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Network neutrality debate dominates US telecom policy in 2015

The US Federal Communications Commission is expected to have a dynamic 2015. Under the leadership of Chairman Thomas Wheeler, the FCC will finalize its review of two multi-billion dollar mergers, finish a spectrum auction projected to generate over four times its expected revenue, and continue on a path toward an even larger spectrum auction of a portion of the television broadcast frequencies for mobile broadband use in 2016. Reform will also continue on intercarrier compensation rules, improvements in public safety through wireless 911, broadcast ownership and media consolidation, and the expansion of funding and support for broadband infrastructure deployment.

Nothing, however, will dominate the FCC's agenda and garner more controversy in 2015 than its expected decision and requirements regarding network neutrality. Initially a four-point policy statement in 2005 but later adopted as rules in 2010, the FCC's network neutrality regulations prohibited Internet service providers from engaging in some types of discrimination against particular Internet sites, content, or applications, while still affording those providers the ability to engage in reasonable network management practices. The FCC required that Internet service providers disclose those network management practices and further created a presumption that paid Internet traffic priority agreements would violate the bar on discrimination. Although the FCC considered a common carrier based regulatory approach known as Title II, it ultimately decided to base its authority to enact network neutrality rules on a relatively obscure section of its governing law that gives the FCC authority to take steps to encourage the deployment of broadband services.

The FCC's network neutrality rules were subsequently challenged in appellate court under the theory that the FCC lacked the statutory authority to adopt those rules and that, even if the FCC had such authority, it could not impose the no blocking and no unreasonable discrimination rules because they created common carrier Title II obligations on entities that were not classified as common carriers. In early 2014, the appellate court agreed with the common carrier arguments and struck down the majority of the network neutrality requirements.

In response, the FCC launched a rulemaking proceeding in May 2014 seeking public comment on how best to protect and promote an open Internet. The FCC's proposals focused on several basic principles: (1) developing the strongest legal framework for enforceable rules; (2) ensuring choices for consumers and opportunity for innovators; (3) preventing practices that can threaten open access to and from the Internet; (4) expanding transparency of Internet access providers' services; (5) protecting consumers, innovators, and startups through new rules and effective enforcement; and (6) ensuring access for all communities, especially rural America. Not only did industry participants weigh in on the FCC's proposed rules, but millions of comments were filed by concerned citizens. As of this writing, the FCC has stated its intention to announce a decision on network neutrality rules in late February 2015.

The principal point of contention associated with network neutrality rules, apart from their need at all, is the statutory authority for the rules. Because of the appellate court's decision that vacated the FCC's previous rules, the FCC has shied away from using common carrier regulation, Title II, as a basis for its authority. Initially Chairman Wheeler proposed a hybrid approach that utilized some aspects of common carrier regulation without relying on that authority, but proponents of stronger regulation maintained that the hybrid approach would have the same pitfalls as the failed strategy that had led to the appellate court reversal in the first place. The White House even weighed in, going further than Chairman Wheeler's proposal, with the President specifically urging that the FCC should utilize common carrier Title II regulation to impose network neutrality requirements for consumer-facing Internet access services, but allowing for forbearance from rate regulation and other aspects of common carrier regulation. President Obama also made it clear that network neutrality rules should apply to both wireless and wireline broadband providers as had been suggested by the FCC in May.

Recent statements by Chairman Wheeler suggest that the FCC ultimately will assert authority to impose network neutrality provisions on Internet service providers by treating them as common carriers under Title II. Only a limited subset of Title II obligations are expected to apply to Internet service providers, as the FCC is likely to invoke its authority to forbear from application of a majority of the common carrier obligations that opponents to the FCC's action contend will inadvertently be swept up with any conclusion that broadband services are subject to Title II obligations. For example, the FCC is expected to forbear from imposing pricing regulation and tariffing requirements on Internet service providers.

The FCC decision on network neutrality is not expected to be unanimous and will probably be a 3-2 vote along political party lines. The likely-dissenting FCC Commissioners say they are not against an open Internet, but contend that government regulation is unnecessary to accomplish that goal and that the FCC's rules will deter broadband deployment and infrastructure investment throughout the US. The Commissioners in the majority are anticipated to conclude that without new rules, the openness of the Internet will be threatened and divided into "haves" and "have-nots," favouring those persons and entities with greater resources.

Regardless of what is decided, an appeal of the FCC's rules is a virtual certainty and is expected to center on the authority upon which the FCC's network neutrality rules are grounded – that is, whether the FCC can issue rules that apply to broadband Internet service providers based on its authority to regulate common carriers. Some broadband Internet providers are expected to argue that they are not common carriers, and that the FCC cannot simply declare them to be so. Given that the appellate court that traditionally reviews FCC decisions has vacated prior FCC efforts that sought to impose network neutrality requirements under non-Title II grounds, a decision by the FCC to reclassify broadband under Title II to avoid that precedent would inevitably provoke an extremely close examination by the court to determine whether the FCC's actions have a sufficient legal and factual basis. It is uncertain whether either the FCC on its own initiative or an appellate court by order will delay the FCC's rules from going into effect during the pendency of the appeal process.

The US Congress could take up the mantle and pass network neutrality legislation. Republican leaders in both Houses are preparing a bill to redefine the FCC's jurisdiction over broadband Internet access, but, given the current makeup of both the House of Representatives and Senate, without Democratic member support, Congress is unlikely to pass legislation that is palatable to President Obama and thus would likely face a veto.

Given the expected lengthy appellate process and the dim prospects of successful legislative action, the ultimate fate of the anticipated FCC network neutrality rules will likely remain unsettled for the next several years.