FCC Won’t Challenge D.C. Circuit’s Net Neutrality Decision, Wheeler Says

"We will carefully consider how Section 706 might be used to protect and promote an Open Internet consistent with the D.C. Circuit’s opinion and its earlier affirmance of our Data Roaming Order,” Wheeler said (http://fcc.us/Ob0TVj). “Thus, we will consider (1) setting an enforceable legal standard that provides guidance and predictability to edge providers, consumers, and broadband providers alike; (2) evaluating on a case-by-case basis whether that standard is met; and (3) identifying key behaviors by broadband providers that the Commission would view with particular skepticism."

The proposed rules are part of the evolution of FCC net neutrality rules, a work in progress since 2005, said a senior official on a conference call with reporters. Former chairmen Julius Genachowski, Michael Powell and Kevin Martin all addressed net neutrality (CD Feb 3 p1). The FCC also opened a formal docket, no. 14-28, (http://fcc.us/1jdeRjt) seeking comments on “how the Commission should proceed in light of the court’s guidance in the Verizon v. FCC opinion."

Former commissioners disagreed on the proper path for Wheeler, in interviews Wednesday. Former Chairman Reed Hundt said Wheeler accomplishes three key things in the approach. Wheeler assures “the open Internet rules can be and will be defined by the FCC and not by Congress,” Hundt said. The proposal also addresses in a sense the specter of possible net neutrality deal conditions as part of Comcast’s plan to buy Time Warner Cable, Hundt said. The rules are “not going to be set as a part of horse trading on the cable merger, but instead they're going to be applied to the entire broadband industry,” he said. Wheeler has also “made it clear that he will use any and all jurisdictional powers to guarantee that his rules are upheld by the D.C. Circuit,” Hundt said.

Former Commissioner Robert McDowell, one of two no votes against the net neutrality order, said he wasn’t surprised Wheeler decided to act expeditiously. “It’s important for him to decide this issue and move on to other issues quickly,” McDowell said. “However, the FCC is not out of the legal woods just yet. A new order runs the risk of overturning the split decision regarding authority under Section 706. A new panel of judges, depending on its composition could favor the [Judge Laurence] Silberman dissent over the ... majority opinion leaving the commission without authority. So the nondiscrimination retooling offers the most risk for the FCC on appeal because it sounds like common carriage regulation."

To some industry observers, keeping the Title II docket open is a lingering threat to get ISPs to the negotiating table. But former Commissioner Michael Copps, who voted for the order in 2010, said Title II remains the best tool for the FCC to use to provide certainty to the industry. “Title II reclassification is by far the best way to guarantee consumer protection and free speech online,” Copps said. “That’s where I'm hopeful the commission will end up.” After-the-fact adjudication isn’t the best course of action, said Copps. “Each one of those cases is going to drag out before the commission, it’s going to drag out before the court, and then someone will say, ‘Let’s try a different iteration of it,’ and we'll go down that road again. That is not the road for network neutrality.” Section 706 simply creates too much uncertainty, Copps said. “Certainty is good for everybody, including business."

Internet in Adolescence

The Internet is still in its adolescence, Copps said. No one knows what kinds of applications might develop, or what the Internet will be like years from now, he said: “That’s why we want to make sure it’s open to all, that it’s not the province of toll booths and gatekeepers, so it remains true to its technological potential.” The Internet can “flourish and take us to undreamed-of places if we preserve that openness and dynamism and freedom,” he said.

President Berin Szoka of TechFreedom said he “wouldn’t read too much” into the fact that Wheeler is keeping the Title II docket open. It gives Wheeler leverage in the rulemaking process, since it “will continue to lurk out there in the background; whatever anybody thinks about 706, all of the carriers will do just about anything to avoid reclassification,” Szoka said. The data-roaming decision is just an example of how much flexibility the FCC has, said Szoka: It’s a “remarkable decision” that imposes “95 percent of common carriage.” Szoka disagrees with those who think the FCC can’t prevent discrimination, saying it “clearly can require” that any deal struck be nondiscriminatory.

"The D.C. Circuit’s decision contained a number of open suggestions of ways the FCC might be able to regulate that would survive judicial scrutiny,” said Christopher Yoo, University of Pennsylvania professor of law. “It is only natural for the FCC to take the court up on its invitation."

Former Obama transition team official Kevin Werbach of the University of Pennsylvania’s Wharton School of Business said if anyone expected a different response from Wheeler, they weren’t paying close attention. “The FCC is taking the D.C. Circuit at its word,” Werbach said. “The court concluded the FCC had legal authority to promote the open Internet under Section 706, but that its prior rules were too close to common carriage. The FCC is going to see just how far it can push that opening. While Title II reclassification would be a simpler legal theory, the ultimate issue has always been what practices are appropriate where the rubber meets the road. It’s worth keeping in mind that the only two significant FCC interventions against broadband discrimination -- Madison River and Comcast -- came before it adopted the open Internet rules that were recently invalidated.”

If Wheeler decides to actually impose requirements on ISPs that are too close to common carriage, he would find a “less than receptive D.C. Circuit,” said Penn State Law Professor Robert Frieden. “I don’t see much wiggle room in the no blocking, no discrimination area, nor am I as sanguine as the Chairman in terms of what deference the data roaming decision affords the FCC,” Frieden said by email. One might draw a parallel between the duty to negotiate commercially-driven data roaming terms and conditions, and the similar duty to negotiate retransmission consent between cable operators and local television broadcasters, Frieden said. “In both instances the FCC cannot act proactively and has limited powers even to resolve a protracted dispute. Unfortunately for broadband subscribers there won’t be a specific ‘must see’ television program that forces one side to capitulate, so degraded service and not so subtle abuses of last mile access may occur,” he said.

Groundhog Day?

Wheeler’s plan raised concerns for the two current Republican commissioners. Ajit Pai said the announcement reminded him of the movie Groundhog Day. “In the wake of a court defeat, an FCC chairman floats a plan for rules regulating Internet service providers’ network management practices instead of seeking guidance from Congress, all while the specter of Title II reclassification hovers ominously in the background,” Pai said in a statement (http://fcc.us/1gHuorI). “I am skeptical that this effort will end any differently from the last.” Mike O'Rielly said the FCC is “tilting at windmills.” All should “fear that this provision ultimately may be used not just to regulate broadband providers, but eventually edge providers,” he said (http://fcc.us/1nOJCeN). “Instead of fostering investment and innovation through deregulation, the FCC will be devoting its resources to adopting new rules without any evidence that consumers are unable to access the content of their choice.”

Democratic commissioners took a rosier view. Jessica Rosenworcel said (http://fcc.us/1hwkD2c) she supports Wheeler’s announcement and looks forward to developing policies that “ensure the Internet continues to drive innovation, experimentation, and economic growth.” Mignon Clyburn applauded the chairman, and urged the agency to “act expeditiously to adopt clear, enforceable rules that protect the openness of the Internet while continuing to promote innovation and investment.” Clyburn (http://fcc.us/1dOq2yu) also voiced her approval at Wheeler’s announcement that the commission would examine restrictions on the ability of municipalities to offer their own broadband services.

Although the Verizon court threw out the agency’s no-blocking and no-discrimination provisions as too close to common carriage, the agency sees the court decision as a significant win, said an FCC official on a background call with reporters. That’s because the court upheld the FCC’s judgment that an open Internet helps with broadband adoption, said the official.

Calling it a “significant win” is a fair reading of the case, said Phoenix Center President Lawrence Spiwak. The court essentially said that because broadband ISPs “have evil in their hearts,” and might discriminate against edge providers, Section 706 gives the FCC jurisdiction, Spiwak said. Having that dicta -- that ISPs will “always have the ability to discriminate against the edge” -- is a “very potent” source of power, he said.

The question, Spiwak said, is what Wheeler’s FCC will do with that power. “They didn’t propose any rules,” he said. “They said, ‘Anybody got any ideas?'” The agency is “still at a very early stage,” but it seems like case-by-case adjudication is “the right way to go,” said Spiwak. Some question whether the FCC can handle case-by-case adjudication better than the FTC, but the FTC’s Section 5 authority over unfair competition uses a standard that’s “just as vague, if not more vague, than the public interest standard,” he said. “So I'm not sure the grass is necessarily greener on the other side of Independence Avenue."

Free State Foundation President Randolph May said Wheeler’s statement on the whole was “disappointing,” especially since he keeps alive the possible of Title II reclassification. “It’s poor policy to hold open the threat of regulating Internet providers as common carriers, just like the Bell telephone companies during an earlier monopolistic era, or like the electric utilities today, or the railroads in the nineteenth century,” May said. “With respect to whatever authority the Commission may possess under Section 706, the commission would be better off engaging in ‘watchful waiting’ rather than rushing to fashion new rules.” May said Wheeler also may “be overestimating his ability to fashion a non-discrimination rule that threads the needle between mandating common carriage, which is prohibited, and prohibiting certain practices that the commission somehow might consider discriminatory."

"It’s a good thing that they haven’t shut the door on Title II reclassification, because that’s the best way to hold Internet service providers accountable,” said Consumers Union in a news release. “The stakes are high, for your wallet and your free speech. The Commission wants to hear from the public, and we're urging consumers to join us in speaking out on why net neutrality is so important."

Wheeler Statement ‘Unusually Strong'

The Wheeler statement offers more than a regulatory holding pattern, said Public Knowledge Senior Vice President Harold Feld. “This is an unusually strong statement and gives every appearance of moving as fast as a federal agency can move -- especially an agency where you need all five commissioners to vote on any official agency action,” Feld emailed us. “So on the one hand, it is good to see Chairman Wheeler taking this seriously and -- despite an already massive agenda including incentive auction, IP Transition, media ownership, and a gigantic cable merger -- is moving forward. This is a clear commitment to rejecting the industry push for voluntary codes of conduct and vague principles and ought to be acknowledged and praised as such.” But Feld also has concerns. “It remains an open question on whether the FCC actually carries through,” he said. “More importantly, if it becomes clear that Section 706 does not provide adequate authority for real network neutrality rules that genuinely protect the open Internet, will Wheeler have the courage to actually use Title II? Or is this going to be Genachowski Redux, with lots of bold talk but settling for an ‘industry consensus’ that lets Wheeler claim ‘mission accomplished’ while leaving consumers and edge providers exposed?"

Removing legal restrictions on municipal broadband could enhance Internet access competition, Wheeler said. To New York Law School Professor Michael Santorelli, that’s one of the “many problematic aspects” to Wheeler’s announcement. “While federal preemption of state telecommunications laws is certainly appropriate in some instances (e.g., furthering the national regulatory framework for information services), it is not appropriate when it would undermine dialogues between state legislatures and Governors regarding state and local fiscal policy,” Santorelli told us via email. “Because municipal broadband networks necessitate the assumption of significant debt and enormous risk by cities, state governments are acting rationally when they implement legal processes to better inform the public and guide the decision-making of local officials.”

"The broadband industry has always supported consumers having the freedom to access the legal content and apps of their choice, so new replacement FCC behavioral rules-of-the-road based on consumer freedoms are expected and not really controversial,” said Scott Cleland, chairman of NetCompetition, a pro-competition e-forum supported by broadband companies. The controversy around net neutrality “comes solely from those trying to transmogrify net neutrality into FCC economic regulation of broadband prices, terms and conditions, like Title II common carrier regulation,” he said. “That radical strain of price regulation net neutrality is extremely controversial because it would kneecap market competition for broadband services and have the FCC pick market winners and losers in the marketplace, not consumers."

"This is a serious attempt at a meaningful net neutrality reset by Chairman Wheeler within the limits of the law and political realities,” said Jeff Silva, analyst at Medley Global Advisors. “Whether the outcome actually achieves key agency objectives and is sustainable as a legal matter is collectively another matter. Recent history suggests little is ever really settled on net neutrality.”

"Verizon remains committed to an open Internet that provides consumers with competitive choices and unblocked access to lawful websites and content when, where, and how they want,” said the telco on its blog (http://vz.to/Obwy95). Other ISPs and their associations made similar comments Wednesday. AT&T will work with the FCC as it launches a new net neutrality proceeding, said Senior Executive Vice President Jim Cicconi. “We believe the FCC possesses sufficient authority under section 706 to preserve Internet freedom and openness, and that it can do so without over-regulation,” Cicconi said on the company’s blog (http://bit.ly/1oT7zoL). “Indeed, and as the court recognized, section 706 was clearly intended by Congress as a tool to enhance broadband investment and deployment. Thus, it is vital that, as the FCC defines its authority, it do so in a way that does not inhibit the very investment section 706 was intended to assist."

Blackburn Threatens Bill

One House Republican wants to halt FCC action legislatively. House Commerce Committee Vice Chairwoman Marsha Blackburn, R-Tenn., plans to introduce a bill “to block these efforts and protect Internet freedom for consumers,” she promised Wednesday. It’s clear Wheeler is on “a crusade to implement these socialistic regulations,” Blackburn said, comparing net neutrality to the “most restrictive policies of countries like China.”

Senate Commerce Committee ranking member John Thune, R-S.D., plans to speak with Wheeler this week and “again remind him of the importance of working with Congress to ensure his plans do not require corrective legislation,” Thune said in a statement, saying he’s hopeful for “common ground.” He has urged Wheeler to consult with Congress before reinstating any net neutrality rules (CD Feb 12 p10) and called the Wednesday announcement “an unnecessary overreaction” to the January court ruling. Thune worried about “an expansive reading of section 706,” and said Wheeler “must have little faith that the FCC’s latest attempt to regulate the Internet will hold up under legal review, otherwise why bother keeping the Title II reclassification docket open?”

Democrats backing net neutrality legislation applauded Wheeler’s announcement, saying it affirms the objectives they had in introducing the Open Internet Preservation Act in recent weeks. The bicameral bill, S-1981/HR-3982, would restore FCC net neutrality rules but was widely seen, including by at least one sponsor, to have poor prospects for advancing. It has six co-sponsors in the Senate and 26 in the House, all Democrats. Lobbyists have said any net neutrality bills, whether restricting such protections or codifying them, likely can’t advance due to partisanship on the issue (CD Feb 3 p5).

Wheeler “is committed to achieving the same goal administratively” that Democrats sought legislatively, said House Commerce Committee ranking member Henry Waxman, D-Calif., a sponsor of the House version. Senate version sponsor Ed Markey, D-Mass., is looking forward to reinstating rules “on strong legal footing,” Markey said, a phrase Waxman also used in describing the rules he hopes the FCC adopts quickly. House Communications Subcommittee ranking member Anna Eshoo, D-Calif., said she welcomes the news, saying the FCC now “aims to enhance broadband competition by reducing barriers to municipality-built broadband networks.” Rep. Doris Matsui, D-Calif., is pleased, she said. Rep. Mike Doyle, D-Pa., another co-sponsor of the Open Internet Preservation Act, praised the FCC’s actions but also pointed out the Democrats’ legislation is pending in the House Communications Subcommittee and encouraged subcommittee leadership “to take it up as soon as possible.”

Co-sponsor Sen. Al Franken, D-Minn., questioned the FCC’s choice of tactics. There are “some real questions about whether the path they've chosen will actually accomplish” necessary net neutrality protections, Franken said, saying he plans to work with the FCC “to make sure that the FCC’s action to protect net neutrality is enduring and effective.” Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., who didn’t co-sponsor the Democrats’ legislation, said he appreciates “that Chairman Wheeler has kept all options on the table,” lauding the news.

Other top House Republicans slammed the news though they did not mention any potential congressional response. “No matter how many times the court says ‘no,’ the Obama administration refuses to abandon its furious pursuit of these harmful policies to put government in charge of the web,” said House Commerce Committee Chairman Fred Upton, R-Mich., and Communications Subcommittee Chairman Greg Walden, R-Ore., in a joint statement. They slammed net neutrality as “a solution in search of a problem” and urged the agency to focus instead on the spectrum incentive auction and fostering economic growth. They want an “open and transparent process” if the FCC does advance rules, “consistent with the recommendations of the commission’s Report on FCC Process Reform,” they said. (hbuskirk@warren-news.com),