Net Neutrality: The New Rules

In February, we looked ahead to the U.S. Federal Communications Commission’s (FCC) effort to enact rules to ensure unblocked, non-discriminatory access to the Internet, a regulatory scheme known as Net Neutrality. The FCC issued the Net Neutrality Report and Order on Dec. 23 containing the new rules. A Net Neutrality regime is critical to the development of satellite broadband. If fixed Internet backbone providers are allowed to block and discriminate in their treatment of broadband traffic, competitive providers, including satellite operators, will be squeezed out of all profitable markets.

The new Net Neutrality rules provide that fixed and mobile broadband providers must, in the interests of transparency, publicly disclose accurate information regarding their network management practices, their network performance characteristics and their terms and conditions of commercial service. The disclosure must be sufficient for consumers to make informed choices about use of the broadband service and for content, application, service and device providers to develop, market and maintain their service and product offerings. The rules expressly do not require public disclosure of information that is competitively sensitive, that would compromise network security or undermine reasonable network management practices. An expressly non-exhaustive list of network practices, performance characteristics and commercial terms subject to disclosure is provided

The rules provide that fixed broadband providers may not block lawful content, applications, services or non-harmful devices. Mobile broadband providers (including satellite operators) may not block lawful websites or applications that compete with their voice or video telephony services, a less stringent standard. The FCC expressly notes that the rules permit blocking of unlawful content, such as child pornography, and that the no-blocking rule prohibits impairment or degrading of lawful content, applications, services or non-harmful devices so as to be effectively equivalent to blocking. For example, delaying traffic may have the same functional results as blocking. The FCC states unequivocally that a circumstance in which a content, application, service or device provider was able to avoid blocking only by paying the broadband provider a fee would be prohibited.

The rules provide that fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic. Reasonable network management practices will not constitute unreasonable discrimination. The FCC enumerates some examples of prohibited unreasonable discrimination: impairment or degradation of a competitor’s applications or services; practices that impair and effectively reduce end user choice of content, applications, services or devices; and conduct that impairs free expression. Any “pay for priority” traffic arrangement between a broadband provider and a third party almost certainly would be prohibited. The FCC expressly declines to impose a strict non-discrimination rule as proposed in earlier regulatory proceedings. There is no non-discrimination rule at all for mobile broadband providers, including satellite.

The FCC, having made exceptions to prohibitions when “reasonable network management practices” cause differential treatment of traffic, sets out the limits of such practices, stating that a network management practice is reasonable if appropriate and tailored to achieving a legitimate management purpose, taking into account network architecture and technology. Perhaps recognizing the “eye of the beholder” quality of this formulation, the FCC states that it will develop specifics on a case-by-case basis and will know the practice when it sees it — but also offers some guidance. First, the FCC disavows a “narrowly or carefully tailored” standard of reasonable network practices, which would be too restrictive and might constrain legitimate network engineering decisions. The FCC further states that what is a reasonable practice may differ across broadband platforms: cable, telephony, satellite, terrestrial mobile and so forth. Reasonable management may include considerations of network security, end user wishes and network congestion.

The new rules mainly are on target and intended to bring about an authentic Net Neutrality regime. They are in places wishy-washy, reflecting perhaps an irrational fear of litigation on the part of the FCC (irrational, because enacting stricter rules would not have increased the chances of litigation and adverse ruling and might conceivably have diminished those chances). Finally, it is worth repeating: What is really needed is Congressional action to amend the 1934 Communications Act, as amended by the 1996 Telecommunications Act, to impose the platform-agnostic parity that our patchwork and obsolete legislative and regulatory framework so badly needs and which this writer has long urged.

Owen D. Kurtin is a founder and principal of private investment firm The Vinland Group LLC and a practising attorney in New York City.
He may be reached by e-mail at [email protected].