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.]