Wednesday, February 5, 2014

The Network Neutrality Debate in “Extra Innings”

     Since release of the D.C. Circuit Court decision on the FCC’s Open Internet Order, I have read and reread the decision along with many interpretations.  I have seen some opponents to network neutrality try to convince themselves and others that the two courts decisions have little impact or finality, so the campaign (and the need for financial support) must continue. 

     On the other hand, some advocates for network neutrality appear intent on finding a glimmer of hope that the decisions do not prevent the FCC from yet again trying to carve out a regulatory regime for Internet access.  Even as the court devoted much space in explaining what the FCC cannot do, many advocates on both sides invoke the validation of FCC statutory authority (under Section 706 of the Telecommunications Act, 47 U.S.C. §1302) as evidence that the FCC can still do harm, or remedy likely problems.

     Both sides appear to overstate what the court considers lawful going forward.  Bear in mind that Section 706 only authorizes the FCC to promote access to, and investment in the Internet.  The legislative history appears to emphasize deregulatory initiatives, rather than new regulatory ones to achieve the specified twin goals.  Both court decisions devote many pages on what the FCC has done unlawfully with fairly clear admonitions on what the Commission cannot do going forward.  Put simply, the FCC has a limited wingspan for invoking Sec. 706 to create regulations directly impacting how Internet Service Providers (“ISP”) deal with upstream sources of content and downstream subscribers.

     The Commission can impose transparency requirements such as the duty to disclose when network management factors warrant throttling (slowing down) certain traffic streams, or when an ISP offers premium, “better than best efforts” quality of service and traffic routing options.  Likewise the Commission should retain authority to respond to complaints from subscribers, upstream ISPs and content sources.

     However, the language in Sec. 706 and the clear prohibition on imposing common carriage responsibilities significantly constrain the FCC.  Perhaps more importantly and ignored from the analyses I’ve read is the insight provided by cable television case precedent and the court’s reading of these cases.  These cases did not endorse the FCC’s imposition of anything coming close to common carriage responsibilities on cable operators. 

     The high water market of a duty to deal occurred when the FCC created a dichotomy of carriage options pertaining only to significantly viewed broadcast television stations.  When unable to extract payment from cable operators for their “retransmission consent” broadcasters can demand carriage, a process known as “must carry.”  Note that the FCC limited this carriage obligation to a select beneficiary, broadcast television stations, not to any and all sources of content.

     The D.C. Circuit court in Verizon v. FCC, http://www.cadc.uscourts.gov/internet/opinions.nsf/3AF8B4D938CDEEA685257C6000532062/$file/11-1355-1474943.pdf, emphasized that the FCC could apply its expertise to determine that the public would benefit from a limited cable television carriage regime.  The FCC rules provided for a marketplace-driven, commercial negotiation process by the stakeholders, with the prospect of mandatory carriage coupled with denial of monetary compensation flowing to the source of content electing compulsory carriage. Note that currently most broadcaster-cable operator negotiations opt for retransmission consent and not must carry.  Additionally the FCC limited the carriage requirement to a percentage of overall channel capacity.  Also the Commission never put itself in the position of ordering cable operators to carry a specific station, or content.

     The court in Verizon v. FCC devoted several pages to explaining that when the FCC decided to mandate the reservation of channels by cable operators for access by a larger group of qualifying candidates, (public, educational, local governmental, and leased-access users), the Commission exceeded its statutory authority by imposing the functional equivalent of common carriage.  See FCC v. Midwest Video Corp. - 440 U.S. 689 (1979)(Midwest Video II).

     It appears to me that the D.C. Circuit has provided the FCC and others rather clear guidance on the way forward.  The Commission cannot impose common carriage requirements and not even quasi-common carrier duties to deal that extend to a large subset of the public.  The court used a little snarkiness to admonish the FCC not to push the envelope as it had done with previous interpretations of its ancillary jurisdiction.  Noting that even regulatory agencies take pride in authorship, the court recited the history of network neutrality litigation where the Commission’s work product failed to pass muster, but it soldiered on only to receive the same rejection.

     Perhaps history will not repeat itself.  However the FCC has a long history of false pride, or at least the inability to take no for an answer. Some of the judges in the D.C. Circuit court appear to know this and to infer from this the need to provide clear instructions. 

    Is anyone listening?

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