Thursday, July 17, 2008

Hard Cases Make Bad Law: On Regulatory Bits and Torrents

An item in today’s trade press caught my eye, and in a way that makes me think the FCC itself needs to do some rethinking before again moving in an unduly and unnecessarily regulatory direction. Sometimes regulation from the FCC comes in bits and sometimes in torrents. Either way, all too often, as economist Dennis Weisman, a member of the FSF Board of Academic Advisors, put it in a paper released earlier this year: “The FCC seems perennially to be regulating through the rearview mirror - time and again failing to grasp the manner in which the pace of technological change is so thoroughly and irreversibly transforming the telecommunications marketplace.”

Communications Daily says that FCC Chairman Kevin Martin has scheduled a vote for August 1 on a draft order he has circulated that would find that Comcast violated the agency’s network neutrality principles last November with respect to Comcast’s network management practices. Free Press filed a complaint with the Commission after it came to light that Comcast had -- in Free Press’s view -- taken improper steps to degrade BitTorrent’s enabling of peer-to-peer traffic. The core of the Free Press complaint seeking FCC enforcement action is that the broadband provider’s actions did not constitute “reasonable” network management practices, a category of practices which the Commission clearly exempted from the purview of the network neutrality principles. Free Press claims Comcast violated the strict no-discrimination mandate which the organization reads into the principles.

It might be, simply as a matter of sound business practice, that Comcast should have more adequately disclosed its peer-to-peer network management practices. Indeed, Comcast has acknowledged as much, enhancing its information disclosures concerning network management shortly after the BitTorrent practices came to light. But sound business practices and FCC legal enforcement actions are two entirely different things.

Although it might have been different had Comcast and BitTorrent, and for that matter most parties interested in the dispute (other than Free Press and its network neutrality allies), proceeded in a “take-no-prisoners” fashion to force the Commission to decide what, at best, would be described as a classic “hard case” -- as in the proverbial “hard cases make bad law” dictum. But the parties didn’t proceed that way. And looking at where we are today rather than last November, argues in favor of the FCC now dismissing the complaint.

Here’s why. Comcast has changed its practices and announced that by the end of this year it will have implemented system-wide a protocol-agnostic network management technique that addresses the very real network management issues in a way that does not single out certain peer-to-peer traffic. Indeed, in March, Comcast and BitTorrent announced they are now collaborating to address network management issues attributable to congestion caused by peer-to-peer traffic. And in April, Comcast and Pando Networks, a firm specializing in peer-to-peer content delivery, announced they would lead an industry-wide effort to develop a P2P Users’ Bill of Rights. Then, in May, Comcast and many other industry participants, representing the various perspectives, began meeting as part of an Internet Engineering Task Force P2P Infrastructure Workshop to discuss technical traffic management issues.
I do not doubt that the filing of the Free Press complaint and the threat of a potential enforcement effort spurred on the cooperation between Comcast and BitTorrent and the industry-wide efforts described above. All well and good.

In light of what has transpired, however, it would not be well and good for the Commission now to proceed further. When it adopted the network neutrality principles in 2005 in a document it clearly labeled a Policy Statement, it stressed “we are not adopting rules in this policy statement.” Thus, under relevant administrative law precedent, the principles are not binding in a way that creates enforceable legal obligations. Rather, they are in the nature of guidance to the Commission’s staff and interested parties as to how the Commission might choose to interpret provisions of the Communications Act or its own legislative regulations that do create binging legal obligations. But in this instance, there are no other provisions of the statute or regulations that clearly create a legal obligation that Comcast allegedly violated.

I say “clearly” because I understand that Free Press and others, now apparently abandoning the claim that the network neutrality principles announced in the policy statement are enforceable, contend the Commission has “ancillary” jurisdiction to take an enforcement action. Absent the adoption of a pertinent Commission rule or precedent dealing with network management practices of the type at issue here, I find the claim problematic. But the main point I want to make is that, by almost all accounts, the Commission’s ancillary authority to grant the relief on the Free Press complaint is quite uncertain.

In the face of this legal uncertainty -- and the facts that Comcast has changed its practices, that most of the industry players have moved on to grapple in a collaborative way with the very real network management issues brought about by the explosion of peer-to-peer traffic, and that the industry is in a much better position than the FCC to do the grappling -- there is no good reason for the FCC now to do anything other than dismiss the Free Press complaint. To do otherwise would be regulating while looking through the rearview mirror. The telecommunications landscape, and especially that part of it involving broadband and the Internet developments, is changing quickly enough, that the agency always needs to be looking forward, not backwards.

Hard cases make bad law, not only at common law, but in agency adjudications. This is an instance that calls for a good dose of prudential regulatory self-restraint.