The Basics of Net Neutrality – What 'You Oughta Know'

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Net Neutrality finds its roots in the original regulations of telecommunication in this country, long before the internet. However, certain actions by the FCC and court rulings over the past decade have shaped the concept of Net Neutrality that we have today. Most recently, in February of 2015, the FCC adopted new Net Neutrality rules. This article offers a brief background of Net Neutrality and, in the words of Alanis Morisette, tells you what “You Oughta Know.”

I. Net Neutrality Defined

Net Neutrality or “Open Internet” is the concept that all people and companies should be able to access all legal content on the Internet on an equal basis. In its most basic form, it means that an Internet Service Provider (“ISP”) cannot slow down or block content because the ISP does not like the content or because it is the content of a competitor. According to the FCC and proponents of Net Neutrality, the “Open Internet” is the internet as we currently know it.

II. Title II of the Communications Act of 1934

Title II is the portion of the Communications Act of 1934 (the “Act”) that regulates common carriers. Common carriers are communications services that transmit information to the general public. Common carriers are prohibited from “unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service.” 47 USC § 202. Based on the era, it is clear the original legislative intent of the Act was directed at wireline telephone carriers.

III. FCC’s 2005 Policy Statement

In 2005, the FCC issued a policy statement entitled “New Principles Preserve and Promote the Open and Interconnected Nature of Public Internet.” This policy statement set forth:

(1)[C]onsumers are entitled to access the lawful Internet content of their choice; (2) consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement; (3) consumers are entitled to connect their choice of legal devices that do not harm the network; and (4) consumers are entitled to competition among network providers, application and service providers, and content providers.

The 2005 statement was not a rule, simply a policy statement. The policy statement itself states the “Commission did not adopt rules in this regard.”

IV. Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir 2010)

In Comcast, a group of Comcast broadband customers, by way of two non-profits, complained to the FCC regarding Comcast’s practice of interfering with connections to peer to peer networks. The FCC issued an order, finding, inter alia, that Comcast violated federal policy. Id. at 645. Comcast challenged the order and the order was vacated because the FCC “failed to tie its assertion of ancillary authority over Comcast's Internet service to any ‘statutorily mandated responsibility,’“  Id. at 660.

V. The 'Preserving the Open Internet' Order

On December 21, 2010, presumably in response to the Comcast decision, the FCC enacted an order titled Preserving the Open Internet (“Open Internet Order”). This order required transparency regarding network management practices, restricted blocking lawful content (anti-blocking), and restricted unreasonable discrimination in delivering data (anti-discrimination). The 2010 Open Internet Order had limited applicability to mobile broadband.

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

Broadband providers were classified in a manner that exempted them from the same regulatory treatment as common carriers. In Verizon v. FCC, 740 F. 3d 623 (D.C. Cir. 2014), the US Court of Appeals for the D.C. Circuit found that the FCC failed to establish that anti-blocking and anti-discrimination rules do not impose per se common carrier obligations on broadband providers; and, accordingly, vacated the anti-blocking and anti-discrimination portions of the Open Internet Order. Id. at 628.

VII. Recent Rules

On February 26, 2015, the FCC met, discussed, voted on and adopted “strong sustainable” Open Internet rules. The FCC enacted a new framework, reclassifying broadband as a telecommunication service under Title II of the Act. By classifying broadband service providers as common carriers, the FCC is now able to regulate the broadband service providers to enforce Open Internet policy. Moreover, to strengthen its position, the FCC claimed authority under Section 706 of the Telecommunications Act of 1996, which grants the FCC authority independent of Title II. Further, the FCC regulates mobile broadband under Title III. The February 26, 2015 ruling is meant to follow the blueprint set forth by the Verizon court, making challenge more difficult.

VIII. The Six Most Important Things to Know about The February 26, 2015 Ruling:

  1. Internet Broadband Service is now a telecommunication service, or “common carrier” under Title II of the Communications Act of 1934. By classifying ISPs as common carriers, the FCC is now able to regulate the ISPs to enforce Open Internet policy. However, the FCC notes that 27 provisions of Title II and 700 regulations will not apply to broadband providers in what the FCC calls a “light touch” approach.
  2. Blocking: Broadband providers may not block access to legal content, applications, services, or non-harmful devices.
  3. Throttling: Broadband providers may not slow down internet speeds on the basis of content, applications, services, or non-harmful devices.
  4. “Fast Lanes”: Broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for consideration. This rule also bans ISPs from prioritizing content and services of their affiliates.
  5. The Rules Apply to Mobile Broadband:  The recent order clearly applies to mobile broadband.
  6. An ISP May Engage in Reasonable Network Management:  Management of the network that does not violate the anti-blocking, anti-throttling, and anti-fast-lane provisions of the order are permitted.

There is a 100% chance that ISPs will challenge the recent order. In fact, the CFOs of Verizon Communications, Inc. and AT&T, Inc. have already predicted “a few years” of litigation.

IX. Businesses Most Affected by The New Rules

The businesses most affected negatively by the new rules are 1) all landline ISPs such as Cox, Comcast, Verizon, and AT&T; and 2) all mobile broadband providers, which, at this point in time, is almost every mobile phone company. The rules, however, positively affect “edge providers” such as Google, Amazon, E-Bay, and Facebook, who have supported net neutrality as a fundamental requirement to encourage innovation.

ISPs are affected because the rules apply directly to ISPs preventing them from throttling, blocking, or providing fast lanes. Edge providers are affected because they can be assured that an ISP owned by (or paid by) a competitor will not be able to throttle or block the delivery of content from the edge provider to an end user of the ISP.

On the other hand, content providers could also be negatively affected by the ruling if they already have paid “fast lanes” or other any preferential treatment by broadband providers.  As an example, a mobile broadband provider offering unlimited unthrottled data to its customers for music services only may be considered to be favoring a certain type of legal content (music) over other types of legal content. This could affect services like Spotify and Pandora.

X. Who are the Winners and Losers

Most of the technology sector believes it won because the new rules protect the internet as it is now.

Broadband providers, in general, view this as a loss because of the restrictions.

Moreover, while net neutrality is, at its core, a technological issue rather than a political one, support for or against net neutrality divides along political lines. Liberals would characterize the new rules as a win for internet content providers and end users; in effect, liberals believe the new rules are good for everyone. Conservatives, rather,  view the rules as a segue way to additional, possibly oppressive government regulation of the internet.

XI. Future Litigation

There is a 100% chance that ISPs will challenge the recent order. In fact, the CFOs of Verizon Communications, Inc. and AT&T, Inc. have already predicted “a few years” of litigation.

Verizon, 740 F. 3d 623, set forth a framework to follow for the FCC to accomplish its anti-blocking, anti-throttling, and anti-fast lane rules. Supposedly, the February 2015 order took into account the points raised in Verizon, making a challenge more difficult. Accordingly, it will be interesting to see the theories raised by ISPs in upcoming legal challenges.

XII. Conclusion

The details of the Net Neutrality debate are not settled. However, it is a doctrine with popular support from both individuals and certain powerful businesses, particularly technology businesses. Although future legal challenges may weaken the FCC’s Net Neutrality rules, Net Neutrality, in general is likely here to stay.

*

[A shareholder at law firm Fowler White Burnett, Avery A. Dial focuses his practice on commercial, professional liability, insurance, intellectual property, product liability, and wrongful death litigation. Avery defends and prosecutes business matters including breach of contract, civil theft, conversion, breach of warranties, statutory violations, fraudulent business practices, professional malpractice, and entertainment matters.]

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