Brendan Bordelon

The House passed two bills on unanimous voice votes Jan 10 — one that would waive certain transparency requirements for small internet service providers and one that encourages data efficiency in the federal government. The Small Business Broadband Deployment Act (HR 288), would exempt ISPs with fewer than 250,000 subscribers from transparency requirements that were mandated under the Federal Communications Commission’s controversial Open Internet order. An identical bill passed the House in March before it stalled in the Senate. Both measures were introduced by House Commerce Committee Chairman Greg Walden (R-OR). The Federal Communications Commission had a temporary exemption for ISPs with fewer than 100,000 subscribers, but it expired in December after commissioners failed to agree on an acceptable threshold for the waiver. The requirements won’t take effect until Jan. 17 due to a delay at the Office of Management and Budget. Republican FCC commissioners have promised small providers that the agency won’t enforce the requirements once they take over the FCC on Jan. 20.

The House also passed the Energy Efficient Government Technology Act (HR 306). Sponsored by Rep Anna Eshoo (D-CA), it would require federal data centers to employ energy efficient technologies. That bill also passed the House in March but was not taken up by the Senate. In a statement, Chairman Walden said he hopes the Senate will “expeditiously” act on these bills.

As Republicans prepare to take over the Federal Communications Commission in 2017, don’t expect them to make a quick, clean break with the agency’s 2015 network neutrality rule. Two commission officials said that procedural hurdles and related programs may make scrapping the Open Internet order more complicated than GOP rhetoric suggests. The commission is still required to issue a proposed rule, which typically takes months to craft, and the comment period spans about two months.

Political precedent will weigh in. FCC Commissioner Ajit Pai will likely be acting chairman starting on Jan 20, and he will have to balance any desire to move quickly on Title II with some deference to the administration’s pick for chairman. That nomination could take months to finalize. Perhaps most importantly, the two commission officials separately noted that a rule to roll back net neutrality could face scrutiny in the courts. A federal appeals court upheld the net neutrality rule in June, and the decision relied on evidence of how the broadband market changed over the previous 10 years, making it difficult for Republicans to argue for a rollback now.

The US Supreme Court denied review of a case that leaves intact a Colorado law forcing retailers without a physical presence in the state to turn over customer purchase data to state tax officials. The court’s denial of Direct Marketing Association v. Brohl gives the green light for other states to impose laws mandating the collection of consumer purchase data from online retailers, making it more difficult for customers who buy products online to avoid state sales taxes. It may also presage an examination of a 1992 Supreme Court ruling in Quill v. North Dakota that prohibits states from ordering out-of-state retailers to directly collect sales tax from their customers.

A reconsideration of that decision has already been suggested thanks to a separate 2015 high court ruling in the same case, where the justices unanimously agreed that the Direct Market Association had the standing to sue. In that ruling, Justice Anthony Kennedy also wrote a concurring statement emphasizing that the court should take another look at its 1992 decision. Kennedy noted that the amount of forgone taxes resulting from the decision is now many orders of magnitude greater than in 1992, when Internet commerce was not yet viable. He urged the the court to reconsider the decision at the earliest opportunity.

The Federal Communications Commission’s network neutrality rule is “the worst kind of crony capitalism” and is likely to be weakened or dismantled in the next administration, according to Jeffrey Eisenach, one of President-elect Donald Trump’s top telecommunications advisers. Eisenach also said that one of the two Republicans currently on the commission “will be designated chairman, because that’s the way the world works.”

President-elect Trump will have the opportunity to name a Republican chairman of the FCC in 2017, and Eisenach, who’s head of Trump’s transition team for the agency, is expected to play a key role in determining who the White House places on the commission. Eisenach noted that the net neutrality rule is tangled up in federal court and seems likely to end up on the Supreme Court’s docket. Eisenach also suggested that a new Republican-led FCC would curb its own power, saying 1980s-style deregulation “absolutely” can happen.

Federal Communications Commission Chairman Tom Wheeler has laid out an unexpected roadmap through which the FCC could directly regulate the security of Internet-connected devices. In a letter to Sen Mark Warner (D-VA) dated Dec 2 and released by Sen Warner on Dec 5, Chairman Wheeler proposed an FCC-mandated cybersecurity certification process for “Internet of Things” devices. The proposal would also require consumer cybersecurity labels for IoT devices and associated services.

Chairman Wheeler is set to step down on Jan 20, but the new framework could be used to support legislation enhancing the FCC’s ability to regulate IoT devices. Chairman Wheeler’s letter responded to a set of questions that Sen Warner sent to the FCC four days after an Oct 21 cyberattack directed through IoT devices knocked popular websites offline for several hours. Chairman Wheeler that he shares Sen Warner’s concern “that we cannot rely solely on the market incentives of ISPs to fully address the risk of malevolent cyber activities.”

Confirmation prospects for Democratic Commissioner Jessica Rosenworcel of the Federal Communications Commission, who’s awaiting a Senate vote for a second term, aren’t dead yet, apparently. “I’ve felt for some time we were gonna get that resolved, I still hope that we will,” Senate Commerce Committee Chairman John Thune (R-SD) said. Earlier, he told reporters who were asking about Commissioner Rosenworcel,”It’s a leader decision about when that would come to the floor. …But you know we’re in a whole new world now. We’re going to have a new FCC starting next year.”

The prospect of a Trump Administration complicates pending confirmations, but not necessarily in a bad way for Commissioner Rosenworcel. “Now that we’ve got a new administration, we’ll have a new FCC. They’ll be looking at how and when to proceed with her nomination,” Chairman Thune said. Democratic lawmakers say Commissioner Rosenworcel is owed a confirmation vote based on a promise from Senate Majority Leader Mitch McConnell (R-KY). In December 2014, he promised Senate Democrats that if they voted to confirm Republican FCC Commissioner Michael O’Rielly, the GOP would in turn move quickly to confirm Commissioner Rosenworcel at the beginning of the 114th Congress in 2015. That hasn’t happened.

Don’t expect the Federal Communications Commission to rush into issuing network security rules anytime soon, even in the face of a congressional inquiry seeking the agency’s response to the massive Oct 21 distributed-denial-of-service attack. At issue is whether the FCC’s Open Internet rules restrict internet service providers’ ability to block insecure Internet of Things (IoT) devices from their networks and whether the commission should mandate greater safeguards. But the commissioners generally believe the Open Internet order already gives ISPs sufficient leeway to protect their networks from vulnerable internet-connected devices without additional regulations or standards. And, according to FCC officials, there isn’t much of an appetite to issue any new mandates now.

There are also questions as to whether cybersecurity is even in the commission’s purview. Sen Mark Warner (D-VA) sent a letter to FCC Chairman Tom Wheeler on Oct. 25, several days after a hijacked network of IoT devices took large swaths of the United States internet offline. Sen Warner asked detailed questions about the commission’s role in empowering both ISPs and consumers with the means to prevent similar attacks in the future. The senator suggested that the Open Internet rule — adopted in 2015 during the debate on net neutrality — might actually limit the ability of ISPs to block insecure IoT devices from their networks. That could make it difficult to prevent future attacks stemming from those devices. Chairman Wheeler called Sen Warner’s letter “thoughtful” and promised a response. He also disputed the notion that the rules limit security practices of ISPs. “The Open Internet order allows for reasonable network management, which clearly gives leeway to be able to deal with issues like this,” Wheeler said at the FCC’s open meeting on Oct. 27. There is clear language in the rules for ISPs to deny access to networks or devices that could put their security at risk, according to one FCC official, who added that they were “designed for flexibility, particularly when it comes to network security.” The rules allow broadband providers to implement network management practices for the purpose of “ensuring network security and integrity, including by addressing traffic that is harmful to the network,” according to the Open Internet order.

The Federal Communications Commission said that commissioners will vote on final rules governing the pricing of older bulk-data services during its next open meeting, scheduled for Nov 17. The commission first unveiled its final rules for business data services on Oct 7. The rules were initially placed on circulation, and they could have been passed at any time after receiving votes from three commissioners. The commission’s plan would place price caps on parts of the $45 billion business data services industry, which powers ATM and retail transactions as well as cell towers. The rules expand upon price caps affecting older, largely copper-based bulk-data technology. Newer packet-based Ethernet technology would not be capped under the rule, but there would be an FCC-overseen complaints process for prices deemed noncompetitive. Oct 27’s announcement said the rules will “allow for light-touch regulation of packet-based business data services,” while “retaining and updating price cap regulation” for slower bulk-data technology.

AT&T and Time Warner chief executives Randall Stephenson and Jeffrey Bewkes are pushing back against “uninformed comments” from top politicians attacking the pending $85 billion deal to combine their companies. The two business leaders also announced a new, $35-a-month streaming content service called DirecTV Now, which will likely include Time Warner content among 100 “premium” channels and will compete nationally with pricier cable plans.

A spokesman for AT&T said the company does not expect the merger with Time Warner to be approved before the planned late-November launch of DirecTV Now. The launch of the new service is just the “tip of the iceberg” in terms of its collaboration with Time Warner. “These are uninformed comments,” the AT&T executive said, stressing the $35 monthly price point of AT&T’s new DirecTV Now streaming service. “Anybody who characterizes this as a means to raise prices is ignoring the basic premise of what we’re trying to do here.” Stephenson also pointed out that the merger was a classic case of “vertical integration,” where two companies occupying different stages of production in an industry come together. “Vertical integrations are rarely a means for raising prices,” said Stephenson. “You’re not changing the market structure in any way, shape or form.” He added that while he’s sure regulators “will have some concerns with this,” the federal government has historically approved vertical integrations.

When the Federal Communications Commission unveiled a new regulation to regulate the $45 billion “business data services” market, many in the industry were surprised the rules didn’t include price caps on newer, Ethernet-based technology. A nonbinding agreement reached summer 2016 between two key players — incumbent carrier Verizon and the competitive-carrier trade group INCOMPAS — included Ethernet price caps. The goal for both the FCC and some in the industry is to curb anti-competitive pricing of the bulk data connections that power ATMs, retail transactions and cell phone towers. Most observers — including some inside the FCC itself — expected the commission’s final rule to track closely to the Verizon/INCOMPAS deal. The rule, which is actually quite different from that agreement, is currently on circulation among the five commissioners. A vote on it could come at any time, but it has not been included on the docket for the commission’s open meeting on Oct 27.

There are competing reasons why the commission excluded Ethernet price caps in the rule, apparently. The main reason is that a thorough examination of its marketplace data showed insufficient evidence that the Ethernet market was noncompetitive. Recent data revealed an uptick in Ethernet competition, driven in part by the entrance of cable companies into the bulk data marketplace. It would be premature to regulate the price at this point. Apparently, there are additional reasons, beyond the main argument about inconclusive data, that explain why the commission didn’t include Ethernet price caps in its latest version. The FCC lacked the pricing data that would make the caps capable of effectively withstanding a legal challenge. In addition, apparently some regulators were concerned by unworkable provisions in the Verizon/INCOMPAS proposal to cap Ethernet prices by census blocks. What’s more, apparently regulators were worried about industry reaction to earlier FCC orders that exempted some bulk data providers from regulation.