[Federal Register Volume 79, Number 126 (Tuesday, July 1, 2014)]
[Proposed Rules]
[Pages 37448-37483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14859]
[[Page 37447]]
Vol. 79
Tuesday,
No. 126
July 1, 2014
Part IV
Federal Communications Commission
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47 CFR Part 8
Protecting and Promoting the Open Internet; Proposed Rule
Federal Register / Vol. 79, No. 126 / Tuesday, July 1, 2014 /
Proposed Rules
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 8
[WC Docket No. 14-28, FCC 14-61]
Protecting and Promoting the Open Internet
AGENCY: Federal Communications Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Communications Commission initiates a rulemaking
seeking public comment on how best to protect and promote an open
Internet following the D.C. Circuit Court of Appeals' remand of
portions of the Commission's 2010 Open Internet Order, 76 FR 59192
(Sept. 23, 2011). In this document, among other things, we propose
enhancements to the transparency rule, adopting the text of the no-
blocking rule from the Open Internet Order with a revised rationale,
and creating a separate screen that requires broadband providers to
adhere to an enforceable legal standard of commercially reasonable
practices. The proposed rules and the comment process that follows will
help the Commission determine the right public policy to ensure that
the Internet remains open.
DATES: Submit comments on or before July 15, 2014. Submit reply
comments on or before September 10, 2014. Written comments on the
Paperwork Reduction Act proposed information collection requirements
must be submitted by the public, Office of Management and Budget (OMB),
and other interested parties on or before September 2, 2014.
ADDRESSES: You may submit comments, identified by WC Docket No. 14-28,
by any of the following methods:
[ssquf] Federal Communications Commission's Web site: http://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting
comments.
[ssquf] People with Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by email: [email protected] or phone: 202-418-
0530 or TTY: 202-418-0432.
FOR FURTHER INFORMATION CONTACT: Kristine Fargotstein, Competition
Policy Division, Wireline Competition Bureau, at (202) 418-2774 or by
email at [email protected]. To submit Paperwork Reduction
Act (PRA) comments, send an email to [email protected]. For further
information concerning the Paperwork Reduction Act information
collection requirements contained in this document, contact Les Smith
at (202) 418-0217.
SUPPLEMENTARY INFORMATION: Pursuant to Sec. Sec. 1.415 and 1.419 of
the Commission's rules, 47 CFR 1.415, 1.419, interested parties may
file comments and reply comments on or before the dates indicated on
the first page of this document. Comments may be filed using the
Commission's Electronic Comment Filing System (ECFS). See Electronic
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
[ssquf] Electronic Filers: Comments may be filed electronically
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
[ssquf] Paper Filers: Parties who choose to file by paper must file
an original and one copy of each filing. If more than one docket or
rulemaking number appears in the caption of this proceeding, filers
must submit two additional copies for each additional docket or
rulemaking number. Filings can be sent by hand or messenger delivery,
by commercial overnight courier, or by first-class or overnight U.S.
Postal Service mail. All filings must be addressed to the Commission's
Secretary, Office of the Secretary, Federal Communications Commission.
[ssquf] All hand-delivered or messenger-delivered paper filings for
the Commission's Secretary must be delivered to FCC Headquarters at 445
12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with
rubber bands or fasteners. Any envelopes and boxes must be disposed of
before entering the building.
[ssquf] Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9300 East Hampton
Drive, Capitol Heights, MD 20743.
[ssquf] U.S. Postal Service first-class, Express, and Priority mail
must be addressed to 445 12th Street SW., Washington DC 20554.
[ssquf] People with Disabilities: To request materials in
accessible formats for people with disabilities (Braille, large print,
electronic files, audio format), send an email to [email protected] or
call the Consumer & Governmental Affairs Bureau at 202-418-0530
(voice), 202-418-0432 (tty).
Synopsis
In this Notice of Proposed Rulemaking (NPRM), we address the D.C.
Circuit Court of Appeals' remand of portions of the Commission's 2010
Open Internet Order and seek comment on the right public policy to
ensure that the Internet remains open.
I. Introduction
1. The Internet is America's most important platform for economic
growth, innovation, competition, free expression, and broadband
investment and deployment. As a ``general purpose technology,'' the
Internet has been, and remains to date, the preeminent 21st century
engine for innovation and the economic and social benefits that follow.
These benefits flow, in large part, from the open, end-to-end
architecture of the Internet, which is characterized by low barriers to
entry for developers of new content, applications, services, and
devices and a consumer-demand-driven marketplace for their products. As
the Commission explained in its 2010 Open Internet Order, the
Internet's open architecture allows innovators and consumers at the
edges of the network ``to create and determine the success or failure
of content, applications, services and devices,'' without requiring
permission from the broadband provider to reach end users. As an open
platform, it fosters diversity and it enables people to build
communities.
2. We start with a fundamental question: What is the right public
policy to ensure that the Internet remains open? This Notice of
Proposed Rulemaking (NPRM), and the comment process that follows, will
turn on this fundamental question.
3. Today, there are no legally enforceable rules by which the
Commission can stop broadband providers from limiting Internet
openness. This NPRM begins the process of closing that gap, by
proposing to reinstitute the no-blocking rule adopted in 2010 and
creating a new rule that would bar commercially unreasonable actions
from threatening Internet openness (as well as enhancing the
transparency rule that is currently in effect).
4. The goal of this proceeding is to find the best approach to
protecting and promoting Internet openness. Per the blueprint offered
by the D.C. Circuit in its decision in Verizon v. FCC, the Commission
proposes to rely on Section 706 of the Telecommunications Act of 1996.
At the same time, the Commission will seriously consider the use of
Title II of the Communications Act as the basis for legal authority.
This Notice seeks comment on the benefits of both Section 706 and Title
II, including the benefits of one approach over the other. Under all
available sources of legal authority (including also Title III for
mobile services), the Commission seeks
[[Page 37449]]
comment on the best ways to define, prevent and punish the practices
that threaten an open Internet. We emphasize in this Notice that the
Commission recognizes that both Section 706 and Title II are viable
solutions and seek comment on their potential use.
5. It is important to always remember that the Internet is a
collection of networks, not a single network. And that means that each
broadband provider can either add to the benefits that the Internet
delivers to Americans--by maintaining Internet openness and by
extending the reach of broadband networks--or it can threaten those
benefits--by restricting its customers from the Internet and preventing
edge providers from reaching consumers over robust, fast and
continuously improving networks. This is a real threat, not merely a
hypothetical concern.
6. In its 2010 Order, the Commission found that providers of
broadband Internet access service had three types of incentives to
limit Internet openness. First, broadband providers may have economic
incentives to block or disadvantage a particular edge provider or class
of edge providers. Second, broadband providers may have incentives to
increase revenues by charging edge providers for access or prioritized
access to the broadband provider's end users. In particular, excessive
fees could reduce edge provider entry, suppress innovation, and depress
consumer demand. Third, if providers could profitably charge edge
providers they would have an incentive ``to degrade or decline to
increase the quality of service they provide to non-prioritized
traffic.''
7. Those threats are even more important today because Americans
and American businesses have become even more dependent on the
Internet. For example, according to the Pew Research Internet Project,
as of January 2014, 87 percent of Americans used the Internet, compared
to 14 percent in 1995. And it is a critical route of commerce,
supporting an e-commerce marketplace that now boasts U.S. revenues of
$263.3 billion.
8. Of particular concern are threats to American innovation. In
``the end-to-end architecture, different economic actors can
independently choose their innovation projects.'' Innovation is the
chief driver of American economic growth, which means that all
Americans lose if the opportunity to innovate is curbed. For example,
an economic study originally released in February 2012 and updated in
July 2013 reported that the app economy is responsible for roughly
752,000 jobs in the United States, which is an increase from zero in
2007 when the iPhone was introduced. But equally important are the jobs
that could be--but might not be--created if edge innovation and
investment were to be chilled by doubt that the Internet will remain
open or, even worse, if openness were defeated.
9. Although the Commission has emphasized for almost a decade the
importance of legally enforceable standards, the United States Court of
Appeals for the District of Columbia Circuit has twice invalidated the
Commission's attempts, most recently in Verizon v. FCC, decided this
January. It is in the absence of these protections for the open
Internet that the Commission must act to ensure that new legally
enforceable rules are put in place. That is a gap that must be closed
as quickly as possible.
10. The remainder of the NPRM proceeds as follows. First, we
generally propose to retain the definitions and scope of the 2010
rules. Second, we tentatively conclude that the Commission should
enhance the transparency rule that was upheld by the D.C. Circuit so
that the public and the Commission have the benefit of sunlight on
broadband provider actions and to ensure that consumers and edge
providers--indeed, the Internet community at large--have the
information they need to understand the services they are receiving and
to monitor practices that could undermine the open Internet. Third, we
tentatively conclude that the Commission should adopt the text of the
no-blocking rule from the Open Internet Order with a revised rationale,
in order to ensure that all end users and edge providers can enjoy the
use of robust, fast and dynamic Internet access. Fourth, and where
conduct would otherwise be permissible under the no-blocking rule, we
propose to create a separate screen that requires broadband providers
to adhere to an enforceable legal standard of commercially reasonable
practices, asking how harm can best be identified and prohibited and
whether certain practices, like paid prioritization, should be barred
altogether. Fifth, we propose a multi-faceted dispute resolution
process to provide effective access for end users, edge providers, and
broadband network providers alike and the creation of an ombudsperson
to act as a watchdog to represent the interests of consumers, start-
ups, and small businesses. Sixth, and finally, we ask how either
Section 706 or Title II (or other sources of legal authority such as
Title III for mobile services) could be applied to ensure that the
Internet remains open.
II. Background
11. Today's NPRM rests upon over a decade of consistent action by
the Commission to protect and promote the Internet as an open platform
for innovation, competition, economic growth, and free expression. At
the core of all of these Commission efforts has been a view endorsed by
four Chairmen and a majority of the Commission's members in office
during that time: That FCC oversight is essential to protect the
openness that is critical to the Internet's success. In recognition of
this, the Commission has demonstrated a steadfast commitment to
safeguarding that openness.
12. In 2004, former Chairman Michael Powell first articulated basic
guiding principles for preserving Internet freedom in an address at
Silicon Flatirons. Chairman Powell recognized that ``consumers' hunger
for an ever-expanding array of high-value content, applications, and
devices'' fueled investment in broadband networks as the ``impressive
generators of economic growth, innovation, and empowerment.'' He
explained that ``ensuring that consumers can obtain and use the
content, applications and devices they want . . . is critical to
unlocking the vast potential of the broadband Internet.''
13. A year later, reinforcing Chairman Powell's guidance, the
Commission unanimously approved the Internet Policy Statement setting
forth four general Internet policy principles intended ``[t]o encourage
broadband deployment and preserve and promote the open and
interconnected nature of the Internet.'' Specifically, subject to
``reasonable network management,'' the principles entitle consumers to
(1) ``access the lawful Internet content of their choice;'' (2) ``run
applications and use services of their choice, subject to the needs of
law enforcement;'' (3) ``connect their choice of legal devices that do
not harm the network;'' and (4) enjoy ``competition among network
providers, application and service providers, and content providers.''
14. The Commission incorporated these open Internet principles in a
series of merger proceedings. In 2005, the Commission conditioned
approval of the SBC/AT&T and Verizon/MCI mergers on the merged
entities' compliance with the Internet Policy Statement. Although the
Commission did not adopt any formal open Internet conditions on the
Adelphia/Time Warner/Comcast transactions, the Commission made clear
that its Internet
[[Page 37450]]
Policy Statement ``contains principles against which the conduct of
Comcast [and] Time Warner . . . can be measured.'' So too, in 2006, the
Commission accepted the AT&T and BellSouth commitment to ``maintain a
neutral network and neutral routing in [the merged entity's] wireline
broadband Internet access service,'' as a formal condition of the
merger. Likewise, in the 2011 Comcast-NBCU merger, the Commission
adopted the commitments of the merged entity to not ``prioritize
affiliated Internet content over unaffiliated Internet content . . .
[or] treat affiliated network traffic differently from unaffiliated
network traffic'' as well as to comply with the Commission's open
Internet rules, regardless of the effect of ``any judicial challenge''
affecting those rules.
15. The Commission likewise incorporated openness principles for
mobile services, adopting an open platform requirement for licensees in
the Upper 700 MHz C Block in 2007. Specifically, the rules require
Upper 700 MHz C-Block licensees to allow customers, device
manufacturers, third-party application developers, and others to use or
develop the devices and applications of their choice for Upper 700 MHz
C-Block networks, provided those devices and applications meet all
applicable regulatory requirements and comply with reasonable
conditions related to management of the wireless network (i.e., do not
cause harm to the network). Further, the Commission prohibited Upper
700 MHz C-Block licensees from disabling features or functionality in
handsets where such action is not related to reasonable network
management and protection, or compliance with applicable regulatory
requirements.
16. Also in 2007, the Commission unanimously adopted the Broadband
Industry Practices Notice of Inquiry, explaining that vigilance and a
willingness to act were necessary to keep the Internet open. The
Broadband Industry Practices Notice specifically sought comment on
whether the Internet Policy Statement should be amended or expanded.
17. Meanwhile, the Commission applied open Internet principles in
the context of particular enforcement proceedings. Just before the
Commission adopted the Internet Policy Statement, the Enforcement
Bureau had entered into a consent decree with Madison River
Communications, a telephone company and provider of digital subscriber
line (DSL) service, arising from complaints by Vonage that Madison
River was blocking ports that were typically used by Vonage customers
to make Voice over Internet Protocol (VoIP) telephone calls. The
consent decree required Madison River to stop blocking VoIP ports and
refrain from otherwise inhibiting customers from using the VoIP
applications of their choice.
18. In 2007, several parties filed complaints with the Commission
alleging that Comcast was interfering with its customers' use of peer-
to-peer applications in violation of the Internet Policy Statement.
Such applications allow users to share large files directly with one
another without going through a central server, but also can consume
significant amounts of bandwidth. In response, Comcast asserted that
its conduct was a reasonable network management practice necessary to
ease congestion. The Commission disagreed and, in a 2008 Order,
concluded that the company's practice ``contravene[d] . . . federal
policy'' by ``significantly imped[ing] consumers' ability to access the
content and use the applications of their choice.'' As the Commission
explained, Comcast's ``practice unduly squelch[ed] the dynamic benefits
of an open and accessible Internet,'' harm that was further compounded
by Comcast's failure to disclose its practice to its customers. In the
Comcast Order, the Commission asserted ancillary jurisdiction under
Title I of the Communications Act and concluded that it could resolve
the dispute through adjudication rather than rulemaking.
19. Comcast challenged that decision in the D.C. Circuit, arguing
(among other things) that the Commission lacked authority to prohibit a
broadband Internet service provider from engaging in discriminatory
practices that violate the four principles the Commission announced in
2005. On April 6, 2010, the D.C. Circuit granted Comcast's petition for
review and vacated the Commission's enforcement decision. As to Section
706 of the Telecommunications Act of 1996, the court noted that the
agency had previously interpreted Section 706 as not constituting a
grant of authority and held that the Commission was bound by that
interpretation for purposes of the case.
20. While the Comcast case was pending, the Commission issued a
Notice of Proposed Rulemaking seeking comment on whether the Commission
should codify the four principles stated in the Internet Policy
Statement, plus proposed nondiscrimination and transparency rules, all
subject to reasonable network management.
21. In December 2010, the Commission released the Open Internet
Order, adopting three basic rules grounded in the Commission's prior
decisions and broadly accepted Internet norms. First, the Order imposed
a transparency rule, requiring both fixed and mobile providers to
``publically disclose accurate information regarding the network
management practices, performance, and commercial terms'' of their
broadband Internet access service. The rule specified that such
disclosures be ``sufficient for consumers to make informed choices
regarding the use of such services and for content, application,
service, and device providers to develop, market, and maintain Internet
offerings.'' Second, the Order adopted anti-blocking requirements. The
rule barred fixed providers from blocking ``lawful content,
applications, services, or non-harmful devices subject to reasonable
network management.'' It prohibited mobile providers from blocking
``consumers from accessing lawful Web sites,'' as well as
``applications that compete with the provider's voice or video
telephony services,'' subject to ``reasonable network management.''
Third, the Order adopted an anti-discrimination rule for fixed
providers, barring them from ``unreasonably discriminat[ing] in
transmitting lawful network traffic,'' subject to ``reasonable network
management.''
22. Verizon challenged the Open Internet Order in the D.C. Circuit
on several grounds. It argued that the Commission lacked statutory
authority to adopt the rules, that the blocking and non-discrimination
rules violated the Communications Act by imposing common carriage
regulation on an information service, that the Order was arbitrary and
capricious, and that the rules violated the First and Fifth Amendments
to the U.S. Constitution.
23. On January 14, 2014, the D.C. Circuit ruled on Verizon's
challenge to the Open Internet Order. As discussed further below, the
court upheld the Commission's reading that Sections 706(a) and (b) of
the Telecommunications Act grant the Commission affirmative authority
to encourage and accelerate the deployment of broadband capability to
all Americans through, among other things, measures that promote
competition in the local telecommunications market or remove barriers
to infrastructure investment. The court further held that the
Commission could utilize that Section 706 authority to regulate
broadband Internet access service. It concluded that the Commission had
adequately justified the adoption of open Internet rules by finding
that such rules would preserve and facilitate the ``virtuous
[[Page 37451]]
circle'' of innovation, demand for Internet services, and deployment of
broadband infrastructure and that, absent such rules, broadband
providers would have the incentive and ability to inhibit that
deployment. The court therefore rejected Verizon's challenge to the
transparency rule. However, the court struck down the ``anti-blocking''
and ``anti-discrimination'' rules, explaining that the Commission had
chosen an impermissible mechanism by which to implement its legitimate
goals. Specifically, the court held that the Commission had imposed per
se common carriage requirements on providers of Internet access
services. Such treatment was impermissible because the Commission had
classified fixed broadband Internet access service as an information
service, not a telecommunications service, and had classified mobile
broadband Internet access service as a private mobile service rather
than a commercial mobile service. The court remanded the case to the
Commission for further proceedings consistent with its opinion.
24. Today, we respond directly to that remand and propose to adopt
enforceable rules of the road, consistent with the court's opinion, to
protect and promote the open Internet. As the above history
demonstrates, our action builds on the foundation begun under Chairman
Powell, continued under Chairmen Martin and Genachowski, and reinforced
by a decade of Commission policy.
III. Discussion
A. The Continuing Need for Open Internet Protections
1. An Open Internet Promotes Innovation, Competition, Free Expression,
and Infrastructure Deployment
25. In the Open Internet Order, the Commission reiterated the
conclusion underlying its prior policies--that the Internet's openness
promotes innovation, investment, competition, free expression and other
national broadband goals. The Commission also found that the Internet's
openness is critical to its ability to serve as a platform for speech
and civic engagement and can help close the digital divide by
facilitating the development of diverse content, applications, and
services. Further, the Order found that the benefits of Internet
openness--increased consumer choice, freedom of expression, and
innovation--applied to end users accessing the Internet using mobile
services as well as fixed services.
26. In the Open Internet Order, the Commission specifically found
that the Internet's openness enabled a ``virtuous circle of innovation
in which new uses of the network--including new content, applications,
services, and devices--lead to increased end-user demand for broadband,
which drives network improvements, which in turn lead to further
innovative network uses.'' For example, the Commission explained that
innovative streaming video applications and independent sources of
video content have spurred end-user demand, which, in turn, has led to
network investments and increased broadband deployment. By contrast,
the Commission reasoned, ``[r]estricting edge providers' ability to
reach end users, and limiting end users' ability to choose which edge
providers to patronize, would reduce the rate of innovation at the edge
and, in turn, the likely rate of improvements to network
infrastructure.'' As discussed further below, the Commission found
that, despite the advantages of the virtuous circle, broadband
providers have short-term incentives to limit openness, generating
harms to edge providers and users, among others. Thus, the risk of
broadband provider practices that may reward them in the short term but
over the long run erode Internet openness threatens to slow or even
break the virtuous circle--chilling entry and innovation by edge
providers, impeding competition in many sectors, dampening consumer
demand, and deterring broadband deployment--in ways that may be
irreversible or very costly to undo. Also, innovation that does not
occur due to lack of Internet openness may be hard to detect.
27. The Open Internet Order acknowledged that there were tradeoffs
to consider in adopting the 2010 rules. The Commission concluded,
however, that any small costs of imposing the rules were outweighed by
the positive effect on network investment from the preservation of the
openness that drives the virtuous circle, as well as the increased
certainty in continued openness under the rules.
28. The D.C. Circuit held that ``the Commission [had] more than
adequately supported and explained its conclusion that edge provider
innovation leads to the expansion and improvement of broadband
infrastructure.'' The court also found ``reasonable and grounded in
substantial evidence'' the Commission's finding that Internet openness
fosters the edge provider innovation that drives the virtuous circle.
29. We believe that these findings, made by the Commission in 2010
and upheld by the court, remain valid. If anything, the remarkable
increases in investment and innovation seen in recent years--while the
rules were in place--appear to have borne out much of the Commission's
view. Both within the network and at its edges, investment and
innovation have flourished while the open Internet rules were in force.
30. According to a June 2013 report by the White House Office of
Science and Technology Policy, for example, nearly $250 billion in
private capital has been invested in U.S. wired and wireless broadband
networks since 2009. USTelecom reports that broadband capital
expenditures have risen steadily, from $64 billion in 2009 to $68
billion in 2012. Wireline providers alone invested $25 billion in 2012.
And venture capital financing of ``Internet-specific'' businesses has
doubled in the past four years, from $3.5 billion in 2009 to $7.1
billion in 2013. Annual investment in U.S. wireless networks grew more
than 40 percent between 2009 and 2012, from $21 billion to $30 billion,
and exceeds investment by the major oil and gas or auto companies.
31. Whole new product markets have blossomed in recent years, and
the market for applications has both diversified and exploded. A total
of $8.33 billion has been raised since 2007 on mobile media ventures, a
majority of the funds ($4.7 billion) to companies that provide software
services, including mobile Web development, carrier-backend software,
app development, and cloud-based services in the United States. In
April 2010, Apple released the first version of the iPad, which
launched the tablet market. The number of tablet users in the United
States has increased from 9.7 million in 2010 to almost 70 million by
the end of 2012, and is projected to grow to more than 160 million
(approximately 50 percent of the U.S. population) by 2016. In 2013,
over $1 billion in venture capital funding was invested in mobile media
startups, and overall app use in 2013 posted 115 percent year-over-year
growth. According to CTIA, in 2012 there were more than 20 independent
non-carrier mobile application stores, offering over 3.5 million apps
for 14 different operating systems. The Wall Street Journal reported in
March 2013 that Apple and Google each offered about 700,000 apps, and
that application sales were approaching $25 billion.
32. Finally, we have seen tremendous growth in the online voice and
video markets. The number of hours Americans spend watching video over
the Internet has grown 70 percent since June 2010. Between 2010 and
2013, revenues from online video services
[[Page 37452]]
grew 175 percent, from $1.86 billion to $5.12 billion. Real-time
entertainment (that is, programming that is viewed as it is delivered,
such as video streamed by Netflix and Hulu) grew from 42.7 percent of
the downstream fixed access traffic at peak time (generally 8:00 p.m.
to 10:00 p.m.) in 2010 to 67 percent of the downstream fixed access
traffic at peak time by September 2013. VoIP usage has similarly
continued to increase. The number of global over-the-top mobile VoIP
subscribers increased by 550 percent in 2012.
33. We have also, however, witnessed a growing digital divide that
threatens to undo the work of the Commission's open Internet policies.
As certain cities get connected with fiber or other technologies
capable of providing broadband speeds of 25 Mbps up to 1 Gigabit, rural
America and even some parts of urban America are falling farther and
farther behind. Recent data suggest that a majority of Americans living
in urban areas (64 percent) have access to at least 25 Mbps/10 Mbps
service, while only a substantial minority of Americans residing in
rural areas (only 21 percent) have access to that same 25 Mbps/10 Mbps
service. We are similarly concerned as to whether advanced networks are
being deployed to all Americans in urban areas, as the construction of
new networks, especially competitive networks, is an outcome that must
be encouraged.
34. In light of developments in the Internet ecosystem since 2010,
we wish to refresh the record on the importance of protecting and
promoting an open Internet. We seek comment on the current role of the
Internet's openness in facilitating innovation, economic growth, free
expression, civic engagement, competition, and broadband investment and
deployment. Particularly, we seek comment on the role the open Internet
rules have had in investment in the broadband marketplace--networks and
edge providers alike. We are similarly interested in understanding the
role that the open Internet may play in the promotion of competition or
in identifying barriers to infrastructure investment that an open
Internet may eliminate or lessen. We also seek comment on the role that
the open Internet has for public institutions, such as public and
school libraries, research libraries, and colleges and universities.
35. Additionally, we seek comment on the impact of the openness of
the Internet on free expression and civic engagement. For example, the
percentage of Americans who use the Internet reached 87 percent in
2014--an increase of 8 percent from 2010, the year in which the Open
Internet Order was adopted--marking ``explosive adoption'' that has had
``wide-ranging impacts on everything from: the way people get, share
and create news . . . the way they learn; the nature of their political
activity; their interactions with government; the style and scope of
their communications with friends and family; and the way they organize
in communities.'' In light of the important role that the Internet now
plays as a vehicle for communication of all sorts--both for consumers
and content providers--how should we consider the potential impact on
social and personal expression of an Internet whose openness was not
protected? For example, would there be particular impacts on political
speech, on the ability of consumers to use the Internet to express
themselves, or on the Internet's role as a ``marketplace of ideas''
that serves the interests of democracy in general, serving even the
interests of those Americans who listen even if they do not actively
speak? Are there other ways in which we should understand free-
expression interests and whether they may be impaired by a lack of
openness?
36. At the same time, we are mindful of the possible tradeoffs the
Commission recognized at the time it adopted the Open Internet Order.
When it adopted the rules in 2010, the Commission's primary focus was
on the market between broadband providers and their end-user
subscribers. The record contained no evidence of U.S. broadband
providers engaging in pay-for-priority arrangements, in which the
broadband provider would agree with a third party to directly or
indirectly prioritize some traffic over other traffic to reach the
provider's subscribers. As such, the Commission found that such
arrangements would be a ``significant departure from historical and
current practice.''
37. In the years since, this second side of the market--between
broadband providers and edge providers or other third parties--has
gotten increasing attention. In its arguments challenging the Order,
Verizon expressed interest in pursuing commercial agreements with edge
providers to govern the carriage of the edge providers' traffic. We
also note that such arrangements between broadband and edge providers
have begun to emerge. In January 2014, for example, AT&T launched a new
sponsored data service, in which an edge provider enters an agreement
with AT&T to sponsor and pay for data charges resulting from eligible
uses of the sponsor's content by an AT&T mobile subscriber.
38. We seek comment on the potential for, and development of, new
business arrangements in the market between broadband providers and
edge providers. What does the multi-sided market look like, and what
are its effects on Internet openness? Do some types of broadband and
edge provider arrangements (or aspects of such arrangements) raise
greater concerns about Internet openness than others?
2. Broadband Providers Have the Incentive and Ability To Limit Openness
39. The Open Internet Order found that broadband Internet providers
had the incentives and ability to limit Internet openness, and that
they had done so in the past. And the D.C. Circuit found that the
Commission ``adequately supported and explained'' that absent open
Internet rules, ``broadband providers represent a threat to Internet
openness and could act in ways that would ultimately inhibit the speed
and extent of future broadband deployment.'' As discussed further
below, we seek to update the record to reflect marketplace, technical,
and other changes since the 2010 Open Internet Order was adopted that
may have either exacerbated or mitigated broadband providers'
incentives and ability to limit Internet openness. We seek general
comment on the Commission's approach to analyzing broadband providers'
incentives and ability to engage in practices that would limit the open
Internet, as well as more targeted comment as addressed below.
40. As noted above, the Commission has pursued policies to
safeguard Internet openness for over a decade. Thus, while the number
of existing cases has been relatively few, we believe this to be
primarily due to the fact that the Commission has had policies in place
during the period in question that it has been ready to enforce. This
is different from the experience under the European legal framework,
which for the most part has not contained rules or policies prohibiting
blocking and discriminatory practices like the Commission's open
Internet regulatory policies. In the absence of such rules and
policies, commenters note more instances of broadband providers
engaging in some level of restriction in Europe than the Commission has
witnessed in the United States under its open Internet policies. The
European Parliament voted to adopt net neutrality rules in April 2014
that will now be considered by the 28 European Union Member States in
order to become binding regulation. To date, among European countries
only the
[[Page 37453]]
Netherlands and Slovenia have net neutrality regulations. For example,
a survey conducted by the Body of European Regulators for Electronic
Communications (BEREC) shows that European Internet service providers
reported engaging in specific restrictions such as traffic degradation
as well as blocking and throttling when accessing ``specific
applications (such as gaming, streaming, email or instant messaging
service) and, to a much lesser extent, when [accessing] specific
content and application providers.'' We seek comment on this analysis
and ask whether there is some other explanation to account for this
phenomenon.
41. We also note that concerns related to the open Internet rules
and norms have continued to occur. For example, in 2012, the Commission
reached a $1.25 million settlement with Verizon for refusing to allow
tethering apps on Verizon smartphones, based on openness requirements
attached to Verizon's Upper 700 MHz C-Block license. In the same year,
consumers also complained when AT&T refused to permit Apple's FaceTime
iPhone and iPad application to use its mobile network, restricting its
use to times when the end user was connected to Wi-Fi and thus to
another broadband provider, although the Commission did not conclude
whether such a practice violated our open Internet principles. We seek
identification of, and comment on, actions taken by broadband
providers--both domestically and internationally--since the adoption of
the Open Internet Order that have threatened or could potentially
threaten the Internet's openness. How should such incidents inform how
we craft our rules on remand?
a. Economic Incentives and Ability
42. In the Open Internet Order, the Commission found that providers
of broadband Internet access service had multiple incentives to limit
Internet openness. The Order concluded that the threat of broadband
provider interference with Internet openness would be exacerbated by--
but did not depend on--such providers possessing market power over
potential subscribers in their choice of broadband provider. However,
the Commission found that most residential customers have only one or
two options for wireline broadband Internet access service, increasing
the risk of market power, and found the future of mobile Internet
access service as a competing substitute remained unclear. Moreover,
the Commission emphasized that customers may incur significant costs in
switching from one provider to another, thus creating ``terminating
monopolies'' for content providers needing high-speed broadband service
to reach end users.
43. The D.C. Circuit found that the Commission's assessment of
broadband providers' incentives and economic ability to threaten
Internet openness was not just supported by the record but also
grounded in ``common sense and economic reality.'' It affirmed the
Commission's conclusions that vertically integrated broadband providers
have incentives to interfere with competitive services and that
broadband providers generally have incentives to accept fees from edge
providers. And the court cited with approval the Commission's
conclusion that a broadband provider would be unlikely to fully account
for the harms resulting from such practices. The court also upheld the
agency's conclusion that such incentives could ``produce widespread
interference with the Internet's openness in the absence of Commission
action.'' Finally, the court agreed that the Commission need not engage
in a market power analysis to justify its rules, explaining that
broadband providers' ability to block or disadvantage edge providers
depended on ``end users not being fully responsive to the imposition of
such restrictions,'' not on ``the sort of market concentration that
would enable them to impose substantial price increases on end users.''
44. We seek to update the record underlying the Open Internet
Order's conclusion that broadband providers have incentives and the
economic ability to limit Internet openness in ways that threaten to
weaken or break the virtuous circle. How have changes in the
marketplace or technology since 2010 affected broadband providers
incentives and economic ability to engage in such practices? To what
extent do broadband providers today have economic incentives and
mechanisms to block or disadvantage a particular edge provider or class
of edge providers? To what extent do vertically integrated providers
have particularized incentives to discriminate--on price, quality, or
other bases--in favor of affiliated products? What are broadband
providers' incentives to increase revenues by charging edge providers
for access or prioritized access to the broadband provider's end users?
Are there features of the Internet ecosystem that facilitate or impede
a broadband provider's ability to internalize the harms caused by
practices that limit openness? Are there justifications for charging
fees to edge providers that were not present in 2010? We seek comment
on these and other economic incentives and abilities that broadband
providers may have to limit openness.
45. We generally seek comment on what economic tools broadband
providers utilize to manage traffic on their networks. Broadband
providers may address traffic management through commercial terms and
conditions on end users, such as pricing for different levels of
throughput or through the use of ``data caps.'' To what extent and in
what ways do broadband providers use such tools to manage traffic, such
as by excluding certain content from such an end user data cap? Might
these tools be used to exploit market power or reduce competition?
46. In addition, we seek comment on end users' ability to switch
providers if a particular broadband service does not meet their needs.
What is the extent of switching costs, and how do switching costs
affect the incentives and economic ability of providers to limit
Internet openness? As discussed in the Open Internet Order and affirmed
by the D.C. Circuit, both edge providers seeking access to end users
and end users seeking access to edge providers are subject to the
gatekeeper effect of a retail broadband provider. Absent multi-homing,
an end user has only one option to reach a given edge provider's
content. To reach any given end user, an edge provider must ensure that
it or its broadband provider can reach the end user's broadband
provider. Terms and conditions, price, or lack of other broadband
providers, among other factors, can raise switching costs to the point
where switching is inefficient, infeasible, or even impossible. We seek
comment on these conclusions. To what extent do consumers face
significant switching costs in choosing to change broadband access
providers? Which services, if any, are most vulnerable to a broadband
provider's market power because of the inability to effectively reach
subscribers through other means? To the extent that such switching
costs exist, to what extent, if any, are they exacerbated by additional
factors, such as the difficulty consumers may have in effectively
monitoring the extent to which edge providers have difficulty reaching
them, the number of effective substitutes a consumer may have among
broadband providers, or the impact of bundled pricing and switching
costs attached to the purchase or use of bundled services, such as a
combined offering of broadband access along with video services and
voice telephony? Would all likely alternatives have similar incentives
to limit openness, possibly for a different set of services? We also
seek comment on an end user's ability to switch broadband providers in
[[Page 37454]]
response to specific broadband provider practice, for example a
broadband provider's decision to charge an edge provider to reach the
customer. Are switching costs relevant to an edge provider's
interaction with a broadband provider and, if so, how? Finally, what
are the implications when consumers have no ability to switch providers
because there is only one provider offering service to the consumer's
location?
47. We also seek comment on the state of competition in broadband
Internet access service, and its effect on providers' incentives to
limit openness. We seek comment on the appropriate view of whether
broadband services with substantially different technical
characteristics are competitive substitutes. For example, how should we
regard the ability of DSL service with speeds of, for example, 3 Mbps
downstream and 768 kbps upstream to constrain conduct by a provider of
high-speed broadband with speeds of, for example, 25 Mbps downstream
and 3 Mbps upstream (or higher)? How should we regard the geography of
broadband competition? From an end user's point of view, do national
practices or market shares have any impact on edge providers, without
regard to the definition of a geographic market?
48. In the fixed broadband context, we have seen evidence of
limited choice between broadband providers in many areas of the
country. As the speed threshold increases to 6 Mbps downstream and 1.5
Mbps upstream, the number of households that are located in census
tracts with at least three providers that report serving customers at
those higher speeds dips down to a mere 34 percent. In many areas of
the country, with respect to fixed Internet access, consumers may have
only limited options, i.e., one or two fixed providers available. We
seek comment on the extent to which commercial practices differ in
places where consumers have only one choice of a wireline broadband
provider, two choices, or more than two choices. We therefore also seek
comment as to whether increased spectrum availability and technological
developments in the mobile broadband marketplace, e.g., growth in 4G/
LTE availability, would affect the market power of fixed broadband
providers.
49. We further seek general comment on our approach towards
analyzing broadband provider incentives. Under the Commission's
reading, which the court upheld, our Section 706 authority is not
predicated on a finding of market power, specifically, that broadband
providers need not be found to be ``benefiting from the sort of market
concentration that would enable them to impose substantial price
increases on end users.'' Nor do we believe that the open Internet
concerns described above solely arise in markets where broadband
providers possess market power over subscriber prices. We recognize,
however, that the presence or absence of market power--over broadband
subscriptions, over end users once they have chosen a broadband
provider, and over content providers who wish to reach those end
users--may inform an understanding of a broadband provider's behavior
in the Internet marketplace and its incentives to engage in practices
that limit Internet openness. Thus, we seek comment on whether the
Commission should engage in a market power analysis with respect to
broadband providers and, if so, how we should go about that analysis.
50. We further seek comment on whether there are other economic
theories that the Commission should consider to better understand and
assess broadband providers' incentives to engage in practices that
affect the Internet's openness. For example, do broadband providers
have an incentive to extract rents from upstream services whose price
significantly exceeds the marginal cost of delivering those services to
an additional customer? Are there positive network effects from
widespread adoption of broadband services by consumers that we should
recognize? Do edge providers that incur significant sunk costs in the
delivery of their output face ``lock-in'' problems if they become
dependent on a particular pathway to their current or potential users?
In the absence of open Internet protections, would those edge providers
face uncertainty that would hamper their ability to attract capital?
Does the trend towards the caching of content closer to end users
either increase such lock-in problems or, separately, limit the number
of pathways by which an edge provider's output can effectively reach
current or potential end users? We seek comment on whether and how
other theories and new evidence may supplement or supplant the original
Open Internet Order analysis.
b. Technical Ability
51. The Open Internet Order likewise found that broadband providers
have the technical ability to limit Internet openness. As the Order
explained, increasingly sophisticated network management tools enable
providers to identify and differentiate the treatment of traffic on
their own broadband Internet access service networks. We recognize that
broadband providers also have the ability to impact traffic and
congestion in ways that go beyond the management of traffic within
their networks. In particular, we understand that broadband providers
also manage traffic in the context of their relationships with other
autonomous networks. For example, traffic and congestion may be
affected by interconnection arrangements for the exchange of Internet
traffic between two networks as well as CDN-type arrangements in which
third parties place equipment in or adjacent to the providers' network.
As discussed in Section III.B, the rules we propose today reflect the
scope of the 2010 Open Internet Order, which applied to broadband
provider conduct within its own network. The D.C. Circuit agreed,
finding ``little dispute that broadband providers have the
technological ability to distinguish between and discriminate against
certain types of Internet traffic.'' We seek comment on this general
conclusion and on how this ability to impose restrictions on edge
providers and end users has increased or decreased with further
developments in technology or business practices since the Open
Internet Order. We also seek comment on provider abilities that were
not identified in the Open Internet Order or elsewhere in this NPRM,
including identifying the particular ability and its relevance to this
proceeding. For example, one commenter has expressed concern about
broadband providers offering prioritized service in a manner that may
harm rural or minority end users. Is it technically feasible for a
broadband provider to block or degrade based on the location or
neighborhood of the end user? Is it likely that it would do so? If so,
how should our rules address this concern?
52. We seek comment on broadband providers' ability to limit
Internet openness through management of traffic on their own networks
and limitations imposed on their end users. Providers generally have
the ability to manage traffic and congestion on their own networks and
have developed a number of techniques to do so. For example, a provider
can use technical methods like packet classification, admission control
and resource reservation, rate control and traffic shaping, as well as
packet dropping and packet scheduling to identify and manage traffic on
its network. Such techniques may provide additional ability to
discriminate in a way that is largely opaque to edge providers and end
users. We note that other forms of discrimination in the Internet
ecosystem may exist, but such conduct is beyond the scope of this
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proceeding. We seek comment on the technical tools broadband providers
can and do use to manage traffic on their networks.
53. The Open Internet Order found that providers had in fact used
their ability to limit openness, citing several instances where
broadband providers had been subject to Commission enforcement
proceedings for violating open Internet norms. In the Order, the
Commission cited the Madison River case, the Comcast-BitTorrent case,
as well as various mobile wireless Internet providers' refusal to allow
customers to use competitive payment applications, competitive voice
applications, and remote video applications. The Commission also noted
other allegations of blocking or degrading peer-to-peer traffic, but
did not determine whether those specific practices violated open
Internet principles. The D.C. Circuit noted these examples along with
the Commission's as persuasive justification for adopting open Internet
rules.
B. Scope of the Rules
54. The rules adopted in the Open Internet Order applied to
``broadband Internet access service,'' which was defined as:
A mass-market retail service by wire or radio that provides the
capability to transmit data to and receive data from all or
substantially all Internet endpoints, including any capabilities
that are incidental to and enable the operation of the
communications service, but excluding dial-up Internet access
service. This term also encompasses any service that the Commission
finds to be providing a functional equivalent of the service
described in the previous sentence, or that is used to evade the
protections set forth in this Part.
The Order defined ``mass market'' to mean a service marketed and sold
on a standardized basis to residential customers, small businesses, and
other end-user customers such as schools and libraries, including
services purchased with support of the E-rate program.
55. The Verizon decision upheld the Commission's regulation of
broadband Internet access service pursuant to Section 706 and did not
disturb this aspect of the Open Internet Order. Thus, the definition of
``broadband Internet access service'' remains a part of the
Commission's regulations. We tentatively conclude that we should retain
this definition without modification. We seek comment on that
conclusion. The court in Verizon also stated that, apart from the
service provided to end users, ``broadband providers furnish a service
to edge providers, thus undoubtedly functioning as edge providers'
`carriers.' '' We seek comment on whether this should be identified as
a separate service and, if so, how we should define that service and
what the regulatory consequences are, if any, of that definition.
56. We also seek comment on the following issues that arise in
connection with the scope of the application of the rules we propose
today.
57. Specifically Identified Services. The Open Internet Order
excluded certain categories of services from the definition of
broadband Internet access service, such as dial-up Internet access
service and multichannel video programming, the latter of which the
Commission understood not to meet the definition of ``provid[ing] the
capability to transmit data to and receive data from all or
substantially all Internet endpoints.'' We tentatively conclude that we
would maintain this approach, but seek comment on whether we should
change this conclusion.
58. Enterprise Services. The Open Internet Order excluded
enterprise service offerings, which are typically offered to larger
organizations through customized or individually negotiated
arrangements. Similarly, the Open Internet Order excluded virtual
private network services, hosting, or data storage services. The
Commission explained that such services ``typically are not mass market
services and/or do not provide the capability to transmit data to and
receive data from all or substantially all Internet endpoints.'' We
also note that our rules apply only as far as the limits of a broadband
provider's control over the transmission of data to or from its
broadband customers. The Open Internet Order also established that the
rules did not apply to: (1) Edge provider activities, such as the
provision of content on the Internet; and (2) premise operators,
entities like coffee shops or bookstores, which offer Internet access
services to their patrons. We tentatively conclude that we would
maintain this approach, but seek comment on whether we should change
this conclusion.
59. Internet Traffic Exchange. The Open Internet Order explained
that its rules did not apply beyond ``the limits of a broadband
provider's control over the transmission of data to or from its
broadband customers.'' In other words, the Order applied to a broadband
provider's use of its own network but did not apply the no-blocking or
unreasonable discrimination rules to the exchange of traffic between
networks, whether peering, paid peering, content delivery network (CDN)
connection, or any other form of inter-network transmission of data, as
well as provider-owned facilities that are dedicated solely to such
interconnection. Thus, the Order noted that the rules were not intended
``to affect existing arrangements for network interconnection,
including existing paid peering arrangements.'' We tentatively conclude
that we should maintain this approach, but seek comment on whether we
should change our conclusion. Some commenters have suggested that we
should expand the scope of the open Internet rules to cover issues
related to traffic exchange. We seek comment on these suggestions. For
example, how can we ensure that a broadband provider would not be able
to evade our open Internet rules by engaging in traffic exchange
practices that would be outside the scope of the rules as proposed?
60. Specialized Services. In the Open Internet Order, the
Commission recognized that broadband providers may offer ``specialized
services'' over the same last-mile connections used to provide
broadband service. The Commission stated that these services can
benefit end users and spur investment, but also noted the potential for
specialized services to jeopardize the open Internet. Due to these
concerns, the Commission stated that it would monitor these services,
but that its rules would ``not prevent broadband providers from
offering specialized services such as facilities-based VoIP.'' We
tentatively conclude that we should maintain this approach and continue
to closely monitor the development of specialized services to ensure
that broadband providers are not using them to bypass the open Internet
rules or otherwise undermine a free and open Internet. We seek comment
on this tentative conclusion. How can we ensure that the specialized
services exception is not used to circumvent our open Internet rules?
In addition, should specialized services be addressed within the scope
of the ``commercially reasonable'' rule either as a safe harbor or
among the factors for consideration? Should the Commission define
``specialized services''? The Open Internet Order did not formally
define ``specialized services,'' but described them as ``services that
share capacity with broadband Internet access service over providers'
last-mile facilities.'' By contrast, the net neutrality rules that the
European Parliament voted to adopt in April 2014 included a specific
definition for ``specialized services'' as ``an electronic
communications service optimised for specific content, applications or
services, or a combination thereof, provided over logically distinct
capacity, relying on
[[Page 37456]]
strict admission control, offering functionality requiring enhanced
quality from end to end, and that is not marketed or usable as a
substitute for internet access service.''
61. Reasonable Network Management. Although the Open Internet
Order's definition of broadband Internet access service did not itself
address reasonable network management, the concept was incorporated
into each of the 2010 rules. Specifically, the transparency rule ``does
not require public disclosure of competitively sensitive information or
information that would compromise network security or undermine the
efficacy of reasonable network management practices.'' The 2010 no-
blocking rule was made expressly subject to ``reasonable network
management.'' And the unreasonable discrimination rule expressly
provided for reasonable network management, which was defined as
follows: ``A network management practice is reasonable if it is
appropriate and tailored to achieving a legitimate network management
purpose, taking into account the particular network architecture and
technology of the broadband Internet access service.'' The Commission
further concluded that it would ``develop the scope of reasonable
network management on a case-by-case basis.'' We tentatively conclude
that we should continue the same approach. We seek comment on this
conclusion as applied to an enhanced transparency rule, our re-adoption
of the no-blocking rule, and the proposal to adopt a ``commercially
reasonable'' standard. How can we ensure that the ability of providers
to engage in reasonable network management is not used to circumvent
the open Internet protections implemented by our proposed rules?
62. Mobile Services. The Open Internet Order also adopted
definitions for ``fixed'' and ``mobile'' Internet access service. It
defined ``fixed broadband Internet access service'' to expressly
include ``broadband Internet access service that serves end users
primarily at fixed endpoints using stationary equipment, . . . fixed
wireless services (including fixed unlicensed wireless services), and
fixed satellite services.'' It defined ``mobile broadband Internet
access service'' as ``a broadband Internet access service that serves
end users primarily using mobile stations.'' The impact of this
distinction varied by rule. The transparency rule applies equally to
both fixed and mobile broadband Internet access service. The no-
blocking rule applied a different standard to mobile broadband Internet
access services, and mobile Internet access service was excluded from
the unreasonable discrimination rule. We tentatively conclude that we
should maintain the same approach in today's NPRM. We seek comment on
this approach, which is discussed in more detail in the context of each
of the proposed rules below. We recognize that there have been
significant changes since 2010 in the mobile marketplace, including how
mobile providers manage their networks, the increased use of Wi-Fi, and
the increased use of mobile devices and applications. We seek comment
on whether and, if so, how these changes should lead us to revisit our
treatment of mobile broadband service. Specifically, we seek comment
below on whether the no-blocking rule should continue to distinguish
between fixed and mobile broadband and whether, under the commercially
reasonable rule, mobile networks should be subject to the same
totality-of-the-circumstances test as fixed broadband. In addition, how
should the definitions of ``fixed'' and ``mobile'' services be applied
to a fixed broadband provider's commercially deployed Wi-Fi service
that is made available to the provider's fixed broadband customers? How
should such changes affect our treatment of reasonable network
management for mobile providers? Similarly, how should we treat mobile
services that are deployed and/or marketed as express substitutes for
traditional telecommunications or broadband services? Finally, have
there been changes in technology or the marketplace for the provision
of satellite broadband Internet access service that should lead the
Commission to reassess how its rules should apply to such services?
C. Transparency Requirements To Protect and Promote Internet Openness
1. The 2010 Transparency Rule
63. In the Open Internet Order, the Commission concluded that
effective disclosure of broadband providers' network management
practices, performance, and commercial terms of service promotes
competition, innovation, investment, end-user choice, and broadband
adoption. To that end, the Commission adopted the following
transparency rule:
A person engaged in the provision of broadband Internet access
service shall publicly disclose accurate information regarding the
network management practices, performance, and commercial terms of
its broadband Internet access services sufficient for consumers to
make informed choices regarding the use of such services and for
content, application, service, and device providers to develop,
market, and maintain Internet offerings.
64. The Commission determined that the best approach to
implementing the transparency rule was to allow broadband providers
flexibility, while providing guidance concerning effective disclosure.
The Commission stated that ``effective disclosures will likely
include'' information concerning ``some or all'' of the following
topics: (1) Network practices, including congestion management,
application-specific behavior, device attachment rules, and security
measures; (2) performance characteristics, including a general
description of system performance (such as speed and latency) and the
effects of specialized services on available capacity; and (3)
commercial terms, including pricing, privacy policies, and redress
options. In 2011, the Commission's Enforcement Bureau and Office of
General Counsel issued advisory guidance to further clarify compliance
with the transparency requirements regarding point-of-sale disclosures,
service descriptions, security measures, and the extent of required
disclosures, while noting that ``these particular methods of compliance
are not required or exclusive; broadband providers may comply with the
transparency rule in other ways.''
65. The D.C. Circuit's decision in Verizon v. FCC upheld the
transparency rule, which remains in full force, applicable to both
fixed and mobile providers. In today's NPRM, we inquire as to ways that
the transparency rule can be improved, taking into account changes in
the nature of the provision of broadband services since 2010. We
believe we have ample authority not only for our existing transparency
rule, but also for the enhanced transparency rule we propose today,
whether the Commission ultimately relies on Section 706, Title II, or
another source of legal authority. We seek comment on whether and how--
if at all--the source of the Commission's legal authority relied upon
to adopt other open Internet rules would affect the authority or
authorities that provide the strongest basis for any improvements to
the transparency rule or otherwise would inform how we define the goal
of transparency in general.
2. Enhancing Transparency To Protect and Promote Internet Openness
66. ``Sunlight,'' as Justice Brandeis has explained, ``is . . . the
best of disinfectants.'' If designed correctly, disclosure policies are
among the most effective and least intrusive regulatory measures at the
Commission's disposal.
[[Page 37457]]
Applied here, the Commission continues to believe that access to
accurate information about broadband provider practices encourages the
competition, innovation, and high-quality services that drive consumer
demand and broadband investment and deployment. The transparency rule
thereby reflects the ``virtuous circle'' that, in the long term, unites
the interests of end users, edge providers, and the broader Internet
community. As the Commission explained in the Open Internet Order,
disclosures under the rule: (1) Help end users make informed choices
regarding the purchase and use of broadband services and increase end
users' confidence in broadband providers' practices; (2) ensure that
edge providers have access to broadband providers' network information
necessary to develop innovative new applications and services; and (3)
inform the Internet community and the Commission about broadband
providers' practices and conduct that could impact Internet openness.
In today's NPRM, we seek comment on the effectiveness of the existing
transparency rule and on whether and, if so, how the rule should be
enhanced to meet its goals with respect to end users, edge providers,
the Internet community, and the Commission.
67. Today, we seek general comment on how well the Commission's
existing transparency rule is working. We are especially interested in
comments that describe the current operation, benefits, and
shortcomings of the existing rule, how broadband providers are
complying with it, and how we should measure such compliance. We note
that an informal review of broadband provider disclosures conducted by
Commission staff found that the majority are providing some form of
disclosure statements, but that many do not appear to provide all the
information the rule was designed to disclose. We are also mindful that
the additional rules we propose today to protect Internet openness
consistent with the D.C. Circuit's decision may place even greater
importance on the extent to which information about broadband
providers' practices is disclosed to end users, edge providers, and the
Commission. Taking all of that into account, we tentatively conclude
that we should enhance the transparency rule to improve its
effectiveness for end users, edge providers, the Internet community,
and the Commission. We seek comment on this tentative conclusion and on
what burdens or compliance issues may be associated with this approach,
including for smaller providers.
68. Tailored disclosures. In the Open Internet Order, the
Commission stated that broadband providers may be able to satisfy the
transparency rule through use of a single disclosure, and therefore did
not require different types of disclosures to different parties such as
individual end users, edge providers, the broader Internet community,
and the Commission. We have concerns that a single disclosure may not
provide the required disclosures in a manner that adequately satisfies
the informational needs of all affected parties. For example, some
recent research suggests that consumers have difficulty understanding
commonly used terms associated with the provision of broadband
services. Edge providers, however, may benefit from descriptions that
are more technically detailed. We therefore tentatively conclude that
it would be more effective to require broadband providers to more
specifically tailor disclosures to the needs of these affected parties.
We seek comment on this tentative conclusion, on the nature of the
disclosures that should be tailored, and on what burdens or compliance
issues, if any, may be associated with more targeted disclosures.
a. Transparency to End Users
69. Since the Commission adopted the transparency rule, we have
received hundreds of complaints from consumers suggesting that, under
the rule, broadband providers may not be providing end user consumers
the accurate information they need and have a right to receive. Our
analysis of consumer complaints received since the transparency rule
took effect shows a significant number of consumer complaints about
provider speeds, charges, and other commercial practices that the rule
was designed to disclose. In some cases, however, it is difficult to
discern whether the consumer's frustration is with slow speeds or high
prices generally, or instead with how the service as actually provided
differs from what the provider has advertised. Of particular concern to
many consumers is that the speed of their service falls short of the
advertised speed. Many consumers complain that they have been charged
amounts greater than advertised rates, including fees and charges
beyond basic rates. We have also received a number of consumer
complaints raising questions about the source of slow or congested
services. Consumers have also reported surprise at broadband providers'
statements about slowed or terminated service based on consumers'
``excessive use.'' Other consumers report confusion about how data
consumption is calculated for purposes of data caps.
70. We seek comment on the extent to which the existing
transparency rule is effectively informing end users. We are interested
both in what information broadband providers are disclosing to end
users and how that information is being disclosed. In addition, we seek
comment on the incentives and ability of broadband providers to provide
service at lower quality or higher prices than their subscribers
expected when they enrolled, and on the incentives and ability of
subscribers to choose other options if their broadband providers fail
to live up to these expectations. If a subscriber is locked in to a
particular provider, how can transparency rules bring the performance
of that provider up to the subscriber's expectations?
71. In light of the consumer complaints discussed above, we also
consider enhancements to the existing rule with respect to the content,
form, and method of broadband providers' disclosures to end users.
72. Content and Form of Disclosure. We seek comment on whether
there are ways to make the content and format of disclosures more
accessible and understandable to end users. With respect to content,
should the Commission require the disclosure of specific broadband
provider network practices, performance characteristics (e.g.,
effective download speeds, upload speeds, latency, and packet loss),
and/or terms and conditions of service to end users (e.g., data caps)?
We are particularly interested in whether there are network practices,
performance characteristics, or commercial terms relating to broadband
service that are particularly essential but not easily discoverable by
end users absent effective disclosure. With respect to format, both
academic research and the Commission's experience with consumer issues
have demonstrated that the manner in which providers display
information to consumers can have as much impact on consumer decisions
as the information itself. We therefore seek comment on best practices
for displaying and formatting relevant disclosures for end users,
including any potential costs and burdens to broadband providers. For
example, the Open Internet Advisory Committee (OIAC) has proposed the
use of a standardized label for Internet service that includes basic
information such as performance speed (i.e., upload and download
speed), price (i.e., monthly fee averaged over three years), and usage
restrictions (i.e., any points at which the
[[Page 37458]]
applicable terms of service change, including data usage caps and any
charges, speed reductions, or other penalties for exceeding a cap) that
consumers can use to comparison shop for service. Are there lessons we
can learn regarding effective disclosure practices from independent
consumer research or disclosure in other approaches to standardized
labels? Should the information be made available in a machine-readable
format, such as XML, that might allow the Commission, industry
associations, or other organizations to easily access and synthesize
information for consumers?
73. Network Practices. With respect to data caps, should we require
disclosures that permit end users to identify application-specific
usage or to distinguish which user or device contributed to which part
of the total data usage? Should we require disclosure of any type of
traffic exempted from any data caps, and how end users can find their
current consumption levels? Should we require that disclosures explain
any restrictions on tethering for mobile devices? Should the Commission
expand its transparency efforts to include measurement of other aspects
of service such as packet loss, packet corruption, latency, and jitter
in addition to upstream and downstream speed? Should the Commission
require the reporting of actual achieved results for each category? If
providers offer different tiers of service to their end users, should
providers be required to make disclosures by tier? What should be the
required timing of any such disclosures? Is it important that network
practices be disclosed in advance of their implementation?
74. Method of Disclosure. The Transparency Compliance PN advised
broadband providers that they can comply with the point-of-sale
disclosure requirement by, for instance, ``directing prospective
customers at the point of sale, orally and/or prominently in writing,
to a web address at which the required disclosures are clearly posted
and updated.'' We seek comment on whether that approach is adequate or
whether the Commission should consider alternative approaches.
b. Transparency to Edge Providers
75. As noted above, the Commission also adopted the transparency
rule to ensure that broadband providers would disclose sufficient
information to permit ``content, application, service, and device
providers to develop, market, and maintain Internet offerings.'' Some
commenters have suggested that current disclosures provide insufficient
information for edge providers. We seek comment on how the existing
transparency rule is working and how we can enhance its effectiveness
with respect to edge providers. Should we view some categories of edge
providers, such as start-up companies, as having distinct needs and, if
so, what would be the implications for an enhanced transparency rule?
76. We also seek comment on the extent to which the transparency
rule does, or should, disclose useful information to providers who seek
to exchange traffic with broadband provider networks. In other words,
should we view transit, CDN, or other providers engaged in Internet
traffic exchange as a class of persons whose interests are similar to
those of edge providers who wish ``to develop, market, and maintain
Internet offerings,'' perhaps because they may have such edge providers
as their customers? For instance, many edge providers utilize the
services of an intermediary CDN, such as Akamai, EdgeCast, Limelight,
or Level 3, or cloud service providers such as Amazon, Microsoft, or
RackSpace, which provide the servers upon which the applications run
and also interconnect directly with broadband providers. Other edge
providers bypass these networks and interconnect directly with
broadband providers through peering arrangements. Some edge providers,
such as Google or Amazon, may act both as content providers for their
own services and as CDNs or cloud service providers for other services.
We seek comment on whether these subgroups have distinguishable needs
for information that could be provided through disclosure and, if so,
what kind of information would be most useful.
c. Transparency to the Internet Community and the Commission
77. The Common Interests of End Users, Edge Providers, and the
Broader Internet Community. We seek comment on the extent to which the
existing transparency rule fully reflects the ``virtuous circle'' that,
in the long term, unites the interests of end users, edge providers,
the broader Internet community, and the Commission. Are there ways to
enhance the transparency rule to further facilitate the virtuous
circle? What other disclosures might encourage and improve the
deployment of broadband in the United States?
78. We also seek comment--relevant to all stakeholders--on whether
and, if so, how the Commission should enhance the existing transparency
rule to ensure the effectiveness of, and compliance with, the other
rules we propose in today's NPRM. For example, to ensure the
effectiveness of the no-blocking rule proposed below, should the
Commission mandate that broadband providers disclose--in a more
rigorous and consistent way--the expected performance end users can
expect from their broadband service? To improve information about
broadband provider practices for end users, edge providers, and the
broader Internet community, we tentatively conclude that broadband
providers must disclose in a timely manner to consumers, edge
providers, and the public (and, of course, the Commission) when they
make changes to their network practices as well as any instances of
blocking, throttling, and pay-for-priority arrangements, or the
parameters of default or ``best effort'' service as distinct from any
priority service.
79. Measuring Broadband Performance. The Open Internet Order
requires broadband providers to disclose accurate information regarding
network performance for each broadband service they provide. The
accuracy and availability of such network performance information is a
common linchpin for end users, edge providers, and all stakeholders in
the Internet community. As noted in the Order, the Commission launched
a broadband performance measurement project called ``Measuring
Broadband America'' (MBA) to accurately measure key performance
metrics, including baseline connection speed and latency. To satisfy
their obligations under the transparency rule, all of the 12 largest
fixed broadband providers chose to participate in the measurement
program. Last year the Commission expanded its MBA program to include
mobile broadband by releasing a Mobile Broadband Speed Test App, an
open-source, crowdsourcing program to assess mobile broadband network
performance nationwide. The app measures mobile broadband and Wi-Fi
network performance and delivers to consumers an in-depth view of key
metrics related to their mobile broadband experience. We seek comment
on the effectiveness of this approach for providing consumers with
useful information regarding the performance of both fixed and mobile
broadband networks. We seek comment on whether participation in MBA
should continue to satisfy the requirement that actual speeds be
disclosed. Are there areas of this program that can be improved to
provide more useful information to consumers?
80. More generally, are there more efficient or more comprehensive
ways to
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measure network performance metrics, including for broadband providers
not participating in MBA? For example, could the ability to measure and
report network performance be included in the end user's own network
modem or residential gateway? Do such functionalities currently exist,
or are they in development? Are there academic or other external
research organizations that could assist the Commission in collecting
and analyzing information about traffic, congestion, and other features
of the Internet? Should the Commission mandate the use of monitoring
devices, like those used in MBA? How can performance metrics most
accurately measure the actual download and upload speeds a consumer can
expect to experience, rather than ``up to'' speeds or ``last-mile''
performance? Should the Commission look to an external advisory group
to aid in the development and feasibility of performance metrics and
measurement?
81. Congestion. The Open Internet Order highlighted the value of
providing end users with information about the sources of congestion
that might impair the performance of edge-provider services. As the
Open Internet Order explained, ``it is often difficult for end users to
determine the causes of slow or poor performance of content,
applications, services or devices.'' At the same time, the Commission
recognized that ``congestion management may be a legitimate network
management purpose.'' But the Commission also emphasized the importance
of the disclosure to end users of ``descriptions of congestion
management practices'' including ``indicators of congestion'' and ``the
typical frequency of congestion.''
82. Since the 2010 Open Internet Order, some have suggested that
sources of congestion that impact end users may originate beyond the
broadband provider's network or in the exchange of traffic between that
network and others. An end user's inability to ascertain the source of
congestion could lead to confusion, for example, to the filing of an
unjustified complaint against a broadband provider (if the source of
the congestion were elsewhere) or a mistaken decision by the end user
to purchase additional bandwidth to improve performance (again, if the
source of congestion were elsewhere). Edge providers and other
stakeholders also have expressed a need for greater information about
network congestion.
83. In light of these concerns, we tentatively conclude that we
should require that broadband providers disclose meaningful information
regarding the source, location, timing, speed, packet loss, and
duration of network congestion. We seek comment on this tentative
conclusion, including on how to implement it in a practical manner that
provides meaningful information to end users, edge providers, and other
stakeholders without causing undue burden on broadband providers. For
example, should the information to be disclosed be based upon a
sampling taken at given points in time, and if so, what would be an
appropriate interval for such sampling? We note that Cogent has made
suggestions about enhancements to the transparency rule along these
lines and proposing specific means of implementation, upon which we
seek comment. In making the foregoing tentative conclusion and seeking
comment on how to implement it, we emphasize that we are positing that
the public would be served by additional information concerning the
existence and duration of congestion, regardless of its cause, so that
there is greater understanding of the impact of that congestion on the
performance of a broadband provider's network, if any. We do not,
however, propose to expand the scope of the open Internet rules in any
fashion to regulate traffic exchange, though, as noted above, we ask
for public input on this tentative conclusion.
d. Transparency for Mobile Broadband
84. The Commission currently applies the same transparency
requirement to both fixed and mobile providers, reasoning that end
users need a clear understanding of ``network management practices,
performance, and commercial terms, regardless of the broadband platform
they use to access the Internet.'' We seek comment on how we should
assess the effectiveness of the existing rule in the mobile broadband
context. For example, most mobile broadband plan offerings have
generally had lower data usage limits than those offered for fixed
broadband services. Accordingly, do mobile broadband subscribers have
an enhanced need to understand, monitor, and more flexibly adjust their
mobile data usage needs than the fixed broadband users?
85. We seek comment on whether and, if so, how enhancements to the
transparency rule should apply to mobile broadband network providers.
Would the enhanced transparency requirements described herein, or
others, help meet the information needs of mobile broadband device and
application developers as well as the needs of end users? How can we
make sure that the disclosure requirements discussed above are
appropriate and effective for mobile broadband in view of the many
operational factors that may influence performance of mobile broadband
networks, including the mobile access technology, the weather, the
distance to the serving cell site, the number of users in a cell site,
and device capability? Should the nature of disclosure to customers of
wireless networks be different if the wireless service is provided by a
network as an explicit substitute for copper-based, traditional
service, including voice and DSL?
e. Burdens of Enhanced Transparency on Broadband Providers
86. We seek comment on the extent to which adopting enhanced
transparency requirements would create particular burdens in either the
fixed or the mobile broadband environment and whether and how such
burdens would affect the pace of innovation, investment, and growth.
How can we achieve the public benefits of enhanced disclosure
requirements without imposing unreasonable burdens on the broadband
providers? Are there ways to minimize the costs and burdens associated
with any enhanced disclosure requirements? Are there ways the
Commission or industry associations could reduce any such burdens, for
example through the use of a voluntary industry standardized glossary,
or through the creation of a dashboard that permits easy comparison of
the policies, procedures, and prices of various broadband providers
throughout the country?
3. Compliance and Enforcement
87. In the Open Internet Order, the Commission noted that a key
objective of the transparency rule is to enable the Commission to
collect information necessary to assess, report, and enforce the open
Internet rules. As discussed further below, we seek comment on how the
Commission can best design a process for enforcing the transparency
rule that provides certainty, flexibility, and access for all affected
parties. Should the Commission permit individuals to report possible
noncompliance with our open Internet rules anonymously or take other
steps to protect the identity of individuals who may be concerned about
retaliation for raising concerns? We propose that the consequences of a
failure to comply with our transparency rule should be significant and
include monetary penalties. We seek comment on the most effective
methods to ensure ongoing compliance with the transparency rule. How
can we ensure that these disclosure requirements are as
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effective and effectively enforced as disclosure requirements in other
areas of the law, such as disclosures to the Securities and Exchange
Commission? Should the Commission require broadband providers to
certify that they are in compliance with the required disclosures,
particularly if the current flexible approach is amended to require
more specific disclosures? Should we also require broadband providers
to submit reports containing descriptions of current disclosure
practices? If so, should we modify our existing process for protecting
the confidentiality of competitively sensitive information?
88. We also seek comment on whether the Commission can better
promote transparency through its own outreach and reporting mechanisms.
Should the Commission establish and make public a list of those
broadband providers that block or otherwise limit certain types of
traffic? Should the Commission collect and publish information on pay-
for-priority arrangements? In what timeframe should the Commission
require providers to report such changes in their traffic management
policies to the Commission? We invite comment on the merits of these
options, and any other suggestions commenters may deem relevant, to
ensure full compliance with the transparency rule, including
identification of any regulatory burdens this might entail for
broadband providers.
D. Preventing Blocking of Lawful Content, Applications, Services, and
Nonharmful Devices
89. We believe that, as the Commission found in the Open Internet
Order, ``the freedom to send and receive lawful content and to use and
provide applications and services without fear of blocking is essential
to the Internet's openness and to competition in adjacent markets such
as voice communications and video and audio programming.'' The D.C.
Circuit acknowledged the validity of this policy rationale for the no-
blocking rule adopted in the Open Internet Order, but vacated the rule
because it found that the Commission had failed to provide a legal
rationale under which the prohibition would not impermissibly subject
broadband providers to common carriage regulation. To address the
ongoing concerns with the harmful effects that blocking of Internet
traffic would have on Internet openness, we propose to adopt the text
of the no-blocking rule that the Commission adopted in 2010, with a
clarification that it does not preclude broadband providers from
negotiating individualized, differentiated arrangements with similarly
situated edge providers (subject to the separate commercial
reasonableness rule or its equivalent). So long as broadband providers
do not degrade lawful content or service to below a minimum level of
access, they would not run afoul of the proposed rule. We also seek
comment below on how to define that minimum level of service.
Alternatively, we seek comment on whether we should adopt a no-blocking
rule that does not allow for priority agreements with edge providers
and how we would do so consistent with sources of legal authority other
than Section 706, including Title II. See infra Section III.F. For
example, to the extent the Commission relies on Title II, would
Sections 201(b) and 202(a) of the Act compel a different result than
provision of a minimum level of service? See 47 U.S.C. 201(b)
(prohibiting unjust or unreasonable ``charges, practices, [or]
classifications''); 47 U.S.C. 202(a) (prohibiting ``unjust or
unreasonable discrimination in charges, practices, classifications,
regulations, facilities, or services'').
90. It is important to understand the relationship between the
proposed no-blocking and commercial reasonableness rules. Although the
proposed no-blocking rule only establishes a minimum level of service,
and thus allows room for individualized negotiations, the proposed
commercial reasonableness rule separately applies to any and all
conduct, including by asking whether paid prioritization can be barred
outright and by asking whether to bar practices that harm competition,
consumers, and the free exercise of speech.
1. The 2010 No-Blocking Rule
91. 2010 Open Internet Order. In the Open Internet Order, the
Commission adopted a no-blocking rule to preserve the openness that was
and remains a core expectation of end users. The Open Internet Order
noted that a no-blocking principle had been broadly accepted since its
inclusion in the Commission's 2005 Internet Policy Statement, and the
Internet Policy Statement itself reflected expectations and practices
of how the Internet should and did work. A more limited variation of
the rule applied to mobile broadband providers, due to the operational
constraints that affect mobile broadband services, the rapidly evolving
nature of the mobile broadband technologies, and the generally greater
amount of consumer choice for mobile broadband services than for fixed.
92. D.C. Circuit Opinion in Verizon v. FCC. The D.C. Circuit struck
down the no-blocking rule after finding that the Commission had failed
to provide a legal justification that would take the rule out of the
realm of impermissible common carriage. The court stated that it was
``somewhat less clear'' whether the no-blocking rule constituted per se
common carriage regulation than whether the antidiscrimination rule
did. Nonetheless, the court concluded that the no-blocking rule, at
least as described in the Open Internet Order, required broadband
providers to serve edge providers indiscriminately. The no-blocking
rule thereby imposed per se common carriage rules and thus violated the
Communications Act's prohibition on the imposition of common carrier
obligations on providers of information services.
93. The court intimated that the no-blocking rule could pass
scrutiny, however, if broadband providers could engage in
individualized bargaining while subject to the rule. The court reasoned
that ``if the relevant service that broadband providers furnish is
access to their subscribers generally, as opposed to access to their
subscribers at the specific minimum speed necessary to satisfy the
anti-blocking rules, then these rules, while perhaps establishing a
lower limit on the forms that broadband providers' arrangements with
edge providers could take, might nonetheless leave sufficient `room for
individualized bargaining and discrimination in terms' so as not to run
afoul of the statutory prohibitions of common carrier treatment.'' Such
a practice would allow for individualized bargaining where providers
would not be required ``to hold themselves out to serve all comers
indiscriminately on the same or standardized terms.'' If the
Commission's no-blocking rule allowed individualized bargaining above
the minimum level of service necessary, then the rule might not create
per se common carriage obligations. The court noted that although the
Commission had asserted this interpretation of the rule at oral
argument, the court could not consider it as a possible basis for
upholding the rule because the Commission had not advanced this
position in the Open Internet Order.
2. Proposal To Adopt a No-Blocking Rule
94. We continue to believe that safeguarding consumers' ability to
access and effectively use the lawful content, applications, services,
and devices of their choice on the Internet is an essential component
of protecting and promoting the open Internet. Therefore, we
tentatively conclude that we should adopt the text of the rule that
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the Commission adopted in the Open Internet Order, which provided:
A person engaged in the provision of fixed broadband Internet
access service, insofar as such person is so engaged, shall not
block lawful content, applications, services, or non-harmful
devices, subject to reasonable network management. Consistent with
the 2010 rule, the phrase ``content, applications, services'' in the
proposed rule for fixed broadband service ``refers to all traffic
transmitted to or from end users of a broadband Internet access
service, including traffic that may not fit cleanly into any of
these categories.'' A person engaged in the provision of mobile
broadband Internet access service, insofar as such person is so
engaged, shall not block consumers from accessing lawful Web sites,
subject to reasonable network management; nor shall such person
block applications that compete with the provider's voice or video
telephony services, subject to reasonable network management.
95. We believe this to be the public policy that will best serve
Internet openness. While maintaining this rule text, we propose to make
clear that the no-blocking rule would allow individualized bargaining
above a minimum level of access to a broadband provider's subscribers--
the revised rationale the court suggested would be permissible rather
than per se common carriage--but, also consistent with the court's
analysis, separately subject such practices to scrutiny under the
commercially reasonable practices rule (or its equivalent). We believe
that by preserving end users' ability to access the Internet content of
their choice, reinstating a no-blocking rule would increase demand for
broadband services and thus increase investment in broadband network
infrastructure and technologies. We seek comment on the proposed no-
blocking rule and its potential effect on broadband investment and
deployment, including whether and under what circumstances broadband
providers have incentives to block content. We also seek comment on
possible approaches other than adopting the text of the 2010 rule.
Should we modify the text of the rule to explicitly address the minimum
level of access required, as discussed below?
96. Alternatively, we seek comment on whether we should adopt a no-
blocking rule that either itself prohibits broadband providers from
entering into priority agreements with edge providers or acts in
combination with a separate rule prohibiting such conduct. As discussed
below, the record in this proceeding reflects numerous public concerns
about the potential for priority agreements to harm an open Internet.
How could we address such concerns in the context of the no-blocking
rule? If the Commission were to proceed down this alternative path, how
should the Commission define ``priority''? Are ``priority'' agreements
broader than ``pay-for-priority,'' possibly including the exchange of
consideration other than money? Are there other arrangements between
broadband providers and edge providers that have the potential to harm
Internet openness and should be addressed within the no-blocking rule?
Commenters should address the legal bases and theories, including Title
II, that the Commission could rely on for such a no-blocking rule, and
how different sources of authority might lead to different formulations
of the no-blocking rule.
3. Establishing the Minimum Level of Access Under the No-Blocking Rule
97. As noted above, the D.C. Circuit suggested that the
Commission's 2010 no-blocking rule could be interpreted as requiring
broadband providers to ``furnish . . . access to their subscribers
generally'' while ``establishing a lower limit on the forms that
broadband providers' arrangements with edge providers could take''--and
that under that interpretation the rule might not impose common carrier
status on broadband providers. Consistent with the court's ruling, we
tentatively conclude that the revived no-blocking rule should be
interpreted as requiring broadband providers to furnish edge providers
with a minimum level of access to their end-user subscribers. Such
actions, permissible under the no-blocking rule, would, of course, be
separately subject to the proposed commercially reasonable practices
standard set out below. We tentatively conclude that our proposed no-
blocking rule would allow broadband providers sufficient flexibility to
negotiate terms of service individually with edge providers, consistent
with the court's view that we must permit providers to ``adapt . . . to
individualized circumstances without having to hold themselves out to
serve all comers indiscriminately on the same or standardized terms.''
In this regard, we view the operation of the no-blocking rule separate
from any other impact on broadband providers that might arise from
application of the legal standard, factors, and dispute resolution
framework discussed below. We reiterate that, as discussed further
below, under the proposed rules contained herein such individualized
arrangements for priority treatment would be subject to scrutiny under
the proposed commercial reasonableness rule and prohibited under that
rule if they harm Internet openness. We seek comment on these tentative
conclusions.
98. Requiring this minimum level of access under the no-blocking
rule will ensure that all users have access to an Internet experience
that is sufficiently robust, fast, and effectively usable. This
includes both end-user consumers and edge providers of all types and
sizes, including those content providers who do not enter into specific
arrangements with broadband providers. In short, our approach will
enable consumers to access the content, services, and applications they
demand and ensure that innovators and edge providers have the ability
to offer new products and services. We seek comment on this analysis.
99. Under the approach described by the D.C. Circuit, ``broadband
providers [would] have no obligation to actually provide an edge
provider with the minimum service necessary to satisfy the rules,''
because they could instead ``deliver all edge providers' traffic'' in a
manner that exceeds that minimum, and they would then be free to
``negotiate separate agreements with each individual edge provider''
and also to ``charge similarly-situated edge providers completely
different prices for the same service.'' We note that a broadband
provider's discretion in setting rates could be constrained to some
degree by the commercially reasonable standard and dispute resolution
framework discussed below, if adopted by the Commission. As we explain
below, that proposed standard would not constitute per se common
carriage. Are there alternative approaches that, consistent with the
Verizon decision, would avoid per se common carriage? Are there forms
of price discrimination that, even if appropriate under the no-blocking
rule, should be separately subject to the commercial reasonableness
rule or its equivalent?
100. We also seek comment on how, consistent with this
interpretation, we should define or clarify the minimum level of access
required by the rule, or otherwise define what provider conduct would
constitute ``blocking'' under the rule. In our view, a defined minimum
level of access provides assurances both to end users, by helping them
understand the potential uses of their service, and to edge providers.
Such assurances should enhance consumer demand, which drives investment
both in the network and at the edge.
101. We also seek comment on how ``minimum level of access'' should
be defined to provide the robust, fast, and effectively usable access
discussed above. Should we define the minimum
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level of access from the perspective of end users, edge providers, or
both? Should the minimum level of access be dynamic, evolving over
time, and if so, how can that flexibility be incorporated into the
rule? In the following paragraphs, we describe in alphabetical order
several possible options by which we may define a minimum level of
access under the no-blocking rule. We seek comment on these options and
on any approaches by which the Commission should define the minimum
level of access. For each of these potential options, we seek comment
on its advantages and disadvantages, on its legal sustainability under
Verizon, and on how effective it would be at protecting the open
Internet, including the ease or difficulty with which violations can be
identified and remedied. We seek comment on how the Commission should
implement, monitor compliance with, and enforce the rule, under each of
the options described. For each option, we also seek comment on whether
the minimum level of access should be reflected in providers'
disclosures under an enhanced transparency rule. Under any of these
options, we seek comment on how the minimum level of access should be
measured. Should the Commission measure technical parameters, based on
a sample, focusing on speed, packet loss, latency, or other factors?
Where in the network should such measurement take place to ensure an
accurate measure of the broadband provider's performance? Finally, we
recognize that from time to time a provider may be unable to provide
such a minimum level of access temporarily for a variety of reasons.
Aside from complete outages (which are not the subject of this NPRM),
we note that in some cases inadvertent action or circumstances outside
a provider's control may cause a subset of traffic to be blocked. For
example, if a connection with one of several peering partners is
severed, some Internet traffic may seem unacceptably slow while other
traffic appears normal. Alternatively, a provider engaged in reasonable
network management (such as blocking the source of a distributed denial
of service attack) may inadvertently block other traffic due to a
transcription error. If steps are taken in a timely manner to correct
such problems, we would not anticipate considering such action to
violate a no-blocking rule. We seek comment on how the Commission
should distinguish such temporary inadvertent failures from intentional
or prolonged blocking, including whether the Commission should consider
exempting incidents of blocking that last for less than a specified
amount of time.
102. Best Effort. One way to define a minimum level of access is as
a requirement that broadband providers apply no less than a ``best
effort'' standard to deliver traffic to end users. For any particular
type of Internet traffic, best-effort delivery would represent the
``typical'' level of service for that type of traffic--in effect,
routing traffic according to the ``traditional'' architecture of the
Internet. Broadband providers would be free to negotiate ``better than
typical'' delivery with edge providers, and would be prohibited
(subject to reasonable network management) from delivering ``worse than
typical'' service in the form of degradation or outright blocking. We
seek comment on this potential approach. Would ``best effort'' be
measured against the technical capacity of a particular broadband
provider's network capacity and characteristics?
103. Minimum Quantitative Performance. Another way to define a
minimum level of access is through specific technical parameters, such
as a minimum speed. To the extent that commenters believe that the
Commission should promulgate a rule that establishes specific technical
parameters for the required minimum level of access, what should those
parameters be? Should they identify specific speeds of service, or
would it be preferable to identify specific problems that a minimum
level of service would avoid (such as preventing latency and jitter for
services that tolerate them poorly)? Would the Commission need to
differentiate between different broadband access technologies? While
this approach would provide greater certainty than other approaches, a
specific technical definition of minimum access could become outdated
as available broadband network technologies change and available
broadband speeds improve. How frequently would we need to revisit a
specific technical definition of minimum access to ensure that it keeps
up with advances in broadband service?
104. An Objective, Evolving ``Reasonable Person'' Standard. Another
approach to defining a minimum level of access to broadband providers'
end users is to think of it as the level that satisfies the reasonable
expectations of a typical end user. We might think of this as a
``reasonable person'' standard of access. For example, a typical end
user may reasonably expect the ability to access streaming video from
any provider, place and receive telephone calls using the VoIP service
of the end user's choosing, and access any lawful web content. Under
this approach, a broadband provider that satisfies these and other
reasonable expectations would be in compliance with the no-blocking
rule. One possible advantage of this approach to defining minimum
access is flexibility: the absence of a specific technical definition
means that the standard for compliance can evolve as the expectations
in the marketplace change without further Commission action. On the
other hand, this approach may create less certainty than other
approaches might and could be more difficult to enforce. We seek
comment generally on a ``reasonable person'' standard for defining
minimum access, and in particular, how this standard could be crafted
to be sufficiently objective and predictable to provide certainty to
broadband providers and edge providers.
4. Application of the No-Blocking Rule to Mobile Broadband
105. As noted above, the 2010 no-blocking rule applied differently
to mobile broadband providers than to fixed, and today's NPRM would
maintain that approach. The previous rule prohibited mobile broadband
providers from blocking consumers from accessing lawful Web sites or
blocking applications that compete with the provider's voice or video
telephony services. We propose to adopt the same approach as in the
2010 obligation, which would prohibit mobile broadband providers from
blocking lawful web content as well as applications that compete with
the mobile broadband providers' own voice or video telephony services,
subject to reasonable network management. We seek comment on this
proposal.
106. In addition, we seek comment on whether it would serve the
public interest to expand the rule's scope to include reasonable access
to all applications that compete with the mobile broadband Internet
access provider's other services, not just those that compete with
voice or video telephony services, subject to reasonable network
management practices. Should the application of the no-blocking rule to
mobile broadband providers turn on whether mobile service was marketed
to consumers as a substitute for a fixed telecommunications service
previously offered by the provider or its affiliate? How would treating
mobile broadband differently from fixed broadband affect consumers in
different demographic groups, including those who rely solely on mobile
broadband for Internet access? How should the Commission consider
applying a no-blocking rule to
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facilities-based mobile providers versus resellers?
107. We also seek comment on whether and how we should define a
minimum level of access in the context of the proposed no-blocking rule
for mobile broadband, or otherwise clarify what constitutes
``blocking,'' and whether that definition should be different for
mobile broadband than for fixed. For each of the approaches discussed
above to define a ``minimum level of access,'' we seek comment on any
particular benefits or difficulties that such approach would present.
108. We recognize that there have been substantial mobile
marketplace changes and developments since 2010, including the
increased use of Wi-Fi technology, and seek comment on whether and how
such changes should impact our no-blocking rule for mobile broadband.
We seek comment on the extent to which we should take into account the
increasing provision of Wi-Fi by broadband providers, and the growing
use of Wi-Fi by end users for the off-load of wireless broadband, as we
consider the application of the no-blocking rule to mobile broadband
services.
5. Applicability of the No-Blocking Rule to Devices
109. The 2010 no-blocking rule prohibited fixed broadband providers
from blocking non-harmful end-user devices, and the rule we propose
today would do the same. We seek comment on how this treatment of non-
harmful devices fits into the Verizon court's interpretation of the
rule. Should the ability to attach non-harmful devices to broadband
service be included among the reasonable end-user expectations listed
above, or should we analyze non-harmful devices differently?
E. Codifying an Enforceable Rule To Protect the Open Internet That Is
Not Common Carriage Per Se
110. Separate and distinct from the no-blocking rule, we believe
that establishing an enforceable legal standard for broadband provider
practices is necessary to preserve Internet openness, protect
consumers, and promote competition. While the D.C. Circuit vacated the
Commission's rule prohibiting ``unreasonable discrimination'' by fixed
broadband providers on the theory that it ``so limited broadband
providers' control over edge providers' transmissions that [it]
constitute[d] common carriage per se,'' the court underscored the
validity of the ``commercially reasonable'' legal standard the
Commission used in the data roaming context and the court upheld in
Cellco.
111. Today, we tentatively conclude that the Commission should
adopt a revised rule that, consistent with the court's decision, may
permit broadband providers to engage in individualized practices, while
prohibiting those broadband provider practices that threaten to harm
Internet openness. Our proposed approach contains three essential
elements: (1) An enforceable legal standard of conduct barring
broadband provider practices that threaten to undermine Internet
openness, providing certainty to network providers, end users, and edge
providers alike, (2) clearly established factors that give additional
guidance on the kind of conduct that is likely to violate the
enforceable legal standard, and (3) encouragement of individualized
negotiation and, if necessary, a mechanism to allow the Commission to
evaluate challenged practices on a case-by-case basis, thereby
providing flexibility in assessing whether a particular practice
comports with the legal standard. We seek comment below on the design
and justification of this rule.
112. Alternatively, we also seek comment on whether the Commission
should adopt an alternative legal standard to govern broadband
providers' practices. How can we ensure that our proposed rule
sufficiently protects against harms to the open Internet? How would the
rule we propose today change if the Commission were to rely on Title II
(or other sources of legal authority) to adopt rules to protect and
promote Internet openness? We seek comment on how the goal of the
proposed rule--to prevent those broadband provider practices that limit
Internet openness--could best be achieved.
1. The 2010 No Unreasonable Discrimination Rule
113. 2010 Open Internet Order. The Commission adopted a no
unreasonable discrimination rule to prevent fixed broadband providers
from engaging in harmful conduct when transmitting lawful network
traffic over a consumer's broadband Internet access service. The rule
stated, ``A person engaged in the provision of fixed broadband Internet
access service, insofar as such person is so engaged, shall not
unreasonably discriminate in transmitting lawful network traffic over a
consumer's broadband Internet access service. Reasonable network
management shall not constitute unreasonable discrimination.'' The
antidiscrimination rule prohibited fixed broadband providers from
unreasonably discriminating against network traffic subject to
reasonable network management. Unlike the transparency and no-blocking
rules the Commission adopted in 2010, the no unreasonable
discrimination rule did not apply to mobile broadband Internet access
service providers.
114. D.C. Circuit Opinion in Verizon v. FCC. The D.C. Circuit
vacated the antidiscrimination rule because it found that the rule
improperly relegated fixed broadband providers to common carrier
status. This violated the statutory ban on common carrier treatment of
information service providers because the Commission had classified
broadband providers ``not as providers of `telecommunications services'
but instead as providers of `information services.' '' The court
disagreed with the Commission's interpretation to the contrary, finding
that by compelling fixed broadband providers to serve all edge
providers who provided content, services, and applications over the
Internet without unreasonable discrimination, the rule compelled those
providers to hold themselves out ``to serve the public
indiscriminately''--thus treating them as common carriers.
115. In making its determination, the court relied on its previous
decision in Cellco, where it upheld the Commission's data roaming
requirements against a common carrier challenge. The court suggested
that had the Commission shown that the ``no unreasonable
discrimination'' standard adopted in the Open Internet Order differed
from the ``nondiscrimination'' standard applicable to common carriers,
the rule might have withstood judicial review similar to the data
roaming rule at issue in Cellco. This is because the rule in Cellco
``expressly permit[ted] providers to adapt roaming agreements to
`individualized circumstances without having to hold themselves out to
serve all comers indiscriminately on the same or standardized terms.'
'' The court went on to suggest that, unlike the data roaming rules at
issue in Cellco, which listed specific factors to consider in a case-
by-case determination of whether a data roaming provider's conduct and
offerings were commercially reasonable based on the totality of the
circumstances, the Open Internet Order did not attempt to ``ensure that
[the] reasonableness standard remains flexible.'' The D.C. Circuit
suggested that a rule preventing certain types of conduct by broadband
providers might be acceptable, given the manner in which the Commission
has classified broadband providers, if the Commission articulated a
discrete, flexible standard that prohibited
[[Page 37464]]
practices that could reasonably be understood to harm Internet
openness, while allowing individualized broadband provider practices,
akin to the ``commercially reasonable'' standard adopted by the
Commission in the data roaming context.
2. Proposed Elements of an Enforceable Legal Rule
a. Prohibiting Only Commercially Unreasonable Practices
116. Sound public policy requires that Internet openness be the
touchstone of a new legal standard. Accordingly, we tentatively
conclude that the Commission should adopt a rule requiring broadband
providers to use ``commercially reasonable'' practices in the provision
of broadband Internet access service. Our proposed approach is both
more focused and more flexible than the vacated 2010 non-discrimination
rule. It would prohibit as commercially unreasonable those broadband
providers' practices that, based on the totality of the circumstances,
threaten to harm Internet openness and all that it protects. At the
same time, it could permit broadband providers to serve customers and
carry traffic on an individually negotiated basis, ``without having to
hold themselves out to serve all comers indiscriminately on the same or
standardized terms,'' so long as such conduct is commercially
reasonable. The D.C. Circuit explained that such an approach
distinguished the data roaming rules at issue in Cellco from common
carrier obligations. We seek general comment on this approach, and more
targeted comment below.
117. With respect to this approach in general, we tentatively
conclude that it should operate separately from the no-blocking rule
that we also propose to adopt. In other words, the presence or absence
of the no-blocking rule would have no impact on the presence or absence
of the ``commercially reasonable'' standard, and vice versa. This would
mean that conduct acceptable under the no-blocking rule would still be
subject to independent examination under the ``commercially
reasonable'' standard. We seek comment on this approach.
118. The core purpose of the legal standard that we wish to adopt,
whether the ``commercially reasonable'' standard or another legal
formulation, is to effectively employ the authority that the Verizon
court held was within the Commission's power under Section 706. In
essence, the court upheld the Commission's judgment that (1) Section
706 grants substantive power to the Commission to take actions,
including removing barriers to infrastructure investment and promoting
competition in telecommunications markets, that will promote the
deployment of broadband networks; (2) the Commission was within its
authority to conclude that the ``virtuous circle'' can be adversely
impacted by broadband network practices that, over the long term,
depress end user demand, which then threatens broadband deployment; and
(3) threats to the open Internet, such as limitations on users to
access the content of their choice or speak their views freely, are
therefore within the authority of the Commission to curb. In selecting
a legal standard, the Commission not only wishes to avoid subjecting
broadband networks to common carriage per se, it also wishes to choose
a legal standard whose valid adoption renders unnecessary the
adjudication of any question other than whether the adopted legal
standard has been violated. This is the distinction between the
authority to adopt a standard and its subsequent application. It is
axiomatic that an as-applied challenge to a rule would invalidate an
application of the rule, but the rule itself may otherwise remain
broadly applicable. See Brockett v. Spokane Arcades, Inc., 472 U.S.
491, 504 (1985). Thus, assuming the rule is facially sustained by a
reviewing court, the Commission would not be required to re-litigate
its underlying determination that adoption of the rule will promote
deployment. 47 U.S.C. 1302(b). Because the commercially reasonable
practices rule requires a determination that an entity did not act in a
commercially reasonable manner, the inquiry is, then, not whether the
Commission has authority to adopt the regulation, but whether the
Commission may enforce the regulation in a particular set of
circumstances. See Colo. Right to Life Comm., Inc. v. Coffman, 498 F.3d
1137, 1146 (10th Cir. 2007) (holding that an as-applied challenge is
limited to testing ``the application of [a regulation] to the facts of
a plaintiff's concrete case''). For example, the D.C. Circuit
determined that the Commission's data roaming rule--the legal standard
adopted--was facially valid and within the Commission's authority, but
that the application of that standard could still be subject to
subsequent challenge. See Cellco, 700 F.3d at 548.
119. Are there alternative legal standards, whether in analogous
contexts or otherwise identified by commenters, that the Commission
should consider? Is there an existing standard that would serve a
similar purpose to what we propose here and that would prevent the
harms to Internet openness? If so, how, and if not, what would any
differences be? Could the Commission modify its approach to
``reasonable network management'' in ways that would establish a more
flexible legal standard that would not constitute common carriage per
se? Commenters advocating alternative legal standards should explain
why they are preferable, both in terms of the substantive requirements
of the alternative standard (such as how they would address providers'
conduct, offerings, and practices) and its implementation (such as
whether and how it may permit individualized decision-making), and how
they would protect an open Internet. And, as to the ``commercially
reasonable'' standard or any other, we seek comment on whether there
are sources of law or practice the Commission should rely upon in
explaining the meaning and application of that standard.
120. We also seek comment on how a rule requiring broadband
providers to engage in commercially reasonable practices with respect
to delivery of traffic to and from end users should apply in
circumstances in which no individualized negotiation occurs between the
edge provider and the broadband provider. To cite just a few of many
possible examples, consider a start-up VoIP service, a politically
oriented Web site with an audience of fewer than 100 unique visitors
per day, a social networking application narrowly focused on a
particular demographic, or peer-to-peer communications among
individuals. Not all of those actors may seek to enter into a contract
with a broadband provider; they may simply wish to reach its
subscribers. We seek comment on the impact of this difference on the
selection and/or application of the general legal standard.
121. As an alternative to our proposed approach, we seek comment on
whether the Commission should adopt a different rule to govern
broadband providers' practices to protect and promote Internet
openness. As mentioned above, a number of parties have expressed
concerns about the effect of pay-for-priority agreements on Internet
openness. How can the Commission ensure that the rule it adopts
sufficiently protects against harms to the open Internet, including
broadband providers' incentives to disadvantage edge providers or
classes of edge providers in ways that would harm Internet openness?
Should the Commission adopt a rule that prohibits unreasonable
discrimination and, if so,
[[Page 37465]]
what legal authority and theories should we rely upon to do so? If the
Commission ultimately adopts a Title II approach, how should the
Commission define the rule in light of the requirements under Sections
201 and 202 of the Act?
b. Factors To Guide Application of the General Legal Standard
122. Similar to the Commission's approach in the data roaming
context, we propose to identify factors the Commission can use to
administer the proposed commercially reasonable practices standard. We
recognize that there are significant differences between the open
Internet and the data roaming contexts, including a broader range of
open Internet practices at issue and a greater diversity of parties
affected by such practices. Thus, while we look to our data roaming
approach for guidance, we propose to develop factors specific to the
open Internet context. These pre-defined factors would provide guidance
to encourage commercially reasonable individualized practices and, if
disputes arise, provide the basis for the Commission to evaluate
whether, taking into account the totality of the circumstances on a
case-by-case basis as discussed below, a particular practice satisfies
the enforceable legal standard.
123. We seek comment on this approach and what factors the
Commission should adopt to ensure commercially reasonable practices
that will protect and promote Internet openness. We discuss below
several categories of factors, noting that there is considerable
overlap between these categories, and that they are not mutually
exclusive. As with the data roaming rule, we tentatively conclude that
a review of the totality of the circumstances should be preserved
through the creation of a ``catch all'' factor designed to ensure that
rules can be applied evenly and fairly in response to changing
circumstances and that all users have an Internet experience that
affords them access to a minimum level of service sufficient to protect
and promote an open Internet. Further, we seek comment on providers'
experiences with the ``commercially reasonable'' practices standard in
the data roaming context, and on how such experiences might inform our
thinking as we develop the ``commercially reasonable'' practices
standard for the open Internet.
124. Impact on Present and Future Competition. The Commission has
previously observed that unfair competitive advantages can jeopardize
innovation on the edge and impair otherwise lawful delivery of products
and services. For that reason, we seek comment on how we should
construct factors in applying the commercially reasonable legal
standard to assess the impact of broadband provider practices on
present and future competition. We understand this competition inquiry
to extend beyond an application of antitrust principles to include, for
example, the predicted impact of practices on future competition.
125. To what extent should such competition-oriented factors focus
on market structure and the extent of competition in a given market?
For example, should we consider factors that the Commission has used in
case-by-case adjudications under Section 628(b) of the Act, which
proscribes certain ``unfair methods of competition'' by cable operators
and certain programming vendors? Are there other competition-oriented
standards in other contexts (including those outside of
telecommunications) that we should look to for guidance?
126. We propose that the competitive factors should also examine
the extent of an entity's vertical integration and/or its relationships
with affiliated entities. For example, broadband providers sometimes
offer an affiliated streaming video service over their broadband
network in competition with many other third-party broadband and edge
providers' services. How can we ensure that competition is not harmed
in such situations? We note that the no-blocking rule as applied to
mobile Internet access service specifically prohibits broadband
providers from blocking ``applications that compete with the provider's
voice or video telephony services.'' And the Commission looked to a
similar restriction to address harms raised by the Comcast-NBCU
transaction. In light of such concerns, we propose to adopt a
rebuttable presumption that a broadband provider's exclusive (or
effectively exclusive) arrangement prioritizing service to an affiliate
would be commercially unreasonable. We seek comment on this proposal.
127. More generally, we seek comment on the use of rebuttable
presumptions as a tool to focus attention on the likely impacts of
particular practices. What source or law, either within the
Communications Act or in other statutes, would help us craft the
creation and use of rebuttable presumptions? Are there particular
rebuttable presumptions that should be used, for example, dealing with
some or all forms of exclusive contracts, or particularized degradation
of services?
128. How can the Commission ensure that parties are acting in a
commercially reasonable manner without foreclosing the creation of pro-
competitive opportunities through certain forms of price discrimination
or exclusivity agreements? Should we develop factors modeled in part
after those that the Commission uses in determining whether an
exclusive contract between a vertically integrated cable operator and
cable-programming vendor would serve the public interest? Should the
Commission adopt a rebuttable presumption that broadband provider
conduct that forecloses rivals (of the provider or its affiliates) from
the competing marketplace is commercially unreasonable?
129. Impact on Consumers. In addition to the competitive factors,
the Commission proposes to adopt factors to examine the extent to which
broadband providers' practices could harm consumers. In the Open
Internet Order, the Commission looked to, among other things, the
extent of transparency and end-user control in assessing whether a
practice is unreasonably discriminatory. We believe these factors would
likewise be relevant to assessing whether a practice is commercially
reasonable. What continued role does the existing or enhanced
transparency rule have in ensuring that consumers are receiving correct
information from broadband providers and not being misled?
130. We believe that consumers of broadband access service should
have the ability to exercise meaningful choices. How can we factor
consumer choice into our analysis of what is commercially reasonable?
Should the Commission look for guidance to Section 628 of the Act,
which makes it unlawful for cable operators and their affiliated
satellite cable programming vendors to engage in ``unfair or deceptive
acts or practices'' with certain purposes and effects?
131. Impact on Speech and Civic Engagement. The open Internet
serves as a critical platform for speech and civic engagement. As noted
above, the ability of citizens and content providers to use this open
platform to communicate with one another and express their views to a
wide audience at very low costs drives further Internet use, consumer
demand, and broadband investment and deployment. We therefore propose
to adopt a factor or factors in applying the commercially reasonable
standard that assess the impact of broadband provider practices on free
exercise of speech and civic engagement.
132. Technical Characteristics. We also propose to examine the
relevant technical characteristics associated with broadband providers'
practices. In the Data Roaming Order, 76 FR 26199 (June 6, 2011), for
example, the Commission
[[Page 37466]]
looked to the technical characteristics of the service at issue,
including the technical feasibility of a requested service as well as
the technical compatibility of providers' networks. We seek comment on
how the Commission should consider such technical characteristics in
assessing whether a broadband provider's practice is commercially
reasonable. The application of the legal standard to satellite Internet
access service presents one example. How should the Commission account
for the technical differences between satellite and terrestrial
broadband services when examining commercially reasonable behavior for
satellite broadband providers?
133. ``Good Faith'' Negotiation. The Commission has imposed good
faith negotiation requirements in a variety of contexts. For example,
the Commission explicitly requires television broadcasters and
multichannel video programming distributors (MVPDs) to negotiate
retransmission consent agreements in good faith. The Commission also
mandated good faith negotiations for dealings between certain spectrum
licensees. Would adopting a similar framework for evaluating
negotiations between parties in the open Internet context serve the
public interest, convenience, and necessity? How should such a ``good
faith'' test be applied where parties do not seek to enter into
contractual relationships with each other?
134. Industry Practices. How, if at all, should the fact that
conduct is an industry practice impact the application of the
``commercially reasonable'' rule? What should be treated as an
``industry practice''? For example, should that term be limited to
express standards adopted by standards-setting organizations or similar
entities? If so, should the make-up or processes used by such a
standards-setting organization be considered? If not, how should the
existence of an ``industry practice'' be effectively established for
purposes of the application of the ``commercially reasonable'' rule,
and how should the Commission best evaluate potential harms to
competition arising from coordinated conduct in a market with a limited
number of participants?
135. Other Factors. We seek comment on any additional factors the
Commission should consider in assessing whether a particular practice
or set of practices by a broadband provider is commercially reasonable,
given the importance of preventing harms to an open Internet. Are there
other factors that the Commission adopted in the Data Roaming Order
that we should incorporate here? How can the Commission best include a
factor to capture special or extenuating circumstances to ensure that
it can take into account the totality of the circumstances,
particularly given the rapid evolution of the Internet marketplace and
technology?
c. Case-by-Case Evaluations for Commercial Reasonableness
136. As discussed, we tentatively conclude that we will adopt a
case-by-case approach, considering the totality of the circumstances,
when analyzing whether conduct satisfies the proposed commercially
reasonable legal standard, or another legal standard ultimately
adopted. We believe that, in conjunction with the factors listed above,
this approach will provide the advantage of certainty and guidance to
broadband providers and edge providers--particularly smaller entities
that might lack experience dealing with broadband providers--while also
allowing parties flexibility in their individualized dealings. We seek
comment on whether there is another avenue or mechanism we should use
when evaluating commercial reasonableness.
3. Potential Conduct That Is Per Se Commercially Unreasonable
137. In Southwestern Cable, the Supreme Court concluded that a
Commission requirement that cable systems carry local broadcast signals
did not constitute common carriage even though the Commission's rule
applied to all cable systems in defined circumstances. As the Supreme
Court later noted, that holding ``was limited to remedying a specific
perceived evil [that] did not amount to a duty to hold out facilities
indifferently for public use.'' In Verizon, the D.C. Circuit likewise
explained that the Southwestern Cable regulation ``imposed no
obligation on cable operators to hold their facilities open to the
public generally, but only to certain broadcasters if and when cable
operators acted in ways that might harm those broadcasters.'' Thus,
consistent with Supreme Court precedent and the Verizon decision, the
Commission may be able to identify specific practices that do not
satisfy the commercially reasonable legal standard. For example, we
note that the data roaming rule upheld by the D.C. Circuit's Cellco
decision states that ``[c]onduct that unreasonably restrains trade . .
. is not commercially reasonable.'' Similarly, the Commission recently
concluded that certain joint activities between certain television
stations, which are not regulated as common carriers, in the
negotiation of retransmission consent fees are a per se violation of
the requirement of ``good faith'' negotiation. Are there any practices
that, consistent with the Verizon court's reasoning, could be viewed as
per se commercially unreasonable?
138. Some have suggested that the Commission go even beyond the
requirements of the Open Internet Order to impose flat bans on pay-for-
priority service. We seek comment on these suggestions, including
whether all pay-for-priority practices, or some of them, could be
treated as per se violations of the commercially reasonable standard or
under any other standard based on any source of legal authority. We
emphasize that Section 706 could not be used to reach some conduct
under this judicially recognized approach to circumvent the principle
that the proposed rules will not, in any circumstances, constitute
common carriage per se. If the Commission were to ultimately rely on a
source of authority other than Section 706 to adopt a legal standard
for broadband provider practices, such as Title II, we seek comment on
whether and, if so, how we should prohibit all, or some, pay-for-
priority arrangements, consistent with our authority, to protect and
promote Internet openness.
4. Potential Safe Harbors
139. Similar to the approach of identifying practices ex ante that
would not satisfy the commercially reasonable legal standard, the
Commission may be able to identify specific services that would be
treated separately from the application of the commercially reasonable
legal standard. We seek comment on this approach and how the services
below should be considered under such an approach.
140. Application to Mobile Broadband. The Commission chose not to
apply its no unreasonable discrimination rule to mobile broadband
providers in 2010 based on considerations including the rapidly
evolving nature of mobile technologies, the increased amount of
consumer choice in mobile broadband services, and operational
constraints that put greater pressure on the concept of reasonable
network management for mobile broadband services. We have tentatively
concluded that we will continue that approach in the proposed rules.
Alternatively, should the Commission account for different
characteristics of mobile service as a factor in its application of the
commercially reasonable standard, subject to mobile providers'
reasonable network management? How would
[[Page 37467]]
maintaining our previous approach for mobile broadband affect end users
across different demographic groups, including end users who rely
solely on mobile broadband for Internet access?
141. Non-exclusive, non-affiliated agreements. AT&T has suggested
that the Commission exclude from its review of particular practices any
agreement between a broadband provider and an edge provider if the
agreement is not exclusive and if the edge provider is not an affiliate
of the broadband provider. AT&T explains that subjecting broadband
providers to case-by-case scrutiny in such cases ``would unnecessarily
impede efficient and pro-consumer arms-length commercial dealings.'' We
seek comment on whether this approach should be adopted to limit the
scope of the commercially reasonable standard and whether it could be
made consistent with the protections afforded by the rule.
F. Legal Authority
142. In this NPRM, we propose to adopt rules to protect and promote
the open Internet. For the reasons set forth below, we believe we have
ample authority to do so. We propose that the Commission exercise its
authority under Section 706, consistent with the D.C. Circuit's opinion
in Verizon v. FCC, to adopt our proposed rules. We also seek comment on
the nature and the extent of the Commission's authority to adopt open
Internet rules relying on Title II, and other possible sources of
authority, including Title III. Additionally, we seek comment on the
Commission's authority under any of the legal theories discussed below
to address any transition or implementation issues associated with any
open Internet rules adopted in this proceeding, such as the effect on
existing agreements.
1. Section 706
143. We seek comment on our authority under Section 706. 47 U.S.C.
1301 et seq. We interpret Sections 706(a) and (b) as independent and
overlapping grants of authority that give the Commission the
flexibility to encourage deployment of broadband Internet access
service through a variety of regulatory methods, including removal of
barriers to infrastructure investment and promoting competition in the
telecommunications market, and, in the case of Section 706(b), giving
the Commission the authority to act swiftly when it makes a negative
finding of adequate deployment. The rules we propose today would be
authorized by Sections 706(a) and (b) because they would ``encourage
the deployment'' of advanced telecommunications capability by promoting
competition in the telecommunications market and removing barriers to
infrastructure investment. We also seek comment on the relevant
differences between Sections 706(a) and (b) and how, if at all, those
differences should impact our exercise of authority here. There are
significant differences between the authorities granted in each
provision. For example, while both Section 706(a) and (b) permit the
Commission to enact measures that promote competition in the
telecommunications market, Section 706(b) permits the Commission to act
by promoting competition in the ``telecommunications market'' while
Section 706(a) limits the Commission to promoting competition in the
``local telecommunications market.'' Also, while Section 706(a) gives
the Commission general authority to encourage the deployment of
broadband regardless of findings under Section 706(b), Section 706(b)
gives the Commission authority to take ``immediate action.''
144. To the extent that we rely on our authority under Section
706(b), we seek comment on how we should treat the existence of and the
findings in the Commission's Broadband Progress Reports for the
purposes of this proceeding. Could and should the Commission
incorporate findings that satisfy Section 706(b) in this proceeding?
Finally, we seek comment on the extent to which the disparity between
metropolitan areas and rural deployment of broadband or within
metropolitan areas should impact our conclusions as to whether advanced
telecommunications capability is being reasonably and timely deployed.
145. We also seek comment on how to construe the specific terms and
definitions in Section 706. For example, ``advanced telecommunications
capability'' is defined ``without regard to any transmission media or
technology, as high-speed, switched, broadband telecommunications
capability that enables users to originate and receive high-quality
voice, data, graphics, and video telecommunications using any
technology.'' It is clear that broadband Internet access service is
such ``advanced telecommunications capability,'' but we also seek
comment on what other broadband-enabled services may fall within the
definition of ``advanced telecommunications capability.'' Should the
Commission interpret the term ``advanced telecommunications
capability'' to require that certain practices accompany a broadband
provider's deployment to ensure that end users receive ``high-speed,
switched, broadband telecommunications capability that enables users to
originate and receive high-quality voice, data, graphics, and video
telecommunications?'' In addition, we note that Congress did not define
``deployment.'' We believe Congress intended this term to be construed
broadly, and thus, consistent with precedent, we have interpreted it to
include the extension of networks as well as the extension of the
capabilities and capacities of those networks.
146. In Section 230(b) of the Communications Act, Congress also set
forth statutory ``polic[ies] of the United States'': to ``promote the
continued development of the Internet,'' to promote ``technologies
which maximize user control over what information is received'' over
the Internet, and to ``preserve the vibrant and competitive free market
that presently exists for the Internet, unfettered by Federal or State
regulation.'' We continue to believe the Commission's interpretation of
Section 706 is bolstered by these congressional policies. We seek
comment on how the Commission should read Section 230(b) in exercising
its Section 706 authority.
147. We also seek comment generally on how the court's decision in
Verizon v. FCC should inform our exercise of legal authority. The D.C.
Circuit upheld the Commission's interpretation of its authority under
Section 706, concluding that the factual predicate that the Commission
had laid justifying its regulations was reasonable and that such a
factual predicate was reasonably linked to the Commission's exercise of
authority. However, because the court determined that the Commission's
no-blocking and anti-discrimination rules impermissibly regulated
broadband providers as common carriers, the court vacated those rules,
and remanded for further proceedings consistent with the opinion. We
seek comment generally on how the court's Verizon decision should
impact our exercise of authority here. Are there principles raised in
Judge Silberman's separate opinion concurring in part and dissenting in
part that are relevant to our exercise of authority as to the new rules
proposed, or upon which we otherwise seek comment, here?
2. Title II
148. We seek comment on whether the Commission should rely on its
authority under Title II of the Communications Act, including both (1)
whether we should revisit the Commission's classification of broadband
Internet access service as an information service and (2) whether we
should separately identify and classify
[[Page 37468]]
as a telecommunications service a service that ``broadband providers .
. . furnish to edge providers.'' For either of these possibilities, we
seek comment on whether and how the Commission should exercise its
authority under Section 10 (or Section 332(c)(1) for mobile services)
to forbear from specific obligations under the Act and Commission rules
that would flow from the classification of a service as
telecommunications service.
149. Title II--Revisiting the Classification of Broadband Internet
Access Service. In a series of decisions beginning in 2002, the
Commission has classified broadband Internet access service offered
over cable modem, DSL and other wireline facilities, wireless
facilities, and power lines as an information service, which is not
subject to Title II and cannot be regulated as common carrier service.
In 2010, following the D.C. Circuit's Comcast decision, the Commission
issued a Notice of Inquiry (2010 NOI) that, among other things, asked
whether the Commission should revisit these decisions and classify a
telecommunications component service of wired broadband Internet access
service as a ``telecommunications service.'' Specifically, the
Commission sought comment on whether to classify as a
telecommunications service ``Internet connectivity,'' which it defined
as ``the functions that `enable [end users] to transmit data
communications to and from the rest of the Internet.''' The docket
opened by the 2010 NOI remains open. To ensure that it remains current,
we hereby direct the Wireline Competition Bureau to issue a public
notice to refresh the record in that proceeding including the inquiries
contained herein. The Commission also asked whether it should similarly
alter its approach to wireless broadband Internet access service,
noting that Section 332 requires that wireless services that meet the
definition of ``commercial mobile service'' be regulated as common
carriers under Title II. In response, the Commission received
substantial comments on these issues. We now seek further and updated
comment on whether the Commission should revisit its prior
classification decisions and apply Title II to broadband Internet
access service (or components thereof). How would such a
reclassification approach serve our goal to protect and promote
Internet openness? What would be the legal bases and theories for
particular open Internet rules adopted pursuant to such an approach?
Would reclassification and applying Title II for the purpose of
protecting and promoting Internet openness impact the Commission's
overall policy goals and, if so, how?
150. What factors should the Commission keep in mind as it
considers whether to revisit its prior decisions? Have there been
changes to the broadband marketplace that should lead us to reconsider
our prior classification decisions? To what extent is any
telecommunications component of that service integrated with
applications and other offerings, such that they are ``inextricably
intertwined'' with the underlying connectivity service? Is broadband
Internet access service (or any telecommunications component thereof)
held out ``for a fee directly to the public, or to such classes of
users as to be effectively available directly to the public?'' If not,
should the Commission compel the offering of such functionality on a
common carrier basis even if not offered as such? For mobile broadband
Internet access service, does that service fit within the definition of
``commercial mobile service''? We also note that on May 14, 2014,
Representative Henry Waxman, Ranking Member of the Committee on Energy
and Commerce of the U.S. House of Representatives, sent a letter to
Chairman Wheeler proposing an approach to protecting the open Internet
whereby the Commission would proceed under Section 706 but use Title II
as a ``backstop authority.'' We seek comment on the viability of that
approach.
151. Title II--Classification of the Broadband Providers' Service
to Edge Providers. Separate from the reclassification of ``broadband
Internet access service,'' we seek comment on how the Commission should
consider broadband providers' service to edge providers and whether
that service (or some portion of it) is subject to Title II regulation.
As mentioned above, in Verizon, the D.C. Circuit stated that
``broadband providers furnish a service to edge providers, thus
undoubtedly functioning as edge providers' `carriers.''' We understand
such service to include the flow of Internet traffic on the broadband
providers' own network, and not how it gets to the broadband providers'
networks. The Commission in the Open Internet Order understood the 2010
rules to regulate ``broadband Internet access service,'' which the
Commission classified as an information service. That service, however,
is by definition a ``mass-market retail service'' providing the
capability to send and receive data from ``all Internet end points.''
Does the ``service'' contemplated by the court between broadband
providers and edge providers fit that definition? We seek comment on
whether and, if so how, the Commission should separately identify and
classify a broadband service that is furnished by broadband providers'
to edge providers in order to protect and promote Internet openness.
152. Some have made proposals suggesting that the Commission could
apply Title II to such services to achieve our open Internet
objectives. For example, on May 5, 2014, Mozilla filed a petition
requesting that the Commission (1) recognize remote delivery services
in terminating access networks; (2) classify these services as
``telecommunications services'' under Title II of the Act; and (3)
forbear from any ``inapplicable or undesirable provisions of Title II''
for such services. Mozilla states that, unlike the end-user facing
broadband services the Commission has classified as information
services, the Commission has not classified the service that broadband
Internet providers to remote endpoints, particularly to entities not in
privity with the broadband provider. These services, Mozilla argues,
can and should be classified as telecommunications services, subject to
whatever Title II regulations the Commission deems appropriate.
Similarly, academics from Columbia University have submitted an
alternate proposal to classify Internet-facing services that a
broadband provider offers. This theory would split broadband Internet
access service into two components: first, the subscriber's ``request
[for] data from a third-party provider; and second, the content
provider's response to the subscriber.'' The proposal would classify
the latter ``sender-side'' traffic, sent in response to a broadband
provider's customer's request as a telecommunications service, subject
to Title II. According to the proposal, this is a stand-alone offer of
telecommunications--transmission between points specified by the end-
user. We seek comment on these proposals and other suggestions for how
the Commission could identify and classify such services and apply
Title II to achieve our goals of protecting and promoting Internet
openness.
153. Title II--Forbearance. If the Commission were to reclassify
broadband Internet access service as described above or classify a
separate broadband service provided to edge providers as a
``telecommunications service,'' such a service would then be subject to
all of the requirements of the Act and Commission rules that would flow
from the classification of a service as a telecommunications service or
common carrier service. Should the
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Commission take such an approach, we seek comment on the extent to
which forbearance from certain provisions of the Act or our rules would
be justified in order to strike the right balance between minimizing
the regulatory burden on providers and ensuring that the public
interest is served. For mobile broadband services, we seek comment on
whether and how the Commission should apply Section 332(c)(1) in
addition to Section 10 forbearance.
154. In the 2010 NOI, the Commission contemplated that, if it were
to classify the Internet connectivity component of broadband Internet
access service, it would forbear from applying all but a handful of
core statutory provisions--Sections 201, 202, 208, and 254--to the
service. In addition, the Commission identified Sections 222 and 255 as
provisions that could be excluded from forbearance, noting that they
have ``attracted longstanding and broad support in the broadband
context.'' We received considerable comment in that proceeding and seek
further and updated comment. Commenters should list and explain which
provisions should be exempt from forbearance and which should receive
it in order to protect and promote Internet openness. Commenters should
also detail which services should receive forbearance, list the
provisions from which they believe the Commission should forbear, and
provide justification for the forbearance. Commenters should also
define the relevant geographic and product markets in which the
services or providers should receive forbearance.
155. For mobile broadband services, we also seek comment on the
extent to which forbearance should apply, if the Commission were to
classify mobile broadband Internet access service as a CMRS service
subject to Title II. The 2010 NOI also asked whether the Commission
could and should apply Section 332(c)(1) as well as Section 10 in its
forbearance analysis for mobile services. We received considerable
comment in that proceeding and seek further and updated comment here.
3. Other Sources of Authority
156. Title III. We further seek comment on the Commission's
authority to adopt open Internet rules for mobile broadband services
under Title III of the Communications Act. The Supreme Court has found
that Title III endows the Commission with ``expansive powers'' and a
``comprehensive mandate to `encourage the larger and more effective use
of radio in the public interest.''' Section 303 of the Act, in
particular, authorizes the Commission to exercise its authority as
``the public interest, convenience, and necessity requires'' to
``[p]rescribe the nature of the service to be rendered by each class of
licensed stations and each station within any class,'' and to establish
obligations, not inconsistent with law, as may be necessary to carry
out the provisions of the Act. It further directs the Commission to
``generally encourage the larger and more effective use of radio in the
public interest.'' Likewise, Section 316 of the Act authorizes the
Commission to adopt ``new conditions on existing licensees'' when
taking such action will ``promote the public interest, convenience, and
necessity.'' The Commission may exercise this authority on a license-
by-license basis or through a rulemaking, even if the affected licenses
were awarded at auction.
157. We find that these provisions provide authority for the
Commission to adopt open Internet rules for mobile broadband service
providers. Particularly, we find that it is within our authority to
``prescribe the nature of the service to be rendered by each class of
licensed stations and each station within any class,'' consistent with
what the ``public interest, convenience, and necessity requires'' to
apply open Internet rules to mobile broadband service providers. We
seek comment on this interpretation of our Title III authority.
158. Other Sources of Authority. We seek comment on other sources
of authority that the Commission may utilize to underpin the adoption
of these rules. For example, the Open Internet Order delineated a
number of arguments for authority under a variety of statutory
provisions. We also seek comment on the theory that the Commission may
underpin open Internet rules by using its discretion to define the
scope of common carriage. In addition, we seek comment on the
Commission's authority to adopt rules under the World Trade
Organization's Basic Agreement on Trade in Telecommunications. We seek
comment on the efficacy of those, and other justifications for the
rules we propose adopting here.
4. Constitutional Considerations
159. Finally we seek comment on other legal limitations and
barriers to adoption of the rules we propose today, including First
Amendment and Due Process considerations. In the Open Internet Order,
the Commission concluded that ``broadband providers typically are best
described not as `speakers,' but rather as conduits for speech,'' and
that the open Internet rules therefore did not implicate broadband
providers' First Amendment rights. The Commission also found that even
if the rules ``did implicate expressive activity, they would not
violate the First Amendment'' because they would advance an important
government interest--``ensur[ing] the public's access to a multiplicity
of information sources and maximiz[ing] the Internet's potential to
further the public interest''--without burdening ```substantially more
speech than is necessary.''' We seek comment on these findings. We do
not anticipate constitutional, statutory, or other legal barriers to
adopting the rules we propose today, but we nonetheless seek comment on
these matters. Are there modifications we could make to the proposals
we make today that would avoid constitutional questions?
G. Other Laws and Considerations
160. The Open Internet Order provided that the open Internet rules
did not alter broadband providers' rights or obligations with respect
to other laws or safety and security considerations. The Commission
further established that the rules did not prohibit broadband providers
from making reasonable efforts to address transfers of unlawful content
and unlawful transfers of content. We tentatively conclude that this
continues to be the correct approach in light of the rules proposed in
today's NPRM. We therefore propose to retain these regulations without
modification. We seek comment on this tentative conclusion.
H. Enforcement and Dispute Resolution
1. Background
161. The Open Internet Order allowed parties to file informal
complaints pursuant to Section 1.41 of the Commission's rules and
promulgated a set of formal complaint rules. The formal complaint rules
give the Commission flexibility to shift the burden of proof or
production where appropriate and to structure and streamline the
process to the extent possible. Due to the technical nature of
potential disputes, however, the Open Internet Order stressed the
importance of direct negotiations and consultation with independent
technical bodies in hope that parties would be able to resolve disputes
before availing themselves of the complaint processes. Thus, the policy
of the Commission has been to encourage the filing of informal, rather
than formal, complaints, and thus it was not surprising that the
Commission did not receive any formal complaints following the adoption
of the Open Internet Order. As noted above, the Commission has received
many informal complaints from
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consumers alleging violations of the Open Internet Order. In addition,
the Commission takes notice of public commentary and events, which may
lead the Enforcement Bureau to initiate its own investigation. We seek
comment on the efficiency and functionality of the complaint processes
adopted in, and used pursuant to, the Open Internet Order.
2. Designing an Effective Enforcement Process
162. The Verizon decision and our earlier data roaming rules
provide a blueprint for the creation of a dispute resolution process to
govern the rules we propose today to protect and promote the open
Internet. Of course, there are significant potential differences
between the data roaming and open Internet environments. For example,
in Cellco, the D.C. Circuit considered a circumstance in which an
identified party, a wireless carrier, would desire to enter into a
business arrangement with another identified party, another wireless
carrier. The rule at issue was designed to create circumstances that
both incented individualized bargaining and, in specific circumstances,
curbed the limits of such negotiation where necessary to serve the
public interest. A similar circumstance could arise in the open
Internet context, if for example, an app developer wished to enter into
a contractual arrangement with a broadband provider. But it is just as
possible that the entity that feels aggrieved by an alleged violation
of an open Internet rule does not seek a direct contractual
relationship with a broadband provider. That could arise, for example,
if a Web site is blocked or if an edge provider feels that it is being
harmed by differential treatment afforded by a broadband provider to
its own affiliate. For this reason, the dispute resolution mechanism
adopted by the Commission to enforce our proposed open Internet rules
should be designed to operate between parties that do not necessarily
desire to enter into a binding agreement.
163. We tentatively conclude that an effective institutional design
for the rules proposed in today's NPRM must include at least three
elements. First, there must be a mechanism to provide legal certainty,
so that broadband providers, end users and edge providers alike can
better plan their activities in light of clear Commission guidance.
Second, there must be flexibility to consider the totality of the facts
in an environment of dynamic innovation. Third, there must be effective
access to dispute resolutions by end users and edge providers alike. We
seek comment on these elements. Are there others that should be
considered? Should any be eliminated? What forms of dispute resolution
would be the best strategy to implement ``data-driven decision-
making''?
164. We believe we have ample legal authority to design an
effective enforcement and dispute resolution process, whether the
Commission ultimately relies on Section 706, Title II, or another
source of legal authority. We seek comment on whether and how, if at
all, the source of the Commission's legal authority would affect our
dispute resolution and enforcement proposals.
a. Legal Certainty
165. The Commission has a responsibility to provide certainty,
guidance, and predictability to the marketplace as we protect and
promote the open Internet. The most important form of guidance is, of
course, the adoption by the Commission of a particular legal standard
in the forthcoming rulemaking. As with the ``commercially reasonable''
standard employed in our data roaming rule, the purpose of such a legal
standard is allow broadband providers, end users, and edge providers to
measure broadband-provider conduct against a known rule of law, both
prospectively and retroactively. Under the existing rules, formal
complaints would also result in Commission orders that would both
decide a specific complaint and provide useful guidance on the
application of our proposed open Internet rules--particularly in those
cases where the adjudicated set of facts is representative of a larger
industry practice. What other forms of guidance would be helpful? For
example, is there value in establishing a business-review-letter
approach similar to that of the Antitrust Division of the Department of
Justice, whereby entities concerned about certain practices under the
new rules may ask the Commission for a statement of its current
enforcement intentions with respect to that conduct and by which the
Commission would publish both the request for review and its response?
If adopted, would it make sense to have such a prospective review
process be administered jointly by the Enforcement Bureau and the
Office of General Counsel, or should such prospective reviews be
considered by the full Commission? Should such guidance be binding or
non-binding? How might petitions for declaratory ruling be helpful?
166. Non-Binding Staff Opinions. Are there other mechanisms by
which the Commission can provide guidance before broadband providers
initiate practices that are within the scope of the open Internet
rules? For example, the Commission could designate certain staff to
offer parties non-binding views on the likelihood that a particular
practice by a broadband provider is commercially reasonable or
commercially unreasonable (assuming that were the applicable legal
standard ultimately adopted). The Commission has some experience with
this non-binding, advisory approach to interpretation of its rules.
While this type of informal guidance from staff is not binding, it may
provide parties with helpful information as they consider whether and
how to resolve a dispute privately and outside of the complaint
process. Should we establish a similar process for helping parties
anticipate issues or resolve disputes that might arise under our
proposed open Internet rules? If so, should the non-binding guidance be
made public in any way, or should it provide a confidential basis for
early consultation? We emphasize that these sorts of non-binding
processes would always be in addition to, and not in lieu of, the right
of parties to seek binding determinations from the Commission through
the formal or informal complaint process, declaratory rulings, or other
mechanisms we adopt to resolve disputes and allegations of violations
of our open Internet rules.
167. Enforcement Advisories. Another type of guidance can come in
the form of enforcement advisories. For example, the Enforcement Bureau
and the Office of General Counsel issued an enforcement advisory in
2011, providing additional insight into the application of the
transparency rule. Is it helpful to have these bureaus issue such
advisories periodically where issues of potential general application
come to, or are brought to, their attention? Should such enforcement
advisories be considered binding policy of the Commission, or merely a
recitation of staff views?
b. Flexibility
168. Our process for promoting and protecting Internet openness
through the rules we propose today must be flexible enough to account
for the totality of circumstances, including Internet evolution and
innovation from all sources over time. In the Open Internet Order, the
Commission stated that it would make certain determinations on a case-
by-case basis. The Commission also stated in the Data Roaming Order
that it would determine whether the terms and conditions of a proffered
data roaming arrangement were commercially reasonable on a
[[Page 37471]]
case-by-case basis, taking into consideration the totality of the
circumstances. Based on the Commission's precedent in using this
decision-making process, we tentatively conclude that we will adopt a
similar case-by-case analysis and consider the totality of the
circumstances to consider alleged violations of our proposed open
Internet rules. Such an approach would, for example, allow the
Commission to consider any sources of innovation when analyzing whether
conduct meets the legal standard ultimately adopted by the Commission.
Moreover, this approach helps to ensure that, as new circumstances
exist, the Commission and interested parties will be advantaged by a
culture of learning that, drawing on the strengths of common-law
reasoning, reflects the experiences of the present, as well as the
logic of the past. We seek comment on whether the combination of a
certain legal standard and a case-by-case approach provides the best
means of both providing guidance and cabining administrative
discretion, while ensuring that a system of dispute resolution is both
focused on facts and founded on the strengths of common-law reasoning.
169. Fact Finding Processes. In implementing either an informal or
formal complaint process, how should the Commission structure its fact-
finding processes? What level of evidence should be required in order
to bring a claim? Are there other circumstances where initial pleading
standards or burdens of production should be either higher or lower? In
general, what is the showing required for the burden of production
shift from the party bringing the claim to the other party in a
dispute? Should interim relief be available? Should the process permit
parties to seek expedited treatment of claims and, if so, under what
circumstances?
c. Effective Access To Dispute Resolution
170. To be effective in protecting and promoting Internet openness,
the process for enforcing the rules we propose today must be accessible
to a diverse array of affected parties. As noted above, the Open
Internet Order contemplated informal and formal complaints but did not
include any alternative mechanisms for either providing guidance
beforehand or resolution in the wake of a challenge to an existing
practice. But, as also noted above, the rules proposed in today's NPRM
will operate in an environment in which a complaining party may not
have sought, or may not even want, to enter into a contractual
arrangement with a broadband provider. Moreover, the ability of edge
providers to effectively access a dispute resolution is important to
the administrative effectiveness of any legal regime that the
Commission might adopt. To what extent should the structure of edge
provider market segments impact the kind of regime that the Commission
adopts? For example, although 17 broadband access providers accounted
for about 93 percent of U.S. retail subscribers in 2013, near the end
of that year there were almost 900 app developers that each served more
than one million active users globally. And app developers as a group
may be quite a bit smaller than broadband providers; one estimate in
2013 calculated that 65 percent of app developers garner less than
$35,000 per year. Moreover, individuals are themselves quite capable of
serving as edge providers, for example aspiring musicians who upload
videos to sites such as YouTube.
171. How can a dispute resolution system be best structured to
account for individuals and small businesses that may not have the same
legal resources and effective access to the Commission as broadband
providers? We propose to create an ombudsperson whose duty will be to
act as a watchdog to protect and promote the interests of edge
providers, especially smaller entities. Should initial pleading or
procedural requirements be adopted that make access to Commission
processes by individuals or small businesses less cumbersome?
3. Complaint Processes, Enforcement, and Additional Forms of Dispute
Resolution
172. Complaint Processes. We tentatively conclude that the same
three means by which the Commission focused on potential open Internet
violations after the adoption of the Open Internet Order, namely self-
initiated investigation, informal complaints, and formal complaints,
should be used as well to enforce any new open Internet rules. We seek
comment on this tentative conclusion. Are there ways we can improve our
informal complaint process to make it easier to access and more
effective, especially for consumers and small businesses with limited
resources? For example, should the Commission create a separate Open
Internet complaint category for consumers filing informal complaints
under the open Internet rules? Should the Commission permit individuals
to report possible noncompliance with our Open Internet rules
anonymously or take other steps to protect the identity of individuals
who may be concerned about retaliation for raising concerns?
173. Enforcement. We tentatively conclude that enforcement of the
transparency rule and any enhanced transparency rule that is adopted in
this proceeding should proceed under the same dispute mechanisms that
will apply to the proposed no-blocking rule and the legal standard for
provider practices ultimately adopted by the Commission. We also
tentatively conclude that violations of the rules would be subject to
forfeiture penalties, as appropriate, under the Act. We seek comment on
these tentative conclusions.
174. Additional Forms of Dispute Resolution--Alternative Dispute
Resolution. In addition to the Commission processes noted above to
provide guidance, flexibility, and access, we seek comment on whether
additional dispute resolutions should be adopted. Should we adopt
measures to require or encourage disputes over the legality of
broadband provider practices to be resolved through alternative dispute
resolution processes, such as arbitration? Would such an approach be
sufficiently accessible to smaller edge providers, or would a different
dispute resolution process be more appropriate? Are there any legal
considerations, limitations, or concerns that the Commission should
consider with adopting an alternative dispute resolution procedure,
including arbitration or mediation by a third party? For example, under
the Alternative Dispute Resolution Act, an agency ``may not require any
person to consent to arbitration as a condition of entering into a
contract or obtaining a benefit.'' 5 U.S.C. 575(a)(3). We note,
however, that this restriction does not prevent the Commission from
requiring parties to submit to third-party arbitration so long as the
arbitration is subject to de novo review by the Commission. We note
that under our informal dispute resolution procedures, Commission staff
can mediate disputes if parties voluntarily request such a process.
During such mediations, for instance, the staff may ask parties to
submit their best offers to facilitate negotiations. We also can adopt
specific rules to determine appropriate remedies and rapid resolution
of formal complaints, including a requirement that parties provide
their best and final offers to help Commission staff determine an
appropriate remedy if a violation of the rule is found. We seek comment
on the benefits and costs of such an approach in this context.
175. Additional Forms of Dispute Resolution--Multistakeholder
[[Page 37472]]
Processes. We also seek comment on whether a multistakeholder approach
to the enforcement of our proposed open Internet rules would work in
this context, in whole or in part. For example, should the Commission
provide an initial forum for discussion and thereafter encourage
stakeholders, should they so choose, to independently develop standards
that they consider to meet the governing legal standards? Such
standards might then be shared with the Commission for consideration,
or the stakeholders might publicize their proposed standards and
encourage industry to use them as best practices. If the Commission
employed a model similar to that of NTIA's multistakeholder privacy
process, are there lessons we can learn from that experience? How can a
multistakeholder process best further the goals of providing guidance,
flexibility, and access?
176. Additional Forms of Dispute Resolution--Technical Advisory
Groups. We also seek comment on whether and how the Commission should
incorporate the expertise of technical advisory groups into a new open
Internet framework in a manner that could serve the goals of providing
guidance, flexibility and access. For example, should we invite the
Open Internet Advisory Committee (OIAC), the Broadband Internet
Technical Advisory Group (BITAG), the Internet Engineering Task Force
(IETF), or the North American Network Operators Group (NANOG) to
recommend to the Commission or public more generally industry best
practices or other codes of conduct that would either serve as
presumptive safe harbors and/or help determine whether a broadband
provider is in compliance with our open Internet rules? Or, rather than
asking industry groups and other interested parties to play a role ex
ante, should the Commission instead ask them generally, or specific
groups in particular, to weigh in on specific disputes once they are
brought to the Commission's attention? We seek comment generally on how
the inclusion of advisory groups might strengthen the open Internet
framework and reduce the burdens of compliance. Similarly, we seek
comment on the potential value of allowing providers to opt into
voluntary codes of conduct or other suggested best practices that may
serve as presumptive safe harbors.
IV. Procedural Matters
A. Paperwork Reduction Act Analysis
177. This document contains proposed new information collection
requirements. The Commission, as part of its continuing effort to
reduce paperwork burdens, invites the general public and the Office of
Management and Budget (OMB) to comment on the information collection
requirements contained in this document, as required by the Paperwork
Reduction Act of 1995, Public Law 104-13. In addition, pursuant to the
Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44
U.S.C. 3506(c)(4), we seek specific comment on how we might further
reduce the information collection burden for small business concerns
with fewer than 25 employees.
B. Initial Regulatory Flexibility Analysis
178. As required by the Regulatory Flexibility Act of 1980 (RFA),
the Commission has prepared an Initial Regulatory Flexibility Analysis
(IRFA) for this NPRM, of the possible significant economic impact on
small entities of the policies and rules addressed in this document.
The IRFA is set forth in Appendix B. Written public comments are
requested on this IRFA. Comments must be identified as responses to the
IRFA and must be filed by the deadlines for comments on the NPRM
indicated on the first page of this document. The Commission's Consumer
and Governmental Affairs Bureau, Reference Information Center, will
send a copy of this NPRM, including the IRFA, to the Chief Counsel for
Advocacy of the Small Business Administration (SBA).
C. Ex Parte Rules
179. This proceeding shall be treated as a ``permit-but-disclose''
proceeding in accordance with the Commission's ex parte rules. Persons
making ex parte presentations must file a copy of any written
presentation or a memorandum summarizing any oral presentation within
two business days after the presentation (unless a different deadline
applicable to the Sunshine period applies). Persons making oral ex
parte presentations are reminded that memoranda summarizing the
presentation must (1) list all persons attending or otherwise
participating in the meeting at which the ex parte presentation was
made, and (2) summarize all data presented and arguments made during
the presentation. If the presentation consisted in whole or in part of
the presentation of data or arguments already reflected in the
presenter's written comments, memoranda or other filings in the
proceeding, the presenter may provide citations to such data or
arguments in his or her prior comments, memoranda, or other filings
(specifying the relevant page and/or paragraph numbers where such data
or arguments can be found) in lieu of summarizing them in the
memorandum. Documents shown or given to Commission staff during ex
parte meetings are deemed to be written ex parte presentations and must
be filed consistent with rule 1.1206(b). In proceedings governed by
rule 1.49(f) or for which the Commission has made available a method of
electronic filing, written ex parte presentations and memoranda
summarizing oral ex parte presentations, and all attachments thereto,
must be filed through the electronic comment filing system available
for that proceeding, and must be filed in their native format (e.g.,
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding
should familiarize themselves with the Commission's ex parte rules.
D. Contact Person
180. For further information about this rulemaking proceeding,
please contact Kristine Fargotstein, Competition Policy Division,
Wireline Competition Bureau, at (202) 418-2774.
V. Ordering Clauses
181. Accordingly, it is ordered, pursuant to Sections 1, 2, 4(i)-
(j), 303 and 316 of the Communications Act of 1934, as amended, and
Section 706 of the Telecommunications Act of 1996, as amended, 47
U.S.C. 151, 152, 154(i)-(j), 303, 316, 1302, that this Notice of
Proposed Rulemaking is adopted.
182. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Notice of Proposed Rulemaking, including the Initial
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of
the Small Business Administration.
Initial Regulatory Flexibility Analysis
1. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), the Commission has prepared this Initial Regulatory
Flexibility Analysis (IRFA) of the possible significant economic impact
on a substantial number of small entities from the policies and rules
proposed in this Notice of Proposed Rulemaking (NPRM). The Commission
requests written public comment on this IRFA. Comments must be
identified as responses to the IRFA and must be filed by the deadlines
for comments on the NPRM provided on the first page of the NPRM. The
Commission will send a copy of the NPRM, including this IRFA, to the
Chief Counsel for Advocacy of the Small Business Administration (SBA).
[[Page 37473]]
In addition, the NPRM and IRFA (or summaries thereof) will be published
in the Federal Register.
A. Need for, and Objectives of, the Proposed Rules
2. With this NPRM, the Commission is directly responding to the
remand by the U.S. Court of Appeals for the D.C. Circuit in Verizon v.
FCC of portions of the Commission's 2010 Open Internet Order and
proposing enforceable rules to protect and promote the open Internet.
The NPRM seeks comment on a variety of issues relating to the
Commission's stated objective of protecting and promoting an open
Internet. The Internet's openness promotes innovation, investment,
competition, free expression and other national broadband goals. It is
also critical to the Internet's ability to serve as a platform for
speech and civic engagement and can help close the digital divide by
facilitating the development of diverse content, applications, and
services. The Commission has specifically found that the Internet's
openness enables a ``virtuous circle of innovation in which new uses of
the network--including new content, applications, services, and
devices--lead to increased end-user demand for broadband, which drives
network improvements, which in turn lead to further innovative network
uses.'' However, as the Commission has previously found, broadband
providers have both the incentive and ability to limit Internet
openness. As discussed in the NPRM, the Commission is seeking comment
on proposed open Internet rules that will protect against the harms
identified in the 2010 Open Internet Order, while fostering all sources
of innovation on the collection of networks known as the Internet. The
NPRM asks for comment in a variety of specific areas and sets forth
proposals in the following six key areas: scope of the proposed rules,
enhancement of the existing transparency rule, a no-blocking rule, an
enforceable rule designed to protect the open Internet that is not per
se common carriage, the best source of legal authority for protection
of Internet openness and an enforcement and dispute resolution process.
3. First, the NPRM proposes to retain the same definitions and
scope as the 2010 rules. The NPRM seeks comment, however, on whether
the Commission should change the scope of the proposed rules as applied
to the following: specifically identified services, enterprise
services, Internet traffic exchange, specialized services, and mobile
services. The NPRM also proposes to interpret ``reasonable network
management'' under the same framework adopted in the 2010 Open Internet
Order and seeks comment on developing the scope of ``reasonable network
management'' on a case-by-case basis under the proposed rules.
4. Second, the NPRM proposes enhancements to the Commission's
existing transparency rule, which was upheld by the D.C. Circuit. The
NPRM seeks comment on whether disclosures of broadband providers'
network management practices, performance, and terms and conditions
that are specifically tailored to the needs of affected parties would
better ensure that consumers, edge providers, and the Internet
community at large have the information they need to understand the
services they are receiving and to monitor practices that could
undermine the open Internet than the existing rule. The NPRM seeks
comment on the burdens of enhanced transparency on broadband providers
and specifically asks if there are ways to minimize these potential
costs and burdens.
5. Third, the NPRM proposes adopting the text of the no-blocking
rule from the 2010 Open Internet Order, with a revised rationale, in
order to ensure that all end users and edge providers can enjoy the use
of robust, fast and dynamic Internet access. To address the ongoing
concerns with the harmful effects that blocking of Internet traffic
would have on Internet openness and to competition in adjacent markets,
the NPRM seeks comment on a draft no-blocking rule that would allow
individualized bargaining above a minimum level of access to a
broadband provider's subscribers, which the D.C. Circuit suggested
would be permissible and take the rule out of the realm of common
carriage regulation. The NPRM proposes a variety of ways to establish a
minimum level of access under the proposed no-blocking rule and seeks
comment on those interpretations. Alternatively, the NPRM seeks comment
on whether the Commission should adopt a no-blocking rule that either
itself prohibits broadband providers from entering into priority
agreements with edge providers or acts in combination with a separate
rule prohibiting such conduct. Additionally, consistent with the 2010
Open Internet Order, the NPRM proposes to apply the proposed no-
blocking rule differently to mobile broadband providers than to fixed
broadband providers and seeks comment on that approach.
6. Fourth, where conduct would otherwise be permissible under the
no-blocking rule, the NPRM proposes a separate rule that requires
broadband providers to adhere to an enforceable legal standard of
commercially reasonable practices. The NPRM tentatively concludes that
the Commission should adopt a revised rule that, consistent with the
court's decision, may permit broadband providers to engage in
individualized practices, while prohibiting those broadband provider
practices that threaten to harm Internet openness. The Commission's
proposed approach contains three essential elements: (1) An enforceable
legal standard of conduct barring broadband provider practices that
threaten to undermine Internet openness, providing certainty to network
providers, end users, and edge providers alike, (2) clearly established
factors that give additional guidance on the kind of conduct that is
likely to violate the enforceable legal standard, and (3) encouragement
of individualized negotiation and, if necessary, a mechanism to allow
the Commission to evaluate challenged practices on a case-by-case
basis, thereby providing flexibility in assessing whether a particular
practice comports with the legal standard. The NPRM proposes that the
concept of reasonable network management would be treated separately
from the application of the commercially reasonable practices legal
standard and seeks comment on this approach. The NPRM asks how harm can
best be identified and prohibited and whether certain practices, like
paid prioritization, should be barred altogether. The NPRM also seeks
comment on whether the Commission should consider current technical
characteristics, industry practices, and the impact on consumers, among
other factors, when evaluating commercially reasonable practices.
7. Fifth, the NPRM proposes to rely on Section 706 of the
Telecommunications Act of 1996 as the source of authority for the
proposed rules. It seeks comment, however, on the best source of
authority for protecting Internet openness, whether Section 706, Title
II of the Communications Act of 1934, as amended, and/or other sources
of legal authority such as Title III of the Communications Act for
wireless services. With respect to the prospect of proceeding under
Title II, the NPRM seeks comment on whether and how the Commission
should exercise its authority under Section 10 of the Act--or Section
332(c)(1) for mobile services--to forbear from specific Title II
obligations that would flow from the classification of a service as
telecommunications service.
[[Page 37474]]
8. Sixth, the NPRM proposes a multi-faceted dispute resolution
process to provide effective access for end users, edge providers, and
broadband network providers alike and the creation of an ombudsperson
to act as a watchdog to represent the interests of consumers, start-ups
and small businesses. The NPRM seeks comment on the level of
flexibility needed for such approaches and, specifically, how the
Commission can ensure that the process is accessible by end users and
edge providers, including small entities. The NPRM also proposes that
should the Commission ultimately adopt one of the proposed dispute
mechanisms, then enforcement of the existing transparency rule and any
enhancements to that rule would proceed under the same manner as
enforcement of the Commission's other proposed open Internet rules if
adopted.
B. Legal Basis
9. The legal basis for any action that may be taken pursuant to the
NPRM is contained in Sections 1, 2, 4(i)-(j), 303, and 316, of the
Communications Act of 1934, as amended, and Section 706 of the
Telecommunications Act of 1996, as amended, 47 U.S.C. 151, 152, 154(i)-
(j), 303, 316, 1302.
C. Description and Estimate of the Number of Small Entities To Which
the Rules Would Apply
10. The RFA directs agencies to provide a description of, and where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted. The RFA generally defines
the term ``small entity'' as having the same meaning as the terms
``small business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small-business concern'' under the Small Business
Act. A small-business concern'' is one which: (1) Is independently
owned and operated; (2) is not dominant in its field of operation; and
(3) satisfies any additional criteria established by the SBA.
1. Total Small Entities
11. Our proposed action, if implemented, may, over time, affect
small entities that are not easily categorized at present. We therefore
describe here, at the outset, three comprehensive, statutory small
entity size standards. First, nationwide, there are a total of
approximately 28.2 million small businesses, according to the SBA. In
addition, a ``small organization'' is generally ``any not-for-profit
enterprise which is independently owned and operated and is not
dominant in its field.'' Nationwide, as of 2007, there were
approximately 1,621,315 small organizations. Finally, the term ``small
governmental jurisdiction'' is defined generally as ``governments of
cities, towns, townships, villages, school districts, or special
districts, with a population of less than fifty thousand.'' Census
Bureau data for 2007 indicate that there were 89,476 local governmental
jurisdictions in the United States. We estimate that, of this total, as
many as 88,761 entities may qualify as ``small governmental
jurisdictions.'' Thus, we estimate that most governmental jurisdictions
are small.
2. Internet Access Service Providers
12. The actions proposed in the NPRM would apply to broadband
Internet access service providers. The 2011 Economic Census places
these firms, whose services might include Voice over Internet Protocol
(VoIP), in either of two categories, depending on whether the service
is provided over the provider's own telecommunications facilities
(e.g., cable and DSL ISPs), or over client-supplied telecommunications
connections (e.g., dial-up ISPs). The former are within the category of
Wired Telecommunications Carriers, which has an SBA small business size
standard of 1,500 or fewer employees. These are also labeled
``broadband.'' The latter are within the category of All Other
Telecommunications, which has a size standard of annual receipts of $25
million or less. These are labeled non-broadband. The most current
Economic Census data for Wired Telecommunications Carriers are 2011
data, and the most current Economic Census data for All Other
Telecommunications are 2007 data, which are detailed specifically for
ISPs within the categories above. For the first category, the data show
that 3,372 firms operated for the entire year, of which 2,037 had nine
or fewer employees. For the second category, the data show that 1,274
firms operated for the entire year. Of those, 1,252 had annual receipts
below $25 million per year. Consequently, we estimate that the majority
of ISP firms are small entities.
13. The ISP industry has changed since these definitions were
introduced in 2007. The data cited above may therefore include entities
that no longer provide Internet access service and may exclude entities
that now provide such service. To ensure that this IRFA describes the
universe of small entities that our action might affect, we discuss in
turn several different types of entities that might be providing
Internet access service. We note that, although we have no specific
information on the number of small entities that provide broadband
Internet access service over unlicensed spectrum, we include these
entities in our Initial Regulatory Flexibility Analysis.
3. Wireline Providers
14. Incumbent Local Exchange Carriers (Incumbent LECs). Neither the
Commission nor the SBA has developed a small business size standard
specifically for incumbent local exchange services. The appropriate
size standard under SBA rules is for the category Wired
Telecommunications Carriers. Under that size standard, such a business
is small if it has 1,500 or fewer employees. According to Commission
data, 1,307 carriers reported that they were incumbent local exchange
service providers. Of these 1,307 carriers, an estimated 1,006 have
1,500 or fewer employees and 301 have more than 1,500 employees.
Consequently, the Commission estimates that most providers of incumbent
local exchange service are small businesses that may be affected by our
proposed action.
15. Competitive Local Exchange Carriers (Competitive LECs),
Competitive Access Providers (CAPs), Shared-Tenant Service Providers,
and Other Local Service Providers. Neither the Commission nor the SBA
has developed a small business size standard specifically for these
service providers. The appropriate size standard under SBA rules is for
the category Wired Telecommunications Carriers. Under that size
standard, such a business is small if it has 1,500 or fewer employees.
According to Commission data, 1,442 carriers reported that they were
engaged in the provision of either competitive local exchange services
or competitive access provider services. Of these 1,442 carriers, an
estimated 1,256 have 1,500 or fewer employees and 186 have more than
1,500 employees. In addition, 17 carriers have reported that they are
Shared-Tenant Service Providers, and all 17 are estimated to have 1,500
or fewer employees. In addition, 72 carriers have reported that they
are Other Local Service Providers. Of the 72, seventy have 1,500 or
fewer employees and two have more than 1,500 employees. Consequently,
the Commission estimates that most providers of competitive local
exchange service, competitive access providers, Shared-Tenant Service
Providers, and other local service providers are small entities that
may be affected by our proposed action.
[[Page 37475]]
16. We have included small incumbent LECs in this present RFA
analysis. As noted above, a ``small business'' under the RFA is one
that, inter alia, meets the pertinent small business size standard
(e.g., a telephone communications business having 1,500 or fewer
employees), and ``is not dominant in its field of operation.'' The
SBA's Office of Advocacy contends that, for RFA purposes, small
incumbent LECs are not dominant in their field of operation because any
such dominance is not ``national'' in scope. We have therefore included
small incumbent LECs in this RFA analysis, although we emphasize that
this RFA action has no effect on Commission analyses and determinations
in other, non-RFA contexts.
17. Interexchange Carriers. Neither the Commission nor the SBA has
developed a small business size standard specifically for providers of
interexchange services. The appropriate size standard under SBA rules
is for the category Wired Telecommunications Carriers. Under that size
standard, such a business is small if it has 1,500 or fewer employees.
According to Commission data, 359 carriers have reported that they are
engaged in the provision of interexchange service. Of these, an
estimated 317 have 1,500 or fewer employees and 42 have more than 1,500
employees. Consequently, the Commission estimates that the majority of
IXCs are small entities that may be affected by our proposed action.
18. Operator Service Providers (OSPs). Neither the Commission nor
the SBA has developed a small business size standard specifically for
operator service providers. The appropriate size standard under SBA
rules is for the category Wired Telecommunications Carriers. Under that
size standard, such a business is small if it has 1,500 or fewer
employees. According to Commission data, 33 carriers have reported that
they are engaged in the provision of operator services. Of these, an
estimated 31 have 1,500 or fewer employees and two have more than 1,500
employees. Consequently, the Commission estimates that the majority of
OSPs are small entities that may be affected by our proposed action.
4. Wireless Providers--Fixed and Mobile
19. The broadband Internet access service provider category covered
by this NPRM may cover multiple wireless firms and categories of
regulated wireless services. Thus, to the extent the wireless services
listed below are used by wireless firms for broadband Internet access
services, the proposed actions may have an impact on those small
businesses as set forth above and further below. In addition, for those
services subject to auctions, we note that, as a general matter, the
number of winning bidders that claim to qualify as small businesses at
the close of an auction does not necessarily represent the number of
small businesses currently in service. Also, the Commission does not
generally track subsequent business size unless, in the context of
assignments and transfers or reportable eligibility events, unjust
enrichment issues are implicated.
20. Wireless Telecommunications Carriers (except Satellite). Since
2007, the Census Bureau has placed wireless firms within this new,
broad, economic census category. Prior to 2007, such firms were within
the now-superseded categories of ``Paging'' and ``Cellular and Other
Wireless Telecommunications.'' Under the present and prior categories,
the SBA has deemed a wireless business to be small if it has 1,500 or
fewer employees. For the category of Wireless Telecommunications
Carriers (except Satellite), data for 2011 show that there were 784
firms operating that year. Of these 784 firms, an estimated 749 have
500 or fewer employees and 35 have more than 500 employees. Since all
firms with fewer than 1,500 employees are considered small, given the
total employment in the sector, we estimate that the vast majority of
wireless firms are small.
21. Wireless Communications Services. This service can be used for
fixed, mobile, radiolocation, and digital audio broadcasting satellite
uses. The Commission defined ``small business'' for the wireless
communications services (WCS) auction as an entity with average gross
revenues of $40 million for each of the three preceding years, and a
``very small business'' as an entity with average gross revenues of $15
million for each of the three preceding years. The SBA has approved
these definitions. The Commission auctioned geographic area licenses in
the WCS service in 1997. In the auction, seven bidders won 31 licenses
that qualified as very small business entities, and one bidder won one
license that qualified as a small business entity.
22. 1670-1675 MHz Services. This service can be used for fixed and
mobile uses, except aeronautical mobile. An auction for one license in
the 1670-1675 MHz band was conducted in 2003. One license was awarded.
The winning bidder was not a small entity.
23. Wireless Telephony. Wireless telephony includes cellular,
personal communications services, and specialized mobile radio
telephony carriers. As noted, the SBA has developed a small business
size standard for Wireless Telecommunications Carriers (except
Satellite). Under the SBA small business size standard, a business is
small if it has 1,500 or fewer employees. According to Commission data,
413 carriers reported that they were engaged in wireless telephony. Of
these, an estimated 261 have 1,500 or fewer employees and 152 have more
than 1,500 employees. Therefore, a little less than one third of these
entities can be considered small.
24. Broadband Personal Communications Service. The broadband
personal communications services (PCS) spectrum is divided into six
frequency blocks designated A through F, and the Commission has held
auctions for each block. The Commission initially defined a ``small
business'' for C- and F-Block licenses as an entity that has average
gross revenues of $40 million or less in the three previous calendar
years. For F-Block licenses, an additional small business size standard
for ``very small business'' was added and is defined as an entity that,
together with its affiliates, has average gross revenues of not more
than $15 million for the preceding three calendar years. These small
business size standards, in the context of broadband PCS auctions, have
been approved by the SBA. No small businesses within the SBA-approved
small business size standards bid successfully for licenses in Blocks A
and B. There were 90 winning bidders that claimed small business status
in the first two C-Block auctions. A total of 93 bidders that claimed
small business status won approximately 40 percent of the 1,479
licenses in the first auction for the D, E, and F Blocks. On April 15,
1999, the Commission completed the reauction of 347 C-, D-, E-, and F-
Block licenses in Auction No. 22. Of the 57 winning bidders in that
auction, 48 claimed small business status and won 277 licenses.
25. On January 26, 2001, the Commission completed the auction of
422 C and F Block Broadband PCS licenses in Auction No. 35. Of the 35
winning bidders in that auction, 29 claimed small business status.
Subsequent events concerning Auction 35, including judicial and agency
determinations, resulted in a total of 163 C and F Block licenses being
available for grant. On February 15, 2005, the Commission completed an
auction of 242 C-, D-, E-, and F-Block licenses in Auction No. 58. Of
the 24 winning bidders in that auction, 16 claimed small business
status and won 156
[[Page 37476]]
licenses. On May 21, 2007, the Commission completed an auction of 33
licenses in the A, C, and F Blocks in Auction No. 71. Of the 12 winning
bidders in that auction, five claimed small business status and won 18
licenses. On August 20, 2008, the Commission completed the auction of
20 C-, D-, E-, and F-Block Broadband PCS licenses in Auction No. 78. Of
the eight winning bidders for Broadband PCS licenses in that auction,
six claimed small business status and won 14 licenses.
26. Specialized Mobile Radio Licenses. The Commission awards
``small entity'' bidding credits in auctions for Specialized Mobile
Radio (SMR) geographic area licenses in the 800 MHz and 900 MHz bands
to firms that had revenues of no more than $15 million in each of the
three previous calendar years. The Commission awards ``very small
entity'' bidding credits to firms that had revenues of no more than $3
million in each of the three previous calendar years. The SBA has
approved these small business size standards for the 900 MHz Service.
The Commission has held auctions for geographic area licenses in the
800 MHz and 900 MHz bands. The 900 MHz SMR auction began on December 5,
1995, and closed on April 15, 1996. Sixty bidders claiming that they
qualified as small businesses under the $15 million size standard won
263 geographic area licenses in the 900 MHz SMR band. The 800 MHz SMR
auction for the upper 200 channels began on October 28, 1997, and was
completed on December 8, 1997. Ten bidders claiming that they qualified
as small businesses under the $15 million size standard won 38
geographic area licenses for the upper 200 channels in the 800 MHz SMR
band. A second auction for the 800 MHz band was held on January 10,
2002 and closed on January 17, 2002 and included 23 BEA licenses. One
bidder claiming small business status won five licenses.
27. The auction of the 1,053 800 MHz SMR geographic area licenses
for the General Category channels began on August 16, 2000, and was
completed on September 1, 2000. Eleven bidders won 108 geographic area
licenses for the General Category channels in the 800 MHz SMR band and
qualified as small businesses under the $15 million size standard. In
an auction completed on December 5, 2000, a total of 2,800 Economic
Area licenses in the lower 80 channels of the 800 MHz SMR service were
awarded. Of the 22 winning bidders, 19 claimed small business status
and won 129 licenses. Thus, combining all four auctions, 41 winning
bidders for geographic licenses in the 800 MHz SMR band claimed status
as small businesses.
28. In addition, there are numerous incumbent site-by-site SMR
licenses and licensees with extended implementation authorizations in
the 800 and 900 MHz bands. We do not know how many firms provide 800
MHz or 900 MHz geographic area SMR service pursuant to extended
implementation authorizations, nor how many of these providers have
annual revenues of no more than $15 million. One firm has over $15
million in revenues. In addition, we do not know how many of these
firms have 1,500 or fewer employees, which is the SBA-determined size
standard. We assume, for purposes of this analysis, that all of the
remaining extended implementation authorizations are held by small
entities, as defined by the SBA.
29. Lower 700 MHz Band Licenses. The Commission previously adopted
criteria for defining three groups of small businesses for purposes of
determining their eligibility for special provisions such as bidding
credits. The Commission defined a ``small business'' as an entity that,
together with its affiliates and controlling principals, has average
gross revenues not exceeding $40 million for the preceding three years.
A ``very small business'' is defined as an entity that, together with
its affiliates and controlling principals, has average gross revenues
that are not more than $15 million for the preceding three years.
Additionally, the lower 700 MHz Service had a third category of small
business status for Metropolitan/Rural Service Area (MSA/RSA)
licenses--``entrepreneur''--which is defined as an entity that,
together with its affiliates and controlling principals, has average
gross revenues that are not more than $3 million for the preceding
three years. The SBA approved these small size standards. An auction of
740 licenses (one license in each of the 734 MSAs/RSAs and one license
in each of the six Economic Area Groupings (EAGs)) commenced on August
27, 2002, and closed on September 18, 2002. Of the 740 licenses
available for auction, 484 licenses were won by 102 winning bidders.
Seventy-two of the winning bidders claimed small business, very small
business or entrepreneur status and won a total of 329 licenses. A
second auction commenced on May 28, 2003, closed on June 13, 2003, and
included 256 licenses: 5 EAG licenses and 476 Cellular Market Area
licenses. Seventeen winning bidders claimed small or very small
business status and won 60 licenses, and nine winning bidders claimed
entrepreneur status and won 154 licenses. On July 26, 2005, the
Commission completed an auction of 5 licenses in the Lower 700 MHz band
(Auction No. 60). There were three winning bidders for five licenses.
All three winning bidders claimed small business status.
30. In 2007, the Commission reexamined its rules governing the 700
MHz band in the 700 MHz Second Report and Order, 72 FR 48814 (Aug. 24,
2007). An auction of 700 MHz licenses commenced January 24, 2008 and
closed on March 18, 2008, which included, 176 Economic Area licenses in
the A Block, 734 Cellular Market Area licenses in the B Block, and 176
EA licenses in the E Block. Twenty winning bidders, claiming small
business status (those with attributable average annual gross revenues
that exceed $15 million and do not exceed $40 million for the preceding
three years) won 49 licenses. Thirty three winning bidders claiming
very small business status (those with attributable average annual
gross revenues that do not exceed $15 million for the preceding three
years) won 325 licenses.
31. Upper 700 MHz Band Licenses. In the 700 MHz Second Report and
Order, the Commission revised its rules regarding Upper 700 MHz
licenses. On January 24, 2008, the Commission commenced Auction 73 in
which several licenses in the Upper 700 MHz band were available for
licensing: 12 Regional Economic Area Grouping licenses in the C Block,
and one nationwide license in the D Block. The auction concluded on
March 18, 2008, with 3 winning bidders claiming very small business
status (those with attributable average annual gross revenues that do
not exceed $15 million for the preceding three years) and winning five
licenses.
32. 700 MHz Guard Band Licensees. In 2000, in the 700 MHz Guard
Band Order, 65 FR 17594 (Mar. 4, 2000), the Commission adopted size
standards for ``small businesses'' and ``very small businesses'' for
purposes of determining their eligibility for special provisions such
as bidding credits and installment payments. A small business in this
service is an entity that, together with its affiliates and controlling
principals, has average gross revenues not exceeding $40 million for
the preceding three years. Additionally, a very small business is an
entity that, together with its affiliates and controlling principals,
has average gross revenues that are not more than $15 million for the
preceding three years. SBA approval of these definitions is not
required. An auction of 52 Major Economic Area licenses commenced on
September 6, 2000, and
[[Page 37477]]
closed on September 21, 2000. Of the 104 licenses auctioned, 96
licenses were sold to nine bidders. Five of these bidders were small
businesses that won a total of 26 licenses. A second auction of 700 MHz
Guard Band licenses commenced on February 13, 2001, and closed on
February 21, 2001. All eight of the licenses auctioned were sold to
three bidders. One of these bidders was a small business that won a
total of two licenses.
33. Air-Ground Radiotelephone Service. The Commission has
previously used the SBA's small business size standard applicable to
Wireless Telecommunications Carriers (except Satellite), i.e., an
entity employing no more than 1,500 persons. There are approximately
100 licensees in the Air-Ground Radiotelephone Service, and under that
definition, we estimate that almost all of them qualify as small
entities under the SBA definition. For purposes of assigning Air-Ground
Radiotelephone Service licenses through competitive bidding, the
Commission has defined ``small business'' as an entity that, together
with controlling interests and affiliates, has average annual gross
revenues for the preceding three years not exceeding $40 million. A
``very small business'' is defined as an entity that, together with
controlling interests and affiliates, has average annual gross revenues
for the preceding three years not exceeding $15 million. These
definitions were approved by the SBA. In May 2006, the Commission
completed an auction of nationwide commercial Air-Ground Radiotelephone
Service licenses in the 800 MHz band (Auction No. 65). On June 2, 2006,
the auction closed with two winning bidders winning two Air-Ground
Radiotelephone Services licenses. Neither of the winning bidders
claimed small business status.
34. AWS Services (1710-1755 MHz and 2110-2155 MHz bands (AWS-1);
1915-1920 MHz, 1995-2000 MHz, 2020-2025 MHz and 2175-2180 MHz bands
(AWS-2); 2155-2175 MHz band (AWS-3)). For the AWS-1 bands, the
Commission has defined a ``small business'' as an entity with average
annual gross revenues for the preceding three years not exceeding $40
million, and a ``very small business'' as an entity with average annual
gross revenues for the preceding three years not exceeding $15 million.
For AWS-2 and AWS-3, although we do not know for certain which entities
are likely to apply for these frequencies, we note that the AWS-1 bands
are comparable to those used for cellular service and personal
communications service. The Commission has not yet adopted size
standards for the AWS-2 or AWS-3 bands but proposes to treat both AWS-2
and AWS-3 similarly to broadband PCS service and AWS-1 service due to
the comparable capital requirements and other factors, such as issues
involved in relocating incumbents and developing markets, technologies,
and services.
35. 3650-3700 MHz band. In March 2005, the Commission released a
Report and Order and Memorandum Opinion and Order that provides for
nationwide, non-exclusive licensing of terrestrial operations,
utilizing contention-based technologies, in the 3650 MHz band (i.e.,
3650-3700 MHz). As of April 2010, more than 1270 licenses have been
granted and more than 7433 sites have been registered. The Commission
has not developed a definition of small entities applicable to 3650-
3700 MHz band nationwide, non-exclusive licensees. However, we estimate
that the majority of these licensees are Internet Access Service
Providers (ISPs) and that most of those licensees are small businesses.
36. Fixed Microwave Services. Microwave services include common
carrier, private-operational fixed, and broadcast auxiliary radio
services. They also include the Local Multipoint Distribution Service
(LMDS), the Digital Electronic Message Service (DEMS), and the 24 GHz
Service, where licensees can choose between common carrier and non-
common carrier status. At present, there are approximately 36,708
common carrier fixed licensees and 59,291 private operational-fixed
licensees and broadcast auxiliary radio licensees in the microwave
services. There are approximately 135 LMDS licensees, three DEMS
licensees, and three 24 GHz licensees. The Commission has not yet
defined a small business with respect to microwave services. For
purposes of the IRFA, we will use the SBA's definition applicable to
Wireless Telecommunications Carriers (except satellite)--i.e., an
entity with no more than 1,500 persons. Under the present and prior
categories, the SBA has deemed a wireless business to be small if it
has 1,500 or fewer employees. For the category of Wireless
Telecommunications Carriers (except Satellite), data for 2011 show that
there were 784 firms operating that year. While the Census Bureau has
not released data on the establishments broken down by number of
employees, we note that the Census Bureau lists total employment for
all firms in that sector at 245,875. Since all firms with fewer than
1,500 employees are considered small, given the total employment in the
sector, we estimate that the vast majority of firms using microwave
services are small. We note that the number of firms does not
necessarily track the number of licensees. We estimate that virtually
all of the Fixed Microwave licensees (excluding broadcast auxiliary
licensees) would qualify as small entities under the SBA definition.
37. Broadband Radio Service and Educational Broadband Service.
Broadband Radio Service systems, previously referred to as Multipoint
Distribution Service (MDS) and Multichannel Multipoint Distribution
Service (MMDS) systems, and ``wireless cable,'' transmit video
programming to subscribers and provide two-way high speed data
operations using the microwave frequencies of the Broadband Radio
Service (BRS) and Educational Broadband Service (EBS) (previously
referred to as the Instructional Television Fixed Service (ITFS)). In
connection with the 1996 BRS auction, the Commission established a
small business size standard as an entity that had annual average gross
revenues of no more than $40 million in the previous three calendar
years. The BRS auctions resulted in 67 successful bidders obtaining
licensing opportunities for 493 Basic Trading Areas (BTAs). Of the 67
auction winners, 61 met the definition of a small business. BRS also
includes licensees of stations authorized prior to the auction. At this
time, we estimate that of the 61 small business BRS auction winners, 48
remain small business licensees. In addition to the 48 small businesses
that hold BTA authorizations, there are approximately 392 incumbent BRS
licensees that are considered small entities. After adding the number
of small business auction licensees to the number of incumbent
licensees not already counted, we find that there are currently
approximately 440 BRS licensees that are defined as small businesses
under either the SBA or the Commission's rules.
38. In 2009, the Commission conducted Auction 86, the sale of 78
licenses in the BRS areas. The Commission offered three levels of
bidding credits: (i) A bidder with attributed average annual gross
revenues that exceed $15 million and do not exceed $40 million for the
preceding three years (small business) received a 15 percent discount
on its winning bid; (ii) a bidder with attributed average annual gross
revenues that exceed $3 million and do not exceed $15 million for the
preceding three years (very small business) received a 25 percent
discount on its winning bid; and (iii) a bidder with attributed average
annual gross
[[Page 37478]]
revenues that do not exceed $3 million for the preceding three years
(entrepreneur) received a 35 percent discount on its winning bid.
Auction 86 concluded in 2009 with the sale of 61 licenses. Of the ten
winning bidders, two bidders that claimed small business status won 4
licenses; one bidder that claimed very small business status won three
licenses; and two bidders that claimed entrepreneur status won six
licenses.
39. In addition, the SBA's Cable Television Distribution Services
small business size standard is applicable to EBS. There are presently
2,436 EBS licensees. All but 100 of these licenses are held by
educational institutions. Educational institutions are included in this
analysis as small entities. Thus, we estimate that at least 2,336
licensees are small businesses. Since 2007, Cable Television
Distribution Services have been defined within the broad economic
census category of Wired Telecommunications Carriers; that category is
defined as follows: ``This industry comprises establishments primarily
engaged in operating and/or providing access to transmission facilities
and infrastructure that they own and/or lease for the transmission of
voice, data, text, sound, and video using wired telecommunications
networks. Transmission facilities may be based on a single technology
or a combination of technologies.'' The SBA has developed a small
business size standard for this category, which is: all such firms
having 1,500 or fewer employees. To gauge small business prevalence for
these cable services we must, however, use the most current census data
that are based on the previous category of Cable and Other Program
Distribution and its associated size standard; that size standard was:
all such firms having $13.5 million or less in annual receipts.
According to Census Bureau data for 2007, there were a total of 996
firms in this category that operated for the entire year. Of this
total, 948 firms had annual receipts of under $10 million, and 48 firms
had receipts of $10 million or more but less than $25 million. Thus,
the majority of these firms can be considered small.
5. Satellite Service Providers
40. Satellite Telecommunications Providers. Two economic census
categories address the satellite industry. The first category has a
small business size standard of $30 million or less in average annual
receipts, under SBA rules. The second has a size standard of $30
million or less in annual receipts.
41. The category of Satellite Telecommunications ``comprises
establishments primarily engaged in providing telecommunications
services to other establishments in the telecommunications and
broadcasting industries by forwarding and receiving communications
signals via a system of satellites or reselling satellite
telecommunications.'' For this category, Census Bureau data for 2007
show that there were a total of 570 firms that operated for the entire
year. Of this total, 530 firms had annual receipts of under $30
million, and 40 firms had receipts of over $30 million. Consequently,
we estimate that the majority of Satellite Telecommunications firms are
small entities that might be affected by our action.
42. The second category of Other Telecommunications comprises,
inter alia, ``establishments primarily engaged in providing specialized
telecommunications services, such as satellite tracking, communications
telemetry, and radar station operation. This industry also includes
establishments primarily engaged in providing satellite terminal
stations and associated facilities connected with one or more
terrestrial systems and capable of transmitting telecommunications to,
and receiving telecommunications from, satellite systems.'' For this
category, Census Bureau data for 2007 show that there were a total of
1,274 firms that operated for the entire year. Of this total, 1,252 had
annual receipts below $25 million per year. Consequently, we estimate
that the majority of All Other Telecommunications firms are small
entities that might be affected by our action.
6. Cable Service Providers
43. Because Section 706 requires us to monitor the deployment of
broadband using any technology, we anticipate that some broadband
service providers may not provide telephone service. Accordingly, we
describe below other types of firms that may provide broadband
services, including cable companies, MDS providers, and utilities,
among others.
44. Cable and Other Program Distributors. Since 2007, these
services have been defined within the broad economic census category of
Wired Telecommunications Carriers; that category is defined as follows:
``This industry comprises establishments primarily engaged in operating
and/or providing access to transmission facilities and infrastructure
that they own and/or lease for the transmission of voice, data, text,
sound, and video using wired telecommunications networks. Transmission
facilities may be based on a single technology or a combination of
technologies.'' The SBA has developed a small business size standard
for this category, which is: all such firms having 1,500 or fewer
employees. To gauge small business prevalence for these cable services
we must, however, use current census data that are based on the
previous category of Cable and Other Program Distribution and its
associated size standard; that size standard was: all such firms having
$13.5 million or less in annual receipts. According to Census Bureau
data for 2007, there were a total of 2,048 firms in this category that
operated for the entire year. Of this total, 1,393 firms had annual
receipts of under $10 million, and 655 firms had receipts of $10
million or more. Thus, the majority of these firms can be considered
small.
45. Cable Companies and Systems. The Commission has also developed
its own small business size standards, for the purpose of cable rate
regulation. Under the Commission's rules, a ``small cable company'' is
one serving 400,000 or fewer subscribers, nationwide. Industry data
shows that there were 1,141 cable companies at the end of June 2012. Of
this total, all but ten cable operators nationwide are small under this
size standard. In addition, under the Commission's rules, a ``small
system'' is a cable system serving 15,000 or fewer subscribers. Current
Commission records show 4,945 cable systems nationwide. Of this total,
4,380 cable systems have less than 20,000 subscribers, and 565 systems
have 20,000 or more subscribers, based on the same records. Thus, under
this standard, we estimate that most cable systems are small entities.
46. Cable System Operators. The Communications Act of 1934, as
amended, also contains a size standard for small cable system
operators, which is ``a cable operator that, directly or through an
affiliate, serves in the aggregate fewer than 1 percent of all
subscribers in the United States and is not affiliated with any entity
or entities whose gross annual revenues in the aggregate exceed
$250,000,000.'' The Commission has determined that an operator serving
fewer than 677,000 subscribers shall be deemed a small operator, if its
annual revenues, when combined with the total annual revenues of all
its affiliates, do not exceed $250 million in the aggregate. Based on
available data, we find that all but ten incumbent cable operators are
small entities under this size standard. We note that the Commission
neither requests nor collects information on whether cable system
operators are affiliated with entities whose gross
[[Page 37479]]
annual revenues exceed $250 million, and therefore we are unable to
estimate more accurately the number of cable system operators that
would qualify as small under this size standard.
7. Electric Power Generators, Transmitters, and Distributors
47. Electric Power Generators, Transmitters, and Distributors. The
Census Bureau defines an industry group comprised of ``establishments,
primarily engaged in generating, transmitting, and/or distributing
electric power. Establishments in this industry group may perform one
or more of the following activities: (1) Operate generation facilities
that produce electric energy; (2) operate transmission systems that
convey the electricity from the generation facility to the distribution
system; and (3) operate distribution systems that convey electric power
received from the generation facility or the transmission system to the
final consumer.'' The SBA has developed a small business size standard
for firms in this category: ``A firm is small if, including its
affiliates, it is primarily engaged in the generation, transmission,
and/or distribution of electric energy for sale and its total electric
output for the preceding fiscal year did not exceed 4 million megawatt
hours.'' According to Census Bureau data for 2011, there were 2,419
firms in this category that operated for the entire year. Census data
do not track electric output and we have not determined how many of
these firms fit the SBA size standard for small, with no more than 4
million megawatt hours of electric output. Consequently, we estimate
that 2,419 or fewer firms may be considered small under the SBA small
business size standard.
D. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements for Small Entities
48. As indicated above, the NPRM seeks comment on possible
enhancements to the Commission's existing transparency rule that may
impose additional reporting, recordkeeping, or other compliance
requirements on some small entities. While the NPRM tentatively
concludes that the Commission should enhance the transparency rule to
improve its effectiveness for end users, edge providers, the Internet
community, and the Commission, the NPRM does not propose specific
revisions to the existing transparency rule. As described above, the
NPRM also seeks comment on a dispute resolution process that would, if
adopted, potentially require small entities to respond to complaints or
otherwise participate in dispute resolution procedures. One feature of
the enforcement mechanism as discussed in the NPRM, includes a proposal
to establish the role of an ombudsperson who would act as a watchdog to
represent the interests of start-ups and other small entities in
addition to consumers.
E. Steps Taken To Minimize the Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
49. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach,
which may include (among others) the following four alternatives: (1)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities. We expect to consider all of these factors when we have
received substantive comment from the public and potentially affected
entities.
50. The Commission expects to consider the economic impact on small
entities, as identified in comments filed in response to the NPRM and
this IRFA, in reaching its final conclusions and taking action in this
proceeding.
51. We note, though, that the potential enhancements to the
transparency rule, the proposed mechanism for individualized decision-
making under the proposed enforceable legal standard of commercially
reasonable practices, and various aspects of the proposed dispute
resolution process all contemplate a certain amount of flexibility that
may be helpful to small entities. For example, the Commission seeks
comment on whether there are ways the Commission or industry
associations could reduce burdens on broadband providers in complying
with the proposed enhanced transparency rule through the use of a
voluntary industry standardized glossary, or through the creation of a
dashboard that permits easy comparison of the policies, procedures, and
prices of various broadband providers throughout the country. We seek
comment here on the effect the various proposals described in the NPRM,
and summarized above, will have on small entities, and on what effect
alternative rules would have on those entities. How can the Commission
achieve its goal of protecting and promoting an open Internet while
also imposing minimal burdens on small entities? What specific steps
could the Commission take in this regard?
F. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
52. None
List of Subjects in 47 CFR Part 8
Cable television, Communications, Common carriers, Communications
common carriers, Radio, Telecommunications, Telephone.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Proposed Rules
For the reasons discussed in the preamble, the Federal
Communications Commission proposes to revise part 8 of Title 47 of the
Code of Federal Regulations as follows:
PART 8--PROTECTING AND PROMOTING THE OPEN INTERNET
Sec.
8.1 Purpose.
8.3 Transparency.
8.5 No blocking.
8.7 No commercially unreasonable practices.
8.9 Other laws and considerations.
8.11 Definitions.
8.12 Formal complaints.
8.13 General pleading requirements.
8.14 General formal complaint procedures.
8.15 Status conference.
8.16 Confidentiality of proprietary information.
8.17 Review.
Authority: 47 U.S.C. 151, 152, 154(i)-(j), 303, 316, 1302.
Sec. 8.1 Purpose.
The purpose of this part is to protect and promote the Internet as
an open platform enabling consumer choice, freedom of expression, end-
user control, competition, and the freedom to innovate without
permission, and thereby to encourage the deployment of advanced
telecommunications capability and remove barriers to infrastructure
investment.
Sec. 8.3 Transparency.
(a) A person engaged in the provision of broadband Internet access
service shall publicly disclose accurate information regarding the
network management practices, performance, and commercial terms of its
broadband Internet access services, in a manner tailored
(1) For end users to make informed choices regarding use of such
services,
[[Page 37480]]
(2) For edge providers to develop, market, and maintain Internet
offerings, and
(3) For the Commission and members of the public to understand how
such person complies with the requirements described in Sec. Sec. 8.5
and 8.7.
(b) In making the disclosures required by this section, a person
engaged in the provision of broadband Internet access service shall
include meaningful information regarding the source, timing, speed,
packet loss, and duration of congestion.
(c) In making the disclosures required by this section, a person
engaged in the provision of broadband Internet access service shall
publicly disclose in a timely manner to end users, edge providers, and
the Commission when they make changes to their network practices as
well as any instances of blocking, throttling, and pay-for-priority
arrangements, or the parameters of default or ``best effort'' service
as distinct from any priority service.
8.5 No blocking.
(a) A person engaged in the provision of fixed broadband Internet
access service, insofar as such person is so engaged, shall not block
lawful content, applications, services, or non-harmful devices, subject
to reasonable network management.
(b) A person engaged in the provision of mobile broadband Internet
access service, insofar as such person is so engaged, shall not block
consumers from accessing lawful Web sites, subject to reasonable
network management; nor shall such person block applications that
compete with the provider's voice or video telephony services, subject
to reasonable network management.
Sec. 8.7 No commercially unreasonable practices.
A person engaged in the provision of fixed broadband Internet
access service, insofar as such person is so engaged, shall not engage
in commercially unreasonable practices. Reasonable network management
shall not constitute a commercially unreasonable practice.
Sec. 8.9 Other laws and considerations.
(a) Nothing in this part supersedes any obligation or authorization
a provider of broadband Internet access service may have to address the
needs of emergency communications or law enforcement, public safety, or
national security authorities, consistent with or as permitted by
applicable law, or limits the provider's ability to do so.
(b) Nothing in this part prohibits reasonable efforts by a provider
of broadband Internet access service to address copyright infringement
or other unlawful activity.
Sec. 8.11 Definitions.
(a) Block. The failure of a broadband Internet access service to
provide an edge provider with a minimum level of access that is
sufficiently robust, fast, and dynamic for effective use by end users
and edge providers.
(b) Broadband Internet access service. A mass-market retail service
by wire or radio that provides the capability to transmit data to and
receive data from all or substantially all Internet endpoints,
including any capabilities that are incidental to and enable the
operation of the communications service, but excluding dial-up Internet
access service. This term also encompasses any service that the
Commission finds to be providing a functional equivalent of the service
described in the previous sentence, or that is used to evade the
protections set forth in this part.
(c) Edge provider. Any individual or entity that provides any
content, application, or service over the Internet, and any individual
or entity that provides a device used for accessing any content,
application, or service over the Internet.
(d) End user. Any individual or entity that uses a broadband
Internet access service.
(e) Fixed broadband Internet access service. A broadband Internet
access service that serves end users primarily at fixed endpoints using
stationary equipment. Fixed broadband Internet access service includes
fixed wireless services (including fixed unlicensed wireless services),
and fixed satellite services.
(f) Mobile broadband Internet access service. A broadband Internet
access service that serves end users primarily using mobile stations.
(g) Reasonable network management. A network management practice is
reasonable if it is appropriate and tailored to achieving a legitimate
network management purpose, taking into account the particular network
architecture and technology of the broadband Internet access service.
Sec. 8.12 Formal complaints.
Any person may file a formal complaint alleging a violation of the
rules in this part.
Sec. 8.13 General pleading requirements.
(a) General pleading requirements. All written submissions, both
substantive and procedural, must conform to the following standards:
(1) A pleading must be clear, concise, and explicit. All matters
concerning a claim, defense or requested remedy should be pleaded fully
and with specificity.
(2) Pleadings must contain facts that, if true, are sufficient to
warrant a grant of the relief requested.
(3) Facts must be supported by relevant documentation or affidavit.
(4) The original of all pleadings and submissions by any party
shall be signed by that party, or by the party's attorney. Complaints
must be signed by the complainant. The signing party shall state his or
her address and telephone number and the date on which the document was
signed. Copies should be conformed to the original. Each submission
must contain a written verification that the signatory has read the
submission and to the best of his or her knowledge, information and
belief formed after reasonable inquiry, it is well grounded in fact and
is warranted by existing law or a good faith argument for the
extension, modification or reversal of existing law; and that it is not
interposed for any improper purpose. If any pleading or other
submission is signed in violation of this provision, the Commission
shall upon motion or upon its own initiative impose appropriate
sanctions.
(5) Legal arguments must be supported by appropriate judicial,
Commission, or statutory authority. Opposing authorities must be
distinguished. Copies must be provided of all non-Commission
authorities relied upon which are not routinely available in national
reporting systems, such as unpublished decisions or slip opinions of
courts or administrative agencies.
(6) Parties are responsible for the continuing accuracy and
completeness of all information and supporting authority furnished in a
pending complaint proceeding. Information submitted, as well as
relevant legal authorities, must be current and updated as necessary
and in a timely manner at any time before a decision is rendered on the
merits of the complaint.
(7) Parties seeking expedited resolution of their complaint may
request acceptance on the Enforcement Bureau's Accelerated Docket
pursuant to the procedures at Sec. 1.730 of this chapter.
(b) Copies to be filed. The complainant shall file an original copy
of the complaint, accompanied by the correct fee, in accordance with
part 1, subpart G (see 1.1106) and, on the same day:
(1) File three copies of the complaint with the Office of the
Commission Secretary;
[[Page 37481]]
(2) Serve two copies on the Market Disputes Resolution Division,
Enforcement Bureau;
(3) Serve the complaint by hand delivery on either the named
defendant or one of the named defendant's registered agents for service
of process, if available, on the same date that the complaint is filed
with the Commission.
(c) Prefiling notice required. Any person intending to file a
complaint under this section must first notify the potential defendant
in writing that it intends to file a complaint with the Commission
based on actions alleged to violate one or more of the provisions
contained in this part. The notice must be sufficiently detailed so
that its recipient(s) can determine the specific nature of the
potential complaint. The potential complainant must allow a minimum of
ten (10) days for the potential defendant(s) to respond before filing a
complaint with the Commission.
(d) Frivolous pleadings. It shall be unlawful for any party to file
a frivolous pleading with the Commission. Any violation of this
paragraph shall constitute an abuse of process subject to appropriate
sanctions.
Sec. 8.14 General formal complaint procedures.
(a) Complaints. In addition to the general pleading requirements,
complaints must adhere to the following requirements:
(1) Certificate of service. Complaints shall be accompanied by a
certificate of service on any defendant.
(2) Statement of relief requested.
(i) The complaint shall state the relief requested. It shall state
fully and precisely all pertinent facts and considerations relied on to
demonstrate the need for the relief requested and to support a
determination that a grant of such relief would serve the public
interest.
(ii) The complaint shall set forth all steps taken by the parties
to resolve the problem.
(iii) A complaint may, on request of the filing party, be dismissed
without prejudice as a matter of right prior to the adoption date of
any final action taken by the Commission with respect to the petition
or complaint. A request for the return of an initiating document will
be regarded as a request for dismissal.
(3) Failure to prosecute. Failure to prosecute a complaint, or
failure to respond to official correspondence or request for additional
information, will be cause for dismissal. Such dismissal will be
without prejudice if it occurs prior to the adoption date of any final
action taken by the Commission with respect to the initiating pleading.
(b) Answers to complaints. Unless otherwise directed by the
Commission, any party who is served with a complaint shall file an
answer in accordance with the following requirements:
(1) The answer shall be filed within 20 days of service of the
complaint.
(2) The answer shall advise the parties and the Commission fully
and completely of the nature of any and all defenses, and shall respond
specifically to all material allegations of the complaint. Collateral
or immaterial issues shall be avoided in answers and every effort
should be made to narrow the issues. Any party against whom a complaint
is filed failing to file and serve an answer within the time and in the
manner prescribed by these rules may be deemed in default and an order
may be entered against defendant in accordance with the allegations
contained in the complaint.
(3) Facts must be supported by relevant documentation or affidavit.
(4) The answer shall admit or deny the averments on which the
adverse party relies. If the defendant is without knowledge or
information sufficient to form a belief as to the truth of an averment,
the defendant shall so state and this has the effect of a denial. When
a defendant intends in good faith to deny only part of an averment, the
answer shall specify so much of it as is true and shall deny only the
remainder, and state in detail the basis of that denial.
(5) Averments in a complaint are deemed to be admitted when not
denied in the answer.
(c) Reply. In addition to the general pleading requirements,
replies must adhere to the following requirements:
(1) The complainant may file a reply to a responsive pleading that
shall be served on the defendant and shall also contain a detailed full
showing, supported by affidavit, of any additional facts or
considerations relied on. Unless expressly permitted by the Commission,
replies shall not contain new matters.
(2) Failure to reply will not be deemed an admission of any
allegations contained in the responsive pleading, except with respect
to any affirmative defense set forth therein.
(3) Unless otherwise directed by the Commission, replies must be
filed within ten (10) days after submission of the responsive pleading.
(d) Motions. Except as provided in this section, or upon a showing
of extraordinary circumstances, additional motions or pleadings by any
party will not be accepted.
(e) Additional procedures and written submissions.
(1) The Commission may specify other procedures, such as oral
argument or evidentiary hearing directed to particular aspects, as it
deems appropriate. In the event that an evidentiary hearing is
required, the Commission will determine, on the basis of the pleadings
and such other procedures as it may specify, whether temporary relief
should be afforded any party pending the hearing and the nature of any
such temporary relief.
(2) The Commission may require the parties to submit any additional
information it deems appropriate for a full, fair, and expeditious
resolution of the proceeding, including copies of all contracts and
documents reflecting arrangements and understandings alleged to violate
the requirements set forth in the Communications Act and in this part,
as well as affidavits and exhibits.
(3) The Commission may, in its discretion, require the parties to
file briefs summarizing the facts and issues presented in the pleadings
and other record evidence.
(i) These briefs shall contain the findings of fact and conclusions
of law which that party is urging the Commission to adopt, with
specific citations to the record, and supported by relevant authority
and analysis.
(ii) The schedule for filing any briefs shall be at the discretion
of the Commission. Unless ordered otherwise by the Commission, such
briefs shall not exceed fifty (50) pages.
(iii) Reply briefs may be submitted at the discretion of the
Commission. Unless ordered otherwise by the Commission, reply briefs
shall not exceed thirty (30) pages.
(f) Discovery.
(1) The Commission may in its discretion order discovery limited to
the issues specified by the Commission. Such discovery may include
answers to written interrogatories, depositions, document production,
or requests for admissions.
(2) The Commission may in its discretion direct the parties to
submit discovery proposals, together with a memorandum in support of
the discovery requested. Such discovery requests may include answers to
written interrogatories, admissions, document production, or
depositions. The Commission may hold a status conference with the
parties, pursuant to Sec. 8.15 of this part, to determine the scope of
discovery, or direct the parties regarding the scope of discovery. If
the Commission determines that extensive discovery is required or that
depositions are warranted, the Commission may advise the parties that
the proceeding
[[Page 37482]]
will be referred to an administrative law judge in accordance with
paragraph (g) of this section.
(g) Referral to administrative law judge.
(1) After reviewing the pleadings, and at any stage of the
proceeding thereafter, the Commission may, in its discretion, designate
any proceeding or discrete issues arising out of any proceeding for an
adjudicatory hearing before an administrative law judge.
(2) Before designation for hearing, the Commission shall notify,
either orally or in writing, the parties to the proceeding of its
intent to so designate, and the parties shall be given a period of ten
(10) days to elect to resolve the dispute through alternative dispute
resolution procedures, or to proceed with an adjudicatory hearing. Such
election shall be submitted in writing to the Commission.
(3) Unless otherwise directed by the Commission, or upon motion by
the Enforcement Bureau Chief, the Enforcement Bureau Chief shall not be
deemed to be a party to a proceeding designated for a hearing before an
administrative law judge pursuant to this paragraph (g).
(h) Commission ruling. The Commission (or the Enforcement Bureau on
delegated authority), after consideration of the pleadings, shall issue
an order ruling on the complaint.
Sec. 8.15 Status conference.
(a) In any proceeding subject to the part 8 rules, the Commission
may in its discretion direct the attorneys and/or the parties to appear
for a conference to consider:
(1) Simplification or narrowing of the issues;
(2) The necessity for or desirability of amendments to the
pleadings, additional pleadings, or other evidentiary submissions;
(3) Obtaining admissions of fact or stipulations between the
parties as to any or all of the matters in controversy;
(4) Settlement of the matters in controversy by agreement of the
parties;
(5) The necessity for and extent of discovery, including objections
to interrogatories or requests for written documents;
(6) The need and schedule for filing briefs, and the date for any
further conferences; and
(7) Such other matters that may aid in the disposition of the
proceeding.
(b) Any party may request that a conference be held at any time
after an initiating document has been filed.
(c) Conferences will be scheduled by the Commission at such time
and place as it may designate, to be conducted in person or by
telephone conference call.
(d) The failure of any attorney or party, following advance notice
with an opportunity to be present, to appear at a scheduled conference
will be deemed a waiver and will not preclude the Commission from
conferring with those parties or counsel present.
(e) During a status conference, the Commission may issue oral
rulings pertaining to a variety of matters relevant to the conduct of
the proceeding including, inter alia, procedural matters, discovery,
and the submission of briefs or other evidentiary materials. These
rulings will be promptly memorialized in writing and served on the
parties. When such rulings require a party to take affirmative action,
such action will be required within ten (10) days from the date of the
written memorialization unless otherwise directed by the Commission.
Sec. 8.16 Confidentiality of proprietary information.
(a) Any materials filed in the course of a proceeding under this
part may be designated as proprietary by that party if the party
believes in good faith that the materials fall within an exemption to
disclosure contained in the Freedom of Information Act (FOIA), 5 U.S.C.
552(b). Any party asserting confidentiality for such materials shall so
indicate by clearly marking each page, or portion thereof, for which a
proprietary designation is claimed. If a proprietary designation is
challenged, the party claiming confidentiality will have the burden of
demonstrating, by a preponderance of the evidence, that the material
designated as proprietary falls under the standards for nondisclosure
enunciated in FOIA.
(b) Submissions containing information claimed to be proprietary
under this section shall be submitted to the Commission in confidence
pursuant to the requirements of Sec. 0.459 of this chapter and clearly
marked ``Not for Public Inspection.'' An edited version removing all
proprietary data shall be filed with the Commission for inclusion in
the public file within five (5) days from the date the unedited reply
is submitted, and shall be served on the opposing parties.
(c) Except as provided in paragraph (d) of this section, materials
marked as proprietary may be disclosed solely to the following persons,
only for use in the proceeding, and only to the extent necessary to
assist in the prosecution or defense of the case:
(1) Counsel of record representing the parties in the proceeding
and any support personnel employed by such attorneys;
(2) Officers or employees of the parties in the proceeding who are
named by another party as being directly involved in the proceeding;
(3) Consultants or expert witnesses retained by the parties;
(4) The Commission and its staff; and
(5) Court reporters and stenographers in accordance with the terms
and conditions of this section.
(d) The Commission will entertain, subject to a proper showing, a
party's request to further restrict access to proprietary information
as specified by the party. The other parties will have an opportunity
to respond to such requests.
(e) The persons designated in paragraphs (c) and (d) of this
section shall not disclose information designated as proprietary to any
person who is not authorized under this section to receive such
information, and shall not use the information in any activity or
function other than the prosecution or defense of the case before the
Commission. Each individual who is provided access to the information
by the opposing party shall sign a notarized statement affirmatively
stating, or shall certify under penalty of perjury, that the individual
has personally reviewed the Commission's rules and understands the
limitations they impose on the signing party.
(f) No copies of materials marked proprietary may be made except
copies to be used by persons designated in paragraphs (c) and (d) of
this section. Each party shall maintain a log recording the number of
copies made of all proprietary material and the persons to whom the
copies have been provided.
(g) Upon termination of the complaint proceeding, including all
appeals and petitions, all originals and reproductions of any
proprietary materials, along with the log recording persons who
received copies of such materials, shall be provided to the producing
party. In addition, upon final termination of the proceeding, any notes
or other work product derived in whole or in part from the proprietary
materials of an opposing or third party shall be destroyed.
Sec. 8.17 Review.
(a) Interlocutory review.
(1) Except as provided below, no party may seek review of
interlocutory rulings until a decision on the merits has been issued by
the Commission's staff, including an administrative law judge.
(2) Rulings listed in this paragraph are reviewable as a matter of
right. An application for review of such ruling may not be deferred and
raised as an exception to a decision on the merits.
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(i) If the staff's ruling denies or terminates the right of any
person to participate as a party to the proceeding, such person, as a
matter of right, may file an application for review of that ruling.
(ii) If the staff's ruling requires production of documents or
other written evidence, over objection based on a claim of privilege,
the ruling on the claim of privilege is reviewable as a matter of
right.
(iii) If the staff's ruling denies a motion to disqualify a staff
person from participating in the proceeding, the ruling is reviewable
as a matter of right.
(b) Petitions for reconsideration. Petitions for reconsideration of
interlocutory actions by the Commission's staff or by an administrative
law judge will not be entertained. Petitions for reconsideration of a
decision on the merits made by the Commission's staff should be filed
in accordance with Sec. Sec. 1.104 through 1.106 of this chapter.
(c) Application for review.
(1) Any party to a part 8 proceeding aggrieved by any decision on
the merits issued by the staff pursuant to delegated authority may file
an application for review by the Commission in accordance with Sec.
1.115 of this chapter.
(2) Any party to a part 8 proceeding aggrieved by any decision on
the merits by an administrative law judge may file an appeal of the
decision directly with the Commission, in accordance with Sec. Sec.
1.276(a) and 1.277(a) through (c) of this chapter.
[FR Doc. 2014-14859 Filed 6-30-14; 8:45 am]
BILLING CODE 6712-01-P