The FCC’s Open Internet Order (“Order”), set to take effect on June 12, 2015, asserts FCC authority over the Internet connections between so-called “edge providers” and broadband providers.  Edge providers, as understood by the FCC, are those companies that provide content, services, and applications over the Internet (for example Google and Netflix).   The FCC’s order reclassifies both fixed and mobile broadband service provided to edge providers as telecommunications services under Title II of the Communications Act.  It bars blocking, throttling and paid prioritization by broadband providers, prohibits other conduct that unreasonably interferes with or unreasonably disadvantages edge providers, and allows the FCC to hear complaints regarding interconnection  would have authority to hear complaints and take enforcement action if it determines the interconnection

Rationale for Regulating Broadband Service to Edge Providers

The FCC’s move, in the Order, to regulate the connection between edge providers and broadband networks appears grounded on a conclusion that broadband providers “function as gatekeepers for,” among others, “edge providers attempting to reach [] broadband provider’s end-user subscribers,” and that the broadband providers had both “economic incentives and technical ability” to engage in practices that could harm edge providers.[1]    The FCC found “substantial evidence that broadband providers have significant bargaining power in negotiations with edge providers and intermediaries that depend on access to their networks because of their ability to control the flow of traffic into and on their networks.”[2]  The Open Internet Order further expressed concern that broadband providers could “exploit [the gatekeeper] role by acting in ways that may harm the open Internet, such as preferring their own or affiliated content, demanding fees from edge providers, or placing technical barriers to reaching end users.”[3]

Bright-Line Bars on Blocking, Throttling and Paid Prioritization

The Order enacts bright-line rules prohibiting broadband providers from blocking, throttling and paid prioritization.  These rules, codified in 47 C.F.R. §§ 8.5, 8.7 and 8.9, apply to traffic between edge providers and broadband providers just as they apply to traffic between broadband providers and end-users.[4]   Under the no-blocking rule, broadband providers may not block access to legal content, applications, services, or non-harmful devices, and cannot charge edge providers a fee to avoid such blocking.  Under the no-throttling rule, broadband providers may not impair or degrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices, and may not impose a fee on edge providers to avoid having the edge providers’ content, service, or application throttled.   And under the ban on paid prioritization, broadband providers may not favor some lawful Internet traffic (including traffic from affiliated edge providers) over other lawful traffic in exchange for payment.  Subsequent FCC actions and litigation are likely to clarify and refine exactly what type of conduct does (and does not) constitute blocking, throttling and paid prioritization.

No Unreasonable Interference/Disadvantage

Beside the bright-line prohibitions, the Order imposes , at 47 C.F.R. § 8.11, a “catch-all” rule that broadband providers cannot “unreasonably interfere with or unreasonably disadvantage” edge providers’ “ability to make lawful content, applications, services, or devices available to end users.”[5]  By prohibiting only “interference” or “disadvantag[ing]” that is “unreasonable,” the Order may ultimately allow for some practices that incidentally, or unintentionally, pose obstacles to edge providers.  However, the FCC declined to define what is “unreasonable,” leaving that for case-by-case determinations in the future.   The Order states that “this ‘no-unreasonable interference/disadvantage’ standard will be applied to carefully balance the benefits of innovation against harm to end users and edge providers.”

Nonetheless, the Order provides several indications as to how the catch-all standard might be applied.

First, the text of the Order evinces concern that, absent a more flexible (albeit less well-defined) catch-all standard, there would be an incentive for broadband providers to exercise “gatekeeper power” through technical and economic means that would fall outside the blocking, throttling, and prioritization standards.  The FCC’s concerns suggest that it could use the catch-all as a check on tactics that might circumvent the letter, but not the spirit, of the blocking/throttling/paid prioritization rules.  Thus, the broader concerns concerning the alleged “gatekeeper” role of broadband providers, and the potential for abuse of that role, are likely to guide the FCC’s application of the “no unreasonable interference/disadvantage.”  Regardless of whether one agrees with the FCC’s analysis (which describes incentives, negative externalities, switching costs, and the responsiveness of end-users to respond to restrictions on edge-providers), that analysis may well inform future FCC rules and enforcement actions.

Second, the Order emphasizes that the “no unreasonable interference/disadvantage” standard protects free expression, noting the “congressional policy that ‘the Internet offer[s] a forum for a true diversity of political discourse, unique opportunities for cultural development, and myriad avenues for intellectual activity.’”[6]  The emphasis on expression, which is referenced repeatedly in the Order, suggests that the FCC may be particularly attentive to activities of broadband providers that appear to favor particular points of view.  The Order states that “[p]ractices that threaten the use of the Internet as a platform for free expression would likely unreasonably interfere with or unreasonably disadvantage consumers’ and edge providers’ ability to use [broadband Internet access service] to communicate with each other.”

Third, the FCC identifies several additional “factors” that will determine its case-by-case application of the “no unreasonable interference/disadvantage” standard.   There are seven such factors, which again include free expression:

  • Promoting end-user control;
  • Avoiding anti-competitive effects;
  • Protecting consumers;
  • Encouraging innovation, investment, and broadband deployment;
  • Promoting free expression;
  • Promoting application-agnostic (or use-agnostic) practices;
  • Attention to Internet governance and standards bodies.

How these factors are weighed, particularly in cases where one or more factor must be balanced against others, will be closely watched as the FCC enforces its Open Internet Order.

Adjudication of Interconnection Complaints

Under the Order, the FCC would have authority – under sections 201, 202 and 208 of  the Communications Act (47 U.S.C. §§ 201-202, 208) to hear complaints and take enforcement action if it determines the interconnection activities of broadband providers are not just and reasonable, allowing the FCC to adjudicate disputes between broadband providers and edge providers on a case-by-case basis.  However, the Order signaled flexibility in determining whether interconnection arrangements are “just and reasonable,” by expressly excluding commercially-negotiated interconnection agreements—that is, agreements for the exchange of Internet traffic—from the scope of the Open Internet Order’s new rules (e.g., the “no unreasonable interference/disadvantage” rule).  In explaining that decision,  the FCC observed that it does not have a long history of reviewing agreements between edge providers and broadband providers, and noted that it is “difficult to predict what new arrangements will arise to serve consumers’ and edge providers’ needs going forward.”   For those reasons, the Order explains, it is desirable to act on a case-by-case basis rather than to prospectively prohibit certain arrangements.  It remains to be seen whether, and under what circumstances, the FCC might determine that an interconnection agreement between an edge provider and a broadband provider could fall short of  the “just and reasonable” standard under 47 U.S.C. § 201.

Will there be Complaints? 

The impact of the FCC’s Open Internet Order on the relationships between broadband providers and edge providers will hinge, in part, on who brings complaints involving edge-provider issues to the FCC.  The extent to which edge providers bring complaints about broadband providers to the FCC—and the nature of such complaints—remains to be seen.   Another unanswered question is whether edge providers’ end-users will attempt to bring consumer complaints alleging that broadband providers are unreasonably interfering with access to their edge providers—particularly edge providers with services requiring high-bandwidth connections (live-streaming of HD video, for instance).  The number and type of complaints that are brought may help determine the practical impact of the Open Internet Order on the relationships between broadband providers and edge providers.