Net Neutrality: A Historic Decision

Submitted on June 17, 2016

You’re reading the Benton Foundation’s Weekly Round-up, a recap of the biggest (or most overlooked) telecommunications stories of the week. The round-up is delivered via e-mail each Friday; to get your own copy, subscribe at www.benton.org/user/register

Robbie’s Round-Up for the Week of June 13-17, 2016

June 14, 2016: a historic day for network neutrality. The US Court of Appeals for the District of Columbia upheld the Federal Communications Commission’s network neutrality rules. The rules, adopted in February 2015, reclassified Internet service under Title II of the Communications Act, essentially ruling that broadband Internet service access providers are common carriers. The Benton Foundation has described those rules as the “greatest commitment ever made to preserve and protect an open and free Internet.” The Appeals Court has spoken: net neutrality is here to stay.

What are the Net Neutrality Rules?
In February 2015, the FCC adopted “Open Internet” rules aimed at preventing Internet service provider (ISP) practices that could be detrimental to broadband subscribers’ experience of the 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 FCC also enhanced transparency rules and applied the rules to wireless broadband services, too. In addition, the rules include:

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. Broadband providers’ transparency disclosures cover any offering of 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 rules 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.

The Court's Decision

The appeals panel, in a 2-1 decision, ruled broadly that the FCC had established sufficient basis to impose tougher common-carrier regulations on broadband providers. Why? Because consumers no longer look to ISPs to supply much of the online content they are seeking. The judges held that despite advances in technology, the underlying importance of the Internet to everyday communications and commerce makes it more similar to the phone system than not.

"Over the past two decades, this content has transformed nearly every aspect of our lives, from profound actions like choosing a leader, building a career and falling in love to more quotidian ones like hailing a cab and watching a movie. The same assuredly cannot be said” for broadband providers’ own add-on applications. The ruling sided with the FCC in a dense, methodical opinion that rejected the challengers’ various arguments one by one. The DC Circuit majority said its role in reviewing the net neutrality regulations was “a limited one.” The court said its job was “to ensure that an agency has acted within the limits of Congress’s delegation of authority."

The 115-page majority opinion was written jointly by Judges David Tatel and Sri Srinivasan. Judge Tatel, a President Bill Clinton appointee, wrote the court’s previous two opinions that went against the FCC on net neutrality. Judge Srinivasan is a President Barack Obama appointee who was on the President’s short list for the Supreme Court vacancy created by the February death of Justice Antonin Scalia. Judge Stephen Williams, a President Ronald Reagan appointee, dissented, saying a core part of the FCC’s approach “fails for want of reasoned decision making.” He said the FCC’s explanation for its new regulatory treatment of broadband providers “is watery thin and self-contradictory.”

Impact

The court verdict puts to rest — for now — a key question: Whether the Internet represents a vital communications platform that deserves the same consumer protections as the networks of the past, such as the telephone system. Importantly, the ruling opens a path for consumer protections beyond net neutrality, as the FCC now has a stronger footing to take other pending steps.

Consumer Privacy
Already, the FCC has proposed privacy rules for broadband providers, curbing the ability of companies like Verizon and AT&T to collect and share data about broadband subscribers. With reclassification, broadband providers now face expectations they once could safely ignore because they were not considered telecommunications carriers. For instance, phone companies currently must obtain explicit consent from consumers before sharing consumer’s names, phone numbers, addresses, or other personal information with marketers. Internet providers do not. But the pending proposal at the FCC would seek to extend a similar set of expectations to broadband companies.

Wireless
Two of the three judges agreed that wireless broadband services are also common carriers subject to anti-blocking and discrimination rules. This could affect some emerging industry practices, such as imposing data caps on consumers while exempting provider-sponsored content (e.g., T-Mobile’s Binge On offering).

In the majority opinion, the judges said that Internet users don’t feel the difference between fixed-wire broadband and mobile service. To an iPad user, whose device switches automatically between Wi-Fi and wireless networks, the government’s oversight of those technologies should not differ, they said.

Rate Regulation
Arguably the biggest threat to broadband providers is the potential of any regulation of the rates they charge for the service. The FCC has promised it will not impose broadband rate regulation. However, industry analyst Craig Moffett said, “The pendulum has today swung a bit further in the direction of long-term price regulation.”

What’s Next?

To The Supreme Court?
The cable and telecommunication industries have signaled their intent to take the case to the Supreme Court. “We have always expected this issue to be decided by the Supreme Court and we look forward to participating in that appeal,” said David McAtee II, the senior executive vice president and general counsel for AT&T.

But legal scholars on both sides of the debate said it is unlikely the Supreme Court would hear the case. Reed Hundt, FCC Chairman during the Clinton Administration, said the dissenting opinion supports the argument that the FCC has the authority to reclassify Internet service as a utility, making it unlikely that the Supreme Court will take up the issue. Hundt said the FCC decision settled the matters of law and is among the top victories in the FCC’s history.

Further diminishing the possibility of an appeal is the tendency that the Supreme Court doesn’t accept cases unless lower courts have ruled differently on the issue, which has not happened. “SCOTUS does not take up a case unless there is a split in lower courts,” said Matt Wood, policy director at Free Press. John Bergmayer, senior staff attorney at Public Knowledge, agreed. There is “no legal question for the court to take up,” he said.

Legislation?
The cable industry’s biggest lobbying group, the National Cable and Telecommunications Association (NCTA), said broadband legislation is a better alternative to the FCC’s classification of Internet business as a utility. “While this is unlikely the last step in this decade-long debate over Internet regulation, we urge bipartisan leaders in Congress to renew their efforts to craft meaningful legislation that can end ongoing uncertainty, promote network investment and protect consumers,” NCTA said.

Republican lawmakers said they were still weighing how to move forward after the decision. House Communications Subcommittee Chairman Greg Walden (R-OR) said, “I think that door remains open to look at this legislatively. But I also think that between now any legislation moving forward you’ll see an appeal by those who disagree with the court’s decision.”

Sen Brian Schatz (D-HI), who is an active voice on communications policy, predicted the Democratic party would be less interested in striking a deal now that the court battle went their way. "You know, it’s the ruling we wanted. The reason to work on legislation was that both sides of this debate had the possibility of an adverse ruling. Now that it’s been settled by the courts, there’s less of an incentive to legislate,” he said.

Chairman Walden said he has doubts about whether President Obama would sign off on any compromise legislation regarding the rules, especially given the court’s decision. “We’ll be evaluating it and look forward to what paths are there, but clearly, with President Obama in the White House, the odds of him signing a net neutrality reform bill are pretty low.”

Quick Bits