FCC Adopts Net Neutrality Rules
On Dec. 21, 2010, the Federal Communications Commission (FCC) adopted net neutrality rules, which largely implement existing Internet traffic and management practices, impose new non-discrimination and transparency rules, but leave room for specialized or managed services and usage based billing. The order is notable for basing jurisdiction mostly on Title I and ancillary jurisdiction, rather than reclassifying broadband as a Title II common carrier service.
As expected, the vote was adopted on a 3-2 partisan vote. Democratic Commissioners justified the order as a compromise necessary for maintaining the Internet as an open platform where innovation may occur without seeking regulatory permission, while providing certainty conducive to investment at the edge as well as in the broadband network core. In vigorous dissent, Republican Commissioners questioned any need for departing from the successful history of building and maintaining an open Internet by leaving it largely free of government regulation.
Net neutrality principles
The FCC rules codify three basic principles for providers of broadband Internet access. The FCC adopted a lighter set of principles for wireless (mobile) than for wireline (fixed) providers, on the premise that wireless is a newer platform which is evolving rapidly. The three principles are:
- Transparency. Wireline and wireless providers must provide transparent disclosure to consumers and third parties of commercial terms, performance, and network management practices. Providers must provide disclosures at point of sale and on the web. Wireless providers must specifically disclose wireless device certification requirements.
- No blocking. Wireline providers may not block lawful content, applications, or services, or the use of non-harmful devices. Wireless providers may not block lawful websites or block applications offering voice and “video telephony” that compete with the wireless provider’s offerings. This does not apply to wireless applications stores or their functional equivalent. This principle is subject to reasonable network management.
- No unreasonable discrimination. Wireline providers may not engage in “unreasonable” discrimination in transmitting lawful traffic over broadband internet access service. This principle is also subject to reasonable network management. Significantly, there is no nondiscrimination requirement that wireless providers carry other content, applications, or services, or permit the use of non-harmful devices.
These rules are directed to providers of last mile Internet access to all or substantially all Internet endpoints, not to peering or backbone arrangements. These principles apply not only for residential use but for services to small businesses, schools and libraries. Excluded from the set of regulated broadband access providers are coffee shops, bookstores, and airlines.
Reasonable network management is broadly defined as “appropriate and tailored” measures for legitimate network management functions.
Specialized (or managed) services are permitted under these principles, meaning that providers are not bound by these rules in shaping innovative IP arrangements which do not include Internet access to all or substantially all Internet endpoints. Providers do not need to seek permission to launch specialized or managed services, but the FCC will actively monitor such offerings (partly through a new Open Internet Advisory Committee), and retain the authority to treat specialized and managed services like Internet access if they become the functional equivalent, or are considered an evasion of the new rules.
Paid prioritization for certain traffic is not forbidden, but the order is expected to recite that many harms could arise, that the FCC majority believes paid prioritization would likely fail the unreasonable discrimination test for fixed services, and that providers who offer such services would, if challenged, have the burden to demonstrate that the arrangement is not harmful and is consistent with an open Internet.
Usage based billing (tiered pricing), is also allowed under these principles.
The FCC will enforce its new rules on a case-by-case basis. Informal complaints may be filed online without charge. Formal complaints may be submitted after 10 days notice to the provider. The rules for the FCC’s “rocket docket” will govern these complaints. The FCC may also investigate and potentially file its own complaints.
Although wireless broadband service is held to a lower bar, wireless providers are cautioned that wireless practices that are not explicitly forbidden have not been endorsed and will be subject to active monitoring.
In an effort to collect three votes, the FCC did not hew entirely to the draft bill that Rep. Waxman had brokered, with which industry had expressed some comfort. In a significant departure from the Waxman framework, the order adopts a presumption against paid prioritization, covers more than residential Internet access, and includes no sunset provision.
The legal justification for the order steers sharply away from this summer’s “Third Way” proposal to reclassify broadband as a telecommunications service. That approach would have subjected broadband providers to the Title II provisions designed for monopoly “Ma Bell” telephony. Instead, the FCC draws on a variety of cable, broadcast, interconnection, wireless, and deregulation provisions of the Communications Act to tether its claim to Title I “ancillary” authority over the Internet. “Ancillary” jurisdiction is an approach which reviewing courts have sometimes used to sustain FCC authority over new technologies. It is an open question whether this approach can withstand appeal any better than the FCC’s Comcast BitTorrent decision fared in the D.C. Circuit earlier this year. In this instance, the dissenting Republicans noted the absence of any limiting principle which would confine the FCC to statutory bounds.
The FCC majority obviously did not defer to the many bipartisan voices of protest that a net neutrality decision should be left to Congress. We should expect a response from Congress, at least through oversight hearings, bills, and efforts to defund enforcement.
The FCC also split on partisan lines over whether this order would encourage or discourage foreign nations from adopting their own restrictions on the Internet.
When the full text of the order is released, we will provide an updated analysis.