Month: December 2017

In my ongoing series debunking the nonsense from Pai & Friends on what the draft net neutrality repeal/reclassification Order does and doesn’t do, I will now take on yet another cherished talking point that gets repeated ad naseum. “We are just winding back the clock to before 2015, when the Internet flourished and — to paraphrase  a popular song of the time from a different Lord Business — everything was awesome! Everything was cool when you were part of the team (cable)! ”

Like “the FTC, antitrust law and state law can handle net neutrality” and “the FTC can stop ISPs from blocking content/services,” this talking point is intended to be a “technically true but totally not the way you think/we imply” statement that lawyers, politicians and demons selling you wishes in exchange for your soul love to tell you to get you to sign on the dotted line. In this case, however, this statement turns out to be literally false to fact as well as false by implication. Below, I compare the regulatory regime in place on January 17, 2014 (the day after Verizon v. FCC) and the anticipated regulatory regime as it will exist on January 17, 2018, and explain the Top 3 Ways They Are Totally And Completely Different In Ways That Make Consumers Worse Off.

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In my last post, took the 4 most famous net neutrality violations to see how they would come out under the current rules adopted in 2015 v. how they would come out under the regulatory framework following the FCC vote to repeal net neutrality rules, based on the draft Order. To condense the approximately 5500 word analysis — all 4 incidents are addressable under the 2015 rules. None of the incidents are addressable under the combined Federal Trade Commission (FTC) and antitrust regime that remains after the vote to repeal the rules, with the exception of Comcast’s deliberate deception about their blocking peer-2-peer protocols in 2007-08.

Since most folks won’t plow through 5500 words of legal analysis, I’ve gotten some requests to specifically address the claims by FCC Chairman Ajit Pai and others that the FTC can address blocking as easily as the FCC and prevent any ISP from blocking any content or application. My short answer is: “No. The FTC CANNOT have a “no blocking” rule like the FCC has today. The FTC may stop an ISP from blocking content or services when it can prove that the blocking violates the antitrust laws, or that the blocking violates the ISP’s published terms of service, or if the ISP blocking causes (or is likely to cause) substantial harm to consumers and is not outweighed by countervailing benefits. And, as I covered extensively in my previous post, proving these things can be hard.

My somewhat longer answer, laid out in more detail below, is that Section 5 of the Federal Trade Commission Act, 15 USC 45, simply cannot do what Section 201(b) and Section 202(a) of the Communications Act (47 U.S.C. 201(b) & 202(a)) can do. The two statutes are designed and interpreted very differently. The FTC has very broad jurisdiction but fairly limited authority because it is a very generalist agency. More importantly, it is purely an enforcement agency — designed to prosecute companies from doing what I will refer to here as “bad stuff.” Note, it is not even designed to prevent companies from doing the bad stuff in the first place. It is designed purely to enforce a fairly general consumer protection statute. In particular, the FTC Act Amendments of 1994 severely limited the FTC’s enforcement authority by adding Section 5(n), which requires the FTC to overcome certain obstacles before it can find conduct “unfair” and thus unlawful under Section 5(a).

By contrast, Congress designed the FCC to ensure that our critical communications infrastructure functions in a consistent and stable manner and to explicitly promote all kinds of industrial policy like innovation, universal service, affordability, and to ensure that telecommunications services operate in a manner that serves “the public convenience and necessity.” This is critical because we don’t generally require businesses to serve the public interest, we limit this requirement to a fairly small number of specific industries that are absolutely critical to the functioning of our economy and important in our daily lives. As a result, in contrast to the FTC, the FCC has very broad authority over telecommunications services but virtually no authority over other stuff — like information services.

As I explain below, this makes it literally impossible for the FTC to simply prohibit blocking (let alone prohibit “fast lanes” or “slow lanes”) as the FCC does. To the contrary, under the FTCA, the FTC cannot prevent a broadband carrier from blocking any website, application or service it chooses unless it can prove that this blocking (a) causes (or is likely to cause) “substantial injury” to consumers, (b) there is no other way the consumer could reasonably avoid the harm, and (c) there are no countervailing consumer benefits. While Section 5(n) does allow the FTC to consider “established public policies as evidence to be considered with all other evidence. Such policy considerations may not serve as the primary basis” for a finding of unfairness. So even if we assume that there is an “established public policy” against blocking, that alone does not allow the FTC to stop a broadband provider from blocking content or applications.

And all this, of course, assumes the FTC even has authority to deal with broadband carriers reclassified as information services, which remains up in the air at the moment pending the Ninth Circuit resolution of the en banc rehearing of FTC v. AT&T Mobility.

I explain all this in more detail below . . .

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I have been personally involved in just about every major network neutrality issue since this began as “open access” in 1998. It gives me a somewhat different perspective than others, I expect. For one thing, I actually remember the various network neutrality violations we’ve had over the years — and how the FCC previously expected to address them.

FCC Chairman Ajit Pai’s proposed draft Order repealing net neutrality is, without doubt, the most dramatic and radical about face committed on this matter in the almost 20 years this issue has percolated. Among other things, it completely renounces any FCC oversight over the behavior of broadband providers. Back in 2002, when Chairman Michael Powell’s FCC issued the Cable Modem Declaratory Ruling, defenders of the FCC’s action dismissed the claim that the FCC was abandoning all regulatory oversight of broadband as “fear mongering.” Now, of course, Pai insists that the draft Order simply resets the clock to the golden age of 2014, and that those who insist the FCC ever exercised authority over last-mile broadband are “fear mongering.” To paraphrase Inigo Montoya of the Princess Bride, ‘you keep using that phrase. I do not think it means what you think it means.’

In particular, Pai and defenders of the draft Order insist that a combination of the Federal Trade Commission (FTC) Section 5 (15 U.S.C. 45), state consumer protection law, and anti-trust law will provide more than adequate protection for consumers and anyone who doubts this is — you guessed it — fear mongering. Happily, we do not need to speculate on this entirely. We can simply apply the proposed rules in the draft Order and the protections cited by the draft Order and its defenders and apply them to the four most significant network neutrality violations on record.

(1) The 2013-14 “peering dispute” between Netflix and the four largest broadband Internet access service (BIAS) providers — Comcast, Time Warner Cable (now Charter), AT&T and Verizon;

(2) The 2012 decision by AT&T to limit Facetime to the highest tier plan on its mobile service;

(3) The 2007-08 blocking of peer-2-peer (p2p) applications such as BitTorrent by Comcast;

(4) The 2005 blocking of Vonage VOIP calls by the ISP Madison River.

It’s worth noting as we begin the analysis that, while the draft Order does not discuss the Netflix/BIAS peering dispute at all, it does discuss the other 3 and explain why they were (a) not a big deal, and (b) would probably be permitted under the FCC’s new approach. But lets run through the exercise on our own. As discussed below, under the existing 2015 rules, the FCC can address and resolve each of these. Under the FTC/State consumer protection law/Sherman Act approach, the only one of these actions subject to any sanction is the 2008 Comcast/BitTorrent blocking, and even then only for the misrepresentations to customers denying its “network management” decision to disrupt p2p traffic. Assuming Comcast actually admitted to blocking/degrading p2p traffic when initially confronted in 2007, neither the FTC nor any of the other proposed remedies would have ended Comcast’s “network management practice.”

This result should not surprise us. After all, not only does the draft Order explicitly cover the 2012 AT&T/Facetime, 2008 Comcast/p2p fight, and the 2005 Madison River VOIP blocking and explain why they should have been permissible rather than subject to “heavy handed” FCC enforcement, but those defending the current draft Order as the Nirvana of “light touch” regulation defended each of these BIAS actions as entirely within the rights of the BIAS provider and an unwarranted interference on the part of the FCC. Whether or not one agrees that these actions were appropriate network management/market negotiation decisions by broadband providers, no one can deny the rules adopted in 2015 expressly prohibits these four incidents whereas the rules in the draft Order expressly permit them.

More detail below . . .

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