March 1, 2016 | by Wayne Smith

Net Neutrality Part I: An Update

On February 4, 2015, the FCC proposed to reclassify the Internet from an “information service” as defined in the U.S.C. 47 of the Telecommunications Act of 1996, Section 706 to a “communications service” and regulate it under Title II of the Telecommunications Act of 1934. The FCC then issued a new set of net neutrality rules under the 1934 Act on February 26, 2015. After these announcements, Vertex published a short article and suggested there would be several more years of legal, administrative and legislative positioning.

This suggestion was correct as far as the activities, but the timeframe over which they will unfold may be compressed into only one or two years. In this article, we will update you on what has been happening since February 2015. In the next couple of articles, we will dig deeper into the history and concept of net neutrality, its reclassification under Title II and briefly analyze the economic landscape of the key players in this market. Overall, our goal is to answer the following question for you: “Does net neutrality really matter?”

Definition Refresher

Net Neutrality is a national debate that reaches the popular press only when something controversial or ground-breaking occurs. Since little of this has happened this past year, it has faded from the major news sources and the public’s top-of-mind. As you may recall, net neutrality, as defined by Wikipedia, is “the principle that internet service providers (ISPs) and governments should treat all information traffic on the internet equally, not discriminating or charging differentially by user, content, site, platform, application, type of attached equipment, or mode of communication.”

2015 Chronology

On March 12, 2015, the FCC issued the Open Internet Order (OIR) stating the rules that were to ensure consumers and businesses access to a fast, fair, and open Internet. The new rules apply to both fixed broadband providers (cable companies) and mobile broadband services, also known as Internet Service Providers (ISPs). The FCC is saying the rules will protect consumer access to the Internet from either a desktop computer or a mobile device. The rules as published on the FCC website are 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 ISPs from prioritizing content and services of their affiliates.

On May 1, 2015 the U.S. Telecom Association, the CTIA and related parties petitioned the FCC to partially stay the OIR. On May 8, 2015 the FCC rejected the petition to stay the order.

On May 13, 2015 the U.S Telecom Association and related parties filed a motion for stay of the FCC rules in the Court of Appeals in the District of Columbia. This motion basically argued the FCC reclassification of the Internet from an “information service” under U.S.C. 47, Telecom Act of 1996 to a “communications service” under Title II of Telecom Act of 1934 was outside of the FCC’s authority. The CTIA president stated, “CTIA is seeking a stay to preserve the light-touch regulatory regime that, until now, has been a bipartisan success story. The FCC’s decision to impose monopoly-era rules on mobile broadband, which is a highly competitive, innovative and evolving market, is an overreach and unnecessary.” We will address this monopoly-era issue in the next article of this series.

On December 4, 2015 the D.C. Circuit Court of Appeals heard arguments concerning the challenge to the FCC's reclassification of mobile network providers and fixed broadband providers. In the hearing, the FCC argued that it had to reclassify broadband as a utility-like service in order to enforce rules, after the court had vacated its ability to enforce them in 2014 under U.S.C. 47, Telecom Act of 1996. The ISPs (wire-line phone, mobile broadband and fixed broadband providers) argued that broadband services are not telephone services and should not be controlled by the utility-style regulations. A decision from the Appeals court is expected in the spring of 2016.

Meanwhile in Congress

In January 2015, Republican members of the House of Representatives introduced a bill that would prohibit the FCC from reclassifying the net neutrality rules. This bill appears to have been a pressure tactic to the FCC, which was ineffective. Next, conservative members of the House of Representatives introduced language to the 2016 budget that would prohibit the FCC from enforcing net neutrality rules, but it was stricken from the record before approval.

The next article will turn to how the telecom markets have changed over the past 20 years since the Telecom Act of 1996 became law. One fact is obvious: These markets aren’t what they used to be.