What Can the FCC Do When ISPs Block or Degrade Certain Types of Traffic?

A group of pro network neutrality advocates have filed a Petition for Declaratory Ruling and Formal Complaint in response to Comcast’s furtive traffic “shaping” and “management” tactics that have the effect of blocking or degrading peer-to-peer traffic. See http://www.freepress.net/docs/fp_et_al_nn_declaratory_ruling.pdf; and http://www.freepress.net/docs/fp_pk_comcast_complaint.pdf.

The group asks the FCC to issue preliminary and permanent injunctions prohibiting Comcast from engaging in such tactics, to fine Comcast and to declare that such tactics violate the Commission’s Policy Statement that establishe network neutrality “principles” (see http://www.publicknowledge.org/pdf/FCC-05-151A1.pdf).

While I endorse the groups’ efforts, I believe the petition and complaint would achieve greater impact had the authors addressed the issue of whether and how the FCC can act in the ways the group proposes. Specifically both the group and the FCC have to examine the breadth of jurisdiction and regulatory options available to the Commission under Title I of the Communications Act.

Both the petitioners and the FCC assume that the Commission can act to enforce the network neutrality principles articulated in a three page Policy Statement that devotes two sentences to the issue:

While acknowledging that it cannot assert conventional, Title II common carrier regulation, because ISPs provide information services and not telecommunications services, the FCC stated summarily that it “has jurisdiction to impose additional regulatory obligations under its Title I ancillary jurisdiction to regulate interstate and foreign communications.” According to the Commission that translates into having “the jurisdiction necessary to ensure that providers of telecommunications for Internet access or Internet Protocol-enabled (IP-enabled) services are operated in a neutral manner.

Also noted by the petitions was a sentence in the FCC’s its order assigning the information service classification to cable modem Internet access where the Commission stated its intent “to take action to address . . . conduct” that violates network neutrality.

I fully expect opponents of the petition and complaint to state that the FCC has neither the jurisdiction nor the intent to impose on ISPs such as Comcast what opponents will frame as common carrier obligations. So the Internet Policy statement has to be interpreted as lawfully imposing responsibilities that serve the public interest without imposing common carrier responsibilities, but which cannot constitute the kind of unlawful expansion of jurisdiction Justice Scalia predicted would occur in his dissent in the Brand X case. I examine the risk of overstating the scope of Title I “ancillary jurisdiction” in What Do Pizza Delivery and Information Services Have in Common? Lessons From Recent Judicial and Regulatory Struggles with Convergence, 32 RUTGERS COMPUTER AND TECHNOLOGY LAW JOURNAL, No. 2, 247-296 (2006).

The FCC has taken great pains to create a deregulatory “safe harbor” for information services providers. The Commission has managed to shoe horn DSL, cable modems, BPL and wireless Internet access into the information services classification which the Commission considers completely separate from regulated telecommunications services. To underscore the absoluteness of this dichotomy the Commission has come up with a tenuous differential based on whether a carrier “offers” telecommunications versus “provides” telecommunications. The former falls into the common carriage telecommunications service category, while the latter qualifies for private carriage of an information service, because the Commission chooses to subordinate the telecommunications component into a minor and integrated activity.

The FCC already has invoked its Title I ancillary authority to impose a number of traditional common carrier duties on Voice over the Internet Protocol (“VoIP”) providers and courts have deferred to the agency’s expertise absent a clear statutory mandate.

But at some point the FCC may go to the Title I well too often. I suspect the FCC will have to flesh out its authority to abrogate contracts between landlords and cable operators, particularly in light of the traction gained over the years by incumbent telephone companies that interconnection regulation, such as unbundling and line sharing, “confiscates” their property. Perhaps also the FCC will have to explain why it and not the Federal Trade Commission should act on what can be deemed a consumer protection matter.

At the very least the FCC will have to do more than unilaterally and summarily state that it has jurisdiction under Title I to impose network neutrality principles. The petitioners could have helped the Commission come up with a compelling rationale.

DSL and Cable Modem Lose Over 24% Market Share in One Year??!!

In the lies, damn lies and statistics department the FCC has made another contribution. The Commisison's most current compilation of broadband market share shows wireless (satellite and cellular) acquiring over 24% from wireline cable television and telco options. See http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-277784A1.pdf and compare with the prior calculation: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-270128A1.pdf.

How could this be? Well in reality I doubt whether many consumers would gladly pay more than double for a fraction of the bit rate available from wired options. But (and here's the snarky part) if one calculated broadband using an unrealistically low bar--say 200 kilobits per second--and if one ignores cost, then suddenly wireless options have become a major--here's the pay off--FACILITIES-BASED COMPETITOR of the cable/telco duopoly.

If only I could think and grow rich just as the FCC thinks competition exists and its statistics make it so.

In reality wireless options have their niche role wven though they offer no more than 500 or so kilobits per second. If you are on the road and have no wi-fi or wired option, then 500 kbps is better than nothing. But the FCC wants the statistics to evidence that robust competition exists in the real broadband arena (1 megabit or faster). The cable/telco duopoly is alive and well.

Property Confiscation is in the Eye of the Beholder

The issue of FCC confiscation of private property has a long and checkered history in academic literature, sponsored research and litigation. In many instances incumbent telephone companies have argued that FCC regulation, which requires the carriers to do something they do not want to do, constitutes a confiscation or "taking" of property. So when the FCC orders an incumbent carrier to interconnect with a competitor--something common carriers have to do--incumbent carriers are quick to play the confiscation card if they do not like the terms and conditions under which they have to provide interconnection.

The incumbent carriers tried the confiscation argument before the Supreme Court claiming that unbundling and other affirmative obligations under the Telecommunications Act of 1996 constitued a taking of property. In Verizon Communications, Inc. v. FCC, 121 S.Ct. 877 (2001)the Court wisely rejected incumbent local exchange carrier arguments that using a theoretical, most efficient cost model, instead of actual historical costs, constituted a taking that violated the Fifth Amendment. See http://telefrieden.blogspot.com/2007/04/revisionism.html.

Nothwithstanding the Court's determination the FCC has methodically dismantled just about all of the line sharing, unbundling and interconnection obligations incumbent carriers must endure. The Commission rationalizes such deregulation on bogus determinations that marketplace self-regulation will suffice because of robust competition.

With this in mind I have some mixed feeling about the Commission's ostensibly procompetitive, pro consumer decision to abrogate exclusive service contracts between apartment owners and cabel television operators. See http://www.nytimes.com/2007/10/29/business/media/29cable.html?_r=1&oref=slogin

While I can appreciate that the initiative should trigger rate reductions for previously captive apartment dwellers, I wonder why similarly captive broadband subscribers do not warrant such aggressive and conscientious regulatory intervention. The FCC no longer requires incumbent local exchange carriers to share bandwidth available in their local loops at fair compensation rates. Bear in mind that these carriers installed such infrastructure and recouped their investment at a time when ratepayers were equally captive.

So once again the FCC can explain an inconsistent and assymetrical regulatory state of play on grounds that robust competition exists in one market and it does not exists in another market.

I cannot help but think that an alternative explanation exists: political expediency warrant accommodating Verizon, AT&T and other incumbent carriers in both instances. Eliminate unbundling, line sharing and now even most aspects of interconection (special access) regulation because the incumbent carriers want it and the FCC can make a claim that competition exists. Abrogate apartment owner-cable television operator contracts because Verizon and AT&T want the FCC to do so and because the Commission can make a claim that competition does not exist.

Well at least on the south facing side of many apartment tenants with access to private outside space, such as a balcony, can and do access Direct Broadcast Satellite television options. But more fundamentally the FCC can play the competition card in whatever way it chooses with impunity.