Divided Industry Files Net Neutrality Replies at Divided FCC

Companies large and small, public interest groups and trade associations offered a divided FCC very different takes on whether proposed net neutrality rules would stifle or spur competition, in replies in the net neutrality proceeding. The biggest change from the first comment round, in January, is that many filers focused on the Comcast decision and the complicated question of whether the FCC has authority to proceed with new net neutrality rules or first would have to change the way broadband is classified to gain clear authority.

The FCC was divided 3-2 in favor of net neutrality rules when it approved a rulemaking notice in October, and there are few signs that any commissioners have changed their positions. How a vote on reclassification would play out is less clear. The commission is to hold a public workshop on net neutrality rules Wednesday in Seattle.

AT&T said there’s a growing consensus that the FCC should take steps short of imposing net neutrality rules. There’s general agreement “among a diverse cross-section of parties in support of the same types of pragmatic, middle-ground solutions as those proposed in the Broadband Plan,” the carrier said. “These parties tend to support the consumer-focused principles of the Commission’s Internet Policy Statement and encourage the Commission to help consumers make well-informed choices by promoting additional transparency in the broadband marketplace.”

The main “dissenters” are public interest groups like Free Press and Public Knowledge, AT&T said. “While these groups opine extensively on the complex technological and economic issues at the heart of this proceeding, none of them has operated a large-scale IP network -- nor, for that matter, have they invested a dime of risk capital to build and operate any customer-serving commercial enterprise, let alone the tens of billions of dollars in risk capital that the Administration is asking the private sector to invest in order to meet this nation’s broadband objectives,” the carrier said. “This lack of expertise and real-world experience shows."

Free Press countered in its reply comments that opponents of net neutrality rules are the ones stuck in the past. “If you look at the opponents of openness, it’s as if they were stuck in 2005,” it said. “They continue to use the same false and discredited talking points designed to scare policymakers away from their duty to preserve the successful status quo openness framework that is directly responsible for the Internet economy.”

The Information Technology Industry Council sought a separate FCC proceeding to consider “all of the implications” of the Comcast decision. “In the notice, the FCC should describe the jurisdictional basis it seeks to utilize in order to apply regulations to broadband Internet access service,” the council said. “In considering this issue, the Commission should focus on the implications of its jurisdictional proposal for investment by equipment manufacturers, network owners and applications, service and content providers."

The effect of Comcast extends well beyond the net neutrality proceeding, raising questions, for example, about a proposal to use Universal Service Fund money to pay for broadband, the council said. “In sum, the Comcast decision should prompt the Commission to undertake a comprehensive assessment of the appropriate jurisdictional basis for regulations applicable to broadband Internet access, both those proposed in this proceeding and those proposed in other proceedings."

The “free and open Internet is not in danger” and net neutrality rules aren’t necessary, said the Internet Innovation Alliance (IIA): “We are unaware of any current examples of ISPs ‘blocking or degrading’ web sites or broadband traffic. And the few allegedly ‘bad actions’ by ISPs over the past five years have quickly resulted in prompt reversals and/or seemingly effective enforcement actions."

There’s FCC regulation that would lead to “more and better” Internet connections, said the Internet Freedom Coalition. The burden of proof lies with groups like Free Press that want the commission to expand its rules, it said. “Before it seriously considers regulating, the Commission must place the burden of proof on those arguing for the regulations, and not on those arguing for restraint,” the coalition said. “If a clear case cannot be made that a problem actually exists, and that the proposed regulations are necessary and beneficial to address that existing problem, the Commission should show restraint.”

A group of civil-rights organizations, led by the Minority Media and Telecommunications Council, supports rules requiring content neutrality and transparency. But it raised red flags over the fifth principle proposed: Requiring a broadband Internet provider to treat lawful content, applications, and services in a nondiscriminatory manner. The rule “would prohibit the offering of enhanced or prioritized services,” the groups said. “Such an outcome carries a significant risk of doing far more harm than good. The record shows that this rule could harm the interests of minorities by preventing broadband providers from offering enhanced or prioritized services that could generate revenues to offset the costs of network deployment and maintenance, shifting costs from large Internet-based companies to consumers in the form of higher prices for broadband."

The Open Internet Coalition said there’s broad support for FCC rules among consumer groups, schools and library groups, Internet and technology companies, direct broadcast satellite providers, Internet backbone providers, mobile broadband access providers, leading law professors and academics, and venture capitalists and entrepreneurs. “In the wake of the decision in Comcast v. FCC, consumers, entrepreneurs, and venture capitalists are left with little or no reasonable avenues to file a complaint that any lawful application, content, or speech is being discriminated against or blocked by the facilities that are supposed to serve as conduits for lawful transmissions to and from the Internet,” the coalition said. It said the FCC should “quickly initiate a proceeding to put its proposed regulatory structure in this docket and other broadband-related dockets on a solid legal foundation. The OIC believes the FCC has the legal authority to do so, and it encourages the Commission to move expeditiously.” Public Knowledge made a similar case in its reply comments (CD April 27 p6).

Wireless Objections Remain

CTIA said no commenter has made a case for extending the rules to cover wireless, one of the most controversial aspects of the FCC proposal. “The record before the Commission makes clear what CTIA stressed in its opening Comments: there is simply no basis for the Commission to adopt the proposed net neutrality rules and to apply them to wireless broadband service providers,” the association said. “Instead, the action proposed by the Commission would inject uncertainty and confusion into the wireless ecosystem, disrupting the virtuous cycle of innovation, investment, and customer satisfaction that is the industry’s trademark.” CTIA noted that the FCC imposed net neutrality rules on wireless carriers for the 700 MHz C-block. But service based on the licenses hasn’t started, and “the impact of these rules has yet to be observed,” it said.

CTIA also raised jurisdictional questions. “The Commission does not have the legal authority to impose the contemplated rules,” it said. “Most critically, the D.C. Circuit’s recent decision in Comcast v. FCC rejected the legal authority upon which the Open Internet NPRM was grounded. Under the APA, the Commission cannot adopt rules premised on a Notice citing incorrect authority, nor can the Commission adopt rules based on legal authority not contained in the NPRM."

MetroPCS said the net neutrality proposal led to rare unanimity among wireless carriers. “Rural carriers and mid-tier wireless providers -- such as Leap and MetroPCS -- have joined forces with all of the Big-4 carriers -- AT&T, Verizon Wireless, T-Mobile and Sprint Nextel -- to oppose net neutrality regulation,” MetroPCS said. Leap Wireless said: “The Commission should treat wireless services in a manner that does not stunt the development of or investment in technology, or stifle innovation and improvements in service offerings. For example, the Commission should not restrict the ability of wireless carriers to allocate spectrum resources in the manner they see fit, to manage traffic to meet customer demands, or to enter into cooperative transactions to develop innovative services and applications."

Supporters of net neutrality have failed to show why the anti-discrimination rules should be imposed on wireless, T-Mobile said. “While advocates of proposed regulation have issued one dire prediction after another about the ways in which wireless broadband providers would shut out competition, halt innovation in its tracks, and harm consumers, the wireless broadband marketplace has grown more diverse and open every day, with providers competing to offer the broadest array of the most useful and compelling applications and forging unique partnerships with innovative edge providers and device manufacturers."

TIA said the network neutrality that some commenters propose is possible only “by the management actions of broadband providers and infrastructure manufacturers; if management practices are limited, the network becomes strained by the different requirements of users and applications, both lawful and unlawful.” TIA said wireless, a “nascent” market, poses unique problems and the commission shouldn’t impose new rules on wireless carriers. “The FCC should take the same hands-off approach as it did with the new wireline Internet marketplace, and allow wireless carriers the flexibility to manage their networks to maximize quality and efficiency,” the group said. “While all broadband providers face capacity challenges, broadband wireless providers face a particularly unique operating environment because wireless networks are constrained by limited and dynamically changing radio resources.” TIA said commenters that don’t see wireless as unique “misunderstand the challenges of managing a wireless broadband network and the impact such rules could have on provider flexibility.”

Reply comments from major wireline carriers and some telecom associations reiterated opposition to net neutrality and Title II reclassification. Verizon and Verizon Wireless emphasized the need for improving industry self-governance in the Internet space. The telco reported on a meeting between Executive Vice President Tom Tauke and Ed Lazarus, Genachowski’s chief of staff. Verizon made “efforts over the last year to find common ground with Google and others on the issues of net neutrality and other Internet policies,” it said.

The Comcast decision “unquestionably confirms that the commission lacks authority to impose at least the more onerous aspects of its proposed regulatory framework, the strict nondiscrimination standard,” Qwest said. As a result, the agency should “step back and reevaluate its proposed approach to network openness regulation."

USTelecom said it agrees that many initial comments misconstrue the issues, and that many other filers correctly assert that the commission’s existing principles are sufficient to ensure that broadband innovation thrives. The FCC “should preserve the flexibility afforded by its current principles, which are fostering technological innovation, driving massive investment and creating competitive business models throughout the entire broadband Internet ecosystem,” the group said.

The Independent Telephone & Telecom Alliance said the FCC should “steer clear of all-encompassing non-discrimination rules.” Imposing broad prohibitions “would conflict directly with Congressional intent to maintain a regime in which information service providers are not subject to Title II regulations as common carriers.” Any FCC interest in “attaching regulations to broadband Internet access must overcome the clear standards” articulated by the circuit court in the Comcast case, ITTA said.

The commission should be flexible “in its adoption of open Internet rules,” the National Telecommunications Cooperative Association said. The definition of reasonable network management should be “general and flexible,” and the proposed nondiscrimination principle “must be reworded in a manner that recognizes that some network discrimination is necessary and desirable, so long as the discrimination is not anticompetitive,” the association said.

Small and mid-size carriers represented by CompTel dismissed claims that the Comcast decision proves that the FCC can’t regulate the Internet. “To withstand judicial review, the commission must demonstrate that any net neutrality regulations it adopts pursuant to Title I are reasonably ancillary to the effective performance of its statutorily mandated responsibilities,” CompTel said. As an alternative, the commission could proceed under Title II in order to impose certain regulatory obligations, the association said. The commission should immediately adopt rules to safeguard unfettered Internet access, the Computer & Communications Industry Association said. The Comcast decision shows that “it is within the power of broadband Internet access providers to manipulate traffic for their own commercial purposes in a manner that restricts consumer choice, perhaps undetectably."

Google said the FCC should “utilize affirmative oversight authority regarding the consumer broadband sector.” FCC inaction “will be viewed as a green light for much more aggressive blocking, degradation, discrimination and other practices that harm users,” it said. The company said it remains “largely indifferent” to any particular legal theory to justify the commission’s oversight authority over broadband networks.

State interests also weighed in. The FCC’s proposed nondiscrimination rule “appears to impose an absolute ban on discrimination, rather than just prohibiting unjust and unreasonable discrimination,” NARUC said. “Without additional clarification, this approach could harm quality of service for latency-sensitive applications like telemedicine, VoIP or streaming video."

The California Public Utilities Commission supports codifying the original four principles as binding rules and adopting the transparency rule as written. It also supports a nondiscrimination rule “that would prohibit unjust or unreasonable discrimination, and require only that the Internet access provider treat access to similar content in a similar manner."

The National Association of State Utility Consumer Advocates said it continues its strong support of the FCC’s purpose in the rulemaking. Questions raised by the appeals decision underline NASUCA’s opinion that the commission “must focus on the physical infrastructure on which the Internet runs, which in turn would allow the commission to ground its open Internet rules firmly in Title II of the Communications Act.” A clear Title II framework “provides regulatory certainty, administrative efficiency, and intellectual honesty,” NASUCA said.

Cable on Ancillary Authority

Cable commenters said Comcast doesn’t mean that ancillary authority can’t be used in setting net neutrality rules, but any regulation must be done under current FCC authority. The 2005 net neutrality statement gives industry adequate guidance, and if rules are issued anyway they should apply to all broadband providers, including those of wireless services, cable filings said. “If the initial round of comments proves anything, it is that there has been no pattern of harmful conduct by ISPs that cries out for preventive regulatory intervention or that warrants the risks and costs that would accompany such regulation,” the NCTA said. “Not surprisingly, wireless providers, in their comments, argue that such rules should apply, if at all, only to their wireline competitors. That surely would constitute picking winners and losers” and “would be wholly unjustified."

Comcast said the ruling April 6 on its appeals case doesn’t “close the door” on the FCC’s use of ancillary authority and but does mean that it can’t be the basis of commission rules. The ruling confirms the FCC must show how any rule is “reasonably ancillary” to requirements by Congress, the company said. The reliance of the notice of proposed rulemaking (NPRM) about net neutrality on Sections 230(b) and 706(a) doesn’t work because of the ruling, by the U.S. Court of Appeals for the District of Columbia Circuit, Comcast said. “That Comcast decision also makes clear that the Commission cannot make a general assertion of ancillary authority to regulate Internet services,” it said. “If the Commission elects to go forward with open Internet regulations, it must revisit the basis for its authority set forth in the NPRM and proceed under the parameters provided by the D.C. Circuit."

Tighter rules than proposed in the rulemaking must under Comcast be linked to “specific mandates” in the Communications Act, the NCTA said. “The Court left room for the Commission to find Title I jurisdiction to adopt regulations that are shown to be ancillary to specific statutory responsibilities. To the extent that the Commission takes on the heavy burden of justifying the regulation of broadband services, rules that are more narrowly targeted at such responsibilities would be more likely to be sustained, although both the statutory and constitutional barriers remain significant.” The commission shouldn’t use the appeals ruling “as a pretext to impose monopoly era Title II regulation on the Internet,” since “the current system is working,” said Charter Communications. “Only ‘unreasonable and anticompetitive’ discrimination should be prohibited -- two-sided paying arrangements involving edge providers should be explicitly endorsed unless anticompetitive."

There’s evidence of “actual misconduct” by “gatekeepers” such as Google, which would be exempt from the FCC’s proposed rules, and not by ISPs that would be the subjects of the regulations, said Bright House Networks. “Google favors its own services at or near the top of its search results, bypasses the algorithms it uses to rank the services of others, `tweaks’ the algorithms it uses to rank its competitors, and reserves broad rights to demote web sites, all out of sight of average consumers who have no way to know if their Internet experiences have been manipulated by Google,” Bright House said. “If opportunity and record justify a rule, it should apply to Google, and not to the competing providers of Internet access on whom Google seeks to heap unfavorable regulatory presumptions."

The commission should ensure open access to the Internet without allowing an increase in copyright infringement, unions representing 300,000 employees total said in a filing. They generally favor the proposed rules, “so long as the Commission encourages any parties subject to these rules to take affirmative steps to stop the distribution of content that violates federal law, including content distributed in violation of copyright,” said the American Federation of Television and Radio Artists, Directors Guild of America, International Alliance of Theatrical Stage Employees, and Screen Actors Guild. Any nondiscrimination principle should be written to avoid hindering “detection, monitoring, and filtering of both traffic and specific files for unlawful content,” they said, and reasonable network management should “encourage the screening for unlawful and illegally distributed content by way of a shifting presumption of reasonable network management.”