Net Neutrality In The United States: An Opinion

Disclaimer

I am not a lawyer, so what follows is my layman’s analysis of various source material linked and available for your own perusal.

All the opinions here are entirely my own and are not the views of my employer, Google.

Title II Classification of ISPs in 2017

This is currently a large talking point in the tech community, and unfortunately occasionally has emotions running high. I originally started drafting this post on November 28th 2017 to outline my position using primary documents, and since then there’s been some interesting positions that I’ve read that have their own take. First, let’s go through a whirlwind of basic background info. Then let’s go through several opinions I’ve seen floating about. Next, I’ll examine some primary documents and come to the conclusion that a reversion away from Title II regulation will significantly cripple the FCC’s ability to enforce net neutrality principles unlike any period of internet regulation seen before.

The whirlwind background: Internet Service Providers (ISPs) at the beginning of the year 2015 used to be regulated extremely lightly under Title I of the Communications Act of 1934. That changed when the FCC reclassified ISPs as common carriers under Title II of the same act, which contains much more strict regulations. These regulations were originally intended to protect consumers from potential predatory industry practices when drafted in 1934. These predatory industry practices are rooted in economic natural monopolies, but there is still an unsettled debate amongst economists about the exact properties of any natural monopolies that exist today in the American broadband internet market.

From this, I’ve seen four opinions:

The Anti-Regulatory Opinion: This is a stance that values free-market capitalism and, at its core, determined that no or few natural monopolies exist in the broadband internet market. This kind of opinion is held by FCC Chairman Ajit Pai: he claims that the internet is overly-regulated and causing real business harm. He also asserts that in the past, the internet was doing just fine without the current regulations. I’ll revisit the specific history in great depth later, just know his position is made clear in The Future Of Internet Freedom when he disfavors the decision to reclassify ISPs as common carriers under Title II: “For almost two decades, the FCC respected that [light-touch] policy. It adopted a light-touch regulatory framework, one explicitly approved by the U.S. Supreme Court, which enabled the Internet to grow and evolve beyond almost anyoneís expectations. […] Nothing about the Internet was broken in 2015. Nothing about the law had changed. […] No, it was all about politics.” Holders of this opinion simply want the Title II classification reversed.

The Pro-Net Neutrality Opinion: This is a stance that draws strength from the principle that an internet service provider should not discriminate against the specific internet traffic. People in this camp tend to believe that some degree of natural monopolies exist in the broadband internet market, which puts consumers at risk of certain kinds of predatory pricing schemes without regulation. Proponents may even go so far as to claim that internet access is a utility much like water, sewage, gas, and electricity. Holders of this opinion simply want the Title II classification upheld.

The Pro-Net Neutrality Anti-Title-II Opinion: This is a rare stance I’ve seen from Stratechery and another economics professor I don’t have a link immediately on hand for. Basically, it is a deep dive on the economics of the industry while ignoring the legal landscape that has changed significantly due to court cases.

The Net-Neutrality-Is-A-Tool-Of-Oppression-Against-Conservatives Opinion: This is the stance held by the current sitting President of the United States. I cannot argue against this point because fundamentally the burden of proof lies in the opinion holder. However, I do have some reflective metallic hats I would like to sell. Since they’re Made in Switzerland they’re guaranteed to be neutral and expensive. Snark aside, in my following research I have not turned up credible primary source documents justifying this fear so to me it remains firmly in the minds of those with fantastic imaginative capabilities.

With these opinions as background, let’s approach the legal and regulatory history of this issue. There are many other great discussions of the economics of this issue even if I disagree with their conclusion, such as Stratechery.

The FCC And Acts

When the original Communications Act of 1934 was written, Title I governed the establishment of the Federal Communications Commission (FCC): these statutes govern what the FCC may and may not regulate. In Title II it dictated the definition of “common carriers” and laws governing such entities. The general idea is pretty basic: anyone engaged in interstate transmission of information by wire or radio should not be the deciding gatekeepers of what information the users of the network could consume. For cultural norms, this aligned pretty well with the tradition of the First Amendment and allowing people to have a public platform of speech. Also, the Act established the commission to be of five individuals, all appointed by President and Senate-confirmed, with one party having no more than a simple majority of seats. This is why Obama, a Democratic President, appointed Republican-leaning Ajit Pai.

It was not until 1996, 62 years later, that the Telecommunications Act of 1996 was passed to amend the original Communications Act of 1934. For the first time, it included provisions surrounding the internet but solely within the significant Title II changes. The Telecommunications Act of 1996 left Title I of the original Communications Act untouched. Note that the FCC did gain Section 706 which simply states: “The Commission […] shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans […] by utilizing, in a manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.”

That’s all the legal changes to the FCC’s structure and operation in the past 83 years! Notice how all the internet related changes were kept within Title II, with the important caveat for Section 706. This will be important as we analyze the classification and legal cases over the next 21 years.

Also, here is a summary that the NTIA made in 1998 as an immediate hindsight to the Telecommunications Act of 1996. It’s neat but pretty light on substance.

1998 - 2002: Title II Regulation Era

Since I have already jumped the gun, let me dive into an analysis of the decision in the court case Verizon Communications Inc. v. FCC (2014). Pages seven to twelve describe a nice summary of the internet’s regulatory history by the FCC, and the crux of the problem as I see it. I continue below, paraphrasing and summarizing pages from this document while also adding other sources I’ve found.

In 1980, the FCC adopted the Computer II regime, which defined “basic” services – phone calls over telephone lines, for example – as being regulated under Title II. The “enhanced” services – internet via modems using telephone lines, for example – as not being subject to Title II. The rules at the time makes it seem like AT&T was forced to allow other ISPs to use their “basic service” telephone lines on the common-carrier basis, so others could deliver “enhanced service” internet content. Thus, America Online (AOL) was able to leverage a consumer’s AT&T phone line to provide internet. The thinking was that a “basic service” is actual physical transmission of information from point A to point B. That’s it; the pipes should not discriminate nor filter. On the other side, the “enhanced service” is protocols, data, and content sent over the wires: web pages, emails, IRC chats.

This is the state of the world when the Telecommunications Act is passed. The “basic services” are rebranded as “telecommunications carriers”, while “enhanced services” become “information-service providers”. It still maintains Title II regulation parity: telecoms are subject to it, info-services are not. Pipes are dumb and fair. Content can be anything that is legally reasonable.

Then, an interesting thing happened: The FCC classified broadband internet over telephone lines (DSL) as “telecommunications carriers” and being subject to Title II common carrier regulations in 1998. Everyone getting broadband internet was not only getting faster speeds as well as the ability to make phone calls and use the internet at the same time, they were also getting access to the full, unbiased, net-neutral-by-government-regulation Internet. This means that everyone using the internet during this period of time, DSL or not, was accessing it via net-neutrality common-carrier regulation. Curiously, the well-known phenomena that occurred during this time was the dot-com bubble. However, I cannot reasonably make the claim that there was any causation. As an aside: I imagine the crazy capital investments would have looked very different if paid prioritization or bundles-of-websites were in effect.

Back to reality, four years later in 2002 the FCC reversed their decision about broadband internet in a release. They only had to provide a “single integrated information-service” which are the magic legal words that mean no more Title II common carrier classification. This was challenged, and it eventually went to the Supreme Court in National Cable & Telecommunications Assín v. BrandX Internet Services in 2005. And the Supreme Court upheld it. Checkmate! Game over, time to stop reading!

Actually, no, not checkmate. All that the Supreme Court decided was that the FCC’s interpretation at that time seemed reasonable. The court did not explicitly say the FCC made the correct decision, which is a significant omission to make if the goal is to permanently pick one or the other. This did not stop the controversy surrounding the reclassification. In fact, whatever the complex legal landscape looked like before, it was now far more convoluted according to Amy L. Signaigo’s National Cable & Telecommunications Association v. Brand X Internet Services: Resolving Irregularities In Regulation? paper in the Northwestern Journal of Technology and Intellectual Property. Some sample issues to ponder: Does this dichotomy of “telecom carrier” vs “info-service provider” even make sense? Do the classifications into each bucket make sense? Is a user who uploads a cat video to YouTube an “info-service provider”?

2002 - 2015: The Struggle For Light Touch Regulation

This mess over common carrier classification was still not done. The FCC started indicating that despite “information-service providers” not being regulated under common-carrier rules, they should still be regulated somehow to protect the interests of consumers. In 2005, they declared “To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to access the lawful Internet content of their choice” in a policy statement titled Appropriate Framework for Broadband Access to the Internet over Wireline Facilities. These kinds of policy documents are political posturing as they are indicative of the organization’s priorities without being legally binding. This can be clearly seen by the tension within this single sentence: “encouraging broadband deployment” versus the “open and interconnected nature of the public Internet”. This tension will be revisited later.

The FCC overtly signaled this desire when they wanted to go after Comcast in 2008 because of their artificial throttling of peer-to-peer connections. They throttled the BitTorrent protocol which is a very useful, clever, and neatly-engineered protocol that helps tiny servers, similar to one giving you this webpage, propagate large files en masse widely. It’s very effective at taking an idea and multiplying it exponentially without requiring the writer to have to buy a beefy server and fat bandwidth. Anyway, when the FCC went after Comcast they tried to justify their regulation of this non-Title II entity by taking the areas they were allowed to regulate, which is their jurisdiction, and use legal tactics such as Section 706 to bring their actions under “ancillary jurisdiction”. Ultimately, the courts ruled against the FCC and did not buy the “ancillary jurisdiction” argument. This kind of limitation is also a good thing given a functioning Congress; the regulatory body should be able to request Congress reevaluate their limitations on power, and Congress can grant it or not. But it is also on the citizens to push for it as well.

During this Comcast lawsuit, the FCC brewed up and eventually published the Open Internet Order in 2010. It has three core rules: Be transparent in network operations, do not block lawful content, do not unreasonably discriminate against lawful internet traffic. This was then legally challenged as being a regulatory overreach by Verizon.

We now arrive at the Verizon Communications Inc. v. FCC (2014) court case we have been following along for this history lesson. Remember, at this time the internet companies were not classified as Title II common carriers, but the FCC still wanted to regulate them a little differently than just the average “information-service providers”. Speaking of which, examples of “information-service providers” are this website, Google, Facebook, Amazon, and most other webpages visited on the internet. But we will pick that back up later.

Verizon did not like the Open Internet Order, and the courts decided Verizon’s legal case was the correct one. They found that the legal basis for the order was the same that the FCC had attempted to use to get Comcast to stop throttling peer-to-peer traffic six years prior. And since it didn’t work the first time, it didn’t work this time around either. However, a key detail was written into the ruling on page 4: The FCC could have its net neutrality regulation if broadband ISPs were governed by Title II common carrier regulations. This also means there is no returning back to this legal framework for regulation – the courts have already shot it down, so another Act by Congress would be needed to give FCC its “light touch” powers under Title I. This is significant because it solidly refutes the core point of Ajit Pai’s The Future Of Internet Freedom which is premised on being able to return to this era of regulation.

All of this, to me as an outsider, seems like the FCC working with companies like Verizon to try to keep them happy and out of Title II classification, which they would have been regulated as in the period of 1998 to the early 2000’s, but also add just enough regulation to protect consumers and net neutrality. By their policies and some actions, it seems they were always interested in keeping broadband ISPs honest. However, at this point it was clear that such companies were not satisfied with being treated differently than other Title I companies like Google, Facebook, and Amazon, and would keep suing the FCC. Since the FCC’s legal powers did not confer them the ability to do the job how they wanted to under Title I, they had to turn to the tools they did have. Thus ended the era of light-touch regulations.

The Net Neutrality Violations

During this period of Title I regulation from 2002 - 2015, I looked at this biased summary of internet content given to customers being artificially restricted by ISPs, violating principles of net neutrality. As a counterpoint, here’s a fact check of it. Both are overall pretty bad at sourcing primary documentation, but occasionally the fact check has some good references. However, the fact check snarkily diminishes everything by mentioning the overall low impact to greater society which severely weakens its argument. For a country staunchly in defense of edge cases for principles enshrined in law, like the First or Second Amendments, it doesn’t make sense to suddenly abandon principle here. It especially doesn’t make sense when evaluating net neutrality as a principle. This quickly goes down a philosophical road, and I want to bring us back to the task at hand.

I wanted to sift deeper and find more primary documentation, but it is difficult, so I just pulled what I could find. I am not ascribing value and saying all of these instances are bad, but want to highlight that these actions have and do occasionally happen. This gives credence that during the “light touch” regulatory framework there actually were net neutrality issues. The fact that they do happen also directly refutes Ajit Pai’s The Future Of Internet Freedom when he claims “Did these fast lanes and slow lanes exist? No. The truth of the matter is that we decided to abandon successful policies solely because of hypothetical harms and hysterical prophecies of doom”. For small numbers of consumers, typically the rural and poor, slow lanes did exist as per primary documents:

2005: Madison River - From my home state of North Carolina, an ISP blocked Voiced-over-IP (VoIP) Vonage. They paid a fine instead of legally challenging the FCC.

2007: Comcast - Comcast throttled Bittorrent peer-to-peer clients and the FCC attempted to enforce net neutrality, but lost the legal case.

2011 - 2013: AT&T, Sprint and Verizon - The Google Wallet app was blocked, entirely. This is because the ISPs had their own competing app, Isis, which quickly turned into a branding problem. The FCC filed a formal complaint, and the one against Verizon contains a lot of other problems.

2012: Verizon - This is contained in the complaint above. Verizon received airwave licenses from the FCC with conditions, and Verizon violated those conditions by banning certain tethering apps that were available from the Android store so they could charge customers $20 as a tethering fee.

2012: AT&T - AT&T denied FaceTime from being used by its users with “unlimited” data plans and only allowed users that were on shared data plans to use it.

2013: Verizon - I have to disagree with the fact-checker’s analysis on this one. The way I interpret it, at 29:00 in this video, Verizon’s legal representative Helgi Walker discusses the possibility of having Verizon charge other peers or content providers for access to its market. I get the sense she says Verizon wants to be like ESPN, where ESPN currently charges Verizon for providing ESPN content to Verizon customers, except now it would be Verizon to other ISPs or possibly content providers like ESPN.

The Legal Regulation

Since Verizon had destroyed the FCC’s legal argument for lightly regulating the industry as an “information service provider” in Verizon Communications Inc. v. FCC (2014), the FCC turned to regulating exactly with the powers given to it by Congress. Remember the tension of “encouraging broadband deployment” and preserving the “open and interconnected nature of the public Internet” from way before? This is when the FCC decided decisively on the latter. In a parallel to the 1998 classification of DSL as Title II, they reclassified broadband ISPs as being common carriers governed by Title II on February 26, 2015. Here is the daily release. It was a natural consequence of their policy posturing and trying to work with the industry to lightly regulate without the Title II classification that was originally governing the internet of the late 90’s and early 2000’s. Verizon and the rest of the industry suddenly found themselves at the polar opposite of what they were fighting for. Instead of being “information-service providers” without any additional regulations, they were subjected to the entirety of “telecommunications carriers” regulations.

The rest, as they say, is history. A brief look at the very complex history shows a regulatory body that, to me, worked for a decade to try to use an 83 year old law’s powers to lightly regulate the industry. Recall that a reversion to Title I also means “light-touch” regulation legally cannot happen due to the FCC lawsuit losses leading up to the 2015 reclassification decision. This makes the industry seem greedy since they simply want Title II reversed with a Commission in charge that can’t enforce net neutrality as a matter of policy, as was attempted 2002-2015. And remember, previous to 2002, the internet was governed by Title II! In fact, the only update to the original Communications Act expected the internet to be regulated under Title II. While I cannot predict the future, I can tell the “it just worked before” is a gross dismissal of the problem, especially considering we have seen ISPs regulate user traffic in the past even if it isn’t a huge fraction of users. Furthermore using regulation to protect against potential predatory industry practices has been fundamental to the United States of America: Teddy Roosevelt and the National Park Service is a lazy and easy example. Given the concrete primary source evidence I’ve outlined above documenting net neutrality violations, I am immediately skeptical of people such as Ajit Pai who try to cast these as mere hypotheticals.

Also, remember those “information service providers” like my little website here, or giants like Google, Amazon, and Facebook? The reason the ISPs have occasionally brought them into the mix is for two reasons:

One: Verizon and other companies want to be perceived as “information service providers” with no additional light-touch regulations like Google, Amazon, Facebook, and this little website. It is simply because there is money to be made if they can get those companies to pay for their usage of content; the physical equivalent would be if people had to pay to send and receive snail mail. They have the ability to hold other large companies hostage, especially if they make their own competing services like AT&TSearch, VMail, and ComcastPrime.

Two: Verizon and other companies wouldn’t mind it if my website, Google, Amazon, and Facebook were “dragged down to their level” and subjected to common carrier regulation. It would theoretically improve their market share of AT&TSearch, VMail, and ComcastPrime.

So while AT&TSearch, VMail, and ComcastPrime, for example, would be innovations, I don’t see any settled debates about whether they would be good ones. To be fair, this is also a little bit mean of me; there are other ways ISPs can innovate besides creating direct competitors. But these would be things like: HBO-style bundled website access, Verizon telling me I need to pay to let its customers read this article, or charging specifically for certain purposes and not others (web browsing, hi-definition video streaming, gaming, etc).

The Future

No matter what the future holds, I’m on a personal mission to avoid any partisan discussions around this issue. Those go unproductively for all involved. Instead, I plan to continue to dabble in exploring a couple extra questions here and there. But overall, I firmly believe a reversion away from Title II regulation will significantly cripple the FCC’s ability to enforce net neutrality principles unlike any period of internet regulation seen before. If I had it my way, Congress would revisit the Communications Act of 1934 while still regulating ISPs under Title II as a temporary measure until a better solution is found than the two extremes of Titles I and II.

Published: Dec 06, 2017 08:02:10 EST
By: Cory Slep