Tuesday, December 02, 2014

The Net Neutrality Hybrid Proposals: They Definitely Are Not Comfortable

Let me ask you this: “If a man has one foot in a bucket of boiling water and the other foot in a bucket of ice, do you think that, on average, he would be comfortable?”

Answer: Not really.

Well, if the FCC, for purposes of pursuing further net neutrality regulation, puts one foot in the Title II bucket and the other in the Section 706 bucket, do you think that, on average, the agency is likely, as a legal matter, to comfortably succeed?

Answer: Not really.

Each time I think about the various so-called “hybrid” proposals that agglomerate various aspects of Title II common carrier regulation and Section 706 “commercial reasonableness” authority in the quest for some “compromise” version of Internet provider regulation, I am reminded of the poor rube with one foot in the boiling water bucket and the other in the ice bucket. In the main, the various hybrid versions are offered as a way to avoid the acknowledged adverse effects of applying Title II’s public utility-style regulation to Internet providers and as a way of bolstering the legally problematic case for invoking pure Title II or Section 706 regulation alone.

Initially, I must confess that, for the most part, the hybrid proposals are difficult to understand on their own terms, at least for me. And I’ve been involved with communications law and policy for almost forty years now. On average, the hybrid proposals make me very uncomfortable.

The proffered hybrids come in many varieties, but among them are these. Rep. Henry Waxman has a “springing Title II proposal” whereby the FCC simultaneously would subject Internet providers to net neutrality regulation under Section 706, while also declaring Internet access services to be a telecommunications service subject to Title II. Somehow, Title II regulation would only spring into effect if the FCC’s exercise of Section 706 authority were held unlawful. Rep. Waxman later offered a variation of his “springing” proposal whereby the FCC would classify Internet providers as common carriers but then immediately forbear from imposing all of the Title II provisions, while at the same time relying on Section 706 to adopt bright-line rules prohibiting blocking, throttling, and prioritization of traffic.

Mozilla has put forward a proposal urging the FCC to classify a so-called Internet “edge provider’s” remote delivery of content to a “retail” user endpoint as a common carrier service and then to forbear from any “inapplicable or undesirable provisions” of Title II. In somewhat of a mirror image of Mozilla’s proposal, Columbia law professors Tim Wu and Tejas Narechania propose that the FCC divide Internet access service into a “retail” end user’s request for data and an edge provider’s response to the retail user’s request. Under this hybrid model, the edge provider’s response (or “sender-side’” response as the Columbia professors call it) would be classified as telecommunications subject to Title II regulation, while the retail user’s request for data would not be. Again, the exercise of the Commission’s forbearance authority is invoked to avoid application of harmful regulatory requirements that the Commission may not wish to apply to the sender-side entity.

The various hybrid proposals obviously are complicated, and to some extent contradictory. In reality, so-called edge providers and end users can be one and the same individual and entity, depending on the way they are using Internet access service at any particular time. Indeed, during the same Internet “session,” the supposed roles may switch back-and-forth, depending on the way the Internet is used.

In any event, from a policy perspective, the hybrid proposals are problematical because, in essence, the objective of each is to apply some degree of public utility-style regulation to Internet providers in the absence of evidence of present market failure or consumer harm. In this piece, however, I wish to put aside pure policy arguments and focus on two principal legal defects that pervade the hybrid agglomerations.

To one degree or another, the hybrid proposals depend on the successful exercise of the Commission’s forbearance authority and/or its successful reclassification of Internet providers as regulated common carriers under Title II of the Communications Act rather than as information service providers outside of the public utility realm.

The exercise of forbearance authority: Given the constrained way the Commission previously has interpreted the forbearance authority provision adopted as part of the Telecommunications Act of 1996, it is highly unlikely the agency will be able successfully to forbear from applying some or all of Title II’s burdensome regulatory requirements to Internet providers. This is true even for requirements upon which there is widespread agreement that they should not be applied.

As FCC Commissioner Michael O’Rielly pointed out in remarks at the Free State Foundation’s recent “Thinking the Unthinkable” seminar, the Commission’s insistence on using intensely granular product and geographic analyses, which it has defended in court, requires “such an extraordinary showing of insufficient market power backed by very specific market data, that the forbearance process resembles little of its original intention.” I have made much the same point for many years. Thus, in an April 2011 piece titled “Rolling Back Regulation at the FCC: How Congress Can Let Competition Flourish,” I called on Congress to revise the forbearance provision in a way that would require the agency to more readily grant justifiable forbearance requests.

Furthermore, as Commissioner O’Rielly went on to explain:

“[T]he findings that the Commission would have to make to justify forbearance run counter to the arguments for imposing net neutrality in the first place: broadband providers seemingly have the market power to discriminate against other providers and consumers. In other words, the Commission would be forced to argue that imposing Title II is necessary because of the discriminatory possibilities that broadband providers may inflict on the marketplace but somehow the same broadband providers would be required to show that imposition of parts of Title II are not necessary to ensure just, reasonable and non-discriminatory practices, which is the first part of the statutory test for Section 10 forbearance….”

Harry Houdini has long since performed his last act of trickery, but were he alive, even Houdini couldn’t fool a panel of judges with such an inherently contradictory switcheroo.

Classification under Title II of parts of Internet access: The hybrid proposals put forward by Mozilla and Professors Wu and Narechania (and others) are more exercises in Aristotelian metaphysics than in law compliance. Aristotelian metaphysics “examines what can be asserted about anything that exists just because of its existence and not because of any special qualities it has.” Something like this is what is going on with regard to the proposals to simply declare as separable elements of Internet access service what the Commission previously declared to be a single integrated service. And not only did the Commission previously declare Internet access service to be a single integrated service, it successfully defended this position in the Supreme Court in the landmark Brand X case.

I don't think the integrated, inseparable nature of ISPs' service offerings, from a functional standpoint, and from a consumer's perspective, has changed since the Brand X decision, so it won't be easy for the Commission to argue that it is changing its mind about the proper classification based on changed consumer perceptions of the service offerings' functionality. And to the extent that the Brand X Court cited favorably to the FCC's claims concerning the then-emerging marketplace competition and the dynamism in the broadband marketplace, those factors, if anything, today argue even more strongly for a non-Title II common carrier classification.”

I understand that Tim Wu, Mozilla, and other hybridists suggest that either the “sender-side” portion of the Internet service or the “retail side” portion can be isolated and treated differentially for purposes of regulatory classification. They base this in part on assertions that consumer perspectives concerning the integrated nature of Internet access service have changed since the Commission’s 2002 classification decision. But I have seen no Commission findings in support of this assertion. Moreover, as Justice Thomas declared in the Brand X majority opinion: “The entire question is whether the products here are functionally integrated (like the components of a car) or functionally separate (like pets and leashes).” While Justice Thomas readily acknowledged the deference due to the FCC “in the first instance” under the Chevron doctrine, he said the classification of Internet access “turns not on the language of the Act, but on the functional particulars of how Internet technology works and how it is provided….”

The argument the hybridists now put forward is similar to the one accepted by Justice Scalia in Brand X – but unfortunately for them it was in a dissent. The majority rejected the notion that the “telecommunications” and “information” elements, or the “sender-side” and “retail” end user side, or the “wholesale” or “retail” elements – however cleverly characterized – are functionally separable for regulatory purposes. Should the Commission now attempt to cull out any element of Internet access for purposes of applying Title II regulation, the agency will bear an especially heavy burden. I submit that, upon judicial review, a proper understanding of the law will prevail over a particularly foggy exercise of Aristotelian metaphysics.

In sum, the hybrid proposals do not offer a viable solution for FCC Chairman Tom Wheeler, or others, who may be wary of offending the most fervent net neutrality advocates. To his credit, it now appears Chairman Wheeler, having in mind the difficulties of either a pure Title II or hybrid Title II approach, recognizes the need to take time to reassess the way forward.

It certainly makes sense for the Commission to hit the “pause” button. This is especially so when no one seriously claims that Internet providers presently are acting in ways that cause consumers or competition actual harm.

Mere conjecture concerning future potential harms is not a sufficient reason for the Commission to plow ahead with consideration of hybrid proposals – to put one foot in a bucket of boiling water and the other in a bucket of ice, all the while deceiving itself into thinking, on average, it feels comfy.