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Net Neutrality: What Is Old Is New Again

On July 22, after considerable political and administrative machinations, the FCC’s open Internet Order will take effect, bringing us back to the net neutrality regulatory regime that was in effect in 2015. At a very high level, net neutrality or open Internet is a regulatory question of to what degree the FCC should regulate the ability of Internet service providers to act as content neutral common carriers that must transport Internet traffic in a nondiscriminatory fashion, regardless of its origin or destination.

Enterprise customers and consumer groups have argued that Internet service providers should be obligated to transport packets of information without prioritizing certain packets based on their origin or destination. Or to put it more bluntly, Internet service providers should not be permitted to demand payment from businesses that want to communicate with their customers in order to allow those communications to go through a timely fashion. The fact that customers are already paying a not insignificant monthly fee for their home or mobile Internet service should be sufficient to ensure that they can interact with all websites on a nondiscriminatory basis.

Internet service providers, on the other hand, have argued that this regulation is burdensome and unnecessary and ultimately depresses investment in the Internet network. Such providers have also argued that marketplace forces will ensure that Internet service providers do not engage in such nefarious behavior.

The central legal issue is the almost metaphysical question of whether Internet access is a telecommunications service or an information service. Telecommunications is a transmission service with just enough information processing to ensure proper routing, but no more. Information service, on the other hand, is a transmission service with additional permission processing to do things other than properly route the call. As a matter of law, telecommunications services are heavily regulated under Title II of the Communications Act, while information services are lightly regulated, if at all, under Title I of the Communications Act.

When it has declared Internet access to be an information service the FCC has relied on the use of domain name servers and caching as the information processing power that transformed Internet access into an information service. On the other hand, when it has declared Internet access to be a telecommunications service, the Commission determined that DNS and caching were similar enough to the call routing information included in a voice call to make Internet access no more than a transmission service.

This legal and policy debate is not new. In 2010 the FCC adopted the 2010 Open Internet Order, which was largely vacated by the D.C. Circuit in Verizon v. FCC. The Commission responded to the Verizon decision by adopting the 2015 Open Internet Order, which, for the first time, classified Internet access as a Title II telecommunications service and imposed no blocking, no unreasonable discrimination, and transparency requirements. The D.C. Circuit upheld this open Internet order in 2016.

But the days of the open Internet were short, because in 2017, under a new Chair, the Commission adopted the somewhat melodramatically entitled Restoring Internet Freedom Order, which classified Internet access as an information service and generally lifted all Title II and open Internet rules. The D.C. Circuit largely upheld this reclassification in its 2019 Mozilla v. FCC opinion. Finally, in 2020, along with a new President there came a new FCC Chair, who led the Commission to adopt the 2024 Open Internet Order that again classifies Internet access as a Title II telecommunications service, bringing us back to 2015.

And this new Open Internet Order does quite a bit. First, the order classifies mobile Internet access as a commercial mobile radio service (CMRS), which is subject to Title II regulation. This is significant because there are many more entities providing mobile Internet access than there were in 2015, including several automobile manufacturers that offer Wi-Fi hotspots to their vehicle owners as part of a subscription service.

Second, the order subjects fixed and mobile Internet access providers to a dizzying array of Title II requirements. But, significantly, the Commission will not require providers of Internet access service to contribute to any federal funds, including the universal service fund. Many view this as a missed opportunity to rationalize the universal service fund contribution mechanism because it has been estimated that imposing universal fees on Internet access service would reduce the contribution factor from its current level of approximately 35% to 5%.

In addition to these Title II requirements, the FCC imposed several open Internet requirements, including: (1) no blocking of lawful content; (2) no throttling of lawful content (but Internet access providers may offer a data plan in which a subscriber receives a set amount of data at one speed tier and any remaining data at a lower tier); (3) no paid prioritization; and (4) required disclosure of network management practices, performance, and commercial terms.

In the wireless world, the FCC chose not to regulate network slicing or machine to machine mobile data services as mobile Internet access services, but the Commission did reserve the right to do so in the future if the services become functionally equivalent to mass-market Internet access services. This is a significant win for 5G providers because network slicing is an important feature of this technology.

Another interesting aspect of the open Internet order is that it did not discuss the regulatory status of direct Internet access, which some carriers treat as a telecommunications service, others treat as an information service, and still others treat as our telecommunications service and part information service.

Finally, as you might have heard, 2024 is a presidential election year, and the new administration will appoint an FCC chair who will either leave the open Internet order largely undisturbed, or once again and reclassify Internet access as an unregulated information service. So, while the open Internet is not ranked high among voter concerns, it is any effect on the 2024 ballot!

Update: On July 12, the Sixth Circuit stayed the effective date of the open Internet order until August 5, pending briefing by the parties on the effect of the Supreme Court's recent decision in Loper Bright Enterprises (overruling Chevron deference to agency actions). We will know whether the stay is permanent sometime after the July 19 deadline for Sixth Circuit briefing and will update this article accordingly.

By Steve Rosen, Partner at Levine, Blaszak, Block & Boothby, LLP

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