From Death to Resurrection in 377 Days

The Federal Communications Commission released a “tentative agenda” for its February 26 open meeting, but, frankly, there’s nothing tentative about it. FCC Chairman Tom Wheeler this week declared that the Internet must remain “fast, fair and open” and he proposed two major, related actions to make it so. On January 14, 2014, the United States Court of Appeals for the District of Columbia Circuit struck down key elements of the FCC’s Open Internet rules (commonly known as net or network neutrality) which required broadband providers to treat all Internet traffic equally. At the time, in these pages, we wrote “Net Neutrality is Dead. Long Live Net Neutrality”. 377 tumultuous days later, the FCC is poised to declare, “It’s alive!”

Ensuring an Open Internet
Last year, you will recall, the DC Circuit Court ruled, in essence, that the FCC was saddling broadband providers with the same sorts of obligations as traditional "common carrier" telecommunications services -- traditional, landline phone service -- even though the Commission had explicitly decided not to classify broadband as a telecommunications service. The court ruled: 1) the FCC has the authority to regulate the Internet in order to encourage universal broadband and 2) the goals of the Open Internet rules were reasonable, but 3) the FCC cannot apply rules traditionally applied to landline telephone service unless the Commission also decides to classify broadband service as a telecommunications service.

This week, Chairman Wheeler wrote an op-ed for Wired announcing his intention to circulate to his fellow FCC commissioners new net neutrality rules, “the strongest open internet protections ever proposed by the FCC.” He proposed banning practices that are known to harm the Open Internet:

• No Blocking: Broadband providers may not block access to legal content, applications, services, or non-harmful devices.
• No Throttling: Broadband providers may not impair or degrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices.
• No Paid Prioritization: Broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for consideration – in other words, no “fast lanes.” This rule also bans ISPs from prioritizing content and services of their affiliates.

The proposal also enhances existing transparency rules, which were not struck down by the court.

Although the rules struck down by the court last year applied only to wireline broadband, the new rules would apply to wireless, too.

In addition, the new proposal includes:

• A Standard for Future Conduct: A general Open Internet conduct standard that ISPs cannot harm consumers or edge providers.
• Reasonable Network Management: Other than paid prioritization, an ISP may engage in reasonable network management in accordance to the particular engineering attributes of the technology involved -- whether it be fiber, DSL, cable, unlicensed wireless, mobile, or another network medium. However, the network practice must be primarily used for and tailored to achieving a legitimate network management -- and not commercial -- purpose.
• Broad Protection: Some data services do not go over the public Internet, and therefore are not “broadband Internet access” services subject to Title II oversight. The Chairman’s proposal will ensure these services do not undermine the effectiveness of the Open Internet rules. Moreover, broadband providers’ transparency disclosures will continue to cover any offering of such non-Internet data services -- ensuring that the public and the Commission can keep a close eye on any tactics that could undermine the Open Internet rules.
• Interconnection: The proposal will enable the FCC to hear complaints and take appropriate enforcement action if it determines the interconnection activities of ISPs are not just and reasonable, thus allowing the Commission to address issues that may arise in the exchange of traffic between mass-market broadband providers and edge providers.

In a fact sheet released by the FCC, the Chairman made it clear that he is proposing that the FCC reclassify broadband Internet access service as a telecommunications service under Title II of the Communications Act. In addition, the proposal would also base the rules in Section 706 of the Telecommunications Act of 1996 which, the court confirmed, empowers the FCC to encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans. Given the long debate over Title II vs Section 706, Chairman Wheeler’s proposal says both not either/or. “Together Title II and Section 706 support clear rules of the road, providing the certainty needed for innovators and investors, and the competitive choices and freedom demanded by consumers,” the FCC fact sheet states.

For much of the past year, we have heard arguments that Title II would be too burdensome for Internet service providers and, thus, slow innovation. The Wheeler proposal recognizes that Congress requires the FCC to refrain from enforcing -- forbear from -- provisions of the Communications Act that are not in the public interest. In fact, the Chairman is characterizing the proposal as a modernization of Title II “tailoring it for the 21st century, encouraging [ISPs] to invest in the networks American increasingly rely on.”

The Wheeler proposal envisions these major provisions of Title II applying to ISPs:

• No “unjust and unreasonable practices” (sections 201 and 202);
• Allows investigation of consumer complaints (under section 208 and related enforcement provisions, specifically sections 206, 207, 209, 216 and 217);
• Protects consumer privacy (under section 222);
• Ensures fair access to poles and conduits (under section 224), which would boost the deployment of new broadband networks;
• Protects people with disabilities (sections 225 and 255); and
• Bolsters Universal Service Fund support for broadband service in the future (through partial application of section 254).

The FCC fact sheet notes major Title II provisions subject to forbearance:

• Rate regulation: The proposal makes clear that broadband providers shall not be subject to tariffs or other form of rate approval, unbundling, or other forms of utility regulation.
• Universal Service Contributions: The Order does not require broadband providers to contribute to the Universal Service Fund (under Section 254).
• No new taxes or fees: The Order will not impose, suggest or authorize any new taxes or fees. There will be no automatic Universal Service fees applied and the congressional moratorium on Internet taxation applies to broadband.

“There's, like, 38 different sections of Title II. And what we're doing is forbearing, which means we are not using the vast majority of those - approximately 30 of those. We're just going to focus on the things that are relevant,” said Chairman Wheeler.

Reaction to Wheeler’s proposal reflects the passions the issue has instilled over the last decade. It is a "triumph for the American consumer” or a “power grab”, a “victory for the Internet” or “over-regulating up-front without legitimate justification.” Wheeler’s announcement probably didn’t change any minds; it simply identified the winning and the losing sides.

Lifting Community Broadband Restrictions
Network neutrality is not the only item on the FCC’s February agenda. Remarkably, a second item may be just as controversial – and not unrelated to net neutrality. On February 26, the Commission will vote on a Memorandum Opinion and Order addressing petitions filed by two municipal broadband providers asking that the FCC preempt provisions of state laws in North Carolina and Tennessee that restrict the abilities of communities to provide broadband service. As we explained here in July, the cities of Chattanooga (TN) and Wilson (NC) simultaneously petitioned the FCC to pre-empt laws in their states that ban the cities from expanding their high-speed Internet networks.

When the DC Circuit Court struck down the FCC’s network neutrality rules, Judge Laurence Hirsch Silberman recommended that the FCC act to encourage universal deployment of broadband networks by lifting legal restrictions in some states on the ability of cities and towns to offer broadband services to consumers in their communities. In February 2014, when FCC Chairman Wheeler first outlined a plan to address the court’s decision, he highlighted this guidance from Judge Silberman and said the FCC would consider lifting the restrictions.

The Coalition for Local Internet Choice recently told the FCC (and FCC Commissioner Michael O'Rielly highlighted) that North Carolina imposes numerous requirements that collectively have the practical effect of prohibiting public communications initiatives. For example, public entities must comply with unspecified legal requirements, impute phantom costs into their rates, conduct a referendum before providing service, forego popular financing mechanisms, refrain from using typical industry pricing mechanisms, and make their commercially sensitive information available to their incumbent competitors. Some, but not all, existing public providers are partially grandfathered. Tennessee allows municipalities that operate their own electric utilities to provide cable, two-way video, video programming, Internet access, and other “like” services (not including paging or security services), but only within their electric service areas and only upon complying with various public disclosure, hearing, voting and other requirements that a private provider would not have to meet. Municipalities that do not operate electric utilities can provide services only in “historically unserved areas,” and only through joint ventures with the private sector.

On February 2, Chairman Wheeler said, “Communities across the nation know that access to robust broadband is key to their economic future -- and the future of their citizens. Many communities have found that existing private-sector broadband deployment or investment fails to meet their needs. They should be able to make their own decisions about building the networks they need to thrive. After looking carefully at petitions by two community broadband providers asking the FCC to pre-empt provisions of state laws preventing expansion of their very successful networks, I recommend approval by the Commission so that these two forward-thinking cities can serve the many citizens clamoring for a better broadband future.”

Conclusion
We can’t stress enough that although the announcements made this week seem historic, they both remain proposals, not decisions. FCC Chairman Wheeler has set the agenda for the Feb 26 FCC meeting and he has circulated his preferences for Orders. But now a negotiation of the five FCC commissioners begins so that at least three commissioners vote favorably for the two actions. Each commissioner will be visited, repeatedly, by proponents and opponents in these debates. Much could still change in the coming weeks. We’ll keep you abreast of it all in Headlines.