Net Neutrality 2.0: Will The FCC’s New-Look Open Internet Be The Last Word?



By: Brian J. Meli

2014 will, among other things, be remembered as the year the term ‘net neutrality’ was foisted upon the American public’s ever expanding e-lexicon. It began in earnest last January, when Verizon won its high-profile challenge to the FCC’s Open Internet Order, the official name for the Commission’s rules upholding the principle of net neutrality, requiring equal treatment for all web traffic without regard to source. The issue then picked up considerable steam in May when, in response to that ruling, FCC Chairman Tom Wheeler and his fellow commissioners approved a new plan that would scrap the concept of net neutrality as it was understood at the time, and create a new regulatory framework allowing Internet “fast lanes,” which deep-pocketed providers could pay for the privilege to use to push their content at higher speeds. You could say it reached fever pitch one month later when comedian John Oliver pilloried the FCC’s decision in this brilliantly conceived polemic, racking up eight million YouTube hits and cementing the issue in mainstream consciousness. Finally, as 2014 drew to a close, none other than President Obama himself voiced his unequivocal support for net neutrality in a direct address to the nation.

While 2014 was undoubtably the year that net neutrality took center stage, it was merely the opening act of what promises to be a long and contentious legal process to determine how the toll collectors of Internet traffic will be regulated; and to what extent the FCC has the authority to do so. We’re not much more than two months into this new year, and already net neutrality is back, and in a big way. In mid-February Chairman Wheeler and the FCC, in the face of withering public criticism, announced that they were reversing field on the idea of Internet fast lanes and tabling a new proposal that reaffirmed a commitment to an open Internet where paid prioritization (fast lanes), and the ability of broadband service providers (ISPs) to block or throttle certain content, had no place. On February 26th that do-over was approved by the Commission in a 3-2 vote that was split straight down party lines. Writing for the majority, Wheeler had this to say:

We know from the history of previous networks that both human nature and economic opportunism act to encourage network owners to become gatekeepers that prioritize their interests above the interests of their users. […] broadband providers have both the economic incentive and the technological capability to abuse their gatekeeper position.” 

What a difference a year can make. 

The opinions of the dissenting commissioners were no less strongly worded. According to Commissioner Majit Pai’s unapologetically scathing dissent“This Order imposes intrusive government regulations that won’t work to solve a problem that doesn’t exist using legal authority the FCC doesn’t have.”

Michael O’Rielly, the other dissenting commissioner, had equally pointed words for the majority: “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.” From statements like these, it’s obvious the rift that net neutrality has opened among the general public runs no less divisively through the FCC itself. 

As John Oliver so deftly demonstrated, it’s tempting to get emotionally invested in this issue. It’s become such a polarizing debate because it deals with themes that are so quintessentially American; themes like equal rights, level playing fields and competitive fairness. Because of the strong passions it fans on both sides, it’s easy to oversimplify this issue as a clash between freedom and fairness. But as I noted around this time last year, I believe the fears on both sides are, to some extent, overblown. Net neutrality raises important questions about the scope of the FCC’s authority to regulate the delivery of Internet traffic; questions that will no doubt be answered in the coming months and years. But the parade of horribles envisioned by the most vocal alarmists on both sides—from Mark Cuban in the anti camp to Al Franken in the pro—who seem to equate their side’s defeat with technological regression to a time when humans communicated via stone etchings, cyptic symbols and elaborate hand gestures, seem unnecessarily extreme. Leaving the social, political and moral issues to the more philosophically and civic-minded, a fuller understanding of the legal argument at the heart of the FCC’s latest resolution—an argument the agency has all but ensured will be at the eye of the net neutrality storm for some time to come—will be the key to handicapping how this ends.

The FCC’s open Internet roadmap

The reason we’re having this debate in the first place is because of a 2014 U.S. Court of Appeals case called Verizon v. FCC. In that case Verizon challenged the FCC’s original Open Internet Order mandating net neutrality, successfully pleading that the FCC exceeded its authority when it issued that Order back in 2010. The court’s decision was based on the fact that the FCC had, going back almost two decades, classified ISPs (like Verizon, Time Warner, Comcast and AT&T) as “information providers,” rather than “telecommunications providers” which fall under the definition of common carriers and are subject to much more stringent regulation. The court therefore vacated the portions of the Open Internet Order that placed common carrier-like restrictions on ISPs (namely the non-discrimination of Internet traffic provisions), effectively doing away with government-mandated net neutrality, and sending the FCC scrambling for an alternative way to achieve its stated open Internet goals.

While the information/telecommunication divergence may sound like a distinction without a difference, there’s actually a profound difference, and it resides in the Communications Act of 1934, the law from which the FCC draws its regulatory authority. Common carriage is a term that has historically encompassed what people think of as utilities, such a electricity, water and telephone service. And under Title II of the Communications Act the FCC has broad authority to regulate telecommunications providers as common carriers. The policy intent behind the expansive oversight of common carriage is straightforward: when a private company delivers an essential public service, the government’s interest in ensuring equal access to that service justifies more onerous regulation, which may or may not include setting delivery standards, regulating rates, and banning discriminatory practices in favor of higher margin customers. The drawback, of course, is that having the common carrier label slapped on a technology company can limit economic incentives for innovation and discourage investment in infrastructure because it tends to constrain return on capital and lead to resource misallocation.

In the mid-nineties the Telecommunications Act of 1996 first defined the term “information service,” which the FCC interpreted to encompass broadband services; an interpretation the agency reaffirmed in 2002 when it voted to also include cable broadband providers, ensuring that all ISPs fell under Title I of the Communications Act, not Title II. The rationale was that less regulation would lead to the kind of investment and innovation that leads to better quality, lower prices, and more choices for Internet users. Whether that actually occurred is a topic for debate unto itself. What isn’t however is the unparalleled growth the Internet has experienced since 1996.

The FCC’s initial embrace of broadband ISPs as information providers was a policy-based decision that made sense at the time, but the distinction was also rooted in the technology itself, given the wording of the statute. “Telecommunications,” as defined in the Communications Act, is “the transmission of information, between or among points specified by a user without change in the form or content of the information as sent and received by the user.” In other words information travels from point A to point B without that information being modified; much like a phone transmits voice signals from a sender to a receiver. The message itself isn’t altered once its sent any more than a letter is altered in transit once it’s dropped in the mail. In contrast an “information service” gives users the ability to “generate, acquire, store, transform, process, retrieve or utilize” information transmitted via a telecommunications network. Information transmission therefore occurs via a telecommunications service, but its creation and manipulation must be done via an information service. At least that’s how it has been understood since 1996.

In passing its new Open Internet Order last week, the FCC announced its plan to essentially reinterpret those statutory definitions, reclassifying broadband providers as telecommunications providers and shifting the regulatory framework under which they operate from Title I, to the common carrier domain of Title II. In doing so, the question now becomes whether this new interpretation will survive judicial review, or if, as many critics contend, the FCC overstepped, or even abused its authority?

The end of the beginning

Opponents of the new Order adamantly maintain that the risk of unintended consequences resulting from allowing the FCC to regulate broadband like a utility are simply too great to allow this decision to go unchallenged. Those consequences range from the functional—such as diminished broadband investment and the stunting of technologies that rely on its continued deployment—to the procedural: setting precedent for a federal agency to disregard the plain text of established legislation to satisfy the shifting political priorities of the executive branch.

The common position linking most opponents of the FCC’s latest move is that the Internet has not only been working fine for the last twenty years; it’s been working phenomenally well. It amounts to an “if it-ain’t broke” argument, and it’s a valid one given that the net has been non-neutral for the vast majority of its lifespan.

To be sure, the commissioners in the majority were attuned to these concerns after a lengthy rule-making process that included a public comment period that saw roughly three million submissions (one of the largest public responses to an FCC proposal in the agency’s history). To address these concerns, the new Order promises a modernized, “light-touch” approach that forbears enforcement of 27 different common-carriage provisions, and over 700 associated regulations that are either not applicable to broadband services, or that are not in the public interest to enforce; namely rate regulation, tariffs, and heightened filing and accounting standards. But it begs the question that if over 700 different regulations applying to common carriers don’t apply to ISPs, would’t that tend to be strong evidence that IPSs aren’t common carriers? Detractors argue that it should, and that the concept of common carriage-light merely muddies established regulatory boundaries that have stood in stark contrast for two decades. 

What is clear is that the fight to determine how the gatekeepers of the Internet will be regulated is far from over. Even as the FCC’s decision was being voted on, battle lines were being drawn. Commissioner Pai may have summed up the antipathetic post-Order climate best in his dissent when he noted that “It is only a matter of time before the Order is vacated by a court, reversed by Congress, or overturned by a new Commission.” While it is far from certain which, if any, of those legal routes will ultimately end up being the vehicle for a successful challenge, it’s all but certain an attempt will made via one or more of them.

On the judicial front AT&T is already building its case for suing the FCC to challenge the ruling. So is Verizon, the ISP that arguably has the most invested in this process, since it was its lawsuit that started the dominoes falling to get to where we are today. If there was any doubt about the ardor the New York-based telecom giant has for this issue, look no further than its official statement in response to the decision, released in morse code for dramatic effect and taking condescension (and some might say immaturity) in corporate communications to a whole new level.

The legislative route also has momentum. House Energy and Commerce Committee Chairman Fred Upton is seeking to override the Order by proposing a bill that would overturn the common carrier classification while still upholding the principles of net neutrality. Echoing Chairman Pai’s sentiments, Upton was quoted during a committee hearing last week as saying that the FCC vote “is just the beginning.”

So while this may be a new year, 2015 doesn’t appear any more likely to usher in a resolution to this feud than 2014 did. Quite the opposite in fact. It appears that rather than working toward common ground, both sides are planting their heels in further. At this point, the only thing that seems fairly certain about the future of net neutrality is that you’re going to be hearing a lot more about it. As Winston Churchill famously said, “This is not the end, nor the beginning of the end. But perhaps the end of the beginning.” Let’s hope, in the name of progress; and for the sake of consumers, providers and the Internet itself, that we’re closer to the end of this debate than we are the beginning.

The content of this blog is intended for informational purposes only. The information provided in this blog is not intended to and does not constitute legal advice, and your use of this blog does not create an attorney-client relationship between you and attorney Brian J. Meli. Under the rules of certain jurisdictions, the material included in this blog may constitute attorney advertising. Prior results do not guarantee a similar outcome. Every case is different and the results obtained in your case may be different.

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