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FCC Announces Network Neutrality Order

For over a year, the news media has reported extensively on proposed rules from the Federal Communications Commission (“FCC”) concerning “net neutrality.”  Today, the FCC released its anticipated order placing “network neutrality” requirements on broadband internet access providers.  In this e-bulletin we provide a background on developments leading up to the FCC’s action, and a brief overview of the order.

Background

The term “network neutrality” refers to the general principle that all content available on the Internet should receive equal precedence, such that Internet Service Providers (“ISPs”) do not discriminate between different types or sources of traffic.

Prior to the December 21, 2010 announcement, the most significant regulatory recognition of this principle was a 2005 FCC policy statement declaring that consumers are entitled to choose for themselves what content, applications, services, and devices to use, and that they are entitled to competition among providers.

In 2008, the FCC ruled that Comcast had violated these principles by throttling traffic from BitTorrent, a popular peer-to-peer file sharing application, and ordered Comcast to stop—but this April, the U.S. Court of Appeals for the D.C. Circuit overturned the FCC’s order. During the Bush Administration, the FCC had decided to classify the Internet as an “information service” instead of a “telecommunications service” so that broadband access would be regulated under Title I of the Communications Act of 1934 instead of the more onerous Title II.  The FCC argued that despite this classification, it retained ancillary authority to pursue its network neutrality objectives as applied to Comcast.  The D.C. Circuit disagreed, holding that “the Commission . . . failed to tie its assertion of ancillary authority over Comcast’s internet service to any statutorily mandated responsibility.”  The court reasoned that by classifying the Internet as an information service, the FCC had given up any real authority to enforce net neutrality and to allow the FCC to use ancillary authority as a means to do so “would virtually free the Commission from its congressional tether.”

The court’s decision threw into question the FCC’s Open Internet rulemaking that began in October 2009, of which the order announced this week is the culmination. Soon after the Comcast decision, FCC Chairman Julius Genachowski announced plans for a “third way” that will reclassify only the transmission component of internet communications as a telecommunications service under Title II, and apply only those parts of Title II necessary to achieve the Commission’s goals.  The order announced this week relies for authority on several provisions of the Communications Act, including Title II, Title III (spectrum for wireless services), and Title VI (video services).

The FCC’s New Rule

The order announced today requires that “fixed” (as opposed to mobile) broadband providers may not block lawful content, applications, services, or non-harmful devices, and it prohibits unreasonable discrimination; however, reasonable network management is still permitted. In a partial victory for wireless carriers, the rules for mobile broadband are narrower, requiring only that providers may not block lawful websites, or applications that compete with the provider’s voice or video services,—subject, again, to reasonable network management. The FCC does not rule out “pay for priority” arrangements explicitly, but instead warns that such arrangements are unlikely to satisfy the rule against unreasonable discrimination. Finally, the order imposes transparency requirements on fixed and mobile providers alike.

Criticism of the announcement has come swiftly from all sides: the two dissenting commissioners and others argue that it is not necessary and that the FCC does not have the authority to issue these rules; pro-net neutrality groups and two concurring commissioners argue that it does not go far enough; and many have already complained that the order is too vague and will lead to lengthy, expensive adjudicatory proceedings in the FCC, and to litigation. Indeed, throughout the order the FCC explicitly declines to identify practices that will or will not be permitted, and anticipating that the rules will be given more shape by future proceedings.