Revised Net Neutrality Principles Expected, But They Could Face Industry Doubts

Then-Chairman Michael Powell first laid out four net neutrality principles in a speech in Boulder, Colo., in February 2004 (http://fcc.us/LxOAAP). These principles were: “Freedom to access content. Freedom to run applications. Freedom to attach devices. Freedom to obtain service plan information.” The FCC adopted four formal net neutrality principles in an August 2005 policy statement released by the agency in late September (http://fcc.us/1bISmxa). That policy statement came under former Chairman Kevin Martin. FTC watchers said they don’t expect that agency to step up its work in the net neutrality area, because the D.C. Circuit decision gave the FCC some leeway to regulate. (See separate report in this issue.)

Ex-Obama FCC transition team official Kevin Werbach said the new principles may just fill in the gaps left open by the 2005 Internet policy statement, which didn’t include the nondiscrimination and transparency goals that the FCC adopted in the net neutrality order. “My guess is the FCC is thinking of issuing something on how the high-level principles should be enforced or otherwise achieved after the Verizon case,” said Werbach, now an associate professor at the University of Pennsylvania’s Wharton School. “Perhaps they would flesh out more criteria for a successful solution than just the objectives.”

All the major ISPs “have already stated for years that their networks would be open and freedom-enhancing, to allow consumers to access the content and applications of their choice within reasonable network constraints,” said former FCC Commissioner Robert McDowell. “A voluntary code of conduct could start with where the ISPs have already found commonalities in terms of keeping consumers satisfied and safe.” But there are also dangers, McDowell said. “The rub comes with trying to enforce rules that may not exist,” he said. “However, in this case the transparency element withstood the court appeal and that could be a powerful tool for future FCC enforcement. Essentially ISPs would have to disclose if they're going to act in an anticompetitive way. Then that would pique the interest of both antitrust and consumer protection agencies or if they've not disclosed that they're going to act in an anticompetitive way then the FCC along with other agencies could go after them."

"Announcing new principles may make sense politically, but would have little impact legally,” said Christopher Yoo, professor at the University of Pennsylvania Law School. “The FCC is welcome to announce principles whenever it wants, and the agency is under considerable pressure from some quarters to make some effort to resuscitate network neutrality. As we learned from the D.C. Circuit decision overturning the FCC’s attempt to punish Comcast for imposing rate limits on BitTorrent, principles do not have the force of law and are unenforceable unless they go through the formal notice and comment process mandated by the Administrative Procedure Act.”

The D.C. Circuit has clearly found that the 16-part test the FCC created to govern data roaming “did not constitute common carriage and thus was legal,” Yoo said. “One obvious move for the FCC would be to announce principles endorsing a similar framework for access to broadband networks. The problem for network neutrality proponents is that the D.C. Circuit made equally clear that any rule that mandates nondiscriminatory access would be illegal, making it all but impossible to revive the nondiscrimination rule that network neutrality proponents want most. Although Chairman Wheeler has indicated some sympathy for case-by-case after-the-fact adjudication, the D.C. Circuit’s data roaming decision emphasized that mandating nondiscrimination would be problematic even if imposed through case-by-case adjudication instead of through rulemaking."

Section 706 Strong Enough?

Some experts caution that Section 706 might not be the panacea the FCC wants. “The legal basis for this effort is out of a fantasy,” said Marvin Ammori, a New America Foundation fellow and longtime net neutrality proponent. “It seems like it’s delusional.” Ammori argued on behalf of consumer and technology groups during the Comcast appeal in the D.C. Circuit of an FCC sanction against it for slowing BitTorrent traffic. That decision made it pretty clear that without a concrete rule, enforcing principles on a case-by-case basis would likely violate the Administrative Procedure Act notice and comment rules, he said. “Principles have no legal effect beyond, like, being a press release.”

Even under the recent Verizon decision, which said the FCC has Internet authority under Section 706, it’s “crystal clear” that if the agency tries to do anything “that looks like common carriage regulation through Section 706,” it’s not permissible, Ammori said. “There is no legal basis that I can see for enforcing something like net neutrality under 706.” The real meat of net neutrality rules comes from no-blocking and nondiscrimination principles, he said. Any sort of principles that allow individualized negotiations on a case-by-case basis misses the point, he said: One wants someone to be able to build an app in a garage and throw it up on the Web, “not have to hire a lawyer” to go “cut deals with all the carriers.”

The FCC could stay within the boundaries of the Verizon decision by releasing a policy statement clearly giving ISPs the ability to negotiate with edge providers, while articulating a standard for “reasonableness” like the commission did in the data roaming rule, said TechFreedom President Berin Szoka. It’s also important for the FCC to clarify how far its Section 706 power reaches, he said by email. “The FCC could potentially impose neutrality-type regulations on smart home devices, etc. I've already heard some indications that Commission staff are licking their chops at all the things they can now require that they didn’t think they could before.”

"The FCC will be able to get away with a lot more than they should, both as a legal matter and a policy matter,” Szoka said. The FCC won’t actually have to defend its approach until a defendant fights a particular enforcement action -- essentially an as-applied challenge, Szoka said. There’s a theoretical question about where the line exists between principles and full-blown common carriage, and a practical matter about how far the FCC can push that line, he said. It’s likely that “the policy statement and enforcement actions will be framed in a broad enough fashion that the FCC won’t make entirely clear where it’s drawing the line,” he said. In a court challenge, the court is likely to defer to the agency, he said.

There’s broad consensus in the industry around “freedom-defined net neutrality principles,” like the idea that Internet users should be able to access the legal content and applications of their choice, said Scott Cleland, chairman of NetCompetition, which is supported by ISP interests. “FCC rules of the road protecting consumers’ Internet freedoms would very likely garner strong bipartisan support and legal acquiescence.”

"When you're talking about principles, the tension is: Do you have freedom-based principles from a consumer perspective?” Cleland asked. “Or do you have economic principles from a non-consumer perspective?” The key, he said, is determining what the FCC wants to accomplish. “It shouldn’t be hard to devise freedom-based principles because the FCC has largely done it before,” Cleland said, referring to the 2005 principles. The tension comes when the FCC uses “freedom neutrality” language when what it really means is common carrier-style net neutrality, he said. “Common carriage and economic regulation is the antithesis of a free and open Internet,” he said. “Free and open Internet, and government micromanagement, don’t go together. It’s only the Title II crowd that thinks this.”

Timing Questioned

Public Knowledge Senior Vice President Harold Feld said the best thing Wheeler could do would be to lay out a concrete timeline for next steps on net neutrality. In doing so, he could learn from the mistakes of his predecessor Julius Genachowski, Feld said. “The challenge for Wheeler is that, on the one hand, he wants to reassure everyone that he is going to move forward and that he has a clear plan for how to protect the open Internet that goes beyond ‘watchful waiting and hope nothing goes wrong,” he said. “On the other hand, he does not want to be accused by carriers and Republicans of trying to ’take over the Internet’ or appearing to abuse the agencies still-undefined Section 706 authority.” Wheeler should pay attention to history, Feld said.

"I'd be disappointed if the commission released any new net neutrality action so soon, especially if what it releases resembles the vacated rules,” said Free State Foundation President Randolph May. “For now, it should just watch and wait. But if the agency does do something further now, it is crucial that it incorporate into the action the notion that a market failure and consumer harm must be found as a predicate for any violation."

"That the FCC has signaled its intention to move sooner rather later on post-decision net neutrality oversight could suggest a pivot toward Section 706 authority,” said Jeff Silva, analyst at Medley Global Advisors. “If that’s the case, the resulting regulatory construct -- owing to the constraints and ambiguous contours of the D.C. Circuit ruling -- is apt to steer clear of a prescriptive approach in favor of a flexible model based on some general principles and case-by-case adjudication. It might also signal the FCC is reluctant to seek a Supreme Court review of the D.C. Circuit opinion in light of the risk that a majority of the high court might shred up the lower court majority’s treatment of Section 706 authority along the lines of Judge [Laurence] Silberman’s scathing partial dissent."

But Wheeler may also find that just creating a Section 706 framework for net neutrality isn’t enough, Silva said. “Wheeler could choose to complement a Section 706 regime with a valuable asset and powerful tool untouched by the D.C. Circuit decision: the bully pulpit,” he said. “There already are indications he intends to do exactly that by providing repeated assurances, on stages big and small, of his intention to ensure the Internet remains open and issuing cryptic warnings that violators will be dealt with in a swift, harsh manner. Wheeler could also choose to keep the Title II proceeding open as a deterrent of sorts, though doing so will invite the same criticism and political browbeating confronted by his predecessor.” ,