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Broadband's Impact

Building a Legal Case for Net Neutrality Rules, FCC’s Wheeler Hopes Courts Will Look Favorably on His Logic

WASHINGTON, May 19, 2014 – The D.C. Circuit Court of Appeals struck down the Federal Communications Commission’s last two efforts to enshrine network neutrality. So what makes current chairman Tom Wheeler feel as though he can succeed where two of his predecessors failed?

The answers lie in the details of the 85-page order – called a “Notice of Proposed Rulemaking” in the legalese of Washington telecommunications bureaucrats – released late on Thursday.

At its core, Wheeler aims to regulate broadband providers without having to treat them as regulated entities. […]

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Editor’s Note: Federal Communications Commission Chairman Tom Wheeler is attempting to craft legally unassailable rules promoting net neutrality. But he’s run into trouble from all sides. Communications providers aren’t happy. His fellow commissioners aren’t happy. And the “netroots” activists aren’t happy, either.

BroadbandBreakfast.com posts three articles on Thursday’s action at the FCC. First, the scene at 12th Street SW. Second, the reaction from interested parties. Third, what the details of the agency’s order says.

WASHINGTON, May 19, 2014 – The D.C. Circuit Court of Appeals struck down the Federal Communications Commission’s last two efforts to enshrine network neutrality. So what makes current chairman Tom Wheeler feel as though he can succeed where two of his predecessors failed?

The answers lie in the details of the 85-page order – called a “Notice of Proposed Rulemaking” in the legalese of Washington telecommunications bureaucrats – released late on Thursday.

At its core, Wheeler aims to regulate broadband providers without having to treat them as regulated entities.

There are three conceptual building blocks for this maneuver: (1) the transparency requirement in his proposed network neutrality rules; (2) a “no blocking” requirement; and (3) enforcing a “commercially unreasonable” standard against potentially discriminatory practices by internet service providers.

The First Building Block

The transparency requirement was upheld by the court in its January 2014 decision in Verizon v. FCC. In Wheeler’s mind, the transparency requirement will give the agency insight into the possibility that “a network [might] take an action that would affect a content provider’s access.”

The agency seeks to enhance the transparency rules put in place when former FCC Chairman Julius Genachowski introduced it as part of the Open Internet Order of 2010.

The Second Building Block

The “no blocking” requirement is largely uncontroversial: almost all broadband providers are publicly committed to the proposition that they will not block access to a content service, even if it they are competitively adverse to such a service – for example, Comcast hasn’t blocked access to Netflix, even though the cable company’s movies-on-demand feature competes with the internet streaming video company.

Yet finding legal grounds for that rule has been challenging.

While the court struck down the “no blocking” ban, the FCC said that the court accepted the FCC’s reasoning for its “no blocking” ban, if only the agency had justified the rule on firmer legal grounds.

Here’s the FCC’s logic on what the court meant in Verizon v. FCC:

On January 14, 2014, the D.C. Circuit ruled on Verizon’s challenge to the Open Internet Order. …[T]he court upheld the Commission’s reading that sections 706(a) and (b) of the Telecommunications Act grant the Commission affirmative authority to encourage and accelerate the deployment of broadband capability to all Americans through, among other things, measures that promote competition in the local telecommunications market or remove barriers to infrastructure investment. The court further held that the Commission could utilize that section 706 authority to regulate broadband Internet access service.  It concluded that the Commission had adequately justified the adoption of open Internet rules by finding that such rules would preserve and facilitate the “virtuous circle” of innovation, demand for Internet services, and deployment of broadband infrastructure and that, absent such rules, broadband providers would have the incentive and ability to inhibit that deployment.

If the D.C. Circuit is so open to the FCC’s reasoning, why did the agency lose in the Verizon case? Because the FCC made the argument that broadband providers were, effectively, a common carrier.

If it were a common carrier, a broadband company would have to provide internet service in a non-discriminatory manner; common carriers aren’t allowed to discriminate. Private communications providers are permitted to differentiate in their service offerings.

Moreover, in the last decade, prior to struggle for net neutrality rules, the FCC has been moving to deregulate rather than to regulate the provision of broadband.

Historically, telephone connections were classified as “telecommunications services” under Title II of the Communications Act. Broadcast television and radio services were classified under Title III of the law, and cable television services were lumped into yet another section, Title VI.

The 1996 revisions to the Telecommunications Act put telecommunications services subject to regulation under Title II; and information services not subject to such regulation. The agency chose to make fiber-optics exempt from common carrier regulation; then it took the same path for cable-modem service, and for digital subscriber line (DSL) service over copper wires The section is largely deregulatory, if ambiguous in its direction to the FCC.

The 1996 law also added an unusual new section, referred to as Section 706, regarding “advanced telecommunications incentives.”

If the agency determines, as a result of its regular inquiries into the deployment of broadband, that Americans are not being adequately served by high-speed internet, the law stipulates that “it shall take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market.”

What is this “immediate action” that the agency proposes? The “no blocking” provision of the net neutrality rules.

The Third Building Block

The third pillar on which the agency builds its new net neutrality rules is a new standard, that of “commercially unreasonable.”

Overcoming this hurdle will be Wheeler’s biggest obstacle in sustaining the legality of Thursday’s proposed rules.

Previously, Genachowski had attempted to ban all “unreasonable” discriminatory actions of broadband providers. The court didn’t look kindly on this argument, saying that the FCC was now treating broadband providers as common carriers. This it was not allowed to do.

Now, instead of barring “unreasonable discrimination,” the agency seeks to bar only “commercially unreasonable” discrimination. The agency stumbled into this standard in a most accidental manner: in a separate 2012 case, the D.C. Court of Appeal upheld the agency’s data-roaming rules on the grounds that to violate them would constitute “commercially unreasonable” discrimination.

So here’s how, in his remarks on Thursday, Wheeler contends that the building blocks would work:

I want to get to rules that work like this:

  • If the network operator slowed the speed below that which the consumer bought (for reasons other than reasonable network management), it would be a commercially unreasonable practice and therefore prohibited,
  • If the network operator blocked access to lawful content, it would violate our no blocking rule and be commercially unreasonable and therefore doubly prohibited,
  • When content provided by a firm such as Netflix reaches the consumer’s network provider it would be commercially unreasonable to charge the content provider to use the bandwidth for which the consumer had already paid and therefore prohibited,
  • When a consumer buys specified capacity from a network provider he or she is buying open capacity, not capacity the network can prioritize for its own profit purposes. Prioritization that deprives the consumer of what the consumer has paid for would be commercially unreasonable and therefore prohibited.

Simply put, when a consumer buys a specified bandwidth, it is commercially unreasonable – and thus a violation of this proposal – to deny them the full connectivity and the full benefits that connection enables.

Will the argument work? Legally, it’s closer than the FCC has ever been to sustaining net neutrality rules. But politically, that’s another story entirely.

Drew Clark is the Chairman and Publisher of the Broadband Breakfast Club, the premier Washington forum advancing the conversation around broadband technology and internet policy. You can find him on Google+ and Twitter. He founded BroadbandCensus.com, and he brings experts and practitioners together to advance Better Broadband, Better Lives. 

Breakfast Media LLC CEO Drew Clark is a nationally respected U.S. telecommunications attorney. An early advocate of better broadband, better lives, he founded the Broadband Census crowdsourcing campaign for better broadband data in 2008. That effort became the Broadband Breakfast media community. As Editor and Publisher, Clark presides over news coverage focused on digital infrastructure investment, broadband’s impact, and Big Tech. Under the American Recovery and Reinvestment Act of 2009, Clark served as head of the Partnership for a Connected Illinois, a state broadband initiative. Now, in light of the 2021 Infrastructure Investment and Jobs Act, attorney Clark helps fiber-based and wireless clients secure funding, identify markets, broker infrastructure and operate in the public right of way. He also helps fixed wireless providers obtain spectrum licenses from the Federal Communications Commission. The articles and posts on Broadband Breakfast and affiliated social media, including the BroadbandCensus Twitter feed, are not legal advice or legal services, do not constitute the creation of an attorney-client privilege, and represent the views of their respective authors.

Broadband's Impact

House Bill to Make Broadband Grants Non-Taxable Introduced

Sen. Mark Warner said last month he is working to pass a companion bill by year’s end.

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Photo of Rep. Mike Kelly, R-Penn.

WASHINGTON, December 7, 2022 – Reps. Mike Kelly, R-Penn., and Jimmy Panetta, D-Ca., on Wednesday introduced the Broadband Grant Tax Treatment Act, the companion of a Senate bill of the same name, which would make non-taxable broadband funding from the Infrastructure Investment and Jobs Act and the American Rescue Plan Act.

The bill’s supporters say it will increase the impact of Washington’s broadband-funding initiatives, the largest of which is the IIJA’s $42.45 billion Broadband Equity, Access, and Deployment program. The IIJA allocated a total of $65 billion toward broadband-related projects.

Kelly said the proposal “ensures federal grant dollars, especially those made available to local governments through pandemic relief funding, will give constituents the best return on their investment.”

“This legislation allows for existing grant funding to be spent as effectively as possible,” Kelly added.

Sen. Mark Warner, D-Va., sponsored Senate’s version of the bill in September and said last month he is working to push it through by year’s end.

“Representative Panetta’s and Kelly’s bill to eliminate the counter-productive tax on broadband grants is right on the money,” said Jonathan Spalter, president and CEO of trade group US Telecom. “Closing the digital divide in America – especially in our hardest-to-reach rural communities – will require every cent of the $65 billion Congress has dedicated for that critical purpose.”

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Digital Inclusion

Broadband is Affordable for Middle Class, NCTA Claims

According to analysis, the middle class spends on average $69 per month on internet service.

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Photo of Rick Cimerman, vice president of external and state affairs at NCTA

WASHINGTON, November 22, 2022 – Even as policymakers push initiatives to make broadband less expensive, primarily for low-income Americans, broadband is already generally affordable for the middle class, argued Rick Cimerman, vice president of external and state affairs at industry group NCTA, the internet and television association. 

Availability of broadband is not enough, many politicians and experts argue, if other barriers – e.g., price – prevent widespread adoption. Much focus has been directed toward boosting adoption among low-income Americans through subsidies like the Affordable Connectivity Program, but legally, middle-class adoption must also be considered. In its notice of funding opportunity for the $42.5-billion Broadband Equity, Access, and Deployment program, the National Telecommunications and Information Administration required each state to submit a “middle-class affordability plan.”

During a webinar held earlier this month, Cimerman, who works for an organization that represents cable operators, defined the middle class as those who earn $45,300–$76,200, basing these boundaries on U.S. Bureau of Labor statistics for 2020. And based on the text of an Federal Communications Commission action from 2016, he set the threshold of affordability for broadband service at two percent of monthly household income.

According to his analysis, the middle class, thus defined, spends on average $69 per month on internet service. $69 is about 1.8 percent of monthly income for those at the bottom of Cimerman’s middle class and about 1.1 percent of monthly income for those at the top. Both figures fall within the 2-percent standard, and Cimerman stated that lower earners tended to spend slightly less on internet than the $69-per-month average.

Citing US Telecom’s analysis of the FCC’s Urban Rate Survey, Cimerman presented data that show internet prices dropped substantially from 2015 to 2021 – decreasing about 23 percent, 26 percent, and 39 percent for “entry-level,” “most popular” and “highest-speed” residential plans, respectively. And despite recent price hikes on products such as gas, food, and vehicles, Cimerman said, broadband prices had shrunk 0.1 percent year-over-year as of September 2022.

Widespread adoption is important from a financial as well as an equity perspective, experts say. Speaking at the AnchorNets 2022 conference, Matt Kalmus, managing director and partner at Boston Consulting Group, argued that providers rely on high subscription rates to generate badly needed network revenues.

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Broadband's Impact

Federal Communications Commission Mandates Broadband ‘Nutrition’ Labels

The FCC also mandated that internet service provider labels be machine-readable.

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Federal Communications Commission Chairwoman Jessica Rosenworcel

WASHINGTON, November 18, 2022 – The Federal Communications Commission on Thursday afternoon ordered internet providers to display broadband “nutrition” labels at points of sale that include internet plans’ performance metrics, monthly rates, and other information that may inform consumers’ purchasing decisions.

The agency released the requirement less than 24 hours before it released the first draft of its updated broadband map.

The FCC mandated that labels be machine-readable, which is designed to facilitate third-party data-gathering and analysis. The commission also requires that the labels to be made available in customers’ online portals with the provide the and “accessible” to non-English speakers.

In addition to the broadband speeds promised by the providers, the new labels must also display typical latency, time-of-purchase fees, discount information, data limits, and provider-contact information.

“Broadband is an essential service, for everyone, everywhere. Because of this, consumers need to know what they are paying for, and how it compares with other service offerings,”  FCC Chairwoman Jessica Rosenworcel said in a statement. 

“For over 25 years, consumers have enjoyed the convenience of nutrition labels on food products.  We’re now requiring internet service providers to display broadband labels for both wireless and wired services.  Consumers deserve to get accurate information about price, speed, data allowances, and other terms of service up front.”

Industry players robustly debated the proper parameters for broadband labels in a flurry of filings with the FCC. Free Press, an advocacy group, argued for machine-readable labels and accommodations for non-English speakers, measures which were largely opposed by trade groups. Free Press also advocated a requirement that labels to be included on monthly internet bills, without which the FCC “risks merely replicating the status quo wherein consumers must navigate fine print, poorly designed websites, and byzantine hyperlinks,” group wrote.

“The failure to require the label’s display on a customer’s monthly bill is a disappointing concession to monopolist ISPs like AT&T and Comcast and a big loss for consumers,” Joshua Stager, policy director of Free Press, said Friday.

The Wireless Internet Service Providers Association clashed with Free Press in its FCC filing and supported the point-of-sale requirement.

“WISPA welcomes today’s release of the FCC’s new broadband label,” said Vice President of Policy Louis Peraertz. “It will help consumers better understand their internet access purchases, enabling them to quickly see ‘under the hood,’ and allow for an effective apples-to-apples comparison tool when shopping for services in the marketplace.”

Image of the FCC’s sample broadband nutrition label

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