FCC to Issue Net Neutrality Rules

January 20, 2015 Advisory

In February, Federal Communications Commission Chairman Tom Wheeler will circulate a draft order regarding Net Neutrality to his four fellow commissioners. The Net Neutrality rules will govern whether Internet service providers (ISPs), such as Comcast or Verizon, can block access to websites or give preferential treatment to traffic from websites that pay for such treatment. To sustain the rules, the commission may change the regulatory classification of broadband service, subjecting it to rules, known as Title II, that apply to traditional phone service, rather than the less restrictive Title I rules that currently cover broadband. 47 U.S.C. §§ 153–621.

This will be the FCC’s third attempt at imposing Net Neutrality obligations. The U. S. Circuit Court reversed the commission’s first two attempts, finding that the rules were inconsistent with the classification of broadband as a Title I service. Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010); Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014). In the most recent opinion, the court struck down two rules, one prohibiting ISPs from blocking access to websites and one prohibiting them from unreasonably discriminating against traffic from websites or applications.

In response, the FCC published a proposal to reinstate the rules with small changes to address the Court’s concerns. The proposal was roundly criticized by Net Neutrality proponents, because it did not flatly outlaw discrimination. President Obama weighed in with a statement in favor of Net Neutrality rules. Recently, Chairman Wheeler has strongly indicated that the new proposal will reclassify broadband as a Title II service and include a rule banning unreasonable discrimination. The Chairman plans to circulate a draft order to the other commissioners, giving them a chance to comment on the draft and vote on the proposal at the FCC’s open meeting on February 26.

The effect of the rules is uncertain. Rules banning discrimination have been in place for only three of the 12 years since Net Neutrality was first proposed. Even though discrimination was allowed for more than nine years of that time, ISPs have not been able to convince content providers to pay for priority treatment. The new rules may outlaw activities that the ISPs do not have the market power to engage in anyway. But the rules will give content providers comfort that the ISPs will not be able to 
charge them for priority service in the future. 

The bigger (and more uncertain) impact will arise if the FCC reclassifies broadband as a Title II service. If this happens, the Commission will probably forbear from applying most sections of Title II to broadband. But the FCC’s authority to forbear from applying the statute in these circumstances is uncertain. Such a decision will be challenged on each section of Title II and the myriad of regulations under it. Litigation will last for years. If the FCC’s decision to forbear is reversed, the ISPs may be subject to some very onerous Title II regulations, such as obligations to resell their services, obligations to sell out of tariffs, and price restrictions. The outcome could be a messy hodge-podge of regulations that apply to some services and providers but not others.

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