FCC girds for legal attacks on net neutrality order

14 Mar 2015 | Author: | No comments yet »

FCC outlines net neutrality rules in 400-page report: 5 things you need to know.

(Bloomberg) — The Federal Communications Commission released the net-neutrality regulations it adopted last month on a party-line vote, as Republican lawmakers critical of the decision prepared to question the agency at hearings next week. In the FCC’s newly released Net Neutrality Order, it includes a supplemental document on so-called mythsfrom classifying broadband as a Title II regulated telecommunications service.

According to a raft of recent national polls, Republican voters approve of government action to ensure that Internet service providers treat all web content the same.So, not surprisingly, the prospect of a tax increase was a prominent card played by conservatives opposed to net neutrality, the idea of equal treatment for all Internet content. A November 2014 University of Delaware survey, for example, found that 85% of Republicans (and 81% of Democrats) were opposed to allowing ISPs to charge web companies a fee to deliver their content to customers more quickly—an arrangement they call “Internet fast lanes.” Yet five likely Republican presidential contenders have come out against net neutrality in no uncertain terms.

It listed streaming video initiatives by Dish Network Corp., CBS Corp. and Time Warner Inc.’s HBO, and Amazon.com Inc.’s winning two Golden Globe awards for its online series “Transparent.” “The lesson of this period, and the overwhelming consensus on the record, is that carefully tailored rules to protect Internet openness will allow investment and innovation to continue to flourish,” the agency said. Opponents say the regulations are an illegal bureaucratic power grab, and that if they are allowed to stand in court they will do harm. “The consequences: higher broadband prices, slower speeds… less innovation, and fewer options for American consumers,” Ajit Pai, a commissioner at the FCC, said in his dissent. The order, released Thursday in the wake of the commission’s vote to approve net neutrality rules in late February, establishes “clear and enforceable rules” to protect consumers, an FCC official said.

Through 313 dense pages of regulations and explanations, the FCC never explains why it needs to pull a 180-degree shift in how it oversees the Internet, from treating it as an “information service” exempt from utility-style regulation, to a “telecommunications service” falling under the 1934 law written to control telephone monopolies. “The real question is, will a court defer to the FCCs view of the facts?” said John Beahn, counsel in Skadden’s Washington office focusing on telecommunications law. “There are going to be a lot of billable hours spent on that.” The rules, as I said, appear simple. The regulations talk about a new tax on Internet providers in a positive light, noting it could add “to the stability of the universal service fund,” which subsidizes building connections in unprofitable areas. Moreover, even if your monthly bill does rise a few pennies, the money would go toward expanding broadband service nationwide — and that’s a good thing, as just about every study of the economic and social benefits of broadband has shown. While the order is long, the actual changes to the Code of Federal Regulations that the FCC approved amount to eight pages, running from pages 283 to 290 in Appendix A of the order. The fundamental idea is to guarantee the free flow of bits from so-called edge providers of information, entertainment and apps through the chokepoints of the Web to consumers, without anybody holding out their hand for a toll along the way.

Republican Commissioner Ajit Pai, in a dissent, said the FCC was replacing Internet freedom with government control. “It seizes unilateral authority to regulate Internet conduct,” Pai said. Broadband Internet providers – including wireless carriers – are prohibited from blocking legal websites, throttling back traffic, or charging fees for better access to consumers.

While its order does not explicitly impose new taxes, it does open to the door for others to tax the Internet for the first time under existing state and local laws, and will likely lead to further expansion of taxes in years to come. Jeb Bush, the frontrunner for the Republican presidential race in 2016, said the FCC’s plan to ensure net neutrality was “one of the craziest ideas I’ve ever heard.” 1) It’s All About Obama. In other words, an ISP, such as Comcast or Verizon, for example, can’t take action to keep ordinary customers away from certain websites (or stop them from downloading certain movies or music, for that matter), unless the content in question and the act of obtaining it is otherwise illegal. The FCC order includes a history of net neutrality efforts at the agency as well as a lengthy justification for the rules and an analysis of potential legal issues.

Since the Feb. 26 vote, the text has undergone final edits to respond to the dissents of the two Republicans on the five-member agency led by Chairman Tom Wheeler, a Democrat. If another wants to upgrade the bandwidth of its routers at the cost of some latency, the FCC may block it.” The regulations include “net neutrality” rules – which were the main impetus for the new policies. So while the new rules prohibit ISPs from blocking access to blogs that might be critical of their corporations, web service providers can still take action if a customer is somehow caught downloading illegal content. “[T]he no-blocking rule only applies to transmissions of lawful content and does not prevent or restrict a broadband provider from refusing to transmit unlawful material, such as child pornography or copyright-infringing materials. The collapse of reasoned discussion about net neutrality into partisan bickering is yet another example of why it’s so hard to get things done in this country. He blamed the change on pressure from the White House, which was dissatisfied with earlier proposals that stopped short of regulating broadband providers as common carriers under Title II of the Telecommunications Act.

By reclassifying Internet services as common carrier telecommunications services, states that tax the tangible property and equipment of public utilities and regulated telecommunications services can now tax the property of broadband service providers. We believe that this approach will allow broadband providers to honor their service commitments to their subscribers without requiring a specified level of service to those subscribers or edge providers under the no-blocking rule,” the agency says.

Public utilities are taxed at a much higher rate than other property taxes, which means that broadband costs and prices will increase with states never having to pursue the more challenging course of securing legislative change. Throughout the report, the FCC notes that, notwithstanding rules such as the “no blocking” provision, certain custodial efforts (or “reasonable network management”) might affect access to the internet. Editing the document after the FCC’s vote makes sure the agency addresses opposing views as courts have demanded, Jonathan Sallet, the agency’s general counsel, said in a March 2 blog post. David Edelman – saw reclassification of the Internet as the key to getting past unfavorable court decisions striking down the FCC’s previous Open Internet orders.

Pollsters have found that Republican voters often say they don’t like “net neutrality,” but they say they like it when the issue is explained instead. Similarly, the FCC’s new rules also say that internet providers can’t decide to speed-up and slow-down the delivery to customers of online content at an ISP’s own discretion.

President Barack Obama welcomed the rules, saying they will protect innovation and “create a level playing field for the next generation of entrepreneurs.” They might simply designate all of the firm’s property as “mixed use” and subject it to the full taxation as regulated telecommunications property.

Therefore, broadband providers that provide video services, information services and other lines of business (such as applications and cloud computing services) could have their tangible and intangible property for other lines of businesses taxed at higher rates and under a broader base, exposing the entire business to these higher costs. While the FCC says that federal universal service fees will not apply to broadband services, the Chairman’s later notes that reclassifying “bolsters universal service fund support for broadband service in the future through partial application of Section 254.” The current fund uses total interstate telecommunications revenues as its tax base, which means broadband (an interstate service) would eventually be subject to these fees. Cable and telecom companies, after all, oppose net neutrality and pour tens of millions of dollars every year on politicians’ campaign coffers, PACs and philanthropic projects and spend tens of millions more on lobbyists and letters and advertisements on the subject. To name one example, Comcast spent more on lobbying members of Congress in 2012 than any other company in the entire country, except Northrop Grumman, the defense contractor that makes the B-2 bomber.

Yet while paid prioritization and “fast lanes” became a central argument to the net neutrality debate, the FCC has included language in its report that doesn’t outright ban that concept 100 percent. But those contributions go pretty equally to Republicans and Democrats, and there’s a counterbalance from tech companies such as Google, Amazon and Netflix that are spending gobs of money, sometimes on the same politicians. 3) It’s the Means, Not the Ends. No one knows… businesses will have to decide for themselves — with… high-priced attorneys and accountants — whether to take a risk.” “Now we shall remain mired in endless lawsuits,” Wayne Crews, vice president of policy at the libertarian Competitive Enterprise Institute, told FoxNews.com.

RT reported at the time that a Justice Department attorney said in 2013 that the government wants to use CALEA to monitor the online conversations of suspected criminals in real time, and disclosures that same year from former intelligence contractor Edward Snowden revealed that the government uses Section 702 of FISA to authorize digital surveillance on foreign persons – the likes of which, tech experts have argued, has involved exploiting security weaknesses on behalf of the government and, as a result, secretly undermining the protocols meant to protect online activity. The fee — conservatives are calling it a tax — was established in 1997 and raises billions of dollars annually to defray phone companies’ costs for running lines to far-flung areas.

That could lead to a whole host of new state taxes and state traffic studies on broadband providers, not unlike those imposed in the days of “Ma Bell.” It’s time for the FCC to fess up. The language in the report doesn’t provide any new powers to law enforcement, but rather clarifies that open internet provisions shouldn’t in any way preclude the authorities’ already established abilities.

The 1998 law bans new taxes — but not fees — on Internet service. “This is essentially a massive tax increase on the middle class being passed in the dead of night without the American public really being made aware of what is going on,” Sen. The commission will address mobile data caps on a case-by-case basis. [Pages 66 to 68.] — So-called specialized services that do not provide Internet access, including some VoIP services, online heart monitors and energy consumption sensors, are not covered by the rules. [Page 11. paragraph 35.]

In the case of broadband, however, we all benefit from its expansion by improved commerce, education, healthcare, entertainment, security and a host of other aspects of daily life. But it’s rare for the agency to bundle the order on remand, or request for reconsideration, with the declaratory ruling stating stating broadband internet is a telecommunications service and a third ruling detailing forbearance from hundreds of regulations. To get to the point: Could someone reading the Notice have anticipated the FCC might reject its past proposals and tentative conclusions and instead pursue reclassification?

It also rejects the idea that consumers might consent to paid prioritization, as is done in other two-sided markets, whether it is television subsidized by advertising or credit card “rewards” paid for by merchant fees and usurious interest rates charged to cardholders who don’t pay off their balance each month. “Given the dangers, there is no room for a blanket exception for instances where consumer permission is buried in a service plan—the threats of consumer deception and confusion are simply too great,” the order says. Iowa Utilities Board in 1999, saying the FCC had “irrationally refused” to consider whether a competing carrier could build its own local network or lease one from another party.

The agency also overstepped by considering any price increase to be an “impairment.” The agency came back with a new standard defining impairment as anything that “materially diminishes” a carrier’s “ability to provide the services it seeks to offer.” The D.C. The court criticized the agency’s “broad and analytically insubstantial concept of impairment” that failed to seek a balance between the benefits of unbundling and the costs in the form of discouraging investment in the network. And it vacated the FCC’s order requiring local carriers to lease their lines to competitors because the agency refused to consider alternatives like cable companies.

Then-FCC Chairman Michael Powell, who like Pai today had dissented vociferously from the previous attempts to regulate local access, said this of the whole drama: For eight years, the effort to establish viable local unbundling rules has been a litigation roller coaster. Regrettably, years of fierce battles to bend the rules entirely toward one sector or another without proper respect for the legal constraint s have contributed to a prolonged period of uncertainty and market stagnation.

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