FCC Votes to Adopt Order Reinstating Net Neutrality Rules

Key Points:

• On Thursday, April 25, the FCC voted 3–2 to reinstate the Commission’s net neutrality framework by reclassifying broadband Internet access service as a Telecommunications Service, which is regulated under Title II of the Communications Act.
• The Commission argued that this reclassification would provide it with “additional authority to safeguard national security, advance public safety, protect consumers, facilitate broadband deployment, and support broadband access.”
• In connection with the reclassification, the Commission will forbear from applying many aspects of traditional utility regulation to BIAS providers and will impose new rules regarding BIAS providers’ treatment of traffic.
• The new rules will take effect 60 days after the FCC’s Order is published in the Federal Register.

On Thursday, April 25, the Federal Communications Commission (FCC or Commission) voted to approve a Declaratory Ruling, Order, Report and Order, and Order on Reconsideration (Order) reinstating a set of regulations on broadband Internet access service (BIAS) commonly referred to as “net neutrality.” The three Democratic Commissioners voted in favor of the Order, with the two Republicans dissenting. The adoption of the Order and the release of the final text on May 7 mark the latest development in a long-standing debate at the FCC over how BIAS should be regulated, signaling a departure from the 2017 Restoring Internet Freedom Order (RIF Order) adopted under former FCC Chairman Ajit Pai¹  and promoting FCC Chairwoman Jessica Rosenworcel’s long-standing belief that “every consumer deserves internet access that is fast, open, and fair.”

Reclassification of BIAS as a Title II Telecommunications Service

Among other things, the 2017 RIF Order reversed the earlier 2015 Open Internet Order²  by reclassifying BIAS as an “Information Service,” which is regulated under Title I of the Communications Act of 1934, as amended (the Communications Act or Act), instead of a “Telecommunications Service,” which is regulated under Title II of the Act. This distinction is a critical one, as Title II Telecommunications Services are subject to much greater regulatory oversight by the FCC than Information Services. The current order posits that the 2017 “temporary deviation . . . left consumers exposed to behavior that can hinder their ability to access—and the Commission without recourse to protect and promote—an open Internet.”

In the Order, the Commission argues that reclassification of BIAS as a Title II Telecommunications Service is necessary to protect the public by giving the FCC broader regulatory power over providers and their networks, including the authority to address cybersecurity risks and network vulnerabilities, monitor broadband network resiliency, issue stronger regulations regarding consumer privacy and ensure accessibility for people with disabilities. The Commission posits that this reclassification will also have other benefits, including (1) giving BIAS providers the same statutory protections for pole attachments that telecommunications and cable providers currently enjoy; (2) prohibiting BIAS providers that serve multitenant environments from engaging in unfair, unreasonable and anticompetitive practices, such as exclusive contracts and (3) making BIAS providers eligible to receive Universal Service funding.

The reclassification will apply to “mass market, retail data transmission and capabilities that are incidental to and enable its operation,” including facilities-based and resale service, as well as mobile BIAS that is “marketed and sold on a standardized basis to residential customers, small businesses, and other end-user customers, such as schools and libraries.” Wholesale services and special access services tailored to meet the needs of a specific enterprise will be excluded from the reclassification. The Commission indicates that this Order will create a “mechanism” for it to prevent BIAS providers from gatekeeping in a way that might “compromise the open Internet.”

Forbearance

In conjunction with the reclassification, the Commission will forbear from applying to BIAS many of the utility-style regulations generally applicable to telecommunications services and will limit its regulation of BIAS to those rules deemed necessary to protect consumers, promote national security and preserve the broadband ecosystem. Accordingly, certain rules will not apply to BIAS providers, such as rate regulation, tariffing, unbundling of last-mile facilities, cost accounting, requirements to obtain a Certificate of Public Convenience and Necessity, Universal Service Fund contribution obligations, requirements for providers to charge similar rates in rural and urban areas and the prohibition on cross-subsidization. On the other hand, BIAS providers will be subject to other rules, including those designed to protect consumers and promote competition, the Commission’s enforcement rules, information collection requirements, consumer privacy rules, provisions designed to provide BIAS providers with nondiscriminatory access to physical infrastructure such as poles and conduits and regulations ensuring access for individuals with disabilities.

Regulation of Providers’ Treatment of Traffic

Finally, the Order also includes rules governing the conduct of BIAS providers, noting that because competition for BIAS is limited in many areas to only one or two providers, there are not adequate market incentives for providers to act in a manner that puts consumer interests first. Accordingly, the Commission has prescribed three bright-line rules prohibiting BIAS providers from (1) blocking lawful content, applications, services and nonharmful devices; (2) throttling lawful content, applications, services and nonharmful devices or (3) engaging in paid or affiliate prioritization. The ban on blocking includes carveouts for illegal content that BIAS providers may wish not to transmit, including illegal abuse or copyrighted material. The Order also expressly notes that the ban on throttling will not prohibit practices that provide consumers the choice to change data speeds, such as a BIAS plan in which a set amount of data is transmitted at one speed tier and any remaining data is provided at a lower tier.

In addition to the three bright-line rules above, the Order also reforms the Commission’s general conduct standard, which generally prohibits practices the Commission believes “unreasonably interfere with the ability of consumers or edge providers to select, access, and use BIAS to reach one another.” This “no-unreasonable interference/disadvantage” standard will be applied on a case-by-case basis to cover harmful practices the Commission may not be able to anticipate in ex ante rules. The Order also expands the transparency requirements applicable to BIAS providers, who will now be required to disclose certain network practices and performance characteristics in order to provide consumers with an accurate picture of the service level they can expect at their exact location.

Next Steps

Now that the Order has officially been approved, it will take effect 60 days after it is published in the Federal Register. We anticipate that the adoption of the Order will prompt a flurry of lawsuits from industry groups, similar to what occurred after the adoption of the Open Internet Order in 2015. Indeed, the dissenting FCC Commissioners such as Commissioner Brendan Carr are already criticizing what they deem as “command and control regulation.” Commissioner Carr further argues that the FCC has created “new pretext to justify an old power grab.” Some experts predict that the new net neutrality rules will ultimately be taken up by the Supreme Court under the major questions doctrine. The fate of the new rules could also be impacted by the outcome of the 2024 presidential election: if Donald Trump wins reelection and nominates a Republican FCC chair, the new administration could overturn the newly adopted rules.

^{1 Restoring Internet Freedom, Declaratory Ruling, Order, and Report & Order, 33 FCC Rcd 311 (adopted December 14, 2017).}

^{2 Protecting and Promoting the Open Internet, Report and Order on Remand, Declaratory Ruling, and Order, 30 FCC Rcd 5601 (adopted February 26, 2015) (Open Internet Order).}