A federal appeals court all but told the FCC Tuesday that it has no power to regulate the internet, putting large chunks of the much-lauded national broadband plan at risk. And the FCC has only itself to blame.

Telecoms and many internet activists have long argued that the internet is a developing technology that was innovating so quickly that strict regulations would hamper it. In 2005, that argument drove the FCC under the Bush Administration to win a fight in the Supreme Court for the right to deregulate broadband providers, classifying them as an "information service," largely outside the FCC's power, rather than a "telecommunications service" that could be regulated like the phone system.

Following that win, the FCC simply issued a set of four principles of net freedom that it said it expected broadband companies to follow. They promised that broadband users could plug in whatever devices they wanted to their connection and then use whatever software or online application that they liked – without interference from their provider. Those principles never went through a rule-making period, and when the FCC went after Comcast for blocking peer-to-peer file sharing services, the company sued the commission in court.

And, on Tuesday, won.

Now broadband companies effectively have no regulations that constrain them, as the FCC has left itself with no statutory means to control what telecoms do with their internet networks.

A broadband company could, for instance, ink a deal with Microsoft to transfer all attempts to reach Google.com to Bing.com. The only recourse a user would have, under the ruling, would be to switch to a different provider – assuming, of course, they had an alternative to switch to.

Companies can also now prohibit you from using a wireless router you bought at the store, forcing you to use one they rent out – just as they do with cable boxes. They could also decide to charge you a fee every time you upgrade your computer, or even block you from using certain models, just as the nation's mobile phone carriers do today.

While this might seem like a win for the nation's broadband and wireless companies, the ruling could be so strong that it boomerangs on them. For instance, if the FCC is left without the power to implement key portions of the National Broadband Plan – a so-far popular idea – then Congress or the FCC may have to find a way to restore power to the commission. That could leave the FCC stronger than it was before the ruling.

The option favored by public interest groups is for the FCC to take the drastic course of formally reclassifying broadband as a regulated service, reversing the position it held and defended just a few years ago.

"The FCC should immediately start a proceeding bringing internet access service back under some common carrier regulation similar to that used for decades," said Gigi Sohn, the president of the pro-net neutrality group Public Knowledge. "In our view, the FCC needs to move quickly and decisively to make sure that consumers are not left at the mercy of telephone and cable companies."

The FCC's own statement on the decision acknowledges it will have to do just that.

"Today’s court decision invalidated the prior Commission’s approach to preserving an open internet," said FCC spokeswoman Jen Howard in a written statement. "But the Court in no way disagreed with the importance of preserving a free and open internet; nor did it close the door to other methods for achieving this important end."

"Other methods" obliquely refer to either Congress passing a law giving it the power (a process that would likely take years) or the FCC reclassifying broadband as a telecommunications service – in legal terms, moving broadband from Title I to Title II of the Telecommunications Act.

Title II-type regulations should be very familiar to most Americans – they are the rules that apply to phone services. For instance, phone customers have the right to attach whatever device they like to the phone network – from rotary-dial machines to modems to fax machines – so long as they don't harm the network. They also have the right to call anyone else in the country from friends to astrology services, and phone companies are obliged to connect the call – making them into "common carriers."

Phone companies that own the physical lines that connect to your house have to rent them to competing services at fair rates. They also have to provide cheap services to low-income customers – subsidized by a tax known as the Universal Service Fee. And they have their prices regulated.

That doesn't mean moving broadband into "Title II" would impose the full spectrum of telephony regulation on internet service. The FCC has a power known as "forbearance" that lets it lift selected obligations, according to Free Press's policy counsel Aparna Sridhar.

"Let's say Title II has 50 provisions," Sridhar said. "The commission can decide 48 of these don't make sense for broadband, but one or two or three do. It will be a skinny Title II. Monopoly-style rate regulation is not necessarily the outcome."

Another consideration is whether the FCC would then be in the business of regulating the content of the internet – as it famously does with fines against broadcasters for profanity on the radio or over-the-air television. Sridhar said that wouldn't have to be the case.

"If the FCC decided to reclassify the underlying transmission, that doesn't mean that Hulu or The New York Times or your favorite app will be regulated."

Hoping to prevent the FCC from reclassifying broadband, the Wireless Association – an opponent of net neutrality rules – argued before the ruling arrived that the Comcast case wouldn't undermine the national broadband plan.

"I don't think the National Broadband Plan is in jeopardy, based on the Comcast case," Guttman-McCabe said a day before the ruling. "Look at things about disclosure and even the Universal Service Fund – there is no need to have Title II authority to address those issues."

But the court's reasoning undermines Guttman-McCabe's theory. While it was tangential to the net neutrality case, the appeals court took the time to point out that the Universal Service Fund was approved by the courts only because it was tied to the FCC's "Title II responsibility to set reasonable interstate telephone rates." In short, the court is saying that the Universal Service Fund couldn't be changed to support broadband, since the FCC has no similar mandate to set broadband rates.

The Wireless Association welcomed the ruling in a written statement Tuesday, ignoring the tricky question of how the FCC could implement large portions of the National Broadband Plan without the authority to regulate broadband.

"Today's unanimous and very thorough opinion in the Comcast case makes clear that the FCC needs to focus on the important task of making the promise of the National Broadband Plan a reality by spurring investment, innovation and job growth, and turn away from calls to impose restrictive regulations on broadband providers and the internet ecosystem," said Steve Largent, the group's CEO.

Comcast also welcomed the ruling, while trying to strike a conciliatory note by saying it likes the idea of open internet principles.

"We are gratified by the Court’s decision today to vacate the previous FCC’s order," said Sena Fizmaurice, a Comcast spokeswoman. "Comcast remains committed to the FCC’s existing open internet principles, and we will continue to work constructively with this FCC as it determines how best to increase broadband adoption and preserve an open and vibrant internet."

Meanwhile, Thursday marks a now odd deadline the FCC's attempt to bolster its net neutrality authority by creating a proper rule-making process last fall that would have codified the ad hoc principles it used to go after Comcast.

Companies and interest groups were set to file final comments by Thursday on that rulemaking – which rested on the same arguments the court just struck down.

That makes the proceeding mostly useless, even though the FCC will still likely take the comments to heart, if and when it ever regains any authority over broadband.

Photo: Craig A. Rodway

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