Martin Gets the Ball Rolling On “Blocking” Investigation: What Does It Mean And What Happens Next?

As always, I am impressed with the ability of so many people to hate whatever Kevin Martin does, and for so many different reasons! At CES, Martin announced that the FCC would investigate allegations of blocking content and determine whether they violated the FCC’s four broadband principles. Comcast pledged to cooperate in any investigation (although, unsurprisingly, Comcast representatives — along with supposed object of Martin’s affection AT&T and other big telcos and cablecos — said at CES they would restructure or eliminate FCC altogether).

As I said in my PK blog post, while details remain unclear, I am “cautiously optimistic” that this will be a good thing. But it did not take long for the folks in the “Martin is a bastard 24/7 crwd” to express themselves. DSL reports doubted this would go anywhere, while the “why ya gotta hate on cable” crowd at Techdirt opined that Martin would never investigate if it were a telco rather than a cable co.

So we flash forward to yesterday, when new developments began to percolate out of the FCC. Of significance:

1) The FCC issued a public notice asking for comment on our Petition for Declaratory Ruling that Comcast’s “network management practice” of messing with BitTorrent uploads violated the FCC’s “Broadband Policy Statement,” which includes a principle that network operators may not block or degrade content or applications. In a separate public notice (but as part of the same proceeding), the FCC also seeks comment on the Vuze Petition for Rulemaking on how broadband access providers handle and shape IP traffic generally. (Copy of Vuze Petition here, copy of our Petition here).

2) Separately, the FCC issued a separate public notice seeking comment on a Petition filed by Public Knowledge and the usual suspects asking the FCC to declare that wireless carriers cannot deny short codes or block text messaging. This goes after Verizon’s high profile “oopsie” of denying a request by NARAL for a short code. Although, as we pointed out in the Petition, the more likely and pernicious problem is with plain old anticompetitive blocking, such as denying a short code to VOIP provider Rebtel.com and denying applications to major banks offering competing services.

3) Comcast confirmed that the FCC has lanched a formal inquiry into whether it violated the FCC’s broadband policy statement. Comcast reiterated that it will fully cooperate with the FCC, and expects any investigation to show that Comcast did not block content and has engaged in legitimate network management practices.

Not bad for a commitment made a week ago. But what does it mean and where will it go from here? Analysis below . . . .

Not that I expect the “Martin loves the telcos and picks on the poor little cable cos” crowd to cease their whining, but Martin has so far made good on his commitment at CES to fully investigate any complaints or allegations of “blocking consumers from content.” Of course, launching an investigation is just the first step. But any investigation must take place by the numbers (particularly given the widespread complaints that Martin has turned the FCC into his private kingdom without due process).

So what happens next?

The Complaint

So far, this is what you would expect. Enforcement investigations are closed proceedings, so we will not know anything about the investigation of the complaint against Comcast, except what Comcast or the FCC chose to disclose, until the FCC concludes its investigation and makes a determination. Assuming the complaint is handled by the Enforcement Bureau (although it could arguably go to either the Wireline Competition Bureau or the Media Bureau). Whichever Bureau handles the complaint, the Bureau could either conclude that a violation took place, or make a recommendation to the full Commission for a vote. If the Bureau makes a determination against Comcast, Comcast can appeal to the full Commission. Alternatively, if we lose, we can appeal such a determination to the full Commission.

For Martin, the advantage of having the Bureau take a first crack at it is that it gives him greater control. The Bureau Chiefs are appointed by the Chairman, and report directly to the Chair rather than to the full Commission (this is part of what makes being Chair so powerful, despite being only one vote on a Commission decision like any other Commissioner). By contrast, a decision by the Commission requires three votes, placing Martin in the position of being once again caught between his fellow Republicans, who will want to do as little as possible, and the Democrats, who will want to take a very aggressive approach. That means a decision could get stuck “on circulation” among the Commissioners, without any consensus for a vote.

If the Bureau makes an initial determination, than that determination becomes the applicable rule until the Commission votes on any appeal. And by the time the Bureau makes a decision and an appeal gets filed, we are likely to be at the point in the Washington cycle where no one wants to do anything controversial until they know how the election comes out. So it would make sense for Martin, if he wants to exercise maximum control over the outcome and be seen as being aggressive in terms of acting on the complaints, to go for a Bureau decision first.

But the FCC rules do not delegate authority to Bureau Chiefs to decide novel questions of law, or forfeitures that exceed certain dollar amounts (I’d need to go check the specific delegations for each Bureau). This is a case of first impression, and potentially involves millions of dollars in fines. That puts pressure on Martin, particularly in light of the The House Commerce Committee’s investigation into the fairness of FCC procedures, to go for a full Commission vote in the first instance. That gives Martin political cover, since any vote will automatically have the support of at least 2 other Commissioners, and any complaints by critics that the resultant Order is either too harsh or not harsh enough can be explained as compromise politics to get the needed votes. But such a course must inevitably take longer, and may end up running out the election clock.

Ultimately, however, launching the investigation is a shrewd move by Martin, whether or not he has a specific result in mind. By responding to the complaint, Martin shows his Democratic Congressional critics that he cares about consumer complaints and will process them according to appropriate procedures. At the same time, he satisfies Republican critics who insist that there is not enough information to determine whether Comcast or other broadband providers that “delay” traffic (such as Cox) have violated the FCC’s principles. Since it is a complicated issue, we can legitimately expect that the investigation will run at least a month or two — especially if the FCC investigators decide they need to broaden the scope of the investigation or survey the rest of the industry to educate themselves on the issue.

Bottom line: no way to tell from this what’s actually going on or how long it will take. But Martin has done everything that we could wish, and in a reasonable time frame. I therefore remain cautiously optimistic.

The Public Notices: The Petitions For Declaratory Ruling

For a start, applause to Martin for going after text the wireless issues as well as the BitTorrent issue. Of course, in addition to being the right thing to do, it is also the politically smart thing to do. Martin now has a ready reply to the folks who keep trying to make this into a “Martin loves the phone companies but hates the cable cos” debate rather than a debate on the merits. Of course, die-hard critics will never be satisfied. But the public notice on short code blocking goes in the same category as other wireless issues like adopting the C Block rules for the 700 MHz auction, telco competition issues such as denying Verizon’s forebearance petition, something that doesn’t make sense for a pure telco shill but makes perfect sense given my take on Martin’s overall philosophy.

That said, I notice some interesting things here. These are public notices issued by the Bureaus. Had the FCC wanted to bury this while complying with its legal obligations, it could have issued a one line notice in the Federal Register as part of a list of petitions and other items the law requires go out on public notice. Instead, the FCC issued a full page, Bureau level public notice. That’s pretty standard for petitions that potentially raise significant questions and where the FCC wants to facilitate public input.

For the tea-leaf readers, I note that the FCC decided to role the Petitions on broadband network management into the pending Notice of Inquiry on Broadband Industry Practices. That lets Martin move forward more quickly, and includes in the record of these inquiries anything useful already submitted on the general question. It has the added benefit of consistency with the FCC’s treatment of these services as ancillary to Title II Telecom services rather than saying “well, it involves a cable system, so we’ll go with the Media Bureau.” It also places the Petitions under the purview of the Wireless Competition Bureau rather than the Media Bureau, which is good news from a fairness perspective. The Wireless Competition Bureau, as an institutional matter, is a lot less sympathetic (relatively) to the industries it regulates than the Media Bureau has been, especially where cable is concerned. The text messaging Petition, for obvious reasons, is going to the Wireless Bureau (which, as regular readers know, does not exactly thrill me, given their history of regarding wireless providers as “clients” to be nurtured, protected, and serviced).

The Petitions for Declaratory ruling present the FCC with a straight up and down choice: Does the kind of “network management” practiced by Comcast violate the FCC’s Broadband Policy Statement? In this regard, the Petition for Declaratory Ruling is similar to the enforcement complaint. Why did we file this apparently redundant Petition? Because unlike the complaint, the Petition is an open process and will enjoy broad public input. True, it can’t lead to a fine or punishment. But it provides the FCC to declare in a manner potentially applicable to all providers what sort of “network management” it will or will not tolerate under the Broadband Policy Statement. Further, in the event Comcast or other party appeals, the FCC will (as a practical matter) enjoy greater deference from a reviewing court without muddying the issue by whether it was fair to punish Comcast for conduct that was arguably permissible.

The Petition for Declaratory Ruling on text blocking offers a similar up or down approach on how to handle text messaging. Because of the muddle around this issue created by the FCC’s previous declaratory ruling on wireless broadband and previous “hands off” treatment of wireless services, as well as the complicated legal questions relating to whether text messaging is a Title II “Telecommunications Service” or a Title I “Information Service” (you can see why this is important in my old Net Neutrality Primer here), there was no way we wanted to file an enforcement complaint on this one. Happily, because of the way a Petition for Declaratory Ruling works, the FCC can say “Verizon and the other wireless carriers did nothing wrong, but we are now declaring that such conduct violates the law.” That is, if the FCC wants to make such a finding.

Mind you, a declaratory ruling may not resolve the issue. Either decision can become a spring board for investigating further issues or for proposing rules, or both. But the most likely outcome will include, at a minimum, an answer to the basic question contained in the Petition. Is messing with BitTorrent Uploads and denying it a “reasonable network practice?” And can cellular providers tell those requesting text codes to take a hike if they dislike their political views or offer competing services?

In both cases, the Bureau can make a preliminary ruling first (subject to appeal to the full Commission), or the Commissioners can vote on a decision in the first instance. Given the novel questions of law presented and the political interests involved, I am betting on a decision by the Commission rather than at the Bureau level. But that raises the stakes politically, and will make it much harder for the Commission to reach agreement. Whereas the complaint against Comcast can rely on the narrow facts of that case, and could hold that deliberately misleading customers is per se unreasonable without reaching the merits of the rest of the arguments, the FCC really can’t get away with that in the context of a Declaratory Ruling. Further, the Commissioners have incentive to see who wins the Presidential nominations or even the general election, which may determine the desirability of trying to roll this over to the next FCC for either the Dems or the Rs. So don’t look for resolution on this any time soon.

The Vuze Petition For Rulemaking

In theory, the FCC could have gotten more aggressive if it wanted to do so, at least on the Vuze Petition for Rulemaking. The FCC has pending before it a Notice of Inquiry on Broadband Industry Practices. Indeed, it makes both the Petition for An aggressive FCC could have gone directly to a Notice of Proposed Rulemaking (effectively granting the Vuze Petition, using the data collected in that proceeding to formulate proposed rules that respond to Vuze’s Petition. But I cannot imagine the Republicans going along with such a proposal, and even the Dems probably want more info before proposing specific rules. So I don’t see the decision to issue a public notice on the Vuze Rulemaking Petition rather than going directly to a Rulemaking as a real criticism. While it was theoretically possible to go right to proposed rules, it was neither practical nor politically feasible.

So instead, parties will push the FCC to have a rulemaking, and suggest what the proposd rules will be. Others will oppose a rulemaking, arguing that at the very least, the FCC should wait and see how the Comcast complaint and the Petition for Declaratory Ruling come out.

If Martin wants to avoid rules and stick with adjudications like this one, he almost certainly has three votes in his other two Republicans to deny the Vuze Petition outright. But doing so may prove politically awkward if the Commission cannot simultaneously come to any conclusions on the other items. It would seem rather ridiculous to determine the FCC doesn’t need rules because its processes work just fine, only to have the FCC subsequently rule that it has no authority under the Broadband Policy Statement to actually enforce its principles (a possible, if unlikely, outcome). A speedy denial of the Vuze Rulemaking Petition would also galvanize Congressional supporters of network neutrality legislation, and would certainly draw fire from Congressional Dems as another example of a broken FCC rushing to judgment.

So, while I give the Vuze Rulemaking Petition the least likely chance of being granted, I do not expect the FCC to issue a decision until it is ready to issue a decision on the Comcast Petition for Declaratory Ruling. In any event, I expect all of these to take several months at least, although we will be quite busy filing comments.

How Do I File Comments?

If you want to file comments in response to the Public Notices, the relevant dockets are:
Free Press, et al. Petition for Declaratory Ruling: WC 07-52;

Vuze Peition for Rulemaking: WC 07-52;

Public Knowledge, et al. Petition on Text Messaging: WB 08-7.

All Petitions have a comment deadline of February 13 (30 days from publication), with replies due February 28 (15 days later). But, since these are all “permit but disclose” proceedings, the FCC will take comment until just before it issues a decision.

Still Feeling Cautiously Optimistic?

Yes. While you can never tell how things will come out, these proceedings are moving along at a reasonable rate and along a reasonable path. Certainly we need to see how it plays out, and it is way too premature to start declaring that Martin has already made a decision one way or another. But even in the best of circumstances, we are looking at months before anything gets resolved.

Stay tuned . . . .