entail. The latest notices announcing OMB review don’t add anything – which means that would-be commenters are still flying at least somewhat blind.

Note that the Federal Register notices announcing this next step in the PRA process do NOT mean either that the net neutrality rules are now effective, or that they are now subject to judicial review. Before anybody will be able to appeal the new rules, those rules will have to be published in toto in the Federal Register. 

And before the new rules can be effective, they not only will have to have been published, they will also have to have been approved by OMB. That won’t happen before August 8 for sure – but it could happen very soon after that date, if OMB has no problem with the rules. We’ll keep you posted.

The FCC and Net Neutrality: "Reducing" Paperwork

Bureau releases tentative – and temporary – guide for compliance with transparency rules

When the FCC adopted network neutrality rules, back in December (full text of the Order is here), almost nobody was happy. Verizon immediately tried to challenge the rules in court, but was deemed premature. More challenges are sure to follow. And even some net neutrality supporters condemned the new rules as vague.

One particularly vague rule concerns transparency. A broadband Internet access provider must

publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.

Back in February, as required by the Paperwork Reduction Act (PRA), the FCC asked for comment on the burden this rule would impose. Broadband providers expressed concerns about difficulties in complying, particularly for smaller providers having limited resources. As we discussed then, the rule cannot take effect until the FCC and the Office of Management and Budget (OMB) complete a complicated procedural dance, which includes a finding that the rule complies with the PRA notwithstanding the providers’ comments.  The Commission’s request for comments in February started that PRA dance; while the next step (i.e., sending the rules and comments over to OMB for its review) could have been taken as early as April, it hasn’t happened yet.

In the meantime, the FCC’s Enforcement Bureau and Office of General Counsel  have tried to address the charges of vagueness with an “Advisory Guidance for Compliance With Open Internet Transparency Rule.” Some highlights:

1.         Point-of-Sale Disclosures. The Order that adopted the transparency rule requires broadband providers to disclose network management practices, performance characteristics, and commercial terms “at the point of sale.” This does not require distribution of disclosure materials in hard copy, says the Advisory, or extensive training of sales employees to provide the disclosures themselves. Instead, providers can comply by directing prospective customers to a web address with the required information. At a brick-and-mortar outlet, a provider relying on a web page must have equipment that customers can use to access the disclosures.

2.         Disclosure of Network Performance. The Order requires broadband providers to disclose accurate information on network performance. This is a difficult and potentially expensive requirement, as measurements could entail specialized modems and software at end users’ locations. Besides, there is little agreement on how the measurements should be done.

The FCC, in collaboration with the nation’s largest wireline broadband providers, has launched (but not yet completed) a project to develop key performance metrics. The Advisory suggests that participating broadband providers disclose data from the project, and that others use the methodology developed through the project, although that has not yet been released. Alternatively, a provider can disclose actual performance based on internal testing, consumer speed test data, or other data on network performance, including data from third-party sources. The Advisory warns, though, that all of this advice is temporary, as the FCC will provide additional guidance later. It does not say when. We can hear the broadband providers muttering their response to the FCC: “Thanks for nothing.”

Even less helpful are the Advisory’s suggestions regarding disclosure for mobile broadband services. Further guidance will be forthcoming, the Advisory says. In the meantime, mobile broadband providers having access to reliable information on network performance may disclose it. Or not.

3.         Breadth of Required Disclosures. The Order states that its list of disclosure topics is neither necessarily exhaustive nor a safe harbor, leaving providers worried that they could be liable for failing to disclose additional data. The Advisory now clarifies that disclosure of the information specifically identified in Order will suffice for compliance “at this time,” but also warns that the requirements may change at some unspecified time in the future. Thanks, guys.

4.         Disclosure to Edge Providers. The rule requires broadband providers to disclose accurate information sufficient for “content, application, service, and device [‘edge’] providers to develop, market, and maintain Internet offerings.” Providers wondered whether this calls for information beyond that provided to consumers, and if so, what. The Advisory “anticipates” that disclosures to consumers will be sufficiently detailed as to satisfy this requirement as well. That raises the question whether required disclosures to consumers may be more detailed than consumers need or want.

5.         Disclosures on Security Measures. The Order stated that required disclosures will likely include information on network security and end-user security. This is a problem because providers use a variety of security measures and frequently update them, which makes keeping disclosures up to date a burdensome task. Worse, disclosures on security methods might be used to undermine security. In response, the Advisory suggests that broadband providers use “sound judgment” in deciding what to disclose, so long as consumers can make informed choices and developers can develop.  We hope the FCC will not penalize the good faith efforts of providers that indeed use their sound judgment in withholding sensitive information.

Just how specific should the FCC’s transparency requirements be? Reasonable minds may differ.   A rule that is too vague doesn’t do much good, because it leaves the broadband provider with little or no idea of  what  it is expected to do.   On the other hand, a rule  that  is too detailed risks (a) imposing  on providers burdensome or counter-productive requirements  that ignore varying market realities, and (b) stripping providers of the flexibility necessary to best serve their customers. 

The Advisory purports to provide helpful guidance. Unfortunately, whatever clarity the Advisory offers is likely to be temporary. The Advisory itself states that much of its advice will likely be superseded in the near future. The OMB review process may lead to revisions of the underlying transparency rule. 

Ditto for the appeals process, which hasn’t even begun yet. (As the Verizon case mentioned above established, nobody can take the net neutrality rules to court until the FCC has published them in the Federal Register. Despite trade press reports last winter indicating that the Commission was planning on getting the rules into the Register back then, the rules still haven’t been published yet. More recent trade press reports have popped up to suggest that publication might be expected soon. It could happen any day – but that’s been true since last December.) When the rules finally do get to court, the result could substantially change them – if not trash them altogether.

And until the rules become effective – i.e., until they are approved by OMB and published in the Federal Register – by definition they’re, um, not effective. That means that it doesn’t matter just right now whether or not they’re vague, because just right now nobody has to comply with them.

Which leads us to wonder why the FCC went to the trouble of releasing the Advisory. One possibility: an attempt to convince OMB that the transparency rule is not so vague as to be impermissibly burdensome.   To which we say, “Good luck!”

Verizon v. FCC: On To Plan C?

Initial net neutrality appeal dismissed as premature

So much for creativity in appellate litigation. The U.S. Court of Appeals has determined that Verizon jumped the gun when they filed notices of appeal of the FCC’s net neutrality decision last January. As a result, Verizon’s appeal has been dismissed. (A similar appeal by MetroPCS was also dismissed in the same order.)

As faithful readers will recall, Verizon made a two-pronged effort to insure that the D.C. Circuit would be the court to review the net neutrality approach adopted by the Commission in late 2010. (Verizon’s motive in that effort isn’t hard to guess: the D.C. Circuit had slammed a similar regulatory approach in the 2010 Comcast decision.) But one prong of that effort – a request that Verizon’s appeal be assigned to the same panel of judges who decided Comcastwas rejected in less than two weeks. And now the second shoe has fallen.

The Court’s latest order is terse. Offering no substantive analysis, it merely concludes that

[t]he challenged order [i.e., the net neutrality decision] is a rulemaking document subject to publication in the Federal Register, and is not a licensing decision “with respect to specific parties.”

The theory of Verizon’s approach was that it was a “licensing decision” affecting “specific parties”. So much for that theory. As a result of the Court’s order, judicial review cannot be sought until the agency’s decision is published in the Federal Register, something that hasn’t happened yet. 

The good news for Verizon is that dismissal of its initial appeal does not foreclose it from seeking judicial review again once net neutrality finally makes it to the Register. (No word yet as to when that might be. Trade press reports a couple of months ago indicated that Federal Register publication was then imminent. Those reports were apparently wrong.)

The bad news for Verizon is that, when the opportunity to file does arise, there will be no way to guarantee that the case lands in the D.C. Circuit. If other parties file their petitions for review in other Circuits, a “judicial lottery” system kicks in. While it would seem to make sense for the D.C. Circuit to hear the next round of net neutrality appeals – that Court, after all, is very familiar with administrative law issues generally and issues arising from the Communications Act in particular – at this point it’s anybody’s guess where the case will ultimately land.

Net Neutrality Update: Coming soon - OMB Review!

But effectiveness of the new rules is still months away, at least

The Commission’s Open Internet (a/k/a Net Neutrality) initiative has taken a tangible step forward with the announcement that the FCC is getting ready to ship two “information collection” aspects of the rules over to the Office of Management and Budget (OMB) for its review. But don’t hold your breath – it’ll take at least a couple of months to get there.

OMB review is mandated by our old friend, the Paperwork Reduction Act, which requires agencies to quantify and justify “information collection” burdens before imposing them on regulated industries or the public. The idea is that OMB may perceive regulatory excess that the FCC has somehow overlooked and slam the brakes on the process.

The two Net Neutrality information collections in question? First, there are the formal complaint procedures to be used to resolve “open Internet disputes” when other, less formal, means don’t do the trick. And second, we have the requirement that broadband providers disclose their network management practices. Unfortunately, the FCC’s Federal Register notices concerning its proposals afford no particular insight into just what the complaint and disclosure requirements will involve. That may complicate the task of preparing comments on the proposals.

But wait – doesn’t the Net Neutrality order itself fill in some of the gaps in the notices? Some, maybe . . . but not all.

The formal complaint process is addressed at Paragraphs 154-159 of the Net Neutrality order. The bottom line appears to be that a complainant is expected to “plead fully and with specificity the basis of its claims and to provide facts, supported when possible by documentation or affidavit, sufficient to establish a prima facie case of an open Internet violation.” The target of the complaint can then answer each claim in the complaint, “demonstrating the reasonableness of the challenged practice.” The complainant can then try to rebut that.

The network management practices disclosure requirement is covered in Paragraphs 56-61 of the order. There the Commission provides an extensive list of types of information that might be disclosed. But the FCC emphasizes that the list is “not necessarily exhaustive, nor is it a safe harbor.” Talk about wiggle room! And just how is the information to be disclosed? That, too, is a bit up in the air. It’s got to be posted on a “publicly available, easily accessible website”, and must also be provided at the point of sale. According to the Commission, “[c]urrent end users must be able to easily identify which disclosures apply to their service offering.” The Commission declined to specify any particular format for the disclosures.

In the Federal Register notice, the FCC summarizes the disclosure requirement as mandating disclosure of “accurate information regarding the network management practices, performance, and commercial terms of their broadband Internet access services sufficient for consumers to make informed choices regarding use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.” A standard defined by what might be deemed (by whom? the FCC? the consumer?) “sufficient” to allow “consumers” to make “informed choices” doesn’t seem to be much of a “standard” in the traditional sense, but you never know.

So anyone inclined to file comments on either of these proposals may find it tricky to get a firm grip on precisely what burdens are likely to be involved here. (For the record, we asked the FCC if it could let us know what its proposed information collections would entail – above and beyond what is shown in the Federal Register notices. We were directed to the paragraphs of the order mentioned above, along with Appendices A and B to the order.)

What happens next?

Anyone who wants to comment on either (or both) of the proposals has two (count ‘em, two) opportunities to do so. First off, between now and April 11, you can submit comments to the Commission. According to the FCC’s notices, comments should address: 

(a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information will have practical utility; (b) the accuracy of the Commission’s burden estimate; (c) ways to enhance the quality, utility, and clarity of the information collected; (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and (e) ways to further reduce the information collection burden on small business concerns with fewer than 25 employees.

Once April 11 comes and goes, the Commission will package up any and all comments and ship them to OMB, along with its proposed information collections and a separate “supporting statement”. At that point, interested parties will have a 30-day opportunity to let OMB know what they think. The Commission will then have a chance to respond to any incoming comments and/or questions that OMB might pose. Its response may include revising either or both proposals. (Note – Neither OMB nor the FCC provides any public notice of any such post-comment period revisions. If you’re diligent, you should be able to find out about them by checking the OMB website on a daily basis . . . but that may prove an empty exercise, since OMB affords no formal opportunity to comment on any such on-the-fly revisions.) 

Once OMB is satisfied that the FCC’s proposals are consistent with the Paperwork Reduction Act, OMB will issue its approval. That approval will be formally announced in the Federal Register and, 60 days after that announcement, all of the Open Internet rules adopted last December are set to become effective.

So even in the fastest scenario – where the FCC would send its proposals to OMB immediately after the close of the April 11 comment period, and OMB would in turn approve the proposals immediately after the close of its own 30-day comment period, and the announcement of that approval would be published instantaneously with the issuance of the approval – we’re still looking at 120 days at the very least before the Net Neutrality rules can be expected to take effect.

One more timing consideration. Within a matter of days, if trade press reports are to be believed, the Commission should be publishing the Open Internet order itself in the Federal Register. That publication will mark the opening of a 60-day period during which petitions for review of the order may be filed pursuant to Section 402(a) of the Communications Act. Two appeals of the order have already been filed pursuant to Section 402(b), although the FCC has moved to dismiss both of them. In any event, it is virtually certain that some parties – and maybe a lot of parties – will be seeking judicial review of the order before the rules become effective. Should a reviewing court conclude that a stay of the rules is warranted, the effective date could be pushed back indefinitely.

Verizon v. FCC: On To Plan B?

Comcast panel denies Verizon motion to assign net neutrality appeal to it

Well, that didn’t take long. On February 2, less than two weeks after Verizon filed its unusual motion asking that its appeal of the net neutrality decision be assigned to the same panel that trashed the Commission in the Comcast opinion last April, that panel has denied the motion. Don’t count on sifting through a detailed opinion to obtain subtle nuances of potential significance. The panel’s order consists of a single sentence: “Upon consideration of the appellant’s motion to assign the case to the panel that decided Comcast Corp. v. FCC, it is ordered that the motion be denied.”

Ouch.

Verizon’s appellate strategy has thus suffered a serious blow, but an important element of that strategy is still alive, at least for the time being. Its “notice of appeal” is still pending, although the FCC has moved to dismiss that as well. If the Court denies the FCC’s motion to dismiss and accepts the appeal, then Verizon will at least have secured review by the D.C. Circuit (as opposed to any other federal circuit court of appeals). Chances of that happening? You never know. (Note that the legal arguments underlying Verizon’s “notice of appeal” are separate and distinct from those advanced in its motion for the Comcast panel. In other words, the denial of the latter is not necessarily the kiss of death for the former.)

And even if the Court grants the FCC’s motion and tosses Verizon’s appeal on the theory that Verizon jumped the gun, Verizon will still presumably be able to file a “petition for review” along with any other party unhappy with the net neutrality order once that order is published in the Federal Register. But there is no guarantee that that review proceeding would necessarily end up in the D.C. Circuit. Check back here for updates as developments warrant.

112th Congress: New Line-Up, New Players - New Priorities?

(Blogmeister’s Note: FHH Telecom Law welcomes back guest commentator Catherine McCullough. This month she provides her perspective on the impact recent committee appointments are likely to have on communications issues in the 112th Congress. Catherine is a principal in Meadowbrook Strategic Government Relations, LLC and a specialist in Congressional relations.)

January is over, and the House and Senate Committees that oversee telecom issues have officially organized – issuing full lists of members, deciding on the rules by which the committees will work, and dividing up the budgets between Democrats and Republicans (thus setting the tone for how well the parties will work together in the 112th Congress).

So what will the legislative priorities of these committees be? The two themes of love and money – constituent votes and budget issues – that we identified in an earlier post still dominate. However, now that we know who all of the players are, including the subcommittee chairs, we can take these policymakers’ legislative pasts into account, and perhaps identify which specific bills we should see introduced in the coming months.

The biggest changes from last Congress are on the House side, where the agenda will be determined by Commerce Committee Chairman Fred Upton (R-MI-6th) and the Chair and Vice-Chair of the Subcommittee on Communications, Technology and the Internet Greg Walden (R-OR-2nd) and Lee Terry (R-NE-2nd). The new Chair of Commerce’s Subcommittee on Oversight and Investigations, Cliff Stearns (R-FL-6th) will have a strong impact on the Committee’s telecom policy too, since he served as the Communications Subcommittee’s Ranking Member last Congress.

Chairman Upton enjoys a reputation as solid, pro-business Congressman who is reasonable to deal with. He has chosen to hire former Ranking Member Joe Barton’s (R-TX-6th) well-respected telecom aide, Neil Fried, as his Chief Counsel for telecom matters which gives his staff bench the depth and institutional memory critical for real legislative negotiations.

Upton jumped into the telecom policy fray early when he co-issued a strongly worded release – along with Reps. Walden and Terry – denouncing the FCC’s rules on net neutrality. His communications on that front tend to focus, directly or otherwise, on the agency’s process (or lack thereof), especially the lack of transparency in its decision-making.

Look for this concern about FCC process to color much of the Committee’s telecom work this year. Complaints about the agency’s lack of responsiveness are common, and Committee Republicans consider a lack of orderly process an impediment to investment and a barrier to job growth. In addition to the consumer and budget-related issues discussed in an earlier column, specific FCC reform legislation could be introduced this year. If so, it could resemble H.R. 2183, a bill introduced by Reps. Barton and Stearns in the last Congress. That bill called for a modified “shot clock” – deadlines by which the FCC would have to issue decisions – and statutorily-required processes for the issuance of FCC decisions.

On the Senate side, where Chairman Rockefeller (D-WV) still reigns, work has begun on spectrum allocation. As predicted, this issue is a top priority because Congress can use auction proceeds to pay down the debt or pay for other funding priorities. Rockefeller’s bill, which was introduced with no support from fellow Republicans, would set aside the D-block for public safety use (thus removing it from the pool of auctionable spectrum) and would give the FCC incentive auction authority.

It is the opening shot in the debate over spectrum allocation policy, which is sure to move more quickly than usual through Congress given the strong incentives for all involved to come to a common understanding. Look for Communications Subcommittee Chair Walden to have a strong hand in the negotiations here on the House side. His background as an owner and operator of radio stations makes him a natural ally for the National Association of Broadcasters (NAB) and its efforts to get its members to give up as little spectrum as possible for as much as possible.

The cast of characters is now set: let the play begin!

Net Neutrality: Verizon Looks For A Home Court Advantage

Another appellate round before the Comcast panel? Could be, if Verizon gets its way

Wasting no time, Verizon has taken a bold move designed to herd the next round of appeals in the Net Neutrality proceeding back before the same panel of judges who slammed the FCC in the Comcast decision last April. Verizon has filed a “notice of appeal” with the U.S. Court of Appeals for the D.C. Circuit relative to the Commission’s latest Net Neutrality decision. That alone might raise some eyebrows. But taking it one step further, Verizon has filed a separate motion asking that the Comcast panel be assigned to Verizon’s appeal.

Appellate litigation aficionados take note.

Verizon’s decision to file a “notice of appeal” pursuant to Section 402(b) of the Communications Act is the first element of a one-two strategy. Section 402 lays out the ground rules for getting appellate review of FCC decisions. It establishes two separate and distinct types of review. Section 402(b) provides that agency decisions relating to licensing actions can be reviewed only by the D.C.Circuit; such review is initiated with the filing of a “notice of appeal”. All other agency decisions can be reviewed by any federal court of appeals; in those cases, the process gets started with the filing of a “petition for review” pursuant to Section 402(a).

In perhaps overly simplistic terms, the “appeal” route specified in Section 402(b) tends to be seen as applicable to Commission actions on specific applications for specific licenses or permits – that is, actions that directly related to particular authorizations. In the same simplistic terms, the 402(a) “review” process is available for judicial review of broader rulemaking decisions of more general impact. Since the December Net Neutrality decision was plainly a rulemaking decision of very broad impact, one might have figured that it would be subject to the 402(a) “review” process.

So much for the simplistic view.

If that view were to hold, Net Neutrality – a broad rulemaking decision – might not end up in the D.C. Circuit, but rather in some other federal circuit court of appeals. Who knows how any other circuit might feel about Net Neutrality? But we do know from Comcast that at least some members of the D.C. Circuit have some strong views that are not especially simpatico with the Commission’s. So if you’re Verizon (or any other opponent of the FCC’s latest take on Net Neutrality) and you’re given your druthers, you’d probably opt to have the next round of appellate review go to the D.C. Circuit.

You could, of course, file a Section 402(a) “petition for review” with the D.C. Circuit and keep your fingers crossed that nobody files a similar petition in any other circuit. (If petitions for review of the same order are filed in different circuits – and if certain procedural hoops are jumped through – a lottery process kicks in to determine which circuit gets the case.) But if you’ve got your heart set on one circuit alone, that’s iffy, at best.

What to do? Well, you could file a Section 402(b) “notice of appeal” with the D.C. Circuit – if you could figure out a way to claim that the FCC decision has at least arguably changed a license of yours in some way.

If you guessed that Verizon picked Option 2, go to the head of the class. Citing a couple of sentences buried in Paragraphs 133-135 of the Net Neutrality order, Verizon argues that that order effectively changes Verizon’s licenses and, therefore, is appealable under Section 402(b). 

And since 402(b) appeals can go only to the D.C. Circuit, if Verizon’s argument holds, the case is guaranteed to stay in D.C. 

(Another advantage to Verizon: Section 402(b) appeals can be filed as soon as the FCC lets go of its order, while Section 402(a) review proceedings can’t be initiated until the order has been published in the Federal Register. The Net Neutrality order was issued in December but has not yet shown up in the Register – so anyone who thinks that 402(a) is the relevant section has not been able to file yet, leaving the field open to Verizon to make its move.)

An impressive gambit on Verizon’s part. But wait, there’s more.

There are 13 judges on the D.C. Circuit, but only three of them sat on the Comcast panel. In Verizon’s best case scenario, it would get those same three. But panel assignments in the D.C. Circuit are ordinarily made randomly, so even if Verizon’s appellate strategy works, it might still take a stroke of luck to get the Comcast panel . . . unless, of course, you ask the Court to assign that same panel to your case. And sure enough, that’s what Verizon has done.

Not that that is a conventional request. In fact, the court’s rules don’t seem to contemplate such requests . . . but they don’t preclude them, either. So why not ask?

Enter Verizon’s cleverly titled “Motion to Assign Case to the Panel that Decided Comcast Corp. v. FCC. Is that clear enough? Verizon can’t point to any slam dunk precedents that mandate assignment of a particular panel. But it can legitimately argue that the issue of Net Neutrality is complex, and the Comcast panel already addressed one aspect of it, and the FCC’s latest decision is plainly an effort to respond to the Comcast court’s position. So Verizon can reasonably claim that its appeal is just another round in an on-going slugfest – in which case, wouldn’t it make sense to assign the case to the Comcast panel?

Will either – or both – of Verizon’s strategies work? It’s impossible to say just now. The Court generally doesn’t like being told by litigants how best to manage its own docket. Plus, neither of Verizon’s points – i.e., the Section 402(b) “appeal” approach and the effort to get the Comcast panel – is a sure winner by any means . . . but neither is laughably wrong, either.  So it’s certainly worth a shot. 

If you doubt the potential benefits to Verizon should its approach pay off, check out the reaction of Public Knowledge, a Net Neutrality supporter. In a press release, the PK legal director sniffs that Verizon is “play[ing] legal games” and “trying to be cute”. Oh snap. He urges the court to “see through this ploy” and reject Verizon’s arguments. Such apparent resentment suggests serious unhappiness chez Public Knowledge relative to the possibility that Verizon’s approach might work.

We’re still in the early, early rounds, but it’s obvious that we can expect to see some very interesting appellate lawyering before the fate of Net Neutrality is finally resolved. Stay tuned.

Upcoming Appearance: Net Neutrality Maven Paul Feldman To Address Internet Society Chapter

Looking for insight into the front-burner issue of net neutrality? Look no further: Fletcher Heald & Hildreth’s Paul Feldman is headlining a Net Neutrality Reception presented by the Greater Washington DC Chapter of the Internet Society (ISOC-DC). His presentation is titled “Exploring the Middle Ground of Net Neutrality”.  Also on the bill will be Michael Nelson, Visiting Professor in the Internet Studies Communication, Culture and Technology Program at Georgetown University.

Regular CommLawBlog readers will doubtless recall Paul’s previous posts chronicling and analyzing the conundrum that is net neutrality. (The rest of you can catch up by checking them out here and here and here and here and here.) Paul has also waxed eloquent on the same topic in a number of speaking engagements. 

The reception will be held on Thursday, January 20, 2011, beginning at 6:30 p.m. at the Hudson Restaurant & Lounge at 2030 M St. NW, Washington, D.C.  Complimentary reservations are required. Interested? Email the ISOC-DC at chapter@isoc-dc.org to get your name on the list.

For more information on ISOC-DC, please visit their website at http://www.isoc-dc.org/. Paul hopes to see you at the reception!

Net Neutrality: Both Sides Are Wrong

The FCC’s new net neutrality rules won’t work. Unfortunately, there are no better alternatives in sight.

(The opinions below are those of the author. He formerly advocated network neutrality; a glimpse of what it might actually look like has prompted him to change his mind.)

Net neutrality is one of those issues that sharply divide the country. Those who take sides in the debate, do so passionately. To call it a “debate,” though, is misleading. In a debate, people listen to each other before responding. On network neutrality—as in health care, financial reform, and other key national issues—people just shout at each other. Making matters worse, the two sides not only hold conflicting opinions, but deal in conflicting facts.

You know the facts are up for grabs when both sides claim the same slogan: “Keep the Internet Free”! To some, this means keep the Internet free of regulation; to others, keep the Internet free of discrimination by the Verizons and Comcasts that connect us to the world.

One fact is inescapable: when the local Internet data load exceeds capacity, someone will decide whose traffic gets held back. It might be Comcast, making a business decision; if might be the FCC, controlling Comcast through regulation. If both keep their hands off—Keep the Internet Free!—the decision gets made anyway, by the kid down the street supplying bootleg hi-def movies through  his parents’ connection. We know when he’s home from school, because service for everybody else on the street drops to a crawl.

How should Internet service providers (ISPs) decide which content gets priority? Some say regulation only makes things worse, so we should turn the ISPs loose and let the market sort things out. Others retort that a profit-making ISP seeks only to make a profit; if interfering with content furthers that goal, content will suffer. We suspect the first crowd, by and large, are the same people who also oppose health care legislation and financial reform, preferring to trust insurance companies and banking institutions (and ISPs) over government regulators. The second group believes with equal fervor that those companies will happily wrong their customers in return for higher profits, so that only government control can assure fair treatment for all.

As to net neutrality, both sides are wrong.

Let’s start with a few of the supposed facts.

The pro-regulation forces justify their position with a long history of wrongful content discrimination by ISPs. First was the time back in 2007 when Comcast impeded BitTorrent content. That’s one. Then, a small phone company ISP may have blocked VoIP. We know it wrote the FCC a check to settle the claim, so let’s call that two. Third . . . well, the fact is, there is no third. The FCC mined reams of public comments to find a small handful of accusations, but no more smoking guns. Can this scant history justify a major and controversial regulatory effort?

But the small number of past abuses doesn’t matter! says the FCC. The broadband ISPs have both means and motive to discriminate! It’s just a matter of time!

Again, though, the facts get in the way. The broadband ISPs have had the same means and motive for the past five years. If they were as unscrupulous as the FCC seems to think, by now we should be awash in wrongdoing. But that is not happening. Maybe the FCC is right, and content discrimination is inevitable. Even so, we could wait a year or two, and see whether an actual problem arises, before setting out to solve it.

The anti-regulation folks are equally free with the facts. We don’t mean the Rush Limbaugh nonsense about net neutrality being an Obama plot to censor the Internet. We’ll take instead an often-heard assertion both sides seem to accept: the Internet has not been regulated until now, a state of affairs which fostered its explosive growth over the last twenty years.

Sorry, but that’s just wrong. While the Internet was developing from a tiny, hard-to-use network of nerds into the vast facility we know today, it was mostly under the thumb of the FCC. Otherwise, it might not have happened at all.

Once upon a time, in the dark days before Facebook and YouTube, there was no broadband. People accessed the Internet over a “modem” gizmo on the same phone lines they used to make voice calls. (Old-timers hearken back to the mating call of a modem seeking another of its kind.) Voice lines were (still are) subject to FCC regulation. Under a set of rules called Computer III, a large phone company that offered its own ISP service—all of them did—had to open its network to competing ISPs, giving the competition access to the same internal technical facilities that the phone company ISP used. The result was a breathtaking number of competing ISPs. Computer III was essential to this thriving marketplace. Without it, no other ISP could have matched the phone companies’ quality and cost, so the early Internet would have become the exclusive province of the Bells. The Internet might never have flourished as it did.

This bit of history overturns the canard that Internet regulation is a new idea. True, Computer III did not impose content neutrality in so many words, but it had the same effect. A customer unhappy with an ISP’s content offerings could quickly switch to a new ISP, at no added cost. Eager to keep the customers happy, ISPs left the content alone.

That was then. In 2002, the FCC declined to apply Computer III principles to cable modem broadband service, and in 2005, it withdrew Computer III from phone-company DSL broadband. Today Computer III applies only to dial-up. But few people use dial-up any more. Most Internet users subscribe to broadband. Without Computer III, this means signing up for the ISP run by the phone or cable company. That leaves most broadband users with one possible ISP, or two at most, possibly with long-term contracts and early termination fees.

Changing ISPs is no longer the ready option is once was. This is a big problem for the argument that markets are an effective control on ISP behavior. Markets work only where they exist.

But wait, say the anti-regulation people. New competition is coming!

Maybe; but having our hopes repeatedly dashed over the years has made us skeptical. Remember city-wide free Wi-Fi? Broadband-over-power-line? Nationwide fiber-to-the-home? Each of these launched with great fanfare, but they all petered out. FIOS, by far the most successful of the bunch, will top out at passing just one in six of U.S. homes. This year the big hope is for broadband wireless via 4G. We want it to succeed, but we’re not holding our breath.

When the FCC eliminated broadband competition by dropping Computer III, it did so (it thought) for a good reason. The cable and phone companies insisted that requiring them to share their facilities would cut off the incentive to build more. The way to expand broadband, they said, is to leave the providers alone to do their job. The FCC bought the argument, and gave the providers exclusive use of what they build. As a result, the United States promptly surged ahead in global broadband deployment . . . well, no. The United States by some measures is around twentieth in the world, back in the pack between Estonia and Slovenia. The cable and phone companies tout their investment in broadband facilities, but in most cases the service they actually deliver is impressive only by third-world standards.

Some other countries treat broadband Internet like highways and airports—essential to the larger economy, and so justifying government investment. Here in the United States, we would call that a federal takeover. What we have instead, though, is deregulation without competition. This is the worst of all possible worlds: mediocre and expensive service, little or no customer choice, a threat of content discrimination, and no good solutions in sight.

Which brings us to the FCC’s net neutrality rules.

A good rule, first of all, must guide behavior. A person reading the rule should know what it requires.  NO TURN ON RED.  CLOSE COVER BEFORE STRIKING.  EMPLOYEES MUST WASH HANDS.

Here is a key net neutrality rule:

[A broadband ISP] shall not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service. Reasonable network management shall not constitute unreasonable discrimination.

Discrimination is permitted if “reasonable”; otherwise, not. Does anyone know what this means? To be sure, the word “reasonable” is well understood in some areas of the law; but not this one. The FCC offers some commentary and a few examples. But the vagueness of the rule still leaves a great deal of room for both ISP mischief and unrealistic end-user demands. No doubt this will bring many disputes before the FCC. That might not be a bad thing, if decisions came back quickly. Alas, speed is not among the FCC’s many excellent qualities. Allowing for internal appeals, we can hope for a two-year turnaround at best. That is forever, in Internet time. Whatever guidance might come from these decisions will arrive much too late, long after the problems that started them have evolved into entirely new species.

The obvious alternative to vague rules—more specific rules—does not work, either. Nobody wants the government meddling in the details of ISP internal operations. Nobody thinks they would be any good at it.

What, then, is the answer? Sadly, the FCC gave away its best shot when it abolished Computer III for broadband. That eliminated competition. Now the only options left are regulation or nothing. The prospect of regulation is unappealing, at least in its present form. And the prospect may not last long; as my colleague Christine Goepp explains, the new rules might not make it out of the courtroom.

In a parallel universe, one different from our own, the FCC could fix the problem. It would assert Title II telephone-type regulation over broadband ISPs—not all of Title II, which would indeed be oppressive, but just enough to re-impose a Computer III regime that requires ISPs to make capacity available to competitors. The ISPs would oppose this, to put it mildly. But they need not provide the capacity for free; the FCC could mandate charges that fairly compensate them for the competitors’ share of infrastructure costs, plus profit. The ISPs would likely oppose it anyway, because even a fair profit may not cover losses that result from competitors forcing their prices down and quality up. One might answer that the ISPs originally developed their monopoly facilities under protective regulation, as cable companies or phone companies, and perhaps have no inherent right to carry that monopoly over to a market that might otherwise be fully competitive. The ISPs would respond . . .

But the fine points don’t matter, because this is all science fiction anyway. In our universe, the one where government politicians get applause by condemning government, the Title II / Computer III option is about as likely as free universal health care.

Our best hope for an Internet with neither regulation nor discrimination is the emergence of actual broadband competition, whether 4G or something else. But it better happen soon. In one scenario, after the appeals court strikes down the new rules, the current broadband ISPs set up exclusive deals with major Internet content providers. The competition, when it eventually appears, would be unable to provide the content subscribers want most.

In the meantime, let’s enjoy what we have. But expect some delays. The kid down the street just started sending me the high-def True Grit.

You Could Be A Wiener!!!

FCC launches Design-An-App contest; Goal: Equip citizenry for self-defense in Open Internet struggle

Are you a “citizen solver”? Do you want to become one?

As broadband providers across the country contemplate what they’re going to have to disclose to consumers under the FCC’s new “Open Internet” transparency requirement, the Commission is looking to open a new transparency front. The troops to be deployed to that front? An army of consumers, who would be provided with software that will reveal to them, in the comfort of their own homes, precisely what their ISPs’ traffic management practices are. 

And the Commission has thought of a fun and cheap – well, cheap, at least – way to accomplish this goal.  A contest!  Like one of those Thanksgiving Day essay contests, but with software and the Internet and stuff. You get to spend hundreds of hours designing a software application or writing a research paper, which you then submit to the FCC. If your entry wins, you get to travel to Washington, D.C., to attend a reception with Chairman Genachowski. And (are you sitting down?) up to $500 of your travel costs will be paid by Uncle Sam, plus if the winning entry is from a team, a total of up to $1,500 in travel costs will be reimbursed! Be still my heart! (There is no second prize, but if there were, we suspect it would be the opportunity to attend two receptions with the Chairman.)

The contest seeks to unleash the vast untapped potential of the nation’s civic-minded geeks (or, in FCC-speak, “citizen solvers”). It parallels several ongoing “civilian” initiatives to develop network detection tools, such as Measurement Lab (founded by Google, New America Foundation’s Open Technology Institute, the PlanetLab Consortium, and academic researchers) and the Max Planck Institute’s Glasnost project. In fact, the website mentions that applicants may coordinate with M-Lab directly to run their apps on its platform.

So, if you think you can design a better app than Google or the Max Planck Institute, better get started. Your software tool (which, by the way, would be a great name for a band) should provide users with “real-time data” about their broadband connections as well as accumulate data on Internet-wide patterns and trends. For example, it could let Internet users know if providers are interfering with “DNS responses, application packet headers, or content”. (DNS responses are those packets that Comcast faked in order to break off BitTorrent connections.)   Finally, it must be free to use and available over the Internet.

Two awards will be given for applications: one for the “best new or substantially improved open Internet app” and a People’s Choice App Award for “the most popular open Internet app”.  (The People's Choice Award will be decided by on-line voting.) There is also an award for the best research paper that analyzes “relevant Internet openness measurement techniques, approaches, and data.” For full details, go to http://challenge.gov/FCC/114-fcc-open-internet-apps-challenge. (Heads up, though – the instructions are a tad sparse and not entirely consistent. For example, at one point we are told that research papers are limited to “20 pages (11 point font)”. But hold on there – three paragraphs later the word is that “there are no page limits for research papers.” Of course, this may just be a subtle ploy by the Commission to help it identify the real genius entries. We’ll have to wait and see.)

Entries can be submitted from February 1– June 1. Judging will run from June 15-July 15, including (get this!) on-line Internet voting in the People’s Choice App category. Winners will be announced on August 8. 

If things go awry for the Commission’s new rules (given their shaky legal foundation and the ominous rumblings from the House), at least consumers won’t be able to say the FCC never gave them anyway to help themselves.  But carriers must be wondering exactly what use will be made of the data – i.e., will it give rise to enforcement actions?

The Net Neutrality Order: A Look Inside

We previously reported on the release of the FCC’s net neutrality rules. As promised, we have combed through the 194-page document and now provide a more in-depth look at the content and implications of the Commission’s new net neutrality rules.

The Rationale Behind the Rules

The net neutrality debate is primarily about means, not ends. Both sides agree that the Internet should be open, which means, roughly, “the way it is now.” Today, consumers are free to surf websites, download and upload content, and use any online service they choose. Internet access providers do not generally block or prioritize online service and content providers. Consumers, not ISPs, determine marketplace winners and losers. The Internet is thus increasingly attractive to both consumers and service and content providers, creating a self-nurturing “virtuous circle” of innovation and demand. Shopping, entertainment, and civic participation for all.

Opponents of net neutrality think that the best way to preserve this model of success is to leave it alone. There is no need for government regulation, with its attendant cost, unintended consequences, and possible dampening effect on network investment, because there is no evidence of any systematic failure of the existing marketplace to deter “abuse.” Only a handful of instances of alleged abuse have come to light, and they have been swiftly resolved. In the opponents’ view, absent further evidence, the Commission should not attempt to micromanage a thriving, dynamic economic arena.

Net neutrality proponents, on the other hand, see a convergence of factors that makes future discrimination practically certain. Their thinking, as set out in the Commission’s net neutrality order, boils down to this: broadband providers have an ability and incentive they didn’t have before to block or impede selected traffic on their networks. Deep packet inspection (DPI) technology has advanced and is increasingly used for network management. Simultaneously, Internet telephone and cable services – VoIP and Internet video – are growing fast, delivered side-by-side with cable and phone companies’ own offerings and on their own network. As a result, broadband providers are in a position to, and have every incentive to, favor their own, affiliated, or pay-for-priority content, to the detriment of consumer choice and continued innovation. The few samples of discriminatory behavior already documented reinforce this prediction. Finally, the free market won’t help, because in many places there is little choice of broadband Internet providers. 

Given these circumstances, the Commission concludes, it need not wait for substantial, pervasive, and difficult-to-reverse problems to arise before it acts.

What is Subject to the Net Neutrality Rules

The net neutrality rules apply to “broadband Internet access service,” which the order defines as a “mass market retail service” that provides the capability to access “substantially all Internet endpoints.” Broadband Internet access service does not include dial-up, but it does include any service that the Commission finds to be a “functional equivalent” of Internet access service, or that is “used to evade” the net neutrality rules.

The regime will not apply to enterprise service offerings, which typically are individually negotiated. It also will not apply to non-mass market services, such as virtual private networks, content delivery networks, multichannel video programming, hosting or data services, or Internet backbone services. Nor will it likely apply to services offering very limited connectivity, such as those enabling a device like an e-reader or heart monitor to function fully. But the rules would apply to any service with only partial access that is clearly designed to be a substitute for full Internet access, such as a “Best of the Web” or Internet access with certain websites blocked.

The Commission has adopted a “wait-and-see” approach to so-called “specialized services” (i.e., broadband services delivered to the end user other than Internet access). In the meantime, it “expects” that broadband providers will both (a) disclose information regarding specialized services and (b) expand broadband Internet access service to keep pace with any additional capacity for specialized services. 

What the Rules Require

Transparency. Both fixed AND mobile broadband Internet providers must publicly disclose information regarding their network management practices, performance characteristics and commercial terms. The extent of disclosure must be “sufficient for consumers to make informed choices regarding use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.” At a minimum, providers must supply this information on their websites and at the point of sale. Providers are expected to tailor their transparency disclosures according to the above standard; however, the Commission provides a bit of guidance:

  • Network management practices include congestion management, application-specific measures, device attachment rules, and security practices.
  • Performance characteristics include the service technology, access speed and latency, suitability for real-time applications, and any specialized services and their impact on broadband Internet access service.
  • Commercial terms includes pricing, privacy policies (including inspection and the treatment of traffic information), and complaint procedures.

The FCC adds that the list is neither exhaustive nor a safe harbor, but does not tell providers exactly what they must do to comply.

BlockingFixed broadband Internet providers may not block any lawful content, applications, or services – in other words, any lawfultraffic to or from end users – subject to “reasonable network management” (more below). Nor may providers block any non-harmful device from connecting to the network, though they may require that devices conform to widely accepted and publicly-available standards. Providers also may not impair or degrade traffic to the extent that it makes an Internet service effectively unusable (again, subject to reasonable network management). Furthermore, providers may not offer content, application, or service providers the choice of paying a fee or being blocked.

The order defines “reasonable network management” as follows:

A network management practice is reasonable if it is appropriate and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service.

Legitimate purposes would include, for example, ensuring network security and integrity and reducing or mitigating the effects of congestion on the network. Further development of the “reasonable network management” standard will be on a case-by-case basis. A practice is more likely to be considered reasonable if it is transparent, controlled by the end-user, and is use- (or application-) agnostic. A provider in doubt as to a particular practice may seek a declaratory ruling. 

Mobile broadband providers are subject, for now, to a “lite” no-blocking rule: they may not block any websites and they may not block applications that compete with the provider’s voice or video telephony services. (In contrast, fixed broadband providers may not block any applications).“Blocking” includes degrading to the point of unusability. This rule is subject to reasonable network management, which does take into account the nature of the network. It does not apply to management of applications stores.

DiscriminationFixed broadband providers may not unreasonably discriminate among lawful network traffic. In the FCC’s view, transparency would tend to make differential treatment more reasonable, as would end-user control. Differential end-user pricing for heavy use is permitted, and differential treatment of traffic that does not discriminate among specific uses would likely be considered reasonable. An arrangement between a broadband provider and another party to “pay for priority,” on the other hand, would likely be seen as unreasonable discrimination. The Commission will be paying particular attention to practices that:

  • harm an actual or potential competitor (such as an ISP/telephone provider degrading VoIP);
  • harm end users (by inhibiting them from accessing the content, applications, services, or devices of their choice); and
  • impair free expression (such as slowing traffic from a particular blog because the broadband provider disagrees with the blogger’s message).

For the time being, the discrimination rule will not apply to mobile networks, although the Commission intends to “closely monitor” the mobile broadband market and adjust the rules as it sees fit.

Jurisdiction

Section 706. In an earlier post, we noted that the Commission’s then-rumored Section 706 argument raised some eyebrows here at CommLawBlog. (Section 706 directs the Commission to encourage the deployment of advanced telecommunication capability to all Americans.) After a close reading of the order, we still have qualms about the rules’ ultimate durability if – when – they end up in court. 

In the Comcast decision last April, readers may remember, the D.C. Circuit tossed out Section 706 as a source of net neutrality jurisdiction. The FCC, said the court, was bound by its own 1998 holding that Section 706 conferred no independent authority. Now the FCC makes the argument that its 1998 holding was limited to forbearance authority, leaving it free to pursue other actions under Section 706. That’s not a bad argument –except that the Commission already tried it in the Comcast case, where the court thoroughly rejected it.

In the midst of regurgitating its Comcast brief, however, the Commission may have actually done what the D.C. Circuit said it needed to do – that is, expressly overrule its 1998 determination that Section 706 did not confer independent authority. Having arguably done so now, the Commission will have at least one new argument when it defends the new rules in court.

Titles II, III, and VI. The Commission also finds authority over broadband providers in its existing authority over services functionally similar to those now delivered over IP networks. So, since interconnected VoIP is a substitute for traditional voice, Internet access that delivers VoIP can be regulated as “contribut[ing] to the market discipline” of a Title II regulated service. Furthermore, the order explains, if calls to and from VoIP customers are not delivered efficiently and reliably by broadband providers, all users of the public switched telephone network would be limited in their ability to communicate. Finally, blocking VoIP could interfere with the interconnection requirement among telecommunications carriers.

Similarly, because the Internet is an increasingly important medium for radio and television programming, the Commission reasons that it can regulate the provision of Internet access under its Title III broadcasting authority. It likewise claims authority under Title VI to protect competition in the provision of multichannel video programming distributor (MVPD) services, such as cable and satellite television, by preventing cable operators and telephone companies from hindering delivery of competitive video service.

Wireless.The Commission’s authority over wireless services is quite broad. Wireless licenses are granted when the “public interest, convenience, and necessity” warrants, and may be modified after grant. From there, with little further explanation, the FCC asserts its right to impose net neutrality on wireless broadband providers.

First Amendment. Lastly, the Commission asserts that broadband providers are without First Amendment rights because they are mere conduits of speech, not speakers. There is no evidence, it claims, that providers use editorial discretion (such as cable providers have in the choice and arrangement of programming). Bolstering this conclusion are the arguments advanced by broadband providers themselves to deflect liability for transmitting unlawful materials. 

Complaint Procedures

The order adapts the Commission’s Part 76 cable access complaint rules to net neutrality complaints. Basically, anyone may file a complaint with prior notice to the defendant. Upon a prima facie showing that an open Internet rule has been violated, the burden to show reasonableness will shift to the defendant.   In addition, the public can file informal complaints using the FCC website (which we are pretty sure the broadband Internet providers will not try to block). If used, these complaint procedures will bulk up the record of recorded instances of “abuse”, retroactively bolstering the Commission’s analysis that a problem exists.

Committee

A new regime requires a new committee; in this case, the Commission has created an “Open Internet Advisory Committee.”

Oh, and the FCC will review all of this within two years, and adjust the rules as appropriate. Assuming the D.C. Circuit lets them live that long.

Ho-ho-ho - Net Neutrality Order Released

Who says the Christmas spirit didn’t survive the 20th Century? Not us! And, apparently, not the FCC, which took the time – on the eve of Christmas Eve – to release the full text of its Net Neutrality decision. All 194 pages. Actually, the decision itself is only 87 pages long, but then there are the Commissioners’ separate statements, the rules themselves, and a bunch of other stuff that brings the total count close to the 200-page level.

What with last minute Christmas shopping, decorating, baking, and other seasonally-appropriate festivities, we confess that reading the decision has not been a top priority. We do expect to delve into it promptly and will report on our findings, but in the meantime we’re providing the link (above) to the decision for those who want to check it out themselves.

If you’re worried about the immediate effects of the decision, you can breathe a little easy – none of the new rules will take effect until: (1) the Office of Management and Budget has had a chance to give them the once-over (as required by the Paperwork Reduction Act); (2) OMB has given them the thumbs up; (3) notice of the OMB’s approval has been published in the Federal Register; and (4) 60 days have gone by after that publication. In other words, you should be able to enjoy the year-end holidays.

And we here at CommLawBlog do wish all our readers the best of the holiday season.

FCC Adopts Net Neutrality Rules (Genachowski-style)

New rules, solidly endorsed only by the Chairman, seem to displease everybody else; Nagging problem of statutory authority (or lack thereof) persists

The FCC, nominally a five-member organization, proved to be more of a one-man band in the adoption of net neutrality rules. While the official record reflects a 3-2 vote in favor of the rules imposing “open Internet” limitson broadband Internet access service providers, closer inspection reveals that only one member actually favored the rules which have been adopted. The vote tally was: one in favor; two strongly opposed; and two unhappy-with-the-rules-but-willing- to-sort-of-go-along-with-Chairman-Genachowski. 

And with that ringing endorsement, net neutrality has become the law of the land . . . at least for the time being.

The full text of the rules (along with the accompanying order explaining them) has not yet been released. (Check back here for more in-depth analysis once the actual rules and order are available for review.) But from the FCC’s public notice announcing its decision, and from the separate statements of the Commissioners, we can report that, as anticipated, the key provisions of the rules are:

  • Mandatory transparency regarding transmission performance, traffic management practices and commercial terms of service (applicable to both wireline and wireless providers);
  • Prohibition against blocking of content, applications, services, or non-harmful devices (again, for both wireline and wireless); and
  • Prohibition against “unreasonable discrimination” among lawful network traffic (wireline only).

Notwithstanding these strictures, providers will still be permitted to undertake “reasonable network management”, but that won’t necessarily afford them much latitude. For example, paid prioritization is unlikely to be considered “reasonable” under any circumstances. Providers will be allowed to try to demonstrate that such prioritization is, at least in some cases, in the public interest, but they shouldn’t hold their breath: the staff has already indicated that such efforts are not likely to be successful.

Nor will ISPs be able to avoid the new “open Internet” rules by offering “specialized services”. The Commission is defining “broadband Internet access service” – i.e., the type of service subject to the net neutrality limits – as any service that is the “functional equivalent” of Internet, or that is designed to evade Open Internet protections. And the FCC is already warning that it plans to monitor “specialized services” offerings in order to assure compliance with applicable rules.

The new rules are somewhat softer on wireless providers than on their wireline compatriots. In particular, when it comes to blocking, wireline providers may not block any lawful content, applications, services or non-harmful devices; wireless providers, on the other hand, are only prohibited from blocking lawful websites and apps that compete with wireless voice/video services.  So, wireless carriers may block some kinds of lawful content and applications. 

This disparity in treatment between wireline and wireless may not be long-lived, though: the Commission has reserved the right to take another bite at the wireless apple in a couple of years.  

Nobody (with the obvious exception of The Chairman) is happy with the order.  Proponents of net neutrality think the new rules are weak and subject to circumvention; opponents think they are unnecessary and overreaching. Commissioners’ reactions vary from fretful disappointment and half-hearted (at best) support (Copps and Clyburn) to clear loathing (McDowell and Baker).  

Reaction on Capitol Hill has been predictable, with a number of Republicans expressing concern bordering on outrage at the FCC’s perceived effrontery. Look for legislative efforts to block or unravel the new rules early in the upcoming Term. Senator Hutchison has already announced that she plans to propose amendments to an omnibus appropriations bill as a way to prevent the FCC from implementing the rules. And on the House side, hearings may be scheduled to grill Genachowski about the rules. We are also hearing about possible efforts to invoke the Congressional Review Act to effectively overrule the FCC – although that approach, rarely used, would ordinarily require the President’s signature as well, and it’s pretty much a given that the President would not do anything to derail Genachowski’s efforts.

While reasonable people could – and do – disagree over whether there exists a need for regulatory intervention to prevent ISPs from acting as Internet gatekeepers, there is near-universal skepticism about the jurisdictional basis for the rules. Recall that, just last April, the U.S. Court of Appeals for the D.C. Circuit (in the Comcast decision) rejected the FCC’s claims that the Communications Act gives it the authority to regulate the Internet. The FCC’s claims were based in large measure on its reading of Section 706 of the Act. The Court emphatically tossed those claims.

So what is the basis for the new net neutrality rules? Why, Section 706, together with various strands of statutory thread clipped from Titles II, III and VI of the Act. (Since the FCC’s order has not been released, we don’t know for sure precisely how the Commission is using 706 this time around – but Commissioner Baker’s statement, for one, makes abundantly clear that 706 is being advanced as a major basis for the new rules.)  Commissioners Copps and Clyburn would rather have asserted jurisdiction over broadband Internet access service by reclassifying it as a Title II telecommunications service. That approach would raise a host of conceptual and practical problems, and the Chairman was apparently not prepared to head down that road. And he apparently had lost enthusiasm for the “Third Way” approach he tentatively embraced in the wake of the Comcast decision. So he and his staff have apparently re-woven familiar statutory strands, hoping (presumably) to create a sturdier fabric.

Whether this fragile weave of statutory floss holds together remains to be seen. The fact that the Commission has already taken its Section 706 arguments to the judicial well once and come up dry does not bode well on that front. To be sure, Chairman Genachowski and his staff may have been able to tease more nuances from Section 706 than they had previously. But in view of the Comcast Court’s seemingly flat-out rejection, it would appear that something more than nuances may be necessary. We await the inevitable court challenge.

Genachowski Signals Bold Net Neutrality Move

At Chairman's insistence, Commission will vote on new net neutrality rules in December despite shaky legal foundations and opposition in Congress.

On December 1, Chairman Genachowski announced that he has circulated a draft net neutrality order to be voted on at the Commission’s December 21 meeting. While the draft has not been made public, the Chairman’s announcement provides some insight into its contents. Here is an overview of the Chairman’s proposed approach, the Commission’s authority to implement that approach, and the likelihood of its success.

The Proposed Rules 

Genachowski’s remarks indicate that the current proposal is broadly similar to the one he introduced last Fall (you can read our report on that earlier effort here), with some refinements on specific issues like usage-based pricing and wireless. The draft is reportedly modeled on a net neutrality bill developed by departing House Commerce Chairman Henry Waxman (D-CA) earlier this Fall in an unsuccessful attempt to help the FCC out of its Comcast hole through legislative compromise. In particular, it appears that the proposed rules would include:

  • a transparency provision, with a requirement to provide consumers with information regarding network management;
  • a non-discrimination clause prohibiting the blocking of lawful content, apps, services, and devices as well as “unreasonable discrimination in transmitting lawful network traffic”.  The non-discrimination clause would allow for “reasonable network management”, taking into account the nature of the network in determining what is reasonable; and
  • some latitude for usage-based pricing to consumers and other measures to match price to cost. 

For wireless, the proposal would include transparency and a “basic” no blocking rule. The FCC would monitor the mobile market and take such further steps as may be necessary to counteract any “anti-competitive” or “anti-consumer” behavior.

Authority

According to Genachowski, the new rules would be grounded in a “variety of provisions” but will not rely on reclassification of Internet service from Title I to Title II (Title II being the portion of the Act governing basic telephone regulation) . Directly after the Comcast decision, FCC legal staff was leery of the shifting sands of Title I, leading the Chairman to propose a “Third Way” that would have reclassified ISPs as Title II carriers but spared them from most Title II rules. Now, however, Chairman Genachowski is backing off Title II, apparently satisfied that the FCC can find solid jurisdictional ground in Title I despite Comcast

Examining the Comcast wreckage, however, we don’t find many provisions left that could justify Title I ancillary jurisdiction over ISPs. The Comcast Court found that Sections 1 and 230(b) are merely policy statements, not direct delegations of authority. Section 256 failed because it explicitly states that nothing in it can be construed as expanding the Commission’s authority. Section 257 just requires a report; net neutrality regulations would not be “ancillary” to producing such a report. And the Court found no explicit provision that would allow the Commission to regulate the Internet in connection either with its Title III authority over broadcasting or with its Section 623 limited authority over cable. 

Left only half-dead were Sections 706 and 201.  But the Court found that the FCC was bound by its own 1998 conclusion that Section 706 grants no regulatory authority. And as to Section 201, the Court acknowledged that the FCC had, in its underlying Comcast order, laid out an explanation of possible Section 201 authority – but the Commission didn’t advance that explanation in defense of the order before the Court. As a result, the Court did not have occasion to assess the validity of that explanation. Although the Court did not expressly reject the ability of the FCC to rely on either of these sections for net neutrality authority, neither did it affirmatively approve either as a basis for ancillary jurisdiction.

To rely on Section 706, the Commission would first have to overrule its own earlier conclusion that that section grants no regulatory authority. Next the FCC would have to convince a court that net neutrality rules are “ancillary” to Section 706’s specific mandate directing the Commission to “encourage on a reasonable and timely basis the deployment of advanced telecommunications services to all Americans . . .”  Establishing such an “ancillary” nexus would be tricky, even with the copious deference the Courts routinely accord agency actions. Perhaps sensitive to the likely difficulties, the Commission started laying the groundwork for a possible future Section 706 argument last summer when, for the first time, it reported to Congress that broadband is not being deployed in a reasonable and timely way. Still, any effort to ground ancillary authority in Section 706 raises a lot of eyebrows here in the CommLawBlog bunker.

Finally, Section 201 grants the FCC broad authority to “prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this Act.” It’s not clear that this language could provide the “statutorily-mandated responsibilities” that the D.C. Circuit requires for ancillary jurisdiction, particularly when previously unregulated Internet services are involved. A court may well demand a more specific statutory directive to support ancillary jurisdiction.

Prospects

Congress. Genachowski says that the proposed order is a compromise, and that moving the item to a vote in December “is not designed or intended to preclude action by Congress.” Yet each of the four House Republicans currently vying to lead the House Energy and Commerce Committee has condemned the Chairman’s plans in the strongest terms, and Rep. Lee Terry (R-Neb) said that adopting a rule just before a new Congress was tantamount to an “act of war.”

But it’s not clear what the Republican opposition means in practical terms. It is conceivable that any net neutrality rules the FCC might adopt this month could be undone through legislative machinations. But at the end of the day, Republican rhetoric against the Commission’s current move to “regulate the Internet” may result in little more than aggressive oversight from the House Energy and Commerce Committee (think stern letters, lots of hearings, maybe even some finger-wagging).

Commission. It is not even certain that Genachowski’s proposal will meet the approval of a majority of the FCC’s Commissioners at the December meeting. As expected, Commissioners McDowell and Baker strongly oppose any action on net neutrality in advance of the next Congress – or at all. Baker said that the Chairman’s move to put it on the agenda in December “is a mistake. We do not have authority to act.” Commissioner McDowell called it an “ill-advised maneuver”; he also chided that “by choosing this highly interventionist course, the Commission is ignoring the will of the elected representatives of the American people.”

And even net neutrality proponents Commissioners Copps and Clyburn have stopped well short of fully embracing Genachowski’s proposal.  Both were hoping for Title II reclassification, and it is not certain that they will approve the Chairman’s somewhat watered-down approach.  Copps in particular believes that Title II would provide a stronger legal backing for net neutrality rules. He and Clyburn may, however, ultimately accept the Chairman’s approach as at least a step in the right direction.

Industry. Genachowski claims to have “broad support” for his proposal – he has certainly spent a lot of time meeting with various industry players over the past few months. But McDowell counters that “[p]ushing a small group of hand-picked industry players toward a ‘choice’ between a bad option (Title I Internet regulation) or a worse option (regulating the Internet like a monopoly phone company under Title II) smacks more of coercion than consensus or compromise.”  Industry support for the proposal seems to be lukewarm, at best.

And of course there is the possibility – or even likelihood – of challenge in the courts on the jurisdictional issues described above.

Summary

The Chairman’s actions at this point reflect more than mere concern over the future shape of the Internet. Both President Obama and Chairman Genachowski have taken strong positions on net neutrality and stand to lose credibility if the FCC doesn’t follow through. More broadly, the future of the agency’s regulatory clout looks very different depending on whether it can or can’t regulate IP-based communications. Clearly, the FCC’s practical ability to regulate services that perform telecommunications (Title II) and television (Title III) functions is likely to shrink as these types of services become increasingly delivered over IP connections.  The Chairman’s legal staff is working hard to frame a case for delegated authority over ISPs that doesn’t rely on reclassification or Congress; but it doesn’t have a lot to work with.

Deadlines Set In Further Net Neutrality Inquiry

Less than a week ago we reported on the FCC’s inquiry into two “under-developed issues” relative to the Network Neutrality debate. (The issues on the table include how the Commission’s Open Internet approach should address: (1) certain “specialized” services –  referred to in the NPRM as “managed or specialized services”; and (2) mobile wireless platforms.) The Commission’s notice has now been published in the Federal Register, thus establishing the deadlines for comments and reply comments. If you’re planning on filing comments, you have until October 12, 2010; reply commenters will have until November 4, 2010.

FCC Narrows Focus In Network Neutrality Dispute

Public notice seeks further comments on specialized and wireless services

 As all Network Neutrality aficionados know, last October the Commission took a huge step toward adopting Net Neutrality rules by issuing a Notice of Proposed Rulemaking (NPRM) in which it laid out six principles that would be codified in the FCC’s rules. (Check out our post about the NPRM here.) The proposal was, and remains, ambitious – and subject to considerable debate. That debate is complicated by the fact that Internet-related technological and commercial developments and innovations continue despite, or possibly because of, the pendency of the NPRM.

Apparently responding to some of those developments and innovations, the Commission has now issued an inquiry into two “under-developed issues” in its on-going “Open Internet” deliberations. In particular, the FCC is focusing on how its Open Internet approach should address: (1) certain “specialized” services (referred to in the NPRM as “managed or specialized services”); and (2) mobile wireless platforms.

Much has happened in the 10 months since the NPRM was released. Over and above the tens of thousands of comments which have been submitted in response to the NPRM, the Open Internet approach has been addressed, often contentiously, in Congress, at the FCC, and in countless other public venues. The discussion has been dramatically affected by the D.C. Circuit’s Comcast decision, which undercut the jurisdictional basis for the proposed Open Internet rules.  Chairman Genachowski has announced a novel “Third Way” proposal – not formally adopted by the Commission, but nevertheless supported by two other Commissioners and the FCC’s General Counsel – which might allow the Commission to achieve its Open Internet goals despite the limitations imposed by the Comcast decision. Negotiations have been held among the major players under the auspices of the FCC and Congress. And Verizon and Google have reached agreement on a “Legislative Framework Proposal” (Verizon-Google Proposal) intended, in their words, to “preserve the open Internet”.

With so many moving parts, it's little wonder that the FCC needs more information.

The Commission’s latest inquiry seems to respond in large measure to two aspects of the Verizon-Google Proposal. According to Verizon and Google: (1) as long as they comply with four general Open Internet principles (relating to consumer protection, transparency, non-discrimination, network management), Internet service providers should be allowed to provide other broadband services that would not be subject to the Open Internet rules; and (2) wireless Internet access service providers should be subject only to the transparency principle at this time. 

Well, isn’t that special?

With respect to the question of “specialized” services, the Commission is concerned that carving out exceptions for such services could undermine the ultimate effectiveness of the Open Internet principles. “Specialized” services include things like subscription video, telemedicine, or business services to enterprise customers. They’re services that are provided over the same last-mile facilities as “broadband Internet access service” (BIAS). They can in many instances look just like the kind of services normally available to the public through standing Internet access. But they are available only to those who sign up, and they typically incur costs beyond ordinary Internet access.

And that’s the problem.

Such “specialized” services can attract important private investment and can provide those willing to pay with new and valued services. There is therefore good reason to foster them by, for example, exempting them from Open Internet principles. In the NPRM the Commission appeared to recognize this and, accordingly, sought comment on how to define such services.

But the Commission is now focusing more on the possible risk that, if providers avail themselves of such an exemption, the whole point of those principles might be defeated. Providers might use the exemption to avoid Open Internet principles with respect to delivery of services that are substantially similar to standard broadband service. Or providers might devote so much of their capacity to such “specialized” services that the incentive and resources to expand standard broadband service would “wither”. The potential for anti-competitive conduct exists as well. And the risk of any of these undesirable consequences would be exacerbated if the public’s choices of Internet broadband service providers are unduly limited.

With these concerns in mind, the Commission suggests six possible approaches:

Definitional Clarity” – This would involve defining BIAS “clearly and perhaps broadly”, with the Open Internet principles applicable to such service. “Specialized” services not subject to the Open Internet principles would be those services with a “different scope or purpose than broadband Internet access service (i.e., which do not meet the definition of broadband Internet access service)”,. This is somewhat similar to the approach suggested in the Verizon-Google Proposal, which characterized the exempt services as “additional or differentiated services . . . distinguishable in scope and purpose from broadband Internet access service”. The main difference, it would appear, is that the FCC is contemplating a more inclusive definition of BIAS that would, presumably, narrow the range of services entitled to the exemption.

Truth in Advertising” – This heading – quoted directly from the FCC’s inquiry – is curious. The Commission’s brief summary under this heading refers to prohibiting providers from marketing “specialized services” as a substitute for BIAS. The Commission also suggests requiring providers to offer BIAS as stand-alone service. It is not clear that either of those suggestions necessarily involves “truth in advertising”.

Disclosure” – This approach would entail the required disclosure, by providers, of information about specialized services, including their effect on capacity and the BIAS market.

Non-exclusivity in Specialized Services” – Commercial arrangements for the offering of specialized services would have to be offered to all qualified parties on the same terms.

Limit Specialized Service Offerings” – Broadband providers would be allowed to offer “only a limited set of new specialized services, with functionality that cannot be provided via broadband Internet access service”. The Commission offers telemedicine as a possible example.

Guaranteed Capacity” for BIAS – Broadband providers would have to keep “providing or expanding” capacity allocated for BIAS regardless of any specialized services offered. Moreover, the provision of specialized services would be prohibited from “inhibiting the performance of broadband Internet access services at any given time, including during periods of peak usage”. Some of these suggestions are strong medicine, although for now, merely a starting point for discussion.

Going mobile

With respect to mobile wireless platforms, the FCC has asked in the NPRM how, to what extent, and when openness principles should be applied. Again, the Commission is concerned about furthering innovation, private investment and competition in the industry. In the most recent inquiry, the Commission seeks to update the record on these questions in light of intervening developments.

The two intervening developments that appear most significant to the Commission are: (1) the Verizon-Google Proposal suggestion that wireless broadband be exempt from all Open Internet principles other than transparency; and (2) the recent rise of wireless pricing plans based on the amount of data the customer uses. The latter, in particular, raises a serious question.

In essence the issue boils down to this. The need for “network management” – i.e,, blocking or slowing traffic – generally increases to the degree that network traffic approaches or exceeds network capacity. If usage-based pricing reduces congestion on wireless networks, will wireless operators have less need to use traffic management techniques that trigger open Internet issues?  

The latest inquiry raises far-reaching questions, and poses potential solutions, that are likely to generate considerable debate. Look for a further influx of commentary, for and against, as the deadline for comments approaches. (As of this writing the deadlines for comments and replies have not been established. Check back to www.commlawblog.com for updates.)

There is two additional intriguing aspects of the latest inquiry (and Chairman Genachowski’s separate statement in support of it). First, according to the notice, the “discussion” triggered by the Open Internet proceeding “appears to have narrowed disagreement on many of the key elements of the framework proposed in the NPRM”. Genachowski’s statement strikes a similar note. It is, of course, impossible to say for sure whether that gloss on the on-going deliberations is accurate. Certainly the Chairman would prefer it to be so. The response to the most recent may or may not tell a different story. 

Second, whenever the comment and reply deadlines happen to be set, the window for replies will not close before November 2. . . which happens to be Election Day. That means that the conclusion of the Open Internet proceeding, once expected by some to be set for September, will not happen before the upcoming election. In view of the high profile the issue of Network Neutrality has had on Capitol Hill – it’s probably no accident that Verizon and Google titled their magnum opus a “Legislative” proposal – an intervening election could have a significant impact on the fate of the Open Internet proceeding.   We shall see.

The Third Way: What's It All Mean?

Notice of Inquiry seeks definitions to help shape Third Way. We hope the FCC steps carefully in looking for answers.

When an appeals court here in D.C. overturned the FCC’s attempt to enforce “Net Neutrality” in April (reported here and here), the FCC had to come up with a new jurisdictional basis for its Internet policies. It needed a way to support not only the net neutrality rules it proposed in 2009, but also key elements of its proposed National Broadband PlanAs noted by my colleague Mitchell Lazarus, the FCC’s recently released Notice of Inquiry (NOI) attempts to craft a “just right” jurisdictional answer. The proposed “Third Way” is offered as a compromise between an overly burdensome, telephone-type Title II approach, and the Title I approach rejected by the Comcast court. In the process, the NOI raises – both intentionally and otherwise – revealing and challenging questions.

Trouble from the Start

Even a careful reading of the NOI leaves largely unanswered a basic question: What service is the FCC trying to regulate? The stated goal in the NOI is to define a pure Internet connectivity service which the FCC would regulate a “telecommunications service”. (The remainder of Internet access would be left under the current classification of “information service”.) But defining that narrow connectivity service will not be easy, and may not even be possible.

The problems begin in the first footnote of the NOI, where the FCC unhelpfully introduces new terminology, or (more accurately) uses a variation of an established term to mean something possibly different. Where the Commission had previously used the term “broadband Internet access service” for a bundle of services that allow end users to connect to the Internet, it now drops the term “access” and calls the bundle “broadband Internet service”. This seems backwards. According to Commissioner Copps, at least, the Commission is seeking only to regulate how people “get to the Internet”, not the Internet itself. Deletion of “access” certainly suggests that that the target of FCC regulation is getting broader, not narrower.

In the NOI the FCC refers to the component which it would regulate as “Internet connectivity service” or “broadband Internet connectivity service”.  This, too, gives rise to potential confusion and a need for careful definition.  

Historically, the Commission has defined the term “Internet connectivity” to include functions that “enable [broadband Internet subscribers] to transmit data communications to and from the rest of the Internet.” But this definition is probably  too broad to apply to the theoretically more narrow and discrete term “Internet connectivity service”. Apparently sensitive to this none-too-subtle nuance, the Commission solicits information on the specific functions necessary to allow end users to merely access the Internet, without more.

The Commission has previously used the term “Internet connectivity” to refer to a wide range of elements, including: the establishment of a physical connection to the Internet; interconnecting with the Internet backbone; and sometimes provision of numerous other features (think protocol conversion, Internet Protocol address assignment, domain name resolution, network security, caching, network monitoring, capacity engineering and management, fault management, and troubleshooting). Now the Commission wants to revisit “Internet connectivity.” But who is to make the call? Should ISPs be given latitude to define their own telecommunications service, should the FCC define only “bare minimum characteristics” of such service, or should the FCC step in and define “functionality, elements, or endpoints of Internet connectivity service”? Complicating the picture are important differences among the various technologies for delivering broadband Internet, and even among providers’ implementations of those technologies.

Re-engaging in this kind of functional analysis could be a dangerous task for the FCC.  After similar analyses, a pair of Commission orders in 2002 and 2005 concluded that the transmission component is so integrated with the finished Internet service as to make the two a single, integrated offering.  Is there adequate justification – based, for example, on changes in the functional components over the last decade – for adopting some alternate definition that splits the previously integrated components? In the NOI the Commission floats a few candidate explanations, none very persuasive.

Such salami-slicing can also have unintended consequences. To its credit, the FCC does ask commenters to describe the possible consequences of classifying Internet connectivity as a telecommunications service. But all of the business and technical consequences of such reclassification may be impossible to perceive at this point. And mistakes now could be hard to correct later.

Can the FCC Prevent “Un-forbearance”?

There is considerable agreement that full-blown traditional Title II regulation of Internet access would be unduly burdensome on ISPs, and ultimately harmful to the Internet. A key element of the “Third Way” solution is intended to limit some of that burden. That is, the Third Way includes a promise to forbear from applying most of the Title II statutory obligations to Internet connectivity.

A swell idea. But just how permanent could that promise be?

ISPs remain concerned that some future Commission could alter, or scrap entirely, the decision to forbear. Could the Genachowski Commission establish a policy of forbearance that would be immune from reversal at some point down the line? There is precious little precedent on these issues, although normally general administrative law contemplates flexibility to allow agencies to adjust rules and policies to deal with changed circumstances. Still, in the NOI the Commission seeks comment on possible provisions to “establish a heightened standard for justifying future unforbearance.” Crafting such provisions will take great creativity – and even if a plausible approach is identified now, it’s difficult to imagine that future Commissions, and (perhaps more importantly) future courts, will necessarily feel themselves permanently handcuffed by today’s Commission.

Make no mistake: today’s Commission is acutely aware of the problem. The NOI describes a sort of worst-case-scenario for ISPs. It runs like this. First, the FCC classifies Internet connectivity as a Title II service but forbears from applying many of the Title II obligations. Someone appeals the order, as someone usually does. The reviewing court upholds the Title II classification, BUT vacates some or all of the forbearance, thus requiring the FCC to regulate more heavily than the current FCC thinks is necessary or appropriate.  (Yes, a court could do that, if it thought the statute requires it.) The result: The Internet would be subject to precisely the full-tilt Title II burdens that the Genachowski Commission hopes to avoid through the Third Way.

In an attempt to plan ahead, the FCC asks how it might deal with that scenario. One option, of course, would be to undo the Title II classification, much as the proposed Title II regime would undo earlier orders that combined transmission and information services into a single offering under Title I. But the undoing would be neither easy nor quick, and would itself be subject to judicial review. Just the possibility of these events creates a degree of regulatory uncertainty that many people (including Commissioners McDowell and Baker) fear will limit crucial investment in the nation’s broadband network. But  the FCC’s current route to Net Neutrality runs straight through this particular minefield.

The NOI asks some hard questions. We look forward to seeing the FCC’s answers.

[Post-script: As this blog was being prepared for posting, the press reported that a number of top FCC officials have recently met with representatives of AT&T, Verizon, Google, Skype and the National Cable & Telecommunications Association – and possibly others – in what were referred to as “negotiations” looking toward a possible compromise that would enable the FCC to enforce Net Neutrality rules without having to overhaul the regulatory rationale for such rules. While not unheard of, this sort of gathering this early in a proceeding is certainly unusual.   It will be interesting to see how much of the resolution to this complex regulatory problem will be negotiated among the parties, and how much will be imposed by the Commission.]

Previously, On "The Third Way" . . .

Facing a communications universe well beyond anything contemplated by the drafters of the Communications Act in 1934, or even the authors of the 1996 update, the FCC has been forced to improvise – most recently by taking a page from Goldilocks, looking for a “third way” that’s Just Right. On June 17, the FCC took the first formal step in what is likely to be a contentious process intended to determine how, if at all, the FCC will regulate the Internet.

But before we lift the curtain on the next episode of the drama, let’s recap:

A federal agency like the FCC has only the powers that Congress’s statutes bestow on it. Included in the Communications Act are two “titles” arguably relevant to broadband Internet regulation.

Title I lays out the FCC’s general powers, among them, the power to “perform any and all acts, make such rules and regulations, and issue such orders . . . as may be necessary in the execution of its functions.” When the FCC tried to proceed under this provision against Internet provider Comcast for selectively blocking customers’ content, the federal appellate court in D.C. slapped it down, with a ruling that the language is insufficient to support network neutrality regulation. See our further analysis here.

Title II, in contrast, originated in 1934 as a vehicle to regulate telephone companies. Because telephony was then a monopoly, Title II includes detailed provisions allowing the FCC to regulate rates and terms of service, among other things. Most of those are now obsolete, even as to telephony.

With the Comcast court having taken Title I off the table, any FCC effort to regulate network neutrality must turn to Title II. There, though, the FCC is hobbled by its own prior actions. Its 1976 Computer II decision limited Title II regulation to the transport of data, and excluded content from Title II coverage. And then, in a series of rulings through the early 2000s, the FCC removed Internet broadband delivery from Title II altogether.

In response to the Comcast decision, and as reported here previously, and also here, the FCC is now contemplating a small step backwards. It has released a Notice of Inquiry asking for comment on its proposed “third way” approach: to re-regulate the transport component of broadband Internet service, but to impose only those rules needed to implement “fundamental universal service, competition and small business opportunity, and consumer protection policies.” This included network neutrality.

The proposal is extremely controversial, here in Washington (like pretty much everything else, here in Washington). Two of the five FCC Commissioners argued against it, as will most Internet providers. Many others will argue in favor. (Want to tell the FCC what you think? Drop us an email and we’ll tell you how.)

And now stay tuned for the next (but almost certainly not the final) episode of “The Third Way”.

Saving Network Neutrality - Make Way For The Third Way

FCC Chairman moves to re-regulate broadband Internet transport function, but network neutrality may fall by the wayside.

Stymied by the Comcast decision in his efforts to impose network neutrality, Chairman Genachowski is asking the FCC to back up and come at the problem again, this time from a different angle. He calls his approach “the Third Way.” The other two Ways, both rejected, consist respectively of too little and too much regulation. So we think instead the Chairman should name his choice the Just Right Way. But the name is not its only problem.

From a regulatory standpoint, Internet service is a combination of two very different things. One is the provision and selection of content, called an “information service” (IS, for brevity). The other is the transport of that content between the Internet provider’s facilities and the customer’s phone or computer, a function termed a “telecommunications service” (TS). Any FCC power to regulate IS comes from Title I of the Communications Act, which provides its somewhat vague authority to regulate wire and radio communications generally.  But when the FCC first drew the IS/TS distinction – in the pre-Internet days of the 1970s – it forbore from regulating IS.

By contrast, the Commission then chose to regulate TS under Title II of the Act, the same statutory regimen that governs telephone service. Title II unquestionably gives the FCC enormous authority over rates and conditions. Among other rules, the Commission required the phone companies to accommodate other Internet service providers on their dial-up phone lines (and still does). The resulting competition effectively prevented any dial-up provider from short-changing its customers on content.

When broadband arrived, the FCC made a drastic change. It treated IS and TS as one combined service subject to the same regulatory approach as IS – i.e., under Title I only. Soon afterwards, Comcast began to selectively interfere with customer content; the FCC ordered it to stop (in the name of net neutrality); and Comcast challenged the order in court. 

In defending against that appeal, the FCC was badly constrained. Having relinquished Title II, it had to argue that the indeterminate language of Title I was enough to support network neutrality rules. And since Title I has no actual words on the subject, the FCC could rely only on the claim that Title I provides it “ancillary” authority. Wrong, said the court, to the joy of cable companies and phone companies everywhere.

Now Chairman Genachowski is looking for some way out of the hole. And that way is the Third Way.

The Chairman proposes to undo a key part of the Commission’s pre-Comcast broadband decisions. He would re-separate TS and IS, and once again regulate the TS transport component under Title II. (A good idea, some of us thought, when it was posted here several weeks ago.) But the Third Way is self-limited in its reach. Rather than impose the full panoply of 1950s telephone-type regulation, Genachowski would limit the Commission to controlling only unreasonable denials of service and “other unjust or unreasonable practices.”

We foresee a problem. Network neutrality – a prohibition against Internet providers discriminating on the basis of content – does not strike us as an element of TS transport. That makes it a poor candidate for regulation under the new Title II regime. To us, network neutrality makes more sense as an element of IS. But the FCC proposes to leave IS under Title I, as it probably must, as a legal matter. Now the quandary: an FCC that tries to impose information-based network neutrality under Title II, as part of the transport function, is likely to find itself back in court. Where it may well lose yet again.

We offered a solution to that problem: namely, give broadband facilities owners the option of either: (a) opening their systems to competing Internet providers under Title II rules; or (b) being free of such rules, so they could exclude competitors, but instead being subject to network neutrality regulation. An opening-to-competition rule is more plausible under Title II than a network-neutrality rule. But the Chairman has unwisely taken this option off the table, no doubt in hopes of muting cable and telephone opposition to the rest of the proposal. Which leaves him in the awkward position of using a screwdriver to pound in a nail.

On the other hand, network neutrality may not be the Chairman’s biggest concern, as the Comcast decision also threw into doubt the FCC’s authority to implement large pieces of the National Broadband Plan.  Chairman Genachowski may figure that tossing network neutrality overboard is worth it, if that can save the rest of the plan.

So far the new approach takes the form of a personal statement by the Chairman, with more detailed support from the FCC’s General Counsel. While ordinarily a statement by a single Commissioner, even the Chairman,  does not constitute agency action, Commissioners Copps and Clyburn have previously signaled likely agreement with the Chairman’s plan, providing a majority. Commissioners McDowell and Baker, by contrast, have expressed strong reservations.

A notice-and-comment rulemaking is needed to translate the Chairman’s vision into actual rules. The lawyers on all sides are warming up their laptops. Prepare for a long, hard fight, and don’t expect a final resolution any time soon.

A Lobbyist's Look At The Comcast Question

Looking for net neutrality authority at the FCC? You might be one letter off. 

[Blogmeister’s Note: CommLawBlog.com welcomes back guest blogger Catherine McCullough, principal of Meadowbrook Strategic Government Relations, a D.C. lobbying firm. We are pleased that Catherine has agreed to share with our readers her thoughts on how the Administration might deal with its Comcast problem.]

Across the post-Comcast playing field, the governmental players are staking out their positions on the question of who, if anybody, has the authority to enforce network neutrality. 

A recent hearing before the Senate Commerce Committee provided examples: Chairman Rockefeller, emotionally describing how lack of service affected his constituents during the recent West Virginia coal-mining disaster, said he will put his considerable power behind writing a bill to give the FCC unambiguous authority to protect consumers; Ranking Member Hutchison – who doesn’t have the final say over any majority bill now, but whose party could hold all the cards if elections go Republicans’ way in November – warned the FCC that there would be consequences if it acted to reclassify. 

And in an exercise I’ve seen repeated in that Committee room by other agency leaders, Chairman Genachowski stuck to his written testimony and gently tiptoed around the hard questions (like how the FCC might plan to make the National Broadband Plan a reality given the new hazy regulatory climate).

If you were Mr. Genachowski, how would you deal with the conundrum of network neutrality in the aftermath of Comcast?

You could take up Rockefeller’s suggestion and ask Congress to give the FCC express statutory authority. But there are downsides of going to Congress for a remedy: chairs could shift during the November elections, and besides – would you really want to risk opening the Communications Act to amendments (shot clock, anyone?) And let’s not forget about timing – you want the NBP to move ahead now, not at some indefinite future point, after the full range of Congressional process has managed to inch its way to some (unpredictable) conclusion at some point in the indefinite future.

Or you could take Hutchison up on her challenge and reclassify internet access as a Title II telecommunications service. But as many have observed, that would almost certainly lead back to court. 

Or maybe, as Fletcher, Heald’s own Mitchell Lazarus has suggested, the FCC could find a more tailored way out.

Both of the last two options, however, involve the FCC re-jiggering its own legal authority from within – which risks potential punishment from the minority party (not a purely hypothetical risk, as Hutchison’s comments, noted above, demonstrate).

So what’s the answer? 

If I were Mr. Genachowski, stuck between a legal rock and a political hard place, I might look for some other way out of the bind – a way that would permit regulation of net neutrality while keeping my agency both out of court and out of any politically costly cross-fire in Congress. If only I had a protector. Or in this case, a consumer protector. You see where I am going with this: I would consider handing off the net neutrality hot potato to my regulatory siblings at the Federal Trade Commission (FTC). 

The FTC can’t regulate common carriers. But so far ISPs aren’t common carriers, thanks to the FCC’s consistent reluctance thus far to so categorize them. And if ISPs aren’t common carriers, the FTC can step in. (See tech attorney Glenn Manishin’s analysis of Comcast on this point.) 

Section 5(a) of the FTC Act gives the agency jurisdiction over “unfair or deceptive acts or practices”, and FTC Chairman Leibowitz has been willing in the past to assert jurisdiction in order to protect consumers. 

Remember, dear Readers, Chairman Leibowitz has sunk significant political capital into asserting his agency’s power over online commerce issues and other consumer protection initiatives that are threatened if someone in the government can’t enforce net neutrality. So the FTC could be expected to welcome the authority to regulate ISPs and implement net neutrality.

And – just as politically important here – if the FTC were to be deemed the principal locus of control over the issue, Chairman Rockefeller and his Senate Commerce Committee – and their colleagues on the House side – would lose no power. The Commerce Committees have oversight authority over both the FCC and the FTC, so allowing one of the two agencies to take up regulation in an area – say, net neutrality – previously controlled by the other agency would not realign Congressional power in any way. All Chairman Rockefeller has to do is ask his Consumer Protection Subcommittee Counsels to join his meetings with his Communications Counsels. 

But even if the FTC is standing by, ready, willing and able to take over, and even if that approach would likely be acceptable to the powers-that-be on the Hill, there’s still one big question: would Mr. Genachowski voluntarily give up the power he believes his agency has? Jurisdiction does not switch hands easily or often in this town, but Mr. Genachowski’s boss, President Obama, might not care which of his agencies holds authority, as long as his National Broadband Plan’s infrastructure is protected.

One thing, I believe, is certain: net neutrality enforcement authority will be assigned eventually. Like a handful of chips thrown into the air on a casino floor, no part of government’s power will be left un-gathered and unused. The only question left is who will pick them up.

Can Network Neutrality Survive Comcast v. FCC? (Spoiler Alert: Maybe.)

A look at successes of the past gives the FCC a way to move forward.

(Author’s note: Last November I posted an item here improvidently titled “How to Solve the Network Neutrality Problem.” My solution was overturned, along with the FCC’s efforts at Internet regulation, by the recent court decision in Comcast v. FCC. Below is a revised path to the same goal that still works after Comcast.)

Network neutrality advocates are in despair following the Comcast decision. That case arose when cable company Comcast selectively hindered customers’ access to certain file-sharing services. The FCC told it to stop. Comcast already had stopped, but went to court anyway to protest the FCC’s butting in. The court ruled for Comcast, asserting the FCC lacks authority to regulate Internet service providers. Comcast is free to decide what content to favor, impede, or block entirely. Read our account here

Network neutrality – the principle that Internet providers should treat content even-handedly – seems to be dead, waiting only for someone to close its eyes and straighten its tie.   The more desperate among its advocates – including at least one FCC Commissioner – speak openly about the nuclear option: a step called “reclassification.”  This means the FCC would reclassify broadband Internet service as a common carrier “telecommunications service,” thereby exposing it to a wide panoply of regulation. As my colleague Paul Feldman notes, reclassification would generate opposition from several industry segments and possibly Congress, and would certainly lead to protracted court appeals. Also the legality of reclassification is in doubt. Many components of Internet service simply do not fit the definition of telecommunications service (see below), and so are not plausibly subject to regulation.

Reclassification is a sledge-hammer. We need a scalpel. Fortunately, one is available.

Ah, the old days . . .

But first, a nagging question. The Internet has been popular for two decades. Why are we are talking about network neutrality only now? The anti-NN forces note that the stunning growth of the Internet occurred without regulation. Why not just continue?

True, there was no Internet regulation in the dial-up days, but an even stronger force was at work: competition.  The phone companies all had departments functioning as Internet service providers (ISPs). The FCC’s Computer III rules required the bigger phone companies to open their networks to competing ISPs. That gave most people dozens of ISPs to choose from. None of the ISPs dared tamper with customers’ content, because the customers could easily go elsewhere.

Then broadband appeared, and quickly became essential as web pages grew more complex. Most consumers have either one or two sources for broadband: the cable company, over the same wires that carry cable TV; and the phone company, first via DSL and later, in some areas, through fiber-optic cables. 

The DSL channel was originally subject to the Computer III sharing rules, but the cable never was. The FCC asked whether it should open the cable to competing ISPs, in the manner of Computer III.

Follow this part closely. To apply Computer III, the FCC would have to find that cable broadband is, or includes, a “telecommunications service” – that is, the pure transport of information, for payment, offered to the public. Common sense tells us that sending Internet pages over the cable has to involve a telecommunications service, among other things. But the FCC is not always bound by common sense. According to its 2002 order, the telecommunications component is not separable from the other components, such as interactive choice of content. The FCC resolved to treat the combined, non-separable service as non-telecommunications. That means Computer III does not apply. A cable operator need not open its facilities to competitors, and can require its Internet customers to use its own ISP service. Cable subscribers are not entitled to competition among ISPs.

The Supreme Court’s Brand X case subsequently upheld the FCC. But it did not say the FCC’s decision was the only right one. Rather – and this is the kind of thing that makes non-lawyers glad they picked some other line of work – the court deferred to the FCC’s right to make the decision. The distinction matters because, ruling the way it did, the Court could easily have supported even the opposite outcome from the FCC.

In the meantime, phone companies answered the FCC’s 2002 cable ruling with outraged filings about a “level playing field.” They still had to put their ISP competitors on the broadband channel, while the cable companies enjoyed the exclusive use of their own cables. In 2005, just a few weeks after the Supreme Court handed down Brand X, the FCC ruled that phone-company broadband was, like cable broadband, a combined service to be regulated as non-telecommunications. No more Computer III; no more competing ISPs.

As a result, if you have broadband Internet service, it is very likely that your ISP is the cable company or the phone company. And, if both companies serve your location, odds are your provider has tried to lock you into a long-term deal with a stiff early termination fee. Unhappy with the service? Tough luck.

Still, some people don’t want the Government intruding into the market for Internet services. Others don’t want a near-monopoly provider deciding what content they should receive. After Comcast, is there any hope for the second camp?

A possible way out

Suppose the FCC were to revisit that 2002 cable decision, the one holding the telecommunications and non-telecommunications aspects of Internet service to be inseparable. Could the FCC now change its mind, and separate out the transport-for-pay component as a telecommunications service? Then, instead of applying the full weight of common carrier rules, it could impose just one: a requirement like that in Computer III, requiring the operator to allow competing ISP on the cable. That would bring back competition among ISPs, and create a major disincentive to tampering with content.

Until last year, this would not have been workable. An agency like the FCC could not change its position without an intervening change of circumstances, such as a major shift in the industry landscape. But last year’s Supreme Court case of Fox v. FCC changed the rules on changing the rules. 

After Fox, the FCC need show only that the new policy makes sense – not that it makes more sense than the old policy. Admittedly, abrupt reversals of established policy have historically been disfavored for many good reasons, and such reversals may – as Brother Feldman observes – still be subject to attack as unjustified. But Fox appears to given the agency considerably greater leeway to change its mind.

Had the FCC chosen to regulate the cable transport back in 2002, the cable companies would have gone to court, but they probably would have lost, under the reasoning in Brand X that defers to the FCC’s judgment. And if the FCC could have required ISP competition on the cable in 2002, then the Fox case strongly suggests they could do it today. 

The argument is even better for phone company broadband, which was subject to mandatory-competition rules until 2005. If anything, the case for requiring ISP competition is stronger now, in light of abuses by the providers, followed by the Comcast court’s closing off more direct remedies.

The process has one more step. The FCC can require ISP competition, as above, but not network neutrality, after Comcast. Either one – competition or neutrality – can protect consumers against content discrimination. So why not give the provider a choice? Undo the 2002 and 2005 broadband orders; regulate data transport as telecommunications; require providers to open their facilities to competitors – but waive that rule for providers that adopt network neutrality. Competition will flourish, or content will be available without discrimination. Either way, consumers come out ahead.

In The Wake Of Comcast: Quo Vadis?

FCC faces a range of options, none particularly attractive

As my colleague Mitchell Lazarus concisely analyzed here, the D.C. Circuit has vacated the FCC’s 2008 determination that Comcast’s network management practices violated the 2005 Internet Policy Statement. The Court held that the FCC’s attempt to enforce these particular “net neutrality” policies was invalid for lack of jurisdiction.

 Jurisdiction in this context means power or authority. An independent federal agency’s ability to take any action depends on the authority granted that agency by Congress. If Congress has authorized the agency to act, the agency may act; if Congress hasn’t authorized it, the agency may not act. Of course, things are seldom that cut and dried.  Sometimes Congress authorizes the agency to regulate in a general area but doesn’t mention anything about another, related, area.  (For example, prior to 1984 the Communications Act authorized the FCC to regulate broadcasting, but said nothing about regulating the cable TV industry.) The courts have agreed that, in such cases, the FCC may act in the not-specifically-mentioned area if such action is “reasonably ancillary” to the agency’s “statutorily mandated responsibilities”.

 In the Comcast case, the FCC claimed its regulation of Comcast’s practices was “reasonably ancillary” to a number of the Act’s provisions. But the D.C. Circuit concluded that none of the provisions cited by the FCC imposed any “statutorily mandated responsibility” to which the FCC’s regulation of Comcast might be deemed “reasonably ancillary”. And without that essential nexus, the FCC lacked the power, or jurisdiction, to do what it had done. As a result, the Court’s ruling also signaled that the FCC may lack the power to impose network neutrality principles.

 So where does the FCC go from here if it wants to promulgate net neutrality regulations? There appear to be four major options:

Appeal to the Supreme Court.  In its Comcast arguments, the FCC relied on the Supreme Court’s 2005 Brand X decision. That case involved the Commission’s determination that cable modem Internet access service is an “information service” subject to regulation under Title I of the Act, rather than a “telecommunications service” subject to Title II. In its Brand X

opinion, the Supreme Court observed that the FCC “remains free to impose special regulatory duties on [cable Internet access providers] under its Title I ancillary jurisdiction.” In Comcast, the FCC argued to the D.C. Circuit that that Supreme Court language established that the FCC could claim ancillary jurisdiction derived from Title I.

But the D.C. Circuit felt that the Commission was reading too much into that quotation. In the Circuit’s view, just because the Supreme Court said that the FCC had jurisdiction to impose some kind of regulation on ISPs under Title I doesn’t mean that the agency had jurisdiction to impose this particular regulation (i.e., “reasonable” traffic management); rather, the Circuit held, each claim for ancillary jurisdiction must be analyzed on its own merits.

Given that, the FCC could try to convince the Supreme Court to provide a broad interpretation of its Brand X language, broad enough to support the Commission’s claim of authority to regulate ISP traffic management. This would not be an easy case for the FCC. As the D.C. Circuit’s Comcast decision makes clear, the Supreme Court itself has, in a number of decisions, treated the concept of ancillary jurisdiction as narrow. Like the Circuit, the Supreme Court has held that each new assertion of such authority must be evaluated on its own terms.  So the prospects of a broad, result-changing opinion out of the Supreme Court are not good. Additionally, a trip to the Supreme Court would not be quick: it is unlikely that a decision would be released prior to June, 2011, even if the Supreme Court agreed to take the case (which it is not required to do – indeed, the Supreme Court routinely agrees to review only about 1% of the cases presented to it).

Go to Congress. Seemingly the most direct way to fix a lack of jurisdiction is to get Congress to eliminate that lack by enacting legislation specifically providing the Commission with the authority to do what it wants to do. While legislation is perhaps the most direct route, it is neither the quickest nor the surest. Bills designed to give the FCC such authority have been introduced over the last few years – but they have not progressed significantly. While it’s difficult (if not impossible) to pinpoint precisely why proposed legislation gets stalled, in this instance that may be attributable, at least  in part, to a preference by Congressional Democrats to give the FCC a chance to take a first shot at crafting net neutrality regulations. Another factor possibly staying Congress’s hand: a desire to wait and see what the D.C. Circuit would do in the Comcast case. But now that the D.C. Circuit has ruled against the FCC’s assertion of ancillary authority in this area, those two factors have been eliminated.  

While it may be possible to get legislation authorizing very narrow FCC regulation of Internet traffic management enacted before everyone’s attention turns to the November elections, that seems unlikely. Verizon has been calling for much broader legislation to re-write the Communications Act for the “Internet Age,” but that seems even less likely to occur before November, and Verizon’s proposal probably would not provide the FCC authority to adopt net neutrality rules. Indeed, it took years of work to get the last re-write of the Communications Act enacted in 1996.  

Re-classify the Transport Component of Internet Access to be a Title II Telecommunications Service.  The FCC has recognized for some time that their 2008 Comcast Order was in trouble (as anyone who attended the oral argument at the Circuit could have surmised).  Perhaps because of that, some Commissioners have been floating a possible alternative approach: re-classify at least some aspects of Internet access (including, e.g., the transport component) as a Title II telecommunications service. Since Title II unquestionably contains “statutorily mandated responsibilities” (more so than Title I), so the thinking goes, the Commission would be better able to establish that its regulation is “reasonably ancillary” to such responsibilities, thus avoiding the jurisdictional problem identified in the Comcast decision.

But this “re-classification” approach has its own problems. 

First, re-classification would require the reversal of multiple FCC decisions made between 2002 and 2006. Those decision classified cable modem, DSL, wireless broadband and broadband-over-powerline as “information services” rather than telecommunications services. To be sure, the FCC already has a pending “Open Internet” proceeding through which a record might be built in support of re-classification of Internet transport as a telecommunications service. But what would Net Neutrality advocates use to make the case that the Internet environment has changed so radically in the last couple of years: the growth of “edge” providers and third-party Internet applications? Another difficulty: the FCC’s reasoning back in 2002, upheld by the Supreme Court in Brand X, was that even accessing the world wide web required an integrated information service, not merely telecommunications transport. 

Further complicating matters is Congress. Would a majority of Congress be happy with the FCC taking things into its own hands, when many in Congress probably believe that re-classification (at least re-classification that involves increasing regulation on the re-classified service providers) is the responsibility of Congress, not the FCC.  

And, of course, re-classification would generate very strong resistance on all fronts from across many industry segments. Further lengthy court appeals would be certain. 

Build a Stronger Case for Title I Ancillary Authority.  In Comcast, the D.C. Circuit did not rule that it was impossible for the FCC to make the case for ancillary jurisdiction, just that the Commission had failed to do so here. The Court left open the alternative possibility that the FCC could assert jurisdiction over Internet traffic management if such regulation were in fact ancillary to the Commission’s responsibilities under Section 201 of the Communications Act (which requires that common carrier charges and practices must be just and reasonable). 

The potential for such an alternative arises from the fact that the Circuit declined to consider one line of argument presented by the Commission in support of its claim of ancillary jurisdiction. In its brief, the Commission argued that it could regulate Comcast’s practices because discriminatory practices that impact VoIP traffic affect the prices and practices of traditional telephone common carriers. But the FCC had not included that as a basis for its regulation back in its 2008 Comcast Order that was on review – and the Circuit (as well as most other courts) refuses to consider justifications for an agency action which are made only at the appeal stage, and not in the original action on review. So the ultimate strength of that particular argument has not yet been tested in court.

Accordingly, the FCC could use the pending Open Internet proceeding to build a record establishing a nexus to Section 201 responsibilities. However, the FCC’s Section 201 theories seem pretty far-fetched, and it is hard to conceive of other theories that could be stronger. And while the Court also left open the possibility that the FCC could try to show a nexus to its responsibilities to protect broadcast TV stations under Title III of the Communications Act, it is unclear if and how the FCC would take on that task.

Statements released by Democratic FCC Commissioners and legislators suggest that they are determined to move forward and find a way to enact net neutrality regulations. Of the alternatives set out above, re-classification of Internet transport as a Title II service currently seems to have the most momentum, but the Obama administration may choose to push one of the other alternatives, or perhaps to work on multiple paths at the same time.   Either way, we are sure to see the struggle over this issue continue.

Court Says No To FCC-Imposed Network Neutrality

FCC lacks authority from Congress to regulate provision of Internet services

Just three short weeks ago, the FCC took the Nation to the mountaintop and showed us the promised land of broadband – every man, woman, and child among us interconnected by high-speed Internet. Part of the dream foresees an Internet free of any provider’s control, giving everyone access to all of the content on the planet.

That last part – Commission-protected freedom from providers’ control – has now taken a serious hit from the U.S. Court of Appeals for the D.C. Circuit. The Court has concluded that the FCC lacks authority to require providers to treat Internet content even-handedly.

Comcast launched the case back in 2007, when it deliberately hindered its Internet customers’ access to certain file-sharing services (possibly, some critics thought, to protect its parent companies’ on-demand cable services from competition). Comcast stopped the practice after the story came out, and after its claims that it was “just controlling congestion” were shown to be untrue. The FCC subsequently imposed certain reporting and disclosure requirements on Comcast’s traffic management practices.  Comcast took the FCC to court, where we observed that the oral argument did not go well for the FCC.

The court has now ruled squarely for Comcast and against the FCC, holding that the powers granted to the FCC by Congress do not include the power to regulate Comcast’s provision of Internet service.

The FCC’s position was a little shaky from the start. It never had a rule prohibiting the Comcast action that caused all the trouble, just a loosely-worded policy statement. And nothing in the Communications Act, from which the FCC derives all of its authority, specifically authorizes control over Internet traffic. The FCC thus had to fall back on a claim of “ancillary authority,” based on a catch-all statutory provision that allows the FCC to do pretty much anything “as may be necessary in the execution of its functions.” 

But as the Court had previously held on a number of occasions, ancillary authority applies only if (1) some other statutory provision covers the subject matter, and (2) the challenged action is “reasonably ancillary” to the FCC’s exercising of its authority under (1). The FCC passed the first test, but not the second. The “other provisions” on which the FCC relied, said the Court, were either mere statements of congressional policy (which cannot support ancillary authority) or statutory provisions that miss the specific topics involved in Comcast’s behavior.

As a result, the FCC is legally barred from imposing or enforcing network neutrality.

The FCC still has a few options.  For example, it can ask the same court for a hearing en banc (Latin for “lots more judges”) or appeal to the Supreme Court. Or it can ask Congress for a law that gives it the authority it needs. There may be other alternatives as well, involving adjustments to the existing regulations for a better fit with the existing statutes, but their likelihood of success in court remains to be seen.

But right now, the view from the broadband mountaintop is a little murky. For the time being, at least, Internet providers are free to favor or block content as they choose. And no use complaining to the FCC.

Upcoming Appearances: Net Neutrality Maven Paul Feldman To Speak At OTTcon East

FHH’s Paul Feldman will soon be on the road again, speaking on Network Neutrality at OTTcon East in Atlanta on June 17.  OTTcon East is a conference focusing on “over-the-top” (OTT) services which rely on the Internet to deliver video content to the home.  (Think Internet-accessing game consoles, DVRs, disk players and the like, all of which permit content providers and consumers to by-pass traditional video service providers like cable.) 

Paul’s address (title: “Network Neutrality – Friend or Foe?”) will focus on – what else? – Net Neutrality.  In addition to providing an overview of the Commission’s 2005 Internet Policy Statement and its 2008 Comcast/BitTorrent Order, he’ll also address the FCC’s latest Net Neutrality proposals and related questions, including:

  • Would Net Neutrality rules help or hurt OTT video providers?
  • What impact, if any, will the proposed Comcast/NBCU merger have on Net Neutrality?
  • What impact, if any, will the FCC’s proposal to require Internet gateway set top boxes have on Net Neutrality?

The OTTcon event is dedicated to providing in-depth perspectives and critical analysis needed to address the challenges which OTT video pose for a range of traditional business models, such as those of pay TV operators, content owners, consumer equipment manufacturers, and over-the-air broadcasters.  For instance, among the featured speakers on June 16 will be:

  • Rick Ducey, Chief Strategy Officer of BIA/Kelsey, providing his take on the role of local broadcast TV in the development of OTT (sample grab: “adding free to air, local digital station into [the OTT] mix is becoming more attractive.”); and
  • Richard Yelen, Managing Director of Neulion, looking at the changing landscape of TV consumption and the pressure that is putting on cable, satellite and over-the-air providers to work OTT and IPTV into their distribution strategy.
  • Kevin Walsh, VP of Marketing for Zeugma Systems, getting technical about the “curse” of buffering of OTT video streams, which causes playback freeze-up.

More information about OTTcon East, including online registration, is available here.

Court Challenges FCC in Early Network Neutrality Test

Chief Judge to FCC lawyer: “How do you want to lose?”

If a recent oral argument before the U.S. Court of Appeals for the D.C. Circuit is any guide, the FCC may have a tough time imposing its proposed network neutrality policies. Unless Congress steps in to give it a hand.

The case (argued on January 8) arose from complaints that Comcast’s Internet service had deliberately and selectively interfered with BitTorrent file-sharing services. Comcast claimed it was just managing traffic on the network; opponents suspected Comcast of trying to shield the parent company’s cable operations from competition.

The FCC sided with the complainants. It did not fine Comcast, but imposed conditions intended to ensure that the practice had ended. Read the details here.

Comcast brought an appeal to the D.C. Circuit, raising two main grounds: (1) the FCC had no actual rule in place prohibiting what Comcast did (due process argument); and (2) the FCC could not have had such a rule because it lacks authority over an Internet provider’s handling of content (jurisdictional argument).

While it is always risky to predict the outcome of a case on the basis of oral argument, things look bad for the FCC – not only as to the Comcast case, but also in regards to its stated goal of adopting network neutrality rules.

The judges seemed to feed “softballs” to the attorney for Comcast, while giving the FCC lawyer a much harder time. We noted three particularly telling moments:

  • The Chief Judge asking the FCC lawyer, “How would you prefer to lose – [on due process or on jurisdiction]?”
  • Another judge pointedly asking the FCC lawyer, “Are there any limits” to the FCC’s jurisdictional claim? The lawyer seemed unable to come up with an answer that both satisfied the court and squared with his own theory.
  • The Chief Judge remarking, “The impact of our decision [on the FCC’s pending network neutrality rules] will be perfectly clear,” in a context suggesting the court expects to undercut the FCC’s ability to adopt those rules.

But even if the FCC loses this case, it would be a mistake to suppose that marks the end of network neutrality. There are two points to remember.

First, the FCC believes it has a decent argument for jurisdiction based on the Supreme Court’s Brand X decision, which has language supporting the FCC’s authority to regulate at least some aspects of Internet service.  The Comcast court appeared uninterested in hearing about Brand X. But the FCC could ask the Supreme Court to rule in its favor under that precedent.

Second, a loss here on jurisdictional grounds will be an invitation to Congress to step in and give the FCC whatever authority it needs to impose network neutrality. Recent congressional proposals have been a lot tougher than the FCC’s proposed rules.

Either way, an FCC loss in this court will only set off the next stage of the dispute.

FHH On The Road: Paul Feldman In Florida (And On The Internet)

FHH member and noted Net Neutrality maven Paul Feldman recently appeared at the TM Forum’s Management World America Conference in sunny Orlando. He spoke at the Conference’s keynote event, “Hype vs. Reality: What is the Role of Deregulation in Delivering a 21st Century Digital World?” (That's Paul on the right in the photo to the left.) For those of you who didn’t make it down to Florida for the festivities, no problem – you can catch Paul’s 15-minute Q-and-A presentation on net neutrality by clicking on this link.

Net Neutrality Hard To Enforce

FCC’s proposed rules good on paper, may do little in practice

The IEEE, a widely respected association of electrical engineers, posted the reflections of FH&H lawyer (and former engineer) Mitchell Lazarus on why the FCC’s proposed network neutrality rules may miss their target.  Read the piece here:

http://spectrum.ieee.org/telecom/internet/policing-net-neutrality

How to Solve the Network Neutrality Problem

Giving ISPs a choice about giving customers a choice

As we have reported elsewhere, the FCC has proposed rules to mandate “network neutrality.” Those rules would bar a broadband Internet service provider (ISP) from, among other things, discriminating for or against a provider’s content.

The big ISPs are implacably opposed to all such rules. We own the networks, they say, and we can run them any way we want. On the other side, in favor of the rules, are content providers who fear discrimination by the ISPs. The big providers in particular, like Google, not only want to compete with the cable and telephone companies, but they want to do it through the cable and telephone companies’ own ISPs.

Ironically, the problem that network neutrality would solve is one of the FCC’s own making.

In the dial-up days, there were two kinds of ISPs: (a) the ones run by the phone companies, and (b) all the others. The phone company ISPs had an enormous potential advantage in easy access to the innards of the phone system. Other things being equal, they could have out-performed and undersold everyone else and had the industry to themselves. But the FCC wanted a competitive market. In the 1985 Computer III proceeding, it required the phone companies to offer to all ISPs the same functional network access available to the phone companies’ own ISPs. (This oversimplifies a very complex ruling; for more, click here.)

The result of Computer III was a lot of ISPs. Customers in many areas could choose from hundreds. Eager to preserve clientele in such an intensely competitive environment, no ISP would dare tamper with any customer’s content. What we now call network neutrality was such a pervasive fact of life as to not even need a name.

With the advent of broadband, the FCC changed course. Phone-company DSL, in the early days of broadband, still implicitly came under the Computer III rules, and thus had to be shared with competing ISPs. But cable TV companies, which had never been subject to Computer III, had no such obligations. Non-cable ISPs clamored for access; the cable companies fought back. The FCC settled the issue in 2002: cable TV is not like telephone service and need not share its facilities. A cable company could require its broadband subscribers to use the cable company’s ISP.

That decision outraged the phone companies, who still had to share their broadband channels. But in 2005, the FCC extended the same ISP exclusivity to the phone companies. The Commission decided that DSL is a lot like cable after all, and so abolished the DSL sharing rules. If you wanted DSL, you took the local phone company as your ISP.

Now, having let the broadband ISPs lock in their customers with nowhere else to go, the FCC is shocked to learn that some of those same ISPs are blocking or slowing content that might compete with their parent companies’ offerings. How can the Commission protect broadband customers from the undesirable circumstances which the Commission’s own regulatory decisions have unintentionally fostered?

It is too late for the FCC to re-apply Computer III to broadband Internet. That opportunity has passed.  And so the FCC goes to Plan B: duct-tape network neutrality rules over the problem and make discrimination victims run the gauntlet of lengthy and possibly expensive enforcement proceedings.

There may be another way. The ISPs cannot easily be forced into giving access to competing ISPs. But perhaps they might be persuaded to give that access voluntarily.

Here is how it might work.

The FCC lays out a set of detailed, no-nonsense network neutrality rules that specify clearly what ISP behavior is banned. (Not like the newly proposed rules, which are vague and general.) The FCC also sets up a swift and certain enforcement procedure that penalizes violations. But it gives each broadband ISP a choice: (a) the ISP can opt to abide by the network neutrality rules; or (b) it can offer competing ISPs access to the broadband channel, equivalent to its own. If an ISP chooses network neutrality, it keeps the entire customer base for itself, but must be neutral as to content. If it opts to open its network, it can block or favor content as it chooses, although it risks losing customers who dislike the discrimination.

Many details remain be worked out. Could a cable or telephone company use its relationships with subscribers to market ISP services? Could an ISP reject network neutrality, yet still hold in customers with optional long-term contracts and early termination fees? How would the rules operate in a rural area with no competing ISPs?

But the principle is simple enough. A provider that chooses to abide by network neutrality must live up to that commitment, in exchange for its role as the exclusive ISP. Another that chooses to open its network will have to work with competitors as promised, in exchange for the right to play favorites with customer content.

In short, a broadband provider can have all the customers, or it can manipulate their content. It just can’t do both.

FCC Releases Net Neutrality NPRM - Let the Jousting Begin!

Regular readers of the CommLawBlog who know a lot about Network Neutrality (see, e.g., recent posts here, here and here) also knew the FCC planned to open a proceeding to adopt formal Net Neutrality rules. True to its word, on October 22 it issued a Notice of Proposed Rulemaking (NPRM) that did just that.

In 61 pages of detailed legal, economic, technical and policy analysis, the FCC proposed:

  • to codify the four principles the Commission previously articulated in its 2005 Internet Policy Statement;
  • to codify a fifth principle that would require a broadband Internet access service provider (IASP) to treat lawful content, applications, and services in a nondiscriminatory manner;
  • to codify a sixth principle that would require an IASP to disclose information concerning network management and other practices reasonably required for users and providers of content, applications and services to enjoy the protections specified in this rulemaking; and
  • to make clear that the principles are subject to reasonable network management, and would not limit an IASP in delivering emergency communications or addressing the needs of law enforcement, public safety, or national or homeland security.

The NPRM also requests comments on:

  • a category of “managed” or “specialized” services, how to define them, and what principles or rules, if any, should apply;
  • how the new rules should govern non-wireline forms of Internet access, such as mobile wireless (an especially fertile ground for dispute), unlicensed wireless, licensed fixed wireless, and satellite; and
  • enforcement procedures that the Commission should use to ensure compliance.

Some noteworthy details:

  • While the proposed rules would apply to broadband Internet access, they would not apply to dial-up Internet access, or to private “intranets.” The exemption for dial-up may offer some comfort to small and rural Internet service providers.
  • Unlike the FCC’s existing Internet Principles – which state what “consumers are entitled to” – the proposed rules are phrased as obligations imposed on IASPs. But this raises the issue of what sorts of entities the rules should apply to. AT&T has called on the FCC to apply Net Neutrality rules to application service providers such as Google, as well IASPs. While the NPRM seeks comments on that idea, the rules as proposed would apply only to IASPs.
  • The proposed Non-Discrimination Rule would prohibit IASPs from charging content, application, and service providers for enhanced or prioritized access to subscribers, but makes no mention of charges to the end users. This might allow, for example, the end user to subscribe to a service that increases throughput (and hence quality) for a video channel, even if it reduces throughput to the same user’s other applications. The Chairman did say at the meeting that users should have the final say on their own Internet experience.
  • The NPRM tees up the issue of whether so-called “managed services” should be exempt from some or all of the Net Neutrality rules. Examples include IP-enabled cable television-like services (AT&T’s U-verse, Verizon’s FIOS video), facilities-based VoIP services, and telemedicine applications. These are delivered over the same network facilities as Internet access, but are not themselves traditional Internet services. This issue will almost certainly be hotly contested.
  • The NPRM asks whether only “unreasonable” discrimination should be prohibited. Such a limitation would allow forms of discrimination that may be desirable for end users (e.g., to promote quality of service for a particular application). While the IASPs can be expected to support that approach, there may be a catch: the concept of prohibiting “unreasonable discrimination” has traditionally be a fundamental component of common carrier regulation, and IASPs do not want to be treated as common carriers. Additionally, drawing the line that defines “unreasonable” will be a contentious task.
  • In exploring the “transparency” rule, the NPRM seeks comment on the proper balance between giving consumers the information that they need and overwhelming them with detail. The NPRM also asks whether the transparency rule should require IASPs to give details of network management to content/application/service providers, and/or to the FCC. While the IASPs may have limited concerns about providing this information to consumers, they will likely fight this extension of the concept.
  • There will be numerous FCC “workshops” in this proceeding, and more importantly, a formal process of technical outreach led by the FCC’s Office of Engineering and Technology. The latter seeks details on what is reasonable network management, what is workable in terms of transparency, and how the FCC can prevent the rules from having detrimental impact.
  • Commissioners McDowell and Baker dissented in part, laying down their “markers” as to how they would oppose the Chairman’s proposal with the “factual and legal predicates” of the NPRM. Commissioner McDowell agreed on the need to preserve an open Internet, but wanted it done through non-government management entities such as ICANN and other voluntary entities – a “bottom up” rather than a “top down” approach. He argued that countries that regulate the Internet more than the U.S. tend to be less free than the U.S., and are waiting for the U.S. to enact more regulation in order to justify their own more intrusive and political regimes. And while the Chairman has stated that a goal of Net Neutrality is to protect innovation at the “edge” of the network, McDowell noted an unprecedented overlap between “edge” applications and “core” ISPs. He also suggested that any anti-competitive conduct by IASPs could be addressed by anti-trust laws.

Comments on the NPRM are due to be filed by January 14, 2010. Reply comments are due March 5, 2010.

Recent history suggests that the proceeding will be a titanic battleground. Time to strap on your armor, grab your lance, and head to the field of combat.  Let the tilting begin!

"Net Neutrality = the First Amendment of the Internet"? Not Really

A good slogan perhaps, but NOT the law

As the FCC prepares to impose its version of net neutrality upon wireless and wired Internet service providers (ISPs), the Internet is buzzing with comments on how such governmental intervention may affect the future development of the Internet. 

On the one hand are the application service providers (with Google leading the charge) who promote net neutrality as necessary for the preservation of the Internet. These folks did not invest in any of the transmission facilities that comprise the hardware pipeline of the Internet – but they are happy to rely on that pipeline to distribute their services.

On the other side are the ISPs (including folks who DID invest in the hardware) and technical experts who believe net neutrality is a solution in search of a problem and a dangerous overlay of regulation upon a dynamic, constantly evolving set of relationships.

This battle presents a range of legal issues. The question mentioned perhaps most often involves the FCC’s authority to regulate at all here:  the Commission (with a thumbs-up from the Supreme Court in the Brand X case) has held Internet data transmission to be an “information service” that cannot be regulated – well, at least not as common carriage. But if that’s the case, how can the Commission now try to impose common carrier-like obligations on ISPs?

Then there is the First Amendment of the U.S. Constitution.

Talk to the advocates of net neutrality, and they will tell you that net neutrality advances the interests embodied in the First Amendment. To them, net neutrality is the “First Amendment of the Internet.” This is an interesting way of looking at the First Amendment . . . because it is backward. To quote Adam Thierer in his very compelling blog about the issue:

After all, the language of the First Amendment could not be more clear when it says, “Congress shall make no law…” It doesn’t contain any caveats or footnotes. And the First Amendment most certainly was not intended as a tool for government to control the editorial discretion of private individuals or institutions. It was about restricting the power of the government to curtail speech and expression.

But net neutrality would open the door for government to exercise at least some control – and very possibly a lot of control – over speech and expression. So the advocates of net neutrality as the “First Amendment of the Internet” have it backwards. Further, they seem not to appreciate that those who would be most directly burdened by net neutrality, the ISPs, enjoy First Amendment rights like the rest of us. ISPs, too, have the right to be free from government regulation of their speech.  Ignoring (whether or not intentionally) that right, the net neutrality advocates  fail to acknowledge the burdens that would be imposed by net neutrality on the ISPs’ First Amendment right to choose to transmit, or not to transmit, particular viewpoints or messages. 

“What?” you say. “ISPs are not newspapers! They’re merely service providers.” If you were to believe that ISPs have no free speech rights, you would be wrong. Think about cable television, which is somewhat similar. Sure, cable companies have been required to carry local commercial television stations without being paid a dime for the carriage. But such carriage has been subject to repeated First Amendment attacks, attacks which were barely parried by a razor-thin 5-4 vote in the last go-around before the Supreme Court (in Turner). And the Supreme Court has repeatedly held – in the 1979 Midwest Video case, and again in the 1986 Preferred opinion, and once again in the 1994 Turner case – that cable companies do have First Amendment rights that exceed those of broadcasters.   (Of course, the more ISPs claim First Amendment protection because they are “speakers”, the more they expose themselves to additional potential liability, as suggested by our previous posts here and here. But that’s a blog for a different day.)

You might also argue that providing access to web sites, applications and content selected by the user is what the Internet is all about and, thus, net neutrality is merely requiring ISPs to do what it is that ISPs do. That is an interesting argument, but it ignores the fact that nothing compels an ISP to adopt any particular business model and nothing compels the ISP not to be a speaker. As stated above, the FCC treats ISPs as “information service” providers who cannot be compelled by the FCC to offer any service at all, let alone any particular type of service.  And this argument also begs the question of what will ISPs being doing in the future?

You might also be thinking that my view on the application of the First Amendment to ISPs is just a theory, and not something that has been decided by, say, a Federal court. Not entirely true. In 2000, a Federal District Court sitting in south Florida considered the constitutionality of a Broward County ordinance which required cable companies who use their systems for Internet access services to allow any and all ISPs to have access to the service on a nondiscriminatory basis. (It may come as no surprise that the ordinance was written by a local telephone company.) The court conducted a thorough analysis of this ordinance under the First Amendment and decided that a cable company offering Internet access service enjoys First Amendment rights and must be free to reject any ISP it wants to reject.

This observer believes that the FCC will have to conduct a thorough and searching First Amendment review of any net neutrality rules it may want to promulgate. I believe that the battle ground will be over the level of First Amendment scrutiny to which any FCC decision will eventually be subject. The FCC will undoubtedly argue that the toughest standard of judicial review -- i.e., “strict scrutiny” – is not applicable here.  The FCC will have to make that argument because “strict scrutiny” is almost always fatal to a speech restriction. To justify a more regulation-friendly “intermediate” level of review, the Commission can be expected to turn to the Turner and Preferred cases to support its theory that net neutrality regulations are content neutral.

This observer believes strict scrutiny is the appropriate standard here because ISPs cannot claim that they possess the type of “bottleneck monopoly” which cable possessed in 1994, and which led the Turner court to apply the intermediate level of scrutiny. Nonetheless, let’s say, for sake of discussion, that the FCC’s regulations will receive an intermediate scrutiny analysis, and the FCC will rely upon the Supreme Court’s opinion in Preferred to urge that, “[w]here speech and conduct are joined”, the interests of the regulator must be considered. Still, Preferred and Turner would require that the burden of proof be placed on the FCC.  That, in turn, would require the FCC to show a factual basis for its belief that net neutrality is needed. And as the Turner court held, “a content neutral regulation will be sustained if it furthers an important governmental interest that is unrelated to the suppression of free expression and the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest.”

This is where it gets sticky for the net neutrality proponents. Web sites and applications are not being blocked as a matter of course now or historically, except in instances in which sites depict the exploitation of children or in certain cases in which peer-to-peer applications hog too much bandwidth.  And if ISPs were to begin to block web sites and applications, what would the harm be? ISPs are operating in a competitive environment, and many new competitors are around the corner. For example, Clearwire has announced that it will bring WiMax services with a huge amount of channel capacity (i.e., more ability to move more bits) to over one-third of the population by the end of 2010 and two thirds of the population by 2017. Verizon Wireless, AT&T Mobility and other wireless service providers have announced that their 4G LTE offerings are just around the corner.

And let’s not forget the costs of regulation. As a regulatory lawyer of almost three decades  (and a former FCC employee, to boot), I can tell you without any reservation that regulatory authority inherently retards new and creative conduct  because of fears that the regulator may not like it, and because regulation inherently guides and restrains the development of markets and technology.

Regulating the Internet without hindering its development presents an especially difficult problem because the Internet is a rapidly evolving set of relationships that owe their evolution to technological developments and unique ideas for content and applications that simply cannot be anticipated.   The FCC appears to recognize that it may have problems attempting to regulate the Internet without thwarting its development – at least that’s the signal I get from  the broad principles which the Commission has proposed as its rules of the road for the Internet.

But how can the FCC’s proposed broad principles provide the clear rules of conduct that everyone will know and appreciate? They cannot. Litigation before the FCC will be the result. (Hint to FCC: better hire 50 or 100 lawyers for the Internet Litigation Bureau).   

Now you may be thinking that the FCC can react when its rules are found to hinder Internet development. Perhaps, but how fast?   Not fast enough. Regulators have a very difficult time adapting regulation to a fast changing marketplace. For one, the rules they must abide by under the Administrative Procedure Act and the Due Process Clause of the U.S. Constitution require a slow and cumbersome rule making process that cannot keep up with a fast changing industry. It is typical for the rule creation process to run for two or more years.

As I stated at the beginning of this blog, the Internet is buzzing with comments about the FCC’s soon-to-be-proposed net neutrality rules. And the net gets more robust every year, all without this proposed Government intervention that, excuse me, will meet some understandable and real crisis I have never seen. Doesn’t that say it all? In conducting my own research, everything I saw, I saw though my Internet connection. Strangely enough, I found only two articles that mentioned my position, and a host of articles that promoted “net neutrality as the First Amendment of the Internet.” Message to the ISPs: you are not doing a very good job of suppressing access to ideas that may hurt you.

Upcoming Appearances: FHH Attorney Paul Feldman To Give Webinar On "Net Neutrality"

Net Neutrality, a long-simmering issue, has exploded into the foreground of public debate as the future of broadband takes shape.  (If you have any doubt about that, check out our posts here, here, here and here, among others.)  And with the announcement that the FCC will be looking, in the very near future, to codify both existing and new Net Neutrality principles, we can expect it to stay in the foreground for some time to come.

If you’re looking for expert, in-depth, analysis of the Net Neutrality debate, FHH member Paul Feldman will be presenting a one-hour webinar on “Net Neutrality – What is it? Where is it going?” on Thursday, October 8, at 1:00 p.m. (ET). 

As an established telecommunications lawyer, Paul has been following the development of Net Neutrality closely for years.  He has written multiple analyses on the topic, including blogs here and here.  In his webinar he will be reviewing the debate over the substance of Net Neutrality proposals, and the FCC’s response – in its 2005 Internet Policy Statement and its 2008 Comcast/BitTorrent Order – to the evolving broadband landscape.  He will look at the Comcast conduct (some might say “misconduct”) that attracted the Commission’s regulatory attention last year, and the changes Comcast made to its network management practices as a result of that attention.  Paul will also address the Net Neutrality obligations which NTIA and RUS are tying to BTOP/BIP broadband stimulus funding.  Lastly, he will examine the new “Fifth and Sixth Principles” recently proposed by FCC Chairman Julius Genachowski to supplement the Commission’s Four Principles of Net Neutrality.

Clearly, the concept of Net Neutrality – however it is ultimately defined – will have an overwhelming impact on all aspects of the broadband industry.  Webinar attendees will come away with answers to important questions, including:

  • What practices have been focus of Net Neutrality discussions and regulations? 
  • What issues may trigger Net Neutrality concerns in the immediate future?

The webinar is being produced by Team Lightbulb.  A registration fee of $99 per computer will be charged.  For registration, go to https://event.on24.com/eventRegistration/EventLobbyServlet?target=registration.jsp&eventid=166037&sessionid=1&key=0B2AB783D63843E31A695E8145B8BFC9&sourcepage=register or call Mr. Sean Sullivan at 703-596-4133.

Two Cheers for Network Neutrality

Those who think network neutrality is the answer might be asking the wrong question

The recent announcement by the FCC Chairman of impending rules on network neutrality caused a lot of stir in the press, including our own coverage here. On the whole, we think network neutrality is a good idea. But it may not achieve the Chairman's stated goal: to preserve the open character of the Internet that fostered so much creativity and innovation in its early days. Those times are slipping away. No set of FCC rules, however well intentioned, will bring them back.

We quickly forget how the Internet used to be. Early technologies of other kinds – 8-track tape players, manual typewriters, tail-finned cars – are easy to remember because we have still examples to look at. But the early Internet has vanished without a trace, save in the reminiscences of the one-time early adopters.

Ah, The Good Old Days

Before the Internet was the precursor ArpaNet, which linked a few dozen major universities and Government facilities. Mainly it was a way to transmit research data, with a pasted-on afterthought called “email” to help researchers coordinate their exchanges.

As students and employees left the ArpaNet sites, they worked out ways to stay linked to the system over ordinary phone lines. Some set up connections their friends and colleagues could dial into, thus becoming the first Internet service providers (ISPs). Using the Internet in those days took technical know-how. Conveniences like URLs and clickable links had yet to be invented. There were few graphics, mostly just text. Access was by typing into command lines. Needed functions like “finger” and “Archie” and “Telnet” were complex and hard to use. Also we walked five miles to school in the snow.

Then, in 1991, came the World Wide Web.

Today many people think the Web and the Internet are the same thing, but in fact the Web was a late add-on. Suddenly anyone, with or without technical aptitude, could learn to use the Internet in a few minutes. One needed only to type an address or click a link. Thousands of ISPs sprung up to serve all the new users. In part because the FCC's earlier Computer II and III rules had assured ISPs equal access to the phone lines, competition among them was fierce. ISPs vied to bring the most content possible to their customers. People with obscure interests had a new way to find each other, to form on-line communities, and to trade conspiracy theories or antique car parts, as the case may be.

It is hard to remember now what a big shift this was. Before the Web, to reach a large audience required going through a book publisher, TV network, or some other powerful gatekeeper. But the Web allowed anyone with a computer and a phone line to make his or her views available to millions. Conversations surged around the globe on every conceivable topic, from the conventional to the bizarre, from cookie recipes to outlandish sexual practices. And yet, amid all this vigorous dialogue, there was almost no large-scale commercial content.   Big companies distrusted the Internet because they could not control it. The medium was too open, too accessible, too accommodating of contrary views.

When people talk about the good old days of the Internet, this is often the period they have in mind – roughly the early 1990s. The Internet itself was big, and getting bigger very fast, as new subscribers signed on in droves and new sites appeared by the millions. Amazingly, though, no one was in charge. The only form of control was a simple system for registering domain names. Any user could post any information and visit any site. Even if a company or government had wanted to limit information or access, there was simply no way to do it.

Large companies soon woke up to the fact that all those millions of computer screens were lighting up the faces of millions of consumers. Cautiously at first, companies began to test out the Internet, first as a marketing tool and then as a channel for conducting actual sales. One early use was for brochures promoting new cars and the like. Internet-only retailers such as Amazon appeared. Chains like CompUSA and Lands End began offering Internet sales in parallel with their physical stores and phone operations. And then came the insight that set off the dot-com boom. If you can sell something that need not be physically delivered in a box, like mortgages or insurance or travel services, then you can sell it on the Internet for little more than the cost of electricity.

As more big firms came to rely on the Internet, they took an interest in seeing it run reliably. The casual patchwork that served in the early days was gradually supplanted by a much larger and more expensive infrastructure run by behemoths like MCI. Other companies installed massive facilities around the country that replicated popular sites willing to pay for the service. A click to access Amazon.com would deliver the content quickly, from a server close by, while the site of a small, specialized bookstore across the country might take much longer to reach the screen. The simple domain-name set-up was replaced by a more complicated scheme that gave big companies a leg up over smaller ones. A plumber named Jim McDonald who wanted to use mcdonald.com for his company website was plumb out of luck.

With commercialization, web-page design evolved from a hobby to a profession. Content became richer and more slickly produced, with more graphics and photos and sound and even videos. End users became impatient with the time it took these increasingly sophisticated pages to load. Once modem makers had wrung the last few bits out of ordinary phone lines, the only recourse was broadband. Consumers signed up for it in droves.

The Narrowing Effect of Broadband

Building out a new broadband connection to every home and business was prohibitive. Fortunately there were wires already in place, and ways to upgrade them. Adding components to the phone company's gear made DSL possible over voice lines, while additions to the cable system allowed for two-way Internet along with one-way video. Other providers offer broadband over electric power lines, via satellite, and through fixed wireless connections, but none of these has made much of a dent in the market.

Where a dial-up customer could choose among a great many ISPs, a broadband customer usually had two at most: the phone company and the cable company.  That limited menu worried the FCC, which considered extending the principle of Computer II and III so competing ISPs could connect through the DSL and cable facilities. But the phone and cable companies insisted they would have no incentive to build out the networks if they had to share them with competitors. The FCC bought the argument, with the result that broadband ISP customers in most markets are limited to two providers at most. Only a few consumers live within range of municipal public Wi-Fi. Cell-phone modems are an option for some, although expensive. FIOS fiber-optic service is available here and there, but again is provided by a major phone company.

Protecting the Parent

When thousands of ISPs competed for subscribers, no one cared about network neutrality. Now we do. Why might the cable and telephone ISPs be more likely to discriminate than their predecessors?

The early ISPs were mostly small businesses, many of them literally mom-and-pop operations. Even the bigger players, like Netcom, were primarily ISPs. Today’s broadband ISPs, in contrast, are all in some other business. The ISP offering in each case started out as a sideline. While it has become a growing piece, the parent companies still have other interests to protect. 

That creates incentives for ISPs to discriminate against certain content. One category at risk is anything that directly competes with some other part of the ISP company. There was an outcry when Comcast blocked subscribers' access to BitTorrent videos, possibly to protect Comcast’s own video-on-demand service. (We reported that here.) Also in danger is anything that might expose the ISP parent to even a remotely theoretical chance of criminal investigation. The major ISPs shut down vast segments of Usenet, a widely-used group discussion service, because a minuscule portion might have been used for distributing child pornography. Subscribers needlessly lost access to enormous amounts of fully legal material. Another category to watch is anything the ISP parent company fears might offend someone’s political sensitivities. Verizon once refused to assign a text-messaging short code to a political group solely because it feared the political content of the messages might be controversial.

In the early days, vigorous competition corrected any such inclinations. But today a home or business broadband subscriber who wants access to blocked content has few options. In principle there is more competition for wireless broadband services, because there are more companies in the market. They certainly tout the fact. “The wireless industry is ultra-competitive,” says their trade association website, “and that means you win with a wide variety of service plans, options, and features from which to choose.” In practice, though, the providers’ use of handset tie-ins and early termination fees makes competition largely ineffective. AT&T won’t let iPhone users run VoIP services over its broadband network, and Apple won’t let any other carrier connect to the iPhone, so iPhone users who want VoIP are stuck. For many of the Verizon users outraged by the company’s hindering their political message, changing carriers would mean paying early termination fees and buying new handsets.

Network neutrality rules will help. The ISPs and carriers no doubt will make the same bat-and-ball argument they have in the past: they built the networks, they own them, and they can run them as they please. In fact, though, the broadband networks could be viewed as a semi-monopoly, and we often take measures to ensure that privately owned monopolies treat their customers fairly.

But let’s be realistic. Although network neutrality rules will look good on paper, they will be frustratingly hard to enforce. The Chairman proposes to evaluate alleged violations “as they arise, on a case-by-case basis.” To anyone who has spent time around the FCC, this is the formula for a slow and expensive process. An innovator with novel content who runs afoul of discrimination by the broadband ISPs will not often have the time and money to litigate against a deep-pocket telephone or cable company.

Network neutrality rules may deter some of the worst abuses. But they will not bring back the anything-goes character of the early Internet. Anything went, in those days, because control was physically impossible. Now that a few companies do have control – or at least the capacity for control – all we can do is tell them not to use it. That may not be enough.

Network Neutrality: The Chairman Sets A Course

Genachowski announces plans to expand, codify Network Neutrality Principles

In a speech this morning, FCC Chairman Julius Genachowski announced his intention to initiate a proceeding looking to the adoption of new rules designed to preserve and enhance the “openness” of the Internet, in accordance with the principles of “network neutrality.” (You can read the speech here or watch it being delivered here.) While the Chairman’s support for a so-called “Fifth Principle”, prohibiting discrimination by Internet service providers, was widely anticipated, he also made the surprising announcement of a “Sixth Principle” requiring broadband Internet service providers to be transparent about their network management practices.   A Notice of Proposed Rulemaking, to be issued in the near future, will certainly precipitate a hotly contested battle over the nature of “discrimination” and “reasonable network management.” 

Fifth and Sixth Principles? What are the first Four? Back in a different Internet era (2005), the FCC took a tentative first step in addressing the issues of Network Neutrality with its Internet Policy Statement (“IPS”). That laid out four “principles” designed to “preserve and promote the open and interconnected nature of the public Internet”. Specifically, the FCC stated that consumers are entitled to:

  • access the lawful Internet content of their choice;
  • run applications and use services of their choice, subject to the needs of law enforcement;
  •  connect their choice of legal devices that do not harm the network; and 
  • competition among network providers, application and service providers, and content providers.

Two elements of the IPS helped bring us to today’s announcement.

First, the IPS acknowledged the need for Internet service providers to engage in “reasonable network management” on their networks to minimize congestion and to limit illegal activities on the Net. Second, the FCC chose to give itself maximum flexibility by announcing only “policies”, rather than rules, in light of the rapidly developing nature of the Internet and the market for Internet services. This choice would come back to haunt the FCC in its first major network neutrality enforcement action. In a 2008 Order, the FCC held that Comcast’s practice of blocking consumers’ use of peer-to-peer applications violated the principles of the IPS. The Commission required Comcast to alter its network management techniques, and make its new techniques known to subscribers. While Comcast claimed to have already complied with those requirements, it nonetheless appealed the FCC’s Order to the D.C. Circuit, arguing that the Commission lacks the authority to regulate Internet traffic generally, and specifically with use of “policies” rather than “rules.” Comcast’s appeal is still pending – the FCC’s brief to the Court was filed today – and no decision is likely until the first part of 2010, at the earliest. (For some history on the Comcast dust-up, read our previous post here.)

One motive for the Chairman’s launch of a new proceeding may be to beef up the FCC’s enforcement abilities by enacting actual rules, in case the Comcast Court holds that “policies” alone just don’t cut it.  And the proposed “Sixth Principle” seems designed to prevent Internet service providers from engaging in discrimination disguised as traffic management, as Comcast may have done. Still, there will be serious debate as to the level of “transparency” that best balances consumer interests with legitimate operator requirements for network security and prevention of harmful or illegal use of the Internet.  

The debate will be even more heated over the proposed rule embodying the “Fifth Principle” of non-discrimination.  As summarized by the Chairman today, “broadband providers cannot discriminate against particular Internet content or applications.This means they cannot block or degrade lawful traffic over their networks, or pick winners by favoring some content or applications over others in the connection to subscribers’ homes. Nor can they disfavor an Internet service just because it competes with a similar service offered by that broadband provider.” But even the Chairman acknowledged that the inquiry will reveal difficult policy issues.  For example, what if a consumer wants to use an application that maximizes the through-put and thus the quality of streaming music or video, but that application reduces the quality of the consumer’s other Internet applications while in use? Should this be prohibited “discrimination,” even if it is openly chosen by the consumer? One could easily answer “no.”

Similarly difficult questions will be triggered regarding the FCC’s legal authority to regulate an “information service” such as broadband Internet. There will be complex technical issues involved in defining “reasonable network management.” And, in light of the core role of the Internet in personal and political speech, First Amendment issues could get a rigorous work-out. But, as Bruce Springsteen has sung, “sooner or later it all comes down to money,” and that’s what the real battle will be fought over.

Some will argue that heavy regulation of Internet operations threatens the current business models under which large ISPs invest the funding necessary to expand and maintain a high-speed network. Large Internet application and content providers, as well, have their own marketing and financial interests in how traffic is transmitted. Many of these parties will argue that innovation in the network requires the government to keep its hands off. But the Chairman has already anticipated these arguments. He argued in his speech that truly transformative innovation has historically come from small entrepreneurs operating on the “edges” of the Internet. Non-discrimination is required, according to the Chairman and his supporters, in order to make possible the next Facebook, eBay or YouTube. 

Things have already begun to move quickly after the Chairman’s speech:  the Republican Commissioners, McDowell and Baker, have already fired back their critique of the Chairman’s approach.  (You can read it here.)  They express concerns that “factual and legal conclusions may have already been drawn” prior to the release of the NPRM.  They also stress their views that rules should not be based merely on “anecdotes” of problems, and that innovation and investment need to be protected in the core of the network, as well as at the edges. It appears that the battle is on!

The Commission is to be commended for opening up the debate, and making it accessible through new media. Check out the FCC’s new web site at www.openinternet.gov, which contains a video blog from the Chairman and space debating the issues. But even the best technology will not, by itself, yield easy answers to complex questions.