What's Not To Like About Open Internet Rules?

In an historic decision on February 26, 2015, the Federal Communications Commission voted to adopt rules to protect the Open Internet. The FCC’s order has not been released yet, so we can’t offer you a detailed summary of the new network neutrality rules. As Andrew Jay Schwartzman noted in Benton's Digital Beat this week, the vote marks the end of a long debate, but it is only the start of what will be a multi-pronged fight over whether the FCC could, or should, enact these new rules. Today we take a closer look at the opposition to the new rules as voiced by FCC Commissioner Ajit Pai and Michael O’Rielly who both voted against the FCC order. Their dissents may offer a preview of the arguments opponents of the new rules will make to Congress and the courts.

The “Historical, Bipartisan Consensus”

As background, many opponents to network neutrality rules point to 20 years of “bipartisan consensus” in favor of a free and open Internet – unfettered by government regulation – but that may depend on your definition of “unfettered” and “bipartisan.”

First, these opponents point to language in the Telecommunications Act of 1996 that says it is the policy of the US to “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.” Of course, they only stress one of a five point policy statement in a section of the law that, well, “regulates the Internet.” First the full policy enshrined in Section 230(b)(2):

1. to promote the continued development of the Internet and other interactive computer services and other interactive media;
2. to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation;
3. to encourage the development of technologies which maximize user control over what information is received by individuals, families, and schools who use the Internet and other interactive computer services;
4. to remove disincentives for the development and utilization of blocking and filtering technologies that empower parents to restrict their children’s access to objectionable or inappropriate online material; and
5. to ensure vigorous enforcement of Federal criminal laws to deter and punish trafficking in obscenity, stalking, and harassment by means of computer.

The law then goes on to set out obligations for providers of “interactive computer service.” So, yeah, not completely “unfettered.”

In March 2002, the FCC concluded, after conducting a Notice of Inquiry not a Notice of Proposed Rulemaking, that cable modem service, as it was offered then, would be properly classified as an interstate information service and therefore subject to FCC jurisdiction. But the FCC also said that cable modem service does not contain a separate "telecommunications service" offering and therefore is not subject to common carrier regulation.

This was not a bipartisan decision. Commissioner Michael Copps, then the only Democrat on the Commission, dissented. “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,” FCC Commissioner Copps said at the time. “How America deploys broadband is the central infrastructure challenge our country faces. It is a public policy matter of enormous implications. How we get it done affects not only how many megabytes of information our computers can download, but what kinds of options consumers will be able to choose from, what kinds of protections they will have against misguided or fraudulent business practices, and what kinds of opportunities will be available to those in our society who do not share fully in our general prosperity.

In early 2004, then-FCC Chairman Michael Powell, appointed by President George W. Bush, first articulated what he called the “four Internet freedoms.” These freedoms were:

1. Consumers should have access to their choice of legal content.
2. Consumers should be able to run applications of their choice.
3. Consumers should be permitted to attach any devices they choose to the connection in their homes.
4. Consumers should receive meaningful information regarding their service plans.

Powell never advocated an enforcement role for government to protect these freedoms, however. Instead, he challenged industry to preserve “Net Freedom”: “[I]f we secure a reasonable balance between the needs of network providers and [I]nternet freedom, consumers will reap the benefits of broadband without intrusive regulation, while preserving industry’s incentives to deploy more high-speed broadband platforms” (his emphasis). Powell also identified consumers’ role: challenge their broadband providers to live up to these standards and to let the Commission know how the industry is doing. “[C]onsumers are the ultimate judges of whether the industry is successfully preserving ‘Net Freedom,’ or falling short,” Powell said.

On August 5, 2005, Powell’s successor, FCC Chairman Kevin Martin, also appointed by President Bush, adopted a policy statement – not rules – that articulated the four freedoms as principles:

1. To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to access the lawful Internet content of their choice.
2. To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement.
3. To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to connect their choice of legal devices that do not harm the network.
4. To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to competition among network providers, application and service providers, and content providers.

The Policy Statement was adopted in a bipartisan fashion – the Commission’s two Republicans and two Democrats all voted in favor of it. But the Commissioners’ official remarks about the Policy Statement revealed stark differences about what it would mean moving forward.

In releasing the statement, Chairman Martin said,

"I have long believed that consumers should be able to use their broadband internet access service to access any content on the Internet. (Subject, of course, to the bandwidth limits and quality of service terms of the particular Internet access service plan that they have chosen to purchase.) Consumers have demanded this ability, and cable and telephone companies have delivered it. In a competitive marketplace, providers must do so.
They provide a service that consumers want, or they do not succeed. The steps we take today to place all broadband internet access providers on a level playing field will make this marketplace only more competitive, further strengthening the forces that best deliver choice, affordability, innovation, and quality to consumers. The policy statement we adopt today lists four principles that are based on this fundamental ability to access any website available to the public. While policy statements do not establish rules nor are they enforceable documents, today’s statement does reflect core beliefs that each member of this Commission holds regarding how broadband internet access should function. Cable and telephone companies have led the way in bringing broadband to millions of Americans. The evidence today is that their internet access consumers have the ability to reach any internet content. Indeed, cable and telephone companies’ practices already track well the internet principles we endorse today. I remain confident that the marketplace will continue to ensure that these principles are maintained. I also am confident, therefore, that regulation is not, nor will be, required." (emphasis added)

Commissioner Copps said, “I am especially pleased at my colleagues’ adoption of this Statement of Policy on Internet openness. This is something I have been advocating for nearly two years. This Statement lays out a path forward under which the Commission will protect network neutrality so that the Internet remains a vibrant, open place where new technologies, business innovation and competition can flourish. We need a watchful eye to ensure that network providers do not become Internet gatekeepers, with the ability to dictate who can use the Internet and for what purpose. Consumers do not want to be told that they cannot use their DSL line for VoIP, for streaming video, to access a particular news website, or to play on a particular company’s game machine. While I would have preferred a rule that we could use to bring enforcement action, this is a critical step. And with violations of our policy, I will take the next step and push for Commission action. A line has been drawn in the sand.” (emphasis added)

FCC Commissioner Jonathan Adelstein said the Policy Statement “articulates a core set of principles for consumers’ access to broadband and the Internet. These principles are designed to ensure that consumers will always enjoy the full benefits of the Internet. I am also pleased that these principles, which will inform the Commission’s future broadband and Internet-related policymaking, will apply across the range of broadband technologies.” (emphasis added)

Commissioner Pai: Leave Net Neutrality to Congress, Focus on Deregulation

When the FCC’s previous net neutrality rules were partially overturned by the United States Court of Appeals for the District of Columbia Circuit in January, 2014, Commissioner Pai was critical of the Commission: “For the second time in four years, the D.C. Circuit has ruled that the FCC exceeded its authority in attempting to regulate the Internet. It is time for the Commission to take no for an answer. Unless Congress acts, we should stay our hand and refrain from any further attempt to micromanage how broadband providers run their networks. We should focus on removing regulatory barriers to broadband deployment, not imposing unnecessary rules that chill infrastructure investment.”

Four months later, when the FCC voted to launch a new proceeding on how best to protect and promote an open Internet, Commissioner Pai voted against it. Pai’s message remained consistent – the FCC should seek guidance from Congress instead of “plowing ahead yet again on its own.” “A dispute this fundamental is not for us, five unelected individuals, to decide. Instead, it should be resolved by the people’s elected representatives, those who choose the direction of government—and those whom the American people can hold accountable for that choice,” he said.

Pai explicitly said he supported the Powell/Martin Internet freedoms “and I am committed to protecting them going forward.” He acknowledged “people of good faith disagree when it comes to the best way to maintain a free and open Internet,” but Commissioner Pai never offered a plan for how he would protect an Open Internet, just how he wouldn’t go about it. He is not willing to protect the four freedoms by regulating broadband providers as “utilities” under Title II of the Communications Act. And he said Section 706 of Telecommunication Act of 1996 did not give the FCC the authority it seeks to ban paid prioritization of Internet traffic – while also saying the same section “grants the FCC virtually unfettered authority to encourage broadband adoption and deployment.” Instead he pointed to the 1996 Act’s language saying it is the policy of the U.S. to “preserve the vibrant and competitive free market that presently exists for the Internet . . . unfettered by Federal or State regulation” (his emphasis).

This week, Commissioner Pai began his dissent saying, “Americans love the free and open Internet. We relish our freedom to speak, to post, to rally, to learn, to listen, to watch, and to connect online. The Internet has become a powerful force for freedom, both at home and abroad. So it is sad this morning to witness the FCC’s unprecedented attempt to replace that freedom with government control.” The FCC “seizes unilateral authority to regulate Internet conduct, to direct where Internet service providers (ISPs) make their investments, and to determine what service plans will be available to the American public.” He characterized the FCC decision as “turning its back on Internet freedom” forced upon the Commission by the heavy hand of President Barack Obama.

The FCC, Pai says, will now – or, perhaps, more precisely, now has the power to – “micromanage virtually every aspect of how the Internet works.” How? Rate regulation. “For the first time,” Pai said, “the FCC will regulate the rates that ISPs may charge and will set a price of zero for certain commercial agreements.” Pai notes that the FCC will apply Section 201 of the Communications Act of 1934 to ISPs. That provision say, “All charges, practices, classifications, and regulations for and in connection with such communication service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is hereby declared to be unlawful.” Pai says, “A government agency deciding whether a rate is lawful is the very definition of rate regulation.”

Harking back to the debate over the unrelated Affordable Care Act, Commissioner Pai stresses that “If you like your current service plan, you should be able to keep your current service plan. The FCC shouldn’t take it away from you.” He criticizes the FCC’s new “Internet conduct” standard, a standard that “gives the FCC a roving mandate to review business models and upend pricing plans that benefit consumers.” Of course, the standard is being created to address business models that restrict consumers’ access to their choice of legal content, ability to run applications of their choice, capability to attach any devices they choose to their connections, and receipt of meaningful information regarding their service plans. Banning usage-based pricing plans -- which cap the total data consumers can use in a month, oftentimes with exemptions for content favored by the ISP -- and sponsored data plans, which discriminates against some content providers and gives others a preference, Pai argues, would hurt consumers, especially the middle-class and low-income Americans who are the biggest beneficiaries of these plans.

Commissioner Pai is also critical of the order for not applying sections of Title II regulation on ISPs – calling this forbearance “temporary.” “Expect forbearance to fade and the regulations to ratchet up as time goes on,” he warns.

Although FCC summaries of the order have stated the Commission is applying no new taxes or fees to broadband service, Commissioner Pai promises that broadband bills will go up and speeds will go down. He predicts the FCC will start applying Universal Service Fund fees to broadband connections and says “read my lips: More new taxes are coming. It’s just a matter of when.” He points to recommendations on the matter from the Federal-State Joint Board on Universal Service due on April 7, 2015. Broadband networks will slow down, Pai warns, because Title II regulation will mean less investment and innovation in broadband networks. “The more difficult the FCC makes the business case for deployment, the less likely it is that broadband providers big and small will connect Americans with digital opportunities.”

Commissioner Pai is also critical of the FCC process in this proceeding, saying it did not use a transparent notice-and-comment rulemaking process. The final FCC order, he argues, “differs dramatically from the proposal that the FCC put out for comment last May.”

Pai points to a Wall Street Journal article that outlined how White House advisors had meetings to formulate the President’s position on net neutrality articulated in November 2014. Although White House officials reportedly met with public interest advocates like Demand Progress, Fight for the Future, Free Press, and Public Knowledge, “what about the rest of the American people?” Pai asks. His answer, “They were being played for fools.”

Commissioner Pai also criticizes the Commission’s openness. Commissioners Pai and O’Rielly as well as Republican lawmakers asked that the FCC order be released to the public before the February 26 vote. “We should be an independent agency making decisions in a transparent manner based on the law and the facts in the record.” Pai has been a FCC Commissioner for nearly three years and he’s never – and fails to mention – voted on an Order that was released to the public beforehand. “[W]e should have released this plan to the public, solicited their feedback, incorporated that input into the plan, and then proceeded to a vote,” Pai said, somehow ignoring that the FCC received more public comment on this decision than any other in the Commission’s history.

Commissioner Michael O’Rielly: No Authority Save Deregulation

In the wake of the United States Court of Appeals for the District of Columbia Circuit decision on net neutrality last year, Commissioner Michael O’Rielly suggested a new focus, “Once again, the D.C. Circuit has confirmed that the Commission’s authority to regulate is not boundless. Rather than continue to test those boundaries with ‘prophylactic’ regulations, the Commission should look for ways to remove regulatory obstacles to the broadband innovation and investment that will benefit all consumers.”

When the FCC launched the latest net neutrality proceeding in May 2014, O’Rielly declared that net neutrality regulation is “unnecessary and defective.” “The premise for imposing net neutrality rules is fundamentally flawed and rests on a faulty foundation of make-believe statutory authority,” he said. The proceeding would “head the Commission down a slippery slope of regulation.”

A former Congressional staffer, O’Rielly reiterated his view that the FCC has no authority to regulate Internet service providers. Section 706 of the Telecommunications Act, he said, was never intended as an affirmative grant of authority to the Commission to regulate the Internet – at most, it could be used to trigger deregulation. He expressed even graver concerns about the use of Title II authority – “applying monopoly era telephone rules to modern broadband services solely to impose unnecessary and defective net neutrality regulations. I cannot support such a backward-looking, ends-driven approach—not in a Notice and certainly not in final rules.” O’Rielly admitted that the courts granted the FCC the legal authority to reverse the previous FCC decision to classify broadband as an information service, but gave more credence to his concerns about the “real world impact (his emphasis) that such a decision could have on the communications industry and the economy as a whole.” Certainty and stability for broadband investment were his top priorities. Forbearance from some Title II requirements, he suggested, only proves that it is an inappropriate tool for regulating broadband.

Commissioner O’Rielly sought proof of market failure. “The Notice fails to make the case that there’s an actual problem resulting in real harm to consumers,” he argued. Although the proposed rules questioned paid prioritization, O’Rielly noted that “some amount of traffic differentiation or “prioritization” must be allowed or even encouraged. Voice must be prioritized over email; video over plain data. Prioritization is not a bad word. It is a necessary component of reasonable network management.” Without clear harms to address, O’Rielly said, the proposed rules were “hopelessly vague and unclear.” He was also critical that the FCC’s proceeding made no attempt to quantify and compare the costs of the proposed new requirements against the supposed benefits. “Proposed rules should be accompanied by a fulsome cost-benefit analysis that includes a detailed and extensive review of current law, especially as it applies to other federal agencies that we seek to imitate,” he said.

Commissioner O’Rielly joined Commissioner Pai in voting against the FCC’s latest Open Internet rules. “Today a majority of the Commission attempts to usurp the authority of Congress by re-writing the Communications Act to suit its own ‘values’ and political ends,” he began his dissent. “The Commission abdicates its role as an expert agency by defining and classifying services based on unsupported and unreasonable findings. It fails to account for substantial differences between fixed and mobile technologies. It opens the door to apply these rules to edge providers. It delegates substantial authority to the Bureaus, including how the rules will be interpreted and enforced on a case-by-case basis. And, lest we forget how this proceeding started, it also reinstates net neutrality rules. Indeed, it seems that every bad idea ever floated in the name of net neutrality has come home to roost in this item.”

O’Rielly reiterated his belief that there’s no need for net neutrality rules and focused much of his attention on how that concept has become “the pretext for deploying Title II to a far greater extent than anyone could have imagined.” He warns “this is not some make believe modernized Title II light that is somehow tailored to preserve investment while protecting consumers from blocking or throttling. It is fauxbearance: all of Title II applied through the backdoor of sections 201 and 202 of the Act, and section 706 of the 1996 Act. Moreover, all of it is premised on a mythical ‘virtuous cycle’—not actual harms to edge providers or consumers.” He calls the move to Title II an “unlawful power grab.”

In his lengthy dissent, O’Rielly hits on these points:

The Proceeding Did Not Provide Sufficient Notice and Opportunity for Comment: Interested parties effectively had no notice or opportunity to respond to the vast evolution that took place from proposed rules to final order. Key points include: the scope of the newly defined services, including how they relate to each other; the legal analysis underlying the classification or reclassification of each service; how forbearance would apply in the context of these newly defined services; and the theory underlying forbearance, including using sections 201, 202, and 706 to backfill other provisions.

The Findings are Not Supported by Evidence of Actual Harms: “There is not a shred of evidence that any aspect of this structure is necessary. The D.C. Circuit called the prior, scaled-down version a “prophylactic” approach. I call it guilt by imagination.” O’Rielly criticizes the lack of market power analysis and adds there’s “no guarantee that such flimsy reasoning will withstand another round (or two) of scrutiny now that all of Title II hangs in the balance as well.”

Title II is an Extreme Solution to an Imaginary Problem: Title II is far more than a convenient legal theory—it is a comprehensive set of regulations designed to rein in monopoly telephone companies. And it is laden with decades of precedent that cannot be shrugged off with simple incantations. O’Rielly worries about the impact on investment – “I am far more concerned about the Americans that will remain unserved as a result of our rules. Forget about an open Internet; they have no Internet. We need to be focused on ways to promote deployment, and not in some roundabout virtuous cycle way, but through proven deregulatory measures. I am very concerned that, far from a virtuous cycle, we are creating a vicious cycle where regulation deters investment in broadband and that begets more regulation to stimulate competition and deployment that will further deter investment.”

The Commission's Decision to Classify Broadband Internet Access Service as a Telecommunications Service is Contrary to Law and Fact: The decision determines that Title II applies to the entire service—not just a transmission component.

The Commission Cannot “Subsume” Internet Traffic Exchange into Broadband Internet Access Service to Regulate it Under Title II: content providers and network operators enter into interconnection relationships with ISPs through individually negotiated private agreements -- “peering,” “transit,” or “on-net-only.” The FCC attempts to transform this “interconnection” into a telecommunications service by “subsuming” it into another service—broadband Internet access service. And just like that, retail broadband Internet access service is no longer a last mile service; it is the entire “Internet traffic path”, including all Internet traffic relationships. This approach is riddled with holes.

Mobile broadband services warrant different regulatory treatment: Until now, the Commission has followed Congress’s mandate under section 332 of the Communications Act and has exercised regulatory restraint by classifying mobile broadband as an information service free from common carrier regulation as required by the statute. “[T]oday, we use sleight of hand to change our definitions so that overnight mobile broadband magically falls under the confines of Title II.” This ignores fundamental differences between the wireless and fixed broadband industries and technologies.

The Promised Forbearance is Fauxbearance: The order claims to forbear from provisions but then quickly points to available protections in other provisions that effectively gut the forbearance. It’s an end run for purposes of spin and allows proponents to claim that it’s a new “modern Title II” when really it only would exclude 56 percent directly and even then allow the inexcusably broad language of certain sections to govern.

The Commission Does Not Have Authority to Re-Write the Act: The Supreme Court has made clear that “an agency has no power to ‘tailor’ legislation to bureaucratic policy goals” by interpreting a statute to create a regulatory system “unrecognizable to the Congress that designed it.” “Yet the item attempts,” O’Rielly writes, “to do just that by engaging in a wholesale re-write of the Communications Act to advance its own vision for the Internet.”

Case-by-case Enforcement Will be a Trap for the Unwary: The bulk of this rulemaking will be conducted through case-by-case adjudication, mostly at the bureau level of the FCC and in the courts. To be sure, there are three bright line rules: no blocking, no throttling, and no paid prioritization. But those are mere needles in a Title II haystack. Many practices will be reviewed under the general conduct standard. Moreover, rates, charges, and classifications will also be reviewed under the amorphous just and reasonable standard in sections 201 and 202.

Conclusion

On February 26, the Benton Foundation released a statement, A Victory for Everyone Who Uses the Internet, celebrating the FCC's new rules, the FCC leadership, and millions of people who made their voices heard in this proceeding. So it is fair to say we're not in agreement with Commissioners Pai and O'Rielly. But there are no permanent victories (nor defeats) in policymaking and the new FCC rules face much scrutiny on their way to settled code. Pai's and O'Rielly's dissents offer us front row criticism of the new rules. But if the rules are to preserve and protect the Open Internet, they must survive this criticism.