Engine's Response to FCC's Reported Net Neutrality Plan


After many months of public debate, the FCC appears close to deciding on new net neutrality rules to replace those vacated earlier this year. Though the issue has to date been framed as a binary choice between the Chairman’s original proposal featuring toothless rules grounded in the Commission’s authority to encourage the deployment of broadband under section 706 of the Telecommunications Act and strong net neutrality regulations based on a full reclassification of broadband as a common carrier service, recent reports suggest that the FCC is settling on what many think of as a so-called hybrid solution.

According to the Wall Street Journal (sub req’d), the FCC is leaning towards adopting a framework that treats all Internet communications as the product of two separate and distinct relationships: 1) a relationship between an end user and an Internet service provider (ISP); and 2) a relationship between an edge provider (i.e. an Internet content provider like Netflix or Amazon) and an ISP. These separate relationships would get different regulatory treatment, but in theory, the plan could support non-discrimination rules that protect both sides of the communication.

The biggest problem with the plan outlined in the Wall Street Journal article is not the authority the FCC may invoke to justify the rules it wants to create (more on that below), but rather the proposed rules themselves. According to the article, the Commission will not ban paid prioritization but will instead allow priority deals so long as they are offered equally to all comers.

In this sense, the FCC’s proposed plan as reported in the Journal is an abandonment of net neutrality principles and will put startups at an enormous economic disadvantage. Enacting net neutrality rules is a two step process—first creating a workable framework for agency authority and then using that authority to create meaningful rules—and the FCC’s proposed plan appears to fail miserably at this second step.

Now for the really wonky part: Under a so-called hybrid proposal, the FCC would regulate these two separate relationships—ISP/end user and ISP/edge provider—differently. The relationship between an ISP and end user will keep its current classification under rules that have been in place since 2002, while the FCC will recognize a new relationship between an ISP and edge provider and classify it as a common carrier service, meaning that the FCC could then impose strong net neutrality rules on ISP/edge provider activities, such as a ban on ISPs charging edge providers for access to Internet fast lanes. According to proponents of hybrid rules, because every Internet transaction necessarily involves an interaction between an ISP and an edge provider, regulating only the ISP/edge provider relationship under Title II is more or less the same as regulating all broadband under Title II.

If this all sounds hopelessly convoluted, that’s because in many ways it is. The legal approach that the FCC is considering is novel, untested, and conceptually complicated. The plan carries significant legal risk and could end up getting thrown out in court.

But, putting aside for a moment concerns about the legal viability of hybrid approaches, it’s important to recognize how far we’ve come in getting the FCC to this point. Hybrid rules are, after all, grounded in Title II and would likely give the FCC authority to block paid prioritization arrangements. Though full Title II reclassification would be a far easier and simpler way to preserve an open Internet, hybrid rules could offer functionally similar protections.

Any net neutrality rules absolutely must prevent ISPs from extracting rents from edge providers and creating Internet slow lanes. While we’re encouraged that the FCC is moving in the right direction in considering rules grounded in Title II authority, the FCC’s consideration of actions that do not include banning paid prioritization deals renders its move towards Title II meaningless. Whether the FCC opts for full reclassification or a hybrid approach, it must use its authority to establish rules that protect startups and consumers or its efforts will have been in vain.