MAINTAINING AN OPEN INTERNET

GAGNIER FOR CONGRESS ISSUE BRIEF

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Maintaining an Open Internet: The FCC and the Course to Preserve Net Neutrality Introduction: Net Neutrality Basics Net neutrality is the idea that Internet service providers (“ISPs”) and governments should not be able to interfere with the right to access legal content and services on the web. At the core of the net neutrality argument is the principle that all Internet users should have unfettered access and control over the content they view, applications they use and this should be equal for everyone. Internet access providers should not be permitted to use their power to discriminate against competing applications or content—just as phone companies should not discriminate which calls go through, get blocked and receive acceptable levels of voice quality. The ultimate goal is to protect innovation that provides consumers with more options, and more value, because this type of innovation will marshal in the next generation of voice, video and other enhanced applications. Equality and control form the core of the net neutrality debate. If a consumer purchased a certain amount of bandwidth per second from a service provider, the consumer should be able to use those bits as they see fit. Without worrying what the bits are used for, where they came from, where they are going or whom they are allocated to, the service provider should simply pass the bits through at the agreed upon rate. The Internet is controlled by a small number of large service providers who have made significant investments to dig trenches to install fiber-optic cables. These providers seek returns on their investments, thus have major incentives to enter into agreements with content providers to obtain preferential treatment for “fast lane” access. These deals lead to an environment where consumer choice and innovation are influenced, limited and controlled by the dominant service providers. Web-based products and services flourish when access to Internet users is free. This type of innovation was never intended to be guided by corporate business models. Innovation has always come from entrepreneurs with bright ideas who had the freedom to develop and run their new applications on the Internet. This issue brief provides an overview of the history of the FCC’s involvement in establishing net neutrality regulations and discusses the current FCC open Internet proposal. This brief further highlights key arguments surrounding controversial elements that have the potential to drastically alter the growth and development of innovative products and services on the Internet. History of the FCC’s Involvement in Net Neutrality

For more than a decade, supporters of net neutrality have argued that the FCC needs to establish rules to ensure broadband ISPs do not abuse their power. Broadband providers are

extremely influential as they control consumers’ access to the Internet and also sell Internet-based services. In 2004, the first FCC proposed guidelines for keeping the Internet open were introduced by then FCC Chairman Michael Powell. In 2005, the FCC adopted a set of guiding principles for ISPs, hoping to encourage “net neutral” behavior. The FCC attempted to enforce these principles in 2008, when Comcast was accused of intentionally slowing down traffic for peer-to-peer (“P2P”) communications. The FCC censured Comcast, which caused the company to retaliate and sue the FCC. In 2010, a federal appeals court ruled that the FCC had no authority to censure Comcast, so the FCC began working to turn the net neutrality principles into a real regulation. By the end of 2010, the FCC passed the first official Open Internet regulation. The regulation treated wireless networks differently from older wireline networks and left open the possibility that broadband providers could sell a “fast lane” Internet service. Proponents of net neutrality argued that the regulation was too weak, but opponents countered claiming the FCC did not have the authority to implement the regulation. In January of 2014, the U.S. Court of Appeals for the District of Columbia in Verizon v. FCC struck down most of the agency’s 2010 regulation. However, the court upheld that the FCC has authority to regulate Internet openness. Net neutrality policies were in limbo from January until late April 2014, when Chairman Tom Wheeler proposed rules to replace the ones struck down by the court. Currently, the proposal is open to public comment. When the comment period ends, the FCC will review the comments and draft official rules. The FCC aims to vote on official rules by the end of the year. Overview of the Current FCC Proposal The proposal essentially lays out a framework for what the FCC believes is the best way to reinstate the 2010 Open Internet Rules, and seeks input on the best way to ensure the Internet stays open, and to prevent broadband companies from blocking or discriminating against rival services. What the Proposal includes: Transparency Rule: Requires broadband providers to disclose any practices that would change consumers’ and content providers’ relationship with the network (e.g. any paid for priority agreements). Additionally, providers are required to release performance reports, with information about the speed of their services and what they are doing to manage traffic during times of congestion. This includes any instances of blocking traffic. No Blocking Rule: Prohibits broadband providers from blocking lawful content on the Internet for any reason. Network operators cannot block access to a site or service that competes with their own services.

No “Unreasonable Practices” Rule: This is the most ambiguous and controversial rule. The proposal seeks to allow the FCC to intervene on a case-by-case basis to stop “commercially unreasonable” practices by broadcast providers. The proposal hints that conduct that hurts “consumers, competition, free expression and civic engagement” will be deemed commercially unreasonable. The proposal specifically asks the public to comment on how to devise a rigorous, multi-factor “screen” to analyze whether any conduct falls under into a legal standard termed “commercially unreasonable.” While the no-blocking rule forbids broadband providers from blocking or intentionally slowing Internet traffic, it leaves open the possibility for providers to create a two-tiered system, offering a “fast lane” for companies to pay to deliver faster access to consumers. Chairman Wheeler stated that broadband providers must continue to provide consumers with the Internet speeds they pay for. Any “fast lanes” broadband companies set up cannot degrade speed and service for anyone else. If setting up a fast lane created a “slow lane” for everyone else, this would be considered commercially unreasonable. For now, providers should just assume that their services cannot be anticompetitive, and broadband providers must maintain the level of service they have promised consumers. Chairman Wheeler’s proposal to intervene on a case-by-case basis would create complex legal issues that lobbyists and lawyers representing wealthy broadband companies are more equipped to handle than the average consumer or content provider. Furthermore, uncertainty regarding which practices the FCC deems “commercially unreasonable” could create a hesitant business environment that discourages innovation and investment. What’s the Beef?: Concerns Regarding Internet “Fast Lanes” Broadband providers argue that premium content applications like voice, music, video and gaming are creating a need for more bandwidth and tiered services, causing issues for carriers who have to spend lots of money upgrading, pushing fiber deeper into their networks. However, broadband providers typically have had very high profit margins and often charge tiered rates based on speeds consumers desire. Providers cannot credibly argue that consumers are not paying enough for access to maintain higher-bandwidth services. Additionally, pushing fiber deeper into their network trenches is not the only method to upgrade. Improvements in electronics and software also help boost Internet speeds. Additionally, creating a two-tiered system for Internet access places those who cannot afford to pay the elevated price for “fast lane” access at a significant disadvantage, which could ultimately stifle innovation. Even if unfunded startups scrounge up the money to pay to be in the fast lane, this only increases their costs and decreases their competitiveness. Web-based products and services flourish when access to Internet users is free. The founders of Foursquare set up their service to reach 100,000 users with only a $25,000 budget. Our modern web platform and application landscape would greatly differ if companies that provide both

economic and social value were unable to secure funding because the laws allowed little guys to get squeezed out by big companies that are ready and willing to pay for faster connections. Reclassification Under Title II of the 1996 Telecommunications Act Chairman Wheeler claims establishing net neutrality under Section 706 of the Telecommunications Act of 1996 is the fastest way to put net neutrality on the books. Section 706 requires the FCC to determine whether “advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion.” Internet freedom advocates argue that FCC rules under Section 706 is unlikely to withstand legal scrutiny, because although it confers the authority to report, it does not grant the authority to take regulatory action. Since Section 706 does not confer an independent approval of authority, broadband providers should instead be reclassified under Title II of the 1996 Telecommunications Act. Title II “common carrier” provisions of the Telecommunications Act of 1996 have governed traditional phone companies for decades. Reclassifying broadband providers under Title II would subject the Internet to the same rules used to regulate the telephone industry, which means network operators would have to make their infrastructure available to everyone. The Act defines “telecommunications service” as the “offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.” Telecommunications is defined as “the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.” Consumers view broadband service as clearly fitting within the definition of telecommunications under the Act, since the service provides transmission between two points, without a change in the form or the content. Title II classification is vehemently opposed by the broadband service providers who claim that such reclassification would impose great costs, and allow unprecedented government micromanagement of all aspects of the Internet economy. Additionally, the service providers claim that under Title II new services, options, and features would be delayed or foregone, giving consumers less choice and a less adaptive and responsive Internet. Despite the opposition, Title II classification of broadband services providers serves as a sturdy legal foundation for allowing the FCC to have the authority and tools it needs to ensure broadband service providers uphold net neutrality. Conclusion The optimal solution to the net neutrality debate must balance the conflicting interests of Internet access providers and consumers, and incorporate a variety of business, technical and legislative contributions. The end goal is to keep the Internet functioning as the wide-open free-flowing

source for information society has spawned a generation of technological innovation. The Internet is a powerful tool for sharing information, holding the powerful accountable, and encouraging democracy. The FCC needs to discourage the practices of any data discrimination, and assume the necessary regulatory role to secure equal treatment for all. Works Cited Sam Gustin, 8 Things You Should Know About Net Neutrality, TIME (May 16, 2014), http://time.com/102268/net-neutrality-facts/. Margurite Reardon, Net Neutrality Debate Part I: How We Got Here, CNET (May 25, 2014), http://www.cnet.com/news/the-net-neutrality-debate-part-i-how-we-got-here/. David Talbot, Talk of an Internet Fast Lane Is Already Hurting Some Startups, MIT TECH. REV. (May 7, 2014), http://www.technologyreview.com/news/527006/talk-of-an-internet-fast-lane-is-already-hurting-some-startups/. Press Release, FCC, FCC Launches Broad Rulemaking on How Best To Protect and Promote the Open Internet (May 15, 2014), available at http://www.fcc.gov/document/fcc-launches-broad-rulemaking-protect-and-promote-open-internet. Broadband & Sec 706, CYBER TELECOM, http://www.cybertelecom.org/broadband/706.htm (last visited June 5, 2014).