Frequently Asked Questions About Net Neutrality

By Marc MartinJenny Paul, and Elyse Schoenfeld*

Net neutrality has been a contentious policy issue for many years. Like many such issues, it is subject to political spin, conflicting academic analyses, and industry and consumer group advocacy. As a result, much of the reporting on net neutrality leaves the underlying facts distorted and confusing. We have designed this FAQ as a handy resource to clarify the contested history of net neutrality, what net neutrality regulations are intended to accomplish, and what the FCC is considering in this sphere.  The FAQs begin after the jump.

Q: What is net neutrality?

A: The term “net neutrality” was first coined by legal scholar Tim Wu in 2003.Since then, the term has spread globally and is subject to varying interpretations. At its core, however, net neutrality is the concept that Internet service providers should not favor or disfavor particular content, applications, or services when they are providing Internet access services. The Federal Communications Commission uses the term “Open Internet” to refer to the principle of net neutrality and the rules the FCC has said it designed in furtherance of that principle. No legally binding net neutrality regulations existed until 2010.

Q: What past actions has the FCC taken with respect to net neutrality?

A: The FCC first took action relating to net neutrality in 2005, when it issued its nonbinding Internet Policy Statement. These policy guidelines were designed to prevent broadband service providers from discriminating against and impeding access to certain applications, services, and content. In 2008, the FCC brought an enforcement action based on the Policy Statement against Comcast for allegedly slowing down peer-to-peer applications, such as BitTorrent. The FCC asserted that it had jurisdiction over Comcast and other broadband service providers via its ancillary authority, which may be employed when (i) its general Title I authority over interstate and foreign communication by wire or radio covers the subject of the regulations, and (ii) the regulations are reasonably ancillary to one of the FCC’s statutorily mandated responsibilities. Comcast appealed to the U.S. Court of Appeals for the District of Columbia Circuit, which vacated the FCC’s order related to the enforcement action and found, among other things, that the FCC did not have jurisdiction because the FCC had not demonstrated its regulations were reasonably tied to a statutory duty.  (Comcast later agreed to abide by the FCC’s 2010 net neutrality rules for seven years as a condition to the FCC's consent to Comcast’s purchase of NBC Universal. Comcast's commitment remains enforceable against Comcast even though the bulk of the rules of general application were struck down by the D.C. Circuit in 2014.)

In December 2010, the FCC adopted binding net neutrality rules to govern broadband Internet service providers. The FCC based its jurisdiction, in part, on Section 706 of the Telecommunications Act of 1996, which states that the FCC should encourage the deployment of broadband by enacting regulations that remove barriers to infrastructure investment or that promote competition in the local market. The FCC claimed that its net neutrality regulations would help to further this statutory mandate by promoting the use of broadband services.

The 2010 rules distinguished between fixed and mobile broadband access providers, largely due to the fact that mobile broadband was in earlier stages of development and had wireless network capacity constraints not faced by fixed networks. For fixed broadband access providers, who primarily provide broadband service and Internet access to a fixed location, the FCC established three rules aimed at transparency/customer disclosures, blocking, and discrimination. The regulations required broadband service providers to disclose information on their network management practices, performance, and commercial terms of services; prevented providers from blocking access to lawful content, applications, and services, subject to reasonable network management; and prevented unreasonable discrimination in the transmission of lawful network traffic over a user’s Internet access service, subject to reasonable network management. The FCC defined reasonable network management as “appropriate and tailored to achieving a legitimate network management purpose.”

Mobile service providers were required to follow the transparency rule, as well as a no-blocking requirement that prevented them from blocking users from websites and from applications that competed with the providers’ voice or video telephony services, subject to reasonable network management. Mobile providers were not subject to the anti-discrimination rule.

Q: Can the FCC mandate an Open Internet?

A: The answer is complicated due to years of FCC rulemakings and litigation, but the FCC has authority to establish at least some net neutrality requirements binding on providers of Internet access services. The unsettled questions are to what extent and under what authority the FCC can do so. The Communications Act of 1934 gives the FCC general jurisdiction over “all interstate and foreign communication by wire or radio.” Courts have said that the FCC may only adopt regulations where expressly authorized by the Act or where doing so would be ancillary to a specific provision of the Act. To be clear, however, the FCC has no authority to regulate the global Internet itself.

Q: What happened to the net neutrality rules adopted in 2010?

A: After the FCC issued the 2010 net neutrality rules, Verizon challenged them. In January 2014, the D.C. Circuit held that: (1) section 706 of the Telecommunications Act of 1996 gives the FCC authority to promote deployment, and the FCC’s conclusion that net neutrality requirements would promote broadband deployment was not unreasonable; but (2) the FCC’s section 706 authority is constrained by certain general limitations on any exercise of authority by the FCC, including that the FCC may not subject services that are not telecommunications services to common carrier regulation. Because the FCC had previously held that Internet access services were “information services,” as that term is defined by law, not “telecommunications services,” the FCC could not, in invoking its section 706 authority, impose common carrier regulation on Internet service providers. The court upheld the disclosure rule because it did not constitute a common carrier obligation and was within the scope of the FCC’s jurisdiction under Section 706. But the court found that the no-blocking and nondiscrimination requirements were framed in ways that made them indistinguishable from common carrier regulation. In so ruling, the court expressly left the door open that the FCC could reframe these requirements to comport with the law.

Q: What actions did Congress take to try to block or overturn the 2010 net neutrality rules?

A: In 2011, the House of Representatives passed a Resolution of Disapproval that, if it had become law, would have prohibited the FCC from regulating how Internet service providers manage their broadband networks. The House also passed an amendment to a budget bill that would have prevented the FCC from using funding to implement net neutrality rules. Neither measure gained traction in the Senate, and even if one had, the White House indicated it would have vetoed such efforts. Although the House Republican efforts failed, the lengths they took to oppose net neutrality demonstrate how partisan and controversial the issue has become.

Q: What’s left of the FCC’s authority to implement net neutrality after the 2014 decision in Verizon v. FCC?

A: Importantly, the D.C. Circuit did affirm the FCC’s authority to regulate broadband Internet service providers under Section 706 as long as the regulations do not impose common carrier requirements and are within the scope of that provision. While the FCC can no longer enforce the 2010 anti-blocking or anti-discrimination rules, it can undertake a new rulemaking to promulgate net neutrality rules that fall within the bounds dictated by the court in Verizon. The FCC could, if it so chooses, seek to reclassify broadband providers as common carriers under Title II of the Communications Act.

Q: Why is net neutrality in the news now?

A: The Verizon decision set off a new media firestorm over the future of net neutrality, with critics and supporters of net neutrality weighing in on the potential steps the FCC might take. In response to Verizon, on May 15, 2014, the FCC released a Notice of Proposed Rulemaking, which proposed new rules for regulating broadband Internet access services and asked for public comment on the regulations. Some published reports treated the FCC’s proposed rules as eliminating net neutrality.

Q: What would the FCC’s new proposed rules do?

A: In short, the new proposed rules would include a more robust version of the transparency rule announced in the 2010 Order; an anti-blocking rule that would allow individualized bargaining above a minimum level of access to a broadband provider’s subscribers; and an anti-discrimination rule that would require fixed broadband providers to use “commercially reasonable” practices in their provision of service. As with the 2010 rules, the FCC has tentatively concluded that the anti-blocking rule would apply a different standard to mobile broadband providers, and the anti-discrimination rule would not apply to mobile broadband providers. (See below for more detail about the proposed rules.) It is important to note that the rules the FCC adopts may differ from the proposed rules as a result of comments by the public, consumer advocacy groups, and industry stakeholders.

Q: On what authority does the FCC propose to rely to regulate broadband service providers?

A: The FCC identified several potential sources of its authority in light of prior court rulings regarding net neutrality.

1. Section 706

In the NPRM, the FCC proposed to rely on Section 706 for its authority to promulgate rules for broadband Internet service providers. While the D.C. Circuit upheld the FCC’s reliance on Section 706 in Verizon, the FCC is seeking comment on the scope of its authority under this provision, including how to interpret Section 706’s terms and definitions and whether the Verizon opinion impacts the FCC’s exercise of authority.

2. Title II

The FCC also seeks comment on whether it should rely on Title II for authority to regulate broadband Internet access service, which would allow the FCC to regulate the providers as common carriers. In order to rely on Title II, the FCC would need to reclassify broadband Internet services as a telecommunications service, instead of an information service. Separately, the FCC is seeking comment on a petition that urged the FCC to hold that an Internet service provider is actually providing two services simultaneously -- one to its end user customers and the other to edge providers whose traffic the Internet service provider delivers to its customers. The petition asks the FCC to reclassify only the latter as a telecommunications service.

3. Title III

Finally, the FCC seeks comment on whether to rely on Title III of the Communications Act for authority to regulate mobile broadband services. Title III empowers the FCC to “generally encourage the larger and more effective use of radio in the public interest” and specifically allows the FCC to dictate the nature of the service to be provided by each class of licensed stations and to adopt new conditions on existing licensees to promote the public interest, convenience, and necessity. In the NPRM, the FCC asserts that these Title III provisions allow it to adopt rules imposing net neutrality requirements on mobile broadband service providers.

Q: How do the proposed rules regulate disclosure and transparency?

A: The proposed transparency rule is a more robust version of the transparency rule adopted in the 2010 Order and upheld by the D.C. Circuit in Verizon. The proposed transparency rule would require providers to furnish more information to end users and edge providers when the providers make changes to their network practices. It would also require providers to disclose instances of blocking, throttling, and pay-for-priority arrangements, or the parameters of a default service as distinct from any priority service. Additionally, providers would have to disclose particular information about network congestion, including source, location, timing, speed, packet loss, and duration. The FCC also noted that the current transparency rules that are in place apply equally to fixed and mobile service providers and sought comment about whether and how the enhanced transparency requirements should apply to mobile service providers.

Q: How do the FCC’s 2014 proposed rules revisit the 2010 anti-blocking and anti-discrimination rules that were struck down in Verizon v. FCC?

A: The FCC proposed to restore the 2010 anti-blocking rule, stating that fixed broadband providers should “not block lawful content, applications, services, or non-harmful devices, subject to reasonable network management” and mobile broadband providers should “not block consumers from accessing lawful websites, subject to reasonable network management; nor shall such person block applications that compete with the provider’s voice or video telephony services, subject to reasonable network management.” However, the FCC modified its interpretation of that text in response to the D.C. Circuit’s finding that the rule as promulgated in 2010 was an impermissible common carrier requirement. It proposed to make clear that this anti-blocking rule would allow individualized bargaining above a minimum level of access to a fixed broadband provider’s subscribers, but that the FCC would separately subject such practices to scrutiny to ensure that they are “commercially reasonable,” i.e., practices that do not threaten to harm the openness of the Internet. The FCC proposed to apply the anti-blocking rule differently to mobile broadband providers by prohibiting mobile providers from blocking lawful web content as well as applications that compete with the mobile broadband providers’ own voice or video telephony services, subject to reasonable network management.

With respect to the anti-discrimination rule, the FCC proposed to adopt a rule requiring fixed broadband providers to use commercially reasonable practices in their provision of service. The FCC noted this rule would allow fixed broadband providers to serve customers and carry traffic on an individually negotiated basis, without having to hold themselves out to serve all users indiscriminately on the same or standardized terms, so long as the providers’ conduct is commercially reasonable. The FCC has tentatively concluded that this rule would not apply to mobile broadband providers.

Q: How do the proposed rules address arrangements that permit a website to pay broadband providers for priority service and access to the provider’s subscribers?

A: Paid prioritization, or pay-for-priority, agreements theoretically would allow a broadband provider to arrange with a third party to directly or indirectly prioritize some Internet traffic over other traffic to reach the provider’s subscribers more quickly. No examples of such agreements have come to light yet, but some critics contend that such an agreement could entail an edge provider paying a broadband service provider to move content from the edge provider’s website to the provider’s subscribers more quickly — a so-called “fast lane” that could give the edge provider an advantage over competing websites.

The proposed rules discussed above appear to allow for at least some paid prioritization agreements. However, the FCC is seeking comment on an alternative anti-discrimination rule that would impose a ban on all, or certain types of, pay-for-priority services. The FCC is also seeking comment on an alternative anti-blocking rule that would either itself prohibit broadband providers from entering into pay-for-priority agreements with edge providers or would act in combination with the alternative anti-discrimination rule to prohibit such conduct.

Q: How are agreements like the one between Comcast and Netflix classified?

A: In February 2014, a media frenzy occurred when Comcast and Netflix entered into an agreement under which Netflix would pay Comcast an undisclosed sum of money for direct access to Comcast’s broadband network. Many reports characterized the deal as implicating net neutrality. However, the Comcast-Netflix deal is a paid peering agreement, not a paid prioritization agreement. A paid peering agreement occurs when one IP network pays another for the right to exchange traffic directly with it. For example, a content delivery network, such as Level 3 or the new proprietary network built by Netflix, may pay for the right to send its traffic directly into the network of a broadband Internet service provider, such as Comcast.

Q: How do the proposed rules address paid peering agreements?

A: The FCC’s 2010 rules did not apply to paid peering arrangements. In its explanation of the 2014 proposed rules, the FCC said it “tentatively” concluded that it would maintain that approach but sought comment on whether it should change this conclusion. The FCC later announced in June that it would conduct a review of Internet interconnection issues, including peering. That review is likely to be separate from its net neutrality rules, as Chairman Tom Wheeler stated in June that he thought interconnection issues and net neutrality were “two different things.”

Q: Why do parties care about which grant of authority the FCC uses to promulgate new net neutrality rules?

A: Certain fixed and mobile broadband service providers are concerned about the effect Title II would have on stakeholder’s business models and investment in the industry, as reliance on Title II would require the FCC to reclassify the provider broadband access services as common carrier offerings. AT&T, for example, argued in a filing to the FCC that Title II reclassification would not fulfill the main objective of its use — i.e., precluding paid prioritization agreements. In that filing, AT&T noted that Title II does not require that all customers be treated equally but rather prohibits only “unjust and unreasonable” discrimination. AT&T also noted that Title II carriers have been permitted to offer different pricing, different service quality, and different service quality guarantees to different customers so long as the terms offered are generally available to all similarly situated customers.

Public Knowledge, a non-profit group, disagreed and argued that the FCC could preclude paid prioritization under its Title II authority if it wished to do so. In a filing to the FCC, it cited past instances where the FCC found conduct or practices inherently unjust, unreasonable, or subject to abuse and, as such, affirmatively prohibited this conduct with no allowance for exception.

Q: How can I comment on the proposed rules?

A: You may e-mail your comments to openinternet@fcc.gov, or you may submit a filing on the FCC’s Electronic Comment Filing System in Proceeding 14-28: Protecting and Promoting the Open Internet. Such filings are made into an official FCC proceeding, and all information submitted, including names and addresses, will be publicly available via the Internet.

Q: When are comments due?

A: Comments are due on or before July 15, 2014. Reply comments (made in response to the comments filed) are due on or before September 10, 2014. Informal comments may be submitted by letter after those dates.

*Elyse Schoenfeld is a summer associate in K&L Gates’ Washington, DC office and contributed to this client alert.

UPDATE - 7/16/2014: The FCC's website has been overwhelmed by traffic, making it difficult for people to file comments into the FCC's Electronic Comment Filing System.  Therefore, the FCC has extended the comment deadline until midnight, Friday, July 18.

Wireless Data Roaming Rules Upheld by D.C. Circuit

By J. Bradford Currier, Marc Martin, and Marty Stern

Mobile wireless data providers must offer roaming agreements to competing carriers on “commercially reasonable” terms following the D.C. Circuit Court’s decision to uphold rules first adopted by the Federal Communications Commission in 2011. The FCC’s data roaming requirements were designed to supplement existing roaming obligations on mobile carriers that only applied to voice services by facilitating access to data services when customers travel outside of their providers’ networks. As we reported previously, the data roaming rules were adopted by a closely-divided FCC and were subsequently challenged by Cellco Partnership, more commonly known as Verizon Wireless.

Verizon Wireless challenged the data roaming obligations on three grounds, arguing that: (1) the FCC lacked statutory authority to impose “common carrier” type rules on mobile data providers; (2) new rules were unnecessary because mobile data providers were already entering into voluntary roaming agreements with competing carriers; and (3) roaming obligations would reduce incentives to expand wireless infrastructure if providers must share their networks with competitors.  Verizon Wireless alleged that the roaming requirements would unfairly benefit smaller carriers with limited networks at the expense of larger providers. In response, the FCC stated that the new rules did not impose common carrier type regulations on mobile data providers and the requirements were necessary in order to prevent larger carriers from excluding smaller providers from their networks. 

The D.C. Circuit began by noting that the FCC may not impose common carrier type obligations on providers of “information services,” including mobile data providers. However, the court found that the data roaming rules allow providers to negotiate the terms of their roaming arrangements on an individualized basis and do not require providers to serve other carriers indiscriminately on standardized terms. While the court recognized that the data roaming requirements “plainly bear[] some marks of common carriage,” the court deferred to the FCC’s determination that the new rules did not amount to common carriage regulation because providers can negotiate flexible terms and conditions. The court further concluded that the data roaming rules did not constitute an unconstitutional taking of Verizon Wireless’s data network or represent arbitrary and capricious rulemaking. Although supporters of the roaming rules also suggested that the court’s decision supports the FCC’s net neutrality rules currently subject to a separate appeal, the court in the data roaming case found that the FCC has explicit jurisdiction over wireless carriers under its broad authority over radio communications under Title III of the Communications Act.

FCC Proposes Streamlined Foreign Ownership Reviews for Wireless Mobile Companies

By Marc Martin and Marty Stern

The FCC launched a review of its foreign ownership rules for common carrier radio licensees, such as wireless carriers, as well as certain aeronautical radio licensees and spectrum lessees in a Notice of Proposed Rulemaking adopted earlier this month. The NPRM aims to reduce the regulatory hurdles on companies petitioning the FCC to exceed the agency’s 25% foreign ownership benchmark, adopted under Section 310(b) of the Communications Act, which in general requires an FCC public interest finding for 25% indirect foreign ownership of common carrier, aeronautical, and broadcast licensees. According to the Commission, the streamlined procedures would reduce the number of required filings by more than 70%. The NPRM does not affect radio or television broadcast licensees.

The Commission noted the continued difficulties companies encounter under the agency’s foreign ownership rules which were last significantly revised in 1998. Specifically, companies must currently compile detailed records concerning the citizenship and principal places of business of their investors, including entities which hold only de minimus interests through intervening investments and holding companies. The NPRM also recognized that under the current rules, companies must repeatedly submit foreign ownership updates to the FCC. To reduce these burdens, the NPRM offered a number of suggestions for comment, including:

  • Eliminating the requirement that companies obtain specific approval for named foreign investors, unless the foreign investor seeks to acquire an interest in the parent company that exceeds 25 percent or represents a controlling interest at any level
  • Allowing parent companies to request specific approval for foreign investors named in their initial petitions to increase their interests in the parent at any time after issuance of the initial ruling up to and including a non-controlling 49.99 percent equity and/or voting interest
  • Issuing foreign ownership rulings in the name of the parent company of the licensee, allowing for automatic extension of the parent’s ruling to cover any of its subsidiaries or affiliates, provided that the parent company remains in compliance with the terms of its ruling
  • Authorizing parent companies with a foreign ownership ruling to have up to and including 100 percent aggregate foreign ownership by investors that are not named in its initial foreign ownership petition, provided that that no single foreign investor or “group” of foreign investors acquires an interest in the parent that exceeds 25 percent, or a controlling interest at any level, without prior FCC approval
  • Permitting internal reorganizations of a parent company in certain circumstances where a new, foreign-organized controlling parent is inserted into the vertical ownership chain above the U.S. company
  • Amending the FCC’s practice of issuing foreign ownership rulings on a service-specific basis and on a geographic-specific basis

In a statement accompanying the NPRM, FCC Chairman Genachowski predicted the proposed paperwork reductions would save companies both time and money while increasing transparency and predictability for foreign investors. Commissioner Clyburn similarly highlighted the importance foreign investment plays in encouraging broadband deployment and economic growth. By contrast, Commissioner Copps questioned whether the current review process actually discouraged foreign investment and warned that the elimination of some foreign ownership rules carries potential risks.

Comments on the NPRM will be due 45 days after its publication in the Federal Register, which is pending, and reply comments will be due 30 days later.