Wednesday, April 7, 2010

The FCC Must Let Thee Be...

Yesterday, a three judge panel of the U.S. Court of Appeals for the D.C. Circuit (one of the twelve circuit courts beneath the Supreme Court), ruled that the Federal Communications Commission (FCC) does not have the legal authority to impose “net neutrality rules” on internet providers. This is a good thing. Here’s what this means.

What Is Net Neutrality
Net neutrality is the idea that internet providers should not be allowed to regulate how their customers use the internet. Specifically, proponents argue that net providers should not be allowed to deny access to specific internet sites or to slow down service when their customers attempt to visit those sites. This was the idea of internet companies like Google and Amazon, who advocated that the federal government should pass regulations preventing internet providers from restricting content or prioritizing one type of traffic over another.

Opponents of net neutrality, basically internet providers and cable companies, counter that these rules would choke off new innovation and prevent them from conducting necessary regulation to prevent harm to their systems and to stop nuisances like spam and piracy. It also prevents them from slowing service to websites that place excessively high demands on the system.
What Caused The Present Case?
In 2005, the FCC adopted a set of principles that said “consumers are entitled to run applications and use services of their choice.” However, these principles also allowed providers to conduct “reasonable network management.” Thus, they appear contradictory on their face. More importantly, the FCC acknowledged at the time that these principles were merely recommendations and were not legally enforceable. In other words, legally, they were meaningless.

Attempts by Google and Amazon and others to back five separate bills in 2006 that would have made net neutrality the law were all defeated. The Democrats, despite being proponents of net neutrality legislation, have been unwilling to advance any such bills since that time.

In August 2008, citing these principles, the FCC issued a cease and desist order to Comcast, after Comcast slowed transfers to and from BitTorrent, a site that allows users to upload and download all manner of songs, movies and software. The FCC decision, a 3-2 decision, was criticized at the time by Republican FCC Commissioner Robert McDowell, who noted that the agency lacked the legal authority to issue such a ruling and claimed that its efforts were “doomed. . . on appeal.”

Comcast appealed.

Tuesday, the DC Circuit struck down the FCC’s cease and desist order, noting that the FCC was unable to identify any law enacted by Congress which gives the agency the power to regulate the internet. In other words, Congress has never given the FCC the power to regulate the internet. Thus, it had no authority to issue the cease and desist letter.

While this decision technically only overturns the FCC’s cease and desist order, and thereby prevents the FCC from using the 2005 principles against providers, it has a larger effect as well. The decision at the least suggests that the FCC has no power at all to regulate the internet. It also suggests that the court will strike down any attempt by the FCC to issue such regulations (in October 2008, FCC Chairman Julius Genachowski announced that he would issue net neutrality rules). However, at this point, those are only suggestions.
What Happens Next?
If the FCC thinks that it has a good case, it may try to appeal the panel’s decision to the full DC Circuit. This is called a “rehearing” and would involve the entire Circuit Court presiding over the decision rather than a randomly selected three judge panel. This will most likely happen if the FCC feels that the three judge panel was somehow unique, and that it would have a better shot before the entire court. But I doubt this will happen.

Right now, the FCC retains a certain amount of wiggle room. Indeed, right now the decision only strikes down the cease and desist order, it doesn’t prohibit all regulation of the internet generally. If the FCC appeals, it runs the risk that it will lose that wiggle room if the Circuit Court makes the ruling more broad based. (The same sort of calculus would apply with any appeal to the Supreme Court.)

A more likely next step for the FCC would be to exploit that wiggle room. For example, net neutrality proponents now want the FCC to declare internet providers to be “common carriers,” like phone companies, and then impose regulations that include price controls, service quality requirements and technological mandates.

Could the FCC get away with this? It’s not decided, but probably not. The Circuit Court noted fairly clearly that the FCC has been unable to show where it gets the authority to regulate the internet. That means it can't issue such regulations. However, we must remember that this was only suggested by the decision, which was in fact much narrower -- holding only that the FCC had no power to issue the cease and desist order.

Would the FCC try this? It might. Indeed, the FCC indicated it is considering this. In a Tuesday statement, it noted that the DC Circuit’s ruling did not “close the door to other methods for achieving this important end.” However, the former chief counsel for the FCC has noted that this is unlikely to lead to the types of regulations the net neutrality proponents want. So it’s unclear if they will try this, or if they will focus instead on forcing a neutrality law through Congress.

The Democrats want the FCC to try again, probably because they are afraid to try again to pass a net neutrality law. The Republicans oppose any such attempts by the FCC. Said Rep. Joe Barton (R-TX): “It would be wrong to double down on excessive and burdensome regulations, and I hope the FCC chairman will now reconsider his decision to pursue expanded commission authority over broadband services.”

All in all, net neutrality was significantly wounded yesterday, but it’s not dead. I guess we’ll see.

By the way, bonus points if you can tell me what the title of this article is alluding to. It’s someone who has had his own problems with the FCC.


USArtguy said...

Thanks for this article, Andrew. It helps clarify a few things. I think "Net Neutrality" is something of a misnomer. I've always thought it implies to the average person that the internet will take care of itself and be free of government interference, when just the opposite is true.

As a Conservative I want as little government interference in my life (and the lives of people who supply the services) as possible. Especially when the government office in question has no authority in the first place. But as a customer, I certainly don't want a reduction in service (intentional slowing of traffic to sites of the provider's choosing).

Using the company I work for as an example, our clients are willing to give us a reasonable amount of time to do our jobs. They really do not care, however, how many extra hours we work or how many people it takes us. They want what they are paying for when it's promised. So we try to do whatever it takes to do just that. Internet providers should have the same attitude or, at least, make it clear when you sign up that they will occasionally slow down your service and why. "Clear" does not mean "mouse type" at the end of a long service agreement document just to make the ISP legal.

Google's philosophy as an "information provider" is that they want access to as much content as possible (so they can sell ads next to the info). So I can see why they support Net Neutrality. On the other hand, why would companies like Amazon support more government regulation? Is it because ISPs were slowing traffic to their sites?

I'm also guessing that having the FCC regulate the 'net will somehow open the door to taxation?

StanH said...

This will not stop the ideologues in Barry’s regime. Court rulings are for the other people. Look for the FCC to attempt an end around.

Writer X said...

A spot of good news. Thanks for the update, Andrew. At first I thought you were playing on a Beatles song with your title, but I guess I was wrong. Your question on the title has me stumped, but I'll go with Barney Franks. He's always lurking around federal agencies.

AndrewPrice said...

USArtguy, You're welcome. I think companies like Amazon are concerned that either because they may one day start doing a lot of downloading, like for the e-books, or because they are concerned that providers (like Comcast) may start trying to charge them an access fee.

I too want the net to be free of regulation, at least as much as possible. I'd like to see regulations to try to limit spam and malware and other invasions of privacy, but I don't like the idea of handing the FCC power to start regulating disputes between huge corporations. That's not regulating for the public good, that's regulating for narrow interests.

As for the name, you're right, it is a misnomer. It's not neutrality at all, it's "forced neutrality."

AndrewPrice said...

Stan, They'll try an end around, but I do think the court has made it clear that they simply won't allow it. I think they'll eventually have to try to pass legislation, which they seem incapable of doing for some reason.

AndrewPrice said...

Writer X, You're welcome. I do think this is good news, not because I want my ISP being able to mess with me, but because I think that's just the nose under the tent. I think we need to be very careful about allowing the government to start tinkering with the internet.

(It's not the Beatles. I'll put up the answer later, so that people have more time to guess.)

Joel Farnham said...


So basically the camel got it's nose slapped. Good. But it didn't go far enough. It should have squashed that wriggle room, but a win is a win in any case.

The only thing I can think of is the title reminds me of a religious quote. For the life of me, I can't recall the right one.

patti said...

oooo, thanks sir. link'd!

AndrewPrice said...

Joel, Nice way to put it -- "the camel got its nose smacked." Yep! I too would like to have seen the court go further and simply find that they have no authority to regulate the internet.

But, as a lawyer, I know the reasons they didn't and they actually are good reasons. Courts try to provide as limited an opinion as possible so as to avoid causing unexpected consequences. It's a pain in the rear, but it really does work for the better. In fact, in the past, whenever the Supreme Court has issued unnecessarily broad-based rulings, those decisions have become some of the more controversial legal problems that caused national rifts and took generations to fix.

AndrewPrice said...

You're welcome Patti! And thanks for the link!

Unknown said...

Andrew: There is some hogging of bandwidth going on, but that's competition, as well as the FCC's own arcane and nearly incomprehensible regulations regarding licensing and usage. Congress has the authority to regulate some of the activity, but as always, it has delegated its inherent power to an out-of-control bureaucracy.

This is a step in the right direction, and since it was a 3-0 decision of the DC Court of Appeals, it's more significant that if it were issued by, say, the Ninth Circuit Court of Appalling Decisions. I am hoping this is the first step in a long series of decisions slapping down the ancillary jurisdiction of multiple federal bureaucracies, not just the FCC.

AndrewPrice said...

Lawhawk, That's the reason I think the FCC won't try to appeal this. The DC Circuit is much more reliable and predictable than the 9th Circuit. And since this was 3-0, it's unlikely that they just got a rogue panel.

AndrewPrice said...

Ok, Since no one seems to be getting the reference....

It's a reference to Eminem and his song "Without Me." Here's the line:

“The FCC won’t let me be, or let me be me, so let me see, they try to shut me down on MTV, but it feels so empty without me.”

BevfromNYC said...

Yeah, Andrew, that's what I was going to say - Eminem, no really I was, I swear! Do I get a prize?

Anyway, great article. Like USArtguy, I was confused by the term "net neutrality". Thanks.

AndrewPrice said...

You're welcome Bev, I'm glad you liked it!

I figured you would know who it was! ;-)

Anonymous said...

Lets cut to the chase.
If you purchase xx amount of bandwidth or reach an agreement for that bandwidth then that is what you are entitled to.
The case that caused the constipation
was when a inter net provider decided that if you do not buy it from me then I'm going to fxxx you over.
As much as I am against Big Brother doing what is best for me, in his view, I do not agree that if you do not do what I want then you will pay extra.
If an analogy is needed, how about,I pay for use of the road into town so that my produce truck can high ball to the farmers market.
The foreman of the road crew has a trucking company and he wants some leverage.
His solution is to stop my trucks which are using the road because they are not his trucks.
Enforceable maybe if he will pay the cops or he can just block the road for maintenance to slow my trucks to the point where if I used his my produce would reach the market in prime condition.
This is one of those greed begets wrong doing.
Another view is ,
"A pound foolish a penny wise."

AndrewPrice said...

JB, I am admittedly of two minds on this. I don't like the idea that an internet provider can slow down my net usage if I visit certain sites (or even block me from visiting). And I don't think there are enough genuine alternatives that it is fair to say "just change providers." In other words, I don't really buy the "free market solution" in this case.

But, on the other hand, I am concerned that this reasonable sounding regulation will only be the first step to regulating the internet. I hear the Democrats talk about imposing taxes and controlling "wrong opinions" to account for "local control." I see foreign governments literally censoring the net. I hear European governments passing laws to deny people internet service if they break certain rules. And I think that allowing regulation even for good causes will lead to total disaster in a few short steps.

So while I don't like what Comcast and others have done, I am more afraid of what the government wants to do. . . and it does anger me that Comcast has laid the groundwork through it's greed to give the government an opening to begin this regulation.

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