Last week, the Federal Communications Commission (FCC) defended its most recent iteration of net neutrality regulations against a challenge by the telecom, cable, and wireless industry and trade associations.1 Two prior versions of the rules were largely overturned by the U.S. Court of Appeals for the District of Columbia—the same court that is considering the current regulations.
The FCC adopted the 2015 Open Internet Order2 in February 2015 after receiving more than four million public comments on the proposed rules. The order has been in effect since June, but whether it will remain the law is in the court's hands. In the meantime, there are five key things to know.
1. The Basics
The overarching principle underlying the 2015 Open Internet Order is that Internet service providers (ISPs or broadband providers) must treat all lawful content delivered over their networks equally. The FCC has characterized this principle as preserving and protecting the "'virtuous cycle' in which innovations at the edges of the network enhance consumer demand, leading to expanded investments in broadband infrastructure that, in turn, spark new innovations at the edge."3
When the order was adopted earlier this year, the headline-grabbing aspect was the FCC's reclassification of broadband Internet access as a "telecommunications service" under Title II of the Communications Act. ISPs, in turn, were deemed "common carriers"—the same heavily regulated status held by traditional landline telephone companies. This was a significant change because prior orders had regulated ISPs under a different category that carries fewer proscriptions—an approach that failed to survive judicial review. This time, the FCC opted for a reclassification that offered a stronger legal foundation for its regulatory authority.
The cable, telecom, and wireless broadband industry quickly challenged the FCC's pivot, arguing that the utility-style regulation would chill broadband investment and limit the very innovation that the commission was attempting to preserve in the online space. In response to such concerns, the commission has continuously pointed to its "light-touch" regulatory scheme for maintaining Internet openness—one in which the FCC will forebear from the majority of the traditional telecommunications rules, including rate regulation.
Another significant change in the 2015 Open Internet Order is the rules' application to wireless broadband services. Previously, the FCC had excluded mobile services from many of its net neutrality rules in recognition of the nascent mobile marketplace. This time, the FCC found significant technological advancements in mobile broadband and its widespread use, which led the commission to apply the regulations across the board to mobile and fixed broadband.
These two changes—reclassification under Title II and the regulation of mobile broadband—are the main focus of industry's legal challenge and were the subject of significant questioning at the recent hearing in the court of appeals. While there has been much speculation as to the judicial panel's leanings on both issues (with some suggestion that the FCC is on shakier ground with respect to mobile broadband), the outcome is not obvious.
2. Specific Prohibitions
Until the court renders a decision, the 400-page 2015 Open Internet Order is fully in effect and includes the following three specific ISP prohibitions, known as the "bright-line rules":
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No blocking of access to legal content, applications, services, or non-harmful devices. This is a straightforward (and generally uncontroversial) ban designed to ensure that broadband providers do not block services that compete with their own offerings.
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No throttling lawful Internet traffic on the basis of content, applications, services, or non-harmful devices. This is designed to ensure that broadband providers do not take actions short of blocking that can impair or degrade consumers' online experience. An example would be constraining bandwidth in a way that targets a particular online video application so as to degrade video streaming.
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No paid prioritization in which broadband providers favor some content in exchange for payment, or in which they prioritize content or services of their affiliates. This is a new blanket prohibition that responds to concerns that preferential "fast lanes" would create new and artificial barriers for smaller content providers and innovators that cannot afford to pay for favorable content delivery.
Under the order, a broadband Internet access service is one that can transmit and receive data to and from substantially all points of the Internet. The bright-line rules do not apply to specialized services, which are services offered by a broadband provider over its network. The FCC will, nonetheless, monitor such services to ensure that broadband providers do not use the exception to circumvent the rules.
3. Lawfulness of Sponsored Data and Usage Allowances
Considerable controversy has surrounded the order's general conduct standard under which the FCC, on a case-by-case basis, may prohibit practices that unreasonably interfere with or disadvantage consumers' access to the Internet or content providers' access to consumers.
The conduct standard was adopted in response to concerns about two types of business practices:
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data caps/usage-based pricing that limit the amount of data a consumer can access during a fixed period; and
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sponsored data plans/zero rating under which broadband providers exclude certain content from data allowances, allowing consumers to download or stream data without consuming their data limits.
In each case, content providers and consumer advocates have voiced their concern that these business models limit consumers' access to heavily data-dependent online services—for example, video streaming offerings that compete with a broadband provider's own video content being thwarted by data caps or sponsored data plans that exclude their service. Broadband providers defend these practices as innovative ways to tailor services to consumers' individualized interests. They maintain that usage-based pricing in which consumers pay more for more data allowances ensures that the lightest data users are not forced to subsidize the heaviest users. ISPs also point to sponsored data plans that exempt specific music or video content as freeing consumers from worries about exceeding their monthly data allotment.
Whether any specific practice is unlawful can be expected to be a source of controversy as long as the rules remain in effect. ISPs will argue that the standard is too vague, and therefore creates marketplace uncertainty, while consumers and Internet content and application providers can point to the standard to complain about business models that appear to limit competition and consumer choice.
Resolution of these controversial disputes will likely fall to the FCC's Enforcement Bureau, which has received much criticism lately for its aggressive posture, with one FCC commissioner asserting that the bureau is pursuing "an enforcement scheme unconstrained by the rule of law."4
4. Regulation of Interconnection Disputes
In the months preceding the FCC's consideration of net neutrality regulations, there were a series of public and high-profile disputes about the commercial terms under which broadband providers would deliver traffic from content providers and transit networks. These commercial arrangements, known as interconnection agreements, enable delivery of content to a broadband provider's network to reach consumers. Congestion at the point of interconnection between the content or transit provider and the broadband network affects the quality of a consumer's access to content.
Since the beginning of the commercial Internet, certain kinds of networks have exchanged traffic "settlement-free"—without payment. The interconnection disputes that have emerged over the past few years have resulted from the largest ISPs seeking to move toward paid interconnection.
The FCC has declined to craft rules governing interconnection agreements and instead will rely on case-by-case review to hear complaints and, if appropriate, resolve disputes about the terms of interconnection agreements. To date, the FCC has not engaged in public resolution of interconnection disputes.
5. FCC Enforcement of Privacy Practices
Until the adoption of the 2015 Open Internet Order, review and government enforcement of ISPs' privacy practices were left to the Federal Trade Commission (FTC). However, when the FCC reclassified broadband service as a common carrier service, it took on additional privacy enforcement because common carrier services are specifically exempted from FTC oversight.5
This shift leaves some uncertainty about the privacy rules that govern ISPs. The FCC acknowledged that its existing Title II privacy regulations are more appropriate for traditional telephone services and has indicated it will propose ISP-focused rules sometime in 2016. In the interim, the FCC reminded broadband providers that they remain subject to statutory privacy obligations, and the Enforcement Bureau issued an "Enforcement Advisory" that instructed ISPs to employ effective "privacy protections in line with their privacy policies and core tenets of basic privacy protections."6 Further, the bureau stated that it would evaluate whether broadband providers are "taking reasonable, good-faith steps" to protect privacy.7
Since that time, the FCC has brought its first privacy and data security enforcement action against a cable provider, raising concerns that it will take a very aggressive approach.8 In that case, Cox Communications agreed to enter into a seven-year consent decree and pay $595,000 to settle a case involving a hack that exposed the data of 61 Cox customers (almost $10,000 per customer).9
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The timing and outcome of the legal challenge to the 2015 Open Internet Order is uncertain. However, the issues identified here will be at the center of any FCC efforts in this space while the rules are in effect. Entities that rely on broadband services to reach consumers will be considering whether ISP behavior is running afoul of the rules, while broadband providers will be analyzing the implications of the order on their business models.
