Federal Communications Commission Proposes "Network Neutrality" Rules Intended To Preserve A Free And Open Internet

Tuesday, January 5, 2010 - 01:00

John J. Heitmann

Kelley Drye & Warren LLP

"Net neutrality" has been the subject of heated debate for years here in Washington. The term "net neutrality" means different things to different people - and even to the same people at different times. This should surprise no one familiar with the ways of the nation's capital.

At its core, the term stands for the concept that communications networks, and the Internet in particular, should be operated in a manner neutral or indifferent to the traffic transported over, the content and applications accessed through, and the devices connected to them. With respect to today's high-speed "broadband" networks, this means that all packets, content, applications, and devices are treated equally by those who operate the networks.

This, however, is not what really happens. Never has been. And it likely happens less now than ever before. That is because network operators must use "network management" practices to ensure that limited resources are used in a manner that meets customer expectations. With the advent of voice over Internet protocol or VoIP and live video, those packets must be prioritized to ensure that they are not delayed and do not drop out along the way. Indeed, many services offered today by communications service providers, including "cloud computing" services where software and data bases are hosted remotely, require prioritization to ensure quality-of-service (QoS). These services are often referred to as "managed services."

The explosion of Internet traffic and the increasing popularity of VoIP, video and other QoS-dependent services has created challenges for network operators, as there are limitations to the bandwidth that can be handled by the network connections to homes and businesses, and the sometimes shared network resources in neighborhoods and business districts. About five years ago, the Federal Communications Commission (FCC) adopted "Internet Principles" to provide guidance to the network operators striving to meet these challenges.

These challenges generally were met in a relatively orderly and responsible way, but for a few notable hiccups. The most notable of these involved the nation's largest cable company, Comcast. In a nutshell, Comcast isolated certain file-sharing applications used for downloading movies and the like over the Internet as a particular problem and began "throttling" them - or deliberately interfering with or preventing the desired data transfer. This annoyed customers and enough of them complained to get the FCC's attention. Noting that Comcast declined to throttle its own competing video-on-demand transfers and neglected to accurately disclose to its customers what it was doing, the FCC determined that Comcast, among other things, violated the Internet Principles and failed to engage in reasonable network management practices.

With the appeal of that decision still pending, proponents of net neutrality regulation kept pounding for legislation and regulation, some arguing that the very fabric of our democracy was at risk if the government did not take more prescriptive action to preserve the "free and open" Internet. Others debated the need for regulation and its potential impact - positive or negative - on investment and innovation in the so-called broadband ecosystem.

The "new FCC," controlled by a chairman selected by the President and a majority of commissioners from the same party, has decided to take a closer look. On October 22, 2009, the FCC released a notice of proposed rulemaking (NPRM), and requested comments on six proposed network neutrality rules and a number of topics relating to the challenge of preserving a "free and open" Internet.

Specifically, the FCC proposes to codify the four Internet Principles and adopt two new principles: nondiscrimination and transparency. In its proposed rules, the FCC shifts from its prior pronouncement of consumers' rights to a potentially more enforceable set of broadband Internet access provider obligations. Enforcement, the Commission says, would be handled on a case-by-case basis.

Under the Commission's proposed rules, subject to reasonable network management and the needs of law enforcement, public safety and homeland security, a provider of broadband Internet access service may not:

(1) prevent any of its users from sending or receiving the lawful content of the user's choice;

(2) prevent any of its users from running the lawful applications or using the lawful services of the user's choice;

(3) prevent any of its users from connecting to and using on its network the user's choice of lawful devices that do not harm the network;

(4) deprive any of its users of the user's entitlement to competition among network providers, application providers, service providers, and content providers.

The draft rules include two new principles which, subject to the same general caveats, state that a provider of broadband Internet access service must:

(5) treat lawful content, applications, and services in a nondiscriminatory manner; and

(6) disclose such information concerning network management and other practices as is reasonably required for users and content, application, and service providers to enjoy the protections specified in the NPRM.

As noted earlier, the lawful content, lawful applications, lawful devices and competition proposals are not new. The last of these is perhaps the most interesting (worrisome or exciting depending on your point of view), and it ties in closely to each of the other three. It is against this backdrop that issues such as whether you should be able to use "Google Voice" over your AT&T Apple iPhone are likely to be addressed. That said, the concept of "open" devices and networks, propelled in no small part by the iPhone itself, has significant momentum.

It is worth noting that the FCC proposes to expand application of these principles and all of its new proposed rules to wireless service providers and other technology platforms (including satellite) for the first time. As you can imagine, folks in those segments of the industry are at the very least "concerned" about the prospect.

Of the two new principles, the nondiscrimination principle is sure to engender the most debate. The transparency principle, which is less controversial, would require providers of broadband Internet access service to make available relevant information regarding network management practices to (a) the consumers who purchase their service; (b) content, application, and service providers, who must ensure that their offerings function on the Internet; and (c) the FCC. The principle and the public statements of policy that are intended to flow from it are envisioned as something that is necessary to enable consumers to make informed choices about their broadband Internet access service providers (assuming they have such a choice to make in the first place).

The nondiscrimination rule, as indicated earlier, is much more controversial. The proposed rule would prohibit broadband Internet access service providers from favoring or disfavoring lawful content, applications, or services accessed by their subscribers, but would allow broadband providers to engage in "reasonable network management." As proposed, "nondiscriminatory" means that a broadband Internet access service provider may not charge a content, application, or service provider for enhanced prioritized access to the broadband provider's subscribers. However, the FCC also proposes that this rule would not prevent a broadband Internet access service provider from charging subscribers different prices for different services.

In support of its proposed rule, the Commission states that it "believe[s] that the proposed nondiscrimination rule, subject to reasonable network management and understood in the context of our proposal for a separate category of "managed" or "specialized" services (described below), may offer an appropriately light and flexible policy to preserve the open Internet." This is the whole ball of wax.

As noted earlier, in order to make VoIP, video and other QoS-based services work, prioritization, which is commonly understood to be a form of discrimination, must take place in the network. As the FCC proceeding unfurls (the comment cycle opens on January 14, 2010 and closes on March 5, 2010 - and a lengthy period during which "ex parte" presentations are made typically follows), service providers surely will push for clarification that such prioritization falls within the framework of reasonable network management (or is otherwise reasonable or permissible) or that the services themselves are "managed" or "specialized."

The NPRM requests comments on a proposed definition for reasonable network management. Notably, the Commission states that it recognizes that there are situations that justify departure from the open Internet principles which may include: (a) when the network becomes so congested that individuals' access is noticeably affected; and (b) when there is harmful or unwanted traffic (e.g., spam or malware) or unlawful traffic (e.g., downloading that results in copyright infringement). In this context, the Commission proposes that access providers may take reasonable steps to mitigate or reduce the adverse effects of congestion or to address quality-of-service concerns. However, the Commission noted that it does not consider the singling out of any particular content for blocking or de-prioritization to be reasonable. The Commission also includes a "catch-all" proposal that would allow access providers to take reasonable steps to maintain proper functioning of their networks.

Managed or specialized services are an as yet undefined set of services which the Commission proposes to keep completely or partially outside the scope of the proposed net neutrality rules. In this regard, the Commission requests comments on how it should define the category of managed or specialized services as well as on the characteristics that would distinguish such services from broadband Internet access services otherwise subject to the net neutrality rules. The Commission also suggests a few services that would be placed into the category of managed services, such as specialized telemedicine, smart grid, eLearning, IP-video, voice, and enterprise services. "Enterprise" is a term that generally means other than consumer in FCC parlance.

The NPRM acknowledges the consumer benefits of managed services and notes that they may lead to increased broadband deployment. The Commission asks for comments on whether and, if so, how the Commission should address managed or specialized IP-based services in order to facilitate continued innovation and investment in that area while "safeguarding the open Internet." Here is where net neutrality proponents are likely to press hardest with the message that the power of the open Internet is largely dependent on its being a common medium for use by everybody and with warnings about exceptions swallowing the rules.

For its part, the FCC states that it recognizes that in answering the questions it poses in the NPRM, it must preserve and protect broadband providers' (a) flexibility to manage their networks in a way that benefits consumers and furthers the safety, security, and accessibility of the Internet, and (b) ability to experiment with technologies and business models necessary to drive innovation, the development of valuable new services, and the investment in and deployment of open, robust, and profitable broadband networks across the nation.

That's a tall order, and it will be worth watching this proceeding to see how it all turns out.

John J. Heitmann is a Partner in the firm's Washington, DC office and a founding member of the Telecommunications practice group. He focuses his practice on representing service providers and users in regulatory, appellate, litigation and transactional matters involving a broad range of communications law issues.

Please email the author at jheitmann@kelleydrye with questions about this article.