The FCC Flexes its Muscle Over Net Neutrality

WASHINGTON, DC—The debate over net neutrality is like a sprawling historical novel that has everything in it: money, ambition, power and lots of sex. That’s because when you’re talking about the huge amounts of bandwidth being consumed by untold millions of people, porn consumption accounts for a big chunk of it. On the other hand, the fact that Comcast has demanded of broadband backbone Level 3 Communications an additional fee for video delivered to its cable subscribers reveals the immense mainstream stakes also at play in this epic showdown.

Netflix, which just partnered with Level 3 to deliver movies and other video content to its customers, accounts for an astounding 20 percent of bandwidth usage during peak periods, and it’s only just morphing from mail delivery to online streaming. Comcast, besides being an internet service provider also owns lots of content companies, is hardly a disinterested party in terms of what content gets delivered to its cable customers and the speed at which it gets there. Despite their claims of operational fairness and a dedication to maintaining a level playing field, is it wise to allow market forces alone decide how level the field truly is?

The Federal Communication Commission (FCC) thinks not. Yesterday, a day after the Comcast/Level 3 news broke, FCC Chairman Julius Genachowski announced a proposal, long in preparation, that would seek to ensure that level playing field not only for users of the internet, but also for businesses at every level that depend upon it for their existence. The proposal will be considered by the Commission for adoption during a meeting Dec. 23.

“Yesterday, I circulated to my colleagues draft rules of the road to preserve the freedom and openness of the Internet,” Genachowski said. “This framework, if adopted later this month, would advance a set of core goals: It would ensure that the Internet remains a powerful platform for innovation and job creation; it would empower consumers and entrepreneurs; it would protect free expression; it would increase certainty in the marketplace, and spur investment both at the edge and in the core of our broadband networks.”

Stressing that the underlying goal of net neutrality is to protect internet freedom in order to drive the internet job creation engine, the commissioner's three main components of his proposal are:

“First, consumers and innovators have a right to know basic information about broadband service, like how networks are being managed,” he said. “The proposed framework therefore starts with a meaningful transparency obligation, so that consumers and innovators have the information they need to make smart choices about subscribing to or using a broadband network, or how to develop the next killer app. Sunshine can help solve problems early, reducing the number of issues that even come to the FCC. 

“Second,” he continued, “consumers and innovators have a right to send and receive lawful Internet traffic—to go where they want and say what they want online, and to use the devices of their choice. Thus, the proposed framework would prohibit the blocking of lawful content, apps, services, and the connection of non-harmful devices to the network.

“Third,” he concluded, “consumers and innovators have a right to a level playing field.  No central authority, public or private, should have the power to pick which ideas or companies win or lose on the Internet; that’s the role of the market and the marketplace of ideas. And so the proposed framework includes a bar on unreasonable discrimination in transmitting lawful network traffic.”

Aiming for a light regulatory approach, however, Genachowski supported the concept of usage-based pricing. "Our work," he said, "has also demonstrated the importance of business innovation to promote network investment and efficient use of networks, including measures to match price to cost such as usage-based pricing." 

A green light also was given to limited network management practices that don't block entire swaths of content because they eat up too much bandwidth. "Reasonable network management is an important part of the proposal, recognizing that what is reasonable will take account of the network technology and architecture involved," Genachowski said.

The gambit by Genachowski to assert the Commission’s authority over decisions related to network management practices is not without its risks. In April, the FCC was handed a big loss when a federal appeals court decided in favor of Comcast in its 2008 appeal of an FCC decision prohibiting the cable provider from slowing BitTorrent traffic in an effort to reduce network congestion.

At the time, the ruling felt like a death blow to proponents of net neutrality, but a closer look at the decision revealed a technical and legislative glimmer of hope, one that Genachowski hopes to exploit with his current proposal.

According to the April ruling, the FCC had acknowledged that it did not have express statutory authority over the network management practices of ISPs, but nonetheless relied on Title II, Section 4(1) of the Communications Act of 1934, “which authorizes the Commission to ‘perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions.’ The Commission may exercise this ‘ancillary’ authority only if it demonstrates that its action—here barring Comcast from interfering with its customers’ use of peer-to-peer file sharing networking applications—is ‘reasonable ancillary to the … effective performance of its statutorily mandated responsibilities.’”

AVN reported at the time, “The judges said the Commission failed to make that showing, and concluded that the FCC’s reliance on congressional statements of policy were surpassed by Supreme Court and D.C. Circuit case law, and that while various provisions in the Communications Act do authorize related responsibilities by the Commission, “for a variety of substantive and procedural reasons those provisions cannot support its exercise of ancillary authority over Comcast’s network management practices. We therefore grant Comcast’s petition for review and vacate the challenged order.”

So what’s different now?

According to Genachowski, it’s all in the Title. Title II of the Communications Act relates to common carriers. It was the overreach by the FCC in creating added authority that expanded upon the original provisions of Title II to which the court took exception, especially because the FCC had not sought congressional approval first. The FCC has apparently found another path: Title I, which covers general provisions of the Act.

“The work of the FCC staff on this proceeding has been exceptional, no more so than in connection with the complex legal issues,” Genachowski said Wednesday. “Informed by the staff’s additional legal analysis and the extensive comments on this issue over the past year, the proposal is grounded in a variety of provisions of the communications laws, but would not reclassify broadband as a Title II telecommunications service.  I am satisfied that we have a sound legal basis for this approach.”

Some people don’t like the idea no matter which Title is used, however. An FCC Commissioner, Republican Robert McDowell, said he strongly opposes the “ill-advised” proposal.

"Pushing a small group of hand-picked industry players toward a 'choice' between a bad option (Title I Internet regulation) or a worse option (regulating the Internet like a monopoly phone company under Title II) smacks more of coercion than consensus or compromise," he said in a statement. "This 'agreement' has been extracted in defiance of not only the courts, but a large, bipartisan majority of Congress as well. Both have admonished the FCC not to reach beyond its statutory powers to regulate Internet access. By choosing this highly interventionist course, the Commission is ignoring the will of the elected representatives of the American people."

And, in an opinion piece for the Wall Street Journal, Andy Kessler opens with a call to do away with the entire agancy.

"It's time to close the Federal Communications Commission," he wrote. "This week, FCC Chairman Julius Genachowski gave a speech outlining his push for net neutrality, the absurd notion that the Internet should be "open and free" when in fact it's quite expensive to build. Net neutrality will straitjacket the U.S. economy's single most important driver of productivity and transformation."

Strong words, but we can expect to hear even more strident vitriol as the debate heads toward a resolution. After all, its outcome will have a profound impact on everyone doing business on the internet as well as everyone who uses it to enjoy digital content: in other words, everyone. Even the pornographers.

Chairman Genachowski's remarks can be read here.