DC Circuit Court Set to Rule on FCC Internet Regs

If the prognosticators are correct, the DC Circuit is going to issue its ruling on the FCC’s Open Internet regulations this week, either Tuesday or Friday. What a wonderful way to celebrate the tax filing deadline. By the time you read this post, the decision could be done but I’ll go ahead and make a prediction just for the fun of it.

Three Items on the Menu

There are three major options in the menu:

1. The court says the FCC didn’t provide sufficient notice, or didn’t adequately respond to comments. If this happens, the order would be remanded to the FCC with instructions to let the people comment and to respond to substantial criticisms. This makes net neutrality a campaign issue, which is fine for the Democrats. It’s inconvenient for the Republicans because the issue is hard to explain to voters. Even though the FCC’s regulations are bad, many of the people who are aware of the issue like them.

2. The court can also find that the FCC exceeded its authority or otherwise misinterpreted the law. This is especially likely with respect to the reclassification of mobile broadband, which appears to defy the Telecommunications Act’s plain language. AT&T’s attorney has argued this point:

“In 2007, the Commission correctly classified mobile wireless broadband Internet access services as both PMRS under Title III and as information services under Title II,” AT&T General Attorney Gary Phillips wrote. “Those separate findings constitute independent and equally sufficient barriers to regulating wireless broadband Internet access as a common carrier service. As the DC Circuit recognized, in light of those findings, ‘mobile-data providers are statutorily immune, perhaps twice over, from treatment as common carriers.’”

The court could easily find this argument persuasive.

3. There is also the possibility that the court can find the FCC’s analysis of the technical and economic realities of Internet service is so deeply flawed that the order has no effect. This is remote, since cases like this usually revolve around questions of law and not matters of fact. This is the outcome I’d like to see because I personally believe the gap between the FCC’s understanding of the Internet and its reality is so large that the service the FCC set out to manage doesn’t actually exist. So if the court rules this way I’ll be happy even if the court directs the FCC to try again.

There’s also the possibility that the court will say the order is fine, which would result in an appeal to the Supreme Court by the challengers. I don’t expect that to happen either, but it’s a logical possibility even though it’s not a practical one.

Consequences of Misclassification

The Open Internet Order has created a lot of work for the FCC on the privacy front, including a whole Notice of Proposed Rulemaking for the May open meeting. This is work that would not have been necessary without the FCC’s Title II reclassification, and its likely result is an uneven playing field between ISPs and other Internet services.

From the technical standpoint, the main problem with the OIO is the disconnect between the Commission’s analysis of the Internet and its reality. While it is becoming apparent that ISPs are playing the same game that Google, Netflix, Amazon, and Facebook are playing with respect to advertising sales, video streaming, and voice services, the FCC still treats ISPs and other Internet services as if they were radically different.

The Android platform that Google licenses to smartphone manufacturer is, for all intents and purposes, a part of the mobile network infrastructure: it chooses towers, it sets power levels, and it routes packets just like the network does itself. Google’s DNS is a direct competitor to the ISPs’ DNS offering as it performs exactly the same functions. But the FCC regards ISP-provided DNS as a regulated service and Google’s DNS as an unregulated one.

Similarly, Netflix is in direct competition with the ISPs for video programming distribution, but Netflix and the ISPs are regulated differently. And Amazon and Facebook sell ads based on their knowledge of user preferences, a market that the ISPs are not deeply involved in yet but one they’re like to enter if the FCC were to allow it. When the ISPs do enter this market, they will have different privacy regulations than the other players do. In fact, one group will be regulated by the FCC and the other will be self-regulated under FTC guidelines.

Do You Remember Convergence?

This is all called Internet convergence, a state of being in which there are no longer any meaningful lines between the services provided by ISPs and those offered by other Internet services. The ISPs are transforming their networks into software-based platforms indistinguishable from other Internet services. When AT&T, Verizon, and Comcast offer video streaming nationwide, they’re just as dependent on other ISPs’ platforms as any other service is.

So the split between content and communication that has shaped US communication law since the 1960s no longer makes a great deal of sense. Commissioner Powell’s FCC realized this was coming when it reclassified broadband from Title II common carrier status to a deregulated Title I service in the 1990s.

The unity of ISP services and other content services will be impossible to ignore when 5G emerges in a big way in the next 5 to 10 years. So even if the FCC is successful in moving the regulatory clock back to the 1980s with this Open Internet Order, all that really means is that a future FCC will need to correct the error once again. Despite the FCC’s desire to exploit voter perception of ISPs as bad guys and Google et al. as good ones, the technology is developing in a way that contradicts the agency’s analysis.

You just can’t stop progress in technology markets, you can only delay it.