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"Attacked From All Sides: Are The FCC's Net Neutrality Rules Too Loose, Too Tight, Or Just Right?" by Brian Farkas

Attacked From All Sides: Are the FCC's Net Neutrality Rules Too Loose, Too Tight, or Just Right?

by Brian Farkas

Friday, September 23, 2011, was a day of both joy and fear for net neutrality advocates. That afternoon, the Federal Communications Commission's (FCC's) net neutrality rules, passed in December 2010, were officially entered into the federal register. The long-awaited rules were slated to go into effect on November 20. See Federal Communications Commission Report and Order, released Dec. 23, 2010, http://transition.fcc.gov/Daily_Releases/Daily_Business/2010/db1223/FCC-10-201A1.pdf (hereinafter "Report and Order").

Telecom enthusiasts in Washington--indeed, most of the telecommunications world--expected that Verizon would be the first out of the box to challenge the constitutional basis for the FCC to regulate Internet Service Providers (ISPs). After all, Verizon was so anxious to enjoin the FCC's scheme of added regulation on its wireline and wireless broadband services that the company already filed a challenge in January, just weeks after the rules were passed. That suit was quickly dismissed for being "premature" at that point. See Edward Wyatt, Court Rejects Suit on Net Neutrality Rules, N.Y. TIMES, Apr. 4, 2011, available at http://www.nytimes.com/2011/04/05/technology/05net.html. Insiders all but assumed Verizon would quickly renew its claims against the Commission the moment the rules were published.

But Verizon was not the first challenger. Ironically it was Free Press, a liberal public interest group that advocates for net neutrality, which filed the first new suit against the published rules. See Free Press Files Suit to Challenge FCC's Open Internet Rules, Sept. 28. 2011, available at http://www.freepress.net/press-release/2011/9/28/free-press-files-suit-challenge-fccs-open-internet-rules. Even more ironically, Free Press opposed the rules for essentially the opposite reasons as Verizon. In its suit, filed in the First Circuit Court of Appeals in Boston, Free Press alleges that the FCC's rules, which prevent Internet services from blocking or slowing down legal content, are "arbitrary and capricious" because they are not tough enough--particularly on wireless internet. Id. Under the FCC's rules, mobile providers cannot block voice or other data services that compete with their services, but they can block other applications. See id.

In short, while Verizon argues that the FCC lacks authority to even regulate wired providers, Free Press argues that the FCC should be required to implement the rules more broadly and forcefully on both wired and wireless providers. Though the public eye will likely focus on the larger Verizon challenge, Free Press's critique from the opposite end of the spectrum is telling. Taken together, the two diametrically opposed challenges to the same set of rules speak to the polarizing context of net neutrality regulations. The same set of rules is under attack for being too strong and not strong enough.

After examining the background and the policy background and the rules themselves, this article will ultimately propose that both suits be dismissed. The FCC and the telecom industry both need some time to grow accustomed to these middle-of-the-road regulations. Certainly the security and fairness of the Internet could not be more important at this juncture in our national history. As FCC Chairman Julius Genachowski has noted, "Broadband intersects with just about every great challenge confronting our nation--jobs, business growth, education, energy, climate change and the environment, international competitiveness, health care, overcoming disabilities, opening doors of equal opportunity, to name only the most obvious." See Report and Order, at 11. Indeed, every one of these great national challenges has a broadband component as a critical part of its solution. "But," Genachowski continued, "broadband connectivity is about even more than that. Increasingly our national conversation, our source for news and information, our knowledge of one another, will depend upon the Internet. So this goes to the future of our civic engagement and our democratic dialogue." Id.


To understand the challenges to the rules, one must first understand the FCC's stated goal in writing them--"to protect a free and open Internet." What exactly is the "open Internet"? The "open Internet" is essentially the Internet as it currently exists. It is "open" because it uses free, publicly available standards that anyone can access and add to, and because Internet Service Providers (ISPs) treats all traffic that flows across the network in basically the same way. In layman's terms, ISP consumers view sites and services on the Internet without regard to the content of those services. See generally Report and Order, at 11 (describing the importance of a "free and open Internet" to both ISPs and the general public alike).

Therefore, we can draw from this a conclusion of how a "closed" Internet might look. Imagine a world in which an ISP struck a special deal with Microsoft's Bing search website. In exchange for some sort of payment, your ISP would block Google's search service and allow its consumers to search only via Bing. Now imagine a world in which your ISP, in an effort to attract more families to subscribe, blocked "offensive" pornographic content. Or a world in which your ISP partnered with NBC to allow NBC programming to stream far more quickly than FOX or ABC programming. In each of these situations, the "Internet" experience of consumers becomes different depending on the corporate relationships and strategies of their ISP. The net is no longer neutral.

Net neutrality, broadly speaking, is an effort to ensure equal access to websites, services and online applications. Government and industry actors publicly agreed that the open Internet is a key platform for innovation, competition, and free expression. Many of these actors disagreed, however (and still do), about whether there was a need FCC regulation to ensure this openness. Those who favored agency action emphasize the risk of harmful conduct by broadband providers, and warn that inaction might result in irreversible damage to the Internet. Meanwhile, those who favor inaction contend that the Internet generally is open today and is likely to remain so, and express concern that rules aimed at preventing harms may themselves impose significant costs. See Report and Order, at 11.

Much of the net neutrality debate came to a head in the summer of 2007 when Comcast was accused of blocking access to peer-to-peer ("P2P") file sharing services like BitTorrent, because people using BitTorrent to share large extensive files were causing slowdowns across the network. See Grant Gross, Comcast Continues to Block Peer-To-Peer, EFF Reports, NETWORK WORLD, Nov. 30, 2007, http://www.networkworld.com/news/2007/113007-eff-comcast-continues-to-block.html. Comcast denied cutting off access completely, but said that it did delay access to P2P sites during peak hours. See id.

The FCC, worried about the precedent created by Comcast's actions, tried to order Comcast not to block peer-to-peer file sharing. But when Comcast challenged the order, the court sided against the FCC, noting that the agency had chosen to deregulate ISPs a few years earlier. See FCC Official Says Comcast Ruling May Impact Broadband Plan, REUTERS, Apr. 7, 2010, http://www.reuters.com/article/2010/04/07/us-fcc-broadband-idUSTRE6366C820100407. Indeed, the FCC had ruled back in 2003 that cable modem broadband is an information service and not subject to the many rules and regulations imposed on incumbent telephone companies such as Verizon and AT&T, which are classified as telecommunications services. The FCC thus had to consider re-regulating ISPs by putting them into the same regulatory bucket as phone service, which gives the FCC clear authority to require ISPs not to block services, just as phone companies must let users call any number they like. See id. This avenue turned out to be politically impossible, however, with Republicans objecting to new regulations on industry. See id.

That political difficulty, along with the Comcast loss, prompted the agency to explore the passage of entirely new rules to give itself more explicit authority over broadband providers. "We conclude that the benefits of ensuring Internet openness through enforceable, high-level, prophylactic rules outweigh the costs," the Commission declared. "The harms that could result from threats to openness are significant and likely irreversible, while the costs of compliance with our rules should be small, in large part because the rules appear to be consistent with current industry practices." Report and Order, at 5.

The Adopted Rules

With all of these present and potential problems on the horizon, the FCC worked to establish a set of basic guidelines for ISPs. On December 21, 2010, after more than a year of vigorous debate, the FCC narrowly approved net neutrality regulations by a vote of 3-2, with Democrats in favor and Republicans opposed. The rules can be broken down into three broad directives: 1) transparency on network operations, 2) a prohibition on content blocking, and 3) prohibition on "unreasonable discrimination." See Net Neutrality, N.Y. TIMES, Dec. 22, 2010, http://topics.nytimes.com/topics/reference/timestopics/subjects/n/net_neutrality/index.html.

First, the transparency piece essentially requires that broadband providers--both fixed and wireless--be more transparent about their activities and billing practices. Providers must disclose any obtrusive network management, for example slowing the networks at certain peak hours, and must also disclose details about their plan options and pricing. See id. Most ISPs would argue that they already make this information available. But when these new rules take effect, consumers who disagree would be able to have their grievances reviewed by the FCC. See id.

Secondly, the rules prohibit blocking of legal content. See id. An ISP would not be able to choose particular services or types of sites to block in order to improve network performance. For example, Comcast could not decide to block Netflix's streaming service or live videogame websites. This rule differs slightly on for fixed versus wireless service providers. Fixed providers cannot block lawful content, applications, services, or "non-harmful" devices. Wireless providers of broadband service cannot block access to lawful websites or block applications that compete with their own voice or video services. (The rules do not apply to mobile broadband application stores). See id.

Finally, fixed broadband providers are prohibited from engaging in unreasonable discrimination. Id. Under the FCC rules, ISPs can manage their networks, but may not "unreasonably discriminate" against specific applications. That is, Comcast could slow its entire network to handle an influx of users, but it would be prohibited from slowing down (or blocking) a specific service like Netflix or Hulu. Not only would ISPs be unable to slow down a competitive service--they would also be prohibited from speeding up a certain service. The idea is that a wealthy company like Amazon should not be able to pay an ISP to have their site load faster than a competing smaller company's site. See, e.g., Brian Stelter, F.C.C. Is Set To Regulate Net Access, N.Y. TIMES, Dec. 20, 2010, available at http://www.nytimes.com/2010/12/21/business/media/21fcc.html?sq=fcc&st=cse&scp=3&pagewanted=print.

Clearly, the rules differentiate between fixed broadband (e.g. cable, fiber and DSL) and mobile broadband (the connection to smartphones and mobile hotspot devices). This differentiation is the crux of a contentious debate, highlighted by the Free Press lawsuit, about whether wireless companies should be forced to play by the same fairness rules as cable and DSL Internet providers. Carriers maintain that their networks are so busy and that competition between them is so fierce that any unfair behavior would be impossible; online activists argue that in absence of regulation, carriers will suffocate innovative services and block content-rich sites. See, e.g., David Goldman, Gimmie YouTube: What FCC Net Neutrality Rules Mean For You, CNN MONEY, Dec. 21, 2010, available at http://money.cnn.com/2010/12/21/technology/fcc_net_neutrality_ruling/index.htm.

Nevertheless, the FCC believes these rules serve as a useful starting point. As Chairman Genachowski noted, the rules have the twin aims of both encouraging Internet innovation and protecting consumers from abuses. "At present, there are no enforceable rules to protect basic Internet values," he said. "[T]hese rules fulfill a promise to the future--to companies that don't yet exist, and the entrepreneurs that haven't yet started work in their dorm rooms or garages." Report and Order, at 135, 139.

The Opposition from the Right and the Left

Not everyone is quite so poetic about the new rules. Last April, Republicans in the United States Congress led a 240 to 179 vote to overturn the regulations, a repeat of a similar attempt they first tried in February. See Brent Lang & Cassie Chew, House Republicans Vote to Kill FCC's Net Neutrality Rules, THE WRAP, available at http://www.thewrap.com/media/column-post/republican-vote-kill-net-neutrality-rules-26227. Although the vote was largely symbolic--it remains unlikely to get through the Democrat-controlled Senate, or escape President Obama's veto--it speaks to a deep resistance to added regulation. See id. House Republicans used the opportunity, which came at the height of the showdown over the government shutdown, to rail against the role of the federal government. Rep. Fred Upton's (R-MI) comments are a perfect example: "Well, Mr. Chairman [Genachowski] the Internet is not broken and this bill [the Republicans' "resolution of disapproval"] will ensure that the FCC does not break it," he said in the hearings. "If we allow the FCC to seize control of the Internet it's going to radically reduce innovation and investment." Id.

Verizon Communications emerged as the first company to vocally challenge the FCC's rules. See Grant Gross, Verizon Files Challenge to FCC Net Neutrality Rules, MAC WORLD, Oct. 1, 2011, available at http://www.macworld.com/article/162617/2011/10/verizon_files_challenge_to_fccs_net_neutrality_rules.html. To begin analyzing their challenge, some basic background on Verizon's business is helpful. Verizon Communications Inc., incorporated in 1983, is a holding company that divides its services into essentially two segments: domestic wireless and wireline. Its domestic wireless communications services include wireless voice and data services and mobile devices for sale to consumer, business and government customers. This segment of the business accounts for roughly 60 percent of the company's revenues. Verizon's wireline services include voice, Internet access, broadband video and data, Internet protocol (IP) network services, network access, and long distance calling to consumers in over 150 countries around the world including the United States. See generally Verizon Fact Sheet, November 2011, available at http://newscenter.verizon.com/kit/vcorp/factsheet.html.

While Verizon has not yet filed merit briefs in the case, we certainly have some insight into the arguments they are likely to make. Filed in the United States Court of Appeals for the District of Columbia Circuit on September 30, Verizon's initial motions try to make a case against "the FCC's assertion of broad authority to impose potentially sweeping and unneeded regulations on broadband networks and services and on the Internet itself." See Katy Bachman, Verizon Challenges FCC Net Neutrality Rules, Again, ADWEEK, Sept. 30, 2011, available at http://www.adweek.com/news/technology/verizon-challenges-fccs-net-neutrality-rules-again-135370. Verizon's complaint, brought pursuant to 47 U.S.C. ยง402(b), emphasized the U.S. Court of Appeals for the District of Columbia Circuit's decision in Comcast. See id. There, the court held that the FCC had failed to justify its exercise of authority over broadband Internet services. See id. With Comcast in mind, Verizon seeks relief on three interrelated theories: 1) the Order is "in excess of the Commission's statutory authority," 2) the Order is "arbitrary, capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act, and 3) the Order is "contrary to constitutional right." For these reasons, as if their feelings were not clear enough, Verizon asks the court to "hold unlawful, vacate, enjoin, and set aside the Order." See generally Petition For Review, Verizon v. FCC (2011) (No. 11-1356).

Though the case has not yet been argued fully, Verizon has already won an early victory. From the beginning, Verizon wanted its challenge to be heard by the U.S. Court of Appeals for the District of Columbia Circuit--the same court that shot down the FCC's attempt to regulate Comcast's Internet traffic. The panel declared at the time that the FCC lacked the statutory authority to regulate the Internet. After several suits were filed challenging the rules, including those by Free Press and Verizon, a judicial panel decided by random lottery which court would hear the consolidated case challenging the rules. Industry analysts believe the D.C. Circuit is the most likely court to overturn the controversial net neutrality rules. "If you're a telecom company, you were hoping for D.C.," said Scott Flick, a partner with D.C.-based law firm Pillsbury Winthrop Shaw Pittman, a firm which deals with regulatory issues before the FCC. "The D.C. Circuit has consistently construed the FCC's ancillary authority narrowly, notably, just a couple of years ago, when it rejected an FCC rule that required wireless carriers to meet high standards for backup power at tower sites." Katy Bachman, Will FCC Net Neutrality Rules Survive Court?, ADWEEK, Oct. 11, 2011, available at http://www.adweek.com/news/technology/will-fcc-net-neutrality-rules-survive-court-135665. While Verizon enjoyed the luck of the draw, the venue is obviously bad news for challenges from left-leaning organizations like Free Press. See id.

The challenge now for the government is to persuade the court this is a different case than Comcast, resting on a different legal theory and different facts. Their difficulty is clear; for years, the FCC did not regulate the Internet, and now they are almost imposing common carrier rules on ISPs. However, the original decision by the D.C. Circuit Court of Appeals established a roadmap for how the FCC could write a rule. It seems that the agency has properly followed that roadmap.

Concluding Thoughts: The Proper Role of the FCC In Net Neutrality

Moving into the 21st century, Americans are communicating and accessing information in new ways. Beyond the technicalities of the combined case now before the D.C. Circuit, common sense tells us that the Internet is an indispensable platform supporting our nation's economy and civic life. Just as the FCC was central to regulating radio and television broadcasts in the previous century, the agency must ensure that the Internet is an accessible and effective means of communication in this century. This is consistent with the Obama administration's National Broadband Plan, which aims to ensure broadband access that is ubiquitous and fast, promoting the global competitiveness of the United States. See Statement from the President on the National Broadband Plan, The White House, Office of the Press Secretary, Mar. 16, 2010.

The rules adopted last December are a decent starting point. But the suit by Free Press is correct that they do not go far enough. The distinctions between fixed and wireless providers will become increasingly less important to consumers. According to new data from International Data Corporation (IDC), by 2015 more users will access the Internet through mobile devices than through desktop computers or other wireline devices. See More Mobile Internet Users Than Wireline Internet Users in the U.S. by 2010, IDC, Sept. 12, 2011, available at http://www.idc.com/getdoc.jsp?containerId=prUS23028711. Another study by Cisco expects mobile data traffic will grow at a compound annual growth rate (CAGR) of 92 percent from 2011 to 2015, reaching 6.3 exabytes per month by 2015. See Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2010-2015, Feb. 1, 2011, available at http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-520862.html. Moreover, the mobile-only Internet population will grow 56-fold from 14 million at the end of 2010 to 788 million by the end of 2015. See id. The conclusion is clear: People are increasingly accessing Internet content through mobile devices.

In short, the FCC's rules of the road should be upheld by the court and allowed to go into effect as planned. If the Republicans in fact are wrong, and this Internet innovation does continue after November 20, the FCC should give serious scrutiny to the idea of extending the rules to wireless carriers. It makes little sense for consumers to experience the same content differently depending on which device they choose to use. Just as consumers must be able to call any number on either a wireless or a wireline phone, so too should they be able to access content in the same way on both wireless and wireline devices. In the end, the FCC exists to ensure that the communications industry works for consumers. Surely, there is no area of communications more worthy of the agency's attention in the 21st century.

Brian Farkas [http://www.linkedin.com/in/brianfarkas] is a student at the Benjamin N. Cardozo School of Law in New York City focusing in Intellectual Property and Information law.

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This page contains a single entry from the blog posted on November 23, 2011 12:53 PM.

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