Continuing Uncertainty Under FCC Network Neutrality Rules Prof. Barbara A. Cherry Indiana University Presented at EDUCAUSE Live! Webcast January 26, 2011

Overview – New Network Neutrality Rules On December 21, 2010, the FCC adopted rules governing broadband industry practices for purposes of preserving the open Internet. These rules are referred to as network neutrality rules. The rules are highly contentious. The rules are another step in a deregulatory policy trajectory for broadband, with decisions oscillating between Republican vs.. Democratic majorities of FCC commissioners and consequences of judicial rulings. These rules were adopted by a 3-2 vote of the FCC commissioners (Democratic majority). 2 Cherry 1/26/11

Overview –Uncertainty of Regulatory Philosophy Perhaps most fundamentally, uncertainty will continue because the battle of regulatory philosophy continues between Republican and Democratic majorities at the FCC and in Congress. Relatedly, affected industry members and public interest groups look for windows of opportunity to change the existing set of rules, or the lack thereof, both in court and in policymaking forums (FCC, Congress). Moreover, the recent deregulatory policy trajectory for broadband is a radical experiment relative to that of other network infrastructures in the U.S. 3 Cherry 12/6/10

Overview – Uncertainty of Implementation Secondly, uncertainty will continue because specific provisions in the rules leave ambiguity in implementation. Some of these ambiguities pose problematic areas for educational institutions. Asymmetric treatment of fixed and wireless (cellular, wifi) broadband Internet access services What constitutes unreasonable discrimination What is the scope of permissible “pay for priority” access What constitutes reasonable management practices 4 Cherry 12/6/10

Overview – Uncertainty with Other Policies Thirdly, uncertainty will continue due to problems in coordinating these rules with other policies. For example, applicability of federal universal service policy to broadband Internet access services (beyond the E-rate program) is unclear. 5 Cherry 12/6/10

Uncertainty of Regulatory Philosophy 6 Cherry 12/6/10

Regulatory History of Network Neutrality John Windhausen (ALA) discussed network neutrality during an EDUCAUSE Live! Webcast on May 19, He stressed the evolving distinction between “telecommunications services” and “information services”, starting with the FCC’s Computer Inquiry proceedings in the 1980’s and after passage of the Telecommunications Act of 1996 (TA96). He also discussed the FCC’s declaratory ruling in 2002 in which cable modem access to the Internet was classified as an “information service”. Cherry 12/6/10 7

Regulatory History after the Cable Modem Order This Cable Modem Order (2002) is what triggered the deregulatory policy trajectory for broadband to which the network neutrality debate has been the response. Since 2002, further policy has evolved based on critical court decisions, shifting party majorities at the FCC, and political stalemate in Congress. The Dec rules were in response to a remand from the D.C. Circuit Court of Appeals in Comcast vs.. FCC, finding that the FCC exceeded its statutory authority in its ruling regarding network management practices. Cherry 12/6/10 8

Understanding the Legal Uncertainty - Title I vs.. Title II jurisdiction The battle is over Title I vs.. Title II jurisdiction under the Communications Act of Title I : governs “information services”. Title II: governs “telecommunications services” as common carriers. FCC’s Title I “ancillary jurisdiction” is more limited than Title II common carriage jurisdiction. The Dec FCC rules are based on Title I jurisdiction. Sustainability upon judicial review is questionable. Title II jurisdiction provides sounder legal basis for rules, but is politically more risky. Even under Title I rules, Congressional Republicans threaten repeal. Cherry 12/6/10 9

Radical Experiment of Broadband Cherry 12/6/10 10

Deeper Understanding of Legal Uncertainty - The Radical Experiment for Broadband The elimination of common carriage legal status for broadband is a radical deregulatory policy in the U.S. U.S. deregulatory policies for transportation technologies preserved common carriage status (e.g. railroads, airlines) Cherry 12/6/10 11

Common Carriage: From Common Law to Statutory Law Common carriers bear fundamental obligations since the Middle Ages under the English common law. To serve upon reasonable request Without unreasonable discrimination At just and reasonable prices With adequate care. The regulatory framework from which 20 th-21st century deregulatory policies are evolving was the result of successive, cumulative layers (4) of centuries-old policy and legal innovation. Cherry 12/6/10 12

The Cumulative Layers of Prior Legal Innovations English Common Law of Common Carriage Federalism under U.S. Constitution Common Law of Public Utilities Federal (and State) Statutory Law Middle Ages: Late 18 th Century: 19 th Century: Late 19 th Century: 13 Cherry 12/6/10

The Cumulative Layers of Prior Legal Innovations: Statutory English Common Law of Common Carriage Federalism under U.S. Constitution Common Law of Public Utilities Federal (and State) Statutory Law Telecommunications Act of 1996 Communications Act of 1934 Sherman Act of 1890 Interstate Commerce Act of 1887 Middle Ages: Late 18 th Century: 19 th Century: Late 19 th Century: 14 Cherry 12/6/10

Deregulatory Transportation Policies Preserved Common Carriage Status Deregulatory transportation policies were incremental, merely modifying the fourth layer of legal innovation. Retained common carriage status and obligations from the first layer; and Modified the fourth layer. Antitrust law is not substituted for the fourth layer. 15 Cherry 12/6/10

Deregulatory Broadband Policy Is Radical by Eliminating Common Carriage Status But classification of broadband Internet access service as an information service is a radical experiment that eliminated the first layer of legal innovation. Disrupts coordination with the successive three layers; Requires the FCC to reconstruct a new first layer under nebulous Title I ancillary jurisdiction; and Requires construction of new interfaces among such a new first layer with the successive three layers and other bodies of law (including antitrust). 16 Cherry 12/6/10

Uncertainty of Implementation 17 Cherry 12/6/10

Elements of the FCC’s Network Neutrality Rules: Transparency Transparency Providers of broadband Internet access service shall publicly disclose accurate information regarding network management practices, performance, and commercial terms of their services sufficient for consumers to make informed choices regarding such services and for content, application, service and device providers to develop, market, and maintain Internet offerings. Uncertainty What constitutes competitively sensitive information excluded from the transparency rule. Level of detail is unspecified, left to implementation. 18 Cherry 12/6/10

Elements of the FCC’s Network Neutrality Rules: No Blocking No blocking For fixed broadband Internet access service: shall not block lawful content, applications, services, or non-harmful devices, subject to reasonable network management. For mobile (cellular, wifi) broadband Internet access service: shall not block consumers from accessing lawful websites, subject to reasonable network management; nor block applications that compete with the provider’s voice or video telephony services, subject to reasonable network management. Uncertainty Asymmetric application between fixed and mobile providers What is permissible scope of reasonable network management practices 19 Cherry 12/6/10

Elements of the FCC’s Network Neutrality Rules: No Unreasonable Discrimination No unreasonable discrimination Applicable only to fixed broadband Internet access services Shall not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service. Reasonable network management shall not constitute unreasonable discrimination. “Pay for priority” access is unlikely to be “reasonable discrimination” Uncertainty Asymmetric application between fixed and mobile providers What constitutes unreasonable discrimination What is permissible scope of reasonable network management practices What is permissible “pay for priority” access 20 Cherry 12/6/10

Uncertainty with Other Policies 21 Cherry 12/6/10

Uncertainty with Other Policies Title I-based jurisdiction for network neutrality rules requires building of new interfaces with other bodies of law For example, federal universal service policy Long-term sustainability of federal support mechanisms is unclear. Applicability to broadband Internet access services (beyond the existing E-rate program) is unclear. Political stalemate in Congress blocks legislative solution. 22 Cherry 12/6/10