The FCC Process

I recently wrote a blog that discussed the possibility that the FCC would change the definition of the speed that constitutes broadband. I got a number of inquiries from readers asking how this could happen outside of the scope of the formal rulemaking process. Specifically, I had reported on the rumor that the FCC was likely to make this decision by February 3, which is not one of the dates when the FCC formally holds open meetings and votes on changes to FCC rules. Today I’m going to try to shed some light on how the FCC makes decisions, which will hopefully clarify the issue.

The FCC has several paths to make decisions. The one that the industry is most familiar with is the rulemaking process. The basic process for rulemaking for all administrative government agencies was created with the Administrative Procedure Act in 1946. This Act defined a process of changing federal rules that mandates getting feedback from the public.

The FCC might consider changing rules for several reasons. Some rule changes are mandated by Congress, with one of the more recent such FCC actions being in response to changes in consumer privacy rules. The FCC can also start a rulemaking in response to a petition asking for a clarification of the rules. In the past such petitions often came from the large carriers or else from state regulators. Finally, the FCC can simply identify an industry problem on their own and begin the rulemaking process to seek possible solutions.

The FCC then has several tools available to facilitate the rulemaking process:

  • One tool available to the FCC is the NOI (Notice of Inquiry). This can be done when the FCC is trying to understand an issue and the possible solutions.
  • But the NOI process is not mandatory and the agency can move directly to an NPRM (Notice of Proposed Rulemaking). This is a formal document that proposes specific rule changes. There is a defined minimum timeline for this process that includes time for the public to comment and for a second round of reply comments, if needed. During this process the FCC might allow ex parte meetings from interested parties, hold public meetings to solicit feedback or engage with industry experts to get feedback on their proposals.
  • Finally, some dockets proceed to an FNPRM (Further Notice of Proposed Rulemaking). This tool is used when the comments on an NPRM cause the FCC to consider a different solution than what they originally proposed. This also then goes through the public comment process.

But not everything done at the FCC goes through the rulemaking process. For example, one of the mandated functions of the FCC is acting to adjudicate industry disputes. Industry parties that disagree on the interpretation of existing FCC rules can ask the agency to clarify – and in the case the agency takes on a nearly judicial role in looking at the facts of a specific case.

Finally, the FCC has a major administrative function. The agency has to make numerous policy decisions in order to meet its mandates from Congress. A simple way to think about this is that the rulemaking process creates formal rule changes. But then the agency must develop the processes and policies to make the new rules function. The FCC spends a lot of time on these administrative functions. For example, holding auctions for spectrum is an administrative function. Deciding how to fund and administer the Universal Service Fund is an administrative function. Approving new telecom and wireless devices is an administrative function.

The decision in the past to define the speed of broadband was an administrative decision. The agency has wide discretion to arbitrarily define administrative rules, but they often ask for public feedback.

The speed of broadband has been discussed at the FCC in several different contexts. First, the FCC has administered several grant programs and they decided that it was in the public good to set minimum broadband speeds for various grant programs. For example, the CAF II program requires the large telcos to deploy technology that delivers at least 10/1 Mbps. But there have been other speed requirements for other grant programs and the ‘experimental grants’ of a few years ago looked to fund technologies that delivered at least 100 Mbps download.

But the primary reason that the FCC decided they needed to define broadband using speeds was due to a mandate from Congress for the FCC is to report once per year on the state of broadband in the country. The Congress wants to know how many people have, or do not have broadband. Past FCCs decided that a definition of broadband was needed in order to create a meaningful report to Congress. They initially set the definition of broadband at 10/1 Mbps and later raised it to 25/3 Mbps. And they purposefully have excluded cellular broadband as not being broadband.

In anticipation of each annual broadband report the FCC sometimes asks questions of the public. They did so last year in an NOI where they asked if the 25/3 Mbps definition of broadband is too high. And they asked if cellular broadband ought to now be counted as broadband. This NOI is issued only for factfinding and to solicit public opinion on the topic. But the speed of broadband is an administrative decision of the agency, meaning that there are not formal rules associated with setting or changing the definition of broadband. The agency is free to make changes at any time to these kinds of administrative definitions. In the past the definition of broadband speeds was included with the annual broadband reports issued to Congress. And the anticipation is that the agency will use this same mechanism this year. There is no formal docket open on the topic and thus no formal and public vote is required. The FCC might or might not change the definition of broadband, but as my blog conjectured, the consensus of industry experts is that they are likely to do so. But we’ll have to wait for the annual broadband report to see if they actually lower the definition of broadband speeds or add cellular data to the definition.

Broadband CPNI?

FCC_New_LogoA group of consumer and privacy groups has asked the FCC to begin enforcing customer privacy rules. In the industry this process is called CPNI (customer proprietary network information) when applied to telephone and cable TV.

Now that the FCC has classified broadband as a common carrier service, they have the authority to investigate and regulate broadband privacy issues. This is something that the industry needs. Until now there has been very limited regulation of broadband by the Federal Trade Commission since the FTC authority was drawn only from the Children’s Online Privacy Act. But the FCC now has much stronger authority.

Current CPNI rules for telephone and cable TV are focused to a large degree on billing issues and on protecting private data like social security numbers, credit card numbers or other sensitive customer information. There is also a prohibition against disclosing the details of what customers do with those services – such as the calls they make or the channels they watch. (Of course, I guess we now know that the NSA is immune from the obligation to protect telephone records).

As sensitive as privacy matters are in those areas there are larger concerns with broadband. What people do online is extremely personal and the vast majority of Americans think that details of their online life should not be recorded or sold to others.

There are a whole lot of places that the FCC could go with broadband CPNI over and above the normal protections of billing data. For example, what are the obligations of companies to notify people when there has been a data breach and customer information has been compromised? Should ISPs have to disclose to customers if they use their data for any purposes or sell it to others in any form? And if so, how much do companies have to disclose?

An ISP is in very powerful position with a customer. If they wish to record what a customer does online they know everything that the customer isn’t somehow encrypted. They are the first in line to see outgoing bits and the only one to see all of the incoming bits.

The FCC has already started some internal work on the topic and held a workshop. From there the FCC has a number of options. They can first solicit comment and ideas from the public to see what kinds of sentiments are out there. It seems for almost everything the FCC does there are two sides of opinion, and there will be those that are in favor of very strong rules and those in favor of a very light touch. But the FCC would do well to hear all of these opinions before trying to formulate specific rules.

But they do have the option to go straight to a rulemaking. They could propose specific CPNI rules and let everybody take pot shots at them. I’m suspecting that for something this new and different that they are going to want to hear all sides of the arguments first before developing rules. The FCC also might be slow-rolling this. The whole Title II regulatory process is under appeal in the courts and they might not want to go too far down any path until they feel more secure that the courts believe they have the authority to regulate broadband in this manner.

One thing that we can probably expect from the FCC is that whatever they do is going to apply to ISPs but not to what they call edge providers. That would be all of the companies like Google and Facebook that operate on the web and that are not under the Title II regulatory regime. I know that consumer groups are going to want that kind of protection because I think it’s generally assumed that it’s the edge providers – and not the ISPs – that are using and misusing people’s data today.