The Recent Court and Regulatory Battles Behind the Net Neutrality Controversy

The appeals court's first decision, Comcast v. FCC, 600 F.3d 642 (D.C. Cir. 2010), held that the FCC failed to cite any statutory authority that would justify its order compelling a broadband provider to adhere to certain open Internet practices. In response, relying on §706 of the Telecommunications Act, 47 U.S.C. 706, the FCC issued an order imposing transparency, anti-blocking and anti-discriminatory requirements on broadband service providers.

That led to the court's second opinion, Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014), which held that §706 does give the FCC authority to enact open Internet rules. Nonetheless, the appeals court vacated the anti-blocking and anti-discrimination provisions because the FCC had chosen to classify broadband service as an “information” service under the Telecommunications Act, which expressly prohibited the FCC from applying common carrier regulations to such services.

In turn, the FCC promulgated its 2015 “Open Internet Order” (FCC 15-24 (Feb. 26, 2015)) in which it reclassified broadband service as a “telecommunications” service subject to common carrier regulation under Title II of the Communications Act.

Title II gives the FCC the power to regulate common carriers (which focused originally on telephone companies providing only voice service by land-line wires), and requires that carriers furnish communications facilities and services upon reasonable request, at just and reasonable rates, and without unjust or unreasonable discrimination. See, 47 U.S.C. §§201, 202.

Of course, just what is reasonable is often a subject of dispute in and out of court. Various Internet service providers (ISPs) and their associations challenged the FCC's Open Internet Order, which characterized them as common carriers subject to Title II regulations. The ISPs argued that the FCC's authority to do so was either non-existent or exercised in an arbitrary and capricious manner. The D.C. Circuit's panel decision in 2016 rejected those challenges, and upheld the FCC's Open Internet Order.

As the U.S. Telecom Association panel explained, the Internet is one of the most significant technological advancements of the late 20th century, and it includes four major participants: 1) end-users; 2) broadband providers; 3) backbone networks; and 4) edge providers.

Most end-users connect to the Internet through a broadband provider, which delivers high-speed Internet access using technologies such as fiber optics, cable modem service and digital subscriber line (DSL) service. Broadband providers interconnect with backbone networks — long-haul fiber optic links and high-speed routers capable of transmitting vast amounts of data. Edge providers, such as Netflix, YouTube and Amazon, provide content or services over the Internet.

Proponents of Internet openness (which in part include not only edge providers, but also consumer, free speech and other public interest organizations, as well as content creators, owners and licensors) — each having in common a lack of control over Internet access or digital distribution channels — all worry about the relationship among broadband providers, edge providers and consumers. They fear that broadband providers might block end-users from accessing content or services provided by certain edge providers, or might slow and degrade the quality of the users' access to them — either as a means of favoring their own competing content or services, or to enable the providers to charge and collect more fees from certain edge providers, who, in turn will pass through those higher costs to consumers or end users.

On May 1, 2017, the D.C. Circuit denied a requested rehearing of the panel decision in U.S. Telecom Association, 855 F.3d 381 (D.C. Cir. 2017), while at the same time addressing concerns raised about U.S. Supreme Court precedent relating to the FCC's authority (which was here found to exist and to have been properly exercised) and the First Amendment (which was here found to be more appropriately applicable to speakers rather than to purportedly indiscriminate conduits for speech).

The D.C. Circuit went on to further hold that review would be particularly unwarranted “at this point in time” in light of the uncertainties surrounding the fate of the FCC's Open Internet Order, as “the court could find itself examining and pronouncing on the validity of a rule that the agency had already slated for replacement.”

The appeals court was referring to the intervening and then pending efforts of FCC Chairman Ajit Pai, a former lawyer for Verizon, appointed to his post by President Trump in January 2017, to vitiate the prior Democratic-led administration's Open Internet Order and otherwise roll back the net neutrality rules via, among other things, a Notice of Proposed Rule-Making (NPRM) issued on May 23, 2017 that was perhaps ironically entitled “Restoring Internet Freedom.” FCC 17-60.

The FCC's NPRM proposed to eliminate the Open Internet Order's classification of broadband Internet access service as a “telecommunications” service subject to common carrier regulation under Title II of the Communications Act, and to reinstate the more lightly regulated “information” service classification.

In response, more than 20 million public comments were filed with the FCC about this issue. Most commenters were generally against repeal and for retention of the broadband net neutrality rules.

Chairman Pai signaled his views early on, claiming that the Open Internet Order had injected uncertainty into the marketplace, restricted innovation and chilled investment. He also discounted the quantity of comments filed (many of which were simple but duplicative form comments) as merely one factor to consider in fulfilling the FCC's statutory mandate to act in the “public interest.”

(In an interesting side story, the New York State Attorney General has been investigating whether any public comments filed at the FCC regarding net neutrality wrongfully used New Yorkers' identities without their consent. Although the state attorney general repeatedly asked the FCC to cooperate with its investigation, the federal agency has been uncooperative. Thus, while soliciting help from the general public, the state attorney general released an open letter to FCC and threatened to join in legal action against the agency.)

On Dec. 14, 2017, the FCC formally adopted the NPRM's proposal by a majority vote of three Republican to two Democratic commissioners and decided to restore the classification of broadband Internet access service (BIAS) as an “information service” rather than a more regulated “telecommunications service.”

Relatedly, the FCC also closed an investigation into whether AT&T or Verizon Wireless violated the now vitiated net neutrality rules with paid data exemptions known as “zero rating practices.” Such practices allow AT&T and Verizon Wireless to stream their own video services (DirecTV and go90, respectively) on their own mobile networks, without counting against customers' data caps, while the carriers charge other video providers for the same data exemptions or “paid prioritization” (an obvious incentive to disadvantage competitors who also provide audio-visual content).

The roll-back of the prior administration's net neutrality rules and policies — which also prohibited the discriminatory use of blocking, speed or signal degradation, and subscriber “authentication” in connection with so-called TV Everywhere — is merely the latest battle in the long and likely ongoing war over net neutrality.

Creating profound near-term and long-term consequences for individuals, companies, government and other organizations, this reversal of course will be challenged at the FCC and in court by multiple parties and amici, including by tech titans such as Google, Amazon, Facebook and Netflix, as well as by state attorneys general. (At press time, all 49 Democratic Senators, plus Senator Susan Collins (R-ME) were backing legislation to reverse the net neutrality roll back.) This should, at least, prompt attorneys to remind their clients and friends that ad hoc coalitions are often organized to share the cost of preparing and submitting administrative and judicial filings addressing common concerns in various matters.

***** Barry Skidelsky is a New York attorney who also serves as consultant, arbitrator and mediator. He is currently co-chair of the Television & Radio Committee for the New York State Bar Association's Entertainment Arts and Sports Law Section (EASL), and an EASL Executive Committee member.