Overlooked Elements of the Verizon-Google Net Neutrality Proposal

Posted on August 24, 2010 by Steve Augustino

Earlier this month, Verizon and Google announced an agreement on the vexing issue of net neutrality.  The agreement has been criticized by net neutrality advocates for allegedly permitting a "private Internet," and for excluding wireless services, among other things.  Until recently, the provisions in the Verizon-Google "Legislative Framework" that radically alter FCC enforcement have been overlooked.

Four elements of the Legislative Framework are described in detail in this post.  These elements would restrict the tools available to the FCC and would raise the standard for FCC fines.  In addition, one provision strips the Federal Trade Commission of any potential jurisdiction over broadband Internet access service. 

Limiting the FCC to Case by Case Enforcement.  First, Verizon and Google propose that the FCC "would enforce the consumer protection and nondiscrimination requirements through case-by-case enforcement, but would have no rulemaking authority with respect to those provisions."  This provision would significantly alter enforcement practice today -- where it is well settled that, absent explicit statutory instruction, an agency may choose whether to enforce through adjudication or through rulemaking.  Verizon and Google propose that in this instance rulemaking authority be denied.

Substituting Private Arbitration of Disputes.  Verizon and Google also propose that another entity assume the FCC's primary role in adjudicating alleged violations.  Specifically, Verizon and Google propose that parties be "encouraged" to use "non-governmental dispute resolution processes established by independent, widely-recognized Internet community governance initiatives," with the FCC granting "appropriate deference" to such opinions.   Verizon and Google don't say that parties will be forced to use this alternative, but the clear hope is that the primary enforcement capability will be shifted away from the FCC to this private group.  It is not clear whether Verizon and Google contend that the private group will have more expertise than the FCC, that it is quicker or less expensive than FCC formal complaints, or that some other reason makes this desirable. 

"Knowing Violation" Standard of Liability.  The Verizon-Google proposal preserves FCC forfeiture authority, but it appears to substitute a stricter standard than applies to other forfeitures.  Under the Verizon-Google proposal, the FCC could impose fines for "knowing violations" of the consumer protection and nondiscrimination standards.  This contrasts with Section 503's current standard of "willful and repeated" violations.  The FCC has interpreted the "willful" standard to require only that the party knew it was committing the act (or omission), not that it had any intent to violate the Communications Act. 

Exclusive FCC authority.  Verizon and Google propose that the FCC have "exclusive authority to oversee broadband Internet access service."  This provision apparently would preempt any jurisdiction by the Federal Trade Commission, which has asserted that it may apply its consumer protection standards to information services (which include Internet access services).  But it is not clear what the FCC's "oversight" authority encompasses, since all regulatory authorities would be precluded from "regulating" broadband Internet access services.

Until last Thursday, these provisions seemed to be overlooked in the proposal.  However, two FCC Commissioners made comments at the "Future of the Internet" hearing in Minnesota sponsored by the Free Press Foundation.  Commissioner Clyburn declared that "any proposal that favors the FCC being stripped of the rulemaking authority regarding consumer protection and non-discrimination requirements, and any proposal that would advocate that no agency will have authority over Internet access would be impossible for me to embrace."  Commissioner Copps expressed similar concerns, warning that the Verizon-Google proposal "would eliminate any meaningful, effective FCC oversight of the open Internet [including] such critically-important responsibilities as the setting of standards and the swift resolution of controversies."  I'm sure we will see more discussion of these proposals as we move forward in this debate.
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Comcast, Phase II: FCC Opens Inquiry into Broadband Classification Options

Posted on June 18, 2010 by Steve Augustino

The FCC today adopted and released its highly anticipated Notice of Inquiry (“NOI”) regarding the potential regulatory reclassification of facilities-based broadband Internet access services.  This proceeding will explore the "third way" toward regulation that Chairman Genachowski suggested in response to the recent decision issued by the U.S. Court of Appeals for the D.C. Circuit in the Comcast case.  In Comcast, the D.C. Circuit rejected the FCC's attempt to rely upon its "ancillary authority" to enjoin a cable operator from degrading its customers' lawful Internet services.  This sparked a concern that similar decisions could cause the Commission to lose regulatory authority over time in connection with most, if not all, Internet access services.  The heart of the problem is that the FCC made a series of decisions over the past decade that have classified wireline broadband Internet access services as "information services" that are exempt from Title II common carrier regulation, and this classification was upheld by the U.S. Supreme Court in its Brand X decision.   If the Commission cannot exert "ancillary authority" to regulate them, then the FCC could be left with virtually no control over services provided over a broadband platform. 

The NOI seeks comment in three areas.  First, the FCC seeks input on whether the current "information service" classification remains adequate for the Commission to perform its mission.  Second, it seeks comment on the legal and practical consequences of "reclassifying Internet services used to communicate with others that have Internet connections" as "telecommunications service" and then applying all of the regulatory requirements of Title II.   Finally, and most importantly, the Commission seeks comment on the "third way" position by which so-called "Internet connectivity service" that is offered as part of a wired broadband Internet service would be reclassified as a "telecommunications service", but that the Commission would forbear from applying all Title II regulatory authority over it except such as necessary to implement a set of discrete rules applicable to universal service, consumer protection, competition and small business opportunity. 

The Commission has fast-tracked the comment cycle in this case.  Comments will be due by July 15, with replies due August 12. 

 

 

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FCC's Genachowski Proclaims a "Third Way" to Apply Net Neutrality

Posted on May 6, 2010 by Steve Augustino

A month after the Court of Appeals reversed the FCC's Comcast decision, FCC Chairman Genachowski announced a "third way" to regulate broadband transmission lawfully.  The Chairman released a statement describing his "third way" along with a memo from the General Counsel asserting its legality.  Commissioner Copps, who publicly advocated reclassification of braodband internet access services to Title II, praised Genachowski's solution (though he still prefers reclassification).  Meanwhile, Commissioners McDowell and Baker, the two Republicans on the Commission, declared the proposal "disappointing" and "deeply concern[ing]." 

The battle has only begun.

The key to Genachowski's view is to classify the transmission component of broadband internet access as a telecom service, while leaving the internet access functionalities unregulated.  (This is similar to an approach I suggested in my post on the Comcast decision). 

Genachowski proposes "light touch" regulation of the transmission component using Sections 201, 202, 208, 222, 254 and 255 of the Communications Act.  Notably, these sections encompass most of the key obligations of telecom carriers, including non-discrimination, "just and reasonable" rates and practices, customer privacy (CPNI), universal service contributions and access by customers with disabilities.  He also proposes to forbear from other obligations that might apply -- principally section 251 unbundling obligations.

In other reports, Genachowski is said to plan to present an order for Commission review within the next 30 days.
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Breaking News: Court vacates FCC's Comcast Decision

Posted on April 6, 2010 by Steve Augustino

The US Court of Appeals for the DC Circuit vacated the FCC's decision declaring illegal Comcast's 2007 blocking of P2P internet traffic.  This decision is not surprising, given how poorly the oral argument went for the FCC.  (see our post here). 

Click here to download the Court's decision.  We will post a discussion of the jurisdictional issue later.

UPDATE 4/6/10:  The Court of Appeals vacated the FCC Order because the Commission had not adequately justified its exercise of Title I "ancillary" authority over Comcast's network management practices.  Discussing at length appellate Title I jurisdiction cases over the last 40 years, the Court in essence held that the FCC failed to relate Internet network management to common carrier telephone service (Title II), broadcast service (Title II) or cable TV service (Title VI).  One quote from the decision sums up the conclusion:  "On the record before us, we see 'no relationship whatever' between the Order and services subject to Commission regulation."  In other words, the FCC must connect its assertion of authority to something that it indisputably can regulate.

Since the decision was released, there has been much discussion about whether the FCC will reclassify Internet access services as Title II common carrier services.  While it is premature to predict these issues with any confidence, one alternative not being discussed is to accept the Court's invitation to connect regulation of Internet access service with regulation of pure transmission services.  In the Wireline Broadband Order, the Martin Commission concluded that Internet access did not have a separate transmission component.  The decision today may lead the Commission to reverse that determination -- and find that a separate transmission component is inherent in the offering -- so that it may then regulate bundled Internet access due to its impact on stand alone transmission services. 

Finally, I note that the Court did not address the enforceability of the Policy Statement itself.  As a result, the potential impact on the Universal Service Fund's Form 499-A instructions did not come to pass.  Maybe next time.

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Comcast, Net Neutrality and the Universal Service Fund

Posted on January 9, 2010 by Steve Augustino

Yesterday, the DC Circuit held oral argument on Comcast's appeal of the FCC's ruling that Comcast ilegally blocked P2P traffic in its broadband Internet service.  By all accounts, the argument went poorly for the FCC.  If the FCC indeed loses the case, it could have implications for enforcement of federal Universal Service Fund (USF) contribution obligations too. 

Some of the best summaries appear in MultiChannel News, The Blog of the Legal Times and Enterprise Networking Planet.  The argument went so poorly that FCC Chairman Julius Genachowski issued what amounts to a "vote of confidence" for the enforcement order.  And we know how well those things work out for NFL coaches.

It appears that the FCC might lose because the court feels the FCC lacks authority over broadband Internet service providers. That would have a significant impact on the FCC's activities, particularly with the Commission on the verge of adopting (and then implementing) a National Broadband Plan.

A more narrow ground also could have significant impact on Universal Service.  One argument made by Comcast was that the FCC Order is unlawful because the Commission was enforcing a 2005 Policy Statement, not an actual law.  The FCC can enforce obligations that are legally binding -- statutes, properly adopted rules and lawful FCC orders.  But a policy statement is not itself enforceable.  Its enforceability depends on the underlying legal obligations that the Commission is interpreting.  If the only "authority" relied upon is the Policy Statement, the FCC would lose.

The Policy Statement is a shortcut to the harder task of adopting specific and enforceable obligations, typically through rulemaking.  The FCC is taking a similar shortcut with its Universal Service rules.  In a series of FCC Orders, the Commission has created a federal USF and established rules for who must contribute to the Fund and on what revenues.  Each year, the FCC releases an FCC Form 499A for contributors to report their revenues for assessment purposes.  The 499A comes with 30+ pages of instructions.  The instructions purport to mandate a variety of actions by contributors, and they are frequently modified without any change in the underlying FCC rules or orders. 

The problem is that USAC acts as if the instructions are binding rules.  It is increasingly becoming more aggressive in audits and enforcement actions, relying on specific instructions that never were subject to notice and comment rulemaking, were not adopted by the FCC and could not be appealed.  If the FCC loses the Comcast case because the Policy Statement is not enforceable, it will have to return to enforcing actual law.  Hopefully, such an outcome will reign in USAC's reliance on non-binding instructions, too.  If so, it will not be a moment too soon.

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President Obama Announces Nomination of Julius Genachowski as FCC Chairman

Posted on March 3, 2009 by Steve Augustino

The “Obama FCC” took one giant step toward reality today when President Obama formally announced his “intention to nominate” Julius Genachowski as Chairman of the FCC. Genachowski’s nomination has been expected for some time, but apparently was delayed when President Obama revamped his process for vetting candidates after several high-profile withdrawals by key nominees.

Genachowski comes with stellar credentials including two Supreme Court clerkships, a prior stint as advisor to FCC Chairman Reed Hundt and several years at Barry Diller’s Internet company, IAC. Virtually every telecom organization took turns today praising the incoming chairman.

Genachowski is expected to further President Obama’s policies to promote broadband deployment and net neutrality. Genachowski’s nomination must be approved by the Senate, so he may not formally take office for a few months.
 

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