Net Neutrality’s New Chapter

Submitted on April 28, 2017

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Weekly Round-Up for April 23-28, 2017

The latest chapter of the long-running net neutrality debate began this week. How did we get here -- and where are we headed?

Stop me if you’ve heard this before. News leaked that the Federal Communications Commission Chairman will propose new network neutrality rules to ensure a free and open Internet. People freaked out. FCC Chairman outlines his plan for net neutrality. People freak out more. FCC Chairman releases full net neutrality proposal. All Hell breaks loose.

Although there’s generally been bipartisan agreement that broadband subscribers deserve consumer protection, there’s never been political consensus on how to ensure those protections. For anyone scoring at home, here's how we arrived at where we are this week. And here's what to expect in the weeks ahead.

A Modern History of Broadband Service Regulation: How Did We Get Here?

The debate over network neutrality centers on how broadband Internet access service is classified under U.S. communications law.

In a 2002 Declaratory Ruling, the FCC, under then-Chairman Michael Powell, classified cable modem service as an interstate information service. An “information service,” according to Title I of the Communications Act of 1934, is

the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service.

The Declaratory Ruling explicitly ruled that high-speed Internet access is not a “telecommunications service,” defined in Title II of the Communications Act as “the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.”

The far-reaching ruling was not bipartisan. Then-FCC Commissioner Michael Copps warned, “Today we take a gigantic leap down the road of removing core communications services from the statutory frameworks established by Congress, substituting our own judgment for that of Congress and playing a game of regulatory musical chairs by moving technologies and services from one statutory definition to another.”

In 2004, Chairman Powell challenged broadband service providers to preserve four “Internet Freedoms”:

Freedom to Access Content. Consumers should have access to their choice of legal content.
Freedom to Use Applications. Consumers should be able to run applications of their choice.
Freedom to Attach Personal Devices. Consumers should be permitted to attach any devices they choose to the connection in their homes.
Freedom to Obtain Service Plan Information. Consumers should receive meaningful information regarding their service plans.

In June 2005, the Supreme Court decided a case, National Cable & Telecommunications Association (NCTA) v. Brand X, which questioned whether the FCC had lawfully interpreted the Communications Act by deciding that cable broadband providers did not provide a telecommunications service. The U.S. Court of Appeals for the Ninth Circuit had determined that cable modem service was a telecommunications service, but the Supreme Court held that the Ninth Circuit should have followed the Supreme Court's 1984 decision in Chevron v. Natural Resources Defense Council. That decision required federal courts to defer to an agency's construction of a statute, if that statute was within the agency's jurisdiction to administer and the agency's interpretation was reasonable, even if it differed from the court's own interpretation. In the Brand X case, the Supreme Court held that the FCC's construction was reasonable.

In August 2005, the FCC, led by then-Chairman Kevin Martin, and relying on Title I/information services authority, adopted an Internet policy statement reflecting Powell’s “four freedoms.” The policy statement said broadband consumers are entitled to:

Access the lawful Internet content of their choice,
Run applications and use services of their choice, subject to the needs of law enforcement,
Connect their choice of legal devices that do not harm the network, and
Competition among network providers, application and service providers, and content providers.

Later in 2005, Ed Whitacre, CEO of SBC, complained to BusinessWeek about companies like Google and Vonage. “Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it.” Although Google, Vonage, and their customers were paying for broadband access, Whitacre apparently wanted the companies to pay an extra toll for using the network to make more money themselves. But in 2006, AT&T pledged to maintain a “neutral network” in exchange for U.S. government approval of its proposed acquisition of BellSouth.

In 2008, Chairman Martin said Comcast was slowing peer-to-peer traffic – and the practice appeared to be more widespread than the company had disclosed. Later that year, the FCC ordered Comcast to stop its “invasive” interference on its broadband network and to create a new network management plan. Comcast took the FCC’s anti-throttling order to court, arguing that the commission had no hard rules against the company’s network management practices. In 2010, the U.S. Court of Appeals for the District of Columbia Circuit overturned the FCC’s Comcast ruling, saying the agency lacked “any statutorily-mandated responsibility” to enforce network neutrality rules. The ruling was the first big blow to the “light-touch”/Title I approach to broadband service regulation. In 2011, Comcast agreed to abide by the 2005 Internet policy statement as a condition of it’s acquisition of NBCUniversal.

In December 2010, the FCC, then under the leadership of Chairman Julius Genachowski approved three basic net neutrality rules:

Transparency. Fixed and mobile broadband providers must disclose the network management practices, performance characteristics, and terms and conditions of their broadband services;
No blocking. Fixed broadband providers may not block lawful content, applications, services, or non-harmful devices; mobile broadband providers may not block lawful websites, or block applications that compete with their voice or video telephony services; and
No unreasonable discrimination. Fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic.

The rules followed directly from the 2005 Internet policy statement, and relied on Title I authority and Section 706 of the Telecommunications Act of 1996, which directs the FCC to take actions that encourage the deployment of broadband.

In 2014, the U.S. Court of Appeals for the D.C. Circuit overturned the FCC’s 2010 Open Internet rules. The court ruled that since the FCC had previously classified broadband providers as information service providers under Title I, the FCC had relinquished its right to regulate them like common carriers.

This second blow to the “light-touch” regulatory approach led FCC Chairman Tom Wheeler to launch a new net neutrality proceeding in April 2014. At the time, Wheeler indicated that reclassification of broadband Internet access service remained a “clear alternative.” On February 26, 2015, the FCC adopted “clear, bright-line” rules based on a “Modern Title II.” For both fixed and mobile broadband Internet access service providers, the FCC rules stated:

A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not block lawful content, applications, services, or nonharmful devices, subject to reasonable network management. A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not impair or degrade lawful Internet traffic on the basis of Internet content, application, or service, or use of a non-harmful device, subject to reasonable network management. A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not engage in paid prioritization.
Any person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not unreasonably interfere with or unreasonably disadvantage (i) end users’ ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice, or (ii) edge providers’ ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be considered a violation of this rule.
A person engaged in the provision of broadband Internet access service shall publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services 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.

Although broadband service providers again challenged the FCC’s rules, the U.S. Court of Appeals for the District of Columbia Circuit upheld them in June 2016. The court ruled that the agency could reclassify broadband service as a telecommunications service, thus giving the FCC the ability to enforce the rules.

Pai’s New Chapter: Where Does He Want To Take Us?

In a speech titled The Future of Internet Freedom delivered this week, FCC Chairman Ajit Pai outlined his approach to giving “the American people what they want”: access to the content and use of the applications, services, and devices of their choice. (You know, the same things that the Wheeler net neutrality rules provide and have been upheld in court.) But, Chairman Pai said, “The question that we at the FCC must answer is what policies will give the American people what they want.”

In the speech, Pai outlined his new net neutrality proposal :

Return the classification of broadband service from a Title II telecommunications service to a Title I information service—that is, light-touch regulation.
Eliminate the so-called Internet conduct standard.
Seek comment on how the FCC should approach the bright-line rules adopted in 2015.

The full text of Pai's proposal was released on April 27. The Notice of Proposed Rulemaking (NPRM) will allow the public to weigh in (again) on net neutrality. If, as expected, the FCC adopts the NPRM at its May 18 open meeting, the NPRM will propose to:

Reinstate the information service classification of broadband Internet access service and return to the light-touch regulatory framework.
Reinstate the determination that mobile broadband Internet access service is not a commercial mobile service and in conjunction revisit the elements of the Title II Order that modified or reinterpreted key terms in section 332 of the Communications Act and the FCC's implementing rules.
Return authority to the Federal Trade Commission to police the privacy practices of Internet service providers.
Eliminate the Internet conduct standard.
Re-evaluate the FCC’s enforcement regime to analyze whether ex ante ( i.e., rules based on what is expected to happen) regulatory intervention in the market is necessary.
Conduct a cost-benefit analysis as part of this proceeding.

In addition, the NPRM will seek comment on whether to keep, modify, or eliminate the bright-line rules. (Hint: the NPRM seems to favor eliminating the rules entirely.)

The NPRM's Reasoning

In the NPRM, the FCC reasons that broadband Internet access service is not a telecommunications service because:

Broadband Internet users do not typically specify the “points” between and among which information is sent online. Instead, routing decisions are based on the architecture of the network, not on consumers’ instructions, and consumers are often unaware of where online content is stored.
Broadband Internet service providers routinely change the form or content of the information sent over their networks.

In contrast, the FCC finds, broadband Internet access service is an information service because:

Broadband Internet access service providers offer the capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications.

Whether posting on social media or drafting a blog, a broadband Internet user is able to generate and make available information online.
Whether reading a newspaper’s website or browsing the results from a search engine, a broadband Internet user is able to acquire and retrieve information online.
Whether it’s an address book or a grocery list, a broadband Internet user is able to store and utilize information online.
Whether uploading filtered photographs or translating text into a foreign language, a broadband Internet user is able to transform and process information online.

In short, the FCC concludes, broadband Internet access service appears to offer its users the “capability” to perform each and every one of the functions listed in the definition—and accordingly appears to be an information service by definition.

Of course this represents a complete reversal from the FCC's 2015 net neutrality order that was upheld by the DC Circuit Court. As Wired's Klint Finley notes,

A 1946 law called the Administrative Procedure Act bans federal agencies making “capricious” decisions. The law is meant, in part, to keep regulations from yo-yoing back and forth every time a new party gained control of the White House. The FCC successfully argued in favor of Title II reclassification in federal court just last summer. That effort means Pai might have to make the case that things had changed enough since then to justify a complete reversal in policy.

“That’s a pretty dramatic reversal,” says Marc Martin, Chair of Communications Law at Perkins Coie. “Presuming there’s an appeal, a court may find that arbitrary.”

The NPRM nods at this possibility, noting the court's opinion that "should the Commission’s predictions 'prove erroneous, the Commission will need to reconsider' the associated regulatory actions 'in accordance with its continuing obligation to practice reasoned decision-making.'" So the crux of the new FCC reasoning will be that the 2015 decision has significantly impacted investment in broadband infrastructure. The NPRM points to evidence the FCC will be relying on:

In March, 2016, Hal Singer estimated that capital expenditure from the nation’s twelve largest Internet service providers has fallen by $3.6 billion, a 5.6% decline relative to 2014 levels.
On April 25, 2017, the Phoenix Center's George Ford estimated that between 2011 and 2015, the threat of reclassification reduced telecommunications investment by about 20–30%, or about $30–40 billion annually.

However, the FCC does note Free Press research indicating an increase in investment in 2015-2016 over 2013-2014.

So, expect the FCC's docket to be filled with lots of data on broadband infrastructure investment -- and attempts to directly tie those numbers to the 2015 net neutrality order.

A Long Debate Ahead

In his speech this week, Chairman Pai said, "Make no mistake about it: This is a fight that we intend to wage and it is a fight that we are going to win." With a 2-1 majority at the commission, Pai is likely to get his way, too. But the sides in this debate will be loud and steadfast. Headlines will help you track the fight blow by blow.

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