Comments of R Street Institute · Properly conceived, 20Net Neutrality can offer tremendous benefits for both competition and consumers. As we have made clear, we support Net Neutrality

105017thStreet,N.W. Suite1150Washington,DC20036 FreeMarkets.RealSolutions.202.525.5717 www.rstreet.org ________________________________________________ ) )IntheMatterof ) ) WCDocketNo.17-108RestoringInternetFreedom ) )________________________________________________)

CommentsofRStreetInstitute

Respectfullysubmitted, /s/ TomStruble TechnologyPolicyManager JoeKane

TechnologyPolicyAssociateJuly17,2017

2|R S t r e e t I n s t i t u t e

TableofContentsCommentsofRStreetInstitute...........................................................................................................................1

TableofContents......................................................................................................................................................2

I. Introduction&Summary........................................................................................................................3

II. RestoringtheLight-TouchRegulatoryFrameworkforBroadband.....................................5

A. TitleIIisNotFitforBroadband......................................................................................................8

B. TitleIandAncillaryAuthorityProvideAdequateAuthorityforLight-TouchNet

NeutralityRegulations.....................................................................................................................12

C. Section706ProvidesAdditionalSupportfortheCommission’sExerciseof

AncillaryAuthorityOverBroadband.........................................................................................15

III. Clear&SimpleRulesoftheRoadforNetNeutrality...............................................................17

A. ReconsideringtheCurrentRules................................................................................................18

1. TheBanonBlockingisSuperfluous&Unconstitutional..............................................18

2. TheBanonThrottlingisSuperfluous&Counterproductive......................................21

3. TheBanonPaidPrioritizationisAlsoSuperfluous&Counterproductive...........23

4. TheAmorphousGeneral-ConductStandardShouldbeEliminated........................26

B. ImplementingClear&SimpleRulesoftheRoad..................................................................27

1. EnsuringTransparency..............................................................................................................28

2. PolicingUnreasonableDiscrimination&AnticompetitiveBehavior......................31

IV. Conclusion..................................................................................................................................................34


I. Introduction&Summary

TheFederalCommunicationsCommission(“FCC”or“Commission”)wascreatedby

Congressin19341fortheexpresspurposeof“regulatinginterstateandforeigncommerce

incommunicationsbywireandradiosoastomakeavailable,sofaraspossible,toallthe

peopleoftheUnitedStates...arapid,Nation-wideandworld-widewireandradio

communicationservicewithadequatefacilitiesatreasonablecharges[.]”2Basedonthat

broadgrantofjurisdictioninTitleIoftheCommunicationsAct,3regulationofbroadband

Internetaccessservice(“broadband”)isclearlywithintheFCC’spurview.4Whatremains

unclearistheextenttowhichtheFCCshould,ormust,regulatebroadbandinordertofulfill

itsvariousstatutoryresponsibilities.

Forliterallydecades,partieshavearguedforandagainstdifferentformsof

broadbandregulationattheFCC.In2015,theFCCaccededtocallsforgreaterregulationby

reclassifyingbroadbandunderthecommon-carrierframeworkofTitleIIofthe

1CommunicationsActof1934,Pub.L.No.73-416,48Stat.1064(1934)[“CommunicationsAct”or“1934Act”],asamendedbytheTelecommunicationsActof1996,Pub.L.No.104-104,110Stat.56(1996)[“TelecommunicationsAct”or“1996Act”],andtheBroadbandDataImprovementAct,Pub.L.No.110-385,122Stat.4096(2008).TheCommunicationsActhasnotbeencodifiedintopositivelaw,sothetextwillrefertosectionsastheyappearintheActitself.However,foreaseofreference,footnoteswillrefertosectionsastheycurrentlyappearintheU.S.Code.247U.S.C.§151.347U.S.C.§§151–62[“TitleI”].4Id;seealso47U.S.C.§152(“Theprovisionsofthischapterapplytoallinterstateandforeigncommunicationsbywireorradioandallinterstateandforeigntransmissionofenergybyradio,whichoriginatesand/orisreceivedwithintheUnitedStates,andtoallpersonsengagedwithintheUnitedStatesinsuchcommunicationorsuchtransmissionofenergybyradio[.]”);47U.S.C.§154(i)(“TheCommissionmayperformanyandallacts,makesuchrulesandregulations,andissuesuchorders,notinconsistentwiththischapter,asmaybenecessaryintheexecutionofitsfunctions.”).


CommunicationsAct,5whilealsoadoptingseveralbright-linerulesandanamorphous

general-conductstandardtopoliceanybehaviorbybroadbandprovidersthatwouldharm

consumersorviolateprinciplesofso-called"NetNeutrality."6Now,theCommissionhas

proposedtoreconsidercertainportionsofthe2015Orderandadoptamore“light-touch”

regulatoryframeworkforbroadband.7Wesupportthisproposal.

Inthesecomments,weexplainwhylight-touchregulation,basedonTitleIofthe

CommunicationsActandancillaryauthority,isthebestpossibleframeworkforbroadband

regulationandNetNeutralitythattheCommissioncanconstructusingitscurrentstatutory

toolkit.8Wealsoexplainwhyvariousrulesfromthe2015Ordershouldbereconsidered.

Lastly,welayoutoursuggestionsforbasicrulesoftheroadthattheCommissionshould

adopttoregulatebroadbandgoingforward.Thesetworegulations,regardingtransparency

andunreasonablediscrimination,shouldbeadequatetoprotectconsumersandpolice

potentialunfaircompetitionbybroadbandproviders.Thislight-touchframeworkwillalso

promotefutureinnovationandcompetitionamongbroadbandprovidersandedge

providers,altogethermakingitvastlysuperiortotheframeworkadoptedinthe2015

Order.

547U.S.C.§§201–76[“TitleII”].6SeeProtectingandPromotingtheOpenInternet,ReportandOrderonRemand,DeclaratoryRuling,andOrder,GNDocketNo.14-28(Mar.12,2015)[“2015Order”],availableathttps://goo.gl/dvjEUP.7SeeRestoringInternetFreedom,NoticeofProposedRulemaking,WCDocketNo.17-108(May23,2017)[“NPRM”],availableathttps://goo.gl/ecJJPM.8Ideally,Congresswillsoonresolvethepolicybattleoverbroadbandregulationbypassingnewlegislation.However,unlessanduntilthathappens,theFCCmustpressaheadanddothebestitcanwithinitscurrentlegislativeframework.


II. RestoringtheLight-TouchRegulatoryFrameworkforBroadband

TheCommissionhasbeenregulatingtelephonyandtelegraphservicesunderTitleII

fornearlyacentury,butbroadbandhistoricallyhasbeentreatedwithalightertouch.9The

FCClongmadeconcertedeffortstosparenewservices,likebroadband,fromthe“morass”

ofregulationsinTitleIIthatstifledinnovationandcompetitioninthetelecommunications

sectorfordecades.10Asaresultofthislight-touchpolicy,broadbandandotherso-called

“EnhancedServices”flourished,totheimmensebenefitofconsumers.

Throughthelate20thcenturyandearly2000s,thewisdomofthislight-touchpolicy

wascommonlyacceptedbyRepublicansandDemocratsalike.11Asrecentlyas2010,the

Democrat-ledFCCinsistedonalight-touchapproachtobroadbandregulation,12evenamid

9See,e.g.,2015Order¶¶310–27(describingtheclassificationhistoryofbroadband).10See,e.g.,RemarksofWilliamE.Kennard,Chairman,FCC,attheNationalAssociationofTelecommunicationsOfficersandAdvisors(Sept.17,1999),availableathttps://goo.gl/YhxNJ9(“[I]fwehavethehopeoffacilitatingamarket-basedsolutionhere,weshoulddoit,becausethealternativeistogotothetelephoneworld,aworldthatwearetryingtoderegulateandjustpickupthiswholemorassofregulationanddumpitwholesaleonthecablepipe.ThatisnotgoodforAmerica.”).11See,e.g.,LetterfromSenatorsJohnAshcroft,WendellFord,JohnKerry,SpencerAbraham,andRonWydentotheHonorableWilliamE.Kennard,Chairman,FCC,at1(Mar.23,1998),availableathttps://goo.gl/iWiHd7(“[W]ewishtomakeitclearthatnothinginthe1996ActoritslegislativehistorysuggeststhatCongressintendedtoalterthecurrentclassificationofInternetandotherinformationservicesortoexpandtraditionaltelephoneregulationtonewandadvancedservices.”).12PreservingtheOpenInternet,ReportandOrder,GNDocketNo.09-191(Dec.23,2010)[“2010Order”],availableathttps://goo.gl/CVEDXn.


growingcriesfortheCommissiontoimposeTitleII.13However,followingalegalsetback,14

criesforTitleIIbecameharderfortheFCCtoresistandtheCommissioneventually

accededtopopulistdemandsforstrongerInternetregulation.15Thisdramaticchangein

coursewasanerrorinjudgmentthatshouldbecorrected.

Eventhoughthe2015OrderimposedfewerthanhalfofTitleII’snumerous

provisionsonbroadband,16thefullmorassoflawsandregulationsinTitleII17nowhang

overbroadbandproviders’headsliketheSwordofDamocles.18Giventhedeference

affordedtoagenciesunderadministrativelawprecedentstoupholdactionssolongasthey

are“reasonableandgroundedinsubstantialevidence,”thethreatthattherestofTitleII

13See,e.g.,id.at18046(ConcurringstatementofCommissionerMichaelJ.Copps)(“SoIpushed—pushedashardasIcould—togetbroadbandtelecommunicationsbackwheretheybelonged,underTitleIIofourenablingstatute[.]”).14SeeVerizonv.FCC,740F.3d623(2014)(strikingdownthe2010Order’srulesonblockingandunreasonablediscrimination).15InadditiontonumerouscommenterscallingontheFCCtouseTitleII,PresidentObamasawfittoissueastatementandYouTubevideocallingontheFCCtodothesame,althoughhetechnicallyreferencedthewrongTitleII(hesaidTitleIIoftheTelecommunicationsAct,whenostensiblyhemeantTitleIIoftheCommunicationsAct).SeeLetterfromPresidentBarackObamatotheFederalCommunicationsCommission(Nov.10,2014),availableathttps://goo.gl/pTxYmW(“IbelievetheFCCshouldreclassifyconsumerbroadbandserviceunderTitleIIoftheTelecommunicationsAct[.]”).16Ofthe48statutoryprovisionsinTitleIIoftheCommunicationsAct,theCommissionbroadlyforborefromapplying27ofthemtobroadband.2015Order¶¶493–527.17See,e.g.,JonathanSpalter,NetNeutralityandBroadbandInvestmentforAll,MORNINGCONSULT(July11,2017),availableathttps://goo.gl/Zho7Ky(“TitleIIoftheCommunicationsActhas48Sectionswithmorethan225subsections.IntheFCC’s‘CommonCarrierServices’rules,thereare20sections,withalmost1,500subsections.”).18See,e.g.,DanielLyons,AWinfortheInternet:TheFCCWantstoRepealTitleIINetNeutralityRegulations,AEI.ORG(Apr.26,2017),availableathttps://goo.gl/yXFnHm(“Inthislegalregime,TitleIIhangsasaswordofDamoclesoverthebroadbandindustry,generatinguncertainty,limitinginnovation,andlikelyreducingcapitalinvestmentinthesector.”).


couldbeimposedonbroadbandisveryreal.19TheFCCshouldactnowtoremovethis

loomingthreat,whichisdiscouraginginvestmentandinnovationamongbroadband

providersastheyseektoimprovetheirserviceofferings.

Properlyconceived,NetNeutrality20canoffertremendousbenefitsforboth

competitionandconsumers.Aswehavemadeclear,wesupportNetNeutralityandwantto

protectitgoingforward.21However,theFCC’scurrentheavy-handedapproachtoNet

Neutralityisill-conceived.TheFCCcaneffectivelyprotectNetNeutralityandguardboth

consumersandedgeprovidersagainstunfairdiscriminationbybroadbandproviders

underalight-touchregulatoryframework.

19See,e.g.,UnitedStatesTelecomm.Ass’nv.FCC,825F.3d674,694(D.C.Cir.2016)(quotingVerizon,740F.3dat644).20Thephrase“NetNeutrality”lacksprecisedefinition.Itdoesnotmeanwhatitliterallysuggests,asnoreasonablepersoncouldwanttheInternettobeneutralineveryrespect.Weusethephraseaswegenerallyunderstandit:NetNeutralityisthepolicythatInternetusersshouldgenerallybefreetoaccessthecontentandedgeservicesoftheirchoosing,andthatanytraffic-managementorinterconnectionpracticesthatdiscriminateunfairlyamongcontentprovidersoredgeservicesshouldbeillegal.SeegenerallyMerriam-Webster,NetNeutrality(lastvisitedJuly17,2017),availableathttps://goo.gl/5f1jjc(providingabasicdefinitionofthephrase);TimWu,NetworkNeutrality,BroadbandDiscrimination,2J.ONTELECOMM.&HIGHTECH.L.141(2003),availableathttps://goo.gl/Gxgiaj(describingthegeneralcontoursofaproposedframeworkforNetNeutrality).21See,e.g.,TomStruble,TheFCC’sComputerInquiries:TheOriginStoryBehindNetNeutrality,MORNINGCONSULT(May23,2017),availableathttps://goo.gl/471DWh;MikeGodwin&TomStruble,Don’tFreakOutAbouttheFCC’sNewApproachtoNetNeutrality,SLATE(May23,2017),availableathttps://goo.gl/hncTc5.


A. TitleIIisNotFitforBroadband

TitleIIoftheCommunicationsActisacomplexschemeofregulationsdesignedfor

commoncarriers22inanerawhencompetitionbetweenmultipleserviceproviderswas

thoughttobeimpossible.23Whentelecommunicationsserviceswereprovidedbya

nationwidemonopolist,therate-makingprovisionsofTitleIIwerealogicalwaytoprotect

consumers.24However,Congresseventuallyrecognizedthatcompetitionisafarbetterway

toprotectconsumersthanregulation,asmadeclearintheTelecommunicationsActof

1996[“1996Act”].25

The1996Act’sderegulatoryframeworksucceededinproducingrobustcompetition

forservices—liketelephonyandvideo—thatpreviouslywereavailableonlyfromstate-

backedmonopolies.26The1996Actalsotookaveryhands-offapproachtobroadband

22Infact,theTitleIIprovisionsadoptedinthe1934Actwerethesameonesusedtoregulaterailroadsduringthe19thcentury.See,e.g.,KuperJones,Sorry,Mr.President,TheInternetIsn’ta19thCenturyRailroad,AMERICANSFORPROSPERITY(Nov.13,2014),availableathttps://goo.gl/Hw5KgQ.23ButseeAdamD.Thierer,UnnaturalMonopoly:CriticalMomentsintheDevelopmentoftheBellSystemMonopoly,14CatoJ.267(Fall1994),availableathttps://goo.gl/G4N9pd(explainingwhytelecommunicationsisnotanaturalmonopoly).24See,e.g.,Orloffv.FCC,352F.3d415,419(D.C.Cir.2003)(quotingMCITelecomms.Corp.v.Am.Tel.&Tel.Co.,512U.S.218,230(1994)(“Muchof‘theCommunicationsAct’ssubchapterapplicabletoCommonCarriers...[hadbeen]premiseduponthetariff-filingrequirementof§203.”).25See,e.g.,47U.S.C.§160(instructingtheCommissiontoforbearfromapplyinganyregulation“[i]ftheCommissiondeterminesthatsuchforbearancewillpromotecompetitionamongprovidersoftelecommunicationsservices”).26See,e.g.,StuartN.Brotman,Wasthe1996TelecommunicationsActSuccessfulinPromotingCompetition?,BROOKINGSTECHTANK(Feb.8,2016),availableathttps://goo.gl/rV2579(“ThesemetricsdonotdemonstratethattheTelecommunicationsActof1996wasanunqualifiedsuccess,buttheyareevidenceofthelaw’srealeconomicandconsumerbenefits.”).


regulation,27whichledtounprecedentedlevelsofnetworkinvestmentbyISPs.28Thiswas

particularlytrueaftertheFCCmadeclearthatthemandatorywholesalingobligations

addedtoTitleIIbythe1996Actwouldnotbeappliedtobroadbandnetworksgoing

forward.29However,theFCCtookadramaticchangeofcourseinthe2015Orderwhen,

overobjectionsfrombothcommenters30andCommissioners,31itreclassifiedbroadband

underTitleII.32

Althoughthelegalityofthe2015Orderhasnotyetbeenfullyresolved,33the

Commissionlikelyhasdiscretiontosubjectbroadbandservice,oratleastaportionofit,to

27See,e.g.,47U.S.C.§230(“ItisthepolicyoftheUnitedStates—...topreservethevibrantandcompetitivefreemarketthatpresentlyexistsfortheInternetandotherinteractivecomputerservices,unfetteredbyFederalorStateregulation[.]”).28See,e.g.,PatrickBrogan,BroadbandInvestmentTickedDownin2015,USTELECOM(Dec.14,2016),availableathttps://goo.gl/NUwcwa(“USTelecom’sannualanalysisofbroadbandindustrycapitalexpendituresrevealsthattheindustryinvestedapproximately$1.5trillioninnetworkinfrastructureover20yearsfrom1996–2015.”).29SeeInquiryConcerningHigh-SpeedAccesstotheInternetOverCableandOtherFacilities,DeclaratoryRulingandNoticeofProposedRulemaking,GNDocketNo.00-185(Mar.15,2002),availableathttps://goo.gl/gvtQwx(rulingthatbroadbandservicedeliveredviacableoperatorsisanInformationServiceandnotTelecommunicationsoraTelecommunicationsService);AppropriateFrameworkforBroadbandAccesstotheInternetoverWirelineFacilities,ReportandOrderandNoticeofProposedRulemaking,CCDocketNo.02-33(Sept.23,2005),availableathttps://goo.gl/RqrbFy(rulingthatfacilities-basedwirelinebroadband,includingitstransmissioncomponent,isanInformationService,andmaybeprovidedonacommon-carrierorprivate-carrierbasis).30See,e.g.,ProtectingandPromotingtheOpenInternet,TechFreedom&ICLELegalComments,GNDocketNo.14-28(July17,2014),availableathttps://goo.gl/MgPh3U.31See,e.g.,2015Orderat321(DissentingStatementofCommissionerAjitPai);id.at385(DissentingStatementofCommissionerMikeO’Rielly).32Seeid.¶¶306–433.33Inthatlegalchallenge,theD.C.Circuitdeniedthechallengers’petitionforrehearingenbanc,butchallengersnowseemintentonseekingreviewfromtheSupremeCourt.SeeApplicationforanExtensionofTimetoFilePetitionforWritofCertioraritotheUnited


someformofregulationunderTitleII.TitleIIregulatedthetransmissioncomponentof

telcobroadbandforyears,34andopinionsfromtheD.C.Circuit35andSupremeCourt36

suggestthattheFCClikelyhasdiscretiontoapplyTitleIItoothertypesofbroadband,as

well.Wearguesimplythat,asamatterofpolicy,theFCCshouldnotregulatebroadband

underTitleIIbecausetheTitleisnotfitforthatpurpose.TitleIIisunnecessarytoachieve

theCommission’sobjectivesandcomeswithahostofunintendedconsequencesthatwill

adverselyaffectbothbroadbandprovidersandconsumers.Someoftheseadverseeffects

areapparentalready.

ThespecterofTitleIIhasloomedoverbroadbandproviderssince2010,37andithas

hadadecidedlynegativeeffectoninnovationandnetworkinvestmentduringthattime.Dr.

GeorgeS.Ford,chiefeconomistofthePhoenixCenterforAdvancedLegalandEconomic

PublicPolicyStudies,conductedarobustdifference-in-differencesanalysisanddetermined

StatesCourtofAppealsoftheDistrictofColumbiaCircuit,U.S.Telecomm.Ass’nv.FCC(July10,2017),availableathttps://goo.gl/tN4WYn.34See,e.g.,2015Order¶313.35SeeUnitedStatesTelecomm.Ass’nv.FCC,825F.3dat697–98(“TheseconclusionsaboutconsumerperceptionfindextensivesupportintherecordandtogetherjustifytheCommission’sdecisiontoreclassifybroadbandasatelecommunicationsservice.”).36SeeNat’lCable&Telecomms.Ass’nv.BrandXInternetServs.545U.S.967,996–97(2005)(“Insum,iftheActfailsunambiguouslytoclassifynonfacilities-basedinformation-serviceprovidersthatusetelecommunicationsinputstoprovideaninformationserviceas‘offer[ors]’of‘telecommunications,’thenitalsofailsunambiguouslytoclassifyfacilities-basedinformation-serviceprovidersastelecommunications-serviceoffers;therelevantdefinitionsdonotdistinguishfacilities-basedandnonfacilities-basedcarriers.Thatsilencesuggests,instead,thattheCommissionhasthediscretiontofilltheconsequentstatutorygap.”)(alterationinoriginal).37SeeFrameworkforBroadbandInternetService,NoticeofInquiry,GNDocketNo.10-127(June17,2010),availableathttps://goo.gl/dxkCxG(inquiringwhetherbroadbandshouldremainclassifiedunderTitleIorbereclassifiedunderTitleII).


thatbroadbandinvestmentwas$160–$200billionlessthanitwouldhavebeenwithout

thethreatofTitleIIregulation.38OthershavepublishedestimatessuggestingthatTitleII

didnotdecrease,orevenincreased,investmentinbroadbandnetworks,39butthesedata

andestimateshaveseriousmethodologicalflaws.40Indeed,whenthoseflawsarecorrected,

thestudiesactuallyyieldtheoppositeconclusions,corroboratingFord’sanalysis.41

Theprohibitionsinthe2015Orderandthethreatofmoreburdensomeregulations

underTitleIIarealreadydepressinginvestmentinbroadbandnetworksandlikelywould

continuetodosointhefuture.Investmentinbroadbandinfrastructureisessentialto

closingthe"DigitalDivide,"stimulatingfacilities-basedcompetition,andprovidinghigh-

qualitybroadbandtoallAmericans,whicharetopmostamongtheCommission’sgoals.42

Forthatreason,theCommissionshouldundothe2015Order’sreclassificationof

broadbandunderTitleIIandadoptnewNetNeutralityregulationsunderthelight-touch

frameworkofTitleIandancillaryauthority.

38GeorgeS.Ford,NetNeutrality,ReclassificationandInvestment:ACounterfactualAnalysis,PERSPECTIVES(Apr.25,2017)availableathttps://goo.gl/jfJ9rc.ItisimportanttonotethattherelevantcomparisonisnotbetweeninvestmentbeforeandafterTitleII,butbetweenactualinvestmentafterTitleIIandwhatinvestmentwouldhavebeeninthesameperiodbutforTitleII.Seeid.at10.39See,e.g.,S.DerekTurner,It’sWorking:HowtheInternetAccessandOnlineVideoMarketsareThrivingintheTitleIIEra,FREEPRESS(May2017),availableathttps://goo.gl/5FQoEh.40See,e.g.,Dr.GeorgeS.Ford,ReclassificationandInvestment:AnAnalysisofFreePress’“It’sWorking”Report,PERSPECTIVES(May22,2017),availableathttps://goo.gl/HZXnzn.41See,e.g.,idat1(“Oncethemostbasicadjustmenttothedataismade—accountingforinflation—FreePress’datashowthatcapitalspendingfellsignificantlyin2016(-2%).”).42See47U.S.C.§151.


B. TitleIandAncillaryAuthorityProvideAdequateAuthorityforLight-TouchNetNeutralityRegulations

ThefightoverTitleIandTitleIIisfundamentallyaboutwhetherbroadbandservice

shouldbeofferedonacommon-carriageorprivate-carriagebasis.Commoncarriersare

generallyrequiredtohold“oneselfouttoservethepublicindiscriminately[,]”43whereas

privatecarriersareallowedtomake“individualizeddecisions,inparticularcases,whether

andonwhattermstodeal.”44TheCommissiongetssignificantdeferenceindeciding

whetheritsregulationsconstitutecommon-carrierobligations,45andFCCcanregulate

privatecarriers’broadbandpractices,underTitleI,solongasthoseregulationsleave

“substantialroomforindividualizedbargaininganddiscriminationinterms.”46Thatis

preciselywhatwewant.

FromthedawnoftheInternetinthelate20thcenturyupthrough2014,theFCC

consistentlyclassifiedbroadbandunderTitleIoftheCommunicationsAct.47Underthis

light-touchapproachtobroadbandregulation,theInternetflourished—andenableda

vastmultitudeofover-the-top(“OTT”)edgeservices—alltotheimmensebenefitof

consumers.Inthislightlyregulatedenvironment,softwaredevelopersandentrepreneurs

43See,e.g.,U.S.Telecomm.Ass’nv.FCC,825F.3dat740(quotingVerizonv.FCC,740F.3dat651);butseeOrloffv.FCC,352F.3dat421(upholdingtheCommission’sfindingthatcertainpricediscountsofferedbyVerizontoindividualcustomersdidnotconstitute“unjustorunreasonablediscrimination”underSection202).44See,e.g.,U.S.Telecomm.Ass’nv.FCC,825F.3dat740(quotingFCCv.MidwestVideoCorp.,440U.S.689,701(1979)).45See,e.g.,CellcoP’shipv.FCC,700F.3d537,544(D.C.Cir.2012)(quotingMCIWorldcomNetworkServs.v.FCC,274F.3d542,548(D.C.Cir.2001)).46See,e.g.,Verizonv.FCC,740F.3dat652(quotingCellcoP’shipv.FCC,700F.3dat548).47See,e.g.,2015Order¶¶310–27.


wereabletoexperimentwithnewandinnovativeserviceofferingswithouthavingtoseek

permissionfromtheFCCoranyotherregulator.48Indeed,manyhavearguedthatwehave

haddefactoNetNeutralityfordecades,becausenormsoftransparencyandfairnessled

broadbandprovidersandedgeproviderstoengageinopenandfaircompetition,even

withoutregulations.49

OnlyinthelastdecadehastheFCCsoughttoimposeadejureNetNeutralityregime.

ItsfirsttwoeffortswerebasedonTitleIandancillaryauthority.Inthefirstcase,the

CommissionsoughttopunishComcastforallegedlythrottlingupstreamtrafficfrom

BitTorrent’speer-to-peerfile-sharingapplication,50buttheD.C.Circuitrejectedtheaction

becausetheFCC“failedtotieitsassertionofancillaryauthorityoverComcast’sInternet

servicetoany‘statutorilymandatedresponsibility[.]’”51Inthesecondcase,Verizon

48See,e.g.,VintonG.Cerf,KeeptheInternetOpen,N.Y.TIMES(May24,2012),availableathttps://goo.gl/GHtXTc(“TheNetprosperedpreciselybecausegovernments—forthemostpart—allowedtheInternettogroworganically,withcivilsociety,academia,privatesectorandvoluntarystandardsbodiescollaboratingondevelopment,operationandgovernance.”).49See,e.g.,TimothyB.Lee,TheDurableInternet:PreservingNetworkNeutralityWithoutRegulation,CATOPOLICYANALYSISat12(Nov.12,2008),availableathttps://goo.gl/31ALvv(“[L]arge-scaleviolationsoftheend-to-endprinciplehavecertainlybeenrareandhavealmostalwaysgeneratedcontroversy.Neutraltreatmentofpacketsby‘dumb’networkshasbeenthenormforaquartercentury,andtherearegoodreasonstopreservethatarrangement.”).50FormalComplaintofFreePressandPublicKnowledgeAgainstComcastCorporationforSecretlyDegradingPeer-to-PeerApplications,MemorandumOpinionandOrder,EB-08-IH-1518(Aug.20,2008),availableathttps://goo.gl/1b1pBA.51SeeComcastv.FCC,600F.3d642,661(D.C.Cir.2010).


succeededinoverturningNetNeutralityrulesfromthe2010Orderongroundsthatthey

unlawfullyimposedpersecommon-carrierobligationsonprivatecarriers.52

FollowingVerizon,theCommissioninitiallysoughtto“followtheVerizoncourt’s

blueprintbyrelyingonSection706toadoptano-blockingruleandarequirementthat

broadbandprovidersengagein‘commerciallyreasonable’practices.”53TheCommission

eventuallyturnedawayfromthisapproach,optingtoinsteadtake“theVerizondecision’s

implicitinvitation”andimposecommon-carrierrulesbasedonTitleII.54However,the

blueprintfor“commerciallyreasonable”rulesremainsaviablepathforwardforthe

Commission.

TheCommissionshouldfollowtheblueprintfor“commerciallyreasonable”Net

Neutralityregulationsunderthelight-touchframeworkofTitleIandancillaryauthority.

TheD.C.CircuitopinionsinCellcoandVerizonsuggestthata“commerciallyreasonable”

standardtoregulatebroadbandproviders’trafficmanagementandinterconnection

practiceswouldbelegallypermissibleunderTitleI,55asaformofquasi-common

carriage.56Multiplecourtshavealsosuggestedthatatransparencyrequirementis

52SeeVerizonv.FCC,740F.3dat628(“BecausetheCommissionhasfailedtoestablishthattheanti-discriminationandanti-blockingrulesdonotimposepersecommoncarrierobligations,wevacatethoseportionsofthe[2010Order].”).53See2015Order¶10;seealsoProtectingandPromotingtheOpenInternet,NoticeofProposedRulemaking,GNDocketNo.14-28(May15,2014)[“2014NPRM”],availableathttps://goo.gl/SNMALC(seekingcommentonaproposed“commerciallyreasonable”approachtoNetNeutrality).54See2015Order¶42.55Seeid.56SeeBrentSkorup&JosephKane,TheFCCandQuasi-CommonCarriage:ACaseStudyofAgencySurvival,18MINN.J.OFL.SCI&TECH.631(June2017),availableathttps://goo.gl/maBABU(examiningthepotentialformissioncreepwhenapplying


“reasonablyancillary”totheCommission’sspecificallydelegatedauthorityinSection257,

andwouldthereforebelegallypermissibleunderTitleI.57Altogether,TitleIandancillary

authorityprovideanadequatebasisfortheCommissiontoadoptthesetypesoflight-touch

NetNeutralityregulationsgoingforward.

C. Section706ProvidesAdditionalSupportfortheCommission’sExerciseofAncillaryAuthorityOverBroadband

Beforethe2015Order,theFCCattemptedtouseSection706ofthe1996Actto

supportnumerousbroadbandregulations.Federalappellatecourtsinthreedifferent

circuitshavereviewedFCCbroadbandregulations,basedonauthoritysupposedly

conferredtotheagencybySection706.58Theopinionsfromthosethreecasessuggestthat

Section706grantsatleastsomeregulatoryauthoritytotheFCC,59makingitreasonablefor

outdatedregulatoryframeworkstonewtechnologiesandmarkets).ATitleIclassificationforbroadbandwouldhelprestrainthepotentialformissioncreepinthiscase.Seeid.57See,e.g.,Comcastv.FCC,600F.3dat659(“WereadilyacceptthatcertainassertionsofCommissionauthoritycouldbe‘reasonablyancillary’totheCommission’sstatutoryresponsibilitytoissueareporttoCongress.Forexample,theCommissionmightimposedisclosurerequirementsonregulatedentitiesinordertogatherdataneededforsuchareport.”);Verizonv.FCC,740F.3dat668n.9(Silberman,J.,dissenting)(“Idothinkthatthetransparencyrulesrestonfirmerground.TheCommissionisrequiredtomaketriennialreportstoCongresson‘marketentrybarriers’ininformationservice,47U.S.C.§257,andrequiringdisclosureofnetworkmanagementpracticesappearstobereasonablyancillarytothatduty.”).58SeeVerizon,740F.3dat628(findingthatSection706givestheFCCauthoritytoadoptbroadbandregulations,butnottheparticularonesinquestion);InreFCC11-161,753F.3d1015,1049–54(10thCir.2014)(findingthatSection706givestheFCCadditionalauthority,apartfromSection254,todirectUniversalServiceFunddisbursementstowardbroadband);Tennesseev.FCC,832F.3d597,613(6thCir.2016)(findingthatSection706doesnotauthorizefederalpreemptionofstatelawsregardingmunicipalbroadband).59Seeid.


theCommissiontoinquireastowhetherSection706couldsupportnewbroadband

regulations.60

WebelieveSection706doesprovidetheFCCwithadditionalauthoritytoregulate

broadband,butnothingindependentoftheCommunicationsAct.Section706directsthe

FCCtoencouragebroadbanddeploymentbyutilizingitsvarioustoolsinthe

CommunicationsActto“promotecompetition”and“removebarrierstoinfrastructure

investment.”61Tellingly,thespecificregulatorytoolsmentionedinSection706—pricecap

regulationandregulatoryforbearance—arealreadygrantedtotheFCCinthe

CommunicationsAct;62nonewtoolsarementioned.Section706clearlyinstructsthe

Commissiontotakeactionifcertainconditionsaremet,63butthoseactionsmustbetiedto

specificgrantsofauthoritywithintheCommunicationsAct.

Thus,iftheCommissionreclassifiesbroadbandunderTitleIwhilerelyingupon

ancillaryauthoritytoadoptbasicrulesregardingtransparencyandunreasonable

discrimination,aswethinkitshould,thenSection706couldserveasanadditional

touchstonetosupporttheCommission’sactions.Returningtoalight-touchregulatory

frameworktopromotebroadbandinvestmentanddeploymentisperfectlyinkeepingwith

Section706.TheCommissionmustsimplyensurethatanybroadbandregulationsdesigned

60NPRM¶101.61See47U.S.C.§1302(a).62See47U.S.C.§§160,201–03,205.63See47U.S.C.§1302(b)(instructingtheFCCto“takeimmediateactiontoacceleratebroadbanddeployment”iftheCommissiondetermines,viaanannualinquiry,thatbroadbanddeploymentisnotproceeding“inareasonableandtimelyfashion.”).


toservethegoalsofSection706aretiedtospecificgrantsofauthoritywithinthe

CommunicationsAct.

III. Clear&SimpleRulesoftheRoadforNetNeutrality

ThereshouldberulesoftheroadforNetNeutrality,andthoserulesshouldbeas

clearandsimpleaspossible.TheCommissionsoughttoestablishsuchrulesfollowingthe

Verizondecision,64butthe2015Orderstrayedfarfromthisinitialplan.Insteadofadopting

simplerules,asthe2010Orderdidandasthe2014NPRMproposedtodo,the2015Order

imposedonbroadbandprovidersseveralrulesprohibitingcertainpractices,aswellasan

amorphousgeneral-conductstandard.65

InitsefforttocoverthefieldofNetNeutralityandprotectedgeprovidersfromall

conceivableharms,theFCCwenttoofar.Thegeneral-conductstandard’snon-exhaustive

listoffactorsishopelesslyvague,whilemuchofthecurrentrulesareeithersuperfluous,

counterproductive,orevenunconstitutional.TheCommissionshouldreconsiderits

currentrules,followthroughwithitsproposaltorepealthegeneral-conductstandard,66

andimplementtwosimpleandclearrulesoftheroadgoverningtransparencyand

unreasonablediscrimination.

64See2014NPRM¶24(“Today,weresponddirectlytothatremandandproposetoadoptenforceablerulesoftheroad,consistentwiththe[Verizon]court’sopinion,toprotectandpromotetheopenInternet.”).652015Order¶¶14–24.66NPRM¶¶72–75.


A. ReconsideringtheCurrentRules

The2015Orderincludedfourspecificrulesandageneral-conductstandard.The

transparencyruleisappropriateandshouldbemaintained,buteverythingelseshouldbe

reconsidered.Forvariousreasonsdetailedbelow,thespecificprohibitionsandthegeneral-

conductstandardfromthe2015Ordershouldallbedoneawaywithandsubsumedintoa

simpleregimegoverningonlytransparencyandunreasonablediscrimination.

1. TheBanonBlockingisSuperfluous&Unconstitutional

Inboththe2010Orderandthe2015Order,theCommissionadoptedrulesbanning

broadbandprovidersfromblockinganylawfulcontent,applications,services,ornon-

harmfuldevicesfromaccesstotheirnetworks.67Theno-blockingruleincludesan

exceptionfor“reasonablenetworkmanagement,”butthatdoesnotsavetherule.Theban

onblockingshouldbeeliminated.Intermsofpolicy,theruleoffersnoprotectionbeyonda

prohibitiononunreasonablediscrimination,andisthereforesuperfluous.Also,intermsof

law,theno-blockingruleislikelyillegalthriceover.

Asapolicymatter,theno-blockingruleissuperfluous.Anyinstanceofblockingthat

trulyharmsconsumersorcompetitionwouldviolatearuleprohibitingunreasonable

672010Orderat17992(“ApersonengagedintheprovisionoffixedbroadbandInternetaccessservice,insofarassuchpersonissoengaged,shallnotblocklawfulcontent,applications,services,ornon-harmfuldevices,subjecttoreasonablenetworkmanagement.ApersonengagedintheprovisionofmobilebroadbandInternetaccessservice,insofarassuchpersonissoengaged,shallnotblockconsumersfromaccessinglawfulwebsites,subjecttoreasonablenetworkmanagement;norshallsuchpersonblockapplicationsthatcompetewiththeprovider’svoiceorvideotelephonyservices,subjecttoreasonablenetworkmanagement.”);2015Orderat284(“ApersonengagedintheprovisionofbroadbandInternetaccessservice,insofarassuchpersonissoengaged,shallnotblocklawfulcontent,applications,services,ornon-harmfuldevices,subjecttoreasonablenetworkmanagement.”).


discrimination.Abright-lineruleagainstblocking,therefore,providesnoadditional

protectionforconsumers.Thisno-blockingruleshouldbeeliminatedforthatreasonalone,

butalsobecauseitislikelyillegalinthreedifferentways.

First,aprohibitiononblockingcompelsbroadbandproviderstotransmitspeech,

evenagainsttheirwill,likelyinviolationoftheFirstAmendment.68Thisargumentwas

raisedinthechallengetothe2015Order,butthecourtrejecteditbasedontheincorrect

beliefthat“Incontrasttonewspapersandcablecompanies,theexerciseofeditorial

discretionisentirelyabsentwithrespecttobroadbandproviderssubjecttotheOrder.”69

Thecourt’sreasoningisincorrectbecausebroadbandproviders,likenewspapersandcable

companies,havefinitecapacity(inthiscase,bandwidth)andthereforecannottransmitan

infinitevolumeofcommunicationsovertheirnetworks.70Duringperiodsofnetwork

congestion,abroadbandprovidermaychoosetodropsomepacketsbutnotothers,and

transmitcertainspeechattheexclusionofotherspeech,accordingtowhateversoftware-

definednetworking(“SDN”)protocolsandheuristicsitemploys.71Potentially,theexercise

68See,e.g.,GeoffreyA.Manneetal.,AConflictofVisions:Howthe“21stCenturyFirstAmendment”ViolatestheConstitution’sFirstAmendment,13FIRSTAMEND.L.REV.319(2015),availableathttps://goo.gl/8nxEdD.69U.S.Telecomm.Ass’nv.FCC,825F.3dat743.70Seeid.at742(citingMiamiHeraldPublishingCo.v.Tornillo,418U.S.241,257(1974)).71See,e.g.,TaimurBakhshi,StateoftheArtandRecentResearchAdvancesinSoftwareDefinedNetworking,WIRELESSCOMMS.&MOBILECOMPUTINGat6(2017),availableathttps://goo.gl/2GmdVx(“Centralizedmanagementofnetworkelementsprovidesadditionalleveragetoadministratorsgivingthemvitalstatisticsofexistingnetworkconditionstoadaptservicequalityandcustomizenetworktopologyasneeded.Forexample,duringperiodsofhighnetworkutilization,certainbandwidthconsumingserviceslikevideostreaming,largefiletransfers,andsoforthcanbeload-balancedoverdedicatedchannels.”).


ofeditorialdiscretioninsuchasituationwouldfallundertheno-blockingrule’sexception

forreasonablenetworkmanagement,butitisunclear.UnlesstheCommissioncanshow

thatano-blockingruleisnarrowlytailoredtoserveacompellinggovernmentalinterest,it

islikelyunconstitutional.

Second,ano-blockingrulelikelyviolatesDueProcessundertheFifthAmendment,

becauseitamountstoaregulatorytakingonbroadbandprovidersbymandatingabelow-

cost,zero-priceinterconnectionfee.72Broadbandprovidersareinthebusinessof

transmittingcommunications,73andtheychargefortheservicebecauseprovidingit

imposesrealcostsontheirnetworks.Mostofthosecostscomefromdownstreamnetwork

traffic,ataratioofaround5:1.74Broadbandprovidersrecoverthosecostsviapeeringand

transitarrangements.Imposingano-blockingruleonbroadbandproviderstakesawayall

oftheirleveragewhennegotiatingservicelevelagreements(“SLAs”)tointerconnectwith

peers,transitproviders,ordirectlywithedgecompanies.Thisunjusttransferofwealthand

regulatorytakingsurvivedfacialchallenge,butwouldlikelybestruckdowninany

72See,e.g.,LawrenceJ.Spiwak,USTelecomanditsAftermath,PHOENIXCTR.POL’YBULL.at7(June2017),availableathttps://goo.gl/zX4K73(“Bydirectlysettinga‘zero-price,’theCommission’sactionsviolatedmanybasicprinciplesofratemaking.Forexample,undertheplaintermsoftheCommunicationsAct,ifedgeprovidersareinfactcustomersofa[broadbandprovider]astheD.C.CircuitfoundinVerizonandTitleIIappliestothisserviceasthe[2015Order]plainlystates,thena[broadbandprovider]mustbeallowedtochargeapositive‘fee’forthisterminationservicebecauseacommoncarrieris‘forhire.’”).73See47U.S.C.§151(“Forthepurposeofregulatinginterstateandforeigncommerceincommunicationbywireorradio...thereiscreatedacommissiontobeknownasthe‘FederalCommunicationsCommission[.]’”)(emphasisadded).74See,e.g.,Sandvine,GlobalInternetPhenomenaReport2H2014at5(Nov.21,2014),availableathttps://goo.gl/S55cTM(showingaveragemonthlybroadbandconsumptioninNorthAmericatocomprise8.5GBofupstreamdataand48.9GBofdownstreamdata).


subsequentas-appliedchallenge.TheCommissionshouldavoidthisoutcomebyrepealing

theno-blockingruleonitsownmotion.

Finally,theno-blockingruleisillegalbecauseitcontravenesthestatutory

protectionCongressgavetobroadbandprovidersinSection230for“GoodSamaritan”

blocking.75Section230plainlygivesbroadbandprovidersdiscretiontoblocklawful

content,yettheno-blockingruleprohibitsthat.TheCommissionhasabroadgrantof

dutiesandpowers,butallofitsactionsmustbeconsistentwiththerestofthe

CommunicationsAct.76Thus,totheextenttheno-blockingruleconflictswithSection230,

itisillegal.Forallthesereasons,theno-blockingruleshouldberepealedandsubsumed

intoaruleprohibitingunreasonablediscrimination.

2. TheBanonThrottlingisSuperfluous&Counterproductive

Inthe2015Order,theCommissionadoptedarulespecificallybanningthepractice

of“throttling,”77inallbutafewlimitedcases.78Whiletheno-throttlingruleraisesfewer

legalproblemsthantheno-blockingrule,itstillisunwiseasamatterofpolicy.Any

instanceofthrottlingbyabroadbandproviderthatharmsconsumersorcompetition

75See47U.S.C.§230(c)(“Noprovider...ofaninteractivecomputerserviceshallbeheldliableonaccountof—anyactionvoluntarilytakeningoodfaithtorestrictaccesstooravailabilityofmaterialthattheprovideroruserconsiderstobeobscene,lewd,lascivious,filthy,excessivelyviolent,harassing,orotherwiseobjectionable,whetherornotsuchmaterialisconstitutionallyprotected[.]”).7647U.S.C.§154(i)(“TheCommissionmayperformanyandallacts,makesuchrulesandregulations,andissuesuchorders,notinconsistentwiththischapter,asmaybenecessaryintheexecutionofitsfunctions.”)(emphasisadded).772015Order¶119.78Id.¶120.


amongedgeserviceswouldbecoveredbyaruleprohibitingunreasonablediscrimination.

Thus,aspecificno-throttlingruleissuperfluousandunnecessary.Moreover,thespecific

banonthrottlingcanbecounterproductiveandanti-consumerinpractice.

Forexample,T-Mobilerecentlybeganofferingazero-ratedvideo-streamingservice

calledBingeOn,whichinvolvesthrottlingvideotraffictoslightlylowerqualitywithout

regardfornetworkcongestion.79T-Mobilemakestheprogramavailable,withoutcharge,to

allvideo-streamingservicesabletoconformtoT-Mobile’stechnicalspecifications.

Commissionstaffthereforefoundthatitlikelydidnotviolatethegeneralconduct

standard,80butBingeOnclearlyviolatesthebanonthrottling.81Thisshowshow

counterproductivetheno-throttlingrulecanbe.SincetheintroductionofBingeOn,

consumershavefloodedtoT-Mobile,82demonstratingthattheyseethebenefitsofits

innovativeandconsumer-friendlyservices.TheCommissionthankfullyendeditsinquiryin

thisandothersimilarprograms,83butitshouldgofurtherandstriketheno-throttlingrule

fromitsbooks.

79JeremyGillula,EFFConfirms:T-Mobile’sBingeOnOptimizationisJustThrottling,AppliesIndiscriminatelytoAllVideo,ELECTRONICFRONTIERFOUND.(Jan.4,2016),availableathttps://goo.gl/nTJPWb.80SeeFCCWirelessTelecomms.BureauStaff,PolicyReviewofMobileBroadbandOperators’SponsoredDataOfferingsforZero-RatedContentandServicesat11(Jan.9,2017),availableathttps://goo.gl/8NyueM.81SeeGillula,supranote79.82KevinTran,T-MobileAddedMoreThan1MillionSubscribersLastQuarter,BUSINESSINSIDER(Apr.26,2017),availableathttps://goo.gl/hX6jTG.83SeeLetterfromNeseGuendelsberger,ActingChief,WirelessTelecomms.Bureau,FCC,toKathleenHam,SeniorVicePresident,GovernmentAffairs,T-Mobile(Feb.3,2017),availableathttps://goo.gl/JuAi4B(informingT-MobilethattheFCChadcloseditsinvestigationintoBingeOn).


3. TheBanonPaidPrioritizationisAlsoSuperfluous&Counterproductive

Inthe2015Order,theCommissionadoptedarulebanning“paidprioritization.”84

ThisrulehasneverbeenusedorinterpretedbytheCommission,butitseeminglycovers

bothinterconnection(“paid”)andtraffic-management(“prioritization”)practicesby

broadbandproviders.Bothofthesepracticescanbeadequatelycoveredbyarule

prohibitingunreasonablediscrimination,soarulespecificallybanningpaidprioritization

issuperfluousandunnecessary.Moreover,thebanonpaidprioritizationislikelyalso

counterproductive,asitwilldiscouragethedevelopmentofinnovativenewservice

offeringsandformsofdifferentialtrafficmanagement.Theseinnovationscouldmake

broadbandnetworksworkbetterforusersandedgeprovidersalike,whilealsopotentially

openingupnewrevenuestreamsforbroadbandproviders,theproceedsfromwhichcanbe

reinvestedintonetworkupgradesornewdeployments.Altogether,theseconsiderations

suggestthattheFCCshouldrepealthebanonpaidprioritization.

Real-timebandwidth-intensiveedgeservicesliketelemedicine,HDVoIP,andcertain

formsofonlinegamingareespeciallysensitivetoservicedisruptions.Users’qualityof

experience(“QoE”)inusingsuchservicesisheavilydependentonthequalityofservice

(“QoS”)thattheservicesreceive.85Affordingthesamelevelofprioritytoallbroadband

842015Orderat284–85(defining“paidprioritization”as“themanagementofabroadbandprovider’snetworktodirectlyorindirectlyfavorsometrafficoverothertraffic,includingthroughuseoftechniquessuchastrafficshaping,prioritization,resourcereservation,orotherformsofpreferentialtrafficmanagement,either(a)inexchangeforconsideration(monetaryorotherwise)fromathirdparty,or(b)tobenefitanaffiliatedentity.”).85See,e.g.,ThomasW.Struble,OntheRelationshipBetweenQoS&QoE:WhyDifferentialTrafficManagementontheInternetIsNotaZero-SumPractice,TPRC44(Aug.31,2016),availableathttps://goo.gl/weWAcY.


trafficwouldbenefitservicesthatarelesssensitivetolatencyandbandwidthconstraints

—likeemail,softwareupdates,orcachedvideo—butharmreal-timeservices.86That

outcomeisnot“neutral”andwouldbeharmfultobothconsumersandedgeproviders.

Thefocusonpaid,ratherthanunpaid,prioritizationisalsoproblematic.Practices

thatbenefitconsumersdonotsuddenlybecomeharmfuljustbecausemoneychanges

hands.Broadbandnetworksexhibitfeaturesofatwo-sidedmarket:bothedgeproviders

andenduserswanttousethenetworkinfrastructuretosendandreceivedata.Inatwo-

sidedmarket,thepricesfacedbyonesideofthemarketarepartiallydependentonthose

facedbytheotherside.Allowingmarketpricestoprevailinsuchamarketwouldtendto

leadtomoreefficientcost-sharingbetweenconsumersandcontentproviders.Banning

paidprioritizationeffectsapricecontrolforonesideofthetwo-sidedmarket,andwill

raisepricesfortheotherside—namely,consumers.87

Thebanonpaidprioritizationalsooutlawspotentialavenuesofcompetitionamong

broadbandproviders.Smallerbroadbandprovidersandnewentrantsoftenlackthe

resourcestobeatthepricesofestablishedcompetitorsdirectly,buttheycanmakedeals

andtakeriskstoprovideinnovativenewservices.SomebroadbandprovidersintheUnited

Kingdom,forexample,havestartedofferingplansthatprioritizetrafficforVoIPand

gamingapplications.88Suchofferingsallowbroadbandproviderstodifferentiatetheir

86Seeid.87Thisisknownasthe“waterbedeffect.”SeeChristosGenakos&TommasoValletti,RegulatingPricesinTwo-SidedMarkets:TheWaterbedExperienceinMobileTelephony,36TELECOMMS.POLICY360(2012),availableathttps://goo.gl/QUvy2Y.88See,e.g.,Plusnet,AboutTrafficPrioritisation(lastvisitedJuly17,2017),availableathttps://goo.gl/fRCerj(“AllourBusinessbroadbandandfibreproducts(andsomeofourolderResidentialones)havetrafficprioritisationappliedtothem.OurPlusnetPro‘addon’


serviceofferingsandbettercompetewithotherproviders,andanyofferingsthattruly

generateanetharmtoconsumersorcompetitioncouldbecoveredbyaruleprohibiting

unreasonablediscrimination.

Economicliteraturehaslongrecognizedthatthewelfareeffectsofthird-degree

pricediscriminationareambiguousanddependonthespecificfeaturesandmarket

structureofanindividualcase.89Therefore,ratherthanoutlawinghypotheticalformsof

priceandservicediscriminationaheadoftime,theCommissionshouldpresumptively

allowbroadbandproviderstoexperimentwithinnovativebusinessmodelsandservice

offerings.TheInternethaschangeddramaticallyinthedecadessinceitsinvention,and

regulatoryframeworksthatentrenchspecificinterconnectionandtraffic-management

practicesjeopardizethefuturedevelopmentofinnovativeserviceofferingsandthe

evolutionaryprogressoftheInternetecosystemwritlarge.

alsousesittoprioritizeVoIP,gamingandVPNtrafficaboveotherless‘time-sensitive’trafficprotocols.”).Plusnet’sinnovativeserviceofferingshaveproventobetremendouslypopularamongBritishusers,withtheproviderhavingrecentlywonmultipleawardsforitsbroadbandservice.SeePlusnet,Multi-Award-WinningBroadbandProviderwithUKBasedCustomerService(lastvisitedJuly17,2017),availableathttps://goo.gl/rS5cnM.89Thereisvastliteratureanalyzingtheambiguouswelfareeffectsofpricediscriminationinparticularcontexts.See,e.g.JOANROBINSONTHEECONOMICSOFIMPERFECTCOMPETITIONat179–202(2ndEd.1969);HalR.Varian,PriceDiscriminationandSocialWelfare,75AM.ECON.REV.870(Sept.1985),availableathttps://goo.gl/sDqAcJ;StephenK.LaysonMarketOpeningUnderThird-DegreePriceDiscrimination,42J.OFINDUS.ECON.335(Sept.1994),availableathttps://goo.gl/jyuYd2;TakanoriAdachiThird-DegreePriceDiscrimination,ConsumptionExternalitiesandSocialWelfare,72ECONOMICA171(Feb.2005),availableathttps://goo.gl/UF27xP.


4. TheAmorphousGeneral-ConductStandardShouldbeEliminated

Inthe2015Order,ontopoffourbright-linerules,theCommissionalsoadoptedan

amorphousgeneral-conductstandard,90withanon-exhaustivelistoffactorsthatthe

Commissionproposedtoconsiderinassessingwhetheranypracticesranafoulofthe

standard.91Theinherentvaguenessofthegeneral-conductstandardcreatessignificant

regulatoryuncertainty,whichisamajorbarriertoinvestmentandgrowth.The

Commissionhasnowproposedtoeliminatethegeneral-conductstandard.92Wesupport

thisproposal.

Ifcompaniesarenotsureifnewinnovationswillbeallowed,theywilltendtoinvest

lessinthembecauseoftheriskthattheirplancouldbeoutlawed.TheCommissionoffered

toissuenon-bindingadvisoriesastowhetherproposedpracticesorserviceswouldviolate

thestandard,93butsucha“Mother,mayI”94approachisaterriblefitforbroadband

servicesandthedynamicInternetecosystem.Consumersarebetterservedbyan

902015Orderat285(“AnypersonengagedintheprovisionofbroadbandInternetaccessservice,insofarassuchpersonisengaged,shallnotunreasonablyinterferewithorunreasonablydisadvantage(i)endusers’abilitytoselect,access,andusebroadbandInternetaccessserviceorthelawfulInternetcontent,applications,services,ordevicesoftheirchoice,or(ii)edgeproviders’abilitytomakelawfulcontent,applications,services,ordevicesavailabletoendusers.Reasonablenetworkmanagementshallnotbeconsideredaviolationofthisrule.”).91Seeid.¶¶138–45.92NPRM¶¶72–75.932015Order¶¶229–41.94SteveDaines&MichaelO’Rielly,FCC,MayIPleaseInnovate?,FORBES(Jan.20,2016),availableathttps://goo.gl/wSSziL.


environmentofpermissionlessinnovation.95TheCommissionshouldclarifythat

broadbandprovidersandedgeprovidersarebothpresumptivelyallowedtoinnovateand

requiresubstantialevidenceofactualorlikelyharmbeforeinterveningtoregulateorban

anypracticesorservices.TheCommissioncandoso,andstillmaintainadequate

protectionsforconsumersandcompetition,byrepealingthevagueandamorphous

general-conductstandardandimplementingtwoclearandsimplerulesoftheroadforNet

Neutrality.

B. ImplementingClear&SimpleRulesoftheRoad

HavingclearandsimplerulesoftheroadforNetNeutralitywouldbenefitall

parties.TheFCChasauthoritytoregulatebroadband96andtoadoptrules,97butoncethe

TitleIIreclassificationisundone,theFCCwillnotbetheonlycoponthebeat.When

broadbandisonceagainclassifiedasanInformationService,theFederalTrade

Commission(“FTC”)willregainitsjurisdictionoverbroadbandservices.Itcouldthenuse

itsauthorityunderSection5oftheFTCActtoprotectconsumersfromanyunfairmethods

ofcompetitionorunfairordeceptiveactsorpracticesinwhichbroadbandproviders

engage.98Thus,theFCCshouldworkcollaborativelywiththeFTCtoprotectNetNeutrality

goingforward,withbothagenciesplayingtotheirrelativestrengths.

95SeegenerallyADAMTHIERER,PERMISSIONLESSINNOVATION:THECONTINUINGCASEFORCOMPREHENSIVETECHNOLOGICALFREEDOM(Revised&ExpandedEd.2016),availableathttps://goo.gl/YWXCHE(detailingthetremendousbenefitsofpermissionlessinnovation).96See,e.g.,47U.S.C.§§151,201(b),257,1302.97See47U.S.C.§154(i).98SeeFederalTradeCommissionAct,Pub.L.No.63-203,§5,38.Stat.719(1914)(15U.S.C.§45).


ThebestwaytodothatisfortheFCCtouseitsauthorityandrulemakingpowerto

adopttworules:onerequiringtransparencyandoneprohibitingunreasonable

discrimination.TheFCCalreadyhasatransparencyruleinplace,sothatpartissimple.

Slightlymorecomplexisanenforceableregimetopolicepotentiallyunreasonable

discriminationoranticompetitivebehaviorbybroadbandproviders.99However,wethink

theFCCcanuseitsauthorityinTitleIandvarioushooksforancillaryauthoritytoadopta

commerciallyreasonableregimeforunreasonablediscriminationandanticompetitive

behaviorthatmirrorstheFTC’santitrustandconsumer-protectionregimes.Doingso

wouldensurethatthereisaconsistentframeworkforNetNeutralitythroughoutthe

Internetecosystem.Thiswouldallowconsumersandedgeproviderstolooknotonlytothe

FCC,butalsototheFTCandstateattorneysgeneralforprotectionifanyharmfulpractices

shouldarise.ThisisthemostcomprehensiveandeffectiveNetNeutralityregimethatcould

behadunderexistinglaw,soweencouragetheFCCtoputitintoplaceassoonaspossible.

1. EnsuringTransparency

Sunlightisoftenthebestdisinfectant,andmanypotentialconsumerharmscanbe

avoidedsimplybyrequiringbroadbandproviderstobetransparentabouthowthey

managethetrafficontheirnetworks.100Thebroadbandmarketwillfunctionbetterif

99SeeNPRM¶75(proposingtoconsiderreplacingthegeneral-conductstandardwithacommerciallyreasonablestandard).100Asprivatecarriersinacompetitivemarket,publicationofinterconnectionrateswouldraisepotentialantitrustconcernsaboutconsciousparallelismorotherformsofcollusion.WewantindividualizedpricingandnegotiationofpeeringandtransitSLAs,becausepriceregulationsofinterconnectionagreementswilllikelydecreasefutureinvestmentandcompetitioninbroadband.Thus,wethinkatransparencyruleshouldbelimitedto


consumersareabletomakeinformedchoicesabouttheirbroadbandserviceplans,andif

edgeprovidershaveclearguidanceonhowtoconformtheirservicestomatchbroadband

providers’traffic-managementpractices.101Moreover,requiringbroadbandprovidersto

makecertainpublicstatementsmeansconsumersandedgeprovidersareabletoholdthe

broadbandproviderstotheirpromisesdowntheline,whichcangreatlyexpeditethe

complaint-resolutionprocess.UndertheFTC’sDeceptionauthority,theagencyneednot

evenshowactualorlikelyconsumerharmtobringanenforcementaction—simply

breakingamaterialpromiseorfailingtodiscloserelevantinformationisenoughtoviolate

thelaw.102WesuggesttheFCCclarifythatitstransparencyruleconformstothestandards

fordisclosuresthattheFTCsetforthinitsDeceptionPolicyStatement.

Legally,atransparencyruleisonsoundfooting.TheFCChashadoneinplacesince

2010,103withnochallengesyettothataspectofNetNeutrality.Evenifitwerechallenged,

though,thetransparencyruleisquitearguablywithintheFCC’sauthority.Section257(a)

disclosuresaboutbroadbandproviders’traffic-managementpracticesandthevariousservicesavailabletoendusers.101See,e.g.,BroadbandInternetTech.AdvisoryGrp.,DifferentiatedTreatmentofInternetTraffic:AUniformAgreementReportat29(Oct.2015),availableathttps://goo.gl/pxnczU(“Inpreviousreports,BITAGhasrecommendedtransparencywithrespecttoanumberofaspectsofnetworkmanagement.BITAGcontinuestorecommendtransparencywhenitcomestopracticesusedtoimplementthedifferentialtreatmentofInternettraffic.”)(internalcitationomitted).102See,e.g.,LetterfromJamesC.MillerIII,Chairman,FTC,totheHonorableJohnDingell,Chairman,CommitteeonEnergyandCommerce,U.S.HouseofRepresentativesat2(Oct.14,1983)[“FTCDeceptionPolicyStatement”]availableathttps://goo.gl/PSuzra(appendedtoCliffdaleAssocs.,Inc.,103F.T.C.110,174(1984))(“Thus,theCommissionwillfinddeceptionifthereisarepresentation,omissionorpracticethatislikelytomisleadtheconsumeractingreasonablyinthecircumstances,totheconsumer’sdetriment.”);idat6(“Injuryexistsifconsumerswouldhavechosendifferentlybutforthedeception.”).1032010Order¶53-61


oftheCommunicationsActrequiredtheFCCtocompleteaproceeding“forthepurposeof

identifyingandeliminating...marketentrybarriersforentrepreneursandothersmall

businessesintheprovisionandownershipoftelecommunicationsservicesandinformation

services,orintheprovisionofpartsorservicestoprovidersoftelecommunications

servicesandinformationservices.”104Section257(c),meanwhile,requirestheFCCto

reporttoCongresseverythreeyearsonregulationsithasprescribedpursuanttoSection

257(a)andonstatutorybarriersthatstandinthewayofSection257(a).105

JudgeSilberman,dissentinginVerizon,suggestedthatatransparencyruleis

reasonablyancillarytotheFCC’sdutiesinSection257.106JudgeWilliams,dissentingin

USTelecom,suggestedthatatransparencyrulecouldalsobeupheldunderanarrow

readingofSection706,107aswesuggestabove.108Furthermore,iftheCommissionpairsits

reclassificationofbroadbandunderTitleIwitharedefinitionof“publicswitchednetwork”

toonceagainrefertotelephonyservicesusingtheNorthAmericanNumberingPlan,asit

hasproposedtodo,109thencertainVoIPservicesmayremainclassifiedas

TelecommunicationsServicesunderTitleII.Thatmeansthatatransparencyrulecouldalso

besupportedasreasonablyancillarytotheCommission’sdutiesinSection201(b)ofthe

CommunicationsAct.110TheCommissiontriedusingthisauthorityinComcast,butthe

10447U.S.C.§257(a).10547U.S.C.§257(c).106SeeVerizonv.FCC,740F.3dat668n.9(Silberman,J.dissenting).107U.S.Telecomm.Ass’nv.FCC,825F.3dat770(Williams,J.,dissenting).108SeediscussionofSection706,suprapage15.109NPRMat40.110See47U.S.C.§201(b).


courtrejecteditbecausetheargumentwasmadeonlyintheCommission’sbriefs,notinthe

underlyingorder.111IftheCommissiontakesbettercareindraftingtheorderthistime

around,thisadditionalauthorityshouldgiveaddedsupportfortheFCC’stransparency

rule.Altogether,arulerequiringbroadbandproviderstobetransparentabouttheirtraffic-

managementpracticesshouldbeeffectiveandlegallysustainable.

2. PolicingUnreasonableDiscrimination&AnticompetitiveBehavior

Unreasonablediscriminationbybroadbandprovidersintheirtraffic-management

andinterconnectionpracticescouldharmconsumersandcompetitionamongedge

providers,inviolationofNetNeutrality.Thereisverylittleevidenceofharmful

discriminationhappeningintherealworld,butithashappenedbefore,112anditmay

happenagain.TheCommissionhaspreviouslyproposedacommerciallyreasonable

standardtoprotectconsumersandcompetitionfromtheharmfuleffectsofsuch

unreasonablediscrimination,113andwethinksuchastandardisareasonableandprudent

waytoprotectNetNeutralitygoingforward.

Specifically,wethinktheFCCshouldprotectconsumersandedgeprovidersfrom

unreasonablediscriminationbyimplementingarulerequiringbroadbandproviders’

111SeeComcastv.FCC,600F.3dat660(“Wehavenoneedtoexaminethisclaim,however,fortheCommissionmustdefenditsactiononthesamegroundsadvancedintheOrder.”)(citingSECv.CheneryCorp.,318U.S.80,87–88(1943)).112See,e.g.,MadisonRiverCommunications,LLCandAffiliatedCompanies,Order,EB-05-IH-0110(Mar.3,2005),availableathttps://goo.gl/krJqii(closinganinvestigationintoallegedblockingofcompetingVoIPapplicationsbyabroadbandprovider).113See,e.g.,2014NPRMat67(“ApersonengagedintheprovisionoffixedbroadbandInternetaccessservice,insofarassuchpersonissoengaged,shallnotengageincommerciallyunreasonablepractices.Reasonablenetworkmanagementshallnotconstituteacommerciallyunreasonablepractice.”);NPRM¶75.


practicestobe“commerciallyreasonable.”Thisstandardshouldbeenforcedonacase-by-

casebasis,withthesubstantiveguidelinesforassessingcommercialreasonableness

identicaltowhattheFTCusestoadministeritsauthorityunderSection5.Suchastandard

wouldprovideaconsistentregulatoryapproachthroughouttheInternetecosystem,and

wouldthusbethemostcomprehensiveandeffectiveapproachtoNetNeutralitythatcould

behadunderexistinglaw.

Havingmultiplecopsonthebeatcouldpotentiallyleadtounevenenforcementand

conflictingguidance,causingregulatoryuncertaintythatstiflesinnovationandinvestment.

However,ajurisdictionaloverlapbetweentheFCCandFTCisimpossibletoavoidinthis

context,anditisunclearwhichagency—thegeneralistconsumer-protectionagencyorthe

specialistcommunicationsregulator—shouldbeinchargeofNetNeutrality.Thus,rather

thanfightingajurisdictionalturfwarwiththeFTC,weurgetheFCCtoembracea

collaborativerelationshipwiththeFTC—ashasalreadybeendoneinothercontexts114—

andrecognizethevaluableinsightandexperienceitcanofferinthecontextofNet

Neutrality.Indeed,FTCinsightintoNetNeutralityisvital.

BeforetheFCCbroughtanyNetNeutralityactionsorevenconsideredreclassifying

broadbandunderTitleII,FTChadconductedextensiveanalysisofNetNeutralityand

114See,e.g.,FCC-FTCMemorandumofUnderstandingTelemarketingEnforcement(2003),availableathttps://goo.gl/4P23pf(establishingacollaborativerelationshipbetweentheFCCandFTCregardingtelemarketingservices)(appendedtoAnnualReportfromCongressforFY2003and2004PursuanttotheDoNotCallImplementationActonImplementationoftheNationalDoNotCallRegistry);FCC-FTCConsumerProtectionMemorandumofUnderstanding(Nov.16,2015),availableathttps://goo.gl/Xd3Vgy(establishingacollaborativerelationshipbetweentheFCCandFTCregardingconsumerprotectiononline).


broadbandcompetition,includingthoroughconsiderationofthebenefitsandcostsof

variouspotentialformsofdiscrimination.115Manypotentialformsofdiscriminationor

violationsofNetNeutralityinvolveverticalrestraintsontrade(e.g.,SLAs)thathave

anticompetitiveeffectsoncertainedgeproviders.Yet,lookingonlyatonemarketgivesan

incompletepictureofthesituation.Forexample,azero-ratingserviceformusicstreaming

oraprioritizedserviceforgamingofferedbyabroadbandprovidermighthaveanti-

competitiveeffectsinthemarketformusicorgamingservices,butalsosignificantpro-

competitiveeffectsinthemarketforbroadband.Infact,therearealreadymultiple

examplesofbroadbandprovidersusingsuchofferingstogreatsuccessinthemarket.116

WeneedaregulatoryframeworkforNetNeutralitythatencourages

experimentationwiththesetypesofofferings,butisabletostepinandregulatethemwhen

neededtoprotectconsumersorcompetition.TheFCCalonecouldnotdeliverthat,butitis

unclearwhethertheFTCalonecoulddeliveriteither.Thus,inthisproceeding,we

encouragetheFCCtoimplementacomprehensiveNetNeutralityframework,utilizingthe

experienceandauthorityofboththeFCCandFTC,basedonacommerciallyreasonable

standard.Downtheline,however,ifitbecomesclearthattheFTCcanenforceaneffective

NetNeutralityregimeonitsown,thenweencouragetheFCCtouseitsauthorityunder

Section10toforbearfromapplyingthecommerciallyreasonablestandardwhereitistruly

115SeeFTCStaffReport,BroadbandConnectivityCompetitionPolicy(June2007),availableathttps://goo.gl/Fd2MEC.116See,e.g.,Tran,supranote82;Plusnet,supra88.


duplicativeandunnecessaryfortheeffectiveperformanceoftheCommission’svarious

dutiesintheCommunicationsAct.117

IV. Conclusion

WethanktheCommissionforlaunchingthisproceedingandproposingtorestore

thelight-touchregulatoryframeworkforbroadband.Westronglysupporttheseeffortsand

lookforwardtofurtherengagementwiththeCommissionandotherstakeholdersonthese

issues.

Respectfullysubmitted, /s/ TomStruble TechnologyPolicyManager JoeKane

TechnologyPolicyAssociateJuly17,2017

117See47U.S.C.§160.

Documents

Comments of R Street Institute · Properly conceived, 20Net Neutrality can offer tremendous benefits for both competition and consumers. As we have made clear, we support Net Neutrality