Pick Your Poison: FCC Chairman Genachowski’s New Network Neutrality Strategy

FCC chairman Julius Genachowski appears set to abandon a strategy applying selective portions of Title II regulatory safeguards in lieu of general Title I ancillary jurisdiction. Either strategy appears likely to fail upon review by a court or Congress.

           

What makes this matter so difficult is that while an appellate court might try to consider the issue narrowly in terms of whether sufficient statutory authority exists, broader business and political factors matter as well.  Recall that the FCC was able to justify substantial deregulation of DSL, replacing Title II with Title I oversight, based on changed circumstances, largely concerns about "regulatory parity" with largely unregulated cable modem service.  In this politicized and super-charged environment, coupled with the Comcast court decision, the FCC cannot readily reassert Title II based on changed circumstances supporting light-handed government oversight and the public interest, e.g., evidence that Internet access has become an essential public need coupled with proof of discriminatory conduct.
       

There is much speculation that Chairman Genachowski has abandoned his Third Way link to streamlined Title II authority, replacing it with Title I ancillary jurisdiction based on language contained in Sec. 706 of the Telecommunications Act of 1996.  This section requires the FCC and states to encourage ubiquitous access to "advanced telecommunications capability."  The Commission probably will face judicial skepticism whether and how Sec. 706 confers statutory authority to encourage Internet access through selective regulation.
       

I can appreciate that Chairman Genachowski would want to apply a streamlined version of Title II.  It provides the direct statutory authority a reviewing court requires and before changed circumstances provided the basis for its abandonment, Title II required nondiscrimination, transparency and the other Internet Freedoms.  But the political impracticality of re-regulation and the Supreme Court's Brand X affirming the FCC's functional abandonment of Title II, by classifying cable modem Internet access as an information service, makes reliance on Title II a sure loser on appeal.
       

Chairman Genachowski appears to have acknowledged this, but returning to Title I ancillary jurisdiction.  There is case precedent for judicial deference to the FCC's expertise to fashion public interest serving remedies under Title I, e.g., the Commission imposition of cable television regulations in advance of having received explicit statutory authority.  But as emphasized by the D.C. Circuit in the Comcast case, the link to some sort of statutory authority must exist.  The D.C. Circuit likely will remain quite skeptical about an FCC claim of ancillary jurisdiction, simply because Title I confers some general oversight duty over "wire and radio" communications, or the advanced telecommunications capability promotion elements of Section 706.
       

From my vantage point, it looks like the Commission loses either way, should some aggrieved party appeal.  Since Congress has a near zero likelihood of passing explicit statutory authority, the status quo remains.  This means that companies, such as Comcast, which can't help but push the envelope, will exploit the absence of rules to its financial advantage.  The demand for video carriage surcharge from Level 3, provides an example how an ISP can raise the cost of doing business of a rival.  Expect Comcast and others to raise the cost of doing business for both content delivery networks, which generate traffic for Comcast to deliver, as well as content producers, like Netflix, that compete with Comcast's video products.

Network Neutrality and the FCC’s Inability to Calibrate Regulation of Convergent Operators

That FCC Chairman Julius Genachowski is struggling to find a way to calibrate network neutrality and Title I ancillary jurisdiction confirms the difficulty in regulating operators that seamlessly blend carriage and content. See, THE THIRD WAY: A NARROWLY TAILORED BROADBAND FRAMEWORK; available at: http://voices.washingtonpost.com/posttech/genachowski.doc.


Internet Service Providers offer convergent services that blend telecommunications, as in bit transport, with telecommunications services, such as telephony and arguably first and last mile Internet access, with video services, such as Internet Protocol Television, and with information services that ride on top of the bit transmission link. For administrative convenience and not as required by law, the FCC likes to apply an either/or single regulatory classification to convergent operators. Having classified ISPs as information service providers, the Commission unsuccessfully sought to sanction Comcast’s meddling with subscribers’ peer-to-peer traffic. Now Chairman Genachowski wants to further narrow and nuance regulatory oversight without changing the organic information service classification.

Some network neutrality advocates have urged the FCC simply to abandon the information service classification and reclassify aspects of ISP Internet access as Title II, common carrier regulated telecommunications service. Why use tortured and legally suspect analysis to craft an absolute dichotomy?

What is wrong with the FCC acknowledging that providers of convergent services trigger different regulatory classifications as a function of what service they provide? Even thought the FCC largely emphasizes wireless carriers’ information services, the Commission occasionally reminds cellular radio service providers that they still operate as common carriers that for example have to interconnect with other wireless carriers to provide seamless roaming opportunities for users. So it’s possible for the FCC to recognize that in the case of wireless carriers, a single venture using the same conduit can configure both regulated telecommunications services and generally unregulated information services.

The FCC has to confront the messy reality that when ventures offer convergent services that combine conduit and content and when these ventures vertically and horizontally integrate throughout many market segments, the Commission cannot rely on absolute either/or service dichotomies to classify everything a venture provides. Even to this day the Commission cannot bring itself to confront this reality as evidenced by its utter silence on what regulatory regime should apply to Voice over the Internet Protocol and Internet Protocol Television.

It’s time to recognize that layered and convergent services defy compartmentalization into convenient, single regulatory classifications and regimes.

Agency Deference or Strict Statutory Construction—Conflicting Case Precedent

Many observers expect the D.C. Circuit Court of Appeals to vacate the FCC’s attempt at fashioning federal Internet policy when it reprimanded Comcast for the company’s violation of the 4 Internet Freedoms. The Commission did not use a notice and comment rulemaking confident that it has both direct and ancillary jurisdiction to impose a policy statement that it subsequently construes as establishing enforceable rules.

In many reviews of bold and creative interpretations of the Commission’s statutory authority, courts seem to go out of their way to defer to agency expertise. But in other cases reviewing courts are sticklers for explicit statutory authority. How can one predict which model applies?

A good example of the deference model is Justice Thomas’ majority opinion in National Cable & Telecommunications Ass’n v. Brand X Internet Services, 545 U.S. 967 (2005) where the Supreme Court affirmed the FCC’s classification of cable modem broadband access as an information service. A good example of the strict construction model are the several cases where the FCC sought to allow long distance carriers to withdraw tariffs even in the absence of legislative repeal of the explicit requirement that carriers file tariffs; see MCI Telecommunications Corp. v. FCC, 765 F.2d 1186 (D.C. Cir. 1985); American Tel. & Tel. Co. v. FCC, 978 F.2d 727 (D.C. Cir. 1992); MCI Telecommunications Corp. v. American Tel. & Tel. Co., 512 U.S. 218 (1994).

It’s easy for an uncertain court to defer to agency expertise: what better way to avoid claims that the court has legislated from the bench. But it’s also easy and enticing for a court to rebuke an agency’s bold attempt to expand its regulatory wingspan. The FCC will claim that the Communications Act requires flexibility in light of technological innovation. But it’s predictable that a regulator can perceive the need to protect the public by interpreting a public interest mandate and broad authority to regulate wire and radio services to include the Internet, which we know is an amalgam of networks, but also content, applications and software.

How can a court hold a line or draw one between regulated Internet subjects and unregulated ones? The Commission, with approval by Justice Thomas, creates a sometimes metaphysical difference between carrier offering of telecommunications capabilities as a subordinate aspect of an information service and providing telecommunications services. Justice Thomas got into a war of competing analogies with his usual soul mate Justice Scalia who offered this skeptical assessment of the FCC’s jurisdictional claim: an “experienced agency can (with some assistance from credulous courts) turn statutory constraints into bureaucratic discretions,” reserving, for example, the option of regulating Internet content based on statutes offering absolutely no basis for anything beyond promoting Internet access.

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.