Final Net Neutrality Order Makes Some Changes on Interconnection, But Largely Leaves Draft Order Intact

It removed, at Commissioner Mignon Clyburn’s suggestion, what the agency had considered a backstop to its main legal justification for the order under Communications Act Title II and Telecommunications Act Section 706 (see 1502250031), agency officials said.

On the backstop, General Counsel Jonathan Sallet told reporters the agency initially wanted to deal with a question raised by the U.S. Court of Appeals for the D.C. Circuit (see 1401150046) in striking down much of the 2010 open Internet rules about the legal relationship between ISPs and edge providers. The draft said if the court wanted to raise the question again, the agency considers the relationship to fall under Title II, an agency fact sheet on the draft said. Google and Free Press cautioned agency officials in recent days that creating the new relationship unnecessarily creates a legal uncertainty that could harm the agency’s ability to withstand the expected legal challenges (see 1502230054). Google also feared the new legal relationship could open the door to ISPs demanding payment from edge providers for delivering their content.

While the order for the first time asserts agency jurisdiction over interconnection, it will do so on a case-by-case basis under the “just and reasonable standard.” The order also temporarily excused small broadband providers from increased transparency requirements, officials said. The American Cable Association, which sought a permanent exemption, still blasted the order in a statement. The order also didn't forbear from Section 201’s requirement for just and reasonable rates, as NCTA had sought.

Clyburn said suggestions that removing the original ISP/edge provider provision “weakens our legal authority over interconnection are completely inaccurate.” Responding angrily to a report in The Hill that she wanted to weaken the order, she said: “I would never advocate for any policy that undermines FCC oversight or enforcement of any open Internet protections including interconnection.”

On interconnection, several groups including Comptel, Cogent, Level 3 and Netflix had urged the agency to add language making clear that “it would be unjust and unreasonable for broadband Internet access service providers to engage in practices … that have the purpose or effect of circumventing or undermining the effectiveness or goals of open Internet rules” (see 1502130049). Sallet said that unlike the decade-long record on the impact of the paid prioritization, blocking and throttling on consumers in the last mile, the agency has less experience with interconnection. It’s not taking a stand on high-profile disputes like those involving Netflix, but will examine cases as they come up based on the specific record in each case.

Comptel is “pleased” the order “will not provide a loophole at interconnection and will protect consumers,” CEO Chip Pickering said. Netflix said in a statement the order is a “meaningful step towards ensuring ISPs cannot shift bad conduct upstream to where they interconnect with content providers like Netflix. Net neutrality rules are only as strong as their weakest link, and it’s incumbent on the FCC to ensure these interconnection points aren’t used to end-run the principles of an open Internet.” The company also praised the commission’s pre-emption of Tennessee's and North Carolina’s anti-municipal broadband laws. Taken together, the two orders “kick off a new era that puts the consumer, not litigious corporate giants, at the center of competition policy,” Netflix said.

The agency also rejected a push by NCTA and Comcast in the last couple of weeks to ease some of what companies considered the most troubling aspect of the order -- the ability to regulate broadband rates. Wheeler repeated the FCC assertion that the order is a “light-touch” approach. The agency has said that unlike the regulatory environment that existed for legacy phone service, it won't require such steps as seeking agency permission to set rates. Industry groups like NCTA argued that Section 201(b)’s requirement for just and reasonable rates opens the door for the agency to deny rates after the fact, particularly if consumer groups protest them (see 1502120064). Clyburn said fears about rate regulation were unfounded, citing high inmate calling rates as “a prime example of how the FCC resisted rate regulation for years even where consumers were subjected to blatantly unreasonable charges by providers with a clear monopoly, where severe costs to society were evident, and where there was a clear case of market failure. So, for those in a panic about rate regulation, there are millions who can testify to how high the bar is when it comes to the FCC intervening when it comes to rates and charges.”

NCTA didn't comment on that aspect of the order, but association CEO Michael Powell said in a statement the order “breathed new life into the decayed telephone regulatory model.”

The exemption to the enhanced transparency requirements in the order would impact providers with 100,000 or fewer subscribers, said Matthew DelNero, deputy Wireline Bureau chief. The enhanced rules clarify the 2010 order’s transparency requirements, which were not thrown out by the courts. The exemption continues until the Consumer and Governmental Affairs Bureau considers whether to keep it, DelNero said. The enhanced rules make clear the disclosure requirements include such things as packet loss. ACA appreciates the change, said association President Matthew Polka in a statement, but “it provides virtually no solace for smaller ISPs that will be swept under by a tsunami of new and totally alien regulatory requirements” in the net neutrality order.

A separate part of the order also makes clear that the order isn’t meant to increase pole attachment rates and the agency would prevent that from happening, DelNero said.