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Legal Reality: Warning! Net Neutrality is Terminated — This is Not a Test

Legal Reality: Warning! Net Neutrality is Terminated — This is Not a Test

March 29, 2014
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" We live in an age of extraordinary technology that can be used by governments and malevolent private parties to intrude into our lives. "

On Jan. 14, the U.S. Court of Appeals for the District of Columbia Circuit handed down a ruling of monumental importance. In its long awaited decision in the case of Verizon vs. Federal Communications Commission the court effectively ended what has come to be known as “net neutrality.”

By doing so, the court has now set the stage for what might be the end of the Internet as we know it. For those not familiar with the concept of net neutrality, it is the principle that all types of data, regardless of type, source or destination, should be transported and delivered evenhandedly by broadband providers. In essence, net neutrality means broadband providers, such as Verizon, are not supposed to play favorites and increase or decrease data transmission speeds for particular Internet-based services or companies, or block content at their election.

For a number of years, the Federal Communications Commission has sought to ensure and effectuate net neutrality through its Open Internet Order setting forth three basic rules, which it calls the Open Internet Rules. Specifically, the Open Internet rules published on the FCC’s website state the following:

“1. Transparency: Broadband providers must disclose information regarding their network management practices, performance, and the commercial terms of their broadband services;

2. No Blocking: Fixed broadband providers (such as DSL, cable modem or fixed wireless providers) may not block lawful content, applications, services or non-harmful devices. Mobile broadband providers may not block lawful websites, or applications that compete with their voice or video telephony services;

3. No Unreasonable Discrimination: Fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service. The no blocking and no unreasonable discrimination rules are subject to limited exceptions for “reasonable network management.”

The end of an era and its implications.

Unfortunately, now, as a result of the court’s ruling in Verizon vs. FCC, the second and third Open Internet rules, which are by far the most important, have been judicially swept away.

And with their demise, so may have passed what might someday be viewed as the “open era of the Internet,” a time in its evolution characterized by more or less equal access to the Information Superhighway by everyone, regardless of whether they were an individual or a multinational conglomerate.

The remaining Open Internet rule left standing by the court only requires that carriers disclose when they’re engaging in discrimination and blocking. The resulting situation effectively gives broadband providers a free hand to do pretty much as the please as long as they report what they are doing. This is a reversal of governmental regulatory power of breathtaking scope.

To put it in perspective, analogizing the FCC’s Open Internet rules to antipollution laws, it is akin to amending an environmental law designed to protect a water source so that a company can now dump hazardous waste into the water supply as long as a photograph of the deed is published in a local newspaper.

In the wake of the decision some have argued that the required disclosure of discriminatory service will act as a deterrent for broadband companies to engage in unrestrained service discrimination and content blocking.

According to this line of thinking, consumers will be motivated to change carriers if they cannot access, or access quickly, content they want to obtain for which transmission is blocked or slowed by the provider. But given consumers’ relatively few choices of broadband providers I think that it is very unlikely that the remaining rule of disclosure operating in the absence of the others will provide any effective deterrent to service discrimination or content blocking.

Interestingly, in its lawsuit against the FCC, Verizon argued that the Open Internet Order violated Verizon’s free speech rights and wrongfully deprived it of its right to control what its networks transmit. But those arguments were not what primarily persuaded the court to rule against the FCC. The court principally based its ruling on its determination that the FCC simply could not require Verizon to comply with the Open Internet rules because to do so would regulate Verizon as a common carrier, something that the FCC was statutorily precluded from doing in large part because of how the FCC had previously classified broadband providers like Verizon.

Essentially the ruling can be viewed as a case of the FCC having painted itself into a kind of regulatory corner some years ago when it determined that broadband providers such as Verizon would be classified as providers of “information services” (like Google, Yahoo and YouTube) and not as providers of “telecommunication services” (like a provider of telephone services). This, in hindsight, many believe, was a colossal mistake by the FCC. The reason for this is that Congress has empowered the FCC to regulate telecommunication services, but not information services as “common carriers.”

Because a provider of telecommunication services, like a provider of telephone services, can be regulated as a common carrier (like a utility), the FCC can, and does, mandate that providers of such telecommunication services provide equal access to such services. But this is not the case with providers of information services. In fact, Congress has specifically prohibited regulation of information providers as common carriers by the FCC. The court seized on this fact and held, essentially, that the Open Internet Order was a common carrier-type regulation of a type of company (a broadband provider) that the FCC itself had classified as an information service provider. So, the court ruled that, in effect, the FCC’s Open Internet rules directed to broadband providers exceeded FCC’s regulatory authority because the FCC had elected to categorize broadband providers as information service providers and not telecommunication service providers.

But no matter how the credit or blame for the current situation gets apportioned, the bottom line is that net neutrality is, at least for now, dead. As a result, supporters of the FCC Open Internet rules are now gravely concerned that Internet providers such as Verizon, Comcast, AT&T and Time Warner will be begin to charge content providers for faster access, or that they will slow down or even block access to particular websites or online services.

I think that these concerns are very real and not without merit. In fact, I believe that online providers of socially “disfavored” content such as sexually explicit materials should be particularly concerned by the fact that the ruling in Verizon vs. FCC will clearly allow broadband providers to freely slow down the online delivery of, or entirely block access to, any content they dislike. Unfortunately, it is also much more likely now that a broadband provider may also block access to disfavored content in response to pressure brought by interest groups or shareholders who disfavor the content. It doesn’t take much imagination to envision that broadband providers such as Verizon may soon find themselves at the center of efforts by anti-porn organizations, such as Morality in Media, to pressure broadband providers to block access to sexually explicit sites now that it is clear that the providers can do so lawfully.

Without net neutrality I am very concerned that the most severe forms of censorship, i.e., those effectuated by private parties with great economic power, will be visited on web communications. The reason why private versus governmental censorship can be so destructive is because in the U.S. our freedom of expression is protected from censorship and other violations of our rights effectuated by governmental entities. The First Amendment and similar protections in state constitutions do not protect us from censorship by companies and other private parties except in relatively rare circumstances such as when they act directly on behalf of, or in the place of, a governmental entity.

This kind of private censorship, immune from any constitutional attack, was how a private entity called the Hays Commission was effective in controlling the sexual content in Hollywood motion pictures for decades. The Hays Commission famously and ruthlessly enforced a set of moral censorship guidelines called the “Motion Picture Production Code” that controlled what could and could not be depicted in most U.S. motion pictures released by major studios from 1930 to 1968. For example, during that period, husbands and wives were required to be depicted to sleep in separate beds, there was no interracial kissing and villains were required to be brought to justice and never allowed to prevail.

The end of net neutrality also is likely to mean that broadband providers will be able to force websites to pay for faster content delivery. Without the requirement of net neutrality broadband providers are free to differentially charge greater fees to website operators that desire rapid content delivery and start shifting longer load times to poorer sites that cannot afford to purchase premium content delivery speeds. Broadband providers are now free, for example, to charge a data-heavy service, such as one that provides substantial video streaming, more money for delivering its data-heavy service.

Alternatively, bandwidth providers could also charge their customers a premium fee for the providing of an “open” Internet connection, or they could charge their customers at a lower rate for more restricted access to the Web.

If net neutrality or something similar is not reintroduced, many observers, myself included, believe that the extraordinary playing field leveling attributes of the Internet that have allowed a multitude of small businesses and startups to thrive in competition with huge multinational companies could all but disappear. We soon could see the web devolve into a cast system of businesses that are stratified into classes correlating with the level of connectivity and data transfer, quality and speed that a company can afford. That is, of course, provided that the site or service is not deemed to be “undesirable” or “untouchable” for whom few or perhaps no broadband providers will be willing to provide broadband service.

On the bright side, the court’s ruling in Verizon vs. FCC validated the FCC’s rulemaking authority over the Internet. In fact, the court held that the FCC has the authority to protect so-called “edge providers”, such as websites, services, and uploaders, against mistreatment by broadband Internet service providers. Many believe that the FCC could use this reservoir of regulatory power to continue to protect businesses and consumers from many of the negative consequences likely to result from the end of net neutrality.

It is possible, of course, that in the wake of the end of net neutrality the reports of the death of the Internet as we know it may be greatly exaggerated. In support of this more optimistic view, some commentators have noted that discriminatory providing of broadband services by some broadband providers has been going on for years without effecting a major disruption in the way the vast majority of people and businesses use the Internet. They point to the fact that since long before the ruling in Verizon vs. FCC, many broadband providers have engaged in the practice of managing the flow of Internet data through a process known as “traffic shaping.” This usually involves slowing down some types of traffic, like file sharing, while giving priority to others.

Another optimistic view of a post-net neutrality future sees a silver lining in the post-net neutrality cloud that hangs over the Internet. This view casts broadband providers as potentially unshackled white knight Telco heroes that now lawfully do battle with copyright pirates and other Internet misanthropes who just happen to be huge consumers of bandwidth. The hope here is that broadband providers have been freed from their government mandated obligation to provide broadband services to all on an equal footing, and the providers are now free to block or refuse to port traffic generated by bit torrents involved in massive unauthorized distribution of unauthorized copies of copyrighted works. Perhaps I am being a bit cynical here, but a certain line from “Prove It All Night”, one of my favorite Springsteen songs comes to mind: “But if dreams came true, oh, wouldn’t that be nice.”

So what is next, or shall I ask, would you like to go for double jeopardy where the scores can really change?

Net neutrality is dead. Or is it? I think that, given that a fundamental feature of what has become the most important medium of this century so far is at the very heart of the net neutrality issue, to quote that great sage Yogi Berra, this battle “ain’t over ‘til its over.” Net neutrality may indeed be dead, or it may rise like an FCC phoenix from the ashes of Verizon vs. FCC. A lot depends on what the FCC does next.

The FCC could, for example, request what is known as rehearing en banc where the case, which was decided by a three-judge panel of the Court of Appeals, is reheard by all of the judges in the D.C. Circuit Court of Appeals. The en banc panel could affirm the existing ruling or reverse it. The latter would almost certainly provoke Verizon to petition for a hearing before the U.S. Supreme Court. The FCC could also petition the U.S. Supreme Court to hear the case directly. Both options are among those FCC Chairman Tom Wheeler has said are among “all available options” that the FCC is considering to ensure that Internet networks “remain free and open.”

The FCC could, however, simply reclassify broadband providers as telecommunication service providers to establish the FCC’s clear authority to impose net neutrality rules on them. Many proponents of net neutrality are urging the FCC to do exactly that, claiming that doing so would be a relatively simple and straightforward way of effectively ensuring that net neutrality becomes the law and will be less vulnerable to legal challenges in the future.

I agree with this view and with Cardozo law professor Susan Crawford who pointed out in a recent New York Times op-ed piece, “This is a moment of opportunity. The court didn’t make its decision because it was opposed to net neutrality, but because the FCC had painted itself into a regulatory corner, having developed a convoluted set of rules regarding Internet access over the last decade.”

But while reclassifying broadband providers as telecommunication service providers seems simple enough, any move in that direction by the FCC is virtually certain to set off a firestorm of fierce opposition from congressional Republicans and the telecoms. It would also likely ignite a fair amount of pyrotechnical discord within the FCC Commission itself, as evinced by a post-decision statement by Republican FCC Commissioner Ajit Pai, who stated that “Unless Congress acts, we should stay our hand and refrain from any further attempt to micromanage how broadband providers run their networks.” Opposing Pai’s view, however, are a number of Democratic leaders in Congress who have urged the FCC to take advantage of the oversight power over broadband providers that the court acknowledged in its opinion.

While it may be unclear at the present time just what course of action the FCC will take, it is likely that some action in response to the court’s ruling will be forthcoming because, as Marvin Ammori of Slate put it, “the loss was so definitive, the powers granted to cable and phone companies so outrageous, that the FCC has a live grenade in its lap.”

In my opinion, regardless of what the FCC and the broadband providers do or don’t do next, I think most Internet users will probably not see an immediate difference in their Internet service. In fact, I think that it is likely broadband providers will lie low for a while and not make any immediately visible changes to their policies or activities. I think they will be restrained, in part, so as not to antagonize public opinion, which might tend to broaden support for an FCC reclassification of companies like Verizon as telecommunications providers. Moreover, as Congress is currently quite divided on the issue of net neutrality along party lines, it would be politically unwise for broadband providers to do anything that might make net neutrality a major political issue in the upcoming midterm elections later this year.

It was not surprising, therefore, that statements of assurance from Verizon and many of the other broadband providers quickly followed the court’s ruling. Randal Milch, Verizon’s general counsel and executive vice president for public policy, stated shortly after court’s decision that the ruling “will not change consumers’ ability to access and use the Internet as they do now”, adding “Verizon has been and remains committed to the open Internet which provides consumers with competitive choices and unblocked access to lawful websites and content when, where, and how they want. This will not change in light of the court’s decision.”

Prominent Internet providers Comcast and Time Warner Cable Inc. also issued reassurances of their commitment to open Internet principles, as did the Broadband for America coalition representing various Internet service providers and CTIA, the wireless industry association.

But despite all the broadband provider’s reassurances and invitations to join hands and sing Kumbaya with the Telcos, content providers, free speech advocates, and those familiar with the phrase “absolute power corrupts absolutely” remain uneasy.

Many net neutrality advocates are once again looking to President Obama, whose 2008 campaign platform included net neutrality, for his assurances. According to the White House in a statement issued shortly after the ruling, the Obama Administration will to continue to work with the FCC, Congress and the private sector “to preserve a free and open Internet”, adding that “the President remains committed to an open Internet, where consumers are free to choose the websites they want to visit and the online services they want to use, and where online innovators are allowed to compete on a level playing field based on the quality of their products.”

In response to the Verizon decision, Netflix CEO Reed Hastings explained his company’s position regarding the end of net neutrality in his company’s recently published quarterly letter to its shareholders. In the letter he states, “Unfortunately, Verizon successfully challenged the U.S. net neutrality rules. In principle, a domestic ISP now can legally impede the video streams that members request from Netflix, degrading the experience we jointly provide. The most likely case, however, is that ISPs will avoid this consumer-unfriendly path of discrimination.” But, the letter continues with a warning: “Were this draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver. ISPs are generally aware of the broad public support for net neutrality and don’t want to galvanize government action.”

While I strongly commend Reed Hastings on his candor and his apparent resolve, I am concerned that Netflix members may not be able to effectively modify the way broadband providers do business. This I believe is simply because of the relatively small number of broadband providers, which leaves consumers with few viable alternatives. This may be a case where businesses and consumers may not be able to vote with their wallets and may need to use the political process, flawed as it is, to preserve the open Internet.

That then, unfortunately leaves net neutrality supporters with nowhere to turn but back to Washington, D.C. Fortunately, the court ruling against the FCC net neutrality rules affirmed the FCC’s authority to regulate broadband providers. As previously mentioned, all the FCC now needs to do to resurrect net neutrality from the dead is to reclassify broadband service providers as “telecommunication service providers” and apply the Open Internet rules to them. Such a move would seize the opportunity to re-establish net neutrality provided by the federal judges in the Verizon vs. FCC ruling, and do so in a way that will provide much greater protection from future legal challenges than there has been in the past.

A lot more than bandwidth at stake.

Net neutrality has sometimes been referred to as the First Amendment of the Internet. I rather like that analogy, but not because it is true in any legal sense. One of the most important reasons freedom of expression must be protected is that it provides our best protection against tyranny by ensuring that the people can communicate with each other freely, express ideas that may be unpopular with the ruling powers, and, if necessary, organize to constrain governmental power run amuck. It also provides an environment for the flourishing and expression of creativity, one of our species great, if not its greatest trait. There is no question that the open Internet that we have had until now works to provide all the same benefits that our constitutional guarantee of free speech does. There is no question that the experiment has worked. The Internet has been instrumental in confronting, and in some cases, toppling tyranny. And regarding whether it has been a successful catalyst for the flourishing of creativity, well, the answer is so patently obvious I need not elaborate further.

We live in an age of extraordinary technology that can be used by governments and malevolent private parties to intrude into our lives. Because of rapidly progressing technologies on all fronts, never before has humanity been so at risk for subjugation. One of the very few counterbalances to the immense power wielded by governments, big companies and powerful interest groups has been the open Internet and the fact that it has, heretofore, been uncontrollable by these powers. If net neutrality is not resurrected from the dead, I sincerely fear that what is left of our privacy, and eventually our freedom will, in the swift march of time, share net neutrality’s fate.

This article is not intended to be, nor should it be considered to be, legal advice.

Gregory A. Piccionelli is an intellectual property attorney specializing in entertainment matters. He can be reached at Piccionelli & Sarno at (818) 201-3955 or greg@piccionellisarno.com.


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