ISPs as Public Utilities

By Adam RouseAdam Rouse Headshot

In late 2010, the Federal Communications Commission (FCC) issued the Preserving the Free and Open Internet Order [1] mandating a set of “net neutrality” policies that required internet service providers (ISPs) to essentially treat all internet traffic the same as it traversed the various individual networks making up the internet as a whole. Verizon filed suit against the FCC claiming that the FCC had no legal authority to issue the order and the FCC exceeded the scope of the Telecommunications Act of 1934 and the Telecommunications Act of 1996.[2] The FCC countered by arguing that it was regulating the activity of broadband providers under its ancillary jurisdiction [3] to regulate certain aspects of internet communication services. The DC Circuit Court held that the FCC lacked authority to issue the anti-blocking and anti-discrimination rules that were part of the Preserving the Free and Open Internet Order, effectively gutting it.[4] Many broadband providers were upset with Verizon for filing suit when they did. They were concerned that the FCC, when challenged, could reclassify broadband and wireless internet service providers as Title II Common Carriers, subjecting them to the hundreds of regulations that were already in place for telecommunications providers.[5]

On Thursday, February 26, 2015, the FCC did exactly what internet service providers feared it would: broadband internet service is now classified as a telecommunications service under Title II of the Communications Act.[6] By reclassifying broadband internet service under Title II the FCC has secured its own authority to strictly regulate almost every aspect of the broadband internet industry. Reaction from internet service providers in the cable and telecommunications industry was dour, and the order is expected to be challenged in court. This time, however, with internet service classified as a Title II utility, there is ample backing for the FCC’s legal authority to impose regulations as suggested by the court in the Verizon v FCC case.[7] Regardless of the eventual outcome of the anticipated court cases, the decision by the FCC to reclassify broadband internet to a Title II utility is widely considered the first step in maintaining a fair and open internet that all can take advantage of.[8]

It is critical to understand what the order will require and similarly what it will not. The FCC is required by the U.S. Congress to refrain from enforcing Title II regulations are not in the public interest. It is within this spirit of public interest that the FCC press release stated that the following provisions of Title II regulations would not be enforced by the new order:

  1. There will not be any rate regulation for broadband internet services. This means that every provider is welcome to set their own pricing provided that they are not anti-competitive or gouging the market – both restrictions which were in place before the order.
  2. There is no change to Universal Service Fund contributions from broadband providers. This means that there will not be any new FCC imposed fees showing up on consumer’s internet service invoices. A Universal Service Fee for broadband is already under consideration by the FCC and is not impacted by this order.
  3. Internet service providers will not be required to perform “last mile unbundling” services. Currently telecommunications providers must lease out portions of their networks to competitors at wholesale pricing (set by regulation) to foster competition in the telecommunications industry. By not requiring network unbundling in the case of ISPs the FCC is removing the fear of sudden competition from the major internet service providers. They will be allowed, for the time being, to maintain their monopolistic grasp on the major service markets.
  4. Broadband access will remain free from taxation by local and state governments.

The order does the following:

  1. Gives the FCC authority to investigate and resolve consumer complaints made against broadband ISPs.
  2. Applies the core principles of anti-discrimination and no unjust or unreasonable practices or policies. ISPs cannot charge more or offer different levels of service based on any discriminatory practices and they must make their services available where reasonable to do so.
  3. Grants consumers greater privacy rights, restricting the information that ISPs can share with third parties about subscribers without the prior consent of the subscriber.
  4. Ensures that internet service providers that want to expand and grow their networks have fair access to the current utility infrastructure such as telephone poles and underground wiring conduits.

The order further imposes the following regulations that are separate from standard Title II regulation, but are allowed under Title II’s authority.

  1. ISPs may not block access to any legal content on the internet.
  2. ISPs may not throttle (slow down) legal content based on the type of content, application, service, or device – so long as the content is not harmful to the network.
  3. ISPs may not favor paid traffic over non-paid traffic. This is the ending of so-called fast lanes on the internet where some companies or consumers would pay to have their traffic prioritized over the traffic of those who could not afford or chose not to pay.

Finally, the order states that while ISPs can engage in practices that are necessary for reasonable network management, they cannot use network management as a guise for instituting anti-consumer policies such as artificial or arbitrary data caps on plans that were advertised and sold as “unlimited” bandwidth plans. ISPs have admitted that there is not a congestion problem on their networks that the extra fees associated with the higher data users is not a cap – it’s a method to lower prices for users who use lessor amounts of data in a billing cycle. Consumer advocates see these artificial caps as ways for ISPs to squeeze additional money out of consumers who were told they would have unlimited service. The order specifically states that any policies (including data capping or throttling) enacted for the purposes of network management must be reasonable, take into account the type of technology at issue, and cannot be instituted for a business purpose – such as attempting to profit from consumers who use more of the services they are already entitled to under their plan.

The FCC’s reclassification of broadband internet services to a Title II utility attempts to cement the FCC’s regulatory authority of internet communications – even with the light touch of all the regulations subject to forbearance. Only time will reveal the eventual impact on the internet service industry, however, the policies seem rooted in the desire to foster an open and free internet that exists as a communications and information vehicle for the common person, not just those who can afford to pay for fast lanes of unblocked traffic.

[1] Federal Communications Commission Order 10-201 (2010),  https://apps.fcc.gov/edocs_public/attachmatch/FCC-10-201A1_Rcd.pdf

[2] 47 U.S.C.

[3] John Blevins, Jurisdiction as Competition Promotion: A Unified Theory of the FCC’s Ancillary Jurisdiction, 36 FLA. ST. U. L. REV. 585 (2009).

[4] Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014).

[5] Jon Brodkin, ISPs ‘secretly furious’ at Verizon, scared of stronger net neutrality rules, arstechnica.com, October 3, 2014, http://arstechnica.com/tech-policy/2014/10/isps-secretly-furious-at-verizon-scared-of-stronger-net-neutrality-rules/

[6] Federal Communications Commission, Press Release – FCC Adopts Strong, Sustainable Rules to Protect the Open Internet, February 26, 2015, http://transition.fcc.gov/Daily_Releases/Daily_Business/2015/db0226/DOC-332260A1.pdf

[7] See, Verizon, 740 F.3d. 623 (D.C. Cir. 2014).

[8] Haley S. Edwards, “FCC Votes ‘Yes’ On Strongest Net Neutrality Rules,” Time, February 26, 2015, http://time.com/3723722/fcc-net-neutrality-2/

One thought on “ISPs as Public Utilities

  1. As we continue to use technology in our daily lives we find that our lives, our privacy and what we thought was all about us continues to become information that can be seen and used by the government and corporate structures. How much of this gets to remain private personal information stands to question. Your article actually reached the realm of “Do we have personal lives anymore? Are we allowed to have anything as private information? How should public respond to this extreme intrusion on privacy?” The salient factor here is that the public do not know they are watched…When that happens one tends to ask where are organizations like the ACLU on this?

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