The Fcc's New Network Semi-neutrality Order Maintains Inconsistency in the Broadband World

• Publication year: 2010

Kendra Legharf⁰

On December 23, 2010, the Federal Communications Commission ("FCC") issued a new Internet Order designed to regulate broadband access providers to further the principle of network-neutrality. The Order imposes regulations on broadband access providers for the first time, seeking to maintain the free and open character of the Internet by preventing this relatively new class of Internet Service Provider ("ISP") from discriminating in the type of content that travels over its network. The Order divides broadband access providers into two categories, fixed and mobile, imposing fewer restrictions on the latter. The rules impose transparency requirements for both, but prohibit only fixed broadband providers from discriminating or blocking any legal content. The disparity of regulation between these two creates a sort of network semi-neutrality rather than a true neutrality in the broadband access market. This article posits that the FCC has not gone far enough in its Order and defends the rules against challenges to the Commission's authority and its decision to regulate the broadband access market.

I. Introduction

The Internet has changed drastically since the general public first gained access to the World Wide Web in 1991.¹ At the time, access to the Internet was provided via dial-up,² a type of Internet connectivity that uses a standard copper phone line.³ Today, the public is increasingly turning to faster broadband connections, which provide speeds roughly 30 times faster than dial-up,⁴ allowing users to watch a full-length movie while instant messaging a friend with just the click of a mouse. The Federal Communications Commission ("FCC"), along with other groups, both public and private, has speculated that the "freedom" and "openness" that is so characteristic of the Internet could be in jeopardy.⁵ Internet Service Providers ("ISPs") have the ability to control the traffic that is sent and received over their network. While dial-up is covered by common carriage rules under the Communications Act of 1934,⁶ broadband access providers have not been characterized as "wire" or "radio" under the Act and have thus gone unrestricted.⁷

Many of these broadband providers offer their own products and services which compete with the third party companies that use their broadband networks to gain access to end consumers of these products and services. In an effort to protect the free and open character of the Internet by ensuring that these broadband access providers cannot discriminate in the content of what is transmitted over their networks, the FCC has taken several actions, the most recent of which is the Open Internet Order ("Order") issued on December 23, 2010.⁸ The FCC claims that the Order furthers a policy of network neutrality⁹ that will preserve the Internet as "an open network, enabling consumer choice, freedom of expression, user control, competition, and the freedom to innovate."¹⁰ The Order is highly political and highly controversial, mainly as a result of the same disagreements that surround the network-neutrality debate. The debate centers on two issues: first, whether the FCC has Congressional authority under the Communications Act of 1934 as amended by the Telecommunications Act of 1996 to push its network neutrality policies through the regulation of broadband access providers, since the Act does not define "broadband"; and second, whether such regulation is needed or in fact will preserve the free and open nature of the Internet that has developed from the Internet's open architecture.¹¹

Network neutrality is a network design principle that purports the idea that there should not be any discrimination by Internet service providers in the content, applications, or services that travel over the network.¹² However, the Order has divided broadband access providers into fixed and mobile broadband, holding only the former to the anti-blocking and anti-discrimination rules. The Order is thus more similar to a policy of "network semi-neutrality" than the more hard-lined network neutrality originally advocated by FCC Chairman Julius Genachowski.¹³

The Order takes aim at broadband access providers by imposing three rules requiring transparency in the form of public disclosure and prohibiting blocking and unreasonable discrimination in the transfer of any legal content.¹⁴ While these rules are designed to create a level playing field, they exempt mobile broadband providers from the two rules prohibiting discrimination of transfer rate¹⁵ and blocking. The result is that the Order has only partially addressed the issues it was intended to remedy and therefore the mobile broadband industry will develop as a separate unregulated niche, making it harder to acclimate to the FCC's proposed future regulations. Furthermore, the examples of discrimination that the Commission has cited as evidence of the need for this Order have generally been acts by mobile broadband access providers.¹⁶

This article examines the Order against the backdrop of the network neutrality debate that has existed for the past decade. Part II will briefly outline the main arguments surrounding the network neutrality debate and the FCC's views in regards to this philosophy. Part III will discuss the FCC's authority to engage in the regulation of broadband providers by looking at the Communications Act of 1934, as amended by the Telecommunications Act of 1996. Part IV will explore the three new rules put forth in the Order and their expected impact on individual users and broadband providers, as well as on the overall "neutrality" of the Internet. Part V will look at the implementation of the Order, as well as current and expected challenges to Congressional approval. This article posits that while it is a viable part of the solution to the network neutrality debate, the Order will not be effective because of the exclusion of the mobile broadband network from the second rule prohibiting blocking and the third rule prohibiting unreasonable discrimination in transfer rate, in addition to the lack of strong Congressional support for expanding FCC authority to broadband ISPs.

II. Network Neutrality

A. Sources of Network Neutrality Principle

The philosophy behind the network neutrality principle goes back to the development of the Internet, though the term did not come into use until about 2005.¹⁷ Network neutrality is the application of common carriage¹⁸ principles to the Internet.¹⁹ Tim Wu,²⁰ who is credited with coining the term,²¹ has described network neutrality as the idea that the network should "treat[] all [that] it carries equally, indifferent to the nature of the content or the identity of the user."²² The basic premise behind this idea is that "information networks are often more valuable when they are less specialized."²³ The "founding principles of the Internet" include the ideas articulated in 1984 by David Reed, David Clark, and Jerome Saltzer, three professors of computer science, who argued for a decentralized system design for the Internet that would give the end user,²⁴ rather than the provider, the discretion to choose the content, keeping the network itself as non-specialized as possible.²⁵

The current state of the network neutrality debate is a reflection of the progressive development of Internet access, from dial-up to broadband. The birth of "dial-up" in the mid-1980s allowed end users to connect to the World Wide Web using telephone companies' phone lines. These telephone companies were required to comply with the FCC's Computer Inquiry Regulations,²⁶ which required them to provide the same transmission capabilities to third-party ISPs as they provided to their own services—essentially a rule of common carrier equality.²⁷ As cable companies began replacing dial-up with broadband²⁸ in the late 1990s, the reliance on equal transmission requirements for telephone companies (common carriage requirements) was lost, since the Computer Inquiry Regulations did not apply to the cable companies' broadband technology.²⁹

Today, these telephone and cable companies, such as Comcast and Time Warner, comprise nineteen of the largest providers of broadband access in the United States, serving approximately 73.5 million subscribers, or about 93% of all broadband users.³⁰ These companies act as broadband providers, affording access to online content, applications, and services—all of which are increasingly in competition with their own products and services. For example, Voice-over Internet Protocol ("VoIP") services are "increasingly being used as a substitute for traditional telephone service[s]."³¹ Many broadband providers are deeply entrenched providers of traditional telephone services. This incentivizes companies that offer broadband access as well as traditional telephone services to block or slow the transmission rate of edge-providers³² such as Skype.³³

Video streaming is another area that may give broadband providers incentive to compete through discrimination and blocking. Online videos have been steadily rising in popularity.³⁴ Hulu, YouTube, and Netflix are just a few of the companies that offer users the ability to watch television shows or movies via the Internet. Broadband providers, many of which are cable companies that market television shows and movies,³⁵ are in competition with these third party companies for subscribers. This competition creates an incentive for broadband providers to restrict or inhibit the transfer of competing third party services via their system. Not only do the majority of, if not all, broadband providers have economic and competitive incentives to discriminate, but they also have the ability to act on these incentives by slowing the transfer rate of or blocking certain content, applications, and services.³⁶

However, evidence of such discrimination in practice is slight. In support of its belief that the above discriminatory acts are not mere future possibilities, the...