On Defining the Third Way

Regarding Reclassification:  A series of blog posts exploring the legal landscape of Communications Act Title I and II reclassification

On June 17, 2010, the Federal Communications Commission (FCC) opened a Notice of Inquiry(NOI) seeking public comment on a new legal framework for broadband regulation. This move is intended to reestablish the FCC's authority over broadband overcoming a legal setback presented by the U.S. Court of Appeals - D.C. Circuit and laying a strong legal foundation for transforming the National Broadband Plan into effective policy. Specifically, the FCC is considering reclassifying the transmission component of broadband Internet access—this is only the communications path that facilitates the transfer of data from one point to another—as a telecommunications service. This proposal, called the "Third Way," separates the transmission component and the computing functionality of broadband Internet access service.

Telecommunications versus information services

The "Third Way" is not radically new. The approach is rooted in the FCC's Computer Inquiries, which distinguished between Internet service, applications, and content for the purposes of drafting regulatory policy. Beginning in 1966, the FCC decided to classify telecommunications providers offering basic data transmission services as common carriers subject to regulation under Title II of the Communications Act of 1934, the section that applies to the transmission of information without additional processing, such as telephone service. Notably, Title II also includes many of the consumer protective components that have ensured consumers fair access to telephone service. This left the smaller Internet service providers offering data processing services largely unregulated.

In the Second Computer Inquiry of 1980, the FCC refined this distinction by creating two categories of services provided by Internet service providers—basic and enhanced. Basic services refer to the fundamental transport services, the sending and receiving of data, which is analogous to the voice service provided by telephone companies. In contrast, enhanced services are the higher-level data processing services, which today would include access to email, web hosting, newsgroups, and a home page portal made available by Internet providers.

The Telecommunications Act of 1996 drew analogous distinctions between telecommunications services (i.e., basic services) and information services (i.e., enhanced services) provided by Internet access providers, and this remains the law today. In 2000, in AT&T v. City of Portland, the United States Court of Appeals for the Ninth Circuit held that cable modem providers offered both telecommunications and information services, consistent with the Computer Inquiries.

In response, the FCC changed course by defining cable modem service as an integrated information service in its 2002 Cable Modem Order. This move was significant because it deregulated cable modem providers, leaving the FCC with only Title I ancillary jurisdiction over broadband provided by cable. This means the FCC does not have direct authority over broadband, and every action it takes toward broadband must be tied to an express statutory mandate, the existence of which is not always clear.

The FCC is likely to define the transmission component using the definitions of "basic service" from the 1980 Second Computer Inquiry and "Internet connectivity" from the 2002 Cable Modem Order.

Under the "Third Way" framework proposed this past May, the FCC aims to bring the telecommunications service component of broadband back under Title II, as it had been classified prior to the 2002 ruling. The computing functionality, analogous to enhanced Internet services, will continue to be classified as a largely unregulated information service under Title I. The FCC is likely to define the transmission component using the definitions of "basic service" from the 1980 Second Computer Inquiry and "Internet connectivity" from the 2002 Cable Modem Order. In this case, the transmission component of broadband will include the services directly related to data transmission, including domain name service (DNS) resolution, Internet Protocol (IP) assignment, network management practices, among other functions. In other words, nondiscrimination and consumer protection principles are tied to the transmission component.

What this means for the National Broadband Plan

Ultimately, Title II reclassification will strengthen the FCC's authority over broadband transmission, making implementation of the National Broadband Plan possible. This approach is necessary after the recent DC Circuit decision in Comcast v. FCC cast doubt on the FCC's legal authority to prevent broadband providers from blocking certain types of Internet traffic. In light of Comcast, it seems that the FCC's 2002 decision to reclassify broadband as an integrated information service over which it could only exercise ancillary authority left the FCC without the ability to enforce nondiscrimination principles. Key policies of the National Broadband Plan hang in the balance.

If the FCC were to continue to rely on its ancillary jurisdiction over broadband, it would likely face multiple legal battles as it proceeds in implementing the National Broadband Plan. With adoption of the "Third Way," the FCC will have the authority to enforce nondiscrimination rules and consumer protection policies, such as information privacy and prohibitions against denials of service. It will also permit the FCC to modernize the Universal Service Fund to support the expansion of broadband Internet access to high-cost rural areas. Because the "Third Way" calls for the application of just six provisions from Title II and applies only to broadband connectivity, the approach would ensure the FCC's most basic oversight role.

The "Third Way" approach to broadband classification is a fair compromise between Title I classification and full Title II classification. If the FCC continues to rely on Title I ancillary authority, it will invite future litigation and uncertainty, as well as the erosion of consumer protection principles and the contraction of investment and innovation.

Co-Authored by Alexandra Wood and Amina Fazlullah