D.C. Circuit Court of Appeals disrupts FCC’s stance on “Net Neutrality” [Updated]

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Updated February 20, 2014: FCC Chairman Tom Wheeler announced yesterday that he does not plan to seek further judicial review of the D.C. Circuit’s striking down a majority of the provisions of the FCC’s Open Internet rules.  Wheeler stated that he intends to accept the D.C. Circuit’s invitation to act by “proposing rules that will meet the court’s test for preventing improper blocking of and discrimination among Internet traffic, ensuring genuine transparency in how Internet Service Providers manage traffic, and enhancing competition.”

“Net Neutrality” was a term coined by Columbia Law Professor Tim Wu to describe the equality of the internet in terms of accessibility of content.  Broken down, the idea simply means that Internet Service Providers (ISPs) cannot charge consumers or content providers more for access to the internet than another.  Everyday internet users are able to access Facebook, Netflix, and Amazon without the threat of ISPs blocking or slowing down content that flows from these sites.  ISPs also have been unable to charge content providers extra for allowing their consumers to access their sites.

Since 2005, the Federal Communications Commission (FCC) has adopted an “open internet” policy that ensures “no one—not the government and not the companies that provide broadband service—can restrict innovation on the Internet.”  This open internet policy stipulates that broadband providers cannot discriminate in transmitting internet access or block sites that may compete with them, making sure that broadband providers are transparent in their dealings.

If broadband had been classified as a “common carrier” instead of an “information service,” the Court could have ruled in the FCC’s favor.

However, the U.S. Court of Appeals for the D.C. Circuit’s ruling (pdf) on January 14, 2014, struck down the FCC’s “open internet” policy.  Only the requirement that ISPs be transparent in their dealings remained following the Court’s ruling.  One of the key findings by the Court stated that the FCC currently does not have the authority to tell ISPs they must treat all content equally, although the Court stated the FCC did have broad authority to regulate the broadband market.

The case hinged on how the FCC has classified broadband in previous instances. Historically, the FCC has labeled broadband as an “information service.” This label has limited how the FCC regulates ISPs as compared to other categorizations.  If broadband had been classified as a “common carrier” instead of an “information service,” then the Court could have ruled in the FCC’s favor. Traditional telecommunications companies fall under this “common carrier” category and are required to treat customers (or in this case, content providers) equally.

This form of regulation is a “dynamic approach” to taking on injustices as they arise.

Following the ruling of the D.C. Circuit, the FCC has a few options as to how it will continue to maintain an open internet.  One of the options would be to appeal the Court’s decision to the full D.C. Circuit for an en banc review or to the Supreme Court of the United States.  This option may be the least likely, given the current ruling.  An FCC attempt to appeal without changing how it controls broadband providers may be futile at best.

Another option, and one that FCC Chairman Tom Wheeler publicly approved, is to pursue abuses of the open internet on a case-by-case basis.  This process of challenging issues is referred to as “adjudication.”  According to Wheeler, this form of regulation is a “dynamic approach” to taking on injustices as they arise. Wheeler believes, and rightly so, that the FCC still has some broad authority to regulate the internet.

Proponents of adjudication claim that a type of complaint process can be established that would allow an internet site or content provider to notify the FCC if they believe their rights are being violated.  From there, the FCC could litigate the issue, as long as the internet site that brought the claim has “proof of discrimination vis-à-vis a similarly situated website” and “material injury flowing from the challenged conduct.”

However, this broad authority to regulate the internet has raised red flags as to how exactly the FCC would enforce any supposed violation.  It would seem any litigation brought by the FCC for a violation of net neutrality would fail for the same reasons that the D.C. Circuit stated in its ruling.  Wheeler’s retroactive plan to tackle problems as they arise creates doubt that a wait-and-see policy may be a “too little, too late” solution.

Giving a valid reason for the change in classification in a short period of time may be difficult, but not altogether impossible.

What seems to be the best solution to the FCC’s dilemma is also the hardest for many to envision actually occurring.  The answer to the FCC’s woes depends on the reclassification of broadband as a common carrier.  This classification would give the FCC the authority to regulate the space and maintain the open internet to which everyone is accustomed.  The problem is that classifying broadband as a common carrier may never happen.

The FCC will first have to convince a court that the common carrier status is more appropriate for broadband than the information service title broadband currently holds.  Usually, agencies such as the FCC cannot change their positions unless they give a valid reason for doing so.  As recently as 2010, the FCC stated that categorizing broadband as an “information service” was the most appropriate.  Giving a valid reason for the change in classification in a short period of time may be difficult, but not altogether impossible.  Additionally, getting broadband reclassified would require an enormous lobbying campaign to outweigh the ISPs’ current political efforts.

In the interim, members of the House of Representatives have introduced a bill that would act as a temporary resolution to the Court’s ruling. The Act would “protect consumers and innovation online” while the FCC determines the best route to fight the adverse court ruling.

The large cable and telephone companies have successfully lobbied to make sure they are the select few that can provide broadband access to the residents of a majority of communities.

Many have also proposed that ISPs should be allowed to regulate themselves, and that in a free market society, prices will drive down any extraordinary costs associated with the new open internet.  There are issues with this ideology however, because it assumes that there is a free market with numerous ISPs available.

On the contrary, broadband providers are more easily compared to a monopoly, since there are only certain providers that are allowed in a given region.  In fact, many states, including North Carolina, have created barriers to locally owned networks. The large cable and telephone companies have successfully lobbied to make sure they are the select few that can provide broadband access to the residents of a majority of communities.  Because of the lack of competition, the ISPs are able to control the flow of content with little incentive to change.  The idea that these ISPs would in good faith regulate themselves is very likely naïve and could lead to unfavorable outcomes—unless the numerous affirmations of ISPs maintaining net neutrality principles after the court ruling truly are followed.

For many, the internet is much more than a system of blogs and tweets.  The internet in its entirety represents openness, a voice, and a form of expression that could not and should not be altered.  Whether the problem at hand is a variable pricing model that affects the consumer, or slower speeds that distort the content, the idea that the internet is a foreign land waiting to be conquered makes many uneasy.  Access to the internet should not be interfered with because of profits or politics, and because of this, many people will watch intently to see how the FCC will handle the open internet in the months to come.