Asked & Answered: Communications industry awaits 'net neutrality' ruling


By Steve Thorpe
Legal News

The issue of “net neutrality” stirs strong emotions in both the business community, which sees it as undue interference, and the Internet community, which sees it as a prerequisite of a free and open Internet. A three-member panel of the U.S. Court of Appeals for the D.C. Circuit recently heard arguments in a case brought by Verizon against the Federal Communications Commission.

Professor John Rothchild has been a member of the Wayne State University Law School faculty since 2001. He is a co-author of “Internet Commerce,” which has been adopted for classroom teaching at more than 30 law schools.

From 1991 to 2001, Rothchild was an attorney at the Federal Trade Commission’s Bureau of Consumer Protection, specializing in law enforcement efforts addressing Internet-based fraud and online compliance.

For several years he led the commission’s international consumer protection program.

He spoke recently with Steve Thorpe of the Legal News.

Thorpe: What is the network neutrality order that is being challenged before the D.C. Circuit?

Rothchild: At issue is a set of rules, popularly known as the “Network Neutrality Order,” that the Federal Communications Commission promulgated in December 2010.

The rules apply to companies that provide broadband Internet access to end users.

All of the rules apply to companies, such as AT&T, Verizon and Comcast, that provide Internet access to home and business users. Some, but not all, of the rules also apply to the networks that supply Internet access to mobile phone users.

The order imposes three rules on access providers.

The first is a requirement of transparency: Access providers must accurately disclose their network management practices, the performance characteristics of their networks, and the terms and conditions under which they offer their services.

The second rule embodies a no-blocking principle: A provider may not block the transmission through its network of lawful content, applications or services, and may not prevent the use of non-harmful devices in connection with their services. (For mobile providers, the no-blocking rule only prohibits blocking lawful websites and applications that compete with their own offerings.)

The third rule implements a principle of nondiscrimination: A provider may not engage in “unreasonable discrimination” against particular types of content. (This rule doesn’t apply to mobile providers.)

What constitutes “unreasonable discrimination” will have to be determined on a case-by-case basis.

The order provides examples of discrimination that are likely to be considered unreasonable: degrading the quality of a voice-over-IP application that competes with the provider’s telephone services; preventing users from accessing the content of their choice, such as by blocking the use of BitTorrent; and interfering with access to disfavored speech. In addition, the order expresses doubts about the legality of “pay-for-priority” arrangements, in which a content provider can pay extra and get priority treatment for its content.

The order also offers some examples of discrimination that wouldn’t be considered unreasonable: charging high-volume end users more than low-volume users and limiting the bandwidth of heavy users during times of network congestion.

These limitations are all subject to an additional principle of reasonable network management: The order explains that a practice “is reasonable if it is appropriate and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service.”

Thorpe: Although Verizon is the named party in the case, I imagine that the entire communications industry is watching this one. True?

Rothchild: Very much so. The entities that challenged the FCC’s order are Verizon and MetroPCS (which is now part of T-Mobile).

The Independent Telephone and Telecommunications Alliance, a telecom trade association, intervened on  behalf of the challengers, and several organizations, including Public Knowledge, Vonage and the Open Internet Coalition, intervened in support of the FCC. More than 100,000 written comments were submitted in the FCC proceeding that produced the order.

Thorpe: Companies argue that the FCC doesn’t have the authority to require that broadband providers give their customers equal access to all Internet content. On what do they base that argument?

Rothchild: Verizon argues that the FCC lacks statutory authority to issue the order. In fact, it says that the Communications Act explicitly forbids the FCC from issuing rules of this sort, which regulate Internet service providers as if they were common carriers.

Verizon also argues that the rules violate the carriers’ First Amendment rights, by regulating the speech they can carry on their networks, and that the rules amount to a taking of the carriers’ property through a “permanent easement” on their networks in violation of their Fifth Amendment right to just compensation.

Lastly, Verizon maintains that the rules aren’t supported by the administrative record before the FCC, since there is no problem in the industry that the rules solve, and the rules are therefore arbitrary and capricious.

Thorpe: The pro net neutrality side likes to portray their fight as one for “freedom.” Is that an oversimplification?

Rothchild: Any time a party in litigation claims it is fighting for “freedom,” you can be sure there is more to the story! But this term does convey a kernel of truth on both sides of the issue.

The proponents of network neutrality are promoting a sort of freedom on the part of those who wish to supply content to end users and on the part of end users themselves. A content or application provider whose offerings are blocked from reaching end users doesn’t enjoy unrestricted freedom to engage in commercial activities.

The Internet access providers are fighting for another sort of freedom: the freedom to manage their networks as they choose, deciding what content may flow over their networks, whether to give some types of content (or content providers) priority over others and how much to charge for different classes of service.

Thorpe: Both sides tend to feature “the market” in their arguments. The pro side argues that innovative startups rely on net neutrality and the anti side says, basically, “we built it, we own it.” Will the court be swayed by either of those arguments?

Rothchild: In the administrative proceeding that resulted in the Network Neutrality Order, the FCC gave extensive consideration to balancing the public policy in favor of technological innovation with the property rights of the network owners.

The questions for the court to answer are “How much authority did Congress delegate to the FCC?” and “Does the order interfere with the carriers’ protected rights?” The court will be doing its job appropriately if it confines its attention to the latter questions and leaves the policy issues for Congress and the FCC.

Thorpe: It will take months to get a decision from the court and by then Congress may be addressing the issue. What may be different in their approach?

Rothchild: The issue of network neutrality is a highly partisan one. Republicans in the House of Representatives have made their intentions clear: The House passed a resolution in 2011 disapproving the order pursuant to a little-known law that allows Congress to nullify a regulation through a joint resolution.

The Senate didn’t take up the measure, so the nullification attempt didn’t succeed. Democratic supporters of network neutrality in Congress have stated that they will introduce legislation to implement the provisions of the FCC’s order if it is struck down by the court.

Both sides are in a holding pattern at the moment and are likely to wait until the court rules before taking further action.