Net neutrality and the FCC: what’s being done to preserve it

Intro

The issue of net neutrality (i.e. internet or network neutrality) is essentially a battle over how much control internet providers should have in deciding whether to give preferences to different sites and online applications. The battle lines are drawn over whether ISPs should have the right to exact direct control over the content and data flowing across their networks. For example, should Verizon Online DSL charge Google extra money to ensure that YouTube videos will download faster than, say, Revver videos? Or should Verizon be able to decide that YouTube is taking up too many resources on its network and make it run slower, or block it entirely?

Network neutrality advocates say that the internet should treat all information more or less equally, and that favoring some content, sites, or applications over others would take control from the users and force them to patronize only that which is favored by the ISPs and network operators — presumably only the internet businesses with the most money to spend on this new kind of carriage deal. Opponents of network neutrality argue that because service providers are in a competitive industry, they have plenty of incentives to provide the best service possible, and that the government should let market forces dictate the results of network regulation.

In 2005, the FCC raised eyebrows when it investigated a small broadband provider, Madison River Communications, that hadblocked access to Vonage’s VoIP application. The matter ended when the provider agreed to unblock Vonage and pay a fine (more on this case later). Some argue that the source of the FCC’s power to regulate net neutrality is based on the Supreme Court’s 1997 decision allowing the agency to enforce “must-carry” regulations, which required cable companies to include local channels in their lineup. However, the reason net neutrality is such a contestable topic is because courts have not yet directly ruled on the jurisdiction of the FCC to enforce it.

Much of this issue boils down to whether ISPs can be considered “common carriers“, a special legal designation for businesses and agencies available to the public for transportation of persons, goods, or messages. Such companies have been saddled with extra legal duties, namely of care and equal treatment, since the railroad days of the 1800s. Since the first Communications Act in 1934, the telephone system has been considered a common carrier and therefore subject to regulation by the FCC. So far, however, authorities have been reluctant to take a heavy-handed approach to regulating the internet.

The FCC’s stance

In 2005, the FCC issued Policy Statement 05-151 [Warning: PDF], which addresses net neutrality. Policy Statement 05-151 did two important things. First, it declared that the FCC has the jurisdiction to regulate telecommunications providers to ensure they operate their networks in a neutral manner. This is important because federal agencies can only regulate areas or issues that have been placed within their rulemaking power by the relevant enabling statute — in the case of the FCC, the Communications Act of 1934, as amended in 1996, is that enabling statute. An agency’s rule over an area can be overturned in court if it is deemed unauthorized by the enabling statute.

If, for example, the FCC started issuing gun control regulations, those regulations would be thrown out in court because the Communications Act does not give the FCC any gun-control powers. If, however, a regulation is within an agency’s jurisdiction, courts will be very reluctant to overturn it. Thus, Policy Statement 05-151 is significant because it declares that the FCC believes that the law enables it to create regulations to enforce net neutrality. Courts often give “great weight” to an agency’s determination that it has a particular rulemaking power. Although a court could conceivably hold that the FCC has exceeded its authority, the deference courts give to agencies in defining their jurisdictions makes it unlikely1. More importantly, this statement also signals the intent of the FCC to start mandating net neutrality.

Policy Statement 05-151 is also important in that it set forth the following four principals regarding network regulation:

  1. Consumers are entitled to access content of their choice.
  2. Consumers have a right to programs of their choice.
  3. Consumers should be able to connect legal devices of their choice to networks.
  4. Consumers have a right to select from competing networks, services, and content providers.

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These are designed to be very general guiding principals of regulation. Besides speaking the FCC’s stance to the general public, they tell regulators that any rules you create regarding net neutrality should be justified by at least one of these principals. These principals also give vague notice to companies that might cross the line; they tell service providers that if things are done which infringe on any of the four consumer entitlements, they may well face action by the FCC. (And trust us, you don’t want the FCC on your back.) Of course, because the principals are so broadly worded it’s difficult to tell what these principals include until some hard-and-fast rules are made.

Pursuing policy statements

A policy statement (such as 05-151) is, unfortunately for those interested in preserving net neutrality, only a non-binding explanation of the FCC’s position on a subject. Technically, a policy statement is not a binding rule because the agency hasn’t completed the formal rulemaking process (which includes hearings, public comments, and so forth). But a policy statement does put companies on notice regarding how an agency such as the FCC interprets the law, and said agency intends to act on it.

The FCC has done more than issue non-binding policy statements, though. The net neutrality issue first entered the political consciousness in February 2005, when the FCC Enforcement Bureau began an investigation of Madison River Communications, a North Carolina ISP. Madison River had allegedly begun blocking ports to prevent the use of Vonage’s VoIP service by its customers, probably to stifle competition of its local landline telephone business. The FCC sent a letter to Madison River officially opening an investigation into the practice, and within a month Madison River had signed a consent agreement, under which it agreed to cease blocking VoIP services and pay a $15,000 fine. In return, the FCC agreed to drop the action against Madison River.

What does this mean for net neutrality? Well, as a practical matter, it means that the FCC is willing to pursue net neutrality investigations. As a legal matter, it means very little. A consent agreement is the administrative version of an out-of-court settlement; we don’t know what would have happened if the FCC and Madison River had gone through the whole adjudication process, nor do we know whether a court would accept the FCC’s claims of jurisdiction on this issue. In other words, the law wasn’t put to the test to see whether the FCC really does have control in maintaining net neutrality. What’s interesting is that the FCC’s investigation and letter came six months before the FCC issued Policy Statement 05-151. That means that the action was commenced without even an informal policy in place to back it up. However, the FCC seems to agree with the action in retrospect, since it responded by issuing a policy statement in favor of net neutrality regulations.

So it is safe to say that the FCC seems to be onboard with net neutrality. Though it hasn’t issued any formal rules yet, its actions indicate that it will probably continue to enforce net neutrality in the future. Given that the FCC will likely be unfriendly to those opposed to net neutrality, the best way for opponents to win the fight is to pull the rug out from under the FCC by having net neutrality regulation removed from its jurisdiction. That means going to Congress to pass some new laws.

Congressional action & inaction

In 2006, the House debated two separate bills to address net neutrality. The first bill, H.R. 5417, was called the “Internet Freedom and Nondiscrimination Act,” and was never even brought up for a vote. The second bill, H.R. 5252, was called the “Communications Opportunity, Promotion, and Enhancement Act of 2006.” It passed the House by a vote 321-101, but never received a vote in the Senate. The two bills present a glimpse into the likely options that the 110th Congress will consider.

HR 5417 can be described as the stricter “neutrality” bill. It does not allow for the discrimination of data either by the source of content or the end devices employed by users. For instance, a broadband provider like Verizon could not favor YouTube over Revver. In terms of devices, it would not allow the ISP to discriminate what hardware (or software) is sending and receiving data, be it a TiVo or VoIP phone. The bill does, however, allow for prioritizing certain types of data (i.e. quality of service), provided that it does not discriminate amongst who is providing that data. Thus, if an ISP wanted to privilege VoIP or video data, used in applications where low-latency is critical, then they could freely prioritize those types of data to the end users’ benefit. Because they are not allowed to discriminate based on the source of data, a broadband company could not enter a given market (like VoIP) and prioritize their particular product’s data over that of a competitor. The bill describes a “broadband” provider as one that provides data transmission rates averaging 200Kbps, regardless of method of providing access. Such a bill might present interesting implications for the cellphone companies, which provide 2.5 and 3G data services to customers, and are often left out of the net neutrality debates.

HR 5252, by contrast, seeks to give the FCC Policy Statement 05-151 from August 2005 the force of law, but says little more. What should be noted is that a proposed amendment by Rep. Markey (D-MA), which offered a stronger net neutrality provision similar to that found in HR 5417, was rejected before the House approved the bill.

Since the start of the 110th Congress in 2007, Senators Olympia Snowe (R-ME) and Byron Dorgan (D-N.D.) have introduced a new bill to address net neutrality. The bill, formally known as S. 217, has been dubbed the “Internet Freedom Preservation Act” [Warning: PDF]. It requires providers not to block or interfere with users on the basis of content, sources of content, or use of non-damaging devices. Regarding content priority, subsection (a)(4) requires a provider to “enable any content, application, or service” and that it be provided in a manner that is:

(A) “reasonable and nondiscriminatory”, 

(B) relayed at least as fast as content of the broadband provider or related affiliates, and 

(C) the provider doesn’t charge different rates for different types of content. 

Subsection (D) requires that every broadband provider offer standalone service (i.e. “naked” DSL and cable internet), and prohibits any requirement to purchase cable, voice, or VoIP service in order to get internet access. Presidential contenders and SenatorsBarack Obama (D-IL) and Hilary Clinton (D-NY) are also sponsors of the bill (we’re oh so glad they found something they can agree on), so perhaps there will be added attention to the net neutrality debate in the coming months. And perhaps with a little luck we can cement the security of net neutrality before it’s too late.

Footnotes

1 Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 843 (1984).

Legal analysis by Neal Hannan, Seth Kertzer, and Zach Sharpe, and edited by Trevor Adler. Originally posted at Endadget.

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