The FCC’s Net Neutrality Order: Substance and Status for Mobile Wireless Broadband

On December 21, 2010, a divided Federal Communications Commission adopted its long-awaited, but highly controversial, Preserving the Open Internet order (“Order”), which requires broadband service providers to treat all web traffic equally and protect open access to the Internet for web consumers and other stakeholders. While Congressional and industry opposition continues to ferment, a closer look at the Order reveals that mobile wireless broadband providers will retain considerable flexibility in how they manage their networks when compared to their fixed provider counterparts.

The Order focused on three primary goals underpinning the Commission’s net neutrality policy: 1) transparency 2) no blocking and 3) no unreasonable discrimination. For “transparency,” both fixed and mobile providers must publicly disclose the network management practices, performance, and commercial terms of their broadband services. By contrast, the application of the “no blocking” condition differs depending on the type of provider. Fixed providers are subject to a broad obligation to not block lawful content, applications, services, or non-harmful devices. Mobile wireless providers are subject to a narrower obligation to not block lawful websites and applications that compete with the provider’s voice or video telephony services. Most importantly, the Order’s “no unreasonable discrimination” provision applies solely to fixed providers, leaving mobile operators free to favor or disfavor certain types of network traffic. According to the Commission, these new rules for mobile wireless providers will not harm customers because most consumers have more choices for mobile wireless service than for fixed broadband. The Commission also noted favorably the mobile industry’s recent moves towards openness, including the introduction of open operating systems like Android. As a result, when the rules finally go into effect, mobile wireless broadband providers will be exempt from the obligation to manage network traffic in a nondiscriminatory manner.

The announcement marked the FCC’s first assertion of authority over broadband Internet access services since the D.C. Circuit overturned their 2008 enforcement action against Comcast Corporation. The court ruled that the FCC could not rely on the “ancillary” authority provided under Title I of the Communications Act of 1934 (the “Act”) to regulate broadband Internet access providers. FCC Chairman Genachowski initially indicated a “Third Way” approach to regulating broadband Internet access service by reclassifying the transmission component of the service as a regulated “telecommunications service” under Title II of the Act, and forbearing application of many of the provisions of Title II against such providers. Ultimately, the Commission relied upon a patchwork quilt of statutory provisions of the Act to assert the FCC’s jurisdiction over broadband Internet access services, including Title II’s “telecommunications services” definition, Title III’s authority to license the wireless spectrum, Title IV’s authority to promote competition in video services, and Section 706 of the Telecommunications Act of 1996’s authority to facilitate the deployment of advanced telecommunication capabilities to the public. Commissioner Baker sharply disapproved of the use of Section 706, stating the provision did not amount to an independent grant of authority. By comparison, Commissioner Copps believed the FCC should have gone further in asserting its authority by classifying all broadband services as common carrier services under Title II.

Reaction to the Order’s treatment of wireless broadband from net neutrality supporters was swift and pointed. Free Press, a leading proponent of net neutrality, attacked the FCC’s relatively lenient treatment of mobile wireless providers, calling the Order a “squandered opportunity” which permits providers to block customer access to disfavored third-party content and a “betrayal” of President Obama’s campaign promise to protect a free Internet. The technology editor of the U.K.’s Guardian labeled the Order “a stunning example” of the U.S. government’s inability to bring about substantive change in telecommunications policy. While these commentators criticized the FCC’s failure to impose more stringent wireless guidelines, others criticized the Commission for overreaching and unnecessary government interference that would stifle innovation. Verizon took a strong stance against the Order, warning the new rules will introduce uncertainty into the wireless market without a solid legal foundation. Others argued that even the more lenient approach towards mobile wireless broadband providers was unnecessary for a robustly competitive wireless industry thathas no incentive to risk alienating customers through blocking, discrimination or unreasonable network management practices.

Despite the FCC’s more lenient approach towards the mobile wireless industry, two appeals of the FCC’s Order have been filed by mobile wireless operators Verizon and MetroPCS. Verizon filed itssuit against the FCC last month, alleging the Commission exceeded its regulatory authority in imposing the new rules. Ironically, Verizon and Google had drafted a joint net neutrality proposal that the Commission largely adopted in the Order’s final language. The company filed its case in the U.S. Court of Appeals for the District of Columbia, the same court which ruled against the FCC in last year’s suit involving Comcast, and requested its case be assigned to the same panel of judges which decided the Comcast case. The D.C. Circuit denied the assignment request and will now review the FCC’s opposition motion requesting that the venue be chosen by lottery and that the appeal be dismissed on ripeness grounds. MetroPCS’s appeal follows the recent allegation that the company violated the FCC’s net neutrality Order by blocking Skype, Netflix and other popular consumer Internet services under its new service plan.

Meanwhile, on Capitol Hill, House Republicans launched a two-pronged attack against the Commission, introducing a Resolution of Disapproval under the Congressional Review Act to overturn the net neutrality rules and passing an amendment to a spending bill preventing the FCC from using funds to implement the Order. House Communications and Technology Subcommittee Chairman Greg Walden (R-OR) called the actions necessary to prevent “onerous restrictions on the currently open and thriving Internet.” Echoing his colleague’s concerns, House Energy and Commerce Committee Chairman Fred Upton (R-MI) warned that “[t]he controversial Internet regulations stifle innovation, investment, and jobs. A federal bureaucracy should not be picking winners and losers.” Leading Democrats responded by sending a letter to the Senate leadershipcriticizing the Republican actions as unwarranted uses of legislative procedure designed to thwart the FCC from properly exercising its delegated authority.

The challenges to net neutrality in the courts and in Congress have caused some proponents to concede that “well-organized and well-funded” opposition groups will always have the advantage in any debate over net neutrality, rendering meaningful change unlikely. Although both House measures must still pass a Democrat-controlled Senate, which largely supports net neutrality, and escape Presidential veto, Congressional rancor over the Order will continue to engender heated debate amongst lawmakers for the foreseeable future while the Order’s ultimate legality plays out in the courts.