Revisiting the regulatory status of broadband Internet access: a policy framework for net neutrality and an open competitive Internet.

• Author: Selwyn, Lee L.

1. INTRODUCTION II. NEITHER FACT, POLICY, NOR PRECEDENT SUPPORT THE CLASSIFICATION OF BROADBAND INTERNET ACCESS AS ANYTHING BUT A BASIC TELECOMMUNICATIONS SERVICE A. The Slippery Slope B. Longstanding Policies Requiring the Separation of Common Carrier Telecommunications from Information Services Should Apply Equally to Next Generation Technology C. Is Today's Broadband Internet Access an Information Service or Simply Basic Transmission? III. TECHNOLOGY-BASED CLAIMS THAT BROADBAND INTERNET ACCESS IS AN INFORMATION SERVICE A. "Bundled" Information Services B. Domain Name Services C. Technology Transitions Are an Ongoing Part of Telecommunications Industry Progress 1 D. Neither Its Eventual Destination (on the Public Internet) nor Its Bandwidth (Speed) Set Broadband Internet Access Apart from Other Last-Mile Telecommunications Services E. Regulating the Underlying Transmission in Internet Access Services is Not, and Would Not Amount to or Result in, the Regulation of Content or Application Providers IV. ECONOMIC REALITIES REQUIRE REGULATORY SUPPORT FOR NONDISCRIMINATORY ACCESS BY COMPETITORS TO BROADBAND TRANSMISSION USED FOR INTERNET ACCESS. ] A. Regardless of the Technology in the Upstream Network, Access Facilities Remain a Bottleneck B. Reevaluation of FCC Competition Analysis Needs to Extend to Broadband Access C. Reconciling Recent FCC Decisions with Existing Policies on Broadband Internet Access V. CONCLUSION: NET NEUTRALITY CAN BEST BE ACHIEVED BY THE FULL RESTORATION OF NONDISCRIMINATORY ACCESS TO BROADBAND LAST-MILE FACILITIES I. INTRODUCTION

   When the United States Court of Appeals for the District of Columbia Circuit recently shut down the FCC's attempt to impose "net neutrality" principles on the Internet access provider Comcast, (1) the FCC was forced to confront the fact that a decade's worth of steps on the slippery slope of broadband access deregulation had led the FCC to an unforeseen and ultimately untenable destination, where it was unable to enforce the fundamental principles of common carrier regulation necessary to ensure that all Internet content and application providers--including those not affiliated with the owners of Internet access facilities--were ensured reasonable and nondiscriminatory use of those facilities. The FCC had arrived at its current dilemma through an unfortunate combination of (1) unverified predictive judgments associating deregulation with investment; (2) fanciful notions about a gold rush of competitive entry into the consumer broadband market; (3) the abandonment of the decades-old "bright line" between common carrier transmission functions and competitive services that any provider could furnish using that basic transmission (i.e., telecommunications); and (4) the elimination of unbundling requirements for services over broadband facilities. The FCC needs now to revisit--and revise--the factual, legal, and policy judgments that have brought it to the current situation. The Chairman of the FCC has proposed that the regulatory oversight the FCC considers necessary for net neutrality can be restored by reclassifying Interact access as "telecommunications services," (2) but under his proposed "Third Way," the FCC would apply and enforce "only a handful of provisions of Title II...." (3)

   This Article explains why dedicated Internet access is a telecommunications service and, as such, why reclassification to Title II must be pursued to correct its earlier--and incorrect--treatment as an "information service." More importantly, it explains why reclassification alone will not be sufficient to assure a competitive and open Internet, and why an approach that restores competitor access to common carrier broadband facilities for purposes of offering Internet access to their own retail customers remains the best strategy for achieving this goal. To be effective, these policies need to be applied regardless of the transmission medium or the regulatory status of the incumbent service provider; for example, incumbent local telephone exchange carriers (ILECs), incumbent cable companies, and wireless carriers that furnish Internet access must be embraced within this framework. To reach this result, the FCC needs to admit to factual errors underlying its broadband Internet access decisions of the past decade, but it also needs to admit to factual errors underlying its pervasive deregulation of broadband access facilities. The FCC stands a better chance of attaining its goals of net neutrality and competitive Internet access if it combines reclassification with a requirement for unbundled access to all network elements necessary for nonfacilities-based providers to offer retail Internet access in competition with the retail services currently available solely from incumbent facilities-based providers.

2. NEITHER FACT, POLICY, NOR PRECEDENT SUPPORT THE CLASSIFICATION OF BROADBAND INTERNET ACCESS AS ANYTHING BUT A BASIC TELECOMMUNICATIONS SERVICE

   1. The Slippery Slope

      The first step along the slippery slope came, innocently enough, shortly after passage of the Telecommunications Act of 1996 (4) (1996 Act or TA96), in the context of the Federal-State Joint Board on Universal Service Report to Congress (the so-called Stevens Report. (5) As it evaluated the various potential sources for federal universal service funding, the FCC was confronted with the primary question of whether to classify Internet Service Providers (ISPs) as providers of telecommunications services subject to assessment under the federal Universal Service Fund (USF), pursuant to the specific directives of the 1996 Act. (6) Given its focus at the time, the FCC was basically trying to decide whether information services should be included in the USF funding base because they contained a "telecommunications" component. In the Stevens Report, the FCC expressed the view that ISPs were furnishing information, and not telecommunications, services, and that the intent of the 1996 Act was not to "break out" the telecommunications component of an information service so as to subject it to a separate universal service support obligation. (7) After all, as the Commission noted, in most cases, the ISP purchased the underlying transmission as a telecommunications service, from a common carrier; whatever "telecommunications" was incorporated into the information service was thus already contributing to the USF base. The Commission went on to find that this treatment was consistent with the fact that the definitional structure for "telecommunications services" and "information services" in the 1996 Act, which--like the Computer Inquiry II framework on which it was based---contained two separate (and thus mutually exclusive) definitions for an "information service" and a "telecommunications service." (8) In its Report, the FCC stated: "We find generally, however, that Congress intended to maintain a regime in which information service providers are not subject to regulation as common carriers merely because they provide their services 'via telecommunications.'" (9)

      Several key distinctions of fact and context make the analysis contained in the Stevens Report a poor basis for the FCC's subsequent decision to permit facilities-based common carriers (including providers of cable telephony) to provide "integrated" Internet access services exclusively as deregulated information services. Most importantly, while the FCC undoubtedly intended to continue its policy of shielding competitive information service providers from common carrier regulation, it unequivocally also intended to preserve the long-standing Computer Inquiry II requirement that facilities-based common carders make the transmission (telecommunications) component of any information service available to competitor ISPs on a non-discriminatory, common carrier basis. (10) This carefully preserved the twin policies that ensured (1) that non ILEC providers of ISP services would be shielded from common carrier status merely because they incorporated "telecommunications" as an input to their end (information service) product, and (2) that the ILEC could not escape its common carrier obligations with regard to the "telecommunications" component of its information services merely by contaminating the transmission with content or processing enhancements.

      This approach was also completely consistent with the nature of ISPs and ISP services at the time of the Stevens Report. (11) At that time, subscribers to the major ISPs were required to provide their own "last mile" connection, usually accomplished on a dial-up basis utilizing the subscriber's home (or business) local telephone service. As such, and unlike today's principal providers of broadband Internet access, dial-up ISPs did not provide last-mile telecommunications services to their customers. According to the FCC,

      In essential aspect, Internet access providers look like other enhanced--or information--service providers. Internet access providers, typically, own no telecommunications facilities. Rather, in order to provide those components of Internet access services that involve information transport, they lease lines, and otherwise acquire telecommunications, from telecommunications providers--interexchange carriers, incumbent local exchange carriers, competitive local exchange carriers, and others. (12) Moreover, although these ISPs redirected a small portion of their end users' traffic to the public Internet, ISPs at the time of the Stevens Report typically continued their traditional "information services provider" role of offering end users enhanced functionalities on the ISP's own host computers. (13) In other words their principal business continued to be to "add value" to the underlying transmission, rather than simply to provide a connection for users' access to independent, third-party content. Thus, both the nature of ISPs' businesses and the regulatory framework that applied continued to reflect the...