Friday, September 03, 2010

Net Neutrality Background

Network, or net, neutrality is a complicated communications technology issue that has significant legal and regulatory implications for all telecommunications and media companies. At issue is what can and cannot be regulated by the Federal Communications Commission (FCC). At odds in this issue are protection of consumers on the one hand (i.e. maintaining fully open access on the Internet) and protection of investment and assets by telecom companies (i.e. allowing competitors access to a company’s network, or charging more for video downloads than simple email). Google and Verizon, as explained recently in the New York Times, have proposed a form of compromise, but the issue is still hotly debated. The FCC is currently hearing more input before making a new statement or policy on net neutrality. The issue is also of interest to any communications professional because of the impact on the distribution and consumption of many forms of media and information. The following is a background on the legal and regulatory environment related to net neutrality that leads up to this point.

Definition of Net Neutrality

Net neutrality emerged as a term around 2003 as part of Internet policy debates. Some communication lawyers describe it by its core issue of negotiating how Internet traffic originating on one broadband network can transmit and terminate on another network.[1] Communication law scholars describe the concept of net neutrality more conceptually, such as a condition in which the infrastructure of the Internet is separate from its content, and wherein all data or content is treated as equal by the various Internet access providers or carriers.[2] Some put it more simply and call net neutrality a form of open access on the Internet.[3]

All are correct definitions. But as a legal concern, it boils down to whether or not the government can and should enforce net neutrality as an issue of Internet public access. It is easier to understand this after a review of the legal and regulatory environment surrounding net neutrality.

Telecommunications vs. Information Distinction

Central to the issue of whether or not the government can regulate Internet access providers is the legal distinction between whether or not a company is providing “telecommunication” services or “information” services. This distinction is best understood by following a chronology of legal actions.

The Communications Act of 1934

Under Title I of this Act, the Federal Communications Commission (FCC) has ancillary jurisdiction over all interstate and foreign communications.[4] However, the Act did not address specifics relating to the Internet.

The Telecommunications Act of 1996

This update to the 1934 Act recognized the need to further develop the Internet[5], This update made the distinction between “telecommunications” service and “information” service. The distinction was made to loosen regulation on the Internet and thus allow it to grow and develop faster. By this distinction, “telecommunications” services could be regulated under Title II of the 1934 Act, but “information” services would be subject to minimal regulations under Title I of the 1934 Act. But it did not provide clarity as to what exactly would be an example of telecommunications as opposed to information.[6]

Federal Communication Commission Determination

In March of 2002, the FCC added specificity to the telecommunications or information distinction when they declared that cable modems were information. Their rationale was that ancillary use of telecommunication facilities are inseparable from transporting digital information. They reasoned that cable operators provide information services to customers via telecommunications.[7]

Ninth Circuit Appeals Court

This decision was appealed in the Ninth Circuit Court of Appeals in a landmark case in 2005 that determined cable providers should open their Internet service to competitor ISPs (Internet Service Providers) on a “common carrier” basis.[8] The appellate court based this decision stare decisis on a previous case[9] which determined the transmission of Internet service over cable broadband is telecommunication service and thus subject to regulation.

Supreme Court

However, the Supreme Court of the United States reversed this decision. They affirmed the FCC decision that cable modems are information. The Court’s rationale was that the FCC was reasonable in determining the telecommunication/information distinction on the basis of whether a customer believed they were purchasing high-speed Internet access (telecommunications) or the stand-alone capacity to send and receive “ordinary language” messages (information).[10]

Resulting FCC Policy Statement

Following the Supreme Court decision, the FCC expanded its determination of cable modems as information to DSL (digital subscriber lines). Foley argues that in addition to coaxial cable and copper telephone wires, the nascent Internet access technology of BPL (broadband over power lines) will also enjoy “information” classification and thus minimal net neutrality regulation.[11]

The FCC in 2005 adopted a policy statement that outlines four principles that they will use to guide future regulation: “1) consumers are entitled to access the lawful Internet content of their choice; 2) consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement; 3) consumers are entitled to connect their choice of legal devices that do not harm the network; 4) consumers are entitled to competition among network providers, application and service providers, and content providers.”[12]

It is important to note that these are principles, not enforceable rules yet. In fact, former FCC Chairman Kevin Martin noted in the same release that the marketplace will ensure these principles are met, and thus foresees no new regulation necessary.[13]

Future Net Neutrality Regulation

The previous FCC chairman stressed the importance of allowing competition to advance the growth of internet communication infrastructure and devices. This assertion is also supported by the stated purpose of the 1996 Telecommunications Act: “To promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies.”[14]

Others argue that current laws will ensure that net neutrality generally and the FCC’s four principles specifically will be met. Laxton points out that the Sherman Antitrust Act applies generally to providers of broadband access, application, and content. He adds that the “essential facilities doctrine” specifically applies to broadband providers under both Sections I and II of the Sherman Act, which allow for punishment of collusion in an oligopoly market or harmful business practices by a monopoly, respectively. An antitrust claim may be made under the essential facilities doctrine by meeting four conditions: 1) a company has control of an essential facility, 2) competitors are unable to practically or reasonably duplicate the facility, 3) competitors are denied use of the facility, 4) it is feasible to provide use of the facility to competitors.[15]

Also, former FCC commissioner, chairman and general counsel Richard Wiley, who currently practices communications law, contends that any update to the 1996 Telecommunications Act should actually be shorter and less restrictive[16]. He stresses that telecommunications “silos” and segments are irrelevant, with cable companies offering telephone service, phone companies offering television, and more blending emerging rapidly. This point seems even more obvious now with this week’s announcement about Apple TV.

However, contrary to the above arguments, the current FCC chairman is opposed to allowing companies the freedom to offer tiered pricing for different uses of the Internet, as expressed in a New York Times article last month. The mood of the FCC seems to have shifted to favor consumer protection, and therefore regulation on service and content providers.

The debate continues. PR professionals should watch and even participate with an informed background on the issue.



[1] Del Bianco, Mark C. (2006) “Voices Past: The Present and Future of VoIP Regulation.” CommLaw Conspectus. (14) 365.

[2] Laxton, William G. Jr. (2006) “The End of Net Neutrality.” Duke Law & Technology Review. 15.

[3] Foley, Paula W. (2006) “Untangling the Third Wire: Broadband Over Power Lines, Open Access, and Net Neutrality.” Journal of High Technology Law. (6). 194.

[4] Laxton.

[5] Foley.

[6] Laxton

[7] Foley.

[8] National Cable and Telecommunication Association v. Brand X Internet Services. 125 S. Ct. 2688 (2005).

[9] AT&T Corp. v. City of Portland. 216 F.3d 871, 880 (9th Cir. 2000).

[10] Foley.

[11] Foley.

[12] Federal Communications Commission. Press Release. “FCC Adopts Policy Statement: New Principles Preserve and Promote the Open and Interconnected Nature of the Internet.” (August 5, 2005).

[13] FCC Press Release.

[14] Telecommunications Act of 1996.

[15] Laxton.

[16] Wiley, Richard E. (2006) “A New Telecom Act: Remarks.” Southern Illinois University Law Journal. (31) 17.

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