Why the FCC’s net neutrality rules could unravel

The White House pressure led to haphazard rules that may encourage ISPs to filter the Internet

Last week marked the one-year anniversary of the FCC reclassifying broadband Internet access service as a regulated Title II service, putting Internet access in the same regulatory category as telephone service. Title II advocates hope that applying a portion of the telephone regulations to the Internet can preserve its open nature by prohibiting content filtering — the primary goal of “net neutrality.”

Unfortunately for the net neutrality cause, the Title II Order and rules were hastily drafted after White House pressure, as revealed in a Senate report released today. The FCC, pushed by the ersatz “parallel version of the FCC” within the White House, may have unwittingly encouraged ISPs to filter the Internet more aggressively.

According to the FCC’s own lawyers defending the Order in court, ISPs that filter the Internet fall outside of Title II and therefore can avoid the burdensome common carrier requirements. These requirements include regulation of interconnection, the need to gain FCC permission before launching new services like gaming and teleconferencing, and pending privacy regulations.

Net neutrality advocates’ insistence for a ban on filtering has always posed legal problems unique to the US. First, Internet service providers, like cable TV companies, own their facilities and distribute and originate speech. Therefore, they have a First Amendment right to sell curated Internet packages that block content they don’t want to be associated with, like pornography or extreme violence or ISIS recruiting materials.

Second, in 1996 Congress passed an important Internet law, Section 230, that expressly encourages ISPs (and websites) to filter Internet content, particularly the harassing, violent, and indecent kind.

White House pressure to enact “strong net neutrality rules” puts the FCC in a tight spot. Agency officials want net neutrality norms but they know they can’t prohibit ISP filtering outright because of First Amendment and Section 230 issues. Understandably, they minimize this fact in the 2015 Open Internet Order. However, there is one line in the Order that allows ISPs to block content that “is unwanted by end users,” citing a portion of the defunct 2010 Open Internet Order discussing Section 230 and the need to preserve parental controls. Further, buried in another footnote in the 2015 Order, the agency cites “family friendly” content filtering, which most ISPs and wireless carriers provide, as an example of a beneficial network management.

As I noted after listening to the December 2015 oral arguments in the Title II lawsuit, Judge Williams drew out the concession that ISPs are free to filter from the FCC lawyer in an illuminating exchange:

FCC lawyer: “If [ISPs] want to curate the Internet…that would drop them out of the definition of Broadband Internet Access Service.” Judge Williams: “They have that option under the Order?” FCC lawyer: “Absolutely, your Honor. …If they filter the Internet and don’t provide access to all or substantially all endpoints, then they drop out of the definition of Broadband Internet Access Service and the rules don’t apply to them.”

It is the FCC’s position, then, that ISPs have the option to elect to be a non-Broadband Internet Access Service provider, thereby avoiding Title II. Net neutrality advocates presumably would prefer that people forget about this exchange during oral arguments.

By exempting ISPs that filter the Internet from Title II, the FCC has created perverse incentives. The FCC’s message to ISPs is: “Offer filtered packages and you can avoid common carriage regulations. Your traditional packages, however, will put you in Title II-land.”

While I support ISPs exercising their First Amendment rights to offer filtered Internet for religious and discerning customers who want it, most consumers are fine with today’s standard Internet packages, and ISPs should satisfy that market demand. (And while the FCC’s “virtuous cycle” theory is unconvincing, there are plausible downsides to Internet filtering.) But by imposing Title II burdens on “unfiltered” traditional packages, the FCC changes the calculus for ISPs. Even if the rules are upheld, ISPs are more likely than before to promote filtered Internet access since filtered Internet is deregulated.

Recent history suggests that when carriers can elect to offer a common carrier-like service or a deregulated service, they’ll overwhelmingly elect the latter. What the FCC has done here resembles what Congress tried to do in 1996 when it permitted phone companies to deliver television service in competition with cable TV. Just as the FCC manufactured the common carrier Broadband Internet Access Service classification, Congress created a new TV category called Open Video Systems (OVS) that imposed common carrier requirements on the phone companies that chose to be an OVS provider. OVS providers are, among other things, required to open up their transmission capacity to unaffiliated programmers. For anyone following the net neutrality proceedings, this should sound familiar.

Firms like to control access to their networks, and common carrier regulatory compliance is costly. What happened with OVS was what some astute experts predicted in 1996: today, phone companies, like AT&T, Verizon, and Frontier, elect not to be OVS when they start delivering video. They choose to be the more lightly regulated cable TV and IPTV providers. Despite Congress’ wish for hybrid common carrier-private TV providers, OVS systems are so marginal the FCC does not include their tiny subscriber numbers in their annual TV competition reports.

It’s hard to say whether or how ISPs will promote their unregulated, filtered Internet packages. Perhaps they’ll discount family-friendly packages or offer Internet access that only supports certain video applications, like some religious ISPs already do and MetroPCS tried to do in 2010. They could also offer exclusive, high-demand video content with their filtered packages to attract subscribers. The FCC’s position suggests that curated IP-based video services like LTE Broadcast and Verizon’s Go90 service are outside of Title II as well.

Title II was intended for the monopoly telephone network, not thousands of ISPs. By forcing Title II on the Internet, the White House and the FCC may have opened a Pandora’s box. The agency likely hopes the large carriers won’t test the rules with filtered packages, but smaller carriers and WISPs might take leadership here. In hastily creating these common carrier rules, the FCC might inadvertently encourage ISPs to filter more.