Proposed rules would reclassify internet service as a Title II common carrier service

On Monday this week, Anna Gomez was formally sworn in as the FCC's fifth commissioner, bringing the Commission back to its full complement and giving Chairwoman Rosenworcel a third Democratic vote. The very next day, Chairwoman Rosenworcel announced that, at the agency's October 19 open meeting, the agency would vote on a Notice of Proposed Rulemaking (NPRM) that, if implemented, would revive the net neutrality rules that were in effect from 2015 through 2018. A draft of that NPRM was released yesterday.

Importantly, assuming the Commission does adopt the NPRM on October 19, this would not itself reimpose network neutrality rules; it would instead open a proceeding to receive comment on the proposal to do so. But it is widely believed that the rules will become effective in due course—probably by mid-2024.

As readers of this advisory likely know, the FCC has, over the last 20 years, repeatedly sought to address net neutrality—and in particular, Chairman Wheeler enacted net neutrality rules through the Open Internet Order in 2015, and Chairman Pai repealed those rules in 2018 in the Restoring Internet Freedom Order. Chairwoman Rosenworcel's draft NPRM—titled Safeguarding and Securing the Open Internet—largely parallels the Wheeler Open Internet Order.

Below we discuss highlights of the regulatory structure proposed in the draft NPRM. Although we do not expect significant changes between the draft and the NPRM the Commission formally adopts, changes are possible. We will provide a further review of what the agency actually proposes to do once it formally adopts the NPRM.

Overview of Proposed Rules

The draft NPRM proposes to reimpose the following rules on all providers of broadband internet access service (BIAS), including landline, mobile, and satellite-delivered services:

• No blocking of lawful content, or of the use by consumers of non-harmful devices attached to the network;
• No throttling lawful content (that is, no impairing or degrading the transmission of such content) based on its source, its content, or the use of any non-harmful device in receiving or transmitting it;
• No paid prioritization (creation of separate "fast lanes") for any third-party or affiliated content;
• A "general conduct standard," banning any unreasonable interference with end users' ability to use BIAS to access services or content of their choice or to use devices of their choice, and with edge providers' ability to make lawful content, applications, services, or devices available to end users;
• As with the 2015 rules, there would be an exception to the blocking and throttling bans for reasonable network management practices, including "reasonable efforts by a provider of [BIAS] to address copyright infringement or other unlawful activity," and such practices would not violate the "general conduct standard"; and
• Existing requirements for disclosures to end users, including the "broadband nutrition label," would remain in effect.

As in 2015, to impose these rules on BIAS providers, the FCC proposes to classify BIAS as a Title II telecommunications service,[1] and—because most Title II requirements are not appropriately applied to BIAS providers—to "forbear" from applying large swaths of those requirements. Importantly, the agency asks whether forbearance should be "differently tailored" than in 2015.

As a matter of administrative law, because reimposing the 2015 rules would effect a significant change in FCC policies (as compared to the action taken repealing those rules in 2018), the agency must explain why it is changing its mind. To that end, the draft NPRM is replete with both direct and implicit criticisms of the logic of, and factual basis for, the 2018 decision that eliminated the Open Internet Order's net neutrality rules, as well as requests for commenters to provide new information and arguments in support of reimposing them.

Evolving Policy Justification for Net Neutrality Rules

The proposed rules are effectively identical to those put into place in 2015 so, as might be expected, the agency's underlying rationale is basically the same as well. Fundamentally, to justify the rules, the FCC relies on its idea of the "virtuous cycle." The "virtuous cycle" posits that when consumers know that their internet access is open and undistorted by providers, that will stimulate demand for broadband, which will create opportunities for innovative edge providers to develop attractive new online applications and services, which will further increase demand for broadband services, which will stimulate investment in broadband capabilities. The agency first articulated this idea in a 2010 ruling addressing these issues, and it was cited approvingly in two different court decisions addressing network neutrality issues.[2]

It is widely expected that there will be strong industry opposition to reclassifying BIAS as a Title II telecommunications service and reimposing net neutrality rules. We expect that a primary avenue of attack will be the argument that (a) the 2018 decision eliminating those rules was correct, and (b) nothing significant has changed since then to justify reversing that decision. At least in part for this reason, the draft NPRM notes several policy grounds for treating BIAS as a telecommunications service that did not exist (or did not feature prominently) in 2018. These include:

• Repeated reference to the potential national security implications of failing to treat broadband as regulated. In this regard, the draft notes FCC activity—occurring after the 2018 decision eliminating net neutrality rules—deauthorizing certain foreign entities from operating as carriers in the United States and banning the use of certain foreign equipment in regulated telecommunications networks, both on national security grounds. The draft NPRM indicates that the public interest would be served by extending its authority to address these concerns to broadband networks.
• Emphasizing the impact of the COVID-19 pandemic—which also occurred after the 2018 decision—in driving consumer use of broadband and cementing the status of broadband as a ubiquitous and essential public service.
• Recognizing that the federal government now massively subsidizes both investment in broadband infrastructure ($65 billion in the Infrastructure Investment and Jobs Act) and the purchase of broadband service by low-income consumers under a range of programs.
• Emphasizing the importance of having a uniform national regulatory system for BIAS. In this regard, the 2018 decision purported to preempt state regulation of BIAS. On review, the D.C. Circuit held that the agency could not simultaneously declare BIAS to be an unregulated information service—outside the agency's regulatory jurisdiction—but at the same time assert authority to preempt states from regulating it.[3] The result, according to the draft NPRM, has been the beginning of a potentially inconsistent patchwork of differing state rules. Treating BIAS as a regulated interstate telecommunications service might increase the FCC's ability to preempt state regulation and ensure that BIAS is regulated consistently nationwide.

While the agency is free to conclude (and proposes to conclude) that the 2018 decision simply got things wrong, the likelihood that a decision to reimpose net neutrality rules will be sustained by the courts will be enhanced by an administrative record showing that the situation now really is different. The draft NPRM invites commenters to assist in building that record—an invitation that also allows for commenters to critique the assertion that things have changed.

Scope of Forbearance from Title II Requirements

At a high level, while the FCC wants to impose net neutrality rules on BIAS providers, and while it knows that to do so it must classify BIAS as a regulated telecommunications service, it does not want to subject BIAS providers to the vast array of statutory provisions and agency regulations that have evolved over decades to deal with regulatory concerns specific to traditional telecommunications carriers.

As a result, just like in 2015, the draft NPRM proposes to exempt BIAS providers from wide swaths of statutory and regulatory provisions that apply to traditional carriers. Two points regarding the draft NPRM's proposed forbearance bear emphasis:

• Section 214 "facilities authorization" authority. Section 214 of the Act nominally requires all carriers to obtain formal approval from the FCC before constructing or operating any telecommunications facilities. In practice, to promote competition and infrastructure development, the agency has freely granted carriers the authority to construct and operate their networks with little oversight, other than in cases of significant foreign ownership. To that end, in its 2015 ruling, the FCC forbore from applying Section 214 to BIAS providers. Now, considering heightened national security concerns regarding construction, ownership, and operation of communications networks, the draft NPRM proposes not to forbear from applying Section 214, specifically so that the FCC would have the power to limit who may own and operate such networks—and what equipment could be used in them—on national security grounds.
• "Ex ante" rate regulation under Sections 201 and 202. A point of significant controversy between the FCC and industry in 2015 was the prospect that classifying BIAS as a telecommunications service would authorize the agency to regulate the rates consumers pay for the service. The agency tried to address that concern by forbearing from engaging in "ex ante" rate regulation—that is, forbearing from requiring BIAS providers to file tariffs laying out their prices in advance and demonstrating that any prices were "just and reasonable" under traditional ratemaking principles embodied in Sections 201 and 202 of the Act. The problem was that the FCC would not and did not forbear from its authority to undertake "ex post" rate regulation—that is, from considering a complaint that a BIAS provider's existing, freely established pricing plans were unreasonably high or unreasonably discriminatory as among classes of customers. The draft NPRM proposes to follow the same path as in 2015—forebear from ex ante rate regulation, but keep open the possibility of ex post regulation. This issue will likely be as controversial now as it was in 2015.

Implementation Issues Needing Further Action

The draft NPRM recognizes that there are several areas where reclassifying BIAS as a telecommunications service will require additional thought and regulatory action, but which the draft NPRM does not specifically propose to resolve. These issues include:

• Privacy obligations of BIAS providers. If BIAS is classified as a telecommunications service, then the Federal Trade Commission (FTC), which generally handles consumer privacy issues on the federal level, may no longer have jurisdiction over those issues for BIAS. (The FTC likely would nonetheless claim jurisdiction over the privacy practices of BIAS providers when they do not act as common carriers—such as when they engage in targeted advertising—having successfully argued that the common carrier exemption is an activity-based, not a status-based, exemption.[4]) The draft NPRM notes that Section 222 of the Act generally requires telecommunications carriers to protect the confidentiality of their customers' proprietary information, and indicates that Section 222 would apply to BIAS providers. It does not, however, propose any specific privacy rules for BIAS. This could be a particularly knotty issue going forward, because in 2017 Congress used the Congressional Review Act to prevent the BIAS privacy rules the agency had promulgated following its 2015 net neutrality order from going into effect. As a result of that disapproval, those BIAS privacy rules "may not be reissued in substantially the same form, and a new rule that is substantially the same … may not be issued, unless the reissued or new rule is specifically authorized" by a new law. This will likely constrain what the agency can now do to promulgate BIAS privacy rules.
• Universal service assessments. Even though billions of dollars of universal service funding goes to support consumers' purchases of broadband, today revenues from broadband service are not subject to assessments to support universal service programs. Reclassifying BIAS as a telecommunications service would (absent Commission action) immediately require BIAS providers to start imposing universal service assessments on that service, which might lead to an immediate price increase for BIAS consumers. The draft NPRM proposes "at this time" to forbear from requiring BIAS providers to collect universal service assessments. But this issue will need to be addressed in the future, and the agency may well at some point seek to require BIAS providers to fund such programs.
• Access by persons with disabilities. If BIAS is classified as a telecommunications service, then BIAS providers will need to ensure that the service is accessible to persons with disabilities.
• Pole attachment rights. If stand-alone BIAS providers are not considered to be providing telecommunications services, then they do not have statutory rights to access other entities' pole and conduit infrastructure under Section 224 of the Act. If BIAS is reclassified as a telecommunications service, BIAS providers would have pole attachment rights. The FCC will need to determine if its existing pole attachment rules are appropriate for stand-alone BIAS providers.

Next Steps

As noted above, we expect the FCC to adopt a final version of the draft NPRM at its meeting scheduled for October 19. (The agency has stated that it has sufficient funds to keep working at least until the day after the meeting, even if the government otherwise shuts down at the end of September.) Once the final NPRM is adopted and publicly available, we will provide a further analysis of what the agency proposes to do.