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

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:

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.