An Update On The FCC's Busy Few Years

• Over the past few years, the FCC has taken steps to impose significant new mandates on telecommunications providers.
• These regulations include last year’s net neutrality rules and several ongoing rulemakings involving video feeds, privacy, and commercial internet service rates.
• The FCC’s rulemakings go beyond its statutory authority and neglect rigorous economic analysis.

OPEN MARKETS HAVE SPURRED INNOVATION

The growth in innovation, consumer choice, and access in the telecommunications sector over the past 20 years is inarguable. A hands-off regulatory approach by Washington has allowed consumers to enjoy growing access to broadband services, and the days of paying a separate fee for long-distance calls are largely over. But in a series of controversial and contentious rulemakings, the Federal Communications Commission has stepped into the regulatory breach in a big way. 

These rulemakings have been marked by party line votes, and observers have cautioned that they have been conducted without any meaningful economic evaluation. Even after the FCC’s original attempts to impose net neutrality were struck down by the courts, the agency has continued to push the boundaries of its statutory authority. In the latest rebuke, its municipal broadband regulations were overturned by the Sixth Circuit Court of Appeals in early August.

“Not even the Obama Administration can get away with breaking the law every time.” – Wall Street Journal, “The FCC Gets Throttled,” 08-10-2016

NET NEUTRALITY AND BUSINESS DATA SERVICES

In February 2015, the FCC voted 3-2 to classify broadband internet access as a “telecommunications service” under Title II and Section 706 of the Telecommunications Act, subjecting internet service providers to so-called “net neutrality” rules. This regulatory maneuver, which the Senate Homeland Security and Governmental Affairs Committee

found was procedurally infirm and politically directed, followed several failed attempts to impose net neutrality regulations. The order effectively allows the FCC to regulate ISPs like utilities, which Commissioner Ajit Pai has predicted will drive smaller providers out of business. A D.C. circuit court panel recently upheld the FCC order, and service providers are now seeking an en banc review of the decision.

This past April, the FCC voted 3-2 to regulate data services further, by proposing pricing regulations on “business data services” – a type of broadband service with guaranteed speeds and services. These services are used by businesses such as large retail stores that need fast broadband access to serve their customers. Mobile carriers also use this type of broadband service to transmit data from cell towers to a physical network.

SET-TOP BOXES

In February, the FCC turned its regulatory gaze to the video market. Commissioners voted 3-2 to issue a notice of proposed rule that would require video provider to make their video feeds accessible to all set-top boxes. This would include boxes not marketed or distributed by the video provider. Although intended to promote competition and innovation, the proposed rule was met by significant opposition from almost every segment of the television and video industry. In addition to the two commissioners who voted against the original proposal, two others expressed concern that the proposed rule had significant copyright issues. Industry figures have asserted that the set-top box rule would hurt innovation. Opponents have also said that the rule would be inconsistent with the Copyright Act.

Following the negative response to the original proposal, FCC Chairman Tom Wheeler announced a new draft that would “require pay-TV providers to offer to consumers a free app, controlled by the pay-TV provider, to access all the programming they pay for on a variety of devices, including tablets, smartphones, gaming systems, streaming devices or smart TVs.” Significant concerns remain under the new proposal, particularly regarding the creation of a new body at the FCC that would oversee the licensing for the video-access apps required by the rule.

ISP PRIVACY REQUIREMENTS

Once ISPs were classified as common carriers under the net neutrality rule, the Federal Trade Commission likely lost jurisdiction over the providers’ privacy practices. So after yet another 3-2 vote in March, the FCC proposed a new series of privacy rules, imposing a novel regulatory scheme specifically on ISPs. Jon Leibowitz, who served FTC chairman from 2009 to 2013, observed in testimony to the Senate Commerce Committee that the FCC apparently ignored the FTC’s expert advice in creating its privacy framework. Leibowitz warned that the FCC rule would create “a serious risk of unforeseen consequences that could adversely affect internet capabilities and operations.” President Obama’s mentor, Harvard Law School professor Laurence Tribe, has added his opinion that the proposed rule would violate the First Amendment.