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

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.

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.

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’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.

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.

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?

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.

Blocking. Fixed 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.

Discrimination. Fixed 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.

• 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.