CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

“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.

The Big Two had argued that imposition of a data roaming rule would permit others to piggy-back on the networks the Big Two have spent good money – and lots of it – to build out.   By limiting the new rule’s application to facilities-based CMDS providers, the FCC ensured that the entities seeking roaming privileges would at least have constructed and operated their own facilities somewhere. Even so, the new rule does open the roaming door to the many providers of Internet access, both large and small, who purvey “information services” and are therefore not common carriers.

This latter point raises some questions here at CommLawBlog. The new rule defines CMDS as any mobile data service that is: (a) not interconnected with the public switched network (PSTN); (b) provided for profit; and (c) available to the public or such classes of eligible users as to be effectively available to the public. Except for the bit about interconnection with the PSTN, that’s pretty much the definition of what we used to call a common carrier. Yet the FCC is at pains to insist that it is not treating CMDS providers as common carriers. That’s because such treatment would be forbidden by Section 332(c)(2) of the Communications Act, which prevents the Commission from treating private carriers like common carriers. 

The trick for the FCC was to impose virtually the full panoply of common carrier obligations on facilities-based CMDS providers but to do so outside the realm of normal Title II regulations applicable to common carriers. Those obligations include the duty to interconnect by providing roaming and the duty to do so on “commercially reasonable terms and conditions” (query: is that different from the “just and reasonable” terms that common carriers must offer?). And the targeted carriers are subject to the threat of enforcement through an FCC complaint process.

The distinction in the FCC’s mind seems to be that CMDS providers can negotiate individualized terms and conditions with different companies; they are therefore not bound by the fundamental common carrier obligation to offer the same terms and conditions to all similarly situated customers. However, that characterization seems to contradict the FCC’s own definition of a CMDS provider, which requires an offering of service to the public at large. This tension creates a fault at the very center of the FCC’s regulatory scheme which may be difficult to slip past alert appellate eyes. The FCC continues to impose common carrier-like regulations on services which it is afraid to call common carriage. At some point, however, the quacking gets too loud to avoid calling it a duck.

More granularly, the FCC neatly dealt with a number of the objections raised by the Big Two. It was claimed that, because of the volume of roaming service expected to result from the data roaming obligation, carriers would be swamped and thus unable to serve their own customers. But the FCC has made it clear that CMDS providers can give their own customers priority if capacity becomes squeezed.

There were also questions about how incompatible data technologies would be handled. The FCC declared that facilities-based CMDS providers will not be required to offer data roaming if the requester’s system is incompatible with the host system or would require the host provider to change its own system to accommodate the requesting entity’s service. Finally, to preclude would-be piggybackers from installing older generation data systems on their own systems while taking advantage of newer 3G or 4G technology on other companies’ networks, the FCC said that a roaming provider could condition access to its service on the availability of comparably advanced technology from the requesting company.  

These exceptions to the general rule served to assuage the major concerns raised by the Big Two while also significantly reducing the likelihood that  potential requesters will qualify for roaming privileges. Given that the Big Two were already pretty stingy about entering into roaming arrangements under the existing roaming rules (which brook few exceptions), the possibilities for jerking requesting companies around under the new scheme are endless. And here, because CMDS is not a common carrier service, the award of damages through the complaint process is not a possibility.   So the FCC has de-fanged and de-clawed hapless roaming requesters at the outset.

We offer, in closing, two observations.   First, the concept of “interconnection” with the PSTN may one day become broad enough to make that element of the CMDS definition meaningless. Eventually all communications will be IP-based, a fact the Commission is addressing in its effort to reform the intercarrier compensation regime – and that eventuality will erase the already thin line between CMRS and CMDS. Second, the FCC carefully chose to base its jurisdiction over CMDS on its authority under Section 303 of the Act – the bit that allows it to impose conditions on radio licenses. This had the appeal of avoiding yet again the question of whether Internet access should be deemed an information service rather than a telecommunications service. However, there are many facilities-based CMDS providers who use unlicensed spectrum. They would appear to be covered by the rule even though the Commission lacks the jurisdictional underpinning necessary to impose the rule on them.   So go figure.

As with so many FCC rulings of late that try to establish a new regulatory paradigm for the Internet Age while using hopelessly outdated service categories, this one promises to keep legions of lawyers toiling for years to come.

It was a close case, with merit to both sides, but the FCC came down on the side of the smaller operators: it mandated home roaming upon request. The Commission eased the sting somewhat for AT&T and Verizon by permitting a carrier presented with a roaming request to rebut the presumption that such a request is reasonable.

With the announcement of the new National Broadband Plan last month, the table appeared set for the Commission to also act on the long-pending question of whether carriers should be required to offer automatic roaming for data, in addition to voice, services. The FCC had punted on this issue in 2007 by the time-honored dodge of seeking more information. Having sat on the facts it developed three years ago, it may now honestly claim that that record is stale and it must therefore delay action again by seeking new facts. 

(Blogger's observation: This is one of the tearing-one's-hair-out aspects of administrative law. An agency can procrastinate on an issue for years, and then, when it takes the matter up again, claim with a straight face that it now needs to gather more information because of the passage of time. Procrastination actually becomes a legal justification for more procrastination.)

In any case, the FCC is seeking further input on this issue, which has taken center stage now that broadband has become the golden idol which the FCC worships. Clearly, if mobile broadband is to become a reality, there will have to be some understanding about the availability of roaming to broadband subscribers who travel to non-home markets. Among the issues the FCC has teed up is the question of whether a non-home carrier can discriminate between its own subscribers and roamers by, e.g., placing limits on roaming access to its network that do not apply to its own subscribers.   Because bandwidth may be in short supply and some data applications are bandwidth-hungry, it might well make sense for carriers to favor their own subscribers over mere roamers – a situation which rarely arises in the pure voice context.  

Also of interest is the question of whether automatic roaming should be required where one or both of the providers involved are not actual CMRS providers, i.e., are not common carriers.   The assumption underlying the original automatic roaming proposal was that the participants in the roaming process would themselves be CMRS carriers.   But since wireless internet service is (at least for the moment) classified as an information service rather than a telecommunications service, there are many wireless data providers in the broadband landscape who would not be covered one way or another by a rule on automatic data roaming.   If automatic roaming for data providers is to be meaningful, the FCC’s inquiry needs to encompass those types of providers, too.

Comments on this aspect of the roaming proceeding are due 45 days after the item appears in the Federal Register, with Reply Comments due 30 days later.     Check back for updates on those deadlines.