The impetus for this action is the D.C. Circuit's recent ruling in Comcast v. FCC, rejecting the FCC's implied or "ancillary jurisdiction" to regulate Internet service services based on the legal theories advanced in the appeal by the agency. The FCC's General Counsel has described the new course of action as "A Third-Way Legal Framework for Addressing the Comcast Dilemma."

The Third Way white paper asserts that:

Applying a few foundational sections of Title II to the transmission component of broadband Internet access service would establish a strengthened legal basis on which to implement the consensus policy for broadband access. If broadband access service is found to contain a separate telecommunications service, as [U.S. Supreme Court] Justices Scalia, Souter and Ginsburg believe was the only plausible view [in NCTA v. Brand X] , then the Commission may protect broadband consumers by grounding its authority in Title II directly as well as in Title I as ancillary authority. This belt-and-suspenders approach—relying on direct statutory authority in addition to ancillary authority—puts the Commission in an inherently more secure position than the Title I approach, which allows only assertions of ancillary authority.

I suppose that security is in the eye of the beholder. I don't believe that re-classifying all or a portion of broadband Internet access service will be either a slam dunk or even an easy shot. But what intrigues me most about the Third Way white paper is the apparent claim that "the Commission's decision to adopt Justice Scalia's classification of broadband access would be permissible." It bears mention that Justice Scalia was writing for the dissent in NCTA v. Brand X, not the majority, and that his "classification of broadband access" —if one may even call it that—failed to garner the support of a majority of the Justices hearing the matter. The majority opinion in the case, of course, upheld the FCC's conclusion that the service at issue—cable modem service—was a single, unitary offering to the public of Internet access, which included a transmission component integrated with an array of interactive computer processing and information capabilities, and proprietary content, consistent with the definition of "information service" in the Act.

The FCC's conclusion that cable modem service is an information service was "unchallenged" before the Court; only the question whether the FCC reasonably concluded that cable companies providing cable modem service were not providing a "telecommunications service" in addition to an "information service" was presented for review. The Brand X majority found the FCC's conclusion that cable operators did not separately "offer" the underlying "telecommunications" used to transmit this service was a reasonable interpretation of an ambiguous term—the word "offer" as used in the definition of telecommunications service—and was therefore due deference by the court under the Chevron doctrine.

Justice Scalia took particular issue with this view of "offer" in his dissent. Nonetheless, Justice Thomas, writing for the majority, found the construction consistent with the FCC's historical approach to "basic" and "enhanced" services under the Computer Inquiry decisions. Justice Thomas noted a significant problem with the contrary interpretation of the statute offered by respondent MCI: that the Communications Act unambiguously classifies as telecommunications carriers all entities that use telecommunications inputs to provide information service. "As MCI concedes, this argument would subject to mandatory common-carrier regulation all information service providers that use telecommunications as an input to provide information service to the public," even if they owned no transmission facilities.

The problem, according to Justice Thomas, was that the FCC had never classified as "offerors" of basic transmission service, and therefore common carriers, enhanced service providers who used similar basic transmission inputs under the Computer II regime. "We doubt that the parallel term 'telecommunications service' unambiguously worked this abrupt shift in Commission policy."

The dissent took the opposite point of view on the FCC's interpretation of the term "offer." Justice Scalia reasoned that the transmission component of broadband Internet access possessed "sufficient identity to be described as separate objects of the offer," and was not, as the FCC and majority posited, "so changed by combination with" the information components of broadband Internet access service so that it is no longer reasonable to describe it any other way.

It is this "classification" of the transmission component of broadband Internet access service that the FCC plans to use for its Third Way approach, imposing some provisions of Title II on "facilities-based providers that offer access transmission to the public at large," in the words of the General Counsel.

As I have said, "good luck with that." While most of the first portion of the Brand X dissenting opinion addresses infirmities with the FCC's and the Supreme Court majority's reasoning concerning the appropriate regulatory treatment of broadband Internet access, it is the concluding paragraphs of this section that I believe bear most directly on the FCC's overall approach to its regulatory authority.

The overall approach of the "Third Way" appears quite similar to the FCC's approach to regulation of Internet service providers generally, and to what I call "Le Affaire BitTorrent," specifically. That is the apparent belief that the FCC has nearly unbounded discretion to implement the provisions of the Communications as it sees fit, largely free of any meaningful statutory constraints. I have written at length about why this view is at odds with both the statutory framework and years of judicial precedents.

Justice Scalia's final observation on this matter is telling:

Finally, I must note that, notwithstanding the Commission's self-congratulatory paean to its deregulatory largesse ... it concluded its Declaratory Ruling by asking, as the Court paraphrases, "whether under its Title I jurisdiction [the Commission] should require cable companies to offer other ISPs access to their facilities on common-carrier terms." ... In other words, what the Commission hath given, the Commission may well take away—unless it doesn't. This is a wonderful illustration of how an expert agency can (with some assistance from credulous courts) turn statutory constraints into bureaucratic discretions. The main source of the Commission's regulatory authority over common carriers is Title II, but the Commission has rendered this inapplicable in this instance by concluding that the definition of "telecommunications service" is ambiguous and does not (in its current view) apply to cable-modem service. It contemplates, however, altering that (unnecessary) outcome, not by changing the law (i.e., its construction of Title II definitions), but by reserving the right to change the facts. Under its undefined and sparingly used "ancillary" powers, the Commission might conclude that it can order cable companies to "unbundle" the telecommunications component of cable-modem service. And presto, Title II will then apply to them, because they will finally be "offering" telecommunications service! Of course, the Commission will still have the statutory power to forbear from regulating them under § 160 [Section 10] (which it already has tentatively concluded it would do) ... Such Mobius-strip reasoning mocks the principle that the statute constrains the agency in any meaningful way.

After all is said and done, after all the regulatory cant has been translated, and the smoke of agency expertise blown away, it remains perfectly clear that someone who sells cable-modem service is "offering" telecommunications.

Reasonable minds may differ on that last point, but it is hard to fault Justice Scalia's cogent analysis of the interpretative games that regulatory agencies play in order to bend the law to fit their policy goals. At some point, however, they don't simply bend but absolutely shatter the bounds of the statute. In the final analysis, there is a factual reality about how broadband Internet access service is "offered" to the public, and I remain of the view that there is not, factually speaking, separate "information" and "telecommunications" services offered to the public, but a single service offered "via telecommunications," and that this has not changed in the years following the FCC's Cable Modem Declaratory Ruling, or any of its other three classification decisions.

That aside, it also seems that the Third Way hews quite closely to Justice Scalia's recounting of the FCC's methods: the Third Way includes a "self-congratulatory paean to its deregulatory largesse," followed by plans for the imposition of a new regulatory framework though a change in the underlying facts—a carving of the integrated broadband Internet access offering into two parts for classification purposes—thus changing and increasing the regulatory obligations of the service providers, which the FCC may then, in its discretion, ameliorate via selective application of its forbearance authority. As Justice Scalia stated, "Such Mobius-strip reasoning mocks the principle that the statute constrains the agency in any meaningful way."

It is very likely that the courts reviewing this latest attempt to create regulatory authority through such extenuated interpretative contortions will also be seen as mocking the principle that the Communication Act constrains the agency in any meaningful way. Rather than bring needed regulatory stability and certainty so that providers may upgrade and expand their broadband Internet offerings, I fear that the Third Way will impair network investment incentives and halt forward progress for years while the courts work through this latest regulatory gambit.

(Image: mobius, a Creative Commons Attribution (2.0) image from fdecomite's photostream)

This Communications Act and the Push for Net Neutrality

The FCC Chairman has announced that the agency intends to pursue a "Third Way" and attempt to create narrowly tailored framework that would apply portions of Title II to those portions of broadband Internet service that the agency "re-defines" as telecommunications service.

The stated reasons for this action are to preserve the "open Internet" and implement some features of the National Broadband Plan on a sound legal basis, without creating a regulatory straightjacket that would stifle investment and innovation by ISPs. The impetus for this action is the D.C. Circuit's recent ruling in Comcast v. FCC rejecting the FCC's implied or "ancillary jurisdiction" to regulate Internet service services based on the legal theories advanced in the appeal by the agency. The FCC's General Counsel has described the action as "A Third Way Legal Framework for Addressing the Comcast Dilemma."

All I can say is "good luck." While the announced goals of the "Third Way" sound relatively reasonable, the regulatory contortions the Commission must go through to effectuate this plan are considerable.

And there are no guarantees that, at the end of the day, investment in broadband networks will continue at the same levels that we have seen under the FCC's now-abandoned "light regulatory touch."

There really is no such thing as "Title II Lite." The way the statute operates, once a service is classified as a "common carrier" or "telecommunications service," all provisions pertaining to that status automatically attach.

The General Counsel's proposal that the Commission will simultaneously forbear from enforcing the vast majority of these provisions may be hard to accomplish.

For one thing, Commissioner Michael Copps has expressed concern that the FCC "must avoid another forbearance binge."

The FCC has not yet addressed what I will call the "flip side" of declaring that broadband Internet access is actually two separate services, one being a "telecommunications service."

The flip side is that by operation of law, this imposes common carrier status on entities that are not operating as common carriers for this service today.

The courts have generally not permitted the FCC to impose common carrier status based solely on the agency's notions of good policy. In fact, the FCC has been struck down when it attempted to do so concerning the provision of "dark fiber" in the mid-90s.

To the extent the FCC has successfully imposed common carrier status in the past, it has either demonstrated that the service provider has substantial market power, or justified its actions on the basis of the monopoly provision of an essential input for competing providers (Policies and Rules Concerning Local Exchange Carrier Validation and Billing Information for Joint Use Calling Cards, CC Docket No. 91-115, Second Report and Order, 8 FCC Rcd 4478, (1993)).

Forced common carrier status via "re-definition" would need to be supported by similar record evidence. The FCC's own broadband reports, the findings of the National Broadband Plan and comments submitted in that docket by our nation's antitrust authorities that broadband Internet service markets are not marked by monopoly and are for the most part workably competitive, all point in the opposite direction.

Even assuming that the FCC could demonstrate a significant market failure warranting common carrier treatment for the transmission component of broadband Internet access service, that finding will complicate, if not preclude, its ability to engage in a "forbearance binge."

The Section 10 forbearance authority that Congress gave the FCC in the '96 Act has three tests:

• Whether enforcement of a regulation is no longer "necessary to ensure that the charges, practices, classifications, or regulations by, for or in connection with" a telecommunications carrier or service are "just and reasonable and are not unjustly or unreasonably discriminatory"
• Whether enforcement is necessary to protect consumers
• Whether forbearance is in the public interest

Section 10 also directs the FCC to consider whether forbearance will promote competition in the market.

Once broadband Internet service is reclassified as containing a separate "telecommunications service," all of the provisions of Title II that pertain to common carriers generally and telecommunications services specifically automatically apply.

The FCC then has to justify each act of forbearance under this three—pronged test.

The question becomes, if the FCC has to find that the markets cannot protect consumers and competition in order to regulate the transmission component of the service under Title II, how can it at the same time find that the markets will protect consumers and competition for forbearance purposes?

There are no guarantees that it can either make this showing or that a court would accept its justifications. This is especially true in light of the Comcast decision. The court accepted the FCC's acknowledgment that it had no direct regulatory authority over Internet service providers, and found that the agency's justification of such regulation under its ancillary jurisdiction did not "hold water."

The FCC is probably correct to abandon its attempt to adopt its proposed "Open Internet" network neutrality rules under the very same theories.

But the courts are likely to be highly skeptical of its attempt to achieve very similar results through the expedient of re-defining the services into something that it has unquestioned authority to regulate.

The FCC's proposal is therefore quite the "high-wire act," where it would be declaring markets to be insufficiently competitive so that it can regulate, but sufficiently competitive so that it can refrain from regulating. The danger would be in losing that fine balance.

More importantly, the "information service" classification was not a purely discretionary action on the part of the FCC. None of the Communications Act's statutory service classifications quite fit broadband Internet access service in 1996 or 2002 or 2007 (the last time the FCC visited the question) and none quite fit it today.

In order to make broadband Internet access service "fit" within the "telecommunications service" definition, the FCC must undo its previous four determinations (cable modem, wireline broadband Internet access, broadband over power line Internet access, and wireless broadband Internet access services) that broadband Internet is a functionally integrated information and transmission offering. To do so, the FCC must:

• Tease out the transmission component;
• treat the transmission component as if it is being offered separately to the public;
• declare that now there are two separate services being offered to the public; and
• declare that one of them is a "telecommunications service."

It has to act as if this is factually true, even though there is no change in the manner in which these services are in fact provided to the public.

We have had cable modem service in our house since the late 1990s. We subscribed to a single Internet access service from our cable operator, receive a single bill for that service and pay a single rate for our cable Internet service. Although we do not use all of the capabilities offered by the operator, we experience it as a single service.

This is the common sense understanding that the Supreme Court majority applied to the matter when it upheld the FCC's cable modem decision in Brand X: the statute speaks in terms of what is "offered" to consumers and what they think they are being offered. It is not written in terms of what the FCC would like the providers to offer.

For these reasons, the FCC's "Third Way" is fraught with significant legal risk. The answer is not to pursue this option at the administrative agency level. The answer is to have Congress re-write the Communications Act for the 21st Century.

The Next Communications Act

Although I do not agree that there is a pressing need for the FCC, as opposed to some other agency of government, to act as a legal "backstop" with respect to Internet services, the fact that the agency is even contemplating such extreme legal contortions to create such a backstop is a sign that the Act is broken, and in need of repair. While it might be able to limp along with a mere tune-up or new paint job, it will more likely require an "extreme makeover."

If the Comcast decision teaches us anything, it is that the next Communications Act should not be structured so that all regulatory consequences flow from service and technology-specific definitional categories.

For these reasons, I agree with suggestions such as those of Verizon Executive Vice President Thomas Tauke and The Progress & Freedom Foundation's 2005 "Digital Age Communications Act" project.

We must move away from service-specific regulation together with vague doctrines like "ancillary jurisdiction" and look more broadly at specific practices or market problems that require a regulatory response and determine how a regulator can most efficiently and effectively address those problems, without creating new ones.

Overview

• The D.C. Circuit's ruling in Comcast v. FCC did not render the FCC a "Toothless Regulator."

• Reclassification of broadband Internet access as a Title II common carrier service to evade the consequences of this decision would be legally suspect and unlikely to survive on appeal.

• The justification offered to reclassify broadband Internet service as a common carrier telecommunications service--insufficiency of market forces to protect consumers--would also preclude the FCC's ability to regulate broadband Internet service "lightly" through statutory forbearance.

• The FCC should use its "Open Internet" docket to prepare a report to Congress on the state of the broadband Internet marketplace, and the need, if any, for additional regulatory authority.

The Comcast decision did not throw a huge legal roadblock in the path of the FCC's National Broadband Plan or render the agency "toothless."

The premise that the Comcast decision throws a "huge legal roadblock" in the path of the FCC's National Broadband Plan is incorrect.

• The National Broadband Plan is not in any sense an actual "plan." It is a staff report containing hundreds of recommendations for the FCC and other government offices for advancement of broadband deployment, adoption and other "national purposes."
• The Plan does not recommend that the FCC adopt network neutrality or "Open Internet" rules.
• Each recommendation in the Plan for FCC action must be accomplished by a vote of the full Commission, pursuant to statutory authorization.
• Reasonable arguments have been advanced that the FCC may redirect Universal Service Support funding obligations and dispersals either by resolving certain ambiguities in the text of the statute, or by reliance on its ancillary authority.
• The FCC has announced an ambitious schedule of actions to implement those portions of the Plan within its control, and has already begun work on these items.
• The FCC's implementation of the Plan appears to be moving full steam ahead rather than resting dead in its tracks.

The Comcast decision only rejected arguments concerning the FCC's implied or "ancillary jurisdiction" to regulate Internet services based on the legal theories advanced in the appeal by the agency.

• The court left intact all of the FCC's expressly delegated regulatory powers over common carriers, broadcasters and cable operators.
• The FCC may still take actions pursuant to its ancillary authority if it can establish a proper factual record and ties its exercise of such authority closely to some specifically delegated regulatory power.
• There is simply no need for the FCC to overreact to the Comcast decision by attempting to reclassify broadband Internet access service from a Title I "information service" to a Title II common carrier "telecommunications service."

Reclassification of broadband Internet access as a Title II common carrier service would be legally suspect and unlikely to survive on appeal.

Reclassification of broadband Internet access for the purpose of regulating it more pervasively under Title II, without change in the underlying facts or law following an unfavorable court decision, would likely be met with extreme skepticism by the courts.

• Reclassification would effect a huge change in regulatory law and policy as the FCC has never regulated Internet access service as a common carrier offering under Title II.
• In four separate orders, concerning cable modem, wireline, power line, and wireless broadband Internet access, the FCC classified all forms of broadband Internet access service as "information service[s]," because that classification best fit the characteristics of the service offered to end users.
• The first of these decisions, finding that cable modem service fit the statutory definition of an information service rather than a telecommunications service, was upheld by the Supreme Court in NCTA v. Brand X, based "on the factual particulars of how Internet technology works and how it is provided:"
• Broadband Internet access service is an information service because it provides a functionally integrated capability to the end user to generate, store, transform, process retrieve and/or utilize data, rather than a pure transmission telecommunications service that does not act upon the user's information.
• The statutory definition of an information service provides that such data processing capabilities be provided "via telecommunications," whereas the statutory definition of a telecommunications service dictates that the transmission be provided to the public for a fee without change in the user's information.
• The definitions are, as the FCC itself found in a 1998 Report to Congress, "mutually exclusive." A single service cannot be both a telecommunications service and an information service, and an information service cannot be classified as a telecommunications service simply by virtue of the fact that it is provided "via telecommunications."
• The Supreme Court upheld the first of the four rulings in its Brand X decision, finding that the FCC's interpretation of the service under the Act was reasonable.
• The Court noted the unreasonable results that would flow from the opposite conclusion: that the "telecommunications" component of the service turned the entire information service into a telecommunications service.
• That reading would render any entity that uses telecommunications in the provision of its own information services a telecommunications carrier, a result that would be at odds with the statutory language.
• This is precisely what would result if the FCC were to reclassify Internet access service as a telecommunications service--the logic of the ruling would apply to all information service providers, including Google, Amazon, and Netflix.

Undoing this series of decisions will require the FCC to effectively disprove each of its earlier factual findings and demonstrate why the elements of broadband Internet access service are no longer "inextricably intertwined," show why it should now force providers to offer the telecommunications functionality separately, on a common carrier basis, and why the competitive forces the FCC cited in its earlier orders as adequate to protect consumers and competition are no longer present in the marketplace.

• Under the Supreme Court's recent decision Fox v. FCC, an agency may change course on policy, but when its "new policy rests upon factual findings that contradict those which underlay its prior policy" or "its prior policy has engendered serious reliance interests," it must provide a "more detailed justification than what would suffice for a new policy created on a blank slate."
• Regulatory classification is not a pure question of policy. It is a mixed question of fact and law.
• The pertinent terms of the Act have not changed since passage of the Communications Act of 1996. To support a change in regulatory classification, as opposed to a change in regulatory policy, the FCC will have to show that the broadband Internet service offered today is factually different today than it was three years ago, when the FCC last examined the question.
• There is no empirical basis for the FCC to say that broadband Internet access service—which continues to provide all the functionality of a statutory information service—is no longer offered as a functionally-integrated information service, but rather as a stand-alone pure transmission service.
• This would be more than a change in policy. This would be an act of regulatory alchemy, and it would be the essence of an "arbitrary and capricious" action.
• Courts will defer to the reasoned judgments of expert administrative agencies like the FCC, but they are not going to turn a blind eye to an attempt to end-run on an unfavorable court ruling by simply "relabeling" the service in question.

Following the Comcast ruling, the FCC will also need to show how it could be precluded from regulating Internet service providers under its ancillary jurisdiction, but can now bring them within its regulatory authority by calling the identical service something else.

• Significantly, in the Comcast decision, the D.C. Circuit accepted the FCC's concession that the Communications Act did not give it express authority to regulate the network management practices of Internet service providers.
• Acceptance of the doctrine of "jurisdiction-by-reclassification" would mean that the FCC has essentially unfettered discretion to regulate the Internet as it sees fit, free of any Congressional restraints.
• The D.C. Circuit has just rejected such an unbounded view of the FCC's authority, ruling that the FCC may not give itself powers over the Internet which Congress has denied it under the Act.

Finally, to succeed in reclassification, the FCC also would have to show that it has the authority to force common carrier status on non-carriers.

• Although advocates describe the action as one of "relabeling" or "reclassification" the practical result would be the involuntary imposition of common carrier status on Internet service providers.
• The reclassification inquiry thus becomes whether the FCC has the legal authority to force common carrier status on non-carriers.
• If a company wants to offer service on a common carrier basis, it may do so without seeking FCC permission. An entity becomes a common carrier, under the terms of the Act, essentially by acting like one. The circularity of the statutory definition requires the FCC and the courts to consult the common law of carriers.
• The common-law test looks to whether the entity is offering to the public, for a fee, a transparent transmission service.
• Once the status is undertaken, the regulatory obligations and rights of Title II automatically attach.
• Nowhere does the Act expressly give the FCC the power to compel a non-common carrier to offer its service on a common carrier basis.
• The courts have made clear that the FCC may not impose Title II regulation based simply on its notions of good policy.
• In my Open Internet comments, I suggest that the FCC does not possess such unbounded discretion under the Act.
• The courts have not allowed the FCC to compel common carrier status in other contexts, such as forcing a telephone company to offer "dark fiber" service on a common carrier basis when it was not the practice of the company to do so.
• These precedents may provide another basis for challenging an FCC action that imposed common carrier status on Internet service providers.
• While the matter is not free from ambiguity, it may be that only Congress can provide the legal compulsion for a company to serve as a common carrier, and not the FCC.

To the extent the FCC has successfully imposed common carrier status in the past, it has either demonstrated that the service provider has substantial market power, or justified its actions on the basis of the monopoly provision of an essential input (Policies and Rules Concerning Local Exchange Carrier Validation and Billing Information for Joint Use Calling Cards, CC Docket No. 91-115, Second Report and Order, 8 FCC Rcd 4478, (1993)).

• Starting in the late 1990s, the FCC has repeatedly found that markets for advanced telecommunications capability and broadband Internet access are marked by competitive forces, rather than monopoly or even significant market power.
• Most recently, the National Broadband Plan found that "Today's broadband ecosystem is vibrant and healthy in many ways."
• This consistent record of findings of a healthy broadband Internet service marketplace will pose substantial impediments to any attempt to now impose common carrier status on broadband Internet service providers.

Even assuming the FCC could compose a record demonstrating the opposite to support the imposition of common carrier status on broadband Internet service providers for the first time, those findings would effectively preclude the agency from being able to exercise its statutory forbearance authority and regulate the service "lightly" under Title II.

• In its 1998 Report to Congress, the FCC dismissed the merits of classifying broadband Internet access as a telecommunications service and then attempting to use Section 10 forbearance authority as that would "effectively impose a presumption in favor of Title II regulation of such providers" that "would be difficult to overcome."
• Forbearance under Section 10 is available for any telecommunications carrier or service where the FCC determines that market conditions are such that enforcement of any provision of the Act is not required to ensure that rates, terms and conditions of service are just and reasonable and not unjustly or unreasonably discriminatory and that consumers will otherwise be protected.
• In making this determination, the FCC is to consider whether forbearance will promote competitive market conditions and enhance competition among providers.
• If the rationale for reclassification is the lack of adequate competition and market forces to ensure just and reasonable behavior on the part of broadband Internet service providers, the FCC will not simultaneously be able to forbear from very many, if any, provisions of Title II.
• We would be left, instead, with a "Full Monty" of Title II common carrier regulation. This would include, just to mention a few:
• The obligation to provide service upon reasonable request. (Section 201)
• The duty to provide service on just and reasonable rates, terms and conditions, without undue or unreasonable discrimination in connection with like communication service, or giving any undue or unreasonable preference or advantage to any person or subject any person to undue or unreasonable prejudice or disadvantage. (Section 202).
• Tariff filing obligations. (Section 203).
• Obligations to submit to FCC inquiries into transactions and management. (Sections 215, 218).
• Duty to submit to FCC requirements concerning accounts, records, books and depreciation charges. (Section 220).
• Line extensions authorizations. (Section 214).
• Duty to protect the privacy of customer information. (Section 222).
• Duties concerning telecommunications services for hearing-impaired and speech-impaired individuals. (Section 225).
• The duty to interconnect, either directly or indirectly, with other telecommunications service providers. (Section 251(a)(1)).
• The duty not to install network features, functions, or capabilities that do not comply with guidelines and standards established pursuant to Sections 255 and 256. (Section 251(a)(2)).
• Duty to contribute to the Universal Service Fund. (Section 254).
• Duty to ensure that service is accessible by persons with disabilities. (Section 255).
• Submission to FCC oversight for coordination for interconnectivity. (Section 256).

The FCC should use its "Open Internet" docket to prepare a report to Congress on the state of the broadband Internet marketplace, identifying any market failures or gaps in consumer protection, and making recommendations for any additional regulatory authority the FCC believes is required to address deficiencies.

In conclusion, the FCC should not attempt to reclassify broadband Internet access service as a Title II service. There is scant empirical evidence that network neutrality rules are required for the protection of competition or consumers, yet there is sufficient debate over the matter that it should be resolved somewhere, and that the best place for such resolution is the legislature.

The FCC should use the record gathered in its "Open Internet" docket to prepare a report to Congress on the state of the broadband Internet marketplace, identifying any market failures or gaps in consumer protection, and making recommendations for any additional regulatory authority the agency believes is required to address such deficiencies.

In the meantime, the agency is well within its rights to work with the broadband Internet providers, consumer groups, Internet content, applications, services and device makers to attempt to achieve consensus solutions to identified problems of network congestion and consumer disclosure and privacy concerns. The FCC can play an important role in informally mediating disputes and bringing participants in the Internet ecosystem to consensus on best practices and the best path forward from the network neutrality morass.

With respect to the National Broadband Plan, those staff recommendations that the FCC wishes to move forward by rulemaking must each be evaluated against the FCC's express and ancillary jurisdiction. If, in the appropriate rulemaking proceeding, the FCC determines that it lacks the requisite statutory authority to adopt a recommendation that it believes necessary in the public interest, it should ask Congress to grant it such authority.

Such a course of action would respect the limitations of agency power and the preeminent role of Congress in promulgating our nation's laws. As I have written previously, "the time has come for our elected representatives to take up the question of whether and how the FCC should regulate the provision of Internet services." As a legal and policy matter, these issues are too important to be left to the vagaries of administrative law and agency discretion.

Overview

To impose Title II regulations on the Internet, the FCC would need to establish a rational evidentiary and sound legal basis to bring Internet service providers under its Title II authority through an act of regulatory "reclassification."

To accomplish this procedurally, the FCC will have to:

1. Adopt either a Notice of Inquiry or Notice of Proposed Rule Making proposing that the FCC reverse four of its own prior orders directly on point, one of which has been upheld by the U.S. Supreme Court in NCTA v. Brand X, so that it could declare Internet services to be "telecommunications services."
2. Receive public comment on its proposal creating a record that on balance supports its proposed reclassification.
3. Adopt either a Declaratory Ruling or a Report and Order providing a reasoned factual and legal basis for changing the classification and regulatory treatment for Internet services.

To survive a challenge in court, the FCC will have to:

1. Demonstrate why reclassification of Internet access service from an "information service" to a "telecommunications service" is not arbitrary and capricious.
2. Demonstrate that it has Congressional authority to regulate the provision of Internet access service as a common carrier offering;
3. Demonstrate that its action does not infringe the constitutional rights of Internet service providers.

"Reclassifying" broadband Internet access service, in whole or in part, as a telecommunications service will not be easy and the FCC would face many hurdles in gaining judicial acceptance of such a move.

The FCC Will Need to Establish a Record to Support Reversal of Four Recent FCC precedents, including the Cable Modem Declaratory Ruling Upheld by Supreme Court in Brand X.

In the Comcast decision, the DC Circuit recognized that Congress had granted the FCC no explicit regulatory authority over Internet service providers.

The court rejected the FCC's broad claim that it had plenary jurisdiction to regulate the network management practices of Internet service providers under the doctrine of implicit or "ancillary" authority.

The court's decision flowed from the FCC's prior determinations that, under the Act's service and technology-specific regulatory framework, Internet service providers should not be treated as providers of "telecommunications service." The legal question in each case turned on whether broadband Internet access simply provides a mechanism for transmitting user-generated content, like traditional telephone service or whether it functionally integrates the ability to generate, acquire, store, transform, process, retrieve and/or utilize data by offering, for example, personalized settings, ISP-provided e-mail, content storage and security functions.

In four separate rulings over a five year period, the FCC concluded that broadband Internet access service fit the statutory definition of an "information service" regardless of the underlying technology (cable modem, wireline broadband internet access, broadband over power line Internet access, or wireless broadband Internet access services). In each decision, the FCC compared the service characteristics to the statutory definitions, keeping in mind market characteristics, the level of actual and likely competition, and congressional policy goals contained in various provisions of the Act.

In each case it concluded that broadband Internet access service provided on a functionally integrated basis should not be treated as a telecommunications service. Or, as the FCC put it, the transport, data processing and content elements of the end user service were "inextricably intertwined."

The FCC found not only that the service characteristics best fit within the definition of information services, but also that sufficient actual and planned market entry would ensure that consumers were protected such that it need not regulate the services under the more restrictive framework of Title II. These rulings were consistent with over 30 years of FCC precedent. The FCC has never treated Internet service providers as common carriers. It has always treated them as "enhanced" or "information service" providers not subject to Title II regulation.

Congress codified this approach in the Telecommunications Act of 1996 when it created the statutory definitions of "information service" and "telecommunications service." When it added the category of information service to the Act, Congress did not also add a separate "Title" giving the FCC authority to regulate information services such as Internet access. Information service is defined as "the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications..." "Telecommunications" is defined as "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." Telecommunications service is defined in terms of an offering this capability to the public, for a fee.

The key to the FCC's decisions classifying broadband Internet access classifications as an information service were it determinations, in each case, that although broadband Internet access contained a telecommunications component—"via telecommunications" being part of the definition—the providers were not separately offering telecommunications service, to the public, for a fee.

Most importantly, the FCC determined that, in the case of cable modem service, it would not " tease out" that telecommunications element and treat it as if the cable operators were offering it separately for the purpose of treating cable modem service as a telecommunications service.

The Supreme Court upheld the cable modem ruling in its Brand X decision. The Court ruled that the FCC acted reasonably when it classified the cable modem service as an information service rather than a telecommunications service on the basis of the integrated functionality offered to the end user.

Following the Brand X ruling, the FCC removed its Computer Inquiry requirements that had compelled wireline carriers to offer a the pure transmission component to third-party ISPs, on the basis of changed market characteristics. There being no separate telecommunications service component, the FCC classified wireline broadband Internet access service as an information service, as it had the cable modem service, based on the integrated functionality provided the end user. The FCC nonetheless left open the option for carriers to continue to offer broadband transmission service on a common carrier basis, if they so desired.

• Undoing this series of decisions will require the FCC to effectively disprove each of its earlier factual findings and demonstrate why elements of broadband Internet access service are no longer "inextricably intertwined," why it should now force providers to offer the telecommunications functionality on a common carrier basis, and why the competitive forces it cited in its earlier Orders are no longer present in the marketplace.
• Following the Comcast ruling, it will also need to show how it could be precluded from regulating Internet service providers under its ancillary jurisdiction, but can now bring them within its regulatory authority by "relabeling" their actions.
• The courts may have a very hard time accepting such arguments.
• This is particularly true of the U.S. Supreme Court, which would now effectively be told with respect to arguments the FCC had made in support of its opposite conclusion in Brand X: As SNL's Emily Litella would say, "Never mind!"
• Acceptance of jurisdiction-by-reclassification would mean that the FCC had essentially unfettered discretion to regulate the Internet as it sees fit, free of any Congressional restraints.
• The DC Circuit just rejected such an unbounded view of FCC authority, ruling that the FCC may not give itself powers which Congress has denied it in the Act.

The FCC Will Need to Convince the Courts that it is Reasonable to Apply Unchanged Law to Unchanged Facts and Reach A Different Outcome

Regulatory classification is a mixed question of law and fact, to be guided by statutory policy. Administrative agencies like the FCC may change their regulatory policies concerning how they will implement statutory mandates, but the courts require that that they are neither "arbitrary" nor "capricious" in making those changes.

Under the recent Supreme Court ruling in FCC v. Fox Television Stations, to pass this test, the FCC must both acknowledge that it is changing its policy and provide a reasoned basis for the change and must take account of reliance interests stemming from the earlier policy.

When the question presented is a change in regulatory classification, presumably there is some underlying factual circumstance, or "truth" that is not subject to change by FCC dictate.

For example, a provider either is or is not offering a pure transmission path to the end user, or a provider either is or is not, offering an information and data processing service that involves changes in the form and content of the information sent and received. These are not policy questions; these are factual determinations, to be made within the legal framework of the Act.

In the case of Internet access, the provisions of the Communications Act are unchanged, and express Congressional policy in Section 230(b)(2) of the Act specifically states that "It is the policy of the United States ... to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation."

Regulatory policy may guide an exercise of regulatory authority, but the FCC's ability to make purely policy choices is constrained by the words of the Act, and its explicit regulatory authority does not extend to the Internet or interactive computer services.

The pertinent terms of the Communications Act have not changed since 1996. To support a change in regulatory classification, as opposed to a change in regulatory policy, the FCC will have to show that the broadband Internet service offered today over cable, wireline, power line and wireless networks is factually different today than it was three years ago, when the FCC last examined the question.

Yet, there is no empirical basis for the FCC to say that broadband Internet access service—which continues to provide all of the functionality of a statutory information service—is no longer offered as a "functionally integrated" information service, but rather as a stand-alone, pure transmission service.

This would be more than a change of policy. This would be an act of regulatory alchemy, and it would be the essence of an "arbitrary and capricious" action.

• The courts will defer to the reasoned judgments of expert administrative agencies like the FCC, but they are not going to turn a blind eye to an attempt to end-run settled law by "relabeling" services.

The FCC Will Need to Show that it has the Authority to Force Common Carrier Status on Non-Carriers.

The regulatory definitions in the Act are written in terms of what providers are offering the public, not in terms of what the FCC thinks they should be providing. The courts have made clear that the FCC may not impose Title II regulation based simply on its notions of good policy. In the NARUC I decision, 525 F. 2d 630 (1976), the D.C. Circuit rejected portions of an FCC order concerning special mobile radio systems "which imply an unfettered discretion in the Commission to confer or not confer common carrier status on a given entity, depending on the regulatory goals it seeks to achieve."

Although advocates describe the action as one of "relabeling" or reclassification, the practical result would be the involuntary imposition of common carrier status on Internet service providers.

If a company wants to offer service on a common carrier basis, it may do so without seeking FCC permission. An entity becomes a common carrier, under the terms of the Act, essentially by acting like one. The circularity of the statutory definition requires the FCC and the courts to consult the common law of carriers.

The two part definition developed by the D.C. Circuit in NARUC I and NARUC II for communications common carriers looks to whether the entity: (1) holds itself out to serve indifferently all potential users, either voluntarily or under legal compulsion; and whether (2) the system be such that customers "'transmit intelligence of their own design and choosing.'" In other words, the test looks to whether the entity is offering a transparent transmission service.

Once undertaken, the regulatory obligations and rights of Title II automatically attach. But nowhere does the Act expressly give the FCC the power to compel a non-common carrier to offer its service on a common carrier basis.

The question thus becomes whether the FCC has the legal authority to force common carrier status on non-carriers. In Section VI.B., of my Open Internet comments, I suggest that the FCC does not possess such unbounded discretion under the Act. While the matter is not free from ambiguity, it may be that only Congress can provide the legal compulsion for a company to serve as a common carrier, and not the FCC.

Because the ISPs are not now "holding themselves out" as common carrier providers of pure transmission service, any move to reclassify their service so that it can be regulated under Title II would result in the de facto imposition of common carrier status by the FCC.

• The courts have not allowed the FCC to do this in other contexts, such as forcing a telephone company to offer "dark fiber" service on a common carrier basis when it was not the practice of the company to do so.
• These precedents may provide another basis for challenging an FCC action that imposed common carrier status on Internet service providers.

The FCC Will Need to Avoid Infringing First Amendment Rights of ISPs

The First Amendment status of Internet service providers has yet to be conclusively established by the Supreme Court. Insofar as ISPs provide content as part of their service offerings, they will likely be considered First Amendment speakers and afforded a significant level of protection against government interference.

If the FCC reclassifies them as common carriers, thus forcing them to transport the content of others, it would arguably infringe upon their right of free speech.

Whether such infringement would be found to violate the First Amendment is an open question, but precedents concerning cable must-carry rules suggest that the action would be subjected to at least intermediate scrutiny so that the FCC would have to justify that its infringement of ISP speech rights is necessary to promote an important government interest.

• The FCC may have a hard time satisfying this standard.
• The government may have an important interest in preserving the free flow of information over the Internet, but there is no evidence of a present danger to that interest.
• The ISP market is effectively competitive, even by the FCC's own reckoning.
• The imposition of common carrier rules that disregard the autonomy of broadband ISPs as speakers, within this competitive context, can further no important or compelling government interest, and would more likely be found to violate, rather than promote, First Amendment freedoms of speech, and of the press.

The D.C. Circuit ruled today in favor of Comcast in the company's challenge to an FCC enforcement action concerning its provision of Internet service. The court's ruling reaffirms the primacy of the rule of law and the legislative authority of Congress to determine whether and how our nation's communications networks are to be regulated. I have said from the outset in my "The Law is Whatever the Nobles Do" series that the FCC's action against Comcast's Internet network management practices was unlawful because Congress has not delegated to the FCC regulatory authority over the provision of Internet services, and the FCC may not self-generate such authority through creative use of the doctrine of implied or "ancillary jurisdiction." The court's decision rests on the foundational principles that the FCC's regulatory authority is not unbounded, the agency is not free to make it up as it goes along and the FCC possess no plenary authority to regulate an Internet service provider's network management practices. That is to say, the administrative nobles in our system must follow the laws as Congress writes them; they do not stand above the law and cannot self-generate their legal authority.

As the D.C. Circuit wrote, the FCC may properly exercise its ancillary jurisdiction over matters not expressly mentioned in the Communications Act, but only when that exercise is reasonably ancillary to—that is, in support of—an expressly-delegated regulatory responsibility. In its Comcast-BitTorrent Order, the FCC could not show, despite strenuous efforts, that regulating Internet network management practices was reasonably related to any of its express regulatory mandates in the Communications Act. This all-important limitation on the exercise of its implied powers, according to the court, is what keeps the agency from freeing itself "from its congressional tether." Paraphrasing an earlier Supreme Court decision, the court observed that the FCC's Comcast decision, not only "'strain[ed] the outer limits of even the open-ended and pervasive jurisdiction that has evolved by decisions of the Commission and the courts,'" it sought to "shatter them entirely."

My network neutrality comments concluded as follows:

The NPRM places its proposed rules in a long continuum of prior FCC actions that purportedly concerned the "openness" of the Internet to demonstrate that it is not "writing on a blank slate in this proceeding." More specifically, the NPRM correctly notes that "it has long been U.S. policy to promote an Internet that is both open and unregulated." This is certainly true. The Act contains no Congressional directive to the FCC to regulate the Internet, interactive computer services, or information services. Sections 230(b) and 706(a) constitute the "ends" that Congress has identified for the Commission to pursue. To the extent that Congress has spoken about the "means," it has indicated an affirmative desire to leave the Internet and interactive computer services unregulated...

The [Communications] Act simply does not grant to the FCC general regulatory authority over the Internet, consistent with affirmative Congressional desire to keep it unregulated. And the Internet has flourished immensely under this framework. The NPRM abandons this wise policy course by proposing extensive regulation of Internet services pursuant to the very same statutory provisions and policies cited in support of its earlier de-regulatory moves. This strongly suggests that the rules proposed contravene both Congressional intent and the agency's own settled understandings of that intent.

The Commission's view that it may use its ancillary jurisdiction to regulate based solely on broad policies contained in the Act would give the Commission almost limitless jurisdiction to regulate any communications technology at will. This theory would essentially render the majority of the provisions of the Act meaningless, including the carefully crafted Congressional directives. Express delegations of regulatory authority by Congress are important for two reasons: they both give power and limit its exercise in ways agreed upon by our elected representatives through duly-enacted legislation. If there are to be "rules of the road" for the Internet, it is Congress that must write them. Paraphrasing Chief Justice Burger's observation in Midwest Video I, the explosive development of the Internet "suggests a need for a comprehensive re-examination of the statutory scheme as it relates to this new development, so that the basic policies are considered by Congress and not left entirely to the Commission and the courts."

The D.C. Circuit's Comcast ruling largely tracks my analysis of the flaws in the FCC's jurisdictional arguments, concluding that under the controlling precedents of the Supreme Court, the D.C. Circuit and the relevant precedents of other Circuit Courts of Appeal, the FCC may not regulate the network management practices of an Internet service provider as "reasonably ancillary" to its responsibilities under sections 1, 230(b), 201, 256, 257 and 623 of the Communications Act and section 706 of the Telecommunications Act of 1996.

In reaction to this court's ruling an FCC Spokesperson has stated:

Today's court decision invalidated the prior Commission's approach to preserving an open Internet. But the Court in no way disagreed with the importance of preserving a free and open Internet; nor did it close the door to other methods for achieving this important end.

It thus appears that the FCC is now repudiating the "prior Commission's approach to preserving an open Internet," and may be considering "other methods for achieving this important end." This is surely a reference to rumored plans to "re-classify" broadband Internet access service from an "information service" to a common carrier "telecommunications service" so that it can be more pervasively regulated under the FCC's express regulatory authority pursuant to Title II of the Act. This would be inadvisable for many reasons noted by FCC Commissioner Robert McDowell, not the least of these is that such a move would send investors "running for the hills" and thereby undermine all the effort the FCC has put into developing its National Broadband Plan.

All of the above strongly suggests that the time has come for our elected representatives to take up the question of whether and how the FCC should regulate the provision of Internet services. Verizon EVP Tom Tauke has suggested that an "extreme makeover" of the Communications Act is now in order, including taking an ex post rather than ex ante approach to Internet service regulation. I have previously questioned whether one need approach this task with a "scalpel or a steamroller." Regardless of whether the Act undergoes an extreme makeover or just a slight "nip & tuck," the continuing legal uncertainty with respect to FCC jurisdiction over the provision of Internet services cries out for legislative attention.

In the meantime, the Commission is well within its rights to expand its aspirational Internet policy principles to include the principles of non-discrimination and transparency, and may wish to use the record it is building on the open Internet to make recommendations to Congress for additional authority. But the FCC should refrain from attempting to codify these principles under either its ancillary jurisdiction or through the expedient of regulatory "reclassification" in the absence of an explicit delegation of authority by Congress over either the Internet or Internet service providers.

Image: Scales Of Justice, a Creative Commons Attribution (2.0) image from crobj's photostream

The Plan includes some 200 recommendations for further action, over half of which are directed at the FCC itself. The agency plans to release an implementation schedule soon of over 40 rulemaking proceedings necessary to implement the Plan's recommendations.

What was released on March 16th is therefore nothing more than a plan for a plan — or, more to the point, a jigsaw of plans that will be implemented piecemeal by the FCC and other government offices. The danger is that the resultant pieces may not fit together, and no clear picture of gains in broadband availability or adoption will materialize.

The Plan was the product of a thirteen-month effort by the FCC and its staff to amass the data necessary to identify gaps in broadband availability and adoption, and examine how broadband could power our nation's economic recovery. Workshops were held nationwide; nearly forty requests for information were issued; and tens-of-thousands of pages of documents, as well as on-line commentary, were submitted for the record.

The framework was promising: an open, transparent and participatory process to develop a consensus plan, fostered by the FCC to help make broadband Internet service as affordable and ubiquitous as voice telephone service. But what was sent to Congress was a Plan developed and written by the FCC staff, and not voted on by the FCC Commissioners themselves.

The Plan was fundamentally framed, developed and written by a group called the "Omnibus Broadband Initiative," an "all star" team assembled by the FCC's Chairman to work in conjunction with FCC career staff. To be sure, the vast majority of the 410 staffers listed as contributors to the Plan were drawn from 13 different Bureaus and Offices of the FCC. But the fact of the matter is that this is no more than a staff-driven piece of work.

This is not to belittle the significant and impressive effort of the FCC's dedicated staff (of which I was once one). But critically missing are the votes of the FCC's five Commissioners. They were not given the opportunity to vote on the Plan and as a consequence, did not officially adopt it. Instead, they voted solely to adopt a brief "Joint Statement on Broadband" — reflecting only their "common beliefs" — that identifies six broadly-worded goals for developing U.S. broadband policy.

Tellingly, the Joint Statement reveals that each of the Commissioners "may have differing opinions on some of the specific recommendations set forth in the Plan." FCC Commissioner Robert McDowell separately stated that while the Plan "represents a tremendous amount of hard work and thoughtfulness … [I]t does not carry with it the force of law."

This is not insignificant. Most questions concerning government actions are "means and ends" questions. There can be a great deal of agreement on the ultimate ends — such as providing every American with a "meaningful opportunity to benefit from broadband" — but tremendous disagreement on how to get there.

Only broad goals saw agreement for this Plan — not the means to get there. The FCC's Commissioners — on the very details of the Plan — showed no official endorsement. The effects of the diversity of opinion on the Commission itself may portend far-reaching, practical consequences. That is, the procedural choice not to put the full Plan to a vote by the five Commissioners could impeded, perhaps greatly, the ultimate efficacy and results of the Plan. As Commissioner McDowell suggested, the staff's freedom to make recommendations without the need to gather votes means that the heavy lifting necessary to adopt consensus rules with the force of law must await another day. In the Commissioner's words, "today marks the beginning of a long process, not the end of one."

The lengthy Plan itself recommends a host of further actions to be taken by the FCC, the Congress, other departments of the federal government, as well as state and local governments. For the FCC to put the framework into action, it will have to proceed step-by-step, via a formal rule-making process. At the end of the formal rule-making process, each separate proposal must be adopted by a majority vote of the Commission.

Though necessary to promote more balanced, sustainable outcomes, rule-makings can be a time consuming and contentious process. Hopefully, the enormous record already amassed to produce the staff's Plan will permit that effort to proceed expeditiously and fairly. Doubtless, many of the staff's recommendations will be very useful in bringing this nation closer to the consensus goal of universal, affordable broadband Internet services for all, including directed subsidies, adoption programs, rationalization of utility pole rates, and endeavoring to make 500 MHz of spectrum newly available for wireless and mobile broadband uses.

But a huge question mark looms over the Plan. Will the other governmental entities whose actions are required to implement over half the recommendations, including state and local governments, feel as compelled to follow the recommendations of the Plan when it does not even bear the imprimatur of an affirmative vote of a majority of the sitting Commissioners?

Even the best-laid plans can go awry. It would be a shame if all the time and money spent developing this very important Plan were put at risk by the decision to have the FCC vote on only a joint statement setting the broadest of policy goals, when it is the detailed manner of implementation of broadly-worded policy goals that really matters.

Image copyright Horia Varlan.]]> 2010-03-10T21:50:52Z 2010-03-10T21:50:51Z tag:blog.pff.org,2010://2.5949 2010-03-10T21:50:51Z

They say April showers bring May flowers. What will the waters of March bring us? I refer not the immortal jazz standard, "The Waters of March" by Antonio Carlos Jobim, but to the increasingly torrential shower of droplets now leaking—or rather, gushing—from the Federal Communications Commission's National Broadband Plan team. Not a day goes by without serial announcements of what is, and is not, in THE PLAN (only full capitalization can do this plan justice, as Professor James Speta once remarked). Examples of this serial leakage, include the tribal radio preference plan, Universal Service Fund reform to support broadband, and the mobile futures auction idea. FCC "Kremlinologists," investment analysts, and the press are busy studying these droplets for clues, as Forbes.com put it, of "Broadband Plan Winners and Losers." Of course the people of the United States will be the ultimate winners if THE PLAN is done correctly, but at the same time, the decisions made by the government will create industry sector winners and losers, as the headline states. Setting aside whether it is a good use of government resources to pick industry winners and losers, development of a plan to spur broadband deployment and adoption is exactly what Congress directed the FCC to do in the American Recovery and Reinvestment Act.

]]> Computerworld's Matt Hamblen had one of the more revealing reports this past week based on a "wide-ranging telephone interview" with Blair Levin, executive director of the FCC's Omnibus Broadband Initiative, entitled "FCC broadband czar defends national plan." Levin characterized the FCC's mandate under the Recovery Act as "may be the broadest mandate any agency has ever gotten from Congress." Consequently THE PLAN is, according to Levin, "inherently broad, including three U.S. priorities for broadband deployment: bolstering the economic infrastructure of the country; spurring broadband innovation and investment; and bringing access to broadband technology to everyone in the U.S., including the 92 million people in the country now without access to high performance Internet connections."

Levin discussed many of the now-familiar aspects of THE PLAN, including recommendations that TV broadcasters be permitted to voluntarily offer unused spectrum for wireless Internet uses, relying on "cognitive radio" to help users find available unused spectrum, and repurposing the telecommunications universal service fund to support broadband Internet connectivity. Yet, I found myself more interested in Levin's description of what is not in THE PLAN, and particularly in his choice of the word "Initiative."

Levin said that net neutrality provisions will not be a part of the Broadband Plan because of a separate FCC Open Internet Initiative. In turn, any legislative recommendations on net neutrality from the Open Internet Initiative will probably be considered by Congress in the Internet Freedom Preservation legislation and related bills.

Note Levin's use of the new buzz word "Initiative" after the phrase "FCC Open Internet." The last time I checked, the FCC's Open Internet proceeding, GN Docket No. 09-191; WC Docket No. 07-92, "In the Matter of Preserving the Open Internet, Broadband Industry Practices," was a formal rule making proceeding under the Administrative Procedure Act, and not an "initiative." An administrative agency "initiative" could produce many things, but not enforceable rules published in the Code of Federal Regulations. Levin' next sentence, indicating that the Open Internet Initiative may produce legislative recommendations to be considered in conjunction with Rep. Markey's Internet Freedom Preservation Act seems to indicate that the end product of the Open Internet rulemaking will not in fact be rules, but rather legislative recommendations.

And this is how it should be in our system of government. Administrative agencies have no law-making powers, separate and apart from those delegated by Congress. If an expert agency like the FCC determines a need for additional regulatory powers to address changing industry structures, technologies, or consumer needs, it should make legislative recommendations to Congress and let our elected representatives decide the matter. It is for Congress and not the FCC itself to say whether the agency should be permitted to regulate the Internet and the provision of interactive computer services, how they should be regulated, and how much of the Internet ecosystem (much of which is already within the FCC's subject matter jurisdiction over wire and radio communications) should be brought within the agency's regulatory jurisdiction.

I have noted the lack of need for net neutrality mandates and the lack of jurisdiction to impose such rules, and suggested in my comments that the FCC might do better to use this rulemaking proceeding to clarify and expand its four Internet policy principles than to issue rules. Using the net neutrality docket to compile legislative recommendations, as Levin suggests, would also be a very productive use of the enormous record the agency is gathering on the net neutrality controversy, whether standing alone or in conjunction with the production of a refined set of Internet policy principles.

In fact, this is probably all the FCC can do under its current statutory authorization, which, as I stated in my net neutrality comments and elsewhere, does not give the FCC the legal authority to regulate the provision of interactive computer services or the Internet.

So, what is in a word? Is it significant that Levin is now calling the rulemaking an initiative? Maybe this word change it is that glimmer of light, that "green shoot," we have been waiting for, indicating that the agency does not plan a regulatory intrusion into the relatively well functioning Internet ecosystem at this time. Well, we can hope.

Photo source: photogirl17

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Bennett's Going Mobile paper is an important contribution to the growing net neutrality literature. It elaborates on his excellent earlier paper, "Designed for Change: End-to-End Arguments, Internet Innovation, and the Net Neutrality Debate," in describing how the Internet was "designed for change," and giving reasons why heavy-handed net neutrality mandates are particularly inappropriate for the mobile Internet.

The Mobile Internet, like the Internet as a Whole, Remains a Work in Progress - It Needs to Continue to Change

Going Mobile traces the historical development of the fixed-line Internet and mobile telephone networks, and identifies points of friction where these two very separate worlds collide in today's nascent mobile Internet market.

The question raised is this: who is in the best place to resolve these frictions, an administrative agency like the FCC, by way of notice-and-comment proceedings, or network engineers, operators, and applications developers working cooperatively through standards setting or other dispute resolution bodies?

Bennett correctly suggests a "co-regulatory" approach that leaves resolution of network engineering and operational problems to the network engineers, operators and content, applications, and services developers. We should heed Bennett's admonition to let the Internet experiment continue under a "light-touch" regulatory framework.

• It is unclear exactly what problem the proposed net neutrality rules are going to solve.
• Over 90% of the country lives in areas that have a choice of 4 or more mobile phone providers; the mobile wireless market is effectively competition by any reasonable measure.
• Bennett demonstrates that the net neutrality advocates' fear of one provider acting as a terminating access monopoly doesn't fit the wireless scenario. Mobile wireless networking offers many options for connecting to the Internet, including some "pay as you go options." Consumers therefore have alternatives if they find one provider "blocking" or slowing particular content or applications.
• The FCC recognizes in its Net Neutrality NRPM that wireless networks will require a different approach than wireline due to spectrum capacity constraints, need for more intensive network management to handle mobility, roaming, and in light of different market structure and product/service provisioning.
• CTIA recently filed an excellent analysis with the FCC demonstrating that the predictions of wireless net neutrality advocates that the wireless Internet market would permit consumer harms to occur in the handset, services, and applications markets have been demonstrably incorrect.
• The record before the FCC remains devoid of evidence of actual anti-competitive or anti-consumer behavior on the part of mobile Internet service providers that cannot be remedied through after-the-fact enforcement of existing antitrust or consumer protection laws.
• To the contrary, what we see is phenomenal growth and dynamism in a sector undergoing a rapid transformation from voice-only to data everything.
• This would appear to be a particularly bad time to transition from a "light touch" to "heavy handed" regulatory approach.

Internet Engineers Fear a Lack of Change While Net Neutrality Advocates Fear Change

Another important point that Bennett raises is while Internet engineers fear a lack of change, net neutrality advocates fear change. The "best efforts" Internet built on end-to-end design concepts "just works" today, according to Bennett, and is under great strain as more and more users join and more and more bandwidth intensive applications are developed; it must change just to keep up. This is true in both the fixed-line and mobile Internet markets, but is a more pressing issue for the mobile operator due to capacity and spectrum constraints.

• Going Mobile demonstrates that the "stupid network" concept of one treatment for all types of Internet traffic is neither practical nor necessary and that it fails to provide a sound basis for legal requirements.
• Current Internet standards don't fully support the range of capabilities required by mobile users so the wireless engineering community is working on the necessary supplements—this is a work in progress.
• According to Bennett:"It would be unfortunate if well-meaning regulators add to the Internet's general ossification by forbidding necessary and constructive changes while the question of the Internet's future architecture remains unsolved."

Bennett's Helpful Policy Suggestions on "Reasonable Network Management" and "Disclosure"

Going Mobile suggests that the way forward should entail a careful and diligent examination of historical rules and precedents with an eye to creating a new framework that will enable the next generation of networking to flourish. This is absolutely correct.

• Any network transparency and disclosure rule should be written on a technology-neutral basis.
• Tying requirements concerning "reasonable network management" to a disclosure requirement can help avoid nettlesome problems like requirements that are too general to be meaningful, or too specific to permit adequate operator flexibility for rapid response to conditions in the field.
• As Bennett suggests, a practice can be considered presumptively reasonable if it "does what it says it does" without violating basic user rights of access to Internet content, applications and services and is adequately disclosed by the network operator.
• Bennett also recommends that the FCC form a "Technical Advisory Group" to develop a consensus set of disclosure requirements.
• I agree with the general approach of government collaborating with industry to develop workable requirements.
• I question whether this function should be housed at the FCC, as opposed to the Federal Trade Commission. The FTC has broader, industry-wide jurisdiction and a good deal of experience developing and enforcing consumer disclosure requirements.

We now depart "Planet Engineering" and arrive on "Planet Law."

The FCC Proposes to Regulate "the Internet"

In comments filed in the Net Neutrality rulemaking, I demonstrated that from a legal perspective, the FCC's proposed rules would constitute regulation of "the Internet." This is true whether one uses the definition of "the Internet" contained in either section 230 of the Communications Act, the FCC's Net Neutrality NPRM, or an earlier FCC definition of the Internet.

Bennett provides a useful explanation of what "the Internet" is from an engineering perspective: it is a virtual network that each individual network "joins" as a "member network" rather than a discrete physical network that is "accessed." That is, a "network of networks" interconnected through the use of common protocols. This view is reflected in all relevant definition of "the Internet."

• In Bennett's words: "An Internet is a virtual network (or a "meta-network") that works with networks as they are, imposing a minimal set of requirements."
• The Internet does not exist apart from the Internet service provider networks.
• It is not a "place" or a "thing."
• It is a set of agreements.
• The "end-to-end" principle means that there is no part of the path between one Internet network-connected system and another that is not part of "the Internet."
• This of course is consistent with the earlier meme that the Internet existed in "cyberspace."
• Like many, Bennett also describes today's Internet as an "ecosystem" that is weakly managed in terms of quality of service.
• Larry Strickling, Assistant Secretary of Commerce for Communications and Information, took issue with the "ecosystem" metaphor in a speech delivered on February 24th at the Media Institute, entitled "The Internet: Evolving Responsibility for Preserving a First Amendment Miracle."
• According to Strickling: "It is more accurate to describe the Internet as an agglomeration of human actors-it's a large and growing social organization."
• Strickling's speech calls for the initiation of an "Internet Policy 3.0." He describes this as a collaborative, rather than regulatory, approach whereby Internet stakeholders and government officials to come together to address unresolved tensions on the Internet. This sounds like Richard Bennett's suggested "co-regulatory" model.
• Internet Policy 3.0 is intended to replace the earlier "hands off" approach of the U.S. government toward the developing Internet, in recognition of the central and vital role the Internet has come to play in societies around the world.
• Strickling took pains to make clear that this initiative was not aimed at instituting a heavy-handed, slow moving, backward-looking regulatory approach to rising tensions on the Internet.
• Whether one visualizes "the Internet" as "cyberspace," a "virtual internetwork," an "ecosystem," or an "agglomeration of human actors," the rules that the FCC proposes to adopt in its Net Neutrality NPRM will regulate that thing in the traditional manner of FCC regulation: prescriptive rules, enforcement actions, and petitions for reconsideration or waiver, with years of litigation to follow.
• And therein lay the rub for the FCC: "Internet Policy 2.0" as reflected in Section 230(b)(2) of the Communications Act continues to state that it is the policy of the United States that "the Internet" and "other interactive computer services" "remain unfettered by Federal or State regulation."
• "Interactive computer services" as defined in section 230(f)(2) include "information services" and the FCC has defined broadband Internet access service provided via cable modem, wireline, powerline, and wireless networks to be information services.
• No matter which way you slice this, the Act appears to preclude FCC regulation of "the Internet" and "broadband Internet access services."

This brings me to the question of the FCC's legal authority to adopt its proposed net neutrality rules.

The Self-Perpetuating Regulatory Machine

Glen O. Robinson, Former FCC Commissioner and Professor of Law Emeritus at UVA School of Law, gave a fabulous lecture on February 18th at the George Mason University School of Law entitled, "Regulating Communications: Stories from the First Hundred Years." Professor Robinson discussed the tendency of regulation to persist and spread, long after the reasons for its origins have ceased to exist and often without explicit legislative direction. Among the topics he covered was the FCC's implicit or "ancillary jurisdiction."

• Professor Robinson characterized the FCC's creation of the doctrine of "ancillary jurisdiction" as "regulatory parthenogenesis" whereby regulation can reproduce without outside help in the form of legislative determination.
• The creation of cable regulation 20 years before the addition to the Communications Act of Title VI, governing cable communications, is the original and primary example of this phenomenon.
• Professor Robinson observed that the FCC is taking advantage of vagueness about what "the Internet" is so that it can define it in way that it can regulate it. In other words, if the Internet cannot be regulated by the FCC, then by definition what the FCC proposes to regulate cannot be the Internet.
• In Professor Robinson's view an agency that can self-define its mission like this can no longer be thought of as an arm of Congress. Rather, it is a machine that, once established, goes on by itself, free of legislative limitations.
• The question, according to Professor Robinson, is whether it is consistent with Congressional intent for a regulatory agency to act as if legislative limitations are simply irrelevant.
• The U.S. Court of Appeals for the District of Columbia Circuit may soon be providing us an answer to the Professor's question in its review of the FCC's Comcast-BitTorrent decision.

The Jurisdictional Dilemma

Bennett's suggestions for building a better net neutrality mouse-trap leave to one side the question of who is to be doing the building, and under what body of law.

• The FCC's jurisdiction to act on the proposals put forth in the Net Neutrality rulemaking is not self-evident.
• The FCC's theory that it may adopt net neutrality rules under its "ancillary jurisdiction" is exceedingly weak, according to most observers and the comments filed in the response to the Net Neutrality NPRM.
• Nor does it appear that there is any other jurisdictional foundation for regulation of the provision of Internet services available to the FCC under the Act.
• Suggestions that the FCC simply "reclassify" broadband Internet access as Title II "telecommunications services" have a certain surface intellectual appeal. But it is far from evident that the courts would accept such an Emily Latella "Never Mind" moment from the agency.
• Not to mention the view from noted investment analysts that such a regulatory about-face would, according to Stifel Nicholas' Rebecca Arbogast, "totally freak people out" (as reported Feb. 23rd by Communications Daily - subscription required) and, according to Bernstein Research's Craig Moffett, send investors "running for the hills."
• Scaring off the investors necessary to fund infrastructure upgrades and deployment would completely undermine the efforts to develop a National Broadband Plan to extend broadband Internet deployment to all the people of America.

In Closing

Bennett's suggestions for what sensible rules that take economic and engineering concerns into account should include are sound, but the fundamental question remains: must these be mandated as enforceable rules by a sector-specific regulatory body or may we continue to rely on market forces, backed up by general antitrust and consumer protection laws, to protect consumer interests? I remain unconvinced that a priori FCC rules are the way to go.

Regulators should turn away from creating unnecessary regulatory constraints on a market that is functioning reasonably well today, and focus instead enabling the further growth and development of Internet services, fixed and mobile, by removing regulatory impediments.

We are already hearing about some very promising steps in this direction from the FCC's National Broadband Plan task force. With any luck, the signals from the FCC's right brain will penetrate to its left brain and signal the net neutrality rulemaking team to "stand down."

I have previously written on this topic and noted that the purpose of regulation is to curtail companies from taking actions that they might otherwise take to gain some benefit, such as increase the return on the capital they have invested in their networks. Aggressive regulation will necessarily adversely impact network operator's future desire to continue to invest in their networks, just as it will adversely affect the desire of their investors to continue to invest in the communications infrastructure sector. As Dr. Larry Darby has observed, the concern is not that heavy handed regulation will completely stop network investment, but rather that "such rules will suppress investment that otherwise would be made, and that the differences might be substantial." In contrast, regulatory stability combined with actions based on empirical evidence and sound legal analysis that do not blow with the winds of the day is what is required to support the substantial long-term investments necessary to fund network industries like communications.

Whatever the merits or short-comings of the FCC's four separate decisions to classify all broadband Internet access services (cable modem, wireline Internet, broadband over powerline, and wireless Internet services) as information services, subject only to its limited Title I "ancillary jurisdiction," it may be too late in the day to go back, like SNL's Emily Latella, and say to the courts: "Never mind!" These decisions were made upon adequate factual records, consistent with the manner in which the services are provided, the wording of the statutory definitions, and the de-regulatory thrust of the provisions added to the Communications Act by the Telecommunications Act of 1996. The cable modem classification was upheld by the U.S. Supreme Court in the Brand X decision as a reasonable interpretation of the statute. There is no evidence that the manner of provisioning these services to the public is different today and the statutory definitions and policies under-girding these decisions are unchanged as well. A sector subject to a regulator using the logic of Humpty Dumpty would hardly be attractive to investors.

The FCC's National Broadband Plan team has previously placed a price tag for providing universal broadband service to all residents of the country at anywhere from $20 to $350 billion for a single network, depending on the speed of the connection delivered and other variables; double that--$700 billion--to support two networks if the competitive provision is deemed necessary. The American Recovery and Reinvestment Act budgeted $7.2 billion to support broadband deployment and adoption efforts. Private companies have invested hundreds of billions of dollars in the past decade to upgrade and expand their distribution networks and for the provision of Internet services and applications, and will need to continue to invest on a massive scale to meet the growing bandwidth demands of the future. The Government Accountability Office has recognized that we must continue to rely largely on private investment to fund network expansion and upgrades to achieve our broadband goals.

It is axiomatic, therefore, that a proposal that would send investors "running for the hills" should be categorically excluded from consideration as part of both the NBP and from the execution of the FCC's general statutory responsibilities, which include encouraging the deployment of advanced telecommunications capabilities such as high speed Internet service. A destabilized communications network sector will simply be unable to deliver the "100 Squared" vision recently articulated by the FCC's Chairman. The FCC would violate, not further, its statutory duties if its actions cause private capital to flee the communications infrastructure sector. At a time of record federal deficits, the chance that the federal government will cover a $350 billion shortfall, let alone the $700 billion shortfall, or that the universal service fund can do so, is somewhere between "Slim" and "None," and Slim just walked out of the building.

We're planning to build and test ultra high-speed broadband networks in a small number of trial locations across the United States. We'll deliver Internet speeds more than 100 times faster than what most Americans have access to today with 1 gigabit per second, fiber-to-the-home connections. We plan to offer service at a competitive price to at least 50,000 and potentially up to 500,000 people...

We'll operate an "open access" network, giving users the choice of multiple service providers. And consistent with our past advocacy, we'll manage our network in an open, non-discriminatory and transparent way.

The Communications Act of 1934 defines the common carrier provision of telecommunications service in terms that seem to fit Google's planned service offering quite nicely. As a consequence, all the provisions of Title II that impose duties on those who provide common carrier services would automatically apply, unless Google were to seek regulatory forbearance from some of its provisions under 47 U.S.C. § 10.

Consistent with the statutory definitions, Google may be engaged "as a common carrier for hire" under 47 U.S.C. § 3(10) by virtue of its provision for hire to the public of a transmission service providing "communications by wire." In notoriously circular fashion, the Act defines a "common carrier" as "any person engaged as a common carrier, for hire, in interstate or foreign communications by wire or radio or in interstate or foreign radio transmission of energy." "Wire communication" and "communication by wire," are defined interchangeably in 47 U.S.C. § 3(52) to mean "the transmission of writing, signs, signals, pictures, and sounds of all kinds by aid of wire, cable, or other like connection between the points of origin and reception of such transmission, including all instrumentalities, facilities, apparatus, and services (among other things, the receipt, forwarding, and delivery of communications) incidental to such transmission." These notoriously vague statutory definitions must be supplemented by reference to the "NARUC I" test for who is a common carrier. Under NARUC I, the key determinant of a common carrier is "the characteristic of holding oneself out to serve indiscriminately" to the public, or one who offers services that are "effectively available directly to the public for a fee." A common carrier need not serve the entire public to fit this definition, it need only hold itself out to provide service "to the clientele one is suited to serve" and the company must not make individualized decisions, in particular cases, whether and on what terms to deal. The manner and terms by which the carrier approaches and deals with its customers is key.

A second prerequisite to common carrier status addressed in NARUC II, and based on the FCC's application of the common carrier concept to the provision of communications, is "that the system be such that customers 'transmit intelligence of their own design and choosing.'"

The Telecommunications Act of 1996 added a complementary set of definitions using "telecommunications" terminology that the D.C. Circuit in Virgin Islands Telephone Corp. v. FCC found clarify, rather than alter, the statutory definition of a common carrier. "Telecommunications service" is defined 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 facilities used," pursuant to 47 U.S.C. § 3(46). "Telecommunications" is defined as "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 or received," in 47 U.S.C. § 3(43). In other words, "telecommunications" is a pure transmission offering that can be provided on either a common carrier or private carrier basis. These definitions have been interpreted by the FCC to be essentially a way of restating the dividing line between common carrier and private carrier services consistent with the tests articulated in the NARUC decisions.

In sum, to the extent Google holds itself indiscriminately out to supply over GoogleNet, for a fee, a pure "open access" wire transmission service to Internet content, applications, and services providers, it would appear to have the characteristics of a statutory "common carrier" under NARUC I and NARUC II, as well as a "telecommunications carrier" under the definitions added by the 1996 Act.

This analysis is confirmed by statements from Google official Minnie Ingersoll in an online interview posted on Giga Om:

GigaOM: By getting into the ISP business Google will expose itself to new regulations. What are the expectations there for you?

Ingersoll: We expect to be regulated in the same way as anyone else is regulated. We don't plan a video or voice offering. Our fiber to the home is strictly an IP data pipe. We will be governed by the regulations that apply there and are not seeking special treatment.

Happily for Google, the other communications services that it provides may remain protected from common carrier treatment by virtue of the definition of a "telecommunications carrier," in section 47 U.S.C. § 3(44), which is defined as "any provider of telecommunications services" except "aggregators" of such services. Section 47 U.S.C. § 3(44) further provides that a "telecommunications carrier shall be treated as a common carrier under this Act only to the extent that it is engaged in providing telecommunications services..." The statute thus permits one to be a common carrier for some, but not all, services offered to the public.

An added benefit to Google in providing telecommunications service on a common carrier basis is that it will be subject to the more permissive prohibition against only "unjust and unreasonable" discrimination contained in Title II, 47 U.S.C. § 202(a), whereas non-common carrier providers of broadband Internet access service will be subject to a strict nondiscrimination prohibition under the network neutrality rules that the FCC proposes to adopt in its "Open Internet" rule making.

And that is one of the great things about America: any company can wake up and decide on its own to be a common carrier (although the converse is not necessarily true). A company might be willing to accept common carrier status and its consequent economic regulation in exchange for a monopoly franchise, or simply because it fits the business model for the service it wishes to provide. Common carrier status has many burdens, but it has many benefits as well.

The government, however, should not force a common carrier business model on those providers who wish to provide service on other terms and conditions of service under today's market conditions. The FCC, the Federal Trade Commission, National Telecommunications and Information Administration, and the Department of Justice have all found that the broadband marketplace is not marked by monopoly conditions today, and does not appear to be developing in that direction -- a conclusion underscored by Google's own announced market entry.

NetworkWorld reports that by constructing its own fiber network, Google "is trying to push its vision for how the Internet as a whole should operate." I wish the company all the success in the world with GoogleNet. Business model experimentation and new entry to the broadband Internet service provider market like this should be encouraged. If this "open access" common carrier network proves to be a viable business model that attracts both customers and followers, it will be a fabulous addition to the domestic Internet ecosystem. But this vision should not be turned into unnecessary government mandates for other Internet network operators who are similarly trying to experiment with their business models in this brave new digital world.

The moderators set up the core questions: "Is net neutrality a solution in search of a problem? Or is net neutrality required to ensure a fair and open Internet?" As the reader may imagine, I argued, as I have in the past, that net neutrality remains a solution in search of a problem, and Riley argued, as Free Press has, that it is required to ensure a fair and open Internet. In my presentation, I focused on the lack of evidence of a market problem or consumer harms to be redressed by this regulatory remedy; the FCC's lack of "ancillary" jurisdiction to impose the proposed net neutrality mandates; and the possibility that the rules would be found to infringe on the First Amendment rights of broadband Internet service provider. Similarly, Riley, in his presentation, argued that broadband ISPs have the incentive and ability to engage in harmful discrimination in the carriage of Internet traffic; that we should not permit ISPs unbounded discretion to decide what traffic gets priority treatment; that the government need not wait for harm to occur but may be proactive in protecting consumers and competition; and that net neutrality would protect the free speech rights of consumers, as Free Press has maintained.

I was pleased, however, to find at least one, perhaps inadvertent, area of agreement. Riley gave as a policy goal of net neutrality the avoidance of "unbounded agency/provider discretion." Although we disagree on the need to curb provider discretion, I am in complete agreement with Riley's policy goal of avoiding unbounded agency discretion. In fact, that is why I have been so distressed by the FCC's claims that it has ancillary -- and utterly discretionary -- jurisdiction to regulate, or not regulate, the provision of Internet services without any regard to statutory limits. In comments that I filed in the FCC's net neutrality rulemaking, I demonstrated that Congress did not delegate to the FCC unbounded discretion to decide whether and how to regulate the Internet or the provision of Internet services. Such unbounded discretion is unacceptable as both a matter of administrative law and good government.

Another interesting difference between our views is over nomenclature. In my comments, I criticized the FCC's attempt to distinguish what it refers to as "the Internet," which it disclaims it will be regulating, from the broadband Internet service providers it does seek to regulate. As my net neutrality comments explain, by the FCC's own definition, as well as most other definitions of the Internet, the downstream Internet service providers appear to constitute "the Internet" just as much as the upstream Internet content, applications and services providers. Riley made very clear during the question and answer period that by regulating the broadband ISPs, the FCC would not be regulating "the Internet." The latter, in his view, consists solely of the Internet content, applications, and service providers the proposed rules are designed to benefit.

This is a very convenient linguistic dividing line for proponents of net neutrality regulation, because it endeavors to permit the FCC to regulate only the broadband ISPs, without having to concern itself with either potential or actual anti-competitive or anti-consumer activities of the Internet content, applications, and services providers that may also threaten the "open Internet." Thus, it would permit the agency to maintain that the Congressional policy contained in Section 230(b) of the Communications Act, that the vibrant and competitive free market that presently exists for the Internet remain unfettered by federal or state regulation, protects only upstream software companies and the like, no matter how any of them may imperil the "open Internet." Of course, this line cannot hold.

If the stated purpose of the FCC's proposed net neutrality rules is to protect the open Internet from censorship, blockages, filtering, and similar behavior, there is no reason to stop at the edge of the broadband ISP's network. In theory, if not in reality, a dominant search engine or content provider could just as easily imperil the open Internet with insidious blockages, filters, or censorship. But is the Internet marketplace really so broken that the FCC needs to regulate any of these Internet functions and service providers? Do we think Congress intended the FCC to be regulating in this area? Do we even want to go down this path of high tech "mutually assured destruction" where all participants in the complex ecosystem that comprises the Internet find themselves subject to FCC regulation because the "open Internet" theory used by net neutrality proponents to establish FCC jurisdiction knows no bounds? I think not.

When Congress stated in Section 230(b) that it is the policy of the United States that "the vibrant and competitive free market that presently exists for Internet and other interactive computer services" remain "unfettered by federal or state regulation," I believe it meant what it said. As I wrote in my net neutrality comments, the statutory definition of "interactive computer services" includes both "information services," and "a service or system that provides access to the Internet." Thus the FCC's attempt to cleave off "Internet access service" as something separate and apart from the services Congress intended to remain unregulated will likely be found unavailing by reviewing courts. Moreover, as I wrote in my comments, the FCC has said in four separate rulings over the course of a five year period that broadband ISPs provide information services. The Internet itself is an interconnected network of networks, and it includes the networks of broadband ISPs. It is they, after all, who provide Internet service to the public. The FCC's proposed net neutrality rules simply cannot be reconciled with Section 230(b), which is of course ironic, since the FCC relies on this provision as the principle basis for its ancillary jurisdiction.

The Webinar also touched upon many other of the now familiar net neutrality topics: whether the government needs to proactively protect Internet innovation or whether there is sufficient marketplace competition do so; the effect of the proposed rules on investment incentives; whether we can trust businesses to "do the right thing;" who should control network management decisions; whether broadband ISPs should be prevented from experimenting with new Internet service business models; and whether net neutrality rules would promote or violate free speech rights under the First Amendment.

I recommend this Webinar for those interested in a good overview of the on-going and ever-evolving debate that surrounds net neutrality. While many aspects of the net neutrality controversy will remain shrouded in mystery, the Webinar may help elucidate some of these key flashpoints.

The situation brings to mind the 1993 film, "Groundhog Day," in which an egotistical and sardonic TV meteorologist, Phil Connors must travel to Punxsutawney, Pennsylvania for the hated annual assignment of reporting on the emergence of the groundhog "Phil" from winter hibernation with his weather report. A blizzard, which Phil reported would miss the area, soon strands our meteorologist in Punxsutawney. By virtue of some cosmic loop, Phil discovers that every time he awakens it is February 2nd, Groundhog Day and he must once again repeat the same day. No one but the erstwhile Phil, however, remembers the actions of the day before. Armed with the knowledge that there will be no long term consequences, Phil begins to misbehave. Eventually, he decides to use what he learns each day to improve himself and the lives of those around him. The phrase "Groundhog Day" has since passed into the popular vernacular as a reference to an unpleasant situation that continually repeats, or seems to.

Are we doomed to continually replay the debate over the imposition of common carrier requirements on broadband ISPs, without learning from our past? Or will we, like Phil the meteorologist, learn from regulatory history, and remove, rather than impose, regulatory barriers to investment and innovation? I hope the answer to this question does not depend on whether the sky over Washington is cloudy or sunny the day the D.C. Circuit Court of Appeals issues its ruling in the appeal of the FCC's Comcast P2P Order. It now appears that nearly everyone, including even the most ardent proponents of the agency's ancillary jurisdiction, understands that the expansive jurisdictional theory that the FCC used to justify its 2008 action against Comcast met with a very frosty reception by the panel hearing oral argument in the case. Talk of a jurisdictional "Plan B" was quick to emerge in the press, to be followed in short order by the request for the FCC to take up the reclassification of broadband services as part of its National Broadband Plan.

Setting aside the legal question of whether the courts will now simply accept an FCC "reclassification" of that which has already been classified (by no means a slam dunk), reopening the question of how the Communications Act applies to broadband Internet services would recommence the protracted regulatory classification debates that occupied the time of regulators, regulatory attorneys, service providers, and the nation's courts for nearly 10 years. Reams of paper, if not whole forests, were expended in search of an answer. This debate, while unavoidable, had its costs, as will any new effort to breathe life into this settled question. Although Public Knowledge is correct to note that reclassification as a common carrier telecommunications service would solve certain problems, including how to quickly re-direct universal support funding--now restricted to telecommunications services--to the re-classified broadband services, it would likely come at a steep cost to the overarching goal of ubiquitous broadband deployment and service improvement.

The cessation of legal uncertainty concerning the treatment of broadband Internet services has brought benefits to the public in the form of increased investment and deployment of broadband infrastructure and more varied and sophisticated broadband Internet service offerings. In 1999, there were only 2.8 million high-speed Internet connections serving homes and small businesses in the U.S. As of 2008, there were 132.8 million connections and broadband Internet service was available to 96 percent of households that could receive cable TV service. Such forward progress would be put at severe risk were the FCC to re-open the regulatory classification issue, thus forcing itself back into a pre-Brand X time loop. The imposition of common carrier economic regulation on the provision of broadband Internet services would likely chill, rather than thaw, the on-going capital formation necessary to build out broadband capability to the unserved, and would do nothing to enhance the rate of broadband adoption for those who remain off-line today.

The FCC should politely decline the invitation to introduce, at this late date, the shadow of regulatory reclassification into its National Broadband Plan effort. Such an action will invariably be met with a blizzard of responsive filings that re-hash the classification arguments from decades past. This would likely strand the Plan within the corridors of the FCC, where every day will feel like Groundhog Day. Such a course of action, I fear, would not provide a happy ending for the blockbuster National Broadband Plan under development at the agency. It should therefore be avoided at all costs.

The NPRM, incorporating by reference the jurisdictional theory stated in the Commission's 2008 Comcast P2P Order, asserts that the Commission has ancillary authority to prescribe rules principally under two statutory provisions: to implement the "federal Internet policy" contained in section 230(b) of the Telecommunications Act of 1996 and to achieve the statutory goal of encouraging broadband deployment pursuant to section 706(a) of the Act. It also appears to rely, at least to some extent, on sections 1, 201(b), and 257, and more broadly on whole titles of the Act - II, III, and VI. My comments examine the Commissions' jurisdictional theory in great detail, and conclude that there is simply "no jurisdictional 'there' there." None of these provisions, taken singly or together, provide a legal basis for the Commission to regulate the provision of Internet services.

The Communications Act simply does not grant to the FCC general regulatory authority over the Internet, consistent with affirmative Congressional desire to keep it unregulated. And the Internet has flourished immensely under this framework. The NPRM abandons this wise policy course by proposing extensive regulation of Internet services pursuant to the very same statutory provisions and policies cited in support of its earlier de-regulatory moves. This strongly suggests that the proposed rules  contravene both Congressional intent and the agency's own settled understandings of that intent.

The proposed network neutrality rules are premised on the view that Congress delegated to the FCC very broad authority to regulate any form of wire or radio communications in its sole discretion, including the Internet. My comments argue that Congress did not delegate to the FCC regulatory authority over the Internet or anything else for that matter solely in the form of "broad policy outlines." If it had, the Act would be very short, consisting perhaps of no more than a few provisions currently contained in Title I. The rest would be no more than surplus usage as the FCC would have a roving commission simply to "go and do good" without any statutory limitations whatsoever.  No administrative agency operates under so broad a delegation of authority from Congress, and there is nothing in the Communications Act to suggest that the FCC is the exception.

Nor may the Commission support its proposed rules on the theory that the Commission has ancillary jurisdiction broadly based on entire Titles of the Act - II, III, and VI--simply because services provided over the Internet may affect aspects of federally regulated communications.  For one thing, the obverse is no doubt true as well. Yet neither observation alters the commands of the Communications Act, and the Act neither directs nor permits the FCC to regulate the Internet simply because services provided over it affect nearly all aspects of federally regulated communications. This "everything-affects-everything" approach to FCC jurisdiction is simply untenable. By having to reach so far to demonstrate its jurisdiction, the NPRM exposes nothing more than its absence. No court has ever upheld a delegation of such limitless discretion to regulate or not, at will, to the Commission under the doctrine of ancillary jurisdiction. 

Unchecked regulatory discretion under the amorphous doctrine of "ancillary jurisdiction" is every bit as big a danger to a free and open Internet as any of the other dangers the NPRM posits to support the proposed network neutrality rules. If there are to be "rules of the road" for the Internet, it is Congress that must write them. Paraphrasing Chief Justice Burger's observation in Midwest Video I, the explosive development of the Internet "suggests a need for a comprehensive re-examination of the statutory scheme as it relates to this new development, so that the basic policies are considered by Congress and not left entirely to the Commission and the courts."

It appears that the Commission too is coming to doubt the efficacy of its ancillary jurisdiction to support its proposed network neutrality rules.  Last week, a skeptical panel of the D.C. Circuit Court of Appeals heard argument on the FCC's claims of ancillary jurisdiction to support its BitTorrent ruling, which are nearly identical to those contained in the network neutrality rulemaking. In the wake of what most observers agree was a tough morning in court, the Washington Post reports that the FCC leadership is already considering a jurisdictional "Plan B." Plan B appears to be consideration of steps to re-classify broadband Internet access service from an unregulated "information service" to a highly regulated "telecommunications service" - that is, a public utility service - under the Act. This would subject broadband Internet service providers to what Kazantzakis "Zorba the Greek" would call the "full catastrophe" of Title II common carrier regulation.

Playing the game of identifying "who's a common carrier?" is a perennial favorite of telecommunications attorneys. The reasons why it might not be as easy as it sounds to just "re-classify" broadband Internet service as a common carrier offering are touched upon briefly in Part VI.B. of my comments. If this is the FCC's new approach to Internet services, my suggestion, per Betty Davis' immortal performance in the 1950 film drama All About Eve, is to "Fasten your seatbelts, its going to be a bumpy night!"

The best alternative, also suggested in the Washington Post article, is for the FCC to use its present network neutrality proceeding to gather data and economic analysis on the question of the need for regulation of the Internet and Internet services that Congress may call upon when it turns its attention to the need for reform of the FCC and the Communications Act.

Last year at about this time, I wrote a short piece about the results of an FCC Office of the Inspector General semi-annual report on the FCC's administration of various universal support funds, including the TRS fund. All telephone consumers pay into the Telecommunications Relay Service (TRS) fund via assessments on their phone bills. In 2008, these TRS fees totaled about $540 million. The TRS fund has growth exponentially in recent years, largely on the basis of the manner in which it supports video relay services. The FCC's rules permit reimbursements for the video service that can totally hundreds of dollars per hour, so accurate billing of minutes of use are particularly important.

Among the many problems identified by the OIG internal reporting, cost standards and cost controls appear to have gone missing from the TRS Fund program.

The worked (sic) performed . . . found that TRS providers' processes for accumulating and reporting minutes of services provided and related costs were not always adequate. This resulted in some TRS providers being paid for unallowable minutes of service from the TRS Fund. The audit work also concluded that methodologies used by TRS providers for accumulating and reporting minutes of services provided and related costs were not uniform. The increased risk that unreasonable, unallowable, unnecessary and inaccurate costs were considered in the rate used to reimburse providers from the TRS fund. These risks could result in rapid cost growth and require higher funding rates. (emphasis added)

My translation of this finding was that the TRS rate base was "at risk" of containing unreasonable, unallowable, unnecessary and inaccurate costs due to irregular and inadequate controls. That is, waste, fraud and abuse may have added to the tremendous growth of the TRS Fund over the last ten years, but one couldn't be sure because recipient internal controls are lacking.

The OIG report had revealed that the seven providers who were the subject of the performance audits received 15 percent of TRS payments made between 2006 and 2007, and that an eighth failed to provide enough cost and billing information to allow completion of its audit. Thus, a small sub-set of providers may account for a large percentage of the cost increases and at least one of them was either uncooperative or incapable of supplying the requested information to the auditors.

Second, the OIG report singled out one specific form of TRS as likely to have been overpaid: video relay services. It appears that the current compensable hourly rate for VRS is $376.11 (out of a maximum of $404.17). Yet the median rate of pay for a VRS interpreter is only $17.79 per hour, leaving "approximately $385.32 or more of gross margin per reportable hour to cover the other costs associated with the provision of VRS telecommunication services. The other cost associated with VRS discussed in the OIG report is broadband service. Significantly, the report states that "the hourly margin, when compared with the costs of broadband services, suggests that the FCC needs to look much more closely into the allowable expenses and the capital costs that underlie the cost projections that VRS providers submit to the FCC in setting the rates that VRS providers receive per allowable minute of reported service." Wow! That is $385 or more of "gross margin" for a service whose hourly ASL interpreter rates are less than $18! That's quite a business to be in.

It was therefore especially heartening to read that the that the FCC had launched the investigation after receiving evidence of fraud. FCC Chief of Staff Edward Lazarus said the event was "both a tragedy and an opportunity." As a result, Lazarus said the FCC has increased scrutiny of records, resulting in withholding payment on some 2 million minutes worth of submitted calls, plans to put stricter controls on the program's administrator, and plans to undertake to a comprehensive review of the program.

This is a very encouraging development and it should be commended. My colleague Adam Thierer worries that the FCC is reconstituting itself as the "Federal Cloud Commission," and I share his concern. But news of the TRS fund investigation also indicates that behind the scenes, the really important work of the FCC -- the day-to-day carrying out of its explicitly delegated authorities under the Communications Act -- has not been sidelined by National Broadband Plan activity, and that repair of some of the FCC's broken processes is underway. That is real forward progress.

Scott Cleland wrote a nice little piece on the tendency of net neutrality advocates to re-write Internet history so that the steady movement away from government ownership and control, including economic regulation, during the Clinton Administration is air-brushed out of history. My point is less global, but no less important. The terms, conditions and prices of cable modem service at both the retail and wholesale level have never been subject to regulation.

Instead, the FCC made the conscious decision to classify the service not as a highly regulated common carrier telecommunications service, but rather as a then-unregulated "information service." This decision was made for the purpose of encouraging broadband deployment and permitting such Internet services to be provided in a minimally-regulated environment, and it was upheld by the U.S. Supreme Court in the Brand X case. And, yes, the FCC launched a companion rule-making to consider whether to impose any special requirements on this information service pursuant to its Title I "ancillary jurisdiction. But it has never acted on that proposal. Thus, there is no rate-regulated leasing of cable modem lines for regulators to revive.

But I digress. The real story is that the FCC, for the first time, is seriously considering imposing common carrier-like economic regulation on cable Internet providers, in the context of its charge from Congress to develop a "National Broadband Plan" to increase broadband deployment. Setting that irony aside for the moment, we can, and will, debate the merits and drawbacks of the open access issue for some time to come (and rest assured, it will feel like Groundhog Day for many of us). But let's not start the debate from the false premise that we are just returning to the good old days of yore.