Net Neutrality – An Update

The Federal Communications Commission’s Network Neutrality rules became effective on June 12. What’s happened since then?

The Federal Communications Commission’s Network Neutrality rules became effective on June 12. Since then, contrary to the warnings of some opponents, the digital world has not stopped turning. On the other hand, while Net Neutrality supporters were jubilant, there has been little visible change for the good, either. That should not be surprising, since the most important impact of the new rules is in shaping future conduct. Even so, for those interested in preserving an open Internet, there are a number of developments worth noting.

Litigation: By far the most significant development since the FCC adopted the new rules is the inevitable litigation challenging the FCC’s power to adopt Net Neutrality rules and the constitutionality of those provisions. Net Neutrality opponents -- led by the cable, wireless and phone companies -- hired a bevy of big name litigators and unsuccessfully went for an early kill, asking the Court to issue a stay blocking the rules from coming into effect. A large group of tech companies and public interest groups joined the case to support the FCC in opposing the stay request. This was, to be sure, a psychological victory, but it does not necessarily foretell how the appeal will turn out.

One common warning of Net Neutrality opponents was that the FCC’s decision would lead to many years of litigation. However, by agreement of all the affected parties, the litigation has been put on the fast track by the U.S. Court of Appeals for the D.C. Circuit, with the first briefs due before the end of this month, oral argument likely before the end of the year. A decision could be issued by spring 2016, about a year after the FCC’s decision. If this schedule holds, if the losing side wishes to seek Supreme Court review, and the Court wishes to hear the case (which is by no means certain), the case could be resolved by early 2017. For major litigation, one or two years is not a long time.

What is out of the ordinary for the case is the number of interested parties. By this week, about 15 different conservative and business organizations have told the court that they will be filing amicus briefs supporting the challenge. A similar number of amicus briefs supporting the FCC are likely to be filed in September.

Legislation: Although Congressional leadership has apparently decided against using the Congressional Review Act to override the FCC’s February decision adopting Net Neutrality rules, a number of bills to overrule the FCC’s decision have been introduced in Congress. Efforts at a bipartisan compromise of some sort have stalled in the wake of the passage of appropriations riders in the House and Senate subcommittees. The House version would overrule the FCC, but the Senate provision would only prohibit the FCC from regulating broadband rates. For reasons having nothing to do with Net Neutrality, there may not be any appropriations bills at all this year. However, if the measure does move forward, there is a reasonable chance that the Senate version might pass. A stronger measure might be vetoed by the President.

Sprint Throttling Policy: Although Sprint claimed that its practice of throttling its most data-hungry customers did not violate the new FCC rules, it nonetheless abandoned that policy in June, claiming it was doing so out of an abundance of caution.

Charter’s Net Neutrality Policies: In seeking FCC permission to acquire Time Warner Cable, Charter Communications committed itself to adhere to the new FCC rules for three years, whether or not they are upheld by the courts. It also promised not to impose data caps, which means that it would not engage in “zero rating,” a practice which may in some instances violate the Net Neutrality rules. Interestingly, Charter hired a prominent Net Neutrality advocate, Marvin Ammori, to advise it on adopting these policies. Ammori elaborated on Charter’s promises in an article in Wired.

Interconnection: One of the most controversial, and complex, components of the FCC’s Net Neutrality decision was its handling of interconnection issues. The FCC indicated that under some circumstances, ISPs would be violating the law by attempting to overcharge for allowing access to their networks to other ISPs (such as Cogent) which specialize in carrying large amounts of data from large end users (i.e., Netflix). The effect of this was that large ISPs quickly began to negotiate new carriage agreements. In June, a smaller company, Commercial Network Services, filed the first complaint under the new rules, claiming that Time Warner Cable should be required to allow interconnection free of charge. The complaint is widely considered to lack merit.

Ombudsperson: Parul P. Desai, Assistant Chief of the FCC’s Consumer and Governmental Affairs Bureau (and formerly with Media Access Project and Consumers Union) has been appointed to serve as the ombudsperson who will be the point of contact for informal and formal inquiries and complaints involving Net Neutrality.

Advisory Opinions: On July 2, the FCC announced procedures under which parties can request advisory opinions on whether particular practices would violate the new rules. While this may prove helpful in some circumstances, the industry’s reaction was rather skeptical, based on the various conditions that the FCC imposed on the process.

Transparency - One aspect of the FCC’s earlier Net Neutrality rules adopted in 2010 -- ensuring the right to accurate information so consumers can choose, monitor and receive the broadband Internet services they have been promised -- was upheld by the Court of Appeals. While the FCC strengthened these requirements in its new decision, the Commission recently proposed a $100 million dollar fine for AT&T Mobility, alleging that it had failed to comply with the old rules by offering “unlimited” data service but in fact capping speeds for customers who used a lot of data. The effect of this was to serve notice that the transparency requirements, old and new, will be aggressively enforced. The agency has also opened a proceeding to consider whether a temporary exemption for small businesses should be made permanent.

Privacy - In making ISPs subject to Title II of the Communications Act, the FCC’s February decision did not specifically address how it would enforce the privacy requirements set forth in Section 222 of the Act. In April, the FCC convened a public meeting of stakeholders to consider questions the Commission should address in the future. It is likely to initiate a rulemaking this fall to adopt formal policies. In the meantime, to give interim guidance, on May 20, the FCC issued an “Advisory” which sought to reassure ISPs that the Commission would not take action against broadband providers taking “reasonable, good faith” steps to comply with Section 222.

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The early days of the new regime provide little insight into how things will proceed in the months and years to come. If the rules are upheld, and a Republican wins the White House in 2016, there is a strong likelihood that efforts will be made to repeal or modify them. However, like the Affordable Care Act, once implemented, Net Neutrality may be hard to displace. If the Democrats control the White House, the rules are likely to remain in place, although it is likely that there will be a need to tweak them as implementation progresses.

By Andrew Jay Schwartzman.