The net neutrality roadblock: Now only Congress can act

Original printing ©2010 BetaNews, Inc.

During President Obama’s first term of office, the administration attempted to define itself by the principles it would uphold, some of which were introduced during Mr. Obama’s campaign. One of those principles was “net neutrality,” which Federal Communications Commission Chairman Julius Genachowski would declare to be “official principles.” But could an official principle be enforced? In April of 2010, the US Supreme Court ruled no, in favor of service providers who argued they can’t be held liable for following the government’s suggestions.

A word about content strategy here: Betanews began its life as a blog about “beta software.” In the era before app stores, developers would often publish early versions of their products for free dissemination by the public, as “public betas.” One of the world’s most frequented locations (for a time, the #1 location) for downloading Windows-based public betas, was the Betanews FileForum. When I became Managing Editor there, my content strategy was to move the publication towards specific areas of technology that were not about “public betas,” leveraging the site’s unimpeachable domain strength to gain traction against technology news sites that did not also have beta download centers. CNET answered this strategy by spending millions to acquire Download.com, which it still owns and maintains. But even then, CNET could not match the authority level Betanews had obtained on topics such as net neutrality, which it essentially owned throughout 2009 and 2010.

Where do the new media of the Internet stop, and the government regulatory bodies created for old media begin? A decision in favor of Comcast on Tuesday by the DC Circuit Court of Appeals does not answer that question; on the contrary, it actually asks the question all over again, this time under closer scrutiny from both the courts and the general public.

Federal Communications Commission Chairman Julius Genachowski explains his “Open Internet Order” during a press conference following an FCC Open Meeting, December 10, 2010.

Tuesday's overturning of a Federal Communications Commission order that Comcast stop throttling certain applications of its Internet traffic, is a blow to proponents of the net neutrality provisions recently outlined as official principles by FCC Chairman Julius Genachowski. "Official principles" are not laws, and thus cannot be regulated -- that's what the DC Circuit Court of Appeals has ruled.

It doesn't mean the FCC should not be the regulator of net neutrality, at some later point in history, should the law be changed. The Court's ruling effectively states the FCC lacks the authority to do so today. And that little problem can be traced back to June 2006, when Congress began a long and poorly camouflaged process of punting responsibility for the net neutrality issue over to the FCC.

Stopping COPE

It was then that a bill that would have created an alternative national licensing scheme for broadband Internet services, was stalled by a tidal wave of bad luck. As originally proposed by then-Chairman of the House Energy & Commerce Committee Joe Barton (R - Texas), the Communications Opportunity, Promotion, and Enhancement Act (COPE) was skillfully offered as an "amendment" to an existing bill...which, in the markup committee, actually replaced the entire existing bill with COPE's new language. It would have given incentives for prospective national licensees, in the form of waivers enabling them to charge service tiers for variable bandwidth. An amendment to the COPE bill attached to the Senate version of that legislation, authored by Sen. Ron Wyden (D - Ore.), was designed not so much to be passed as to be voted on: It effectively struck that incentive provision from the COPE legislation, using language that would become the basis for Congress' long-debated "Network Neutrality Bill."

The amendment did what it was designed to do: It galvanized opposition from Republicans who then constituted the majority in Congress, enabling some to be peeled away -- most notably among them, Sen. Olympia Snowe (R - Maine). And partly by way of its own failure (voted down in a 269-152 House vote to kill debate), it effectively sunk Republican efforts through the remainder of the term to limit debate on the part of the COPE bill they wanted to pass. When Congress changed hands the following term, the COPE bill was left to rot on the table.

As Democrats began the following term of Congress in charge of both houses, rather than act to pass Sen. Wyden's language as a bill unto itself, they chose instead to shift the whole debate to the FCC. Its chairpersons at the time -- Michael Powell, and later Kevin Martin -- were in favor of net neutrality regulation. In fact, it was Powell who broke with the Republican Party to author the language of his Commission's first four net neutrality principles as the "Four Freedoms," which were borrowed by current chairman Julius Genachowski for the current six principles.

Deferring the debate may have allowed Democrats in Congress to dodge a possible bullet of revenge, where Republicans would have used the same tactics to amend the Wyden bill in such a way that it wouldn't have passed anyway. This way, the bill doesn't pass, but no one gets blamed.

Until last Tuesday, when the DC Circuit found that Congress doing nothing does not, by definition, instill the FCC with any authority to do something. As the three-judges stated in their opinion, Comcast argued that the FCC only presumed it had the authority to act when it ordered Comcast to stop throttling BitTorrent traffic in August 2008. In fact, the judges agreed, the FCC first had to prove it had that authority; and by failing to offer that proof, it could not then act.

"Ancillary authority"

The problem with assuming the FCC will take care of things with regard to Internet communication is that the legal definition of "communications" (the kind that government can regulate) is not completely compatible with the constitution of Internet traffic. It's easy to assume, especially during the first paragraphs of political speeches, that the Internet is the next step up from the telephone and the public airwaves. But if you perceive the Internet as the medium, in the same context that the airwaves are a medium, then it isn't exactly public. Companies like Comcast helped build the thing.

US law has granted the FCC a kind of limited authority to regulate communications that move from a medium the FCC unquestionably regulates, like the phone or the airwaves, to a different medium. For lack of any other term, it's called ancillary authority, dating back to a 1968 decision cited by the DC Court of Appeals on Tuesday. Forty-two years ago, an early cable TV company called Southwestern Cable captured distant TV signals using powerful antennas, and retransmitted them to customers in rural areas via cable. Did the FCC have the authority to regulate that activity -- for instance to tell Southwestern which signals it could retransmit and which ones it couldn't?

Yes, ruled the Supreme Court, in a decision that the FCC presumed would set precedent for today. As the DC Court described in its decision: "Seeking to protect Commission-licensed local broadcasters, the Commission adopted rules limiting the extent to which cable systems could retransmit distant signals and, in the order at issue in Southwestern Cable, applied this policy to a particular company. The Supreme Court sustained that order, explaining that even though the then-existing Communications Act gave the Commission no express authority over cable television, the Commission could nonetheless regulate cable television to the extent 'reasonably ancillary to the effective performance of the Commission's various responsibilities for the regulation of television broadcasting.'"

Now, you might be thinking at this point, the Internet isn't exactly a rerun service for TV. Maybe, but keep in mind that Comcast already operates "TV Anywhere," and is preparing to purchase the parent company of Hulu.

Back in the late '60s, the Supreme Court actually did not decide for certain whether the FCC had the authority to regulate anything anyone did with the content of the public airwaves -- otherwise, the case might have set precedent with future copyright infringement cases surrounding the use of the VCR. Instead, it simply created this concept of ancillary authority. Four years later, the Supreme Court established a precedent whereby the meaning of ancillary authority was determined on a case-by-case basis. In one case involving a cable operator named Midwest Video, the high court ruled that cable operators must deliver some type of programming other than that captured over the public airwaves, and that requirement could indeed be regulated by the FCC. But in a second, later case involving the same Midwest Video, the same court ruled that the FCC overstepped its bounds by requiring the cable company to carry some channels exclusively in the public interest.

The precedent was the idea that there must be some borderline where FCC jurisdiction ends and private interests begin, and the courts would find them when they got to them. That made sense in the 1970s.

But the way Congress left the state of US law in 2006, companies that petition for the right to provide Internet service must, by definition (rather than any type of practicality), be petitioning for the right to provide television service as well. That's one reason why television companies have limited monopolies over broadband service in regions across the country. COPE would have changed that, but it could only do so if it could also define a national licensing scheme. Otherwise, the courts might have struck down the COPE law as stepping on states' rights. Currently, it's states, cities, and municipalities that have the right to issue cable licenses, and thus broadband licenses, in their areas. And since they have no interest in changing the status quo, broadband companies must also petition for TV rights...town by town."Subject matter jurisdiction"

Back in 2005, the FCC was defending its right to enforce rules regarding the use of the broadcast flag -- the little signal attached to a digital broadcast that would disable anyone from recording the broadcast. After a challenge from the American Library Association, the DC Circuit made perhaps the first-ever ruling establishing, word for word, just what the FCC's "ancillary authority" meant: "The Commission...may exercise ancillary jurisdiction only when two conditions are satisfied: (1) the Commission's general jurisdictional grant under Title I [of the Communications Act] covers the regulated subject and (2) the regulations are reasonably ancillary to the Commission's effective performance of its statutorily mandated responsibilities."

Meaning, the FCC could do what's necessary with regard to regulating certain other media, in order to protect the interests of the media it already covers. That ruling introduced new language: "the regulated subject." In its defense of regulating how Comcast polices its Internet traffic, the FCC maintained that, by virtue of the fact that communications do take place over the Internet, and "Communications" is the FCC's middle name, it therefore has subject matter jurisdiction over Internet matters. It's that same language that the FCC uses to defend its authority to introduce the six principles, and the basis of its national Broadband Plan.

The problem with the concept of subject matter jurisdiction, courts including the DC Circuit have warned, is that it can be used as a kind of rubber stamp, to assume that simply because a circumstance applies to X, it can or must also apply to Y. The Supreme Court, by setting the case-by-case precedent in the two Midwest Video cases, clearly showed no such rubber stamp existed. And thus when the FCC itself tried to use the Midwest cases in its own assertions that ancillary authority can apply, it opened the door for the DC Circuit to demonstrate that it does not always apply.

Here is where it all comes back to what Congress failed to do in 2006: Anything that does not fall under the "ancillary" category of the FCC's authority, the DC Circuit said, must be explicitly scoped out for it by Congress. Anything ancillary thus becomes authority assumed for the sake of preserving what's already scoped out. You can't use "subject matter" to assume something outside that scope.

In Midwest Video II, the Supreme Court rejected the Commission's assertion of ancillary authority to impose a public access requirement on certain cable channels because doing so would "relegate cable systems . . . to common carrier status."...Pointing out that the Communications Act expressly prohibits common carrier regulation of broadcasters...the Court held that given the derivative nature of ancillary jurisdiction the same prohibition applied to the Commission's regulation of cable providers. The Commission had opposed this logic, arguing that it could regulate "so long as the rules promote statutory objectives." The Court rejected that broad claim and, revealing the flaw in the argument the Commission makes here, emphasized that "without reference to the provisions of the Act directly governing broadcasting, the Commission's [ancillary] jurisdiction . . . would be unbounded."..."Though afforded wide latitude in its supervision over communication by wire," the Court added, "the Commission was not delegated unrestrained authority."

The teaching of Southwestern Cable, Midwest Video I, Midwest Video II, and [other cases] -- that policy statements alone cannot provide the basis for the Commission's exercise of ancillary authority -- derives from the "axiomatic" principle that "administrative agencies may [act] only pursuant to authority delegated to them by Congress."...Policy statements are just that -- statements of policy. They are not delegations of regulatory authority. To be sure, statements of congressional policy can help delineate the contours of statutory authority. Consider, for example, the various services over which the Commission enjoys express statutory authority. When exercising its Title II authority to set "just and reasonable" rates for phone service...or its Title III authority to grant broadcasting licenses in the "public convenience, interest, or necessity"...or its Title VI authority to prohibit "unfair methods of competition" by cable operators that limit consumer access to certain types of television programming...the Commission must bear in mind section 1's objective of "Nation-wide . . . wire and radio communication service . . . at reasonable charges."...In all three examples, section 1's policy goal undoubtedly illuminates the scope of the "authority delegated to [the Commission] by Congress"...though it is Titles II, III, and VI that do the delegating. So too with respect to the Commission's section 4(i) ancillary authority. Although policy statements may illuminate that authority, it is Title II, III, or VI to which the authority must ultimately be ancillary.

Congress had planned to leave it up to the FCC to set the stage for the direction of broadband regulation for this century, and then to follow its lead. Those plans have now been blown to smithereens. Although the Supreme Court still trumps the DC Circuit, there's very little chance the John Roberts court would overturn this ruling.

What this ruling effectively means is that the regulatory body that mandates the absolute neutrality of the use of the Internet does not exist...Not yet.