Court of Appeals Upholds FCC's Net Neutrality Rules and That is Great News for Us

Net Neutrality“Net neutrality” is the principle that internet service providers (ISPs) should treat all internet traffic equally, regardless of the identity of the person or business seeking internet access or of the website the user wants to visit. More specifically, net neutrality assures that ISPs do not favor some users or websites over others — by, for example, providing speedy access to websites that the ISP owns while slowing down access to others.

Concerns about net neutrality have increased as more ISPs have agreed to connect directly to websites (“edge providers”), such as Google and Netflix, bypassing the “backbone” providers that transmit high volumes of internet traffic between ISPs and edge providers. The fear is that ISPs will favor edge providers in which they have an interest or those that pay for prioritized access. Comcast, for instance, might slow traffic to the New York Times in order to increase traffic to its own news website, or it might slow traffic to Bing if Google paid a fee for prioritized access.

The Federal Communications Commission (FCC) enacted a series of rules that protect net neutrality. Those rules were promptly challenged by broadband internet service providers. The ISPs argued that the FCC was regulating beyond its authority.

The dispute recently reached the U.S. Court of Appeals for the D.C. Circuit, which rejected the ISPs’ arguments in a 2-1 decision. Unless the Supreme Court agrees to review the decision, the FCC will continue to enforce rules that protect net neutrality.

FCC Net Neutrality Rules

The FCC’s most recent rules represent its third attempt to assure net neutrality. The first rules were set aside because the FCC did not follow the correct procedure when it enacted them. The court struck down the second set of rules because the FCC classified broadband service as an “information service” rather than a “telecommunications service.” Since Congress did not allow the FCC to impose common carrier regulations upon information services, the court concluded that the FCC’s net neutrality rules exceeded its authority. The FCC then reclassified broadband service as a telecommunications service. The third regulatory effort was a charm, as the Court of Appeals concluded that the FCC finally got it right.

The rules prohibit broadband providers from doing five things:

  • Blocking an edge provider’s lawful content (such as a website) from subscribers.
  • Throttling (or deliberately slowing the connection to) any edge provider.
  • Accepting compensation to favor or prioritize some internet traffic over other traffic.
  • Unreasonably interfering with or disadvantaging a user’s ability to choose and access lawful internet content, applications, and services, or the ability of edge providers to make lawful content, applications, and services available to users (the “General Conduct” rule).
  • Failing to disclose network management practices, performance characteristics, and terms and conditions of broadband services to users.

A number of companies (primarily broadband ISPs) challenged the rules on several grounds. The challenge made its way to the Court of Appeals, where it was rejected.

Broadband ISPs Provide a Telecommunications Service

The companies challenged the FCC’s decision to classify broadband ISPs as telecommunications services after earlier deciding that they were information services. The court decided that the FCC reasonably reclassified broadband ISPs because consumers view them as providing both telecommunication services and information services. Consumers expect their ISP to connect them to Facebook, YouTube, FreeAdvice, and other websites offered by edge providers. By providing that connection, ISPs are (from the perspective of consumers) engaged in telecommunications.

While ISPs might also provide information services (such as email or cloud storage), high speed connectivity is the central service that consumers want from a broadband provider. Broadband is primarily marketed as a conduit between the user and edge providers. Consumers may be offered applications by their ISP, but they typically prefer to choose their own apps.

Since the reclassification of broadband as a telecommunications service was reasonably based on consumer expectations, the court deferred to the FCC’s judgment. In short, as long as it did not act arbitrarily, the FCC was entitled to change its mind.

The court also rejected a challenge to the FCC’s regulation of mobile broadband services furnished to users of smartphones and tablets. The FCC lacks authority to treat “private mobile services” as common carriers, but it is empowered to classify “commercial mobile services” as telecommunications services. Commercial services are available to a large part of the public while private services are not. The FCC classified mobile broadband as a private mobile service in 2007. The court had little difficulty recognizing that the world has changed and that smartphones and tablets offering broadband access are now widely available. The FCC was therefore entitled to reclassify mobile broadband as a telecommunications service.

The Court Upholds Net Neutrality Rules

Other than their general objection that the FCC had no authority to make net neutrality rules, the companies made no independent challenge to the rules that banned blocking and throttling or the rule that required enhanced disclosure. The companies did challenge the anti-prioritization rule and the General Conduct rule.

The attack on the anti-prioritization rule again focused on whether the FCC had authority to enact it. The court concluded that it had already resolved that issue in the FCC’s favor in an earlier case. The most interesting aspect of the court’s discussion concerns the claim that Congress intended to reduce regulation of telecommunications companies while the FCC instead increased its regulation. The court’s majority recognized that Congress also required the FCC to “encourage the rapid deployment of new telecommunications technologies,” a goal it furthered by enacting net neutrality rules. The wisdom of those rules was for the FCC, not the court, to determine.

The companies challenged the General Conduct rule on the ground that it was too vague to understand and therefore violated their right to due process. The general prohibition of conduct that interferes with a user’s internet access was intended to preempt new methods (in addition to blocking, throttling, and prioritization) that ISPs might invent to give some edge providers an advantage while disadvantaging others. The court decided that the goal of protecting and fostering the open nature of the internet gives ISPs a touchstone to follow when they implement future policies.

In addition to specifying the rule’s objective, the FCC identified several factors (such as consumer protection, impact on competition, and impairment of a user’s access to edge providers) that will guide its application of the rule. It also provided examples of practices (including deceptive billing and the failure to protect the confidentiality of the user’s information) that the General Conduct rule would make unlawful. The court decided that broadband providers were given sufficient information to understand what the General Conduct rule prohibits.

Net Neutrality Rules Do Not Violate the First Amendment

Finally, the court rejected a wireless broadband provider’s argument that the rules violate its corporate right to free speech by forcing ISPs to transmit information with which they might disagree. Just as courts have historically required other common carriers (including trains, the Postal Service, and telephone companies) to carry information without discriminating on the basis of legal content, the court did not believe that the equal access obligations imposed by open internet rules impaired the First Amendment rights of broadband providers. Facilitating the speech of others does not invoke the same First Amendment concerns as restrictions on a company’s own speech.

The court’s decision has been lauded as representing “one of the most important moments in the history of the Internet.” By assuring that broadband providers cannot use unfair tactics to favor some edge providers over others, the FCC and the Court of Appeals protected consumers from ISPs that might otherwise dictate how their customers use the internet.

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