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Oct112011

Net Neutrality Fight Intensifies - In Washington Anyway

Seven Court Challenges Consolidated but not Akin

The digital ink is practically still drying on the September 23 Federal Register, where the infamous Open Internet Order (Net Neutrality) rules were finally published nearly 10 months after being narrowly approved at the FCC. As anticipated, Verizon wasted no time in filing an appeal, and the FCC likewise wasted no time in filing a motion to dismiss Verizon’s appeal. Challenges from six other organizations have quickly been consolidated with Verizon’s appeal, and the U.S. Appeals Court in Washington was chosen “randomly” as the venue for Verizon v. FCC. This very same court ruled in the Comcast case last year that the FCC lacked authority regulate the Internet, so things might get really interesting once this case gets rolling. All this action already, in less than 3 weeks!

Things also get really interesting when you look at where the opposition is coming from- Verizon was completely expected, but the first challenger was actually liberal media reform group Free Press who has been one of the most vocal advocates for strong Net Neutrality rules. Free Press contends that the rules do not go far enough to protect mobile consumers because mobile broadband providers are not subject to the same set of rules as wireline providers. Free Press policy director Matt Wood argued that the differentiation between wired and mobile broadband “[fails] to protect wireless users from discrimination, and they let mobile providers block innovative applications with impunity.” Free Press filed its Petition for Review in the U.S. Court of Appeals for the First Circuit in Boston.

Possibly in a coordinated effort to keep the case out of the D.C. Appeals Court, National Journal reports that Media Access Project, Media Mobilizing Project, Access Humboldt, and Mountain Area Information Network have filed similar petitions as Free Press in courts across the country, and “the groups could be looking to increase their odds of getting a sympathetic court…The more courts involved, the less likely it will end up in D.C., statistically speaking.” Well, it looks like the odds were against these groups, and the case will be heard in D.C. where Verizon filed. Yes, the liberal hard-line pro-Net Neutrality advocates’ petitions will be consolidated with Verizon’s decidedly anti-Net Neutrality appeal.

The crux of Verizon’s argument is that the Open Internet Order is “(1) in excess of the Commission’s statutory authority; (2) is arbitrary, capricious and an abuse of discretion within the meaning of the Administrative Procedure Act; (3) contrary to constitutional right, and (4) is otherwise contrary to law.” Verizon filed pursuant to 47 U.S.C. § 402(b)(5) which grants the DC Appeals Court “exclusive jurisdiction over FCC decisions that modify individual radio licenses.” However, in its Motion to Dismiss, the FCC contends that the Net Neutrality decision does not modify individual radio licenses, and “402(b)(5) applies only when this Court is asked to review an FCC order that modifies specific individual licenses, not generally applicable orders like this one.”

The FCC’s Motion to Dismiss outlines a long list of precedents and legislative history where 402(b)(5) has only applied to specific modifications of individual licenses, not general rulemakings like Net Neutrality. The FCC argues that the Net Neutrality rules are “basic rules to govern the conduct of all broadband Internet access service providers, both fixed and mobile…not directed at any specific broadband provider and [do] not purport to modify any specific license.” A point that I found interesting in the FCC’s Motion to Dismiss was that Verizon, as a wireline and wireless provider, “would be subject to the Order even if it did not hold a radio license.” Even though the rules for wireline broadband providers are more restrictive, Verizon is challenging the wireless rules specifically—just like Free Press et al, only from a vastly different perspective.

From my Washington perspective, this rapid, polarized activity is fascinating and dramatic; but what does this all mean for the rural providers beyond the Beltway? RLECs have remained fairly neutral in this whole ordeal (The ILEC Advisor: Brace Yourself for the Net Neutrality Rules), aside from some grumbling about extra paperwork and network management rights. It gets stickier when you start thinking about the long-term implications of the Net Neutrality rules for small ISPs, especially considering the growing bandwidth crunch and the possibility that small carriers may no longer be able to collect fair access revenue to help offset network investment costs.

While following both the Net Neutrality and USF/ICC reform debates, I can’t help but ask: is the Net Neutrality fiasco a foreboding of what lies ahead for the USF/ICC reforms? Will it take 10 months for the final USF/ICC rules to be published, only to be slammed with opposition and heavy-hitting court cases within weeks of publication? This is mere speculation, but it is definitely interesting to compare the similarities of these two groundbreaking and game-changing rulemakings…

First, one could argue that both sets of rules are to some extent Chairman Genachowski’s special babies. They are both controversial decisions with potentially widespread ramifications spearheaded primarily by the FCC Chairman. Genachowski seemed to be the only commissioner who actually approved of the Net Neutrality rules, with the other four commissioners falling firmly on the left and right of his position. The Commission votes on USF/ICC on October 27, and with one commissioner short it will be interesting to see if Genachowski’s rules slide through unopposed.

Moving on, both sets of rules have been in the making for many years and have hit significant roadblocks along the way—USF/ICC reform nearly happened a few years ago and was scrapped when Commissioners couldn’t agree; and the Net Neutrality rules stumbled hard on the Comcast decision. The two sets of rules are both stretching the FCC’s authority over the Internet, and both have instigated a significant amount of tension between the industry, Congress, the FCC and consumers. There are familiar battle lines in both rulemaking proceedings—consumers vs. industry, industry vs. FCC, FCC vs. Congress. For example, the argument that consumers feel taken advantage of by telecom corporations could be used interchangeably to describe tensions in either rulemaking.

There is also considerable polarization within the industry, especially with USF/ICC, where ILECs, wireless and cable have been facing off with very little agreement throughout the proceeding. The final Net Neutrality rules, and the likely final USF/ICC rules, are largely the result of a so-called “industry consensus,” but the actual level of consensus in both situations is debatable. In both proceedings, extreme arguments that the rules (or lack of rules) will destroy innovation, stifle investment, and prohibit broadband deployment and adoption have been cited with high frequency by most stakeholders.

So, will the USF/ICC reform follow the same bumpy road as Net Neutrality once the rules are approved at the FCC? Will the Net Neutrality and USF/ICC rules primarily just maintain the status quo, or will they each deliver radical changes to help bring telecommunications policy into the broadband era, as they both promise to do? And, what are the short- and long-term implications of these two rulemakings together for RLECs?

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