New developments: Since we published our update below, the FCC has adopted a Notice of Proposed Rulemaking to begin the process of rolling back the rules and regulatory framework for net neutrality. The 2-1 vote came after the FCC received over 1 million comments on the proceeding, even before the proposal was formally offered to the public. As noted below in our May 1, 2017 update, the FCC is proposing to reverse the Title II classification of Broadband Internet Access Service (BIAS) and revert to a Title I classification, one that has been previously found to be unable to support net neutrality enforcement actions.

In addition, the full U.S. Court of Appeals for Ninth Circuit recently agreed to rehear an earlier decision by a three-judge panel on that court determining that the FTC lacks jurisdiction over non-common carrier activities performed by common carriers. The en banc panel said the prior decision, discussed below, can no longer be cited as precedent while the rehearing is pending.

Original client update:

FCC Chairman Ajit Pai has waded back into the shark-infested waters of net neutrality by releasing a draft NPRM proposal to reverse the FCC’s recently upheld consumer protection rules prohibiting Broadband Internet Access Service (BIAS) providers from treating online content, apps, connected devices and services in a discriminatory manner. Under a new FCC procedure, the draft NPRM is essentially a non-binding sneak preview of the NPRM prior to its full vote by the FCC’s commissioners in the 2017 May Open Commission Meeting. 

Shortly after Pai released the draft NPRM, the U.S. Court of Appeals for the District of Columbia Circuit denied the petitions to rehear en banc its 2016 decision in U.S. Telecom Association v. FCC that affirmed the FCC’s 2015 Open Internet Order. The en banc denial starts the 90-day clock for petitions seeking U.S. Supreme Court review, although it is unclear if any such petitions will be pursued in light of Chairman Pai’s stated intention to repeal the FCC’s 2015 net neutrality rules at issue. In fact, Chairman Pai released a statement shortly after the D.C. Circuit’s denial of the rehearing petitions in which he described that denial as confirming that “the FCC has the authority to classify broadband Internet access service as an information service,” as Pai proposes to do, and he confirmed that “the Commission on May 18 will begin the process of repealing the FCC’s Title II regulations.”

A Contentious History

Net Neutrality has taken a long and winding road, and the end may still not be in sight. 

The FCC’s first efforts to articulate consumer rights to access online content, apps, devices and services of their choice began in 2005 when the FCC adopted an Internet Policy Statement with voluntary guidelines for the practices of BIAS providers. The Internet Policy Statement itself was adopted in response to the Supreme Court’s Brand X decision affirming the FCC’s prior deregulation of BIAS by reclassifying its transmission component as part of an integrated “information service” under Title I of the Communications Act. When the FCC sought to enforce the Internet Policy Statement a few years later, however, the D.C. Circuit vacated that enforcement action. In response, the FCC adopted binding net neutrality rules in 2010 without changing the Title I regulatory classification of BIAS. Upon review, the D.C. Circuit found in 2014 that the agency’s rules improperly treated BIAS providers as “per se common carriers” without first reclassifying BIAS as a telecommunications service under Title II of the Communications Act.

Having been stung by the appellate court twice, in 2015 Chairman Wheeler decided to follow the D.C. Circuit’s legal roadmap by reclassifying BIAS as a Title II telecommunications service in its 2015 Open Internet Order. In taking this action, the FCC also employed the concept of “forbearance” to enact the more lenient Title II regulatory framework that has long applied to mobile wireless telecom services, rather than the full panoply of Title II obligations, such as tariffs and rate regulation, that historically applied to landline telephone communications. Those actions were vociferously opposed by Commissioner O’Rielly and then-Commissioner Pai, in a preview of the current effort to roll back the 2015 Order.

Proposed Rollback of Net Neutrality

Chairman Pai’s current draft NPRM sharply criticizes the 2015 Open Internet Order by arguing it has caused a decline in broadband infrastructure investment and jobs, and stifled innovation. Under this premise, the draft NPRM proposes to “re-reclassify” BIAS as a Title I information service and thereby effectively jettison the agency’s Title II authority to adopt and enforce net neutrality rules.  

The NPRM also seeks comment on the need for retaining the so-called “bright line rules” of net neutrality—clear prohibitions on blocking, throttling, and “paid prioritization” (i.e., the BIAS provider practice of requiring websites to pay for preferential treatment). It similarly questions the need for the BIAS provider transparency rule that requires disclosure of providers’ network-management practices and performance data, as well as the FCC’s underlying statutory authority for the transparency rule, despite that rule being twice affirmed by the D.C. Circuit. The draft NPRM also questions the utility of the FCC’s enforcement regime and its authority to oversee the business-to-business interconnection of BIAS and common carrier networks.

Finally, the draft NPRM also proposes to “return” authority to the Federal Trade Commission to “police the privacy practices of Internet service providers.” As we have previously noted, however, the FTC’s jurisdiction over broadband privacy is uncertain, and “re-reclassifying” BIAS as a Title I service would not fully cure what caused the U.S. Court of Appeals for the Ninth Circuit to find that the FTC lacks jurisdiction over common carriers under the FTC Act in the first place. In fact, the AT&T decision arose from facts that predate the FCC’s 2015 Title II reclassification, and concerned the then Title I wireless data services of a mobile wireless carrier that also provided traditional Title II voice telephony service. The Ninth Circuit found that the FTC lacks jurisdiction over common carriers even when the FTC targets its non-common carrier services. Although the Ninth Circuit’s decision is not binding on other circuits, it is unclear how the FCC’s reclassification of BIAS as a Title I non-common carrier service would restore FTC jurisdiction over the BIAS services provided by common carriers. 

Short of a legislative amendment to the FTC Act (or the overturning of the Ninth Circuit’s decision in AT&T), the reclassification of BIAS as a Title I service would arguably only restore FTC authority over BIAS providers that do not also provide common carrier services, such as certain cable and satellite companies, but would not be applicable to traditional landline and mobile voice providers.  

Perilous Path Forward

The proposed reclassification of BIAS under Title I faces some potential legal hurdles. 

First, the FCC will need to establish a rational basis supporting a dramatic reversal of the agency’s prior findings regarding the broadband industry only two years ago, which included consideration of millions of comments and which were affirmed by the D.C. Circuit less than a year ago. 

Second, if in following the proposed reclassification of BIAS under Title I the FCC hopes to retain some authority to enforce net neutrality-like principles, what is the legal foundation for doing so in light of the D.C. Circuit’s repeated reprimands of such efforts?  

The FCC’s draft NPRM has already drawn passionate praise and criticism from affected industry stakeholders. FCC Commissioner Mignon Clyburn and FTC Commissioner Terrell McSweeny, both Democratic members of their agencies, issued a joint statement calling the proposal “net neutrality in name only.” Indeed, Republican FCC Commissioner Michael O’Rielly recently spoke for many close observers of the net neutrality debate when he stated, “The only way to bring resolution to the net neutrality debate once and for all is for Congress to consider and enact legislation on the subject matter, as it deems appropriate. There can be no lasting peace until that happens … [and] our action in the coming weeks and months will deliver this debate squarely to Congress’ doorstep.” 

In light of the potential perils of the FCC’s new regulatory proceeding, the long and litigious history of net neutrality, and the apparent necessity of new Congressional legislation, it does not appear that the contentious and partisan debate over net neutrality will end any time soon.

© 2017 Perkins Coie LLP