FCC Adopts a Policy Statement Regarding Network Neutrality
August 5, 2005. The Federal Communications Commission (FCC) adopted, but did not release, an item titled "Policy Statement". It relates to guaranteeing for consumers the freedom to use their internet connections to access any content, use any applications, and attach any devices, that they choose. It also relates to limitations upon these freedoms, imposed by their service providers, or by the government. Finally, it contains language regarding competition in a variety of industry sectors, and hints at the possibility of a broadening of FCC exercise of antitrust authority.
This item is merely a policy statement, without enforceable rules. It may also have been approved as a concession to its primary backer, Commissioner Michael Copps, in return for his support for other items adopted on August 5. If this is the case, there may be little enthusiasm for actually implementing its contents.
Finally, the FCC has not released the actual text of the policy statement. The FCC issued only a half page release [PDF]. The following is the entire substantive language of this release.
"The Federal Communications Commission today adopted a policy statement that outlines four principles to encourage broadband deployment and preserve and promote the open and interconnected nature of public Internet: (1) consumers are entitled to access the lawful Internet content of their choice; (2) consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement; (3) consumers are entitled to connect their choice of legal devices that do not harm the network; and (4) consumers are entitled to competition among network providers, application and service providers, and content providers. Although the Commission did not adopt rules in this regard, it will incorporate these principles into its ongoing policymaking activities. All of these principles are subject to reasonable network management."
This item was being negotiated by Commissioners and staff until late into the night of Thursday, August 4, along with many other matters. It is possible that the Commissioners have not yet fully thought through all of the components of this policy statement, or even the language of the release.
The FCC's release states that this item is numbered FCC 05-151. The FCC release does not, however, state a proceeding title or proceeding number with which this policy statement is associated.
What is a Policy Statement? The adoption of this item raises the question of just what is a policy statement, and what are the legal consequences of an FCC policy statement. Neither the Communications Act nor the Administrative Procedure Act contemplate regulation by policy statement.
Nevertheless, the FCC has a history of adopting policy statements. For example, on November 10, 2000, the FCC adopted a policy statement regarding taking steps towards allowing secondary markets in spectrum rights, and otherwise bringing more clarity and use flexibility to spectrum rights. In the following five years, the FCC has conducted many rule making proceedings that implement this policy statement. That is, the 2000 policy statement did not adopt any rules, but it set in motion a number of rulemaking proceeding that have resulted in implementing rules. See, TLJ story titled "FCC Discusses Secondary Markets for Wireless Spectrum", November 10, 2000.
The FCC also has a history of using policy statements as guidelines for regulated entities regarding how it will apply existing rules in future enforcement proceedings, for example, regarding indecency and advertising of dial-around services. However, the just adopted policy statement is not in the nature of guidelines for the interpretation of existing rules.
FCC Chairman Kevin Martin explained in his separate statement [PDF] on this item that "While policy statements do not establish rules nor are they enforceable documents, today's statement does reflect core beliefs that each member of this Commission holds regarding how broadband internet access should function."
Tom Navin, Chief of the Wireline Competition Bureau (WCB), also responded to questions at a news conference on August 5. He stated that the policy statement is "principles", and that "they are not enforceable".
Michael Copps wrote in his statement [PDF] that these are "principles that will guide our effort". He added that he "would have preferred a rule that we could use to bring enforcement action". He also said that "with violations of our policy, I will take the next step and push for Commission action".
Purpose of the Policy Statement. The policy statement itself states that its purpose is to "encourage broadband deployment and preserve and promote the open and interconnected nature of public Internet".
Commissioner Copps elaborated that it "will protect network neutrality so that the Internet remains a vibrant, open place where new technologies, business innovation and competition can flourish. We need a watchful eye to ensure that network providers do not become gatekeepers, with the ability to dictate who can use the Internet and for what purpose. Consumers do not want to be told that they cannot use their DSL line for VoIP, for streaming video, to access a particular news website, or to play on a particular company’s game machine."
Copps is the Commissioner who has been the strongest proponent of a network neutrality rule. See for example, March 26, 2004 speech by Copps, and story titled "FCC Commissioner Copps Addresses Broadband Network Neutrality" in TLJ Daily E-Mail Alert No. 868, April 2, 2004.
Chairman Martin wrote in his statement that "cable and telephone companies have delivered", without regulatory mandates, "broadband internet access service to access any content on the internet". He continued that their "practices already track well the internet principles we endorse today".
Martin explained that in a "competitive marketplace, providers must do so". And, he said that "I also am confident, therefore, that regulation is not, nor will be, required". Yet, he supported the adoption of this policy statement.
He offered no rationale for supporting this policy statement. Perhaps he supported this item as part of a larger bargain among the four Commissioners to win unanimous support on the Commission for numerous items.
Reaction to the Policy Statement. Ed Black P/CEO of the Computer and Communications Industry Association (CCIA), stated in a release that "This policy statement supports principles of network neutrality crucial to a vibrant Internet, and should be the foundation upon which broadband policy is made".
Michael Petricone of the Consumer Electronics Association (CEA) stated in a release that "we commend the Commission's endorsement of principles ensuring that Americans retain their freedom to access content, use applications and connect devices of their choice to high-speed Internet networks. Adherence to these principles is vital to ensure the development of new innovative consumer electronic devices that depend on unrestricted connection to broadband networks."
Jeff Pulver, a VOIP innovator, wrote in his web site that that "On the bright side, the FCC also adopted earlier today a ``Policy Statement´´ on something akin to ``Net Freedom.´´ This Policy Statement apparently only saw the light of day because of the tireless efforts of Comm'r Copps. So, thank you Commissioner Copps for trying to protect Internet users."
Pulver continued that "I wish the FCC could have gone further than the Policy Statement and adopted explicit, bona fide, enforceable rules for user empowerment. For now, we, as the drivers of IP-based communications Internet innovation, will have to be ever-vigilant to monitor potential abuses of user empowerment. If the FCC revisits the issue a year from now (as Comm'r Copps has called upon the Commission to do), we should be prepared to present the FCC with a sufficient evidentiary record to convince the FCC to enforce user empowerment and to impose any rules that have been proven to be necessary. In any event, Policy Statement aside, nothing is settled and, if Internet users want control over the Internet experience, then Congress probably has to act to protect the Internet and its users." See, transcript.
Mike Godwin of the Public Knowledge, a Washington DC based interest group, stated in a release that "We respect the leadership of Commissioner Copps and others in attempting to promote the principle of open networks in the Commission's policy statement today, but we also believe consumers and the market would have benefited if the FCC had included an openness requirement in the order itself".
Comparison to Powell's Network Freedoms. The content of the policy statement is not a new concept. Numerous proposals have been advanced in filings with the FCC. Commissioners have also spoken on this subject in the past. See for example, comment [17 pages in PDF] submitted by law professors Lawrence Lessig (Stanford) and Timothy Wu (University of Virginia) on August 22, 2003, urging that the FCC adopt a network neutrality rule.
Most notably, former Chairman Michael Powell advocated a concept that he identified as "network freedoms".
On February 8, 2004 Powell gave a speech [PDF] titled "Preserving Internet Freedom: Guiding Principles for the Industry" at the Silicon Flatirons Symposium at the University of Colorado School of Law in Boulder, Colorado. See, story titled "Powell Opposes Regulations to Impose Broadband Network Neutrality" in TLJ Daily E-Mail Alert No. 833, February 10, 2004.
Powell argued in that speech for a concept that he called "Net Freedom" -- the concept that consumers should be able to use their broadband connections to "use the content, applications and devices they want", without restrictions imposed by their broadband service providers. He also argued that at this time "the case for government imposed regulations regarding the use or provision of broadband content, applications and devices is unconvincing and speculative".
On October 19, 2004 Powell gave a speech [5 pages in PDF] at the Voice on the Net Conference in Boston, Massachusetts in which he enumerated four internet freedoms. See, story titled "Powell Discusses VOIP Regulation" in TLJ Daily E-Mail Alert No. 1,000, October 20, 2004.
Powell stated that these four freedoms are: "(1) Freedom to Access Content: Consumers should have access to their choice of legal content; (2) Freedom to Use Applications: Consumers should be able to run applications of their choice; (3) Freedom to Attach Personal Devices: Consumers should be permitted to attach any devices they choose to the connection in their homes; and (4) Freedom to Obtain Service Plan Information: Consumers should receive meaningful information regarding their service plans."
The present policy statement tracks Powell's network freedoms, to a degree. First, both list four items. Also, three of the FCC's items are identical to, or similar to, three of Powell's network freedoms. Moreover, they are enumerated in the same order.
Nevertheless, there are some substantial differences between network freedoms as conceived by Powell, and the policy statement just adopted by the FCC.
In comparing the just adopted policy statement to Powell's four freedoms, the first item, freedom to access any content, the two are basically the same.
On the second item, freedom to use applications, the two start out the same. But, the policy statement adds a phrase -- "subject to the needs of law enforcement".
On the third item, freedom to attach devices, the two start out the same. But the policy statement adds a phrase -- "devices that do not harm the network".
On the fourth item, Powell proposes that "Consumers should receive meaningful information regarding their service plans", while the policy statement provides that "consumers are entitled to competition among network providers, application and service providers, and content providers".
Commentary. These differences are substantial. The concept espoused by Powell, and that underlies the FCC's policy statement, is that there should be limitations upon what broadband service providers can do in their relationship with their customers. In this contractual relationship, the customers are consumers. And, while the legal concept of the term freedom is normally used in the context of the relationship between a government and its citizens, and connotes a limitation upon governmental power, it is also sometimes applied to the relationship between a business and the consumers of its products or services. Hence, it is appropriate, and linguistically accurate, to speak of the network freedoms of consumers.
However, the FCC policy statement also includes new items that lie outside of the concept of network freedoms for consumers. The FCC's release describing the policy statement also suggests limitations upon the rights of individuals, and the concurrent expansion of government authority. This is not appropriately described as consumer freedom or consumer choice.
First, the FCC release uses the phrase "subject to the needs of law enforcement". These "needs" will be asserted, not by broadband internet access providers, but by law enforcement agencies, such as the FBI. Hence, this phrase pertains to the relationship between individuals and the government. In this relationship, individuals are not consumers. Moreover, this phrase implies government imposed limitations upon the activities of citizens, which is the very essence of a diminution of freedom. Hence, this phrase has nothing to do with consumers, and implies the opposite of freedom, and the opposite of choice.
To be sure, some comments filed with the FCC have proposed that the right to use applications and services may be constrained by the service providers' compliance with legal duties imposed by statutes, and so forth. See, for example, the above referenced comment of Lessig and Wu. But such legal duties, effected by the service provider, are different from, and more limited than, the broad concept of the "needs of law enforcement".
This analysis is not merely semantic and hypothetical. Consider, for example, that the FBI has been strenuously lobbying the FCC in recent years for an expansion of the CALEA regulatory regime to include all sorts of internet based information services, even though the CALEA statute plainly states that it applies to telecommunications carriers, and exempts information services. As the FCC's item of August 5 regarding CALEA demonstrates, the FBI has succeeded in its lobbying efforts. The FCC has just determined that notwithstanding the statute, broadband internet access providers and interconnected VOIP service providers are subject to CALEA based regulation.
However, this still leaves a gap in the FBI's regulatory goals. The CALEA still only applies to carriers, albeit very broadly conceived. There is still the matter of the FBI's attempts to deal with individuals in the U.S. who run software or attach devices, perhaps acquired from businesses in other countries beyond the reach of the FBI and FCC.
The language in the FCC's policy statement regarding "subject to the needs of law enforcement" and "devices that do not harm the network", could be construed as laying the groundwork for the FCC and FBI to limit the freedom of individuals to use the internet, where the FBI asserts that such use could affect its "needs" to intercept and access the data of individuals.
If the FCC were to implement the policy statement in this manner, then this policy statement could be in the nature of the Trojan horse of Greek mythology, appearing on the outside as a gift of consumer freedom, but bearing concealed in its inside government limitations on the free use of the internet by individuals.
And then, there is the matter of the policy statement's language regarding "competition among network providers, application and service providers, and content providers". Again, the notion of the network freedoms of consumers pertains to restrictions upon broadband service providers' ability to limit the activities of their customers. But, the above quoted language pertains to market competition analysis, not network freedom.
Moreover, this phrase suggests FCC assumption of authority to apply competition, or antitrust, law principles to competition in several industry sectors, "network providers, application and service providers, and content providers". The is novel, and if actually implemented, would constitute an expansion of FCC authority.
To start with, the FCC holds a very limited antitrust authority under the Communications Act of 1934, as amended. It does not exercise this authority. It does exercise, without statutory authority, antitrust merger review authority. However, it only does this in the context of mergers of companies that hold significant FCC licenses. It acquired this by fait accompli. The FCC has not asserted general antitrust power with respect to non-merger conduct. Nor has the FCC asserted antitrust power over companies that do not hold significant FCC licenses. Yet, the FCC's description of its policy statement suggests exercising competition law authority, absent mergers, and over content companies and application providers, many of which do not hold any FCC licenses.
In conclusion, while this policy statement may be understood by many to be about guaranteeing network freedom for consumers, and preserving consumer choice, it many be implemented by the FCC in a manner that guarantees some network freedoms, but diminishes others. Moreover, it may portend an FCC interest in expanding its competition law authority.
On the other hand, the FCC Commissioners may not have this understanding. Or, the
policy statement may only represent the views of a minority of the Commissioners, and was
agreed to as part of a package of compromises.