With
the election of President Donald Trump and the appointment of Ajit Pai as FCC
Chairman, muscular network neutrality rules soon will evaporate as the
Commission reverts to a general promotion of openness and best practices. [1] Despite judicial affirmance of an earlier
reclassification of broadband Internet access as a telecommunications service,
subject to common carrier regulation, the Restoring Internet Freedom Notice of
Proposed Rulemaking proposes to revert to a looser regulatory classification triggering
substantially less government oversight:
Today, we take a much-needed first step
toward returning to the successful bipartisan framework that created the free
and open Internet and, for almost twenty years, saw it flourish. By proposing to end the utility-style
regulatory approach that gives government control of the Internet, we aim to
restore the market-based policies necessary to preserve the future of Internet
Freedom, and to reverse the decline in infrastructure investment, innovation,
and options for consumers put into motion by the FCC in 2015. [2]
The
FCC now proposes to apply an information service regulatory classification to
broadband Internet access [3] and
to treat wireless service as private carriage rather than the existing commercial
designation established by Congress. [4]
The Commission heavily relies on a questionable conclusion that common carriage
regulation stifles investment, innovation and employment in the Internet ecosystem.
While offering a passing reference to
contrary studies, the FCC opts to accept unconditionally the conclusion in one
study sponsored by incumbent carriers that existing regulation imposed substantial
marketplace harms. The Commission espite
clear evidence that Internet ventures continue to invest billions in both
content delivery plant and content creators who need a robust distribution
network to deliver content to consumers. [5]
Remarkably,
the Commission appears confident that any and all reductions in investment,
innovation and employment have resulted directly and exclusively from common
carrier responsibilities imposed by a Democratic majority. It provides no evidence of causation, nor
does it even consider other factors that may have contributed, such as the
billions of dollars recently invested in content, e.g., Verizon’s acquisition
of America Online and Yahoo, AT&T’s acquisition
of DirecTV and several mergers of cable television operators. Additionally, the Commission conveniently
ignores the cyclical nature of facilities investment that, for example,
triggers a spike in a new generation of wireless plant, e.g., from 3d
generation to 4th generation, followed by a normal reduction capital
expenditures as the new equipment becomes operational.
The FCC also ignores the fact that despite
operating within a so-called public utility regulatory regime, wireless
carriers have invested billions on spectrum and network facilities capable of
delivering content as near wireline speeds. [6]
The
Restoring Internet Freedom NPRM devotes substantial space supporting the
proposed reclassification of broadband Internet access as an information service. The Commission considers this classification more
appropriate and lawful, going so far as to claim bipartisan support, despite
the fact that the previous Democratic majority favored common carrier
requirements:
We believe the Commission under
Democratic and Republican leadership alike was correct in these decisions to
classify broadband Internet access service as an information service and that,
20 years after the passage of the Telecommunications Act, we should be
reluctant to second-guess the interpretations of those more likely to
understand the contemporary meaning of the terms of the Telecommunications
Act. [7]
The
Commission identifies ample precedent where reviewing courts defer to its technical
expertise and statutory interpretation, particularly where the underlying law
lacks clarity. [8]
Ironically,
reversion to the information services classification will result in two
outcomes that can have directly harmful impact on consumers and carriers. First, reliance on Title I authority does not
in and of itself reduce will the regulatory uncertainty which the FCC and
stakeholders abhor, [9] because
of the potential disincentives for investment, innovation and employment it
creates. The FCC clearly signals that
its reliance on Title I will promote deregulation, if not unregulation, but
ample case precedent shows that reviewing courts may not trust regulatory
agencies to maintain consistency. [10] The
FCC clearly seeks to remove regulatory oversight, but it also retains Title I,
so-called ancillary jurisdiction to intervene as circumstances warrant, e.g.,
when a carrier deviates from any of the 2005 Open Internet principles.
Second,
reversion to Title resurrects the view that the FCC can compartmentalize
Internet technologies into an air tight, mutually exclusive dichotomy of
telecommunications services and information services, [11] despite
market and technological convergence. For
example, the FCC already has had to address the fact that wireless devices
combine basic, regulated, telecommunications services, such as voice telephony
and texting, with unregulated or differently regulated content and information
services. Even during a time when the
Commission considered broadband access as constituting an information service,
it imposed common carrier type, affirmative duties to deal and interconnect on
wireless carriers so that consumers can access Internet services when “roaming”
outside their home service territories. [12]
The
FCC also proposes to eliminate the application of a catch-all standard used in
the 2015 Open Internet Order that prohibited “current or future practices that
cause the type of harms [the Commission’s] rules are intended to address.” [13]
This standard allows the Commission to prohibit practices that it determines
unreasonably interfere with or unreasonably disadvantage the ability of
consumers to reach the Internet content, services, and applications of their
choosing or of online content, applications, and service providers to access
consumers. It also enables the FCC to
prohibit any Internet service provider practice that it believes violates any
one of the non-exhaustive list of factors adopted in the 2015 Open Internet Order.
The
Commission believes that eliminating a standard of conduct will provide greater
clarity to stakeholders, because the current Internet conduct standard “is
premised on theoretical problems that will be adjudicated on an individual,
case-by-case basis, Internet service providers must guess at what they are
permitted and not permitted to do.” [14]
The Commission cites the zero rating as an example where the FCC, under a Democratic
majority, investigated the lawfulness of subsidized data access, while the new Republican
majority quickly shut down the investigation.
Arguably, the regulatory uncertain resulted from different
interpretations of the conduct standard, based on political party affiliation,
rather than the conduct standard itself.
Removing the standard provides no guidance at all, unless the Commission
has signaled that it cannot anticipate a problem with any carrier offer to
exempt specific types of traffic from debiting a monthly data allowance.
The
2017 Restoring Internet Freedom NPRM also seeks comments on whether the FCC
should eliminate three carrier conduct prohibitions contained in the 2015 Open
Internet Order: blocking, throttling, and paid prioritization. The Commission strongly hints that it
considers these, ex ante safeguards both unnecessary and imposed without
evidence that consumers have, or would suffer harm if the prohibitions did not
exist.[15]
The
Commission also seeks comments on whether Section 706 of the Telecommunications
Act provides it with direct statutory authority to impose regulatory
safeguards, or simply requires the FCC to assess the competitiveness and
accessibility of the broadband marketplace and report findings to congress. This portion of the NPRM may appear insignificant
and narrow, but the Commission clearly implies its view that Section 706
provides no statutory authority to impose regulatory safeguards under any
circumstances. [16] Even if the current FCC Commissioners did
retain the option of regulatory intervention, an already expressed view that
the wired and wireless broadband marketplace operates competitively strongly
implies that a majority Republican FCC would never seek to impose regulatory
safeguards based on Section 706 authority.
For
good measure, the Restoring Internet Freedom NPRM also seeks comments whether any regulatory
burden on broadband access providers would violate their First Amendment
expression rights, a matter summarily dismissed by the D.C. Circuit Court
majority, but raised in a dissent. [17] Lastly, the FCC expresses a keen interest in applying
a disciplined and substantive cost/benefit analysis assessing the financial
impacts of its action. [18]
While laudable, the FCC’s NPRM provides several instances where the Commission
reaches broad sweeping conclusions without the empirical evidence and analysis
it now regularly seeks to conduct.
[1] Restoring Internet Freedom, WC
Docket No. 17-108, Notice of Proposed Rulemaking, FCC 17-60 (released May 23,
2017); available at: https://apps.fcc.gov/edocs_public/attachmatch/FCC-17-60A1.docx
[hereinafter cited as Restoring Internet Freedom NPRM]. The FCC proposes to treat broadband Internet
access as an information service, subject to Title I of the Communications Act,
that does not authorize the FCC to impose common carrier regulations. Instead the Commission has an ambiguous regulatory
authority to impose safeguards and to promote goals. For example, the Restoring Internet Freedom NPRM
endorses four principles for Internet freedom to further ensure that the
Internet would remain a place for free and open innovation with minimal
regulation. These four “Internet
freedoms” include the freedom to access lawful content, the freedom to use
applications, the freedom to attach personal devices to the network, and the
freedom to obtain service plan information. See
Appropriate Framework for Broadband Access to the Internet over Wireline
Facilities, CC Docket No. 02-33, Policy Statement (2005); available at: https://apps.fcc.gov/edocs_public/attachmatch/FCC-05-151A1.pdf.
[2] Restoring Internet Freedom NPRM at
¶5.
[3] “Today, we propose to reinstate the
information service classification of broadband Internet access service and
return to the light-touch regulatory framework first established on a
bipartisan basis during the Clinton Administration.” Id. at ¶24.
[4] “We also propose to reinstate the
determination that mobile broadband Internet access service is not a commercial
mobile service.” Id. “Furthermore,
insofar as mobile broadband Internet access service is best interpreted to be
an information service, we believe that likely also would counsel in favor of
classifying it as a private mobile service to avoid the inconsistency of the
service being both an information service and a common carrier service. The Commission explained this reasoning when
originally classifying mobile broadband Internet access service as both an
information service and a private mobile service, and we propose to apply that
same reasoning again here.” Id. at
¶60.
[5] “We believe that these reduced
expenditures are a direct and unavoidable result of Title II reclassification,
and exercise our predictive judgment that reversing the Title II classification
and restoring broadband Internet access service to a Title I service will
increase investment.” Id. at ¶46. The Commission relies on a single study,
prepared by a researcher financially sponsored by stakeholders opposed to
network neutrality rules. Id. at
n.113.
[6] The FCC implies that regulatory
compliance forces carriers to incur costs that otherwise would have accrued
consumer benefits. “Internet service providers have finite resources, and
requiring providers to divert some of those resources to newly imposed
regulatory requirements adopted under Title II will, unsurprisingly, reduce
expenditures that benefit consumers.” Id.
at ¶46.
[7] Id.
at ¶39.
[8] “An agency also is free to change
its approach to interpreting and implementing a statute so long as it
acknowledges that it is doing so and justifies the new approach. [citing FCC v.
Fox Television Stations, Inc., 556 U.S. 502, 515-16 (2009) (Fox); Mary V.
Harris Found. v. FCC, 776 F.3d 21, 24-25 (D.C. Cir. 2015)] Evaluating the change in regulatory approach
in the Title II Order, the D.C.
Circuit majority in USTelecom applied
a ‘highly deferential standard’ to the agency’s predictive judgments regarding
the investment effects of reclassification, [citing United States Telecom Ass’n
v. FCC, 825 F.3d 674,707 (D.C. Cir 2016), reh’g
en banc denied, No. 15-1063, 2017 WL 1541517, at *1 (D.C. Cir. May 1, 2017)]
and deferred to the Commission’s ‘evaluat[ion of] complex market conditions’
underlying its rejection of providers’ reliance interests in the prior
classification [citing Id. at 710
(quoting Gas Transmission Northwest Corp. v.
FERC, 504 F.3d 1318, 1322 (D.C. Cir. 2007)]. Restoring Internet Freedom
NPRM at ¶53.
“The Commission has authority, as the Supreme Court recognized in Brand X, to interpret the Communications
Act, including ambiguous definitional provisions.” Id. at ¶52, citing Nat’l Cable & Telecomms. Ass’n v. Brand X
Internet Servs., 545 U.S. 967 (2005).
[9] The Commission considers Title II
regulation as causing substantial regulatory uncertainty despite the greater specificity
this Title provides as compared to Title I. “In addition to imposing
significant regulatory costs on Internet service providers, Title II
reclassification created significant regulatory uncertainty. USTelecom specifically identified ‘regulatory
uncertainty’ as one of the causes of reduced investment. Id.
at ¶48. Title I provides an ambiguous
sphere of regulatory authority which the FCC overstepped when it imposed common
carrier responsibilities on broadband service providers then classified as
information service providers. See, See
Formal Complaint of Free Press and Public Knowledge Against Comcast Corp. for
Secretly Degrading Peer-to-Peer Applications, Memorandum Opinion and Order, 23
F.C.C.R. 13,028 (2008), vacated, Comcast Corp. v. FCC, 600 F.3d 642
(D.C. Cir. 2010) (FCC deemed to have exceeded its statutory authority when
responding to a complaint and imposing network neutrality rules); Preserving
the Open Internet, Report and Order, GN Docket No. 09-191, WC Docket No. 07-52,
25 F.C.C.R. 17905 (2010)[hereinafter cited as 2010 Open Internet Order] aff’d in part, vacated and remanded in part sub nom. Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014).
[10] For example, a reviewing court twice rejected
a Democratic majority FCC from imposing consumer safeguards based on a general
conferral of jurisdiction over wire and radio contained in Title I of the
Communications Act of 1934, as amended. See Formal Complaint of Free Press and
Public Knowledge Against Comcast Corp. for Secretly Degrading Peer-to-Peer
Applications, Memorandum Opinion and Order, 23 F.C.C.R. 13,028 (2008), vacated,
Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010) (FCC deemed to have
exceeded its statutory authority when responding to a complaint and imposing
network neutrality rules); Preserving the Open Internet, Report and Order, GN
Docket No. 09-191, WC Docket No. 07-52, 25 F.C.C.R. 17905 (2010)[hereinafter
cited as 2010 Open Internet Order] aff’d
in part, vacated and remanded in part
sub nom. Verizon v. FCC, 740 F.3d
623 (D.C. Cir. 2014).
[11] “The Commission has previously
concluded that Congress formally codified information services and
telecommunications services as two, mutually exclusive types of service in the
Telecommunications Act. The Title II
Order did not appear to disagree with this analysis, finding that broadband
Internet access service was a telecommunications service and not an information
service. We believe this conclusion
regarding mutual exclusivity is correct based on the text and history of the
Act.” Id. at ¶40. “We also believe
that mobile broadband Internet access service is not the ‘functional equivalent’
of commercial mobile service. Id. at
¶61.
[12] Reexamination of Roaming Obligations
of Commercial Mobile Radio Service Providers
and Other Providers of Mobile-data Services, Second
Report and Order, 26 F.C.C.R. 5411
(2011), aff’d sub. nom. Cellco Partnership v.
FCC, 700 F.3d 534 (D.C. Cir. 2012).
[13] Protecting and Promoting the Open
Internet, WC Docket No. 14-28, Report and Order on Remand, Declaratory Ruling,
and Order, 30 FCC Rcd 5601, 5659 (2015), aff’d
sub nom., United States Telecom Ass’n. v.
FCC, 825 F.3d 674 (D.C. Cir. 2016). pet.
for en banc rehearing denied.
[14] Restoring Internet Freedom NPRM at
¶74.
[15] “In
the Title II Order, despite virtually
no quantifiable evidence of consumer harm, the Commission nevertheless
determined that it needed bright line rules banning three specific practices by
providers of both fixed and mobile broadband Internet access service: blocking,
throttling, and paid prioritization. The
Commission also ‘enhanced’ the transparency rule by adopting additional
disclosure requirements. Today, we revisit these determinations and seek
comment on whether we should keep, modify, or eliminate the bright line and
transparency rules.” Id. at ¶76.
[16] “We seek comment on whether section
706(a) and (b) of the 1996 Act are best interpreted as hortatory rather than as
delegations of regulatory authority.
Such an interpretation generally is reflected in the Commission’s
approach to section 706 prior to 2010.” Id.
at ¶101.
[17] Id.
at ¶104.
[18] Id.
at ¶105-15.
