. . . In Which the Blogger Gets to Play Lawyer

Network_neutrality_poster_symbolNow that numerous lawsuits are being filed against the net neutrality order, I thought I would give my own take on some of the issues being raised by the various lawsuits. I’m certainly no lawyer, but I have been following the FCC closely since 1980 and have seen how numerous challenges to their regulations have gone over the years. So following is my take on the major arguments being made against them.

Procedural Issues There are two procedural problems that could be troublesome for the FCC. First, the final order bears almost no resemblance to the original proposal that the Commission floated when seeking public comments. Even though it took a few hundred pages to explain it, the final net neutrality order boils down to a handful of actual new principles defining the way net neutrality is going to work.

The problem is that those few provisions include new ideas and terminology like prohibiting paid prioritization and not allowing throttling of web traffic. Those concepts were not included explicitly in the original notice. The FCC and other similar agencies have a long history of adhering to specific procedures for making new rules, and that process involves presenting the proposed ideas to the public and then soliciting comments.

I can see a valid argument that there was not adequate opportunity to discuss what was actually ordered. Of course, if that’s the only thing that the courts find wrong about the order, it’s a pretty easy fix, and at worst the FCC would have to go through another public notice and comment period.

More troubling is that at the last minute the FCC tossed in the idea of regulating Internet interconnection agreements and peering arrangements. That was a surprise to most of the industry and even made a few proponents come out against the final order. That is a major change in FCC authority and I can’t find any prior notice of the FCC’s intent to do this to the extent contained in the order.

Reversing Major Precedents Generally, agencies like the FCC must rely on the intent of Congress and existing legislation in creating their overall framework of rules. In this order the FCC reversed a lot of prior work it did on the topic of regulating the Internet. Obviously federal agencies are allowed to change their interpretation of the law, but in this case there is a mountain of prior legal opinions from FCC lawyers saying that Congress did not intend to treat the Internet as a public utility under the 1996 Telecommunications Act.

That makes it hard, under external scrutiny from courts, for the FCC to now reverse itself and say that the Internet is a utility and should be regulated as such. The net neutrality order spends a whole lot of words trying to defend its change in direction. And rightfully so, because I would guess that this is going to be at the crux of any court review of the FCC’s authority to make this new set of rules.

Use of Forbearance to Modernize Regulatory Law I thought the way that the FCC chose to implement net neutrality was clever, by bringing it under Title II rules but then forbearing against rules there that they don’t choose to apply. But that cleverness is a point of legal attack. Obviously choosing which parts of Title II to forbear was somewhat arbitrary. But worse, if forbearance is an acceptable method of regulating the Internet, there would be nothing to stop the FCC in the future from changing the list of things they are forbearing from.

Regulating the Internet is a major new undertaking, and one would normally expect an agency to publish a new coherent set of rules laying forth how they will accomplish such a new undertaking. They would publish the gist of the new rules and ask for comments. In this case, by choosing forbearance, there was no public discussion of which Title II rules should or should not apply, nor is there any particular reason to think that the forbearance choices made are permanent and cast in stone.

Applying the Rules to Small ISPs One of the lawsuits attacks the FCC for applying the network neutrality rules to all ISPs, including small ones that don’t have any market power. Certainly small ISPs, on their own, cannot undertake the large deals that would give priority to some content over others. But this doesn’t mean that small ISPs can’t be bad actors. It certainly is within the ability of small ISPs to block access to content that they find unacceptable, even if such content is lawful. Further, small ISPs often work as part of larger consortiums that might have the market power to undertake arrangements that would violate net neutrality. For example, there are several large ISP clearinghouses in the country that provide the servers, software, and ISP functions for millions of end users.

The courts have an interesting challenge with this order. To some degree, in the FCC’s defense, they undertook regulating the Internet in a manner that the last court review suggested they should consider. But the way they went about it is unorthodox, and in regulatory law that always creates a challenge.

Forbearance and Net Neutrality

Network_neutrality_poster_symbolAs the FCC crawls slowly towards a decision on net neutrality, I thought it would be useful to talk a bit about forbearance. Forbearance means restraining from doing something, and all of the proposals to protect net neutrality that involve Title II regulation require forbearance to some of the FCC’s rules.

The FCC is somewhat unique when it comes to regulation because Congress has given them the right for forbearance, meaning the FCC can selectively decide when to apply certain laws and regulations. Most federal agencies don’t have this power. But this makes sense for the FCC since they are regulating such diverse companies such as cable companies, telephone companies, cellular companies, fiber networks, microwave companies and a number of other niche technologies. It’s always been obvious that rules that make sense for one of these industries might not make any sense when applied to another one.

If the FCC was to put broadband providers under Title II this means subjecting them to all of the rules that are still in place from the Telecom Act of 1934 as well as many of the rules in the Telecom Act of 1996. It is the fear of having to comply with all of these rules that is causing the harsh reaction of ISPs to the idea of being regulated. (Well, that, or just the idea of being regulated at all).

Let’s look at one example of the kinds of rules that are required by the Telecom Act of 1934. That Act requires all telephone companies to issue tariffs. People tend to think of tariffs as a price list and a description of the products offered by a telephone company. But tariffs are much more than that. Tariffs include details of the way that a carrier must interact with its customer. Tariffs define things like how much notice you have to give a customer before you can disconnect them for non-payment. Tariffs require a carrier to give notice before changing rates, meaning that rates can’t be changed on the fly, but must wait for a period of time before being implemented. Tariffs also require nondiscrimination between customers, and that might be the biggest part of tariffs that scare ISPs, who routinely offer different deals to customers every day.

Additionally, every state has developed specific rules for what must be contained in tariffs filed in that state. This means that a nationwide ISP would have to file a different tariff in each state and follow different rules in each state. If forbearance is not applied to these parts of Title II then ISPs would not just be regulated by the FCC, but by each of the fifty states.

There are many parts of Title II that would also not make sense to apply to ISPs. For example, there are sections of the various Acts that look at things like protecting customers from obscene phone calls or the requirement to provide operator services that obviously don’t apply to data services.

But there are other requirements that have the ISPs running scared. For example, the Telecom Act of 1996 requires the large telephone companies to unbundle their networks and to give access of their networks to competitors. And this does not just apply to telephone lines but also to DSL. There is no reason why this could not be applied to cable companies to bring competition into the data market. And there are related rules that regulate things like collocation and that require interconnections between carriers that exchange voice and data traffic.

There are yet other portion of the Title II rules where it is not clear if forbearance ought to be applied. For example, the FCC requires jurisdictional separation of revenues and costs to determine what is under the control of the FCC versus the control of states. Would the FCC just declare broadband to be an Interstate service to keep it all under their control? That is what has been done with DSL, and yet the states are still involved in many aspects of regulating DSL.

It appears to me like the idea of forbearance in this case is going to be extremely complicated. There are repercussions for deciding to forbear or not to forbear different parts of the existing telecom rules. It’s a huge puzzle to solve, and I am going to guess that every decision to forbear or not forbear will present a chance for legal challenge.

But the FCC forbears things all of the time. In fact, there is a legal process that allows for carriers to ask for forbearance from a specific rule, and if the FCC does not act within a year then the forbearance is assumed to be granted.

We already know that Verizon and AT&T are threatening to sue the FCC should they try to regulate broadband under Title II. Even should the FCC be able to win such a challenge, they would have to expect a decade where ISPs are constantly asking for additional forbearance from whatever regulation the FCC chooses to apply to broadband. If nothing else, this sounds like a full employment act for telecom lawyers.