D.C. Appeals court strikes down Net Neutrality

We will cover Net Neutrality in class this semester, but an important case came down today that will fundamentally affect the very basis of Net Neutrality, so I was compelled to comment before our class discussion.

The basis for Net neutrality is based on an old legal concept known as “common carriage.” While it has developed to cover telecommunications, its main thrust was to ensure that the public retained access to fundamental services that use public rights of way, including, in a modern context, the Internet infrastructure used to deliver Web pages, streaming, and other Internet content, over broadband networks.

For example, the definition applied to any commercial enterprise that held itself out to the public as offering to transport freight or passengers for a fee.  A common carrier is generally required by law to transport freight or passengers, without refusal, if a reasonable fare or fee is paid.  Ferries, freight trains, commuter buses, and more have been found to be common carriers. (c.f. Massachusetts courts have held “the statutory definition of ‘common carrier’ typically applies only to private or moneyed corporations and not to public or municipal corporations or quasi-corporations,” thereby declaring the MBTA not to be a common carrier. Massachusetts Bay Transp. Auth. v. City of Somerville, 451 Mass. 80 (2008)).

In The Elements of Jurisprudence (1924), author Thomas Holland stated“[A] ‘common carrier’ is bound to take all goods of the kind which he usually carries, unless his conveyance is full, or the goods be specially dangerous; but may charge different rates to different customers.”  Throughout the development of the common law in the U.S., this concept was adapted to many technological improvements, most importantly telecommunications.  This was to similarly ensure that phone companies, which use public rights of way to string wires and cables, serve all customers equally, without refusal.

Enter broadband services: many legal experts thought why should this be regulated differently? Is it like a traditional telecommunications service subject to the “common carrier” regulation? Others thought it should be classified separately, thereby avoiding the requirements of common carriers.

In 2005, the Supreme Court issued its opinion Nat’l Cable & Telecommunications Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005) upholding the Federal Communications Commission’s (FCC) determination that cable broadband internet access service is an “information service.” (And therefore reversed the judgment of the 9th Circuit).  The reasoning was plain: Broadband is not a telecommunications service, therefore broadband providers’ infrastructure is not considered a public right of way, and should not be regulated under the common carrier concept.  Reasoning follows then that broadband providers could discriminate and block traffic, and the FCC had no authority to prevent those actions.

The FCC wasn’t about to let this go: as an independent U.S. government agency, the FCC regulates interstate and international communications by radio, television, wire, satellite and cable in all 50 states, the District of Columbia and U.S. territories; they are the U.S.’s “primary authority for communications law, regulation and technological innovation;” they were not about to sit back and let private broadband companies potentially discriminate against each other, discriminate against types of service, technologies, or uses – all to the U.S. broadband customer’s loss. [For example, Comcast could arbitrarily block transmission of any peer-to-peer and collaborative software content, such as BitTorrent, Gnutella, Lotus Notes, or Google applications]

In 2011 the FCC published the final rules for its Net Neutrality policy [which barely made it through – one of the FCC Commissioners who initially voted against the rules, stepped down and now works for Comcast <raise eyebrows here>].  The rules are intended to provide certainty and predictability to all Internet stakeholders, including content and service providers as well as consumers. They are the result of an effort to bring government policy into line with the open technology that has allowed the Internet to develop rapidly.

The three underlying principles of the Net Neutrality rules were “transparency,” “no blocking,” and “no unreasonable discrimination.” In effect, the FCC was applying the “common carrier” standards to the Broadband services through regulatory authority with these Net Neutrality rules: Broadband providers may not block lawful content, applications, services, or block applications that compete with their voice or video telephony services, and broadband providers may not unreasonably discriminate in transmitting lawful network traffic.

Verizon challenged these rules, sued, and, after oral arguments in September, a three judge panel of the D.C. Circuit Court of Appeals today sided with Verizon, saying the FCC acted outside its authority by enacting the rules. [full text opinion].  After the oral argument (which I procured a transcript of in less than 36 hours – thanks Internet!), many commentators anticipated that the D.C. Circuit would strike down at least part of the Net Neutrality rules. However, the current opinion goes even farther than expected, throwing out both the anti-discrimination and anti-blocking provisions.  Because the FCC chose to classify Broadband Internet as an “information service” it therefore lacks the authority to impose “common carrier” obligations on it, even in the form of Net Neutrality rules.

What could happen as a result? Internet providers could soon start charging websites like Google, Facebook and Netflix to reach users. Internet providers could auction off priority traffic rights to one site over another, or impose tolls for high-bandwidth sites such as video streamers (as in: You pay more if you are streaming Netflix, Hulu, Amazon, etc.).  “Pay for Tier” service.  Discriminatory bandwidth for certain files. The destruction of collaborative software traffic (throttling BitTorrent traffic, anyone?)

I had to dig, but there may be some scraps of silver lining in the decision.  But “only for those with true grit. And we were chock full of that.”― quoting Hunter S. Thompson, Fear and Loathing in Las Vegas.  And in this case, the five current FCC commissioners are those that need to be chocked full of true grit.

hstnn

The court left part of the Net Neutrality rules intact [the transparency rules requiring disclosure of information about network management practices] saying that the FCC still has “general authority” to regulate how broadband providers treat traffic.  The D.C. court stated: “[T]he [FCC] has established that section 706 of the Telecommunications Act of 1996 vests it with affirmative authority to enact measures encouraging the deployment of broadband infrastructure. The [FCC], we further hold, has reasonably interpreted section 706 to empower it to promulgate rules governing broadband providers’ treatment of Internet traffic, and its justification for the specific rules at issue here—that they will preserve and facilitate the “virtuous circle” of innovation that has driven the explosive growth of the Internet—is reasonable and supported by substantial evidence….”

FCC Chairman Tom Wheeler said the commission might appeal the ruling. “The DC Circuit has correctly held that ‘Section 706 . . . vests [the Commission] with affirmative authority to enact measures encouraging the deployment of broadband infrastructure’ and therefore may ‘promulgate rules governing broadband providers’ treatment of Internet traffic.'”

So the authority exists, but will require some crafty wording in the next attempt at regulation.  Because the FCC chose to classify Broadband providers as “information services” in 2005, that exempted them from treatment as traditional “common carriers” in the future.  Therefore the FCC can’t attempt regulate them with common carrier-like rules.  What new rules will the FCC be able to develop that will still serve the “no blocking” and “no unreasonable discrimination” portions of the Net Neutrality rules?  It’s hard to tell.  Regulation is coming, for sure.  The court did agree with the FCC’s opinion that without Net Neutrality rules, “broadband providers may be motivated to discriminate against and among edge providers.”

One controversial option is for the FCC to simply reclassify the broadband services as a common carriage service.  The D.C. court was clear: it is ultimately up to the FCC to make its own decision on classification.  Julius Genachowski, the FCC chairman at the time Net Neutrality was enacted, didn’t take the classification path.  Why not?  There was, at the time, some limited bi-partisan pressure from Congress on the new FCC classification.  Will present chairman Tom Wheeler want to go through the process?  Many advocate groups like Public Knowledge,

If the reclassification is done, there will definitely be another lawsuit.  But perhaps, in this scenario, the D.C. court would see this as well within the FCC’s authority to “promulgate rules governing broadband providers’ treatment of Internet traffic….”  The U.S. citizens will have to wait and see if the FCC appeals the present decision or “start over” with a new classification in the future.

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One thought on “D.C. Appeals court strikes down Net Neutrality

  1. I hope that FCC moves quickly to resolve this either through re-classificaton of Broadband as “common carrier” service or alternative regulation for the sake of customers who will ultimately bear the brunt if ISP decide to act up. My question however is, will the regulations need Congress’ approval and what are the prospects that the current lawmakers will agree on it?

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