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Net Neutrality

February 28, 2018

NET NEUTRALITY: A SOLUTION TO A PROBLEM OR A SOLUTION IN SEARCH OF A PROBLEM?

By: Tash Bottum, Volume 102 Staff Member

The internet is everywhere. The last two decades have seen extraordinary growth in internet use, investment and innovation.[1] In order to ensure continual growth, the Federal Communications Commission (“FCC”) has committed itself to maintaining and protecting an open internet.[2] Net neutrality is a principle embodying this commitment: internet service providers (“ISPs”) must treat all content and applications the same, providing consumers with equal access to all domains of the internet.[3] Within the last five years, the FCC has both formally imposed and repealed net neutrality regulation, leaving controversy and a heated debate in its wake.

I. NET NEUTRALITY AND ITS REPEAL

Since 2005, the FCC has twice attempted to implement net neutrality through enforcement orders and regulation, to no avail.[4] In 2015, they tried again, charming the internet with a different approach. Under the Telecommunications Act of 1996, the FCC may impose heavier regulation on public utilities—including telecommunication services—than on information services.[5] In 2015, the FCC reclassified all broadband ISPs from information services to telecommunications services, bringing the internet within its ambit of strict regulation.[6] Subsequently, the FCC acted pursuant to its broad regulatory authority over public utilities and established three bright-line rules: no blocking, no throttling, and no paid prioritization.[7] In short, this regulation prohibited ISPs from blocking access to any lawful internet destinations, impairing or degrading lawful internet traffic, and accepting payment to favor some internet traffic over other traffic, thereby creating unlawful internet “fast lanes.”[8] However, these rules would not last long.

Two short years later, the FCC announced its intent to repeal net neutrality.[9] In May 2017, the FCC issued a proposed plan that would return ISPs’ classification to that of information services (“2017 Order”).[10] In December, the FCC approved its plan by a 3-2 vote.[11] This move repeals the bright-line rules, instead requiring ISPs to disclose their content management practices to consumers under new transparency rules,[12] and ultimately aims to restore market-based policies to preserve the future freedom of the internet.[13] In justifying its move, the FCC asserts that the 2015 regulation resulted in a government-controlled internet, which hindered the growth and investment that existed in prior years.[14] This decision fueled an already heated debate.

II. IMPLICATIONS OF THE FCC’S REPEAL

Those opposed to net neutrality—including ISPs such as Comcast, AT&T, and Verizon—are logically in favor of the FCC’s latest action. This side argues that ISPs’ true meddling in content availability is far less frequent than is believed, rendering net neutrality unnecessary in the first place.[15] It emphasizes the Clinton administration’s original decision in 1996 to classify ISPs as an information service in order to maintain the internet’s “vibrant and competitive free market,”[16] a decision that the United States Supreme Court subsequently endorsed.[17] This lighter regulatory approach permits ISP conduct that benefits consumers and promotes healthy competition, while still providing a mechanism for regulation through consumer protection laws and antitrust enforcement.[18]

Antitrust laws enable courts and the Federal Trade Commission (“FTC”) to invalidate and block specific ISP conduct that harms consumer welfare or unfairly advantages particular content or providers.[19] The net neutrality opponents argue that this precise and deliberate enforcement transcends the 2015 “one-size-fits-all regulation,”[20] which deterred investment and innovation.[21] Moreover, these opponents assert that certain ISP streaming preferences are desirable,[22] such that so long as providers maintain the transparency requirement of the 2017 Order, these preferences are appropriate.[23] The proponents of net neutrality, however, have much to say in return.

Those in favor of net neutrality—including major technology companies such as Google, Amazon, and Netflix—are, unsurprisingly, unhappy with the FCC’s latest action. Under the 2015 regulation, small firms and start-up companies were assured the same opportunity to access consumers as the larger, more established firms.[24] Proponents fear that without net neutrality, ISPs will block or slow access to certain content unless its creator pays a fee, while simultaneously creating Internet “fast lanes” to partner firms whose content the ISP hopes to promote.[25] For example, larger firms such as Netflix may now partner with ISPs to ensure faster Internet speeds—a luxury that smaller and newer firms cannot afford.

Additionally, while opponents of net neutrality rely on the FTC to prohibit these unfair practices through antitrust regulation, proponents doubt the FTC has the capacity—or expertise—to do so effectively.[26] Moreover, antitrust regulation occurs after-the-fact, creating the risk that a new firm may not survive the duration of detection, investigation, and conclusion of an ISP’s alleged discriminatory pattern.[27] Proponents assert that such an unpredictable climate implicates start-ups, their investors, and the end consumers.[28] These end consumers face possible increased costs if content providers, such as Netflix, do pay ISPs for Internet “fast lanes,” only to pass the added costs to consumers.[29] Likewise, if the unpredictable climate stifles competition, fewer firms will exist to offer services and content, increasing those firms’ ability to raise prices.[30] Armed with these arguments, this side is unlikely to accept the FCC’s latest ruling in silence.

III. WHAT LIES AHEAD?

The future relationship between the internet and net neutrality remains uncertain. In the meantime, entities at the federal and state level are preparing for an extended fight over the future of internet policy.

At the federal level, the FCC must submit the 2017 Order to Congress pursuant to the Congressional Review Act (“CRA”), which allows Congress to override certain agency orders.[31] While the requisite vote appears possible in the Senate,[32] a successful CRA override requires a majority vote of both houses in addition to the President’s veto.[33] Net neutrality is likely to align with history, which demonstrates the unlikelihood of finding: (1) dual-house congressional disapproval of an agency’s action; and (2) the President’s undermining an agency in his administration.[34]

States, turning to legislation and the courts, are likely faced with a similar outcome.

Several states have begun drafting legislation barring internet discrimination.[35] However, these laws face several roadblocks and a high risk of invalidation through federal preemption. The 2017 Order explicitly bars state and local governments from enacting net neutrality laws inconsistent with its “deregulatory approach” as impractical regulation of interstate commerce.[36] The FCC reasons that because the internet does not recognize state and local borders, neither can nor shall its regulation.[37] However, doubt remains as to whether the FCC has the authority to declare a blanket preemption of state law—a question to which at least one federal court has answered no.[38] Thus, states have vowed to try to protect consumers and businesses within their borders.[39]

In the courts, state attorney generals, technology companies, and public interest groups are filing lawsuits alleging that (1) the FCC’s actions are arbitrary and capricious under the Administrative Procedure Act,[40] (2) the reclassification of ISPs to information services is an impermissible reading of the Telecommunications Act, and (3) the FCC lacks factual support for its Order.[41] While advocates of this litigation are hopeful, administrative law is exceptionally deferential to agency actions.[42] Both the D.C. Circuit and the Supreme Court have specifically recognized the FCC’s latitude under the Telecommunications Act,[43] affirming FCC actions and reminding litigants that courts will not “inquire as to whether the agency’s decision is wise as a policy matter.”[44] Moreover, the 2017 Order is supported with data analysis and evidentiary findings.[45] Courts will rarely intervene in such data analysis, opting instead for deference to agency expertise.[46] Finally, the Supreme Court has held that a change in administration is reason enough for a change in agency policy and action so long as it meets a low standard of reasonableness.[47] Therefore, a court is exceptionally likely to uphold the 2017 Order as adequately reasonable and consistent with the change to Trump’s anti-regulation administration.

What comes next? The proponents of net neutrality are not backing down. It remains to be seen whether net neutrality truly is a solution to a difficult problem, or whether it is simply a solution in search of a problem in the first place. In either case, the conflict is active and the future uncertain. However, under a system with large deference to agency action and President Trump’s anti-regulation administration, most signs point to a future without net neutrality.

  1. See Internet Growth Statistics, Internet World Stats., http://www.internetworldstats.com/emarketing.htm (last updated Feb. 13, 2018) (providing Internet usage statistics from December, 1995—sixteen million users—to December 2017—over four billion users). ↑
  2. Protecting the Internet, 30 FCC Rcd. 5601, 5603, para. 1 [hereinafter Title II Order]. ↑
  3. See CeCilia Kang, F.C.C. Repeals Net Neutrality Rules, N.Y. Times (Dec. 14, 2017), https://www.nytimes.com/2017/12/14/technology/net-neutrality-repeal-vote.html., ↑
  4. Comcast Corp. v. FCC, 600 F.3d 642, 661 (D.C. Circuit 2010) (overruling an FCC order that enforced its net neutrality-based policy statement against Comcast as beyond the FCC’s regulatory authority); Verizon v. FCC, 740 F.3d 623, 655–58 (D.C. Circuit 2014) (vacating the FCC’s rule prohibiting blocking and “unreasonable discrimination” by ISPs for impermissibly regulating broadband ISPs as common carriers, contrary to their classification as information services). ↑
  5. 47 U.S.C. § 230(b)(2). ↑
  6. Title II Order, supra note 2 at 5682, para. 187. ↑
  7. Id. at 5607 para. 14. ↑
  8. Id. at 5607–08 para. 18. ↑
  9. Restoring Internet Freedom, 32 FCC Rcd. 4434 (proposed May 23, 2017). ↑
  10. Id. at 4441, para. 25. Notably, the Supreme Court affirmed the FCC’s finding that ISPs are information service providers in 2005. See Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005). ↑
  11. See Kang, supra note 3. ↑
  12. Restoring Internet Freedom, WC Docket No. 17-108, 125, para. 210 (Dec. 14, 2017), available at https://www.fcc.gov/fcc-releases-restoring-internet-freedom-order. ↑
  13. Id. at 140, para. 239, 2, para. 2–4. ↑
  14. See id. at 63, para. 95. ↑
  15. See Orrin G. Hatch, Chairman, Senate Republican High-Tech Task Force, Net Neutrality: An Unwise and Unnecessary Internet Power Grab, Forbes (Feb. 5, 2015, 11:01 AM), https://www.forbes.com/sites/realspin/2015/02/05/net-neutrality-an-unwise-and-unneccessary-internet-power-grab/#681b9f18d5e9. ↑
  16. 47 U.S.C. § 230(b)(1), (2); 47 U.S.C. § 230(f). ↑
  17. See Nat’l Cable & Telecomms, Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005). ↑
  18. See Maureen K. Ohlhausen, Commissioner, FTC, If FCC Repeals Net Neutrality, FTC Won’t Leave Users Unprotected, The Hill (Aug. 30, 2017, 10:47 AM), http://thehill.com/blogs/pundits-blog/technology/348529-after-the-fcc-repeals-net-neutrality-the-ftc-wont-leave. ↑
  19. See, e.g., Federal Trade Commission Act, 15 U.S.C. § 45(a)(1) (prohibiting “unfair methods of competition”). ↑
  20. Hatch, supra note 15. ↑
  21. See Adonis Hoffman, Regulating the Internet Like 1930s Landline Telephones is Bad Policy, The Hill (Sept. 12, 2017, 10:20 AM), http://thehill.com/blogs/pundits-blog/technology/341615-regulating-the-internet-like-1930s-landline-telephones-is-bad. ↑
  22. See Harsha Madhyastha, A Case Against Net Neutrality, IEEE Spectrum (Dec. 13, 2017, 2:00 PM), https://spectrum.ieee.org/tech-talk/telecom/internet/a-case-against-net-neutrality. ↑
  23. See id. (stating that the transparency requirements allow consumers to decide for themselves whether to “take their business elsewhere”). ↑
  24. See Conner Forrest, Trump’s FCC Kills Net Neutrality, Opening Internet “Fast Lanes” to ISPs, TechRepublic (Dec. 14, 2017, 11:23 AM), https://www.techrepublic.com/article/trumps-fcc-kills-net-neutrality-opening-internet-fast-lanes-to-isps/. ↑
  25. See id. ↑
  26. See Terrell McSweeny, Commissioner, FTC, The FCC Plans to Kill the Open Internet; Don’t Count on the FTC to Save It, Quartz (Dec. 5 2017), https://qz.com/1144994/the-fcc-plans-to-kill-the-open-internet-dont-count-on-the-ftc-to-save-it/. ↑
  27. See Ed Black, The Business Reasons Why the FCC—Not FTC—Should Enforce Open Internet Rules, The Hill (Oct. 31, 2017, 4:15 PM), http://thehill.com/blogs/congress-blog/technology/357894-the-business-reasons-why-the-fcc-not-ftc-should-enforce-open. ↑
  28. See id. ↑
  29. See Douglas MacMillan, End of Net Neutrality: What it Means for Consumers, Wall Street J. (Dec. 14, 2017, 1:26 PM), https://www.wsj.com/articles/end-of-net-neutrality-what-it-means-for-consumers-1513275987. ↑
  30. See id. ↑
  31. 5 U.S.C. § 801(a), (b). ↑
  32. See Clyde Waynes Crews Jr., Net Neutrality Senate Democrats’ Renewed Love for the Congressional Review Act, Forbes (Jan. 18, 2018, 1:02 PM), https://www.forbes.com/sites/waynecrews/2018/01/18/net-neutrality-and-senate-democrats-renewed-love-for-the-congressional-review-act/#744cb46f1f5b. ↑
  33. 5 U.S.C. § 801(b). ↑
  34. See Stuart Sharpiro, The Congressional Review Act, Rarely Used and (Almost Always) Unsuccessful, The Hill (Apr. 17, 2015, 7:30 AM), http://thehill.com/blogs/pundits-blog/lawmaker-news/239189-the-congressional-review-act-rarely-used-and-almost-always (describing the CRA as “relatively toothless”). ↑
  35. See Cecilia Kang, States Push Back After Net Neutrality Repeal, N.Y. Times (Jan. 11, 2018), https://www.nytimes.com/2018/01/11/technology/net-neutrality-states.html?rref=collection%2Ftimestopic%2FNet%20Neutrality&action=click&contentCollection=timestopics&region=stream&module=stream_unit&version=latest&contentPlacement=5&pgtype=collection. ↑
  36. Restoring Internet Freedom, supra note 12, at 109–10, paras. 190–91. ↑
  37. Id. at 109, para. 190. ↑
  38. Tenn. v. Fed. Commc’n Comm’n, 832 F.3d 597, (6th Cir. 2016). ↑
  39. See Kang, supra note 43 (quoting Washington Governor Jay Inslee’s belief that state law is necessary when the federal government “takes away” protection). ↑
  40. 5 U.S.C. § 706(A)(1)(a). ↑
  41. See Cecilia Kang, Flurry of Lawsuits Filed to Fight Repeal of Net Neutrality, N.Y. Times (Jan. 16, 2018), https://www.nytimes.com/2018/01/16/technology/net-neutrality-lawsuit-attorneys-general.html (discussing the possible future litigation). ↑
  42. See Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 42 (1983). ↑
  43. See, e.g., Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 989 (2005). ↑
  44. U.S. Telecom Ass’n v. Fed. Commc’n Comm’n, 825 F.3d 674, 697 (D.C. Cir. 2016) (affirming the FCC’s 2015 reclassification of ISPs as telecommunication services). ↑
  45. See Restoring Internet Freedom, supra note 12, at 53, para. 87. ↑
  46. See State Farm, 463 U.S. at 52. ↑
  47. See id. at 56 (Rehnquist, J., dissenting). ↑
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