To preserve openness and a low barrier to entry, the Federal Communications Commission adopted the Open Internet Order (2010), establishing three rules for Internet Service Providers:
- Transparency: ISPs “must disclose” their practices and terms and conditions of their services.
- No blocking: ISPs “may not block” legal content, services, or devices from their network.
- No unreasonable discrimination: ISPs may not “unreasonably discriminate” in transmitting lawful network traffic. (pg 2).
After Monday’s oral arguments in Verizon v. FCC (US Court of Appeals DC Circuit), Verizon has gained the upper hand. This is the fight for Net Neutrality, and Verizon has the FCC seeing stars.
During oral argument, the crux of Verizon’s strongest point relied on one distinction: the classification as an “information service” rather than a “telecommunications service.” “Telecommunications services” are subject to common carrier regulation, while “information services” are not. The Open Internet Order bears a striking resemblance to 47 U.S.C. § 202, which makes it unlawful to engage in “unjust or unreasonable discrimination” in services and the ability to “make or give any undue or unreasonable preference or advantage.” In 2002, the FCC reclassified ISPs (and wireless ISPs) and removed the long held assumption of common carrier status. (FCC 02-77 § 34).
This brings us to the screaming uppercut: “information services” are not common carriers. The reclassification destroyed the FCC’s statutory authority. Prohibiting discrimination requires ISPs to carry the traffic of all edge providers (content providers such as Google, Netflix, Facebook, even small-scale blogs) at a common, nondiscriminatory rate, specifically zero. The no blocking rule prevents the restriction of internet traffic, except for unlawful material. Verizon frames it as denying the company discretion. What are the consequences of a Verizon victory? The Internet would look a lot more like cable television. If the court rules in favor of Verizon, ISPs can block access to whichever edge provider (again any content producer) it wants unless the customer pays extra. They can also charge edge providers for distribution or push them out of the market. Tiered fees and restricted access produce high entry barriers and alter the competitive landscape.
As a rebuttal, the FCC claimed that its authority extends to “all interstate and foreign communication by wire or radio and all interstate and foreign transmission of energy by radio which originates and/ or is received within the United States.” 47 U.S.C. §152(a). The FCC also relied on § 706 of the Telecommunications Act (1996). It allows for the Commission and each state commission to “encourage the deployment . . . of advanced telecommunications capability to all Americans. . . in a manner consistent with the public interest.” Furthermore, the FCC argued that edge providers are not customers of Verizon, which allows for the increased regulation. The end users are the customer, which Verizon can act in any manner it wants provided it does not block service outright or discriminate. Two of the three judge panel remained unconvinced, and this is devastating to the Commission. -Public Knowledge
The difference between “telecommunication services” and “information services” is apparently a functional one. Telecommunications is defined as “the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.” An “information service” is the “offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications.” (FCC 02-77 § 34). But this is not set in stone. This is something the FCC changed and should be able to change again if the court rules for Verizon.