The Federal Communications Commission has announced that it intends to vote on new network neutrality rules at its open meeting on December 21, 2010. This vote will culminate a year-long proceeding on network neutrality and will achieve one of the central goals of FCC chairman Julius Genachowski. Although both Republican commissioners have signaled their disdain for this action, it is near-certain that all three Democratic commissioners will support the decision. This decision also will spawn a new round of litigation by opponents of network neutrality and could lead to Congressional action as well. The press release announcing that this issue will be on the FCC’s December 21 agenda is available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-303108A1.pdf, and the statements of the commissioners are available on the FCC web site at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-303136A1.pdf (Genachowski), http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-303144A1.pdf (Copps), http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-303128A1.pdf (McDowell), http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-303145A1.pdf (Clyburn) and http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-303140A1.pdf (Baker).

OVERVIEW

If the FCC acts as planned on December 21, it will close the latest chapter in the long-running saga of network neutrality, but it will not be the end of the story. The most likely result of the meeting will be that the FCC will adopt new rules that are intended to put teeth into the principles adopted in the 2005 Internet Policy Statement, which the FCC never has successfully enforced. While Chairman Genachowski has confirmed that the proposed order will not determine that broadband services should be treated as telecommunications service, the new rules nevertheless will be controversial. This is no surprise, as the battle lines were drawn years ago.

THE PROPOSAL

While many of the details of the proposal that will be on the December 21 agenda are not yet clear, the basic elements of the plan are fairly well defined. They are as follows:

  • Transparency – Providers will be required to make information on their network management practices publicly available.
  • Blocking – The rules will forbid blocking “lawful content, apps, services” and connections by devices that do not harm the network.
  • Non-discrimination – Providers will not be able to engage in “unreasonable” discrimination in transmitting content across the network.

The rules will give service providers flexibility to manage their networks. The quid pro quo for this flexibility, however, will be disclosure.

Chairman Genachowski also announced that the proposal will include rules for wireless broadband, but that the rules will be less stringent. In particular, the rules will include transparency requirements and what he described as “a basic no blocking rule.” It does not appear that the wireless rules will incorporate the non-discrimination principle, so wireless providers likely will maintain their current flexibility to favor particular content providers. The proposal also will include ongoing monitoring of the mobile market for “anti-competitive or anti-consumer conduct,” such as the “mystery charges” imposed for broadband access by Verizon. The proposal does not appear to include any limitations on how broadband providers charge their customers. As a result, the decision may explicitly permit usage caps, overage charges or pricing tiered by usage (rather than speed).

In many respects, this proposal is very close to what the FCC outlined in last year’s notice of proposed rulemaking. It also bears some resemblance to the bill that Congressman Waxman drafted, but that never got a vote in the current Congress.

The most significant difference from the original proposal is that it does not appear to include a requirement that broadband providers offer access to their competitors, although in practice that issue likely is addressed by the no-blocking and non-discrimination rules. The proposal also appears to apply a lighter touch to wireless services than the original rulemaking, although the FCC specifically recognized that there might need to be differences in the landline and wireless regulations.

LEGAL AUTHORITY

Since last April’s Comcast decision, the key issue for the FCC has been how it can show that it has the authority to adopt these rules. As part of its search for alternatives, the FCC proposed what it described as a “Third Way” approach, which would reclassify broadband as a telecommunications service but then use employ only selected elements of the FCC’s regulatory authority over common carriers. This approach was extremely controversial, and provoked strong reactions from Congress and much of the industry.

Unless the FCC changes course once again, it does not appear that it will rely on reclassification to establish its regulatory authority. Instead, the FCC will base its authority on its ancillary jurisdiction under Title I of the Communications Act. Chairman Genachowski, in his remarks on the proposal, said that he is “satisfied” that this is “a sound legal approach.”

Although the Court of Appeals concluded that the FCC had not justified its authority in the Comcast case, the court did not foreclose the use of ancillary jurisdiction completely. In fact, the court pointed to provisions that the FCC had not relied upon in the original Comcast order and indicated that the FCC might be able to rely on those parts of the Communications Act.

The FCC has several options for invoking ancillary jurisdiction. For instance, it could attempt to reinterpret Section 706 of the Communications Act, which addresses advanced services, as a provision that grants the FCC affirmative authority. The FCC also could attempt to provide better justification for reliance on other provisions of the Communications Act. While this may relatively difficult in light of the Comcast decision, several of the FCC’s original explanations for using those provisions were not fleshed out very well, and so there may be an opportunity to do a better job explaining how those provisions create authority to act.

FCC POLITICS

It is clear from the commissioners’ statements that Chairman Genachowski is unlikely to have the support of either of the two Republican commissioners. Their statements reiterate comments they have been making since the original rulemaking was adopted. Both Commissioner McDowell and Commissioner Baker argue that the FCC should not act, in part, because of what they describe as a bipartisan majority in Congress that opposes FCC action. They both also claim that the FCC does not have the power to act.

In some respects, the clear disagreement from the Republican commissioners makes the task of crafting a final decision easier. It is unlikely that there are any changes to the proposal that will convince either of them to support it, and so there is no need to negotiate with them over the next three weeks.

This may not, however, result in rules that are more stringent than those described by Chairman Genachowski. While Commissioner Copps – who referred to “Big Phone” and “Big Cable” in his statement – would prefer strict rules, there is no indication he will get what he wants. Given the strong parallels between this proposal and the bill Congressman Waxman crafted, it is more likely that the final rules will look much like that bill, in part to ensure support from key Congressional Democrats.

WHAT’S NEXT

As noted above, the vote on this proposal is scheduled for December 21. Absent some dramatic action in Congress, it is very likely the FCC will act that day and that the order will be issued within 24 or 48 hours of the decision. The rules themselves cannot go into effect until 30 days after they have appeared in the Federal Register, and there is some chance the FCC will include a transition period, particularly because it will take some time to comply with new disclosure requirements.

As with any significant order, and particularly given the controversy surrounding it, this decision will be appealed, most likely by multiple parties. Some of these parties will appeal largely to attempt to influence which court will hear the case. (Proponents of network neutrality will be trying to avoid the U.S. Court of Appeals for the District of Columbia Circuit, which heard the appeal in the Comcast case.) Depending on when the rules go into effect, it is possible that some parties will ask for a stay, and the court’s action on the stay will be indicative of the likely result.

It also is possible that Congress will attempt to overturn or modify the rules. Several prominent Republican members of the House of Representatives have indicated that they will introduce legislation that would prevent the FCC from adopting or enforcing network neutrality rules. However, any legislation also would have to pass the Senate and avoid a veto by President Obama. Given the continued control of the Senate by Democrats and President Obama’s support of network neutrality, it may be difficult for any such legislation to survive.  

IMPLICATIONS

The proposed rules appear to be meaningfully less stringent than the FCC’s original proposal, particularly for wireless providers. Thus, even if they do survive appeal, the impact on broadband providers may be less than might have been anticipated.

It is more significant, however, that the FCC has decided not to reclassify broadband as a telecommunications service. Reclassification would have subjected broadband providers to a panoply of requirements that they now will avoid, with costs that might have been difficult to evaluate. Although network neutrality has been characterized as carrier-like regulation, these rules appear likely to impose much less significant and more predictable obligations on broadband providers than they would face under a telecommunications regulation regime.