United States: Highlights Of The 2015 Open Internet Order

Five years ago, the FCC adopted the Preserving the Open Internet Report and Order ("2010 Open Internet Order") which prohibited blocking and discrimination and imposed disclosure requirements for fixed Internet providers.1 Just over a year ago, the D.C. Circuit Court in Verizon v. FCC struck down the blocking and antidiscrimination provisions and upheld the disclosure requirements.2The gravamen of the Verizon decision was that the FCC sought to impose common carrier requirements on Internet providers who had previously been found to be information services providers and not telecommunication services providers.3

On April 13, 2015, the Commission published new rules in the Federal Register implementing its Protecting and Promoting the Open Internet Report and Order ("2015 Open Internet Order").4 The 2015 Open Internet Order seeks to address the concerns raised by Verizon by re-classifying Internet providers as subject to common carrier provisions of Title II of the Communications Act5 and creating substantial new rules and requirements designed to protect what the FCC calls the "virtuous cycle"6 of the Internet. In addition, while the 2010 Open Internet Order applied to only the relationship between Internet providers and their customers, the 2015 Open Internet Order covers the entire ecosystem of broadband Internet service from the edge provider through the Internet provider to the ultimate consumer. It also covers mobile Internet providers. In the 2015 Open Internet Order, the FCC also exercised its right under Section 10 of the Communications Act7 to employ broad forbearance from imposing a significant number of the requirements of Title II on Internet Providers.

Highlights of the 2015 Open Internet Order

The 2015 Open Internet Order imposes "bright-line" rules that prohibit blocking, throttling, and paid prioritization and establishes enhanced transparency requirements. Specifically, the new rules provide:

  • No blocking: Subject to reasonable network management, a Service Provider may not block lawful content, applications, services, or non-harmful devices.8
  • A network management practice is a practice that has a primarily technical network management justification, but does not include other business practices. A network management practice is reasonable if it is primarily used for and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service.
  • No Impairment or Degradation of Internet Access: Subject to reasonable network management, a Service Provider may not impair or degrade lawful Internet traffic on the basis of Internet content, application, or service, or use of a non-harmful device.9
  • No Paid Prioritization: A Service Provider may not engage in paid prioritization. 'Paid prioritization' refers to the management of a broadband provider's network to directly or indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an affiliated entity.10
  • No Unreasonable Interference or Unreasonable Disadvantage: A Service Provider may not unreasonably interfere with or unreasonably disadvantage (i) end users' ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice, or (ii) edge providers' ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be considered a violation of this rule.11 The interference rule is not a bright line rule and will be enforced on a case by case basis.
  • Transparency Required: A Service Provider must publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services 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.12 In addition to the transparency rules contained in the 2010 Open Internet Order the new rules require "that broadband providers always must disclose promotional rates, all fees and/or surcharges, and all data caps or data allowances; adding packet loss as a measure of network performance that must be disclosed; and requiring specific notification to consumers that a 'network practice' is likely to significantly affect their use of the service.13

The new rules apply to both fixed and mobile broadband Internet access service. It is the FCC's intent that the rules apply to all broadband Internet access services ("BIAS"). BIAS is defined as:

"A mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all Internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up Internet access service. This term also encompasses any service that provides a functional equivalent of the service, or that is used to evade the protections created by the Commission.14

There is one major difference between the application of the rules to fixed Internet providers and mobile providers. The Commission's guidance on how sponsored data and data allowances will be evaluated for mobile providers is less certain than the bright line rule against paid prioritization for fixed Internet providers. Absent a waiver, paid prioritization is prohibited by fixed Internet providers. The Commission looked specifically at Sponsored Data plans employed by mobile broadband providers (sometimes called zero-rating) where Internet providers exclude certain edge provider content from end users' usage allowances; and Usage Allowances (also called "data caps") where mobile Internet providers place limits on the volume of data downloaded by the end user during a fixed period and/or charge for excess data, and once a cap has been reached, reduce the speed at which the end user can access the Internet. While acknowledging that both are common practices by mobile providers, the FCC declined to make a blanket finding about whether these practices are permitted. Instead the FCC will address concerns under the no-unreasonable interference/disadvantage evaluation on a case-by-case basis.

The new rules do not apply to: enterprise services, virtual private network services, hosting, or data storage services. The new rules do not to apply to premises operators to the extent they may be offering broadband Internet access service.

The new open Internet rules will not apply to interconnection agreements. However, because the FCC determined that broadband Internet access service is a telecommunication service it will be subject to sections 201, 202, and 208 of the Communications Act (along with key enforcement provisions). As a result, commercial arrangements for the exchange of traffic with a broadband Internet access provider will be within the scope of Title II, and the Commission will be available to hear disputes raised under sections 201 and 202 on a case-by-case basis. The Commission determined that Title II is an appropriate vehicle for enforcement where disputes are primarily over commercial terms and involve some very large corporations, including companies like transit providers and Content Delivery Networks ("CDNs") that act on behalf of smaller edge providers.

Internet providers will also be subject to the privacy requirements of Section 222 of the Communications Act. However, the FCC determined that its current privacy rules for telecommunication providers were not suitable for Internet providers. The FCC will hold an additional rulemaking to establish appropriate rules for Internet providers. In the interim Internet providers are still expected to comply with the privacy provisions of Section 222 of the Communications Act.

Internet providers are now required to comply with Sections 225, 251(a)(2) and 255 of the Communications Act which ensure Disability Access. However, the FCC decided to forbear from requiring Internet providers to contribute to the Universal Service or Telecommunications Relay Service funds.

Utilities continue to be obligated to provide access to poles and conduits pursuant to Section 224 of the Communications Act.

Internet providers will be required to comply with Section 254 of the Communications Act which provides for promoting universal broadband, except that they will not be required to comply with Sections (d), (g) and (k) which would have required contributions to the Universal Service Fund.

Footnotes

1 Preserving the Open Internet, Report and Order, GN Docket No. 09-191, WC Docket No. 07-52, Report and Order, 25 FCC Rcd 17905 (2010), aff'd in part, vacated and remanded in part sub nom. Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014).

2 Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014) ("Verizon").

3 Verizon, 740 F.3d 623.

4 80 FR 19737 (April 13, 2015), publishing the Commission's order, Protecting and Promoting the Open Internet Report and Order GN Docket 14-28, FCC 15-24, 62 CR 1, (released March 12, 2015)("2015 Open Internet Order"). Several appeals of the Order have been filed, which are still pending. On May 1, 2015, the American Cable Association and the National Cable & Telecommunications Association filed for stay of the 2015 Open Internet Order pending judicial review. See In the Matter of Protecting and Promoting the Open Internet, Petition of American Cable Association and the National Cable & Telecommunications Association for Stay Pending Judicial Review, GN Docket No. 14-28 (May 1, 2015).

5 Title II of the Communications Act is codified at 47 U.S.C. §§ 201-276.

6 2015 Open Internet Order at ¶ 20.

7 47 U.S.C. § 10.

8 2015 Open Internet Order at ¶ 15.

9 2015 Open Internet Order at ¶ 16.

10 2015 Open Internet Order at ¶ 18. The Commission will consider waivers of the ban on paid prioritization if the Internet provider can demonstrate that the practice will provide significant public interest benefit and can show that it: (i) does not materially degrade or threaten to materially degrade the broadband Internet access service of the general public; (ii) does not hinder consumer choice; (iii) does not impair competition, innovation, consumer demand, or investment; and (iv) does not impede any forms of expression, types of service, or points of view.

11 2015 Open Internet Order at ¶ 21.

12 2015 Open Internet Order at ¶ 23.

13 2015 Open Internet Order at ¶ 24. Small providers are not required to adhere to the enhanced transparency rules prior to December 15, 2015.   Id.

14 2015 Open Internet Order, at ¶ 25.

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