What’s Next for Net Neutrality? The FCC Responds to Verizon v. FCC

On January 14 of this year, the U.S. Court of Appeals for the District of Columbia Circuit struck down key provisions of the FCC’s “net neutrality” rules on the ground that they impermissibly imposed common carrier regulation on broadband providers.[1]  At the same time, the court held that the FCC does have statutory authority to impose regulations, and upheld the Commission’s judgment that Internet freedom encourages broadband investment.  With this mandate, the court remanded the FCC’s Open Internet Order to the Commission for further proceedings consistent with its opinion.

Responding to the court’s decision, the FCC has established a new docket to consider what actions the Commission should take, consistent with its authority, in light of the court’s decision, and invited interested parties to file comments by March 21.[2]  With issues at stake affecting broadband carriers, edge providers and end users alike, many parties have already filed comments, and more are certain to follow.  Ultimately, the Commission’s initiative is likely to lead to a formal notice of proposed rulemaking addressing, once again, the challenge of ensuring open, innovative and reliable access to the Internet.  What follows is a brief summary of the FCC’s original action, the court’s ruling, and the FCC’s action on remand.

The FCC’s Net Neutrality Rules.  In a Report and Order released late in 2010, the FCC adopted a set of rules designed, in the Commission’s words, “to preserve the Internet as an open platform for enabling consumer choice, freedom of expression, end-user control, competition, and the freedom to innovate without permission.”  To ensure these goals, the new rules imposed the following specific requirements on broadband service providers:

  • Transparency:  Fixed and mobile broadband providers must publicly disclose accurate information about their network management practices, performance characteristics, and terms and conditions of their broadband service.  Such disclosures must be sufficient for consumers to make informed choices regarding use of such services, and for content, application, service and device providers to develop, market and maintain Internet offerings.
  • No Blocking:  Fixed broadband providers may not block lawful content, applications, services, or non-harmful devices.  Mobile broadband providers may not block lawful websites, or block applications that compete with their voice or video telephone services.
  • No Unreasonable Discrimination: Fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service.

The Court Order.  On appeal, Verizon Communications challenged the FCC’s rules on several grounds, including that the FCC lacked statutory authority to adopt the rules, that its decision to impose the rules was arbitrary and capricious, and that the rules violated statutory provisions prohibiting the FCC from treating broadband providers as common carriers.  In the end, the Court ruled that, although the FCC has broad authority to regulate broadband Internet service, the specific prohibitions against unreasonable discrimination and Internet content blocking could not stand since they improperly imposed common carrier regulations on broadband access providers in violation of the Communications Act of 1934.  Such regulation, the Court found, could not be reconciled with a long line of FCC precedent which had classified Internet broadband service as an information service, exempt from the common carrier requirements of the Communications Act.  The court upheld the Commission’s rule governing transparency, however, stating that this requirement did not constitute a per se common carrier obligation.

The FCC’s February 19 Public Notice.  The FCC’s decision to establish a new docket appears to chart a middle ground which, in the end, may leave neither broadband providers nor their customers satisfied.  At the time of the court’s ruling, the press and industry commentators speculated that the Commission might seek further judicial review, or do nothing at all, observing how the market responded to the decision.  There was also speculation that the Commission might launch a full-scale rulemaking proceeding, proposing to either modify its rules, or to reclassify broadband Internet service as a common carrier offering.

In the end, the Commission has chosen neither option, preferring instead to solicit public comment on which approach it should follow in the wake of the court’s ruling.  At the same time, in its Public Notice the Commission has made clear that it remains committed to a regulatory framework that will ensure an open Internet.  Specifically, the Commission and Chairman Wheeler have stressed the following:

  • Transparency:  In its Public Notice, the Commission expressly emphasizes that, under the transparency rule, which remains in full force and effect, “broadband Internet access service providers must continue to disclose the network management practices, performance characteristics, and terms and conditions of their broadband services…Parties may continue to submit either formal or informal complaints to the Commission regarding violations” of the rule, and parties filing formal complaints may request expedited treatment under the Enforcement Bureau’s Accelerated Docket procedures.  In his own concurrent statement, Chairman Wheeler has added that the Commission must “consider ways to make that rule even more effective.
  • No Blocking:  Acknowledging that the court’s ruling that the Commission had not provided sufficient legal rationale for the no-blocking rule, Chairman Wheeler has promised that the Commission “will carefully consider how, consistent with the court opinion, we can ensure that edge providers are not unfairly blocked, explicitly or implicitly, from reaching consumers, as well as ensuring that consumers can continue to access any lawful content and services they choose.
  • Non-Discrimination:  Chairman Wheeler has stated that the Commission will carefully consider how Section 706 [of the Act] might be used to protect and promote an Open Internet consistent with the D.C. Circuit’s opinion and its earlier rulings.  Specifically, the Commission “will consider (1) setting an enforceable legal standard that provides guidance and predictability to edge providers, consumers, and broadband providers alike; (2) evaluating on a case-by-case basis whether that standard is met; and (3) identifying key behaviors by broadband providers that the Commission would view with particular skepticism.”
  • Title II Authority:  The Commission reserves the option to reclassify broadband internet access as a common carrier offering, subject to Title II of the Communications Act.
  • Holding Internet Service Providers to their Commitments:  The Commission will hold major Internet service providers to their commitments to honor the safeguards articulated in the 2010 Open Internet Order.
  • Enhance Competition.  The Commission will look for opportunities to enhance Internet access competition.  “One obvious candidate for close examination” identified in the Public Notice are legal restrictions on the ability of cities and towns to offer broadband services to consumers in their communities.

Why This Matters, and What’s to Follow.  As the press and commentators have noted, if the Court’s ruling stands, broadband providers will be free to strike deals with companies like Netflix, Amazon, YouTube and Apple to pay to have their movies, software and other data streamed to customers faster than or ahead of other content.  Whether or how carriers may take advantage of this ability – in effect charging more for content providers that use more of the carriers’ broadband pipes – remains to be seen.

The Commission’s initiative is expressly designed to promote a robust, competitive, and innovative Internet environment.  What the agency will ultimately achieve in its efforts, however, is open to question.  While all Commissioners support the principle of an open Internet, not all support the Chairman’s proposals.  It is worth recalling that recalling that the original 2010 Report and Order adopting the Net Neutrality rules was a split decision, with two dissents.  The more recent decision by the Commission to establish a new docket in response to the ruling by the D.C. Court of Appeals likewise garnered only a 3-vote majority.  Expressing skepticism regarding the Commission’s latest effort to regulate Internet management practices, Commissioner Mike O’Rielly has opined that the FCC appears to be “tilting at windmills here…, devoting its resources to adopting new rules without any evidence that consumers are unable to access the content of their choice.”  Commissioner Ajit Pai has similarly concluded that “the Internet was free and open before the FCC adopted net neutrality rules.  It remains free and open today.  Net neutrality has always been a solution in search of a problem.”

At a minimum, however, it is likely that the Commission’s latest initiative will result in a formal notice of proposed rulemaking, seeking public comment on a new set of rules and guidelines reflecting input the Commission receives from the February 19 Public Notice.  Interested parties should monitor the Commission’s activities in this area closely, and seriously consider weighing in on the issues at stake.

[2] Public Notice, DA 14-211, released February 19, 2014, establishing GN Docket No.  14-28.