News - April 2010

Main Topic: Network Neutrality.

Federal regulators lacked authority to censure Comcast Corp. for interfering with subscribers’ Internet traffic, a U.S. court said in a decision that could limit the government’s power to police companies’ Web behavior.

The U.S. Court of Appeals for the District of Columbia Circuit in a 3-to-0 decision vacated the Federal Communications Commission’s 2008 order against the largest U.S. cable company.

[…]

The FCC in 2008 censured Comcast for blocking subscribers using peer-to-peer software often used to view videos, a decision hailed by consumer groups as a step toward keeping Web traffic free of obstruction from corporations. Comcast said it delayed some file transfers to alleviate network congestion.

The court’s decision “invalidated the prior Commission’s approach” and didn’t “close the door to other methods” for “preserving a free and open Internet,” said FCC spokeswoman Jen Howard in an e-mailed statement.

[…]

The decision “creates a dangerous situation, one where the health and the openness of the Internet is being held hostage” to the behavior of telephone and cable companies that own the wires used for Internet traffic to homes and businesses, said the Open Internet Coalition in an e-mailed statement.

The Washington-based group, which lists members including Amazon.com Inc., Google Inc., EBay Inc. and IAC/Interactive Corp., said the ruling could eliminate the agency’s ability to write new open-Internet rules.

The FCC is taking comments until April 8 on so-called net neutrality rules that would forbid companies from favoring content they own, and from blocking or slowing rivals’ services.

Today’s decision “represents a severe limitation on the agency’s future authority” to regulate companies’ activities on the Internet, said Andrew Jay Schwartzman, a Washington-based attorney who helped defend the FCC’s position in the case, in an interview.

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The Open Internet Coalition said the FCC should “clarify its authority” over providers of Internet service.

On Jan. 13, FCC senior counselor Colin Crowell said in an e-mail that if the appeals court “removed the legal foundations of the agency’s current policy framework, the commission would act expeditiously to ensure that consumers are fully protected.”

Separately, the FCC and the Justice Department are reviewing Comcast’s proposed $28 billion deal for control of General Electric Co.’s NBC Universal unit.

The case is Comcast Corp. v. Federal Communications Commission, 08-1291, U.S. Court of Appeals for the District of Columbia Circuit (Washington).

McQuillen, William; Shields, Todd; Rovella, David. “Comcast Wins Ruling Over FCC Internet Traffic Censure (Update4)” BusinessWeek April 6, 2010, 1:41 PM EDT. Available online as of 2010-04-06.

Comcast was handed a victory Tuesday when an appeals court ruled that the Federal Communications Commission did not have the authority to hand down a 2008 network management enforcement action against Comcast; a move that set off today's current debate over net neutrality.

“Because the commission has failed to tie its assertion of ancillary authority over Comcast's Internet service to any 'statutorily mandated responsibility,' … we grant the petition for review and vacate the order,” the court wrote in a Tuesday ruling.

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Comcast complied with that requirement, but filed an appeal because, it argued, the FCC did not have the authority to hand down an action on this topic. In reaching its conclusions, the FCC relied on its Internet Policy Principles, a set of four principles originally released by the agency in 2005 that serve as a framework for broadband Internet access. The principles, however, were developed internally at the FCC and did not go through any formal rulemaking procedure that would make them formal FCC rules.

As a result, Comcast argued, these principles hold no weight. On Tuesday, the appeals court agreed with Comcast's argument.

'Policy statements are just that – statements of policy. They are not delegations of regulatory authority,” the three-judge panel wrote in their decision.

The FCC's authority is outlined in the Communications Act of 1934. The commission is charged with “regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States . . . a rapid, efficient, Nation-wide and world-wide wire and radio communication service . . . at reasonable charges.”

Recognizing that technology would evolve over the years, the law also provides the FCC with additional – or ancillary – authority to “perform any and all acts, make such rules and regulations, and issue such orders, not consistent with this chapter, as may be necessary in the execution of its functions.”

Just how much leeway that ancillary authority provides the FCC is the basis of the Comcast case. The appeals court found that the FCC must prove that any regulations it hands down are “reasonably ancillary to the commission's effective performance of its statutorily mandated responsibilities.”

In this case, the court ruled, the authority to hand down enforcement actions regarding Comcast's network management practices is not part of the FCC's statutorily mandated responsibilities. Essentially, there is nothing in the current law that gives the FCC the right to interfere in such issues.

“Policy statements can help illuminate that authority,” but it is provisions in the Communications Act “to which the authority must ultimately be ancillary.”

Without such restrictions on ancillary authority, the court said the FCC could conceivably apply this authority to anything it wants.

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Rep. Edward J. Markey, a Massachusetts Democrat who has co-authored net neutrality legislation in the House, encouraged the FCC “to take any actions necessary to ensure that consumers and competition are protected on the Internet.”

“It is important to note that the court neither called into question the wisdom of network neutrality policies nor did it exonerate Comcast for its unreasonable interference with lawful consumer Internet use,” Markey said.

Sen. Kay Bailey Hutchison, a Texas Republican and ranking member on the Senate Commerce Committee, however, praised the court's decision.

“This decision highlights what many already believed, the FCC does not have authority to act in this area,” she said. “I hope the FCC Chairman will now reconsider his decision to pursue expanded commission authority over broadband services in current [net neutrality] proceedings before the agency. The Internet has grown and flourished without federal regulations because it has been able to evolve to meet rapid changes without government roadblocks holding up progress.”

Albanesius, Chloe. “Court: FCC Had No Right to Regulate Comcast”. PC Magazine. April 6, 2010. Available online as of 2010-04-06.

[…] The court’s decision marks another turning point in the debate over whether the federal government should regulate Internet access services. What’s entertaining about it is that the problem was solved two years ago by market processes—sophisticated Internet users, a watchdog press, advocacy groups, and interested consumers communicating with one another over the Internet.

The next step will be for advocates to run to Congress, asking it to give the FCC authority to fix the problems of two years ago. But slow-moving, technologically unsophisticated bureaucrats do not know better than consumers and technologists how to run the Internet. The FCC’s “net neutrality” hopes are nothing more than public utility regulation for broadband. If they get that authority, your online experience will be a little more like dealing with the water company or the electric company and a little less like using the Internet.

As I’ve noted before, Tim Lee’s is the definitive paper. The Internet is far more durable than regulators and advocates imagine. And regulators are far less capable of neutrally arbitrating what’s in the public interest than most people realize.

The FCC doesn’t have authority to regulate the Internet. Congress and the president shouldn’t give it that authority.

Harper, Jim. “The FCC Doesn’t Have Authority to Regulate the Internet–and Shouldn’t”. Cato @ Liberty. April 6, 2010. Available online as of 2010-04-06. Hyperlinks in original.

See Also:

* Puzzanghera, Jim. “FCC Decision on Network Neutrality Overturned By U.S. Appeals Court”. Los Angeles Times. April 6, 2010. Available online as of 2010-04-06. * Kang, Cecilia. “FCC Loses Comcast's Court Challenge, A Major Setback For Agency on Internet Policies”. Washington Post. April 6, 2010. Available online as of 2010-04-06.