FCC Moves to Revive Net Neutrality Rules, Setting Up Another Lengthy Regulatory Battle

Key Points

• In a 3-2 vote, the FCC moved to advance a proposal that would restore so-called "net neutrality" rules and allow the agency to regulate broadband internet access service as a utility.
• The vote marks the start of a lengthy regulatory process, with initial comments due in mid-December and reply comments due in mid-January.

Background on the Proposal

On October 19, 2023, the Federal Communications Commission (“FCC” or “Commission”) voted to begin the process of reinstating a set of rules, repealed in 2017, that classify broadband internet access service as a telecommunications service under Title II of the Communications Act of 1934 (“the Act”). The change in classification will allow the FCC to regulate broadband as a utility, like water or electricity. The proposed rules would empower the Commission to regulate internet service providers’ (“ISP”) treatment of similarly situated customers by preventing ISPs from blocking, throttling or unfairly prioritizing certain content or sites. In the proposal, the Commission specifically opted to forbear from rate regulation and from forcing ISPs to share their network infrastructure with competing providers, a practice known as network unbundling.

The final text of the Notice of Proposed Rulemaking (“NPRM”), released on October 20, largely mirrors, and in some places recites verbatim, the rules put in place under FCC Chairman Tom Wheeler during the Obama administration. Those rules were effective for less than three years, at which point the FCC rescinded them under Trump-era Chairman Ajit Pai in 2017.

A Debate Nearly as Old as the Internet

Last Thursday’s vote was the latest development in the ongoing battle over “net neutrality,” a policy concept birthed decades ago based on the principle that broadband customers should be able to access any website without “interference” by ISPs—imposing regulations on ISPs related to blocking, throttling and paid prioritization. The FCC has long designated providers of certain communications services, such as voice services, as “common carriers” under Title II of the Act. Common carriers are generally subject to FCC price regulation and significant anti-discrimination rules, though the FCC can opt to forbear from rate regulation as it has done here. Since the early 2000s, consumer interest groups and “edge providers” that offer services over the Internet have advocated for regulations prohibiting ISPs from treating internet traffic in a discriminatory manner, and for greater ex ante regulation by the FCC. Notably, social media and streaming services, which rely upon but largely don’t pay for broadband infrastructure, have much to gain from proposals that would prevent ISPs from charging them for the disproportionate use or traffic on the broadband infrastructure caused by the services and their users.

The FCC took initial action on the issue in 2002, when it declared that ISPs provided an integrated bundle of “information services” under Title I of the Act, and those services thus were not subject to FCC common carriage regulation. That decision was affirmed by the Supreme Court, which held that the FCC had the authority to classify ISPs pursuant to its interpretation of the Act. Over the years that followed, the FCC announced various net-neutrality-related guidelines and policy statements and took enforcement actions signaling an appetite for greater oversight of ISPs’ conduct. This culminated in the 2010 “Open Internet Order,” in which then-Chairman Genachowski defined the following principles of net neutrality that the FCC intended to apply to ISPs:

• Transparency: Consumers have a right to know about the performance of their internet and about any network management occurring.
• No blocking: Consumers have the right to send and receive lawful traffic and access content, apps and services of their choosing.
• No unreasonable discrimination: ISPs cannot require payment (paid prioritization) for certain content, apps or services.
• Open internet: The principles of open internet apply to mobile broadband as well to maintain the concept of open internet for all.
• Vigilance: For a successful open internet, there must be vigilance in enforcing new rules and monitoring ongoing developments.

The D.C. Circuit eventually struck down much of the 2010 Open Internet Order, finding that the principles therein, as applied to ISPs, amounted to the FCC treating ISPs as common carriers without having classified them as such. The Court did, however, leave open the possibility that net neutrality rules could be implemented without reclassification. When the FCC returned to the drawing board in 2015, it initially sought to avoid reclassification, but ultimately reclassified ISPs under Title II. The net neutrality conduct rules adopted in 2015 codified the following:

• No blocking: Broadband customers must have access to all internet destinations paid for.
• No throttling: ISPs must not impair or degrade lawful internet traffic based on content, source or destination.
• No paid prioritization: ISPs cannot manage their networks by accepting payment that benefits certain content.
• No unreasonable network interference: ISPs cannot unreasonably disadvantage neither end users' ability to select providers or access content, services and applications, nor edge providers' ability to make available said content to end users.
• Transparency: ISPs must disclose information about its network management practices, performance and commercial terms to allow consumers to make informed choices and service providers to make appropriate internet offerings.

The 2015 reclassification was upheld by the D.C. Circuit, but was then repealed by the FCC under Chairman Pai in 2017. An attempt to reverse the repeal was mounted in Congress and passed the Senate with bipartisan support, but never reached a vote in the House of Representatives. California has since enacted legislation that mirrors the 2015 federal Open Internet Order, which has been challenged in the courts but remains in effect to this day. Other states that have maintained net neutrality-related legislation include Oregon, which prohibits state and local government agencies from doing business with ISPs that engage in network blocking and throttling, and Washington, which passed legislation mandating that ISPs maintain net neutrality principles.

Thursday’s vote was a significant step toward federal reclassification of broadband service and reinstatement of the 2015 conduct rules, a much-anticipated goal of the Biden administration made possible by the recent confirmation of the third Democratic Commissioner, Anna Gomez, which gave Chairwoman Jessica Rosenworcel the first Democratic majority in her time as Chair. Chairwoman Rosenworcel cited internet access challenges experienced by the American public during the coronavirus pandemic as a prime example demonstrating the growing need for broadband oversight to mandate quality service from ISPs.

Critics Weigh In

This latest move by the FCC, over dissent from Republican Commissioners Brendan Carr and Nathan Simington, has already faced significant pushback from opponents. Critics of net neutrality label the proposal as “a solution in search of a problem,” and government overreach that stifles innovation and creates challenges for an industry that is thriving without additional regulation. In Thursday’s meeting, Commissioner Carr emphasized the negative impact he believes additional regulation will have, arguing that it will unnecessarily burden service providers. He implied that the proposed rules would not survive legal challenges given current treatment of administrative law issues in federal court, particularly under the “major questions” doctrine endorsed by the Supreme Court last year. He also noted that state preemption language contained in the final rule is weaker than in the pre-meeting draft, undercutting proponents’ argument that the absence of a national regulatory scheme underpins the need for the rule.

In Congress, there is vocal opposition from Republicans, including the House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-WA) and Communications and Technology Subcommittee Chair Bob Latta (R-OH), who argue that there is no need to regulate an industry that is functioning productively.

ISPs and the groups that represent them, including USTelecom, NCTA, the Wireless Internet Service Providers Association and ACA Connects, expressed frustration and disappointment at the reinvigoration of the rules. Many detractors have argued that few, if any, of the dire consequences predicted when net neutrality rules were repealed have come to fruition. AT&T CEO John Stankey publicly wondered why the FCC would expend resources to “chase a problem that doesn’t exist.” Trade groups are already lobbying Congress to take action to stop the FCC, making a range of arguments including claims that the FCC’s proposal constitutes unnecessary regulation in a successful industry and questioning the scope of the FCC’s authority, particularly with respect to national security concerns. On this front, the FCC argues that reclassifying broadband as a telecommunications service will support national security by enabling the FCC to more comprehensively regulate and maintain a secure national network and that the current classification of broadband as an information service creates a national security loophole that undermines the agency’s ability to identify and act to address potential threats in broadband networks. Critics, including Commissioners Carr and Simington, argue that the FCC has not pointed to a significant gap in national security practices that these proposed rules would solve.

Litigation is certainly likely if and when the rule is finalized, but the legal battle faced by the Obama-era net neutrality effort may provide a clearer path forward for the current proposal. Given that the prior reclassification was upheld by the D.C. Circuit, the FCC has legal precedent to support its current effort. That said, and as noted by Commissioner Carr, the current U.S. Supreme Court is generally skeptical of expansions of agency power, which may pose an issue for the FCC in the event that litigations reaches that level.

Takeaway

Consistent with prior attempts to adopt net neutrality regulation, which have preoccupied Washington, D.C. for decades, we are in for a lengthy regulatory battle. The NPRM will soon be published in the Federal Register, and it states that initial comments will be due December 14, 2023, with reply comments due by January 17, 2024.