At its February 26, 2015, Open Meeting, the FCC voted to reclassify broadband internet access - the retail broadband service Americans buy from cable, phone, and wireless providers - as a telecommunications service and subject it to a “light-touch, Title II” regulatory approach similar to that used to regulate mobile voice services. Saying it was “tailoring the application of Title II for the 21st century,” the FCC announced new rules to ensure that America’s broadband networks are fast, fair, and open. Significantly, the new rules will apply equally to fixed and mobile broadband networks.
Why Is The FCC Changing The Way Broadband Service Is Regulated?
The FCC concluded that the nature of broadband Internet access service has changed since it was first classified as an information service 15 years ago. The FCC said that today, broadband Internet access service is understood by the public as a transmission platform through which consumers can access third-party content, applications, and services of their choosing. Noting similar conclusions reached by the U.S. Court of Appeals for the District of Columbia (the Court that overturned most of the FCC’s 2010 Net Neutrality rules), the FCC concluded that broadband providers have economic incentives that “represent a threat to Internet openness and could act in ways that would ultimately inhibit the speed and extent of future broadband deployment.” To respond to this changed landscape, the FCC found it was necessary to reclassify broadband Internet access as a telecommunications service under Title II of the Communications Act. Other sources of authority cited by the FCC are Title III of the Communications Act (mobile) and Section 706 of the Communications Act.
What New Rules Were Adopted?
The FCC adopted three new bright-line rules as follows:
- No Blocking: Broadband providers may not block access to legal content, applications, services, or non-harmful devices.
- No Throttling: Broadband providers may not impair or degrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices.
- No Paid Prioritization: Broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for consideration of any kind - in other words, no “fast lanes.” This rule also bans Internet Service Providers (ISPs) from prioritizing content and services of their affiliates.
The FCC also adopted a fourth new rule in the form of a forward-looking standard. This rule is intended to address concerns that may arise with new practices that do not fall within one of the three bright line rules. It will be applied on a case-by-case basis to address questionable practices as they occur. Among the considerations will be the effect of the practice on competitors and consumers.
- Standard for Future Conduct: ISPs cannot “unreasonably interfere with or unreasonably disadvantage” the ability (a) of consumers to select, access, and use the lawful content, applications, services, or devices of their choosing or (b) of edge providers to make lawful content, applications, services, or devices available to consumers.
Is There Still A Transparency Rule?
Yes. The existing transparency rule requires broadband providers to disclose the network management practices, performance characteristics, and terms and conditions of their broadband services. This rule will be “enhanced” to provide greater guidance and create a “safe harbor” process for the format and nature of the required consumer disclosures. Providers will be required to disclose, in a consistent format, promotional rates, fees and surcharges, and data caps. Disclosures will also have to include packet loss as a measure of network performance and provide notice of network management practices that can affect service.
Fixed and mobile providers with 100,000 or fewer subscribers will be temporarily exempt from the enhanced transparency requirements. The Order delegates responsibility to the FCC’s Consumer and Governmental Affairs Bureau to determine whether to retain the exception and, if so, at what level. The Order contains a date certain for this action, but the date was not publicly disclosed in the News Release or during the meeting or press conference.
Is There Still An Exception For Reasonable Network Management?
Yes. For the purposes of all the rules other than paid prioritization, an ISP may engage in reasonable network management. In assessing reasonable network management, the FCC will take into account the particular engineering attributes of the technology involved i.e., fiber, DSL, cable, unlicensed Wi-Fi, mobile, or another network medium. However, the network practice must be primarily used for and tailored to achieving a legitimate network management (and not business) purpose. For example, a provider can’t cite reasonable network management to justify reneging on its promise to supply a customer with “unlimited” data.
Is Interconnection Covered By The New Rules?
None of the newly adopted broadband Internet access service rules, including the future conduct rule, will apply to interconnection. However, because it is reclassifying broadband Internet access service as a telecommunications service the FCC can, for the first time, address issues that may arise in the exchange of traffic between mass-market broadband providers and other networks and services. All such issues will be addressed through complaint proceedings and will be subject to normal FCC enforcement actions (e.g., monetary penalties, consent decrees, or findings of no fault). Complaints will be decided based on the just and reasonable standard set forth in Sections 201 and 202 of the Communications Act.
When Will The New Rules Become Effective?
The rules will become effective 60 days after publication in the Federal Register except for the enhanced transparency rule. That rule will not become effective until approved by the Office of Management and Budget.
How Will The FCC Enforce The New Rules?
The FCC will enforce the new rules through investigation and the processing of formal and informal complaints. Providers may, but are not required to, seek guidance from the FCC in the form of an advisory opinion regarding proposed practices. The FCC also said it would provide enforcement advisories and will be creating an ombudsman.
How Does This Affect VoIP Service?
The Order recognizes that some data services do not go over the public Internet, and, therefore are not “broadband Internet access” services (e.g., VoIP from a cable system or a dedicated heart-monitoring service). While no specifics were publicly disclosed, the Order apparently addresses these services in some fashion to ensure that they do not undermine the effectiveness of the Open Internet rules. Moreover, it appears that the broadband providers’ transparency disclosures will cover any offering of such non-Internet access data services.
Does This Mean Broadband Service Will Be Tariffed And Rate Regulated?
The Communications Act allows the FCC to refrain from enforcing (forbear from) provisions of the Communications Act that are not in the public interest. Accordingly, the FCC’s Order forbears from enforcing 27 provisions of Title II and over 700 associated regulations that it determined not relevant to modern broadband service. Among them are:
- Rate regulation: Broadband providers will not be subject to utility-style rate regulation, including rate regulation, tariffs, last-mile unbundling, and accounting standards.
- Universal Service Contributions: Broadband providers will not be required to contribute to the Universal Service Fund under Section 254. The question of how best to fund the nation’s universal service programs (including whether broadband services should be assessed) is already being considered by the Joint Board.
- Taxes: Broadband service will remain exempt from state and local taxation under the Internet Tax Freedom Act. This law bans state and local taxation on Internet access regardless of its FCC regulatory classification.
The following provisions of Title II will apply:
- Sections 201 and 202 (no unjust or unreasonable practices or discrimination);
- Section 208 (consumer complaints) and related enforcement provisions (Sections 206, 207, 209, 216, and 217);
- Section 222 (consumer privacy);
- Section 224 (access to poles and conduits);
- Sections 225 and 255 (access for people with disabilities)
- Portions of Section 254 (universal service)
Chairman Wheeler took pains to note that the proposal was modeled on the regulatory scheme currently in place for mobile services and offered greater forbearance than mobile services enjoy. In response to criticisms that forbearance given could also be withdrawn in the future, he again referred to the mobile world where there has been no retreat on forbearance for nearly 20 years.