February 27, 2018

Why Title II Is Not the Answer for Internet Freedom

  • In December 2017, the FCC overturned rules that allowed it to regulate internet service providers as if they were utilities.
  • The FCC turned to the utility-style rules only after its previous attempts to impose net neutrality regulations failed.
  • The unpredictable nature of the FCC’s internet regulations strongly suggests that legislation is the only way to secure a permanent solution for a free and open internet.

In December 2017, the Federal Communications Commission voted to overturn a 2015 order that allowed it to regulate internet service providers as if they were utilities. The 2015 order had classified ISPs as “common carriers” providing a “telecommunications service” under Title II of the Communications Act of 1934. This classification gave the FCC the authority to impose various rules on ISPs, including those relating to “net neutrality.”

Title II Regulation Would Treat the Internet Like Ma Bell

Title II

Net neutrality generally refers to rules that would require ISPs to treat all internet traffic the same. Although proposals differ, most formulations of a net neutrality regime would prohibit ISPs from blocking legal content, slowing down data for competitive reasons, and allowing content providers to pay ISPs to prioritize their websites or applications. The depression-era Title II common-carrier rules go well beyond net neutrality regulations, however, and allow the FCC to treat ISPs like utilities.

Senator Ed Markey is expected to introduce a resolution under the Congressional Review Act that would require the FCC to withdraw its order and leave the archaic Title II regulations in place. Republican senators support clear requirements that would ensure consumers are protected and provide guidance to the market. The way to impose these requirements is through targeted legislation, rather than with antiquated rules like Title II.

Common Carrier Classification

The “common carrier” classification for telecommunications service was created in the Communications Act of 1934, which was signed into law by President Franklin D. Roosevelt. It was enacted at the time of the Bell Telephone monopoly and gave the commission authority to oversee the monopoly’s business practices very closely and to regulate its rates. 

The Communications Act of 1934 was amended by the Telecommunications Act of 1996, which distinguished between two main categories of providers. There are those providing “information service,” covered by Title I of the act, and those providing “telecommunications service,” regulated under Title II. Entities providing “telecommunications service” are subject to potentially onerous common-carrier rules, while those providing “information service” are not.

Until the 2015 Obama-era rules, the FCC treated ISPs as providing information services. This classification was upheld by the Supreme Court in 2005 as consistent with the Communications Act. Under this classification, ISPs were subject to only limited regulation, which allowed the internet to develop organically and led ISPs to invest tens of billions of dollars in broadband infrastructure.

When, in 2015, the commission reclassified ISPs under Title II, it gave itself the power to treat them as “common carriers.” This means that it can supervise their rates and practices, force them to provide service, and ban practices that it decides are “unjust or unreasonable.”

The Tortuous Path to Title II

The FCC used Title II to impose net neutrality regulations in 2015 only after its attempts to do so under other provisions in the Communications Act were stymied. In 2008, the FCC issued an enforcement action restricting an ISP from interfering with subscribers’ use of peer-to-peer file-sharing applications. It grounded its authority to do so in its “ancillary jurisdiction to impose additional regulatory obligations” outside of Title II. The ISP challenged the order in court, and the D.C. Circuit ruled in early 2010 that the FCC’s statutory justification for the restrictions was insufficient.

The next major step toward Title II came later in 2010, when the FCC voted to issue regulations requiring ISPs to “disclose the network management practices, performance characteristics, and terms and conditions of their broadband services” and prohibited providers from blocking lawful content, applications, services, or safe devices. The regulations also prohibited ISPs from “unreasonably” discriminating in transmitting lawful network traffic. The FCC contended that it had the power to issue the regulations under one of its non-Title II authorities.

A Congressional Review Act resolution to repeal these regulations was cosponsored by 43 Republican senators. When the rules were challenged in court, the D.C. Circuit determined in 2014 that they impermissibly caused the FCC to treat ISPs as “common carriers,” a Title II classification.

The 2015 Open Internet Order

After the 2014 D.C. Circuit ruling, the FCC concluded that it would need to reclassify ISPs as telecommunications service providers to impose net neutrality regulations on them. Under pressure from the Obama White House, it did so in a 3-2 vote with the 2015 Open Internet Order.

The depression-era Title II regime is a poor fit for the internet. Although the FCC pledged not to impose some of the more onerous price-control regulations on ISPs, the Title II classification of ISPs allowed it to do so. At the time, FCC Commissioner Ajit Pai warned that “reclassifying broadband, applying the bulk of Title II rules, and half-heartedly forbearing from the rest ‘for now’ will drive smaller competitors out of business and leave the rest in regulatory vassalage.” As an AEI scholar put it, “Title II hangs as a sword of Damocles over the broadband industry, generating uncertainty, limiting innovation, and likely reducing capital investment in the sector.” The treatment of ISPs as Title II common carriers caused other problems, including exempting them from the jurisdiction of the Federal Trade Commission, which led to an ill-designed plan by the FCC to fill the regulatory gap.

In December 2017, the FCC issued the Restoring Internet Freedom order, which repealed the 2015 order. In the new order, the commission determined that “economic theory, empirical data, and even anecdotal evidence ... counsel against imposing public-utility style regulation on ISPs.” It pointed out that the “broader Internet ecosystem thrived under the light-touch regulatory treatment of Title I, with massive investment and innovation by both ISPs and edge providers, leading to previously unimagined technological developments and services.” The order concluded that “a return to Title I classification will facilitate critical broadband investment and innovation by removing regulatory uncertainty and lowering compliance costs.”

The Way Forward

The fitful history of the FCC’s attempts to impose net neutrality regulations supports Commerce Committee Chairman John Thune’s recognition that “Congressional action is the only way to solve the endless back and forth on net neutrality rules that we’ve seen over the past several years.” The resolution of disapproval would do the opposite by forcing the issue back into regulatory and litigation chaos.

Issue Tag: Technology