Wickard for the Internet? Network neutrality after Verizon v. FCC.

Author:Yoo, Christopher S.
Position:IV. Title II Reclassification through VI. Conclusion, with footnotes, p. 440-466
  1. Title II Reclassification

    Many network neutrality proponents regard the Verizon court's prohibition on using section 706 to impose common carriage obligations as an insuperable barrier to the type of nondiscrimination mandate that they regard as the most critical. (168) These advocates believe that the only way to achieve a blanket nondiscrimination mandate would be to reclassify broadband access services under Title II, thereby enabling the FCC to impose common carriage regulation. (169) However, the FCC has repeatedly ruled that broadband access services are information services that are exempt from common carriage regulation, rather than telecommunications services that are subject to common carriage regulations. (170) The Supreme Court upheld this determination as a reasonable interpretation of the Communications Act in Brand X. (171) The FCC floated the possibility of reclassifying broadband access as a Title II service while considering the Open Internet Order, relying exclusively on Justice Scalia's dissent in BrandX. (172) The agency ultimately declined to pursue reclassification, but made it a point to leave the Title II option open. (173)

    1. Legal Barriers to Reclassification

      I have addressed at length the problems with Title II reclassification elsewhere and will only sketch my objections here. The FCC's construction of the statute is subject to Chevron deference. As Brand X made clear, Chevron does not preclude the FCC from changing its mind so long as it justifies its change in position. (174) The fact that the FCC has ruled on six separate occasions that broadband access is an information service and not a telecommunications service does not prevent it from revisiting that decision.

      To say that the agency may reevaluate its construction, however, does not relieve it from satisfying Chevron's standard of review. Chevron Step one requires that the statute's text not foreclose the proffered construction of the statute. (175) If Congress has directly addressed the issue, congressional intent controls. (176) The language of the statute forecloses classifying broadband access as a telecommunications service. The statute defines a "telecommunications service" as a provider that offers for a fee directly to the public "the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received." (177) The FCC has characterized this as "pure" transmission that does not involve computer processing or storage. (178)

      The problem is that much of the world's web content is served by content delivery networks ("CDNs"), which store popular web content in thousands of locations around the world. For example, market leader Akamai uses nearly 150,000 servers throughout the network to serve 30% of the world's web content and rely on the domain name system ("DNS") to determine from which cache it should serve any particular request. (179) The Supreme Court has upheld the conclusion that the DNS and caching functions associated with the typical broadband access service inevitably involve both computer processing and storage and thus take broadband access outside the scope of Title II. (180)

      The statutory requirement that the transmission take place between points specified by the end user is even more problematic. On the Internet, physical locations are addressed by the numbers of an Internet Protocol (IP) address, which in the case of IP version 4 is usually represented by four numbers between 0 and 255 separated by dots (such as, which is one of the IP addresses assigned to the University of Pennsylvania). (181) Although the National Science Foundation is currently studying a proposal to restructure Internet addresses so that they refer to particular content rather than particular locations, (182) until such a proposal is adopted, the address architecture will continue to focus on physical addresses. End users and applications typically do not rely on IP addresses, however. Instead, they generally use domain names (such as upenn.edu) to access Internet resources, relying on the DNS to map domain names onto IP addresses. (183) When this is the case, the points of communication are specified by DNS, not the end user. (184) Moreover, as anyone who has attempted to access Google's website from another country recognizes, the mapping of domain names onto IP addresses is not simply mechanical. (185) On the contrary, the DNS often routes the same domain name to different locations based on its inference of which location is most likely to be the one the end user wants. In addition, content is frequently not stored in a single location. (186) CDNs, for instance, depend on the DNS to determine from which of their thousands of caches that any particular request should be served. (187) Thus, unless the user employs IP addresses instead of domain names or maintains his or her own DNS, it is a third-party DNS provider that selects the points of transmission, not the end user. As a result, it is impossible to see how broadband access can fit within the statutory definition of telecommunications service governed by Title II.

    2. Overlooked Implications of Reclassification

      Interestingly, many network neutrality proponents seem to be unfamiliar with the way that Title II regulation works in practice. Specifically, it has generally not been applied to benefit actors occupying the position of content and service providers, it has never barred prioritized service, and it has long been plagued by a series of implementation difficulties.

      1. Common Carriage's Inapplicability to Complementary Services

        Supporters of Title II reclassification believe it will enable rules that give edge providers nondiscriminatory access to broadband networks. The history of common carriage is to the contrary. The seminal decision is Memphis & Little Rock Railroad Co. v Southern Express Co. (The Express Package Cases), in which the Supreme Court held that the nondiscrimination obligations of common carriers applied only to end users and did not apply to express package companies who wanted to use the railroad as a conduit for delivering another service. (188) This is because the specialized needs of such services "must necessarily be a matter of bargain," the Court reasoned, and thus cannot always be provided to all express package companies. (189) The fact that express package services had become a "public necessity," was "used in almost every conceivable way, and for almost every conceivable purpose," and that "[a]ll have become accustomed to it, and it cannot be taken away without breaking up many of the long-settled habits of business, and interfering materially with the conveniences of social life" did not change the Court's analysis. (190) The courts have applied similar principles to the telecommunications industry. (191)

        The Verizon court elided this distinction somewhat when it rejected the FCC's argument that the nondiscrimination rule's requirement that broadband access providers carry edge providers did not impose common carriage obligations because broadband access providers only served as carriers for end users, not for edge providers. (192) The issue presents the converse of the question presented in the Express Package Cases. In those cases, the question was whether common carriage entailed nondiscrimination towards edge providers. (193) In Verizon, the issue was whether nondiscrimination towards edge providers entailed common carriage.

        In any event, the history of common carriage raises questions whether common carriage would give edge providers the benefit of a nondiscrimination mandate. If not, Title II reclassification would not create the benefits that many network neutrality proponents envisage.

      2. The Permissibility of Prioritized Service

        As noted above, common carriage does not restrict from creating different classes of service so long as it provides each class of service to all comers. (194) Thus, notwithstanding the claims of some network neutrality proponents, Title II reclassification would not necessarily prevent broadband access providers from offering premium services at premium prices. (195)

      3. Difficulties Implementing Common Carriage

        Finally, advocates of Title II reclassification must come to grips with how difficult nondiscrimination mandates have historically been to implement in practice. Any decision-maker confronted with a nondiscrimination claim would have to determine whether the price differentials were the result of differences in quality or cost or the desire to implement schemes such a Ramsey pricing that can make the allocation of high fixed costs goods more efficient. (196)

        Title II would also require decision-makers to ensure that rates are just and reasonable. (197) The methodologies for evaluating the reasonableness of rates have long been criticized for providing insufficient incentives to economize on costs, discouraging innovation, and leading to interminable controversies over how to determine the proper rate base and rate of return, how to allocate common costs, and over the reasonableness of non-price terms and conditions. (198) Rate regulation also facilitates collusion by creating entry barriers, standardizing products and pricing, pooling information, providing advance notice of changes, and allowing the government to serve as the means for forcing parties to adhere to the agreed upon prices. (199) Moreover, with respect to traditional telephony, the increasingly specialized needs of business customers led them to request an ever-growing number of special access tariffs and waivers designed to tailor services to individual customers' particular needs. In light of the growing diversity of Internet applications, imposition of Title II regulation would likely deluge regulators with a similar range of requests.

      4. Difficulties Implementing Forbearance

        Finally, any solution...

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