CCA News

Net Neutrality Update

February 18, 2019
Net Neutrality Update

Net neutrality was once again front and center as the D.C. Circuit Court of Appeals recently heard nearly 5 hours of oral argument on whether to overturn the FCC’s 2018 Restoring Internet Freedom order.  The judges launched numerous tough questions to parties on both sides with early betting being that the court might reverse the FCC on at least some issues.  A decision is not expected for some months.  The House Energy and Commerce Committee also just held a hearing on net neutrality and a number of net neutrality bills have been introduced.

The recent activity provides an opportunity to refresh our collective memories on what’s at stake and who could be affected by whichever way the court comes out on the FCC’s most recent net neutrality order.  For CCA members, the question, theoretically at least, is whether net neutrality rules could provide protection from potential discrimination by broadband providers – companies like Verizon, Comcast, or AT&T – that provide high speed connectivity to business locations, especially if they provide competing managed communications services.  Such discrimination could take the form of blocking or throttling CCA members’ services, or requiring them to pay for faster connections, called paid prioritization.  To assess whether net neutrality rules could prevent such discrimination for CCA members, the first step is to recall which services are subject to net neutrality.

Services Subject to Net Neutrality

Net neutrality has always applied to a very specific service, something the FCC calls broadband internet access service, or the awful acronym, BIAS.  The FCC defines BIAS (and no one disputes this definition) as a “mass-market retail service” that provides the customer with the ability to “transmit data to and receive data from all or substantially all Internet endpoints.”  Mass market in turn means services marketed and sold on a standardized basis to residential customers, small businesses, and other end users such as schools and libraries.  Importantly for CCA members, BIAS does NOT include “enterprise service offerings or special access services,” (now called Business Data Services or BDS).  That net neutrality applies primarily to residential internet access service is consistent with the general concern its proponents express – the ability of content providers like Amazon, Netflix, and Etsy – to reach consumers without interference by internet access providers, especially those that also have competing content.

Whether your company is protected by whatever net neutrality rules exist thus depends on the type of broadband service your customer buys – BIAS or BDS.  As a practical matter, BIAS can be thought of as best efforts internet service similar to what you might get at home and is generally limited to smaller businesses.  BDS services, on the other hand, are dedicated, high capacity point to point transmission services with guaranteed speeds and quality of service levels, (e.g., Ethernet over fiber, copper or co-axial cable, or TDM service like a DS1 or DS3).  If your customer uses BIAS or best efforts internet, then you may be protected by net neutrality.  If your customer used BDS, net neutrality does not apply.  The good news, however, is that BDS is usually considered a telecommunications service, which means that common carrier nondiscrimination rules apply and could provide some protection from unreasonable discrimination or a refusal to interconnect and carry traffic.

Key Net Neutrality Issues

The net neutrality debates focuses on two main issues:  (1) Is broadband internet access service a Title I (of the Communications Act) information service or a Title II telecommunications service; and (2) what net neutrality rules should be adopted.

Is BIAS An Information Service or a Telecommunications Service?

The service classification question goes to the FCC’s authority to adopt rules.  If classified as an information service, the FCC’s authority to regulate is limited. The current FCC classified BIAS as an information service and concluded that it no authority to impose any rules other than requiring BIAS providers to be transparent in how they treat third party content.  The previous FCC, under Chairman Wheeler, on the other hand, had concluded that BIAS is a Title II telecommunications services.  That classification provided ample authority to adopt a range of net neutrality rules, all of which except a transparency rule were eliminated by the current FCC.  A central issue before the D.C. Circuit’s review of the most FCC order is whether the FCC’s finding that BIAS is an information service is reasonable in light of statutory definitions.  The debate turns on fine technical distinctions and some legal hairsplitting of key terms and the answer is in no ways easy or straightforward.  After all the Supreme Court in 2005 upheld the FCC’s initial determination that BIAS is an information service, but the D.C. Circuit also upheld the FCC’s contrary finding that it is a telecommunications service.  So let’s put the classification issue aside for now and focus finally on what net neutrality rules, if any, make sense.

Net Neutrality Rules Past, Present and (?) Future

In 2015, the FCC adopted a set of net neutrality rules.  These rules barred internet service providers (ISPs) from blocking and throttling lawful content, applications and services and established a flat ban on paid prioritization, which precluded  ISPs from charging content or service providers for network access to end user customers.  The FCC adopted a general conduct rule that barred ISPs from unreasonably interfering with or unreasonably disadvantaging the ISP’s end user customers from accessing the lawful content, applications or services of their choosing.   The FCC signaled its intent to review the lawfulness of so-called zero-rating plans.  These are plans that exclude from a carrier’s data limits certain sponsored programming, such as a streaming music service. (With the advent of unlimited data plans, zero rating has become less of an issue). The FCC also adopted an enhanced transparency rule that required ISPs to disclose their network management practices.

The current FCC, as noted, reversed course, and eliminated all of the net neutrality rules, except for an enhanced transparency rule.  (The FCC also purported to preempt any state net neutrality rules – another issue currently on appeal.)  So currently, the only federal net neutrality rule is a transparency regulation that requires BIAS providers to disclose their practices, for example, if they intend to block, throttle or impose paid prioritization.  The theory is that if a BIAS providers does block traffic having said it would not, the provider may be subject to enforce action by the Federal Trade Commission.  Despite the lack of blocking or throttling rules, many BIAS providers have pledged not to engage in such practices or to impose discriminatory paid prioritization.

What does the future hold?  This depends on two key factors, which to some extent or interrelated.  One factor is the upcoming decision by the D.C. Circuit.  It may uphold or overturn some or all of the current FCC’s information services, light regulation framework.  The second factor is whether Congress will finally step in and stop the back and forth ping-pong regulatory game where net neutrality outcomes depend on whether Republicans or Democrats are in charge of the FCC.  In this regard, there has been some recent optimism that there is a consensus building around a core set of net neutrality principles barring blocking, throttling and some or all forms of paid prioritization.  It should be emphasized the Congress can expressly give the FCC authority to adopt these rules without having to find that BIAS is a title II telecommunication services.  In fact, there is a reasonable argument that title II is not well suited to net neutrality.  When the Chairman Wheeler classified BIAS as a title II service, he also then immediately acted to remove virtually all of the title II requirements, such as tariffing, network sharing, rate regulation and USF contribution requirements.

We will continue to keep you updated on future net neutrality developments.

[This is the first of two planned updates on net neutrality.    In the second update, we will focus on universal service implications and drill down on one of the most controversial issues, paid prioritization.]


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