United States: Net Neutrality Revisited

The issue of "net neutrality" has occupied the Federal Communications Commission (FCC or "the Commission") for years. With the FCC poised to adopt a new regulatory regime for broadband providers at its meeting on February 26, FCC Chairman Tom Wheeler recently released the outlines of his proposal—which is anticipated to be adopted on a 3-2 party-line vote. This Alert provides a brief summary of some of the issues and viewpoints, pro and con.

But, first, here is some background. Net neutrality comprises several different concepts. As formulated by the FCC Chairman, they reduce to the following: no blocking access to lawful content, applications, services and devices that do not harm the network; no throttling, i.e. impairing or degrading lawful traffic based on content, applications, services or (non-harmful) devices; and no prioritizing traffic based on the receipt of consideration. In addition, the Chairman has said the proposal will provide a standard by which new practices are deemed lawful or not; and it will ensure that broadband provider practices are transparent. These principles would be subject to an exception for reasonable network management by the provider, as well as (likely) the needs of law enforcement and public safety.

However, these principles are not what has caught so much attention about Chairman Wheeler's proposal, and a related article he authored in Wired magazine. Even draft legislation circulating on Capitol Hill recognizes the substance of net neutrality principles.

Rather, what has generated most of the attention—and potential controversy—is the Chairman's proposal to start regulating broadband providers, wired and wireless, as public utilities under Title II of the Communications Act. In this respect, the Chairman is following the lead of President Obama, who weighed in publicly after the November elections with a statement urging public utility regulation and the "strongest possible rules" for the Internet. In other words, the rules to be taken up by the five Commissioners will not be limited to adoption of net neutrality principles (much less a compromise solution that the FCC Chairman had been circulating prior to President Obama's statement).

Going forward, those following the debate will hear arguments, pro and con, regarding the policy and legal foundations for the proposal. A legal issue likely to be front and center is whether re-classification of broadband providers as "telecommunications service" providers subject to Title II is lawful, when the courts and the FCC have previously held them to be "information service" providers exempt from Title II. In this respect, formal public utility regulation would represent a marked departure from the light-touch regulatory approach heretofore followed by the FCC.1

Likewise, while millions of comments have been filed in the FCC's docket, the agency may be pressed to defend assertion of Title II jurisdiction over interconnection between and among Internet facilities. Typically, interconnection issues are resolved by individual negotiations between the broadband provider and its counter-party. Negotiations are inconsistent with the traditional definition of common carriage, i.e. holding out to serve the public indifferently on the same terms and conditions typically via tariff.

The central policy issue is whether adoption of common carrier regulation will deter investment in new broadband infrastructure. Broadband providers have contended that public utility regulation à la the Bell System is antithetical to the risk-taking inherent in the decision to invest the massive amounts required for broadband deployment. Chairman Wheeler has countered that cellular companies have been subject to Title II regulation, and it has not deterred their investment. [In this regard, it may be interesting to see whether the public utility model (if it is adopted, as seems likely) will undermine one of the FCC's other broadband goals; namely, deployment of higher-speed broadband facilities (based on a recent FCC determination, 25 Mbps for downloads and 3 Mbps for uploads).]

Chairman Wheeler has emphasized that his proposal does not contemplate the imposition of rate regulation. However, the proposed ban on paid prioritization for Internet traffic, for instance, has been characterized as a form of rate regulation by opponents of the proposal. Moreover, the Chairman's proposal does not envision the FCC's forbearing from its authority under Section 201 of the Communications Act to ensure that the "charges" of broadband providers are "just and reasonable."

Expect to see and hear a great deal about the Commission's decision in the months to come.

If you have any questions about this Alert, please contact William K. (Ken) Keane in the firm's Washington, D.C. office, any of the attorneys in the Information Technologies and Telecom Practice Group or the attorney in the firm with whom you are regularly in contact.


1. In January 2014, the U.S. Court of Appeals for the District of Columbia issued a decision vacating the FCC's attempt to adopt net neutrality rules. The court held that, although the FCC had ample authority under Section 706 of the Telecommunications Act of 1996 to adopt requirements designed to forestall practices that could impair broadband access, the rules were contrary to other provisions of the Act and prior Commission decisions. Under this precedent, broadband service was classified as an "information service," not common carriage. Since non-discrimination and anti-blocking rules are quintessential common carrier obligations, the court vacated those two key parts of the FCC's decision. The part of the rule requiring disclosure of network management practices was allowed to stand. See our Alert dated January 16, 2014, for more on the court's decision.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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