Net Neutrality is Dead. Long Live Net Neutrality

On January 14, 2014, the United States Court of Appeals for the District of Columbia Circuit struck down key elements of the Federal Communications Commission’s Open Internet rules (commonly known as net or network neutrality) which required broadband providers to treat all Internet traffic equally. Depending on your philosophy on government regulation of the Internet or your interpretation of the court’s decision, either the sky is falling or all is finally right in the world. We’ve seen tons of coverage of, reaction to, analysis of and opinion about the decision. Here’s a quick take on the decision, what it means and what (may) happen(s) next.

There are three basic Open Internet rules:

  1. Transparency: Broadband providers must disclose information regarding their network management practices, performance, and the commercial terms of their broadband services;
  2. No Blocking: Fixed broadband providers (such as DSL, cable modem or fixed wireless providers) may not block lawful content, applications, services or non-harmful devices. Mobile broadband providers may not block lawful websites, or applications that compete with their voice or video telephony services;
  3. No Unreasonable Discrimination: Fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service. The no blocking and no unreasonable discrimination rules are subject to limited exceptions for “reasonable network management.”

At stake in this court were these rules and the FCC’s authority to regulate broadband service. The court ruled that the FCC may not apply anti-blocking and nondiscrimination provisions to broadband providers. In the ruling, Judge David S. Tatel states the FCC “may not impose requirements that contravene express statutory mandates. Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order.” Basically, the court is saying that the FCC saddled 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 approved of the transparency rules, so broadband providers are still required to disclose their activities -- in other words, to reveal how they are managing traffic.

Also, importantly, the court ruled that the Telecommunications Act of 1996 “vests [the FCC] with affirmative authority to enact measures encouraging the deployment of broadband infrastructure.” The provisions of the 1996 Act in question, Sec 706 for those scoring at home, “empower [the FCC] to promulgate rules governing broadband providers’ treatment of Internet traffic.” The opinion continues to say that the FCC’s justification for the Open Internet rules -- “that they will preserve and facilitate the ‘virtuous circle’ of innovation that has driven the explosive growth of the Internet” -- is both reasonable and supported by evidence. Sec 706 states:

The Commission and each State commission with regulatory jurisdiction over telecommunications services shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans (including, in particular, elementary and secondary schools and classrooms) by utilizing, in a manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.

The law defines "advanced telecommunications capability" as “high-speed, switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology.”

So here’s why the ruling appears to be, at best, a mixed bag for everyone. 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. So the judges don’t seem to have questioned the merits of the FCC’s rules only, writes Jennifer Yu of Free Press, but “whether the FCC had the authority to issue its rules under the legal framework it had adopted.”

Harold Feld at Public Knowledge wrote an analysis of where the ruling leaves the FCC's Open Internet rules. "Providers are free to strike whatever deals they want or block whoever they want ... however, the FCC cannot really do anything about it directly. This doesn’t make the FCC entirely helpless. But it does mean that the best the FCC can hope for, absent reclassifying broadband as Title II, is possibly a sort of 'Net Neutrality-lite' that looks remarkably like what we had in 2008 -- a complaint process based on Open Internet principles." There was a lot of uncertainty at the time about what conduct the FCC would allow, so no one seemed to like that arrangement.

The court ruling appears to leave the FCC with a handful of options:

First, the commission could do nothing, accepting the ruling and abandoning altogether efforts to ensure that consumers can make their own choices about what applications and services to use, and are free to decide what content they want to access, create, or share with others. In this scenario, Internet service providers, tempered by the power of the marketplace, would be free to decide if they would discriminate how data is treated on their networks. Of course, the problem here is that there are large swatches of the U.S. in which there is only one Internet service provider , and so, no chance for a market-driven correction.

In response to the court decision, FCC Chairman Tom Wheeler wrote: "The absolute necessity that there be government oversight of broadband networks stems from two facts. The networks support essential—in fact, increasingly essential—services for our society (and for everyone in the world, for that matter). And, there are not and are not likely to be many such networks. As with many of the communications networks of the past, broadband networks involve very high fixed costs and very large minimum efficient scale. So, to say it a little more abruptly, broadband networks are essential and they are likely in their relative scarcity, especially at the local level, to enable exercises of market power." This would appear to rule out a "do nothing" course of action.

The FCC could appeal the court’s decision -- first to the full Appeals court and, possibly, the Supreme Court. This process could take some time.

A third option for the FCC is to rewrite and re-justify Open Internet rules under Sec 706.

Finally, the FCC could reverse its March 2002 decision to classify broadband as an information service rather than a telecommunications service. (1) The Telecommunications Act defines “telecommunications service” as “the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.” “Telecommunications” is defined in turn 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 Act defines “information service” as “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.” These definitions rest on the function that is made available, not the particular types of facilities used.

Looking at the court’s decision, Jennifer Yu writes: “In recounting the history of the regulatory regime that has governed broadband services, the court observed that when the 1996 Telecommunications Act was passed, the FCC had already been subjecting broadband providers to common-carrier regulations, and that ‘one might have thought, as the Commission originally concluded, that Congress clearly contemplated that the Commission would continue regulating Internet providers in the manner it had previously.’”

In a statement released just after the court's decision was released, FCC Chairman Wheeler said, "We will consider all available options, including those for appeal, to ensure that these networks on which the Internet depends continue to provide a free and open platform for innovation and expression, and operate in the interest of all Americans." Obviously, we'll be tracking those decisions in Headlines and you can follow along.

For further reading now, may we recommend...

In the spirit of disclosure, the Benton Foundation supports reclassification of broadband connectivity as a telecommunications service

By Kevin Taglang.