The Federal Communications Commission will not appeal a court ruling that overturned the FCC's anti-blocking and anti-discrimination rules, Chairman Tom Wheeler announced today. Instead of trying to reinstate rules that prevented Internet service providers from blocking or disfavoring Web services such as Netflix and YouTube, the Commission will try to regulate anti-competitive behavior on a "case-by-case basis."

Verizon succeeded in overturning most of the Open Internet Order, the FCC's net neutrality regulation, when its suit saw the US Court of Appeals for the District of Columbia Circuit strike down major portions of the regulation last month. The ruling left the FCC room to operate, though. The commission could reinstate its anti-blocking and anti-discrimination rules if it reclassified Internet providers as telecommunications services governed by Title II of the Communications Act, also known as "common carriers."

Essentially, the ruling suggested that the FCC under previous Chairman Julius Genachowski screwed up the Open Internet Order by imposing common carriage rules on ISPs without declaring ISPs to be common carriers. But the new chairman, Wheeler, doesn't plan to reclassify broadband. He noted that the court decision affirmed the commission's belief that Section 706 of the Telecommunications Act of 1996 should "empower it to promulgate rules governing broadband providers’ treatment of Internet traffic."

However, rules justified by Section 706 can't be identical to common carriage rules. Consumer advocates, including former FCC Commissioner Michael Copps, urged the commission to reclassify broadband providers, saying straightforward rules are needed to prevent ISPs from discriminating against services that compete against the ISP's own video and voice offerings. For example, an Internet service provider like Verizon could either block traffic from Web services like Netflix or degrade Netflix traffic unless the video provider paid for a faster path to consumers. Verizon notably offers its own TV service.

Wheeler said he will "keep Title II authority on the table" and that it "remains a part of the Communications Act, [and] the Commission has the ability to utilize it if warranted. Accordingly, the Commission’s docket on Title II authority remains open." That seems to be a warning to Internet providers that they will face reclassification if they misbehave.

Because of the ability to regulate using Section 706 and the threat of reclassification, Wheeler said, "The commission will not initiate any further judicial action in connection with the Verizon decision." Section 706 says the commission must encourage deployment of advanced telecommunications capability to all Americans, and that to achieve the goal it can enact measures that promote competition and remove barriers to infrastructure investment.

Using Section 706 authority, Wheeler said he will draft new rules. Here is the key passage from Wheeler's written statement:

I intend to ask my fellow commissioners to: Enforce and enhance the transparency rule . The Court of Appeals has affirmed the Open Internet Order’s transparency rule, which requires that network operators disclose how they manage Internet traffic. This is more significant than many people may realize. We should consider ways to make that rule even more effective. For example, an explicit purpose of the rule is to afford edge providers the technical information they need to create and maintain their products and services as well as to assess the risks and benefits of embarking on new projects.

. The Court of Appeals has affirmed the Open Internet Order’s transparency rule, which requires that network operators disclose how they manage Internet traffic. This is more significant than many people may realize. We should consider ways to make that rule even more effective. For example, an explicit purpose of the rule is to afford edge providers the technical information they need to create and maintain their products and services as well as to assess the risks and benefits of embarking on new projects. Fulfill the “no blocking” goal . The DC Circuit recognized the importance of the Open Internet Order’s ban on blocking Internet traffic, but ruled that the Commission had not provided sufficient legal rationale for its existence. We will carefully consider how, consistent with the court opinion, we can ensure that edge providers are not unfairly blocked, explicitly or implicitly, from reaching consumers, as well as ensuring that consumers can continue to access any lawful content and services they choose.

. The DC Circuit recognized the importance of the Open Internet Order’s ban on blocking Internet traffic, but ruled that the Commission had not provided sufficient legal rationale for its existence. We will carefully consider how, consistent with the court opinion, we can ensure that edge providers are not unfairly blocked, explicitly or implicitly, from reaching consumers, as well as ensuring that consumers can continue to access any lawful content and services they choose. Fulfill the goals of the non-discrimination rule. We will carefully consider how Section 706 might be used to protect and promote an Open Internet consistent with the DC Circuit’s opinion and its earlier affirmance of our Data Roaming Order. Thus, we will consider (1) setting an enforceable legal standard that provides guidance and predictability to edge providers, consumers, and broadband providers alike; (2) evaluating on a case-by-case basis whether that standard is met; and (3) identifying key behaviors by broadband providers that the Commission would view with particular skepticism.

Wheeler was appointed by President Obama to lead the FCC last year. Previously, he was a venture capitalist and a lobbyist for the cable and wireless industries, having led both the National Cable & Telecommunications Association (NCTA) and Cellular Telecommunications and Internet Association (CTIA).

FCC could model new rules on its data roaming policy

An FCC senior official who is familiar with Wheeler's thinking discussed the chairman's plans with reporters today. The official said Wheeler instructed his staff to draft a proposal that fulfills nondiscrimination goals and that there could be something for the Commission to vote on in a few months.

New rules for home broadband might establish a minimum level of service that ISPs must furnish to "edge providers," companies like Netflix that provide Web services to home and business Internet users. The FCC official said the court ruling suggested that the FCC might be able to create a no-blocking rule that requires a minimum level of service. But when asked whether Wheeler will propose a no-blocking rule using its Section 706 authority, the official said it's too early to say because the new rules haven't been written.

While the official didn't specify exactly how the new rules will achieve the no-blocking and no-discrimination goals, he said they may be similar to the FCC's data roaming requirements, which Verizon Wireless unsuccessfully challenged. Those rules require wireless carriers to provide data roaming to other carriers "on commercially reasonable terms and conditions."

The data roaming rules create a binding requirement that carriers must offer commercially reasonable terms, provide guidance to help monitor whether terms being offered are reasonable, and lets the Commission decide on a case-by-case basis whether competition has been harmed, the official said.

Wheeler also said he plans to solicit public comment with a new docket titled "Protecting and Promoting the Open Internet." He will also "[h]old Internet Service Providers to their commitment … [to] continue to honor the safeguards articulated in the 2010 Open Internet Order." That's a reference to an NCTA statement that "[t]he cable industry has always made it clear that it does not—and will not—block our customers' ability to access lawful Internet content, applications, or services." Additionally, Comcast agreed to abide by no-blocking and no-discrimination rules until 2018 in exchange for approval of its merger with NBCUniversal.

Case-by-case regulation is ineffective, skeptics say

Senior Staff Attorney John Bergmayer of consumer advocacy group Public Knowledge has previously warned that case-by-case regulation is ineffective. "We're in a bad place with net neutrality right now because the FCC got itself tied up in a knot with subtle lawyering," Bergmayer wrote. "Instead of building on its successes as a telecommunications regulator, it tried to come up with a 'third way.' I'm skeptical that yet more subtle lawyering—a fourth way or a fifth way—is going to save us."

Public Knowledge CEO Gene Kimmelman released a statement today, saying, "While skeptical that the FCC's initial focus on section 706 will yield meaningful results, we are encouraged to see that the FCC plans to keep its 'reclassification' proceeding open."

Consumer advocacy group Free Press today said, "The FCC can’t protect free speech and prevent discrimination under the so-called Section 706 authority discussed in today's announcement. Last month's court decision made that crystal clear. Section 706 doesn't work for Net Neutrality or any of the FCC's stated policy goals. If the agency really wants to stop censorship, discrimination, and website blocking, it must reclassify broadband as a telecommunications service under Title II of the Communications Act. The FCC's reluctance to reverse its past mistakes is extremely short-sighted."

The NCTA expressed cautious optimism while warning against heavier regulation. “We appreciate Chairman Wheeler laying out the process for developing a new open Internet framework," NCTA CEO and former FCC Chairman Michael Powell said. "The cable industry has always embraced the principles of an open Internet and remains committed to them. We look forward to working with Chairman Wheeler and the Commission on ensuring that American consumers will continue to enjoy a fast, robust, and open Internet experience. We continue to believe that the values of an open Internet can be preserved, while avoiding a damaging move to heavier regulation.”

Verizon issued a statement saying that it "remains committed to an open Internet that provides consumers with competitive choices and unblocked access to lawful websites and content when, where, and how they want. We have always focused on providing our customers with the services and experience they want, and this focus has not changed."

Comcast today said that it "supported the Commission’s Open Internet Order as an appropriate balance of protection of consumer and business interests, and we agreed in the NBCUniversal Transaction Order to abide by the Open Internet rules for seven years even if the rules were modified by the courts. With the direction announced today, FCC Chairman Wheeler has taken a thoughtful approach which creates a path for enforceable rules based on the appropriate authority outlined by the Court’s findings."

AT&T also weighed in, saying, “As the FCC embarks on a new proceeding to clarify its authority under section 706, we will, of course, participate constructively and in the same spirit with which we worked with the Commission on its original rule. We believe the FCC possesses sufficient authority under section 706 to preserve Internet freedom and openness, and that it can do so without over-regulation. Indeed, and as the court recognized, section 706 was clearly intended by Congress as a tool to enhance broadband investment and deployment. Thus, it is vital that, as the FCC defines its authority, it do so in a way that does not inhibit the very investment section 706 was intended to assist.”