How Net Neutrality is Defining the Boundaries
By Babette Boliek
Boston College Law Review (forthcoming)
There is a crucial battle playing out in the world of internet access provision. While the internet is the natural home of competing business giants and warring digital avatars, the contest that will have the most sweeping ramifications for the future of the internet is the turf war being waged between the FCC on the one hand and the Federal Trade Commission (FTC) and the Department of Justice (DoJ), on the other.
1 Nothing less than jurisdiction over the development of the internet is at stake.
Jurisdiction over internet access provision is not the first confrontation between these particular government agents . . .2 [B]ut it is the current iteration of the FCC’s “net neutrality” regulations that has generated the latest contest. Roughly defined, net neutrality encompasses principles of commercial internet access that include equal treatment and delivery of all internet applications and content.3 For some, net neutrality stands further for the proposition that internet access operators should not be permitted to provide different qualities of service for application providers (e.g., guaranteed speeds of transmission), even if those application providers can freely choose their desired quality of service.4 Net neutrality has reinvigorated . . . an underlying inter- agency tug of war [between the FCC and the DoJ/FTC] that reaches deep within, and far beyond, the communications industry.
Although the two regimes [regulation and antitrust law] share a commonality of purpose—to protect consumers and to promote allocative efficiencies in production—the two have quite distinct, predominately opposing, means of securing social benefits. . . .5 The battle between these two regimes may be broadly summarized in a single issue . . . : in the face of the industry-specific regulator, what is (or what should be) the role of antitrust law?6
Antitrust law preserves the process of competition across all industries by condemning anticompetitive conduct when it occurs. In contrast, industrial regulation by its nature is a public declaration that, in a given industry, market forces are too weak or underdeveloped to produce the consumer benefits that are realized in competitive markets. . . .7 Not surprisingly, regulatory agencies were historically created as substitutes for market forces in the few markets that, by the nature of the product or technology, were natural monopolies, or severely prone to monopoly.8 Therefore, the threshold determination of which industries are to be singled out for industry-specific regulation, and to what degree, is of vital importance. . . .910
The net-neutrality debate has brought attention to the larger concerns related to the boundaries between the FCC and antitrust authorities. The shaping of net-neutrality regulatory policy11 has operated under the assumption that the FCC has
the authority by virtue of its ancillary jurisdiction to regulate internet transmission providers.12 This confidence in the FCC’s scope of authority proved to be misplaced by the D.C. Circuit’s recent decision in Comcast Corporation v. FCC [where the court] clarified that the FCC may use its ancillary jurisdiction only when the proposed action is specifically related to the agency’s mandated responsibilities as Congress delineated in the Communications Act.13 In an act of superior confidence or of sheer foolishness, the FCC has subsequently enacted three formal net-neutrality rules14 based on the same jurisdictional premise that was defeated in Comcast . . . .1516171819
The open-ended nature of the FCC’s mandate . . . has historically allowed the FCC to expand its jurisdictional reach far beyond the industries and problems within the contemplation of the original, legislative drafters.20 Such jurisdictional expansion is what critiques of net neutrality insist is occurring now as the FCC would assert jurisdiction over aspects of the internet ecosystem.21
The legal uncertainty of FCC authority has led the FCC Chief Commissioner and some commentators to search for more secure jurisdictional grounds for net neutrality rulemaking—to figuratively place the marketplace for internet service providers (ISPS) deeper within the regulated state and, concomitantly, perhaps further out of reach of antitrust law. . . .2223
Ironically, jurisdiction over wireless internet access, the transport system not subject to the recent net neutrality rules, is the one technology where FCC jurisdiction is most easily asserted.24 Wireless internet access can be regulated under the FCC’s Title III authority over all broadcast licenses by direct insertion of regulatory terms and conditions into the operators’ spectrum license agreements.25 In addition to licenses, the FCC shares oversight responsibilities with antitrust authorities with respect to any merger involving a regulated, communication company and can dictate onerous terms that the parties must accede to in order to close the deal. . . .26
The recent Comcast decision should not be dismissed as an inconvenient hurdle to be sidestepped by reclassification; rather it marks a pivotal invitation to Congress to redefine the boundaries between the FCC and antitrust authorities. . . .27 Before that can be done, however, the rules of the road—the issue of jurisdiction—must be clearly decided.
Babette Boliek, JD, PhD, associate professor of law, focuses her research and writing on analyzing legal issues in the fields of administrative, antitrust, and communications law with particular emphasis on the effects of regulations on the U.S. telecommunication industry. Her most recent article challenges the various jurisdictional theories that underpin the Federal Communications Commission’s (FCC) new net-neutrality regulations. In addition, her article pinpoints the tensions between FCC regulation and antitrust law in the Internet ecosystem. Boliek writes on this topic because of its relevance in today’s regulatory environment as both the United States Court of Appeals for the D.C. Circuit and Congress have expressed grave doubt as to whether the FCC’s jurisdictional limits permit the agency to promulgate net neutrality rules of any kind.
Reprinted with permission of the Boston College Law Review.
1 The Federal Trade Commission (“FTC”) and the Department of Justice (“DOJ”) are the two agencies specifically entrusted with the enforcement of federal antitrust laws.
3 See infra Section II for a more comprehensive definition and discussion of net neutrality.
4 See Bruce M. Owen, Antecedents to Net Neutrality, 30 REGULATION 14 (2007). Note, in this Article “application” signifies both applications (such as Google, Yahoo, and YouTube) and the content delivered by those applications.
6 For purposes of this Article, the term “antitrust law(s)” or “competition law” has the meaning given it in § 1 of the Clayton Act, 15 U.S.C. § 12(a), namely all sections of the Sherman Act, 15 U.S.C. §§1-7. In addition, the term includes the Robinson-Patman Act, 15 U.S.C. §§ 13-13b, 21a (2006) (originally codified as the Act of June 19, 1936, 49 Stat. 1526; 15 U.S.C. §§ 13 et seq.), and the Federal Trade Commission Act “FTC Act,” 15 U.S.C. § 45 to the extent that § 5 of the FTC Act applies to unfair methods of competition. The definition is modeled on that used in other antitrust acts, such as the National Cooperative Research Act of 1984 (“National Cooperative Research and Production Act of 1993″), 15 U.S.C. §§ 4301 et seq.
8 The seminal antitrust case Standard Oil captured the public concern regarding monopolization in general: [T]he conviction was universal that the country was in danger from another kind of slavery sought to be fastened on the American people, namely, the slavery that would result from aggregations of capital in the hands of a few individuals and corporations controlling, for their own profit and advantage exclusively, the entire business of the country, including the production and sale of the necessaries of life. Standard Oil Co. v. United States, 221 U.S. 1, 83-84 (1911) (Harlan, J., concurring and dissenting).
11 Two Chairmen of the FCC believed there should be regulations guiding our use of the Internet. See Preserving Internet Freedom: Guiding Principles for the Industry, Remarks of FCC Chairman Michael K. Powell, Silicon Flatirons Symposium on “The Digital Broadband Migration: Toward a Regulatory Regime for the Internet Age” (Feb. 8, 2004) (listing Freedom to Access Content, Freedom to Use Applications, Freedom to Attach Personal Devices, and Freedom to Obtain Service Plan Information as the Four Principles for the Industry); Preserving a Free and Open Internet: A Platform for Innovation, Opportunity, and Prosperity, Prepared Remarks of FCC Chairman Julius Genachowski at The Brookings Institution, (Sep. 21, 2009),
http://www.openinternet.gov/read-speech.html (arguing that we must choose to preserve the open Internet, and adding the Fifth Principles of Non-Discrimination and the Sixth Principle of Transparency to Powell’s four original freedoms). See also Statement of Commissioner Robert M. McDowell on the recent D.C. Circuit Court of Appeals Decision in the Comcast/BitTorrent Case, Press Release (Apr. 6, 2010); In the Matter of Preserving Open Internet Broadband Industry Practices, Notice of Proposed Rulemaking (Oct. 22, 2009), http://www.fcc.gov/headlines.html (adding nondiscrimination and transparency to four original net neutrality rules); In the Matter of Reexamination of Roaming Obligations of Commercial Mobile Radio Service Providers and Other Providers of Mobile Data Services, Order on Reconsideration and Second Further Notice of Proposed Rulemaking (Apr. 21, 2010), http://www.fcc.gov/headlines.html (Second NPRM calling for discussions on highlighted wireless debate, and FCC’s issuance of a Second NPRM to focus squarely on the issue of wireless net neutrality).
12 Communications Act of 1934, 47 U.S.C. § 154(i) authorizes the FCC to “perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions.” See also Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005) (affirming the FCC’s determination that broadband Internet access is not a common carrier service and will be regulated by ancillary jurisdiction); American Library Ass’n v. FCC, 406 F.3d 689 (D.C. Cir. 2005) (establishing a two part test for FCC ancillary jurisdiction); Nat’l Cable & Telecomms. Ass’n, Inc. v. Gulf Power Co., 534 U.S. 327 (2002) (holding that the FCC has jurisdiction over wired and wireless Internet). See generally Communications Act of 1934, 48 Stat. 1064 (codified in scattered sections of 47 U.S.C. ) amended by Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 5647 (codified as amended in scattered sections of 47 U.S.C.) (detailing Title I through Title VI classifications of radio dependent services) [hereinafter, Communications Act].
13 Comcast Corp. v. FCC, 600 F.3d 642, 654 (D.C. Cir. 2010) (stating that the FCC’s “authority must ultimately be ancillary” to Title II, Title III or Title VI of the Communications Act). Among those duties of interest to the net neutrality debate are the FCC’s review of interstate telephone service charges and practices for “reasonableness”; it’s authority to prescribe “just and reasonable” rates for service; it’s task to allocate and assign spectrum licenses; it’s authority to approve mergers within the broad definition of telecommunications industries; and it’s authority to make rate and other special regulations with respect to cable broadcasters. See, e.g., Communications Act, 47 U.S.C. §§ 201(b), 205(a), 301, 303(a),(c),(i), 309.
14 In the Matter of Preserving the Open Internet Broadband Industry Practices, Report and Order (Dec. 23, 2010), http://www.fcc.gov/headlines.html (creating three net neutrality rules including (1) Transparency, (2) No Blocking and No Unreasonable Discrimination, and (3) Reasonable Network Management and excluding mobile broadband from everything except Transparency and Basic No Blocking rules) [hereinafter, the “Open Internet Order”]. See In the Matter of Preserving Open Internet Broadband Industry Practices, Notice of Proposed Rulemaking (Oct. 22, 2009), http://www.fcc.gov/healines.html (adding nondiscrimination and transparency to four original net neutrality rules).
15 Comcast, 600 F.3d at 659 (claiming that “[t]he Commission’s reliance on section 706 [as a statutory basis for jurisdiction] thus fails”). The FCC itself has concluded in a still-standing order that Section 706 “does not constitute an independent grant of authority.” See In re Deployment of Wireline Servs. Offering Advanced Telecomms. Capability, 13 FCC Rcd. 24,012, 24,047 ¶ 77 (1998).
20 The most notable example of expansive jurisdiction over new technologies is the FCC’s jurisdiction over the incipient cable industry. Id. Another example of the expansive boundaries of ancillary regulatory authority, whether real or perceived, is the DOJ’s restraint from acting against Western Electric, an unregulated equipment supplier, of the original Bell System monopoly. The DOJ concluded that antitrust action was unwarranted because Western Electric was “indirect[ly] regulated” by virtue of its sales to the regulated Bell operating companies. W. Elec. Co., 1956 Trade Cas. (CCH) ¶ 68, 246 (D. N. J. 1956).
21 The FCC mandate of regulating telecommunications for the “public interest, convenience and necessity” is a standard praised by some for its adaptability and central focus on the public wellbeing. As sponsor Senator Dill approvingly noted, the public interest standard of the new 1927 Radio Act was a great advancement in the law as “[i]t covers just about everything.” Clarence Dill, A Traffic Cop for the Air, 75 REVIEW OF REVIEWS SEVS. 181, 181 n. 48, 184 (1927). For critics, this broad, amorphous mandate permits “neither guidance nor constraint on the agency’s actions.” Glen Robinson, The Federal Communications Act: An Essay on Origins and Regulatory Purpose, in A LEGISLATIVE HISTORY OF THE COMMUNICATIONS ACT OF 1934, 14 (Max D. Paglin ed., 1989).
22 See discussion infra in Section II of judicial and statutory limitations to antitrust jurisdiction.
24 Moreover, there is cause for concern that wireless net neutrality may interfere with the proposed development of wireless broadband under the recently released National Broadband Plan. See A National Broadband Plan forOur Future, Federal Communications Commission Notice of Inquiry (“FCC NOI”), 24 FCC Rcd. 4342 (Apr. 8, 2009).
25 The genesis of Title III of the Communications Act reaches back to the 1927 Radio Act and, to some extent, the 1912 Radio Act before that. See discussion infra at p.__. Technologies that are broadcast over the electromagnetic spectrum may do so only upon licensing by the FCC.