What We Learned About Network Neutrality This Week

“I intend to protect a free and open Internet,” President Barack Obama announced in his State of the Union address on Tuesday, January 20. For many that was a clear, albeit truncated, reiteration of his statement in November 2014 calling on the Federal Communications Commission to “create a new set of rules protecting net neutrality and ensuring that neither the cable company nor the phone company will be able to act as a gatekeeper, restricting what you can do or see online.” In November, the President asked the FCC to “reclassify consumer broadband service under Title II of the Telecommunications Act — while at the same time forbearing from rate regulation and other provisions less relevant to broadband services.”

On Tuesday, the White House released Middle Class Economics for the 21st Century - Helping Working Families Get Ahead, summarizing the proposals introduced by the President over the past few weeks. It includes:

Building on Net Neutrality to Increase Access and Reduce Cost for Broadband: Affordable, fast broadband is crucial to the future of our economy and nation. That’s why in November, the President outlined his plan to ensure the Internet economy remains open to new competition and innovation by safeguarding net neutrality — which, at its core, will help ensure no one company can act as a gatekeeper to digital content. To that end, communities around the country are refusing to settle for subpar service that can make it hard to keep business local and attract new entrepreneurs. As a result, communities like Lafayette, LA, Chattanooga, TN, and Kansas City, MO have broadband almost one hundred times faster than the national average. To help more communities do the same, and ensure a level playing field for all competitors, in the lead-up to the State of the Union, the President called to end laws that harm competition, expand the national movement of local leadership for better broadband, unveil new loan opportunities for rural providers, remove regulatory barriers, and improve investment incentives.

The broadband access industry believes Title II would saddle them with a litany of regulations on matters such as pricing and how they manage their networks. Seemingly to slow the momentum of the President’s proposal and the call of millions of commenters at the FCC, Republicans in Congress late last week started circulating a discussion draft of legislation that would carve out new authority for the FCC to enforce net neutrality. The Republican legislation is aimed at avoiding common-carrier regulation but would prevent broadband providers from blocking, slowing down or accepting money to speed up delivery of certain websites. The authors say the legislation:

• Applies to both fixed and wireless forms of broadband Internet access service;
• Prohibits blocking lawful content, applications, or services;
• Prohibits blocking of non-harmful devices;
• Prohibits throttling Internet traffic by selectively slowing, speeding, degrading, or enhancing traffic based on the source, destination, or content;
• Bans paid prioritization of traffic, defined as the speeding up or slowing down of traffic based on compensation, or lack thereof, from the sender to the ISP;
• Retains and codifies the FCC’s current requirement that providers be transparent in disclosing their network management practices, performance, and the commercial terms of its service, in order to allow consumers to make informed decisions about their choice of providers; and
• Directs the FCC to enforce these obligations by adopting formal complaint procedures and to interpret and apply them by adjudicating alleged violations.

The authors claim the legislation provides certainty for investment and innovation by:

• Foreclosing future FCC rulemaking to change the bright-line rules for Internet openness;
• Clarifying that nothing in the bill limits the ability of consumers to make decisions about their plans or service;
• Permitting providers to offer specialized services, so long as those services are not offered in a way that threatens availability of broadband Internet access services or attempts to evade the purposes of this legislation; and,
• Restoring congressional intent that Section 706 of the Telecommunications Act of 1996 is not a direct grant of authority.

Finally, the draft proposes to codify broadband Internet access service’s classification as an information service, not a telecommunications service, and so, could not be regulated as a common carrier under Title II.

For net neutrality advocates and others concerned about universal broadband deployment, the loss of both Sec 706 and Title II are troubling. Free Press Action Fund Policy Director Matt Wood said this week that “if you think that essential communications networks deserve basic protections, then these bills are a wreck.” Free Press offered an analysis of the bills’ shortcomings:

The Bills Offer Inadequate Net Neutrality Protections

• The bills legalize numerous harmful discriminatory practices while preventing the FCC from adopting and enforcing rules that respond to changing circumstances. While the legislation appears to prevent a few of the more harmful net neutrality violations, it also opens the door to various other ways to discriminate.
• The legislation offers an extremely narrow approach to preserving net neutrality. While the bills may prohibit a few specifically defined harms, they do not allow any safeguards against forms of discrimination the legislation doesn’t describe (i.e., even if such other practices might constitute unreasonable discrimination, unjust or commercially unreasonable practices, harmful behavior, etc.).
• The removal of the FCC's rulemaking authority handcuffs the agency while also limiting the public's ability to comment on the process. Under the legislation, the FCC can only adjudicate complaints alleging violations of these rigidly defined categories, and there's no timetable required for such adjudications.
• Beyond the procedural limitations, the legislation may hamstring the FCC so that similar violations (e.g., different technical variations of throttling or prioritization practiced by different ISPs) may have to be separately adjudicated, an expensive and lengthy process.
• Reasonable network management is just as loosely defined as it was in the 2010 rules definition, creating a potentially unbounded loophole — especially if the FCC is prevented from implementing rules or providing further guidance about what constitutes a "legitimate network-management purpose" under the legislation. Considering how narrow the prohibited harms listed in the bills are, almost any other network-management practice may need to be deemed reasonable and outside of the FCC's authority, no matter how discriminatory and harmful that practice may be.
• Because the FCC can't even adjudicate beyond the "obligations" listed in the legislative provisions, this legislation could allow by implication all other practices omitted from the legislation, including:
• ISPs' unpaid or vertical prioritization, allowing for prioritization of their own or their affiliates' content, so long as there's no specific payment for such treatment.
• ISPs' throttling based on application used or some other factor may be expressly allowed, because the legislation only prohibits throttling based on the source, destination or content of Internet traffic. This could allow, for instance, throttling of any and all voice or video apps that compete with an ISP's legacy cable or voice services, or throttling of other applications so long as such throttling did not take the form of prohibited paid prioritization.
• ISPs' discriminatory application of data caps, where an ISP could exempt its own content from such caps, or a third party could pay the ISP for such an exemption since no packets would be sped up or slowed down for payment or non-payment.
• ISPs' continued argument that they may impose access charges and/or so-called "interconnection fees" simply for delivering traffic that the ISPs' own customers request, so long as the congestion allowed to occur at interconnection points does not constitute prioritizing or de-prioritizing packets over the last-mile network.

The Legislation Will Cause Collateral Damage to Broadband Competition and Service

• The legislation effectively guts all the consumer protections and public interest principles Congress adopted in an overwhelmingly bipartisan fashion in 1996 for existing and future two-way communication networks. Americans need competitive, universal, affordable, accessible and fully interconnected nondiscriminatory communications services. This legislation fails on all these fronts by stripping the FCC of authority to deal with such topics under Title II and even under the weaker and less-tested Section 706 framework.
• The legislation would thus turn the public broadband network into a private one, allowing the Internet to be shaped by Comcast, Verizon and AT&T instead of by consumer and business demand, and the Internet innovation to meet this demand.
• Classifying broadband Internet access as an information service could hamper the FCC's ability to promote competition and protect users of any broadband telecom service, and all telecommunications service beyond plain old telephone service. Indeed, the legislation mandates treatment of any service that offers "advanced telecommunications capability" as an information service. This one single amendment to the law could void the entirety of the Communications Act.

Public Knowledge, also a network neutrality advocate, highlighted these problems with the legislation:

• It allows discrimination in violation of the principles of the Open Internet.
• It does not effectively block ‘fast lanes’.
• Consumers would lose protections while special interests would gain new ones.
• This draft would prevent the FCC from providing more clarity about what behavior runs afoul of the stated Internet openness principles.
• This draft would undo nearly five years of work on universal service reform based on Section 706 authority, seriously disrupting efforts to provide broadband to rural areas.
• It would eliminate the FCC’s authority to preempt limits on community broadband.
• It could have serious unintended impacts on voice-over-IP services, placing the stability of the 9-1-1 system at risk and interfering with the FCC’s efforts to resolve rural call completion.
• It could also limit the FCC’s authority to promote access by the disabled to communications services, to protect consumer privacy, and to promote broadband deployment by ensuring that new competitors have access to utility poles and rights of way.

Against this backdrop, both the House and Senate Commerce Committees held hearings on the draft legislation on January 21. The New York Times characterized the House hearing as “a morning of harsh rhetoric.” [See our summary of the House hearing and Senate hearing.] Lobbyists from both wireline and wireless Internet providers testified at both hearings and endorsed the GOP-sponsored legislation.

The industry’s endorsement of the Republican bill isn’t surprising -- it has opposed the use of the common-carrier portion of the law, Title II. But it does reflect a shift among industry officials and their allies in Congress and a recognition that some form of net neutrality rules are likely inevitable. Many Republicans had previously said no government intervention is necessary in regulating the industry. In a joint statement in January 2014 when some of the FCC’s 2010 net neutrality rules were overturned by the U.S. Court of Appeals D.C. Circuit, House Commerce Committee Chairman Fred Upton (R-MI) and Communications and Technology Subcommittee Chairman Greg Walden (R-OR) released a joint statement calling the ruling a “victory for jobs and innovation.” They said, “This ruling stands up for consumers and providers alike by keeping the government’s hands off the Internet.”

But now Upton and Walden are not just proposing net neutrality legislation, but convincing Republican colleagues to support it. At the House hearing, Rep. John Shimkus (R-II) said, “The chairman is bringing some of us kicking and screaming along with him on this policy.” Walden answered, “And boy can he kick.”

Conservative Republicans should “see this as a better course of action for certainty,” Walden told reporters on Tuesday. “We’ve found support among a lot of those groups who, like we, didn’t think that the Internet’s broken and needed a top-down government control,” but nonetheless want to preempt the FCC’s action.

The turnaround is due, in large part, to the visceral and overwhelmingly pro-net neutrality consumer reaction among their constituents, who see the issue beyond the political battle lines. A recent poll found that 56 percent of people strongly agree that "it is critical" to prevent Internet service providers from "blocking, discriminating against, slowing down, or charging" for Internet traffic to certain websites. Another 26 percent of people somewhat agree. Another 65 percent of voters agree that large Internet service providers -- like Comcast, Verizon, AT&T and Time Warner Cable -- need oversight to "ensure that they deliver the Internet fairly."

Michael Powell testified on behalf of the National Cable & Telecommunications Association at both hearings on Wednesday. He’s a former FCC commissioner and chairman who, in February 2004, outlined the four “Internet Freedoms” that broadband consumers deserve:

1. Freedom to Access Content. First, consumers should have access to their choice of legal content. Consumers have come to expect to be able to go where they want on high-speed connections, and those who have migrated from dial-up would presumably object to paying a premium for broadband if certain content were blocked. Thus, I challenge all facets of the industry to commit to allowing consumers to reach the content of their choice. I recognize that network operators have a legitimate need to manage their networks and ensure a quality experience, thus reasonable limits sometimes must be placed in service contracts. Such restraints, however, should be clearly spelled out and should be as minimal as necessary.
2. Freedom to Use Applications. Second, consumers should be able to run applications of their choice. As with access to content, consumers have come to expect that they can generally run whatever applications they want. Again, such applications are critical to continuing the digital broadband migration because they can drive the demand that fuels deployment. Applications developers must remain confident that their products will continue to work without interference from other companies. No one can know for sure which “killer” applications will emerge to drive deployment of the next generation high-speed technologies. Thus, I challenge all facets of the industry to let the market work and allow consumers to run applications unless they exceed service plan limitations or harm the provider’s network.
3. Freedom to Attach Personal Devices. Third, consumers should be permitted to attach any devices they choose to the connection in their homes. Because devices give consumers more choice, value and personalization with respect to how they use their high-speed connections, they are critical to the future of broadband. Thus, I challenge all facets of the industry to permit consumers to attach any devices they choose to their broadband connection, so long as the devices operate within service plan limitations and do not harm the provider’s network or enable theft of service.
4. Freedom to Obtain Service Plan Information. Fourth, consumers should receive meaningful information regarding their service plans. Simply put, such information is necessary to ensure that the market is working. Providers have every right to offer a variety of service tiers with varying bandwidth and feature options. Consumers need to know about these choices as well as whether and how their service plans protect them against spam, spyware and other potential invasions of privacy.

On Wednesday, Powell argued that the classification of broadband under Title II poses a number of risks to broadband providers, even if the FCC chooses to exempt them from the bulk of Title II regulations through a legal process known as forbearance. He said under Title II, the FCC would have the authority to regulate prices, require approval before providers can offer new products and services, and force cable and phone companies to lease capacity on their lines to competing Internet service providers. “Our opposition to Title II does not stem from some nefarious desire to exercise control over consumers’ Internet habits, but rather is spurred by our knowledge of the very real harms that will follow if broadband services are subject to Title II’s outdated regulations,” Powell said.

Knowing that they have the upper hand as long as the FCC continues on its course, Democrats say they are willing to come to the table on a possible net neutrality law. Rep. Bobby Rush (D-IL) announced plans to introduce a new bill "in the near future." But no Democrats said that the FCC should wait for Congress to act first. "In my own mind, the best approach may be to wait until we see what the FCC does," said Sen. Richard Blumenthal (D-CT). "The likelihood of our acting before the FCC, I think, is small anyway." In both chambers, Democrats criticized the draft bill's limits on the FCC's authority to regulate broadband and questioned potential loopholes that they worry could be used to allow pay-for-play deals online.

Republicans indicated that they're open to changes and fiercely made their case for the draft bill, saying that it largely creates the net neutrality protections Democrats say they want. Sen. Dean Heller (R-NV) said the legislation would accomplish "70 percent" of the Democrats' goals. Republicans also argued that a new law would keep the net neutrality rules from getting tied up in years of litigation, a likely outcome if the FCC goes ahead with its plan to reclassify broadband as a Title II service under the Communications Act. "I do believe [Title II] will be challenged in court," and "I think there's a pretty good chance that the FCC won't win," Heller said.

Sen. Richard Blumenthal challenged the Republican argument about litigation, warning that the vague language in the bill could also put the net neutrality debate back in court. "What hope does an individual consumer have against the legal and the lobbying sway ... of some of the bigger [industry] powers if there is that lack of clarity?" he asked. And the Dallas Business Journal reported that AT&T CEO Randall Stephenson believes that net neutrality will make its way all the way up to the U.S. Supreme Court.

Communications Daily reported that Chairman Walden said after the hearing, “We’ll get to where there’s a markup, we’ll have an opportunity to hear from our colleagues on specific changes they’d like to see. Where we do have agreement are on the principles that we’ve outlined that are the same [FCC Chairman] Tom Wheeler’s outlined, the same the President’s out¬lined -- to prevent blocking, to prevent throttling, to prevent abuses on the Internet, to protect consumers. What we hold promise of is legal certainty because we can do it statutorily and clearly.” He declining comment on any legislative timeline.

If there was anything at all that could agree upon after the long day of hearings, it is the following:

• Republican Members of Congress cannot count on Democratic support for the draft legislation – at least not as written;
• If the bill made it through both chambers, it would certainly face a veto from President Obama; and
• It remains highly unlikely Congress will act before the FCC adopts new net neutrality rules on February 26.

But if there's anything we've learned over the past year, it is that the net neutrality debate is constantly evolving. We'll be following and will see you in the Headlines.