Challenge on Broadband Rules, Net Neutrality Remains Tough for FCC, Say O'Rielly, Telecom Industry Experts

The record on net neutrality is missing “more hard data that we can get in terms of what is the cost and benefit of any particular regulation,” O'Rielly said. Legal and data practitioners can help the FCC by analyzing and critiquing the agency’s work and providing their own analysis on cost benefit, he said. “I don’t know that any particular hyperbole or any demonstration has any undue influence or inappropriate influence or impact on any decision,” he said, referring to the public response to the John Oliver segment on net neutrality, featured earlier this month on HBO’s Last Week Tonight With John Oliver. The commission hasn’t provided any evidence of harm to consumers if there were no net neutrality rules, said O'Rielly. Public statements from providers include commitments to existing practices that they think are beneficial to consumers, he said: “What I have difficulty with is, we're trying to impose a new rule without any harm.”

O'Rielly referred to Communications Act Section 706 as “something that has morphed over the years.” It was drafted one way, the FCC interpreted it right the first time, and now the commission has changed its position, he said. “I do not believe it provides the commission authority to regulate broadband services.” O'Rielly expressed deep concerns on how far the authority can go, saying the act can be applied to stand-alone edge providers: “That’s extremely dangerous for those folks in the industry who've been advocating for regulation to all of a sudden be captured potentially in the backdoor."

The commission has some problems in “a number of areas,” including on “an understanding of what our impact can be in decisions we make on the American economy with the cost of regulations as they impact [and] affect an industry, consumer groups and technological development,” O'Rielly said. He bemoaned FCC policy on JSAs that has resulted in broadcasters turning in their licenses, including Sinclair’s decision to sell three stations and an effort from Gray Television to find a buyer for some licenses (CD June 25 p20). “That means that those consumers are losing service and that’s harmful,” he said.

O'Rielly is also concerned that in rural areas, broadcasters are being forced under the change by the FCC rules to “give up existing structures and that’s led to stations being turned off,” he said. The FCC ignored the statute, he said: “We have missed the boat on something we were asked to do by Congress and modernize our media ownership rules to reflect the current marketplace.” O'Rielly and Commissioner Ajit Pai earlier Tuesday warned about TV stations shuttering because of the change in FCC stance on sharing arrangements (CD June 25 p20).

The FCC and industry will have to clear spectrum and look for instances where sharing spectrum is helpful, O'Rielly said, calling the clearing option “more beneficial.” He cautioned against viewing sharing as the ultimate answer. Sharing means someone is probably staying in the band, and there will be exclusion zones, he said. That’s “knocking out a significant portion of the country from service,” he said: “I believe both [options] are part of that equation going forward."

Interpreting Section 706

Telecom attorneys and executives at the event surveyed the path forward for the FCC following the Verizon v. FCC decision concerning Section 706. Section 706, as interpreted by the U.S. Court of Appeals for the D.C. Circuit, “more falls into the category of direct authority than ancillary authority,” said Matthew Berry, chief of staff to Pai. It appears that “so long as you are furthering the goal … in terms of encouraging the timely and reasonable deployment of broadband, and your subject matter was within the Section 2 [of the Communications Act] jurisdiction of the FCC, my reading of Verizon” is the FCC “has the authority to do that,” he said. There’s still an open question whether that will be the law going forward, he said. The D.C. Circuit’s opinion isn’t likely to be the last word, he said. Wilkinson Barker attorney Russ Hanser agreed Verizon “is not the end."

The court was fairly clear that as an affirmative grant of authority, Section 706 isn’t limited to being an advisory provision, said Sam Feder, Jenner Block attorney and former FCC general counsel. It gives the FCC authority “to do things that it couldn’t otherwise do under Title II or elsewhere,” he said. But the prohibitions in Title II still apply, he said. Treating common carriers more restrictively would violate some of the prohibitions, he said.

In 2010, AT&T supported the FCC’s net neutrality rules and it agreed that as an ISP AT&T wasn’t prioritizing bits “on the consumer’s paid-for last mile Internet connection” without the consumer’s consent, said Bob Quinn, senior vice president. The rules can be re-crafted under Section 706 in a manner consistent with the Verizon court and preserve that, he said. The Verizon decision determines there is a separation between Section 706(a) and Section 706(b), said Berry. Feder said he wouldn’t interpret Section 706(a) to provide actual authority, but rather as a policy statement.

There is a “tendency toward uniformity and a tendency toward discouraging experimentation,” Hanser said, referring to the idea of reclassifying broadband providers as common carriers. Title II has a definite preference for uniformity and commoditized phone service, he said. The commercial reasonableness standard “has an attitude toward different and case-by-case analysis,” he said. There’s a way under commercial reasonableness, but it’s unclear how far the FCC can go, said Feder. “What’s reasonable could change over time,” said Quinn. “Ultimately, we can work with that standard."

Three prongs must be met to test whether the FCC can forbear from applying Title II to broadband, said Berry. In the past, forbearance proceedings have taken a long time and the FCC has “dramatically raised in the last few years the evidentiary bar for getting forbearance,” he said. He said he doubts that the FCC can collect the necessary data and make the necessary findings using the Qwest Phoenix forbearance order in a way that will hold up in court. He also said the forbearance process would involve contention over which provisions to forbear from and threats of litigation: “I think forbearance is a much more difficult road to hoe than some people want you to believe.”