FCC Begins Rollback of Net Neutrality Rules

On May 23, 2017, the Federal Communications Commission released a Notice of Proposed Rulemaking (NPRM) proposing the reversal of the agency's 2015 Title II Order which subjected Internet service providers (ISPs) to regulation as telecommunications services pursuant to Title II of the Communications Act of 1934, as amended.

In a 2-1 vote along partisan lines, the Commission proposed rolling back the net neutrality rules based largely on the grounds that the Title II regulatory framework for ISPs has dramatically decreased broadband infrastructure investment. Instead, as stated by Chairman Pai, the repeal of the "utility-style regulation of the Internet" would enable a return to the "Clinton-era light-touch framework that has proven to be successful" in encouraging investment and innovation in the Internet. However, reflecting the highly partisan nature of the decision, Commissioner Clyburn opposed the adoption of the NPRM on the grounds that she had "yet to see a credible analysis that suggests broadband capital expenditures have declined" since 2015, and over concerns regarding the anti-consumer effects of repealing the net neutrality rules.

Proposed Changes

The Commission proposed the following changes to the net neutrality regime in the NPRM:

• Reclassification of Broadband Internet Access Service Providers. The Commission proposed to reclassify broadband Internet access service (BIAS) providers as information service providers regulated pursuant to Title I - as opposed to classifying such providers as telecommunications service providers regulated under the more burdensome provisions of Title II. The proposal to reverse the regulatory classification of BIAS providers was based on three factors: (1) the plain meaning of the definitions of "information services, " "telecommunications," and "Internet access services" in the Act; (2) pre-2015 FCC precedent reflecting a bipartisan consensus favoring regulation of Internet access services as information services; and (3) studies indicating that Title II regulation of ISPs has "depressed broadband investment and reduced regulatory innovation" due to increased regulatory burdens and uncertainty.

• Reclassification of Mobile Broadband Internet Access Services. The FCC proposed to reduce regulatory burdens on wireless Internet services through the reclassification of mobile BIAS as private mobile services - as opposed to being classified as commercial mobile services. Relatedly, the Commission also proposed to reinterpret the meaning of "public switched network" under Section 332(d)(2) of the Act to focus only on the traditional public switched telephone network to prevent mobile BIAS from being considered the "functional equivalent" of commercial mobile services - while otherwise being classified as private mobile services. The Commission stated that reclassification of mobile BIAS would "substantially benefit the wireless marketplace and consumers and have few, if any, policy disadvantages."

• Elimination of the FCC's Authority over ISP Privacy Practices. The Commission proposed to "respect the jurisdictional lines drawn by Congress" providing the Federal Trade Commission with authority over ISP privacy practices given the FTC's "decades of experience and expertise in this area." The FCC stated that it was compelled to cede all of its authority over ISP privacy practices to the FTC due to Congress's rejection of the 2016 Privacy Order pursuant to the Congressional Review Act.

• Elimination of the Internet Conduct Standard. The FCC proposed to eliminate the Internet conduct standard, which allows the Commission to prohibit practices that unreasonably interfere with or disadvantage the ability of consumers to access Internet content. The Commission stated that the standard was too vague to administer successfully, and was based on "theoretical problems" requiring ISPs to "guess at what they are permitted and not permitted to do." In keeping with the NPRM's deregulatory approach, however, the Commission did not propose an alternative approach to monitoring the conduct of ISPs - elsewhere suggesting the regulation of ISPs through either self-governance or an ex post enforcement mechanism.

Additionally, the Commission proposed the review of the following elements of net neutrality:

• ISP Bright-Line Rules. The FCC requested comment on whether to keep, modify, or eliminate the bright-line rules regarding ISP conduct (e., no blocking, no throttling, no paid prioritization, and transparency rules). In supporting the need for the review of the rules, the Commission contended that there was "virtually no quantifiable evidence of consumer harm" which the rules sought to prevent, and reasoned that the rules were unnecessary in light of the fact that existing antitrust regulations sought to curb the anticompetitive conduct prohibited by the regulations.

• Ex Ante Enforcement Approach. Relatedly, the FCC questioned in the NPRM whether the agency's ex ante enforcement approach to broadband regulations was necessary. Instead, the Commission requested comment on whether either self-governance by ISPs or an ex post enforcement framework would serve as a sufficient enforcement framework for the broadband industry under a Title I regulatory regime.

Lifeline

Although the Commission proposed the elimination of many aspects of net neutrality championed by the Wheeler administration, the agency proposed to maintain Lifeline support for broadband services and facilities. Citing its previous decision in the 2011 Universal Service Transformation Order, the Commission reasoned that Section 254 of the Act enabled the agency to continue universal service support for broadband services and facilities following the reclassification of ISPs as information services.

Legal Authority

Finally, the Commission requested comment on the legal basis for the rollback of the net neutrality rules - specifically whether Sections 706 and 230 of the Act provide sufficient authority for such an action. The Commission questioned whether the agency should continue to maintain the post-2010 interpretation of Section 706 (i.e., that the section provides the FCC with an express grant of rulemaking authority in the area of BIAS), or return to the pre-2010 hortatory understanding of the section - therefore requiring the Commission's legal authority to be based elsewhere in the Act. Likewise, the Commission requested comment on whether Section 230 permitted the FCC to retain any rules adopted in the Title II Order by providing the agency with express statutory authority over BIAS.

Cost Benefit Analysis

Seemingly reflecting upon the emotionally-charged atmosphere surrounding the review of the net neutrality rules, Commissioner O'Rielly requested that commenters in the proceeding support their arguments for and against the rollback of the Title II Order by providing evidence substantiating their claims. As such, the Commission proposed to conduct a cost-benefit analysis (CBA) regarding the rollback of the net neutrality rules - which is to be presumably based on quantifiable data provided by commenters. In conducting the CBA, the FCC proposed to follow the Office of Management and Budget's standards for "Identifying and Measuring Benefits and Costs." Nevertheless, the Commission questioned whether there were any concrete benefits to preserving the current net neutrality regime.

Comments in the proceeding are due July 17, 2017, and Reply Comments are due August 16, 2017.

Please feel free to contact our firm should you be interested in submitting comments in the proceeding, or have questions regarding the regulatory changes for ISPs proposed in the NPRM.