[Federal Register Volume 83, Number 36 (Thursday, February 22, 2018)]
[Rules and Regulations]
[Pages 7852-7922]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03464]
[[Page 7851]]
Vol. 83
Thursday,
No. 36
February 22, 2018
Part II
Federal Communications Commission
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47 CFR Parts 1, 8, and 20
Restoring Internet Freedom; Final Rule
Federal Register / Vol. 83 , No. 36 / Thursday, February 22, 2018 /
Rules and Regulations
[[Page 7852]]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 1, 8, and 20
[WC Docket No. 17-108; FCC 17-166]
Restoring Internet Freedom
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this document, the Federal Communications Commission
(Commission) returns to the light-touch regulatory scheme that enabled
the internet to develop and thrive for nearly two decades. The
Commission restores the classification of broadband internet access
service as a lightly-regulated information service and reinstates the
private mobile service classification of mobile broadband internet
access service. The Restoring Internet Freedom Order requires internet
service providers (ISPs) to disclose information about their network
management practices, performance characteristics, and commercial terms
of service. Finding that transparency is sufficient to protect the
openness of the internet and that conduct rules have greater costs than
benefits, the Order eliminates the conduct rules imposed by the Title
II Order.
DATES: Effective date: April 23, 2018, except for amendatory
instructions 2, 3, 5, 6, and 8, which are delayed as follows. The FCC
will publish a document in the Federal Register announcing the
effective date(s) of the delayed amendatory instructions, which are
contingent on OMB approval of the modified information collection
requirements in 47 CFR 8.1 (amendatory instruction 5). The Declaratory
Ruling, Report and Order, and Order will also be effective upon the
date announced in that same document.
FOR FURTHER INFORMATION CONTACT: Ramesh Nagarajan, Competition Policy
Division, Wireline Competition Bureau, at (202) 418-2582,
fcc.gov">ramesh.nagarajan@fcc.gov. For additional information concerning the
Paperwork Reduction Act information collection requirements contained
in this document, send an email to fcc.gov">PRA@fcc.gov or contact Nicole Ongele
at (202) 418-2991.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's
Declaratory Ruling, Report and Order, and Order (``Restoring Internet
Freedom Order'') in WC Docket No. 17-108, adopted on December 14, 2017
and released on January 4, 2018. The full text of this document is
available at https://apps.fcc.gov/edocs_public/attachmatch/FCC-17-166A1.pdf. The full text is also available for public inspection during
regular business hours in the FCC Reference Information Center, Portals
II, 445 12th Street SW, Room CY-A257, Washington, DC 20554. To request
materials in accessible formats for people with disabilities (e.g.,
braille, large print, electronic files, audio format, etc.) or to
request reasonable accommodations (e.g., accessible format documents,
sign language interpreters, CART, etc.), send an email to
fcc.gov">fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at
(202) 418-0530 (voice) or (202) 418-0432 (TTY). The language following
the DATES caption of this preamble is provided to ensure compliance
with 1 CFR 18.17.
Synopsis
In this Declaratory Ruling, Report and Order, and Order, the
Commission restores the light-touch regulatory scheme that fostered the
internet's growth, openness, and freedom. Through these actions, we
advance our critical work to promote broadband deployment in rural
America and infrastructure investment throughout the nation, brighten
the future of innovation both within networks and at their edge, and
move closer to the goal of eliminating the digital divide.
I. Ending Public-Utility Regulation of the Internet
1. We reinstate the information service classification of broadband
internet access service, consistent with the Supreme Court's holding in
Brand X. Based on the record before us, we conclude that the best
reading of the relevant definitional provisions of the Act supports
classifying broadband internet access service as an information
service. Having determined that broadband internet access service,
regardless of whether offered using fixed or mobile technologies, is an
information service under the Act, we also conclude that as an
information service, mobile broadband internet access service should
not be classified as a commercial mobile service or its functional
equivalent. We find that it is well within our legal authority to
classify broadband internet access service as an information service,
and reclassification also comports with applicable law governing agency
decisions to change course. While we find our legal analysis sufficient
on its own to support an information service classification of
broadband internet access service, strong public policy considerations
further weigh in favor of an information service classification. Below,
we find that economic theory, empirical data, and even anecdotal
evidence also counsel against imposing public-utility style regulation
on ISPs. The broader internet ecosystem thrived under the light-touch
regulatory treatment of Title I, with massive investment and innovation
by both ISPs and edge providers, leading to previously unimagined
technological developments and services. We conclude that a return to
Title I classification will facilitate critical broadband investment
and innovation by removing regulatory uncertainty and lowering
compliance costs.
A. Reinstating the Information Service Classification of Broadband
Internet Access Service
1. Scope
2. We continue to define ``broadband internet access service'' 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. By mass market,
we mean services marketed and sold on a standardized basis to
residential customers, small businesses, and other end-user customers
such as schools and libraries. ``Schools'' would include institutions
of higher education to the extent that they purchase these standardized
retail services. For purposes of this definition, ``mass market'' also
includes broadband internet access service purchased with the support
of the E-rate and Rural Healthcare programs, as well as any broadband
internet access service offered using networks supported by the Connect
America Fund (CAF), but does not include enterprise service offerings
or special access services, which are typically offered to larger
organizations through customized or individually negotiated
arrangements.
3. The term ``broadband internet access service'' includes services
provided over any technology platform, including but not limited to
wire, terrestrial wireless (including fixed and mobile wireless
services using licensed or unlicensed spectrum), and satellite. For
purposes of our discussion, we divide the various forms of broadband
internet access service into the two categories of ``fixed'' and
``mobile.'' With these two categories of services--fixed and mobile--we
intend to cover the entire universe of internet access services at
issue in the Commission's
[[Page 7853]]
prior broadband classification decisions, as well as all other
broadband internet access services offered over other technology
platforms that were not addressed by prior classification orders. We
also make clear that our classification finding applies to all
providers of broadband internet access service, as we delineate them
here, regardless of whether they lease or own the facilities used to
provide the service. ``Fixed'' broadband internet access service refers
to a broadband internet access service that serves end users primarily
at fixed endpoints using stationary equipment, such as the modem that
connects an end user's home router, computer, or other internet access
device to the internet. The term encompasses the delivery of fixed
broadband over any medium, including various forms of wired broadband
services (e.g., cable, DSL, fiber), fixed wireless broadband services
(including fixed services using unlicensed spectrum), and fixed
satellite broadband services. ``Mobile'' broadband internet access
service refers to a broadband internet access service that serves end
users primarily using mobile stations. Mobile broadband internet access
includes, among other things, services that use smartphones or mobile-
network-enabled tablets as the primary endpoints for connection to the
internet. The term also encompasses mobile satellite broadband
services. We note that ``public safety services'' as defined in Section
337(f)(1) would not meet the definition of ``broadband internet access
service'' subject to the rules herein given that ``such services are
not made commercially available to the public by the provider'' as a
mass-market retail service.
4. As the Commission found in 2010, broadband internet access
service does not include services offering connectivity to one or a
small number of internet endpoints for a particular device, e.g.,
connectivity bundled with e-readers, heart monitors, or energy
consumption sensors, to the extent the service relates to the
functionality of the device. To the extent these services are provided
by ISPs over last-mile capacity shared with broadband internet access
service, they would be non-broadband internet access service data
services (formerly specialized services). As the Commission found in
both 2010 and 2015, non-broadband internet access service data services
do not fall under the broadband internet access service category. Such
services generally are not used to reach large parts of the internet;
are not a generic platform, but rather a specific applications-level
service; and use some form of network management to isolate the
capacity used by these services from that used by broadband internet
access services. Further, we observe that to the extent ISPs ``use
their broadband infrastructure to provide video and voice services,
those services are regulated in their own right.''
5. Broadband internet access service also does not include virtual
private network (VPN) services, content delivery networks (CDNs),
hosting or data storage services, or internet backbone services (if
those services are separate from broadband internet access service),
consistent with past Commission precedent. The Commission has
historically distinguished these services from ``mass market''
services, as they do not provide the capability to transmit data to and
receive data from all or substantially all internet endpoints. We do
not disturb that finding here. Consistent with past Commissions, we
note that the transparency rule we adopt today applies only so far as
the limits of an ISP's control over the transmission of data to or from
its broadband customers.
6. Finally, we observe that to the extent that coffee shops,
bookstores, airlines, private end-user networks such as libraries and
universities, and other businesses acquire broadband internet access
service from an ISP to enable patrons to access the internet from their
respective establishments, provision of such service by the premise
operator would not itself be considered a broadband internet access
service unless it was offered to patrons as a retail mass market
service, as we define it here. Although not bound by the transparency
rule we adopt today, we encourage premise operators to disclose
relevant restrictions on broadband service they make available to their
patrons. Likewise, when a user employs, for example, a wireless router
or a Wi-Fi hotspot to create a personal Wi-Fi network that is not
intentionally offered for the benefit of others, he or she is not
offering a broadband internet access service under our definition,
because the user is not marketing and selling such service to
residential customers, small business, and other end-user customers
such as schools and libraries.
2. Broadband Internet Access Service is an Information Service Under
the Act
7. In deciding how to classify broadband internet access service,
we find that the best reading of the relevant definitional provisions
of the Act supports classifying broadband internet access service as an
information service. Section 3 of the Act defines an ``information
service'' as ``the offering of a capability for generating, acquiring,
storing, transforming, processing, retrieving, utilizing, or making
available information via telecommunications, and includes electronic
publishing, but does not include any use of any such capability for the
management, control, or operation of a telecommunications system or the
management of a telecommunications service.'' Section 3 defines a
``telecommunications service,'' by contrast, as ``the offering of
telecommunications for a fee directly to the public, or to such classes
of users as to be effectively available directly to the public,
regardless of the facilities used.'' Finally, Section 3 defines
``telecommunications''--used in each of the prior two definitions--as
``the transmission, between or among points specified by the user, of
information of the user's choosing, without change in the form or
content of the information as sent and received.'' Prior to the Title
II Order the Commission had long interpreted and applied these terms to
classify various forms of internet access service as information
services--a conclusion affirmed as reasonable by the Supreme Court in
Brand X. Our action here simply returns to that prior approach.
8. When interpreting a statute it administers, the Commission, like
all agencies, ``must operate `within the bounds of reasonable
interpretation.' And reasonable statutory interpretation must account
for both `the specific context in which . . . language is used' and
`the broader context of the statute as a whole.' '' Below, we first
explore the meaning of the ``capability'' contemplated in the statutory
definition of ``information service,'' and find that broadband internet
access service provides consumers the ``capability'' to engage in all
of the information processes listed in the information service
definition. We also find that broadband internet access service
likewise provides information processing functionalities itself, such
as DNS and caching, which satisfy the capabilities set forth in the
information service definition. We then address what ``capabilities''
we believe are being ``offered'' by ISPs, and whether these are
reasonably viewed as separate from or inextricably intertwined with
transmission, and find that broadband internet access service offerings
inextricably intertwine these information processing capabilities with
transmission.
9. We find that applying our understanding of the statutory
definitions to broadband internet access service as it is offered today
most soundly leads to the conclusion that it
[[Page 7854]]
is an information service. Although the internet marketplace has
continued to develop in the years since the earliest classification
decisions, broadband internet access service offerings still involve a
number of ``capabilities'' within the meaning of the Section 3
definition of information services, including critical capabilities
that all ISP customers must use for the service to work as it does
today. While many popular uses of the internet have shifted over time,
the record reveals that broadband internet access service continues to
offer information service capabilities that typical users both expect
and rely upon. Indeed, the basic nature of internet service--
``[p]rovid[ing] consumers with a comprehensive capability for
manipulating information using the internet via high-speed
telecommunications''--has remained the same since the Supreme Court
upheld the Commission's similar classification of cable modem service
as an information service twelve years ago.
10. A body of precedent from the courts and the Commission served
as the backdrop for the 1996 Act and informed the Commission's original
interpretation and implementation of the statutory definitions of
``telecommunications,'' ``telecommunications service,'' and
``information service.'' The classification decisions in the Title II
Order discounted or ignored much of that precedent. Without viewing
ourselves as formally bound by that prior precedent, we find it
eminently reasonable, as a legal matter, to give significant weight to
that pre-1996 Act precedent in resolving how the statutory definitions
apply to broadband internet access service, enabling us to resolve
statutory ambiguity in a manner that we believe best reflects
Congress's understanding and intent. Our analysis thus is not at odds
with the statement in USTelecom that the 1996 Act definitions were not
``intended to freeze in place the Commission's existing classification
of various services.'' Consistent with this approach as a traditional
tool of statutory interpretation, we reject arguments that suggest that
we should disregard this precedent largely out-of-hand. More generally,
of course, this precedent--Brand X in particular--demonstrates that the
Act does not compel a telecommunications service classification.
a. Broadband Internet Access Service Information Processing
Capabilities
11. We begin by evaluating the ``information service'' definition
and conclude that it encompasses broadband internet access service.
Broadband internet access service includes ``capabilit[ies]'' meeting
the information service definition under a range of reasonable
interpretations of that term. In other contexts, the Commission has
looked to dictionary definitions and found the term ``capability'' to
be ``broad and expansive,'' including the concepts of ``potential
ability'' and ``the capacity to be used, treated, or developed for a
particular purpose.'' Because broadband internet access service
necessarily has the capacity or potential ability to be used to engage
in the activities within the information service definition--
``generating, acquiring, storing, transforming, processing, retrieving,
utilizing, or making available information via telecommunications''--we
conclude that it is best understood to have those ``capabilit[ies].''
The record reflects that fundamental purposes of broadband internet
access service are for its use in ``generating'' and ``making
available'' information to others, for example through social media and
file sharing; ``acquiring'' and ``retrieving'' information from sources
such as websites and online streaming and audio applications, gaming
applications, and file sharing applications; ``storing'' information in
the cloud and remote servers, and via file sharing applications;
``transforming'' and ``processing'' information such as by manipulating
images and documents, online gaming use, and through applications that
offer the ability to send and receive email, cloud computing and
machine learning capabilities; and ``utilizing'' information by
interacting with stored data. These are just a few examples of how
broadband internet access service enables customers to generate,
acquire, store, transform, process, retrieve, utilize, and make
available information. These are not merely incidental uses of
broadband internet access service--rather, because it not only has
``the capacity to be used'' for these ``particular purpose[s]'' but was
designed and intended to do so, we find that broadband internet access
is best interpreted as providing customers with the ``capability'' for
such interactions with third party providers.
12. We also find that broadband internet access is an information
service irrespective of whether it provides the entirety of any end
user functionality or whether it provides end user functionality in
tandem with edge providers. We do not believe that Congress, in
focusing on the ``offering of a capability,'' intended the
classification question to turn on an analysis of which capabilities
the end user selects. Further, we are unpersuaded by commenters who
assert that in order to be considered an ``information service,'' an
ISP must not only offer customers the ``capability'' for interacting
with information that may be offered by third parties (``click-
through''), but must also provide the ultimate content and applications
themselves. Although there is no dispute that many edge providers
likewise perform functions to facilitate information processing
capabilities, they all depend on the combination of information-
processing and transmission that ISPs make available through broadband
internet access service. The fundamental purpose of broadband internet
access service is to ``enable a constant flow of computer-mediated
communications between end-user devices and various servers and routers
to facilitate interaction with online content.''
13. From the earliest decisions classifying internet access
service, the Commission recognized that even when ISPs enable
subscribers to access third party content and services, that can
constitute ``a capability for generating, acquiring, storing,
transforming, processing, retrieving, utilizing, or making available
information via telecommunications.'' As the Commission explained in
the Stevens Report, ``[s]ubscribers can retrieve files from the World
Wide Web, and browse their contents, because their service provider
offers the `capability for . . . acquiring, . . . retrieving [and]
utilizing . . . information.' '' Attempts to distinguish the
Commission's classification precedent thus are unfounded insofar as
they fail to account for this aspect of the Commission's analysis in
those orders. Thus, even where an ISP enables end-users to access the
content or applications of a third party, the Commission nonetheless
found that constituted the requisite information service
``capability.'' When the Title II Order attempted to evaluate customer
perception based on their usage of broadband internet access service,
it failed to persuasively grapple with the relevant implications of
prior Commission classification precedent. The Title II Order argued
that broadband internet access service primarily is used to access
content, applications, and services from third parties unaffiliated
with the ISP in support of the view that customers perceive it as a
separate offering of telecommunications. The Title II Order offers no
explanation as to why its narrower view of ``capability''
[[Page 7855]]
was more reasonable than the Commission's previous, long-standing view
(other than seeking to advance the classification outcome that Order
was driving towards). Consequently, the Title II Order essentially
assumed away the legal question of whether end-users perceive broadband
internet access service as offering them the ``capability for . . .
acquiring, . . . retrieving [and] utilizing . . . information'' under
the broader reading of ``capability'' in prior Commission precedent.
14. But even if ``capability'' were understood as requiring more of
the information processing to be performed by the classified service
itself, we find that broadband internet access service meets that
standard. Not only do ISPs offer end users the capability to interact
with information online in each and every one of the ways set forth
above, they also do so through a variety of functionally integrated
information processing components that are part and parcel of the
broadband internet access service offering itself. In particular, we
conclude that DNS and caching functionalities, as well as certain other
information processing capabilities offered by ISPs, are integrated
information processing capabilities offered as part of broadband
internet access service to consumers today. In addition to DNS and
caching, the record reflects that ISPs may also offer a variety of
additional features that consist of information processing
functionality inextricably intertwined with the underlying service.
These additional features include, and are not limited to: email, speed
test servers, backup and support services, geolocation-based
advertising, data storage, parental controls, unique programming
content, spam protection, pop-up blockers, instant messaging services,
on-the-go access to Wi-Fi hotspots, and various widgets, toolbars, and
applications. While we do not find the offering of these information
processing capabilities determinative of the classification of
broadband internet access service, their inclusion in the broadband
internet access service, and the capabilities and functionalities
necessary to make these features possible, further support the
``information service'' classification.
15. DNS. We find that DNS is an indispensable functionality of
broadband internet access service. While we accept that DNS is not
necessary for transmission, we reject assertions that it is not
indispensable to the broadband internet access service customers use--
and expect--today. DNS is a core function of broadband internet access
service that involves the capabilities of generating, acquiring,
storing, transforming, processing, retrieving, utilizing and making
available information. DNS is used to facilitate the information
retrieval capabilities that are inherent in internet access. DNS allows
```click through' access from one web page to another, and its computer
processing functions analyze user queries to determine which website
(and server) would respond best to the user's request.'' And
``[b]ecause it translates human language (e.g., the name of a website)
into the numerical data (i.e., an IP address) that computers can
process, it is indispensable to ordinary users as they navigate the
internet.'' Without DNS, a consumer would not be able to access a
website by typing its advertised name (e.g., fcc.gov or cnn.com). The
Brand X Court recognized the importance of DNS, concluding that ``[f]or
an internet user, `DNS is a must. . . . [N]early all of the internet's
network services use DNS. That includes the World Wide Web, electronic
mail, remote terminal access, and file transfer.' '' While ISPs are not
the sole providers of DNS services, the vast majority of ordinary
consumers rely upon the DNS functionality provided by their ISP, and
the absence of ISP-provided DNS would fundamentally change the online
experience for the consumer. We also observe that DNS, as it is used
today, provides more than a functionally integrated address-translation
capability, but also enables other capabilities critical to providing a
functional broadband internet access service to the consumer, including
for example, a variety of underlying network functionality information
associated with name service, alternative routing mechanisms, and
information distribution.
16. The treatment of similar functions in MFJ precedent bolsters
our conclusion. Despite the fact that the telecommunications management
exception (and information service definition more broadly) was drawn
most directly from the MFJ, the Title II Order essentially ignored MFJ
precedent when concluding that DNS fell within the statutory
telecommunications management exception. In addition, even the Title II
Order's limited use of Computer Inquiries precedent focused mostly on
relatively high-level Commission statements about the general sorts of
capabilities that could be basic (or adjunct-to-basic) or drew
analogies to specific holdings that are at best ambiguous as to their
application to broadband internet access service. When analyzing
``gateway'' functionalities by which BOCs would provide end-users with
access to third party information services, the MFJ court found that
``address translation,'' which enabled ``the consumer [to] use an
abbreviated code or signal . . . in order to access the information
service provider'' such as through ``the translation of a mnemonic code
into [a] telephone number,'' rendered gateways an information service.
We recognize that gateway functionalities and broadband internet access
service are not precisely coextensive in scope. We do, however, find
similarities between functionalities such as address translation and
storage and retrieval to key functionalities provided by ISPs as part
of broadband internet access service, and we conclude the court found
such gateway and similar functionalities independently sufficient to
warrant an information service classification under the MFJ. The
``address translation'' gateway function appears highly analogous to
the DNS function of broadband internet access service, which enables
end users to use easier-to-remember domain names to initiate access to
the associated IP addresses of edge providers. That MFJ precedent,
neglected by the Title II Order, thus supports our finding that the
inclusion of DNS in broadband internet access service offerings
likewise renders that service an information service. We rely on this
analogy between DNS and particular functions classified under pre-1996
Act precedent not because the technologies are identical in all
particulars, but because they share the same relevant characteristics
for purposes of making a classification decision under the Act. Given
the close fit between DNS and the address translation function
classified as an information service under the MFJ coupled with the
fact that the statutory information service definition (and
telecommunications management exception) was drawn more directly from
the MFJ, we find the MFJ precedent entitled to more weight than
analogies to Computer Inquiries precedent. We thus are not persuaded by
arguments seeking to analogize DNS to directory assistance, which the
Commission classified as ``adjunct-to-basic'' under the Computer
Inquiries.
17. We thus find that the Title II Order erred in finding that DNS
functionalities fell within the telecommunications systems management
exception to the definition of ``information service.'' That exception
from the statutory information service definition was drawn from the
language of the MFJ, and was understood as ``directed at internal
operations, not at services for
[[Page 7856]]
customers or end users.'' The court's definition of information
services excluded capabilities ``for the management, control, or
operation of a telecommunication system or the management of a
telecommunications service.'' Under the Communications Act, the
definition of ``information services'' includes an identically-worded
``telecommunications management'' exception. Commission precedent and
legislative history likewise recognize that the definition was drawn
from the MFJ. We interpret the concepts of ``management, control, or
operation'' in the telecommunications management exception consistent
with that understanding. Applying that interpretation, we find the
record reflects that little or nothing in the DNS look-up process is
designed to help an ISP ``manage'' its network; instead, DNS
functionalities ``provide stored information to end users to help them
navigate the internet.'' As AT&T explains: ``When an end user types a
domain name into his or her browser and sends a DNS query to an ISP, .
. . the ISP . . . converts the human-language domain name into a
numerical IP address, and it then conveys that information back to the
end user . . . [who] (via his or her browser) thereafter sends a
follow-up request for the internet resources located at that numerical
IP address.'' DNS does not merely ``manage'' a telecommunications
service, as some commenters assert, but rather is a function that is
useful and essential to providing internet access for the ordinary
consumer. We are persuaded that ``[w]ere DNS simply a management
function, this would not be the case.'' Comparing functions that would
fall within the exception illustrates the distinction. For example, in
contrast to DNS's interaction with users and their applications, ``non-
user, management-only protocols might include things such as Simple
Network Management Protocol (SNMP), Network Control Protocol (NETCONF),
or DOCSIS bootfiles for controlling the configuration of cable
modems.'' These protocols support services that manage the network
independent of the transmission of information initiated by a user.
Other functions that would fall into the telecommunications systems
management exception might include information systems for account
management and billing, configuration management, and the monitoring of
failures and other state information, and to keep track of which
addresses are reachable through each of the interconnected neighboring
networks.
18. The Title II Order drew erroneous conclusions from Computer
Inquiries precedent and too quickly rejected objections to its
treatment of DNS as meeting the telecommunications management
exception. The same shortcomings are present in the Title II Order's
analysis of caching, as well. Under the Computer Inquiries framework,
the Commission held that some capabilities ``may properly be associated
with basic [common carrier] service without changing its nature, or
with an enhanced service without changing the classification of the
latter as unregulated under Title II of the Act.'' These commonly came
to be known as ``adjunct'' capabilities. The Commission has held that
functions it had classified as ``adjunct-to-basic'' under the Computer
Inquiries framework will fall within the statutory telecommunications
management exception to the information service definition. Drawing
loose analogies to certain functions described as adjunct-to-basic
under Commission precedent, the Title II Order held that DNS fell
within the telecommunications management exception.
19. The Title II Order incorrectly assumed that so long as a
functionality was, in part, used in a manner that could be viewed as
adjunct-to-basic, it necessarily was adjunct-to-basic regardless of
what the functionality otherwise accomplished. In addition to the MFJ
precedent, Bureau precedent similarly has observed that adjunct-to-
basic capabilities do not include functions ``useful to end users,
rather than carriers.'' Given the lack of ambiguity in the MFJ's
holding in this regard, we find it more reasonable to interpret this
precedent to call for a similar requirement that ``adjunct to basic''
services do not include services primarily useful to end-users, and
reject arguments to the contrary. Although confronted with claims that
DNS is, in significant part, designed to be useful to end-users rather
than providers, the Title II Order nonetheless decided that it fell
within the telecommunications management exception. The same is true of
the Title II Order's treatment of caching. While conceding that DNS, as
well as other functions like caching, ``do provide a benefit to
subscribers,'' the Title II Order held that they nonetheless fell
within the telecommunications management exception because it found
some aspect of their operation also was of use to providers in managing
their networks. This expansive view of the telecommunications
management exception--and associated narrowing of the scope of
information services--is a transposition of the analytical approach
embodied in the MFJ and Computer Inquiries; under the approach in the
pre-1996 Act precedent, the analysis would instead begin with the broad
language of the information service or enhanced service definitions,
generally excluding particular functions only if the purpose served
clearly was narrowly focused on facilitating bare transmission. The
Commission and the courts made clear the narrow scope of the `adjunct-
to-basic' or `telecommunications management' categories in numerous
decisions in many different contexts.). Notably, the focus remains on
the purpose or use of the specific function in question and not merely
whether the resulting service, as a whole, is useful to end-users.
20. The Title II Order also put misplaced reliance on Computer
Inquiries adjunct-to-basic precedent from the traditional telephone
service context as a comparison when evaluating broadband internet
access service functionalities. Because broadband internet access
service was not directly addressed in pre-1996 Act Computer Inquiries
and MFJ precedent, analogies to functions that were classified under
that precedent must account for potentially distinguishing
characteristics not only in terms of technical details but also in
terms of the regulatory backdrop. The 1996 Act enunciates a policy for
the internet that distinguishes broadband internet access from legacy
services like traditional telephone service. The 1996 Act explains that
it is federal policy ``to preserve the vibrant and competitive free
market that presently exists for the internet and other interactive
computer services, unfettered by Federal or State regulation.'' The
application of potentially ambiguous precedent to broadband internet
access service should be informed by how well--or how poorly--it
advances that deregulatory statutory policy. We find that our approach
to that precedent, which results in an information service
classification of broadband internet access service, better advances
that deregulatory policy than the approach in the Title II Order, which
led to the imposition of utility-style regulation under Title II.
21. The regulatory history of traditional telephone service also
informs our understanding of Computer Inquiries precedent, further
distinguishing it from broadband internet access service. Given the
long history of common carriage offering of that service by the time of
the Computer Inquiries, it is understandable that some precedent
started with a presumption
[[Page 7857]]
that the underlying service was a ``basic service.'' But similar
assumptions would not be warranted in the case of services other than
traditional telephone service for which there was no similar
longstanding history of common carriage. Thus, not only did the Title
II Order rely on specific holdings that are at best ambiguous in their
analogy to technical characteristics of broadband internet access
service, but it failed to adequately appreciate key regulatory
distinctions between traditional telephone service and broadband
internet access service. Thus, for example, the fact that the adjunct-
to-basic classification of directory assistance arose in the
traditional telephone context likewise persuades us to give it
relatively little weight here as an analogy to DNS, and we reject
arguments to the contrary.
22. Caching. We also conclude that caching, a functionally
integrated information processing component of broadband internet
access service, provides the capability to perform functions that fall
within the information service definition. As the record reflects,
``[c]aching does much more than simply enable the user to obtain more
rapid retrieval of information through the network; caching depends on
complex algorithms to determine what information to store where and in
what format.'' This requires ``extensive information processing,
storing, retrieving, and transforming for much of the most popular
content on the internet,'' and as such, caching involves storing and
retrieving capabilities required by the ``information service''
definition. The Court affirmed this view in Brand X, finding
``reasonable'' the ``Commission's understanding'' that internet service
``facilitates access to third-party web pages by offering consumers the
ability to store, or `cache,' popular content on local computer
servers,'' which constitutes ``the `capability for . . . acquiring,
[storing] . . . retrieving [and] utilizing information.' ''
23. We find that ISP-provided caching does not merely ``manage'' an
ISP's broadband internet access service and underlying network, it
enables and enhances consumers' access to and use of information
online. The record shows that caching can be realized as part of a
service, such as DNS, which is predominantly to the benefit of the user
(DNS caching). We disagree with assertions in the record that suggest
that ISP-provided caching is not a vital part of broadband internet
access service offerings, as it may be stymied by the use of HTTPS
encryption. Caching can also be realized in terms of content that can
be accumulated by the ISP through non-confidential (i.e., non-
encrypted) retrieval of information from websites (Web caching). In
this case, the user benefits from a rapid retrieval of information from
a local cache or repository of information while the ISP benefits from
less bandwidth resources used in the retrieval of data from one or more
destinations. DNS and Web caching are functions provided as part and
parcel of the broadband internet access service. When ISPs cache
content from across the internet, they are not performing functions,
like switching, that are instrumental to pure transmission, but instead
storing third party content they select in servers in their own
networks to enhance access to information. The record reflects that
without caching, broadband internet access service would be a
significantly inferior experience for the consumer, particularly for
customers in remote areas, requiring additional time and network
capacity for retrieval of information from the internet. Thus, because
caching is useful to the consumer, we conclude that the Title II Order
erred in incorrectly categorizing caching as falling within the
telecommunications system management exception to the definition of
``information service.''
24. In addition, the Title II Order's failure to consider
applicable MFJ precedent led to mistaken analogies when it concluded
that caching fell within the statutory telecommunications management
exception. In relevant precedent, the MFJ court observed that the
information service restriction generally ``prohibits the [BOCs] from
`storing' and `retrieving' information,'' but identified ``quite
distinct settings in which storage capabilities of the [BOCs] could be
used in the information services market.'' One of the categories of
storage and retrieval identified by the court appears highly comparable
to caching. That category involved BOC provision of ``storage space in
their gateways for databases created by others'' such as ``information
service providers and end users,'' making ``communication more
efficient by moving information closer to the end user, thereby
reducing transmission costs.'' This functionality--recognized as an
information service by the MFJ court--appears highly analogous to
caching, and lends historical support to our view that the caching
functionality within broadband internet access service is best
understood as rendering broadband internet access service an
information service. The first category the court identified was ``very
short term storage,'' including, among other things, ``the basic packet
switching function,'' which ``involves the breakdown of data or voice
communications into small bits of information that are then collected
and transmitted between nodes,'' involving ``constant storage, error
checking, and retransmission, as required for accurate transmission.''
Although the court was not entirely clear, it seemed to suggest that
such functions were not information services under the MFJ. This
category appears to bear little similarity to caching, however. The
third category of ``storage and retrieval'' information service
functions identified by the court would include the BOC's provision of
``voice messaging, voice storage and retrieval, and electronic mail.''
Because that category does not appear as analogous to caching as the
category identified by the court and described above, nor was it relied
upon in the Title II Order's discussion of caching, we do not focus on
that third category in our discussion here.
25. Ignoring that MFJ precedent, the Title II Order erred in
seeking to analogize caching to `` `store and forward technology [used]
in routing messages through the network as part of a basic service' ''
mentioned in the Computer II Final Decision. In fact, consistent with
the MFJ court's identification of distinct uses of storage and
forwarding, the cited portion of the Computer II Final Decision
recognized that ``the kind of enhanced store and forward services that
can be offered are many and varied.'' In that regard, the Computer II
Final Decision distinguished ``[t]he offering of store and forward
services'' from ``store and forward technology,'' explaining that
``[m]essage or packet switching, for example, is a store and forward
technology that may be employed in providing basic service.'' Reading
that discussion in full context and in harmony with subsequent MFJ
precedent, the reference in the Computer II Final Decision to ``store
and forward technology'' appears better understood as mirroring a
category of storage and retrieval of information that the MFJ court
suggested was not an information service--in particular, ``the basic
packet switching function, . . . [which] involves the breakdown of data
or voice communications into small bits of information that are then
collected and transmitted between nodes.'' That category of activity
relied upon in the Title II Order thus actually appears to be barely or
not at all analogous to caching. We instead find more persuasive the
[[Page 7858]]
MFJ court's information service treatment of BOC provision of ``storage
space in their gateways for databases created by others'' such as
``information service providers and end users''--a distinct category of
storage and retrieval functionality that is a close fit to caching. We
are unpersuaded by claims that this MFJ precedent only is analogous to
CDNs and not ``transparent caching'' based on asserted differences in
how it is determined what content will be stored in each scenario.
Although the factual scenario discussed in the MFJ anticipated end-
users or information service providers electing what information to
store, and that fact may have partially informed the court's decision
whether to ultimately allow BOCs to provide that capability
notwithstanding its classification as an information service, we do not
read the underlying classification as turning on that issue. Further,
in addition to the distinctions between caching and store-and-forward
technology acknowledged even in this filing, Peha Dec. 7, 2017 Ex Parte
Letter at 4, we find additional shortcomings in how the Title II Order
relied on adjunct-to-basic precedent.
b. ISPs' Service Offerings Inextricably Intertwine Information
Processing Capabilities With Transmission
26. Having established that broadband internet access service has
the information processing capabilities outlined in the definition of
``information service,'' the relevant inquiry is whether ISPs'
broadband internet access service offerings make available information
processing technology inextricably intertwined with transmission. Below
we examine both how consumers perceive the offer of broadband internet
access service, as well as the nature of the service actually offered
by ISPs, and conclude that ISPs are best understood as offering a
service that inextricably intertwines the information processing
capabilities described above and transmission.
27. We begin by considering the ordinary customer's perception of
the ISP's offer of broadband internet access service. As Brand X
explained, ``[i]t is common usage to describe what a company `offers'
to a consumer as what the consumer perceives to be the integrated
finished product.'' ISPs generally market and provide information
processing capabilities and transmission capability together as a
single service. Therefore, it is not surprising that consumers perceive
the offer of broadband internet access service to include more than
mere transmission, and that customers want and pay for functionalities
that go beyond mere transmission. As Cox explains, ``[w]hile consumers
also place significant weight on obtaining a reliable and fast internet
connection, they view those attributes as a means of enabling these
capabilities to interact with information online, not as ends in and of
themselves.'' Indeed, record evidence confirms that consumers highly
value the capabilities their ISPs offer to acquire information from
websites, utilize information on the internet, retrieve such
information, and otherwise process such information. NHMC's argument,
based on what it asserts to be a representative sample of consumer
complaints filed with the Commission, is not persuasive. NHMC's
methodology relied on Natural Language Processing (NLP) to determine
words that co-occur in such complaints, and then used ``iterative
clustering algorithms'' to ``ma[p] connections among them.'' Neither
NHMC's methodology nor the representative extracts of the complaints
NHMC submitted demonstrate that individual complaints about particular
aspects of service reflect how a customer would perceive service
offerings as a whole. Indeed, the sample of complaints attached by NHMC
features a broad set of issues, ranging widely from questions about
speed to ``losing my internet connection,'' ``charg[ing] extra for your
services,'' ``interrupt[ing] the service,'' ``bully[ing] me into share
plans,'' ``Google arbitrarily engag[ing] in monopolistic practices,''
``charg[ing] me modem rental fee,'' or ``basically no technical
support.'' We further note that to the extent that perceived speed is a
common complaint, that does not mean consumers view broadband internet
access service as a pure transmission service. A consumer's perceived
speed for many activities (such as web browsing) depends on
information-processing elements of the service like DNS and caching;
indeed, caching's primary consumer benefit is allowing a more rapid
retrieval of information from a local cache (increasing the perceived
speed of a consumer's connection). Moreover, the Commission has never
relied on such complaints to identify what a service is. And for good
reason: We expect consumer complaints about problems with a service--
not every aspect of it. Indeed, applying such a methodology would lead
to absurd results: Should we redefine the public switched network based
on the millions of robocall complaints we get each year or the rural-
call-completion problems that we know are too prevalent? Of course not.
28. This view also accords with the Commission's historical
understanding that ``[e]nd users subscribing to . . . broadband
internet access service expect to receive (and pay for) a finished,
functionally integrated service that provides access to the internet.
End users do not expect to receive (or pay for) two distinct services--
both internet access service and a distinct transmission service, for
example.'' While the Title II Order dwells at length on the prominence
of transmission speed in ISP marketing, it makes no effort to compare
that emphasis to historical practice. In fact, ISPs have been
highlighting transmission speed in their marketing materials since long
before the Title II Order. The very first report on advanced
telecommunication capability pursuant to Section 706(b) of the 1996
Act, released in 1999, cited ISPs' marketing of their internet access
service speed. ISPs' inclusion of speed information in their marketing
also was acknowledged by the Court in Brand X, which nonetheless upheld
the Commission's information service classification as reasonable.
Indeed, consideration of ISP marketing practices has been part of the
backdrop of all of the Commission's decisions classifying broadband
internet access service as an information service and thus cannot
justify a departure from the historical classification of broadband
internet access service as an information service.
29. The Title II Order's reliance on ISP marketing also assumes
that it provides a complete picture of what consumers perceive as the
finished product. First, the record reflects that ISP marketing of
broadband encompasses features beyond speed and reliability. Further,
because all broadband internet access services rely on DNS and commonly
also rely on caching by ISPs, to the extent that those capabilities, in
themselves, do not provide a point of differentiation among services or
providers, it would be unsurprising that ISPs did not feature them
prominently in their marketing or advertising, particularly to
audiences already familiar with broadband internet access service
generally. Indeed, speed and reliability are not exclusive to
telecommunications services; rather, the record reflects that speed and
reliability are crucial attributes of an information service. As such,
we reject assertions that speed and reliability are only
characteristics of telecommunications services and further note that
ISPs market these aspects because they can be differentiated, unlike
DNS or caching. Consequently, the mere fact that broadband internet
access service
[[Page 7859]]
marketing often focuses on characteristics, such as transmission speed,
by which services and providers can be differentiated sheds little to
no light on whether consumers perceive broadband internet access
service as inextricably intertwining that data transmission with
information service capabilities. Neither the discussion of the
consumer's perspective by Justice Scalia nor that in the Title II Order
identifies good reasons to depart from the Commission's prior
understanding that broadband internet access is a single, integrated
information service. Justice Scalia contended that how customers
perceive cable modem service is best understood by considering the
services for which it would be a substitute--in his view at the time,
dial-up internet access and digital subscriber line (DSL) service over
telephone networks. However, dial-up internet access has substantially
diminished in marketplace significance in the subsequent years. In
addition, the legal compulsion for facilities-based carriers to offer
broadband transmission on a common carrier basis was eliminated in
2005. Fixed and mobile wireless broadband internet access service have
grown to play a much more prominent role in the broadband internet
access service marketplace, along with satellite broadband internet
access service, none of which ever was under a legal compulsion to
offer broadband transmission on a common carrier basis--nor, prior to
the Title II Order, were they interpreted as voluntarily doing so.
Consequently, whatever might have been arguable at the time of Brand X,
the service offerings in the marketplace as it developed thereafter
provide no reason to expect that consumers ``inevitabl[y]'' would view
broadband internet access service as involving ``both computing
functionality and the physical pipe'' as separate offerings based on
comparisons to the likely alternatives.
30. Separate and distinct from our finding that an ISP ``offers''
an information service from the consumer's perspective, we find that as
a factual matter, ISPs offer a single, inextricably intertwined
information service. The record reflects that information processes
must be combined with transmission in order for broadband internet
access service to work, and it is the combined information processing
capabilities and transmission functions that an ISP offers with
broadband internet access service. Thus, even assuming that any
individual consumer could perceive an ISP's offer of broadband internet
access service as akin to a bare transmission service, the information
processing capabilities that are actually offered as an integral part
of the service make broadband internet access service an information
service as defined by the Act. As such, we reject commenters'
assertions that the primary function of ISPs is to simply transfer
packets and not process information.
31. The inquiry called for by the relevant classification precedent
focuses on the nature of the service offering the provider makes,
rather than being limited to the functions within that offering that
particular subscribers do, in fact, use or that third parties also
provide. As the Commission recognized in the Cable Modem Order,
internet access service was appropriately classified as an offering of
the capabilities with the definition of an information service
``regardless of whether subscribers use all of the functions provided
as part of the service.'' The Title II Order erroneously contended
that, because functions like DNS and caching potentially could be
provided by entities other than the ISP itself, those functions should
not be understood as part of a single, integrated information service
offered by ISPs. However, the fact that some consumers obtain these
functionalities from third-party alternatives is not a basis for
ignoring the capabilities that a broadband provider actually
``offers.'' The Title II Order gave no meaningful explanation why a
contrary, narrower interpretation of ``offer'' was warranted other
than, implicitly, its seemingly end-results driven effort to justify a
telecommunications service classification of broadband internet access
service.
32. Our findings today are consistent with classification precedent
prior to the Title II Order, which consistently found that ISPs offer a
single, integrated service. Although we find the pre-1996 Act
classification precedent relevant to our classification of broadband
internet access service, we reject the view that Congress would have
expected classification under the 1996 Act's statutory definitions to
be tied to the substantive common carrier transmission requirements
imposed under those frameworks. We conclude that the best view of the
text and structure of the Act undercuts arguments that Congress sought
to preserve the substance of pre-1996 Act regulations through the
definitions it adopted. Instead, where Congress sought to address
substantive requirements akin to those in the MFJ and Computer
Inquiries, it did so by adopting subjective obligations in the 1996
Act--even if not identical to the pre-1996 Act requirements--and
subject to their own Congressionally specified standards for when and
to what entities they apply. In addition, the wholesale service focus
of substantive MFJ and Computer Inquiries common carrier transmission
obligations also distinguishes them from the retail service we classify
here, likewise undermining any claimed relevance of those pre-1996 Act
transmission requirements to our classification decision. The
Commission recognized, for example, that the transmission underlying
broadband internet access required by the Computer Inquiries to be
offered on an unbundled, common carrier basis and provided to ISPs was
not a ``retail'' service within the meaning of Section 251(c)(4) resale
requirements. Nor did such a common carrier transmission service itself
enable access to the internet, even if purchased by end-users. By
comparison, under the Computer Inquiries, the finished service offered
to end-users relying on the required common carrier transmission as an
input was regulated as an enhanced service, not a common carrier
offering, even when offered by the facilities-based carrier's
subsidiary. Given our focus here on the finished retail broadband
internet access service, we see little relevance to prior regulatory
requirements that were imposed to ensure competing providers had access
to a wholesale input in the form of a compelled common carriage
offering of bare transmission that did not itself provide internet
access. Even the early classification analysis in the Stevens Report
recognized that ``[i]n offering service to end users'' ISPs ``do more
than resell [ ] data transport services. They conjoin the data
transport with data processing, information provision, and other
computer-mediated offerings, thereby creating an information service.''
In Brand X, the Court rejected claims that ``[w]hen a consumer . . .
accesses content provided by parties other than the cable company''
that ``consumer uses `pure transmission.' '' Subsequent Commission
decisions involving other forms of broadband internet access likewise
all concluded that the broadband internet access service was a single,
integrated service that did not involve a stand-alone offering of
telecommunications. Although parties have, over time, held various
views regarding the proper classification of broadband internet access
services, the mere fact that a party held such a view in the past, or
holds such a view today, does not render a Commission decision
confirming a particular view ``moot,''
[[Page 7860]]
since a private party's subjective view is not authoritative. The Court
further found that ``the high-speed transmission used to provide cable
modem service is a functionally integrated component of that service
because it transmits data only in connection with the further
processing of information and is necessary to provide internet
service.'' This distinction makes broadband internet access service
fundamentally different than standard telephone service, which the
Supreme Court noted does not become an ``information service'' merely
because its transmission service may be ``trivially affected'' by some
additional capability such as voicemail. Where the addition of some
further capability has appeared to have only a trivial effect on the
nature of a service, the Commission has previously declined requests
for reclassification. Due to the functionally integrated nature of
broadband internet access service, however, we reject claims that those
decisions call for a different approach than we adopt here. Likewise,
the outcome in the Bureau-level Cisco WebEx Order accords with our
approach, given the finding that the information service capabilities
more than trivially affected the transmission capability in the
scenario addressed there. Contrary to some arguments, the Bureau had no
need to--and did not--address the classification of other service
scenarios, and we reject arguments for a different classification
approach that are premised on assumptions about how those unaddressed
scenarios would have been analyzed or classified. The core, essential
elements of these prior analyses of the functional nature of internet
access remain persuasive as to broadband internet access service today.
We adhere to that view notwithstanding arguments that some subset of
the array of internet access uses identified in the Stevens Report or
subsequent decisions either are no longer as commonly used, or occur
more frequently today. Even at the time of the Cable Modem Order the
Commission recognized the role of user-generated content, and its
decision in no way hinged on distinctions in how retail customers of
cable modem service used that service in that respect.
33. We disagree with commenters who assert that ISPs necessarily
offer both an information service and a telecommunications service
because broadband internet access service includes a transmission
component. In providing broadband internet access service, an ISP makes
use of telecommunications--i.e., it provides information-processing
capabilities ``via telecommunications''--but does not separately offer
telecommunications on a stand-alone basis to the public. By definition,
all information services accomplish their functions ``via
telecommunications,'' and as such, broadband internet access service
has always had a telecommunications component intrinsically intertwined
with the computer processing, information provision, and computer
interactivity capabilities an information service offers. We observe
that placing information in IP packets does not change the form of
information. We find that the transmission of IP packets is
transmission of the user's choosing, and also agree that ``[c]hanging
the packet structure of an IP packet from IPv4 to IPv6'' does not
change the form of the information. As just one example, in support of
its classification decision, the Title II Order notes that it is
technically possible for a transmission component underlying broadband
internet access service to be separated out and offered on a common
carrier basis. The same would be equally true of many information
services, however, given that the information service capabilities are,
by definition, available ``via telecommunications.'' Indeed, service
providers, who are in the best position to understand the inputs used
in broadband internet access service, do not appear to dispute that the
``via telecommunications'' criteria is satisfied even if also arguing
that they are not providing telecommunications to end-users. For
example, ISPs typically transmit traffic between aggregation points on
their network and the ISPs' connections with other networks. Whether
self-provided by the ISP or purchased from a third party, that readily
appears to be transmission between or among points selected by the ISP
of traffic that the ISP has chosen to have carried by that transmission
link. We reject as overbroad the claim that ``a transmission is
`telecommunications' within the meaning of 47 U.S.C. 153(30) only if
the transmission is capable of communicating with all circuit switched
devices on the PSTN or has the purpose of facilitating the use of the
PSTN without altering its fundamental character as a telephone
network.'' This claim appears premised on incorporating Section 332's
definition of a commercial mobile service (which must be
``interconnected'' with the ``public switched network'') into Section 3
of the Act and drawing from pre-1996 Act precedent using an end-to-end
analysis to determine the regulatory jurisdiction of communications
traffic to inform the interpretation of the term ``points.'' But we
find no evidence in the text of the statute that Congress intended to
import the commercial mobile service definition from one section into
another, and our precedent similarly does not countenance such an
importation. Nor is the end-to-end analysis the only pre-1996 Act
precedent from which the concept of ``points'' in the
``telecommunications'' definition might have been drawn so as to
unambiguously foreclose our conclusion that ``via telecommunications''
is satisfied here. Such inclusion of a transmission component does not
render broadband internet access services telecommunications services;
if it did, the entire category of information services would be
narrowed drastically. Because we find it more reasonable to conclude
that at least some telecommunications is being used as an input into
broadband internet access service--thereby satisfying the ``via
telecommunications'' criteria--we need not further address the scope of
the ``telecommunications'' definition in order to justify our
classification of broadband internet access service as an information
service. We thus do not comprehensively address other criticisms of the
Title II Order's interpretation and applications of the
``telecommunications'' definition, which potentially could have
implications beyond the scope of issues we are considering in this
proceeding.
34. The approach we adopt today best implements the Commission's
long-standing view that Congress intended the definitions of
``telecommunications service'' and ``information service'' to be
mutually exclusive ways to classify a given service. As the Brand X
Court found, the term ``offering'' in the telecommunications service
definition ``can reasonably be read to mean a `stand-alone' offering of
telecommunications.'' Where, as in the case of broadband internet
access services, a service involving transmission inextricably
intertwines that transmission with information service capabilities--in
the form of an integrated information service--there cannot be ``a
`stand-alone' offering of telecommunications'' as required under that
interpretation of the telecommunications service definition. This
conclusion is true even if the information service could be said to
involve the provision of telecommunications as a component of the
service. The Commission's historical approach to internet access
services carefully navigated that issue, while the Title II Order, by
contrast, threatened to
[[Page 7861]]
usher in a much more sweeping scope of ``telecommunications services.''
35. The Title II Order interpretation stands in stark contrast to
the Commission's historical classification precedent and the views of
all Justices in Brand X. Beginning with the earliest classification
decisions, the Commission found that transmission provided by ISPs
outside the last mile was part of an integrated information service.
The DSL transmission service previously required to be unbundled by the
Computer Inquiries rules likewise was limited to the ``last mile''
connection between the end-user and the ISP. Nor did any Justice in
Brand X contest the view that, beyond the last mile, cable operators
were offering an information service. Indeed, the Title II Order's
broad interpretation of ``telecommunications service'' stands in
contrast to the views of Justice Scalia himself, on which the Title II
Order purports to rely. Justice Scalia was skeptical that a
telecommunications service classification of cable modem service would
lead to the classification of ISPs as telecommunications carriers based
on the transmission underlying their ``connect[ions] to other parts of
the internet, including internet backbone providers.'' Yet the Title II
Order reached essentially that outcome. The Title II Order's
interpretation of the statutory definitions did not merely lead it to
classify ``last mile'' transmission as a telecommunications service.
Rather, under the view of the Title II Order, even the transmissions
underlying an ISP's connections to other parts of the internet,
including internet backbone providers, were part of the classified
telecommunications service. Even if the Title II Order's classification
approach does not technically render the category of information
services a nullity, the fact that its view of telecommunications
services sweeps so much more broadly than previously considered
possible provides significant support for our reading of the statute
and the classification decision we make today. That the Commission
previously identified policy concerns about internet traffic exchange
says nothing about classification, and thus is not to the contrary. Nor
did the Advanced Services proceedings identify interconnection
obligations on providers of xDSL transmission as services necessary to
ensure the provision of internet access. Instead, any interconnection
obligations identified there were limited to interconnection between
providers of common carrier xDSL transmission service and other
telecommunications carriers (rather than providers of edge services or
non-common carrier backbone services). The cited portion of the
Advanced Services Remand Order does not even have anything to do with
interconnection requirements or the scope of functions in an xDSL-based
advanced service. Rather, it analyzed the jurisdiction of the traffic
being carried over the service, which, under the traditional end-to-end
analysis, was not limited in scope to any given service within a
broader communications pathway.
36. In contrast, our approach leaves ample room for a meaningful
range of ``telecommunications services.'' Historically, the Commission
has distinguished service offerings that ``always and necessarily
combine'' functions such as ``computer processing, information
provision, and computer interactivity with data transport, enabling end
users to run a variety of applications such as email, and access web
pages and newsgroups,'' on the one hand, from services ``that carriers
and end users typically use [ ] for basic transmission purposes'' on
the other hand. Our interpretation thus stops far short of the view
that ``every transmission of information becomes an information
service.'' Thus, an offering like broadband internet access service
that ``always and necessarily'' includes integrated transmission and
information service capabilities would be an information service. The
distinction between services that ``always and necessarily'' include
integrated transmission and information service capabilities and those
that do not also highlights a critical difference between internet
access service and the service addressed in precedent such as the
Advanced Services Order. The transmission underlying internet access
service that, prior to the Wireline Broadband Classification Order,
carriers had been required by the Computer Inquiries to unbundle and
offer as a bare transmission service on a common carrier basis to
ensure its availability to competing enhanced service providers--and
which did not itself provide internet access--is another specific
example of a service that does not ``always and necessarily'' include
integrated transmission and information service capabilities. The
Commission naturally recognized at the time that the compelled common
carriage offering of bare transmission was a telecommunications
service, and we reject the view that such an acknowledgment is
inconsistent with, or undercuts our reliance on, precedent classifying
internet access service as an integrated information service. In
addition, the discussion of xDSL advanced services in the Advanced
Services Order cited by commenters addressed the transmission service
generally. It did not purport to be focused specifically on the use of
xDSL transmission in connection with internet access service, rather
than addressing the classification of the stand-alone transmission
service as a general matter. The Commission's historical interpretation
thus gives full meaning to both ``information service'' and
``telecommunications service'' categories in the Act.
37. We reject assertions that the analysis we adopt today would
necessarily mean that standard telephone service is likewise an
information service. The record reflects that broadband internet access
service is categorically different from standard telephone service in
that it is ``designed with advanced features, protocols, and security
measures so that it can integrate directly into electronic computer
systems and enable users to electronically create, retrieve, modify and
otherwise manipulate information stored on servers around the world.''
Further, ``[t]he dynamic network functionality enabling the internet
connectivity provided by [broadband internet access services] is
fundamentally different from the largely static one dimensional,
transmission oriented Time Division Multiplexing (TDM) voice network.''
This finding is consistent with past distinctions. Under pre-1996 Act
MFJ precedent, for example, although the provision of time and weather
services was an information service, when a BOC's traditional telephone
service was used to call a third party time and weather service ``the
Operating Company does not `provide information services' within the
meaning of section II(D) of the decree; it merely transmits a call
under the tariff.'' In other words, the fundamental nature of
traditional telephone service, and the commonly-understood purpose for
which traditional telephone service is designed and offered, is to
provide basic transmission--a fact not changed by its incidental use,
on occasion, to access information services. By contrast, the
fundamental nature of broadband internet access service, and the
commonly-understood purpose for which broadband internet access service
is designed and offered, is to enable customers to generate, acquire,
store, transform, process, retrieve, utilize, and make available
information. In addition, broadband internet access service
[[Page 7862]]
includes DNS and caching functionalities, as well as certain other
information processing capabilities. As such, we reject assertions
that, under the approach we adopt today, any telephone service would be
an information service because voice customers can get access to either
automated information services or a live person who can provide
information.
38. Additionally, efforts to treat the Stevens Report as an outlier
that should not have been followed in subsequent classification
decisions--and should not be followed here--are ultimately
unpersuasive. The clear recognition in the Stevens Report that the ISPs
at issue were themselves providing data transmission as part of their
offerings undercuts arguments seeking to distinguish the Stevens Report
based on the theory that the transmission used to connect to ISPs
typically involved common carrier services either directly (via a call
to a dial-up ISP using traditional telephone service) or indirectly
(with the ISP using common carrier broadband transmission as a
wholesale input into its retail information service). While the extent
of data transmission provided by the ISPs that were found to be
offering information services in the Stevens Report might be
incrementally less than the transmission provided by the ISPs dealt
with in subsequent information service classification decisions, that
appears to be at most a difference in degree, rather than a difference
in kind, and the record does not demonstrate otherwise. Nor can the
Stevens Report's analysis and information service classification be
distinguished on the grounds that the ISPs there generally did not own
the facilities they used. Although the Stevens Report observed that the
analysis of whether a single integrated service was being offered was
``more complicated when it comes to offerings by facilities-based
providers,'' it did not prejudge the resolution of that question. Thus,
there is no reason to simply assume that it was inappropriate for the
Commission to build upon the Stevens Report precedent when analyzing
service offerings from facilities-based providers beginning in the
Cable Modem Order. Nor do commenters identify material technical
differences when facilities ownership is involved that would mandate a
different classification analysis. While the Stevens Report recognized
that under Computer Inquires precedent ``offerings by non-facilities-
based providers combining communications and computing components
should always be deemed enhanced,'' had its analysis simply been
carrying forward that approach most of its analysis would have been
unnecessary (since internet access clearly did combine communications
and computing components). Thus, whether or not the more extensive
analysis set forth in the Stevens Report was necessary to find internet
access provided by non-facilities-based ISPs to be an information
service, that analysis cannot be said to be a mere relic of the
Computer Inquiries approach to non-facilities based providers. Finally,
our reliance on classification precedent does not rest on the Stevens
Report alone, but draws from the full range of classification
precedent, both pre- and post-1996 Act. This reliance notably includes
not only the Commission's classification decisions, but the Supreme
Court's subsequent analysis in Brand X. And although some commenters
criticize the lack of express consideration of the possible application
of the telecommunications management exception in the Stevens Report,
our evaluation of the pre-1996 Act MFJ and Computer Inquiries precedent
better accords with outcome of that Report and the subsequent
classification decisions than it does with the Title II Order in that
regard. We reject similar criticisms of other precedent for the same
reason.
3. Other Provisions of the Act Support Broadband's Information Service
Classification
39. We also find that other provisions of the Act support our
conclusion that broadband internet access service is best classified as
an information service. We do not assert that the language in Sections
230 and 231 is determinative of the information service classification;
rather, we find it to be supportive of our analysis of the textual
provisions at issue. As such, we find Public Knowledge's assertions
that the Commission's reasoning ``would overrule the Supreme Court's
holding in Brand X . . . [in which] the Court ruled that the
Communications Act does not make explicit the correct classification of
BIAS'' inapposite. For instance, Congress codified its view in Section
230(b)(2) of the Act, stating that it is the policy of the United
States ``to preserve the vibrant and competitive free market that
presently exists for the internet and other interactive computer
services, unfettered by Federal or State regulation.'' This statement
confirms that the free market approach that flows from classification
as an information service is consistent with Congress's intent. In
contrast, we find it hard to reconcile this statement in Section
230(b)(2) with a conclusion that Congress intended the Commission to
subject broadband internet access service to common carrier regulation
under Title II.
40. Additional provisions within Sections 230 and 231 of the Act
lend further support to our interpretation. Section 230(f)(2) defines
an interactive computer service to mean ``any information service,
system, or access software provider that provides or enables computer
access by multiple users to a computer server, including specifically a
service or system that provides access to the Internet and such systems
operated or services offered by libraries or educational
institutions.'' Thus, on its face, the plain language of this provision
appears to reflect Congress' judgment that internet access service is
an information service.
41. Section 230 states that an ``information service'' includes ``a
service or system that provides access to the internet,'' and we
disagree with commenters who read the definition of ``interactive
computer service'' differently. Specifically, we disagree with
commenters asserting that it is unclear whether the clause ``including
specifically a service . . . that provides access to the internet''
modifies ``information service'' or some other noun phrase, such as
``access software provider'' or ``system.'' We think it a more
reasonable interpretation that the phrase ``service . . . that provides
access to the internet'' modifies the noun phrase ``information
service.'' Similarly, we disagree that Section 230(f)(2) proves only
``that there exist information services that provide access to the
internet, not that all services that provide access to the internet are
information services.'' On the contrary, we agree with AT&T that ``the
formula `any X, including specifically a Y,' does logically imply that
all Ys are Xs.''
42. Reliance on Section 230(f)(2) to inform the Commission's
interpretations and applications of Titles I and II accords with widely
accepted canons of statutory interpretation. The Supreme Court has
recognized there is a ``natural presumption that identical words used
in different parts of the same act are intended to have the same
meaning.'' And there is nothing in the context of either section that
overcomes the presumption. Indeed, the similarity of circumstances
confirms the presumption of similar meaning, as the deregulatory
approach to information services embodied in Titles I and II, as well
as the deregulatory policy of Section 230, were all adopted as part of
the 1996 Act. Thus, we disagree with the Title II Order's argument that
giving
[[Page 7863]]
Section 230 its plain meaning would be ``an oblique'' way to ``settle
the regulatory status of broadband internet access.'' On the contrary,
we agree that ``it is hardly `oblique' for Congress to confirm in
Section 230 that internet access should be classified as an unregulated
information service when elsewhere in the same legislation Congress
codifies a definition of `information services' that was long
understood to include gateway services such as internet access.'' And
while the USTelecom court did not find this definition determinative on
the issue, we find that ``it is nonetheless a strong indicator that
Congress was more comfortable with the prevailing view that provision
of internet access is not a telecommunications service, and should not
be subject to the array of Title II statutory provisions.'' We find
inapplicable the USTelecom court's invocation of the principle that
``Congress . . . does not alter the fundamental details of a regulatory
scheme in vague terms or ancillary provisions.'' Section 230 did not
alter any fundamental details of Congress's regulatory scheme but was
part and parcel of that scheme, and confirmed what follows from a plain
reading of Title I--namely, that broadband internet access service
meets the definition of an information service. The legislative history
of Section 230 also lends support to the view that Congress did not
intend the Commission to subject broadband internet access service to
Title II regulation. The congressional record reflects that the
drafters of Section 230 did ``not wish to have a Federal Computer
Commission with an army of bureaucrats regulating the internet.'' We
likewise reject arguments premised on the theory that we are treating
definitions in Section 230 and 231 as dispositive, rather than relying
on them to inform our understanding of Congress' intent as revealed by
the text and structure of the Act more broadly.
43. Section 231, inserted into the Communications Act a year after
the 1996 Act's passage, similarly lends support to our conclusion that
broadband internet access service is an information service. It
expressly states that ``internet access service'' ``does not include
telecommunications services,'' but rather ``means a service that
enables users to access content, information, electronic mail, or other
services offered over the internet, and may also include access to
proprietary content, information, and other services as part of a
package of services offered to consumers.'' Further, the carve-outs in
Section 231(b)(1)-(2) differentiate the provision of telecommunications
services and the provision of internet access service. It is hard to
imagine clearer statutory language. The Commission has consistently
held that categories of telecommunications service and information
service are mutually exclusive; thus, because it is an information
service, internet access cannot be a telecommunications service. Our
interpretation of ``telecommunications service'' and ``information
service'' as mutually exclusive ways to classify a given service thus
demonstrates the relevance of Section 231 notwithstanding that it does
not expressly define broadband internet access service as an
information service. On its face then, this language strongly supports
our conclusion that, under the best reading of the statute, broadband
internet access service is an information service, not a
telecommunications service. Nothing in the text of Section 231 reveals
that the use of ``internet access service'' there is limited to dial-up
internet access. To the contrary, it would seem anomalous for Congress
only to exempt entities providing dial-up internet access and not other
forms of internet access from the prohibitions of Section 231(a). We
thus are unpersuaded by arguments advocating a narrower interpretation
of ``internet access service'' in Section 231.
44. We also find that the purposes of the 1996 Act are better
served by classifying broadband internet access service as an
information service. Congress passed the Telecommunications Act to
``promote competition and reduce regulation.'' Further, as a bipartisan
group of Senators stated, ``[n]othing in the 1996 Act or its
legislative history suggests that Congress intended to alter the
current classification of internet and other information services or to
expand traditional telephone regulation to new and advanced services.''
Or as Senator John McCain put it, ``[i]t certainly was not Congress's
intent in enacting the supposedly pro-competitive, deregulatory 1996
Act to extend the burdens of current Title II regulation to internet
services, which historically have been excluded from regulation.'' It
stands these goals on their head for the Commission, as deployment of
advanced services reaches the mainstream of Americans' lives, to
perpetuate the very Title II regulatory edifice that the 1996 Act
sought to dismantle. An information service classification will
``reduce regulation'' and preserve a free market ``unfettered by
Federal or State regulation.''
45. Finally, we observe that the structure of Title II appears to
be a poor fit for broadband internet access service. Indeed, numerous
Title II provisions explicitly assume that all telecommunications
services are a telephone service. For example, Section 221 addresses
special provisions related to telephone companies, Section 251
addresses the obligations of local exchange carriers and incumbent
local exchange carriers, and Section 271 addresses limitations on Bell
Operating Companies' provision of interLATA services. For example, to
obtain authority to offer in-region interLATA services, the BOCs have
to offer a number of functions of particular relevance to the provision
of telephone service. Therefore, it is no surprise that the Title II
Order found that many provisions of Title II were ill-suited to
broadband internet access services, and the Commission was forced to,
on its own motion, forbear either in whole or in part on a permanent or
temporary basis from 30 separate sections of Title II as well as from
other provisions of the Act and Commission rules. We find that the
significant forbearance the Commission deemed necessary in the Title II
Order strongly suggests that the regulatory framework of Title II,
which was specifically designed to regulate telephone services, is
unsuited for the dissimilar and dynamic broadband internet access
service marketplace.
B. Reinstating the Private Mobile Service Classification of Mobile
Broadband Internet Access Service
46. Having determined that broadband internet access service,
regardless of whether offered using fixed or mobile technologies, is an
information service under the Act, we now address the appropriate
classification of mobile broadband internet access service under
Section 332 of the Act. We restore the prior longstanding definitions
and interpretation of this section and conclude that mobile broadband
internet access service should not be classified as a commercial mobile
service or its functional equivalent.
47. Background. Section 332 of Title III, enacted by Congress as
part of the Omnibus Budget Reconciliation Act of 1993 (the Budget Act),
provides a specific framework that applies to providers of ``commercial
mobile service.'' The section defines ``commercial mobile service'' as:
``any mobile service . . . that is provided for profit and makes
interconnected service available (A) to the public or (B) to such
classes of eligible users as to be effectively available to a
substantial portion of the public, as specified by regulation by the
Commission.''
[[Page 7864]]
``Interconnected service,'' in turn, is defined as ``service that is
interconnected with the public switched network (as such terms are
defined by regulation by the Commission).'' In 1994, the Commission
adopted regulations implementing this section, codifying the definition
of ``commercial mobile service'' under the term ``commercial mobile
radio service'' (CMRS). Looking at the statute's text, structure,
legislative history, and purpose, the Commission defined the ``public
switched network'' as ``[a]ny common carrier switched network, whether
by wire or radio, including local exchange carriers, interexchange
carriers, and mobile service providers, that use[s] the North American
Numbering Plan in connection with the provision of switched services.''
It defined ``interconnected service'' as ``a service that gives
subscribers the capability to communicate . . . [with] all other users
on the public switched network.''
48. Section 332 distinguishes commercial mobile service from
``private mobile service,'' defined as ``any mobile service . . . that
is not a commercial mobile service or the functional equivalent of a
commercial mobile service, as specified by regulation by the
Commission.'' In 1994, the Commission established its functional
equivalence test, which starts with a presumption that ``a mobile
service that does not meet the definition of CMRS is a private mobile
radio service.'' Overcoming this presumption requires an analysis of a
variety of factors to determine whether the mobile service in question
is the functional equivalent of commercial mobile service, including
``consumer demand for the service to determine whether the service is
closely substitutable for a commercial mobile radio service; whether
changes in price for the service under examination, or for the
comparable commercial mobile radio service would prompt customers to
change from one service to the other; and market research information
identifying the targeted market for the service under review.''
Emphasizing the high bar it had set, the Commission expected that
``very few mobile services that do not meet the definition of CMRS will
be a close substitute for a commercial mobile radio service.'' We note
that, in another Order adopted today, we are recodifying these factors
under Section 20.3 of the Commission's rules, but not modifying their
substance.
49. The Act treats providers of commercial mobile service as common
carriers, and the legislative history of the 1996 Act suggests that
Congress intended the definition of ``telecommunications service'' to
include commercial mobile service. In contrast, the Act prohibits the
Commission from treating providers of private mobile service as common
carriers.
50. In 2007, the Commission found that wireless broadband internet
access service was not a commercial mobile service because it did not
meet the definition of an ``interconnected service'' under the Act and
the Commission's rules. It found that wireless broadband internet
access was not ``interconnected'' with the ``public switched network''
because it did not use the North American Numbering Plan, which limited
``subscribers' ability to communicate to or receive communication from
all users in the public switched network.'' The Commission concluded
that Section 332 and the Commission's rules ``did not contemplate
wireless broadband internet access service as provided today'' and that
a commercial mobile service ``must still be interconnected with the
local exchange or interexchange switched network as it evolves.''
51. In the Title II Order, the Commission reversed course. First,
the Commission changed definitions of two key terms within the
definition of commercial mobile service. It broadened the definition of
the term ``public switched network'' to include services that use
``public IP addresses.'' And it redefined the term ``interconnected
service'' by deleting the word ``all'' from the requirement that the
service give subscribers the capability to communicate with ``all other
users on the public switched network,'' so that a service would be
interconnected even if users of such a service could not communicate
with all other users. By manipulating these definitions, the Commission
engineered a conclusion that mobile broadband internet access was
interconnected with the public switched network and was an
interconnected service under Section 332.
52. Second, the Title II Order found that even if it had not
changed the definitions, it could change the scope of the service to
meet them. Specifically, the Commission found that ``users have the
`capability' . . . to communicate with NANP numbers using their
broadband connection through the use of VoIP applications.''
Accordingly it found that, by including services not offered by the
mobile broadband internet access service provider as part of the
service, mobile broadband internet access service would now meet the
regulatory definition of ``interconnected service'' adopted in 1994.
53. Third, the Title II Order eschewed the functional equivalence
test contained in the Commission's rules to find that mobile broadband
internet access service was functionally equivalent to commercial
mobile service. Rather than apply that test, the Commission reasoned
that the two were functionally equivalent because ``like commercial
mobile service, [mobile broadband internet access service] is a widely
available, for profit mobile service that offers mobile subscribers the
capability to send and receive communications on their mobile device to
and from the public.''
54. In the Internet Freedom Notice of Proposed Rulemaking (NPRM)
(82 FR 25568), the Commission proposed to ``restore the meaning of
`public switched network' under Section 332(d)(2) to its pre-Title II
Order focus on the traditional public switched telephone network'' and
``to return to our prior definition of `interconnected service.' '' The
Commission further proposed to return to the analysis of the Wireless
Broadband Internet Access Order and find that mobile broadband internet
access service was a private mobile service. Finally, it proposed to
reconsider the Title II Order's departure from the functional
equivalence test codified in our rules.
55. Discussion. We find that the definitions of the terms ``public
switched network'' and ``interconnected service'' that the Commission
adopted in the 1994 Second CMRS Report and Order reflect the best
reading of the Act, and accordingly, we readopt the earlier
definitions. We further find that, under these definitions, mobile
broadband internet access service is not a commercial mobile service.
56. We find that the Commission's original interpretation of
``public switched network'' was more consistent with the ordinary
meaning and commonly understood definition of the term and with
Commission precedent. On multiple prior occasions before Section
332(d)(2) was enacted, the Commission used the term ``public switched
network'' to refer to the traditional public switched telephone
network. In 1981, for example, the Commission noted that ``the public
switched network interconnects all telephones in the country.'' In
1992, the Commission described its cellular service policy as
``encourag[ing] the creation of a nationwide, seamless system,
interconnected with the public switched network so that cellular and
landline telephone customers can
[[Page 7865]]
communicate with each other on a universal basis.'' Courts also used
the term ``public switched network'' when referring to the traditional
telephone network. Based on this history of usage of the term, the
Commission, in 1994, tied its definition of the term ``public switched
network'' to the traditional switched telephone network. We find this
approach appropriately reflects the fundamental canon of statutory
construction that ``unless otherwise defined, words will be interpreted
as taking their ordinary, contemporary, common meaning.'' We find that
the legislative history of the Budget Act further supports this view.
One commenter notes that the Budget Act conferees chose the Senate
version of the relevant statutory definitions, including the use of the
term ``public switched network,'' over the House version, which used
the term ``public switched telephone network,'' and argues that
Congress thereby rejected the latter term. We note, however, that the
conferees also expressly identified the substantive differences between
the House and Senate versions of the definitions, and notably absent
from their list was any contrast between the Senate's use of ``public
switched network'' and the House's use of ``public switched telephone
network,'' suggesting that the conferees did not view the two terms as
a significant difference.
57. We also find that the Commission's prior interpretation is more
consistent with the text of Section 332(d)(2), in which Congress
provided that commercial mobile service must provide a service that is
interconnected with ``the public switched network.'' We find that the
use of the definite article ``the'' and singular term ``network'' shows
that Congress intended ``public switched network'' to mean a single,
integrated network. We therefore agree with commenters who argue that
it was not meant to encompass multiple networks whose users cannot
necessarily communicate or receive communications across networks.
Consistent with Congress's directive to define ``the public switched
network,'' the restored definition reflects that the public switched
network is a singular network that ``must still be interconnected with
the local exchange or interexchange switched network as it evolves,''
as opposed to multiple networks that need not be connected to the
public telephone network. That the Commission's original interpretation
better reflects Congressional intent is further evidenced by the fact
that, although Congress has amended the Communications Act and Section
332 on multiple occasions since the Commission defined the term, it has
never changed the Commission's interpretation. As we further discuss
elsewhere in connection with the term ``interconnected service,'' we
find the best interpretation is to classify a service under Section 332
based solely on the nature of the service offered. Even if we were to
consider such applications, however, we find that the public switched
telephone network and the internet are and will continue to be distinct
and separate networks, and cannot be considered a singular, integrated
network as intended by the term ``the public switched network.'' The
deployment of the Internet of Things (IoT), for example, will mean a
dramatic increase in the number of non-VoIP-capable end-points, such as
IP-enabled televisions, washing machines, and thermostats, and other
smart devices.
58. We also restore the definition of ``interconnected service''
that existed prior to the Title II Order. Prior to that Order, the term
was defined under the Commission's rules as a service ``that gives
subscribers the capability to communicate to or receive communication
from all other users on the public switched network.'' The Title II
Order modified this definition by deleting the word ``all,'' finding
that mobile broadband internet access service should still be
considered an interconnected service even if it only enabled users to
communicate with ``some'' other users of the public switched network
rather than all. We agree with commenters who argue that the best
reading of ``interconnected service'' is one that enables communication
between its users and all other users of the public switched network.
This reading ensures that the public switched network remains the
single, integrated network that we find Congress intended in Section
332(d)(2), as reflected in the statutory definition of ``interconnected
service'' as one that is interconnected with ``the public switched
network.'' The Title II Order rejected this reading on the ground that
the Commission has previously recognized that interconnected services
may be limited in certain ways. While an interconnected service is
required to provide its users with the capability to communicate with
or receive communication from all other users of the public switched
network, the Commission has permitted an interconnected service to
restrict access to the public switched network in certain limited ways
(such as the blocking of 900 numbers). This limited exception to
general access has existed since the original definition of the term
``interconnected service'' was adopted, and the record does not
demonstrate that it has caused confusion or misunderstandings about
what services may be considered interconnected. Accordingly, we will
continue to apply the definition of ``interconnected service'' in this
fashion, and we see no need to codify any language further clarifying
the exception. We agree with Verizon, however, that ``[t]here is a
massive difference between limited, targeted restrictions that deny
access to certain points on the network and the situation envisioned by
the Title II Order, where millions of users on what is ostensibly the
same network are incapable of reaching each other.''
59. Some commenters who argue that the Title II Order's revised
definitions should be maintained point to Congress's delegation of
interpretational authority to the Commission and the Commission's
previous position that it could define the public switched network
based on new technology and consumer demand. In defining the terms
``public switched network'' and ``interconnected service'' in the
Second CMRS Report and Order, however, the Commission recognized that
commercial mobile service must still be interconnected with the local
exchange or interexchange switched network, and it stated that ``any
switched common carrier service that is interconnected with the
traditional local exchange or interexchange switched network will be
defined as part of that network for purposes of our definition of
`commercial mobile radio services.' '' We disagree with commenters
arguing that, by not including IP addresses in the definition of the
public switched network, the Commission would be failing to recognize
the evolution of mobile network technologies that have blurred the
lines between circuit switched and packet switched networks. The
Commission's original decision properly reflects that the public
switched network should not be defined in a static way and should
reflect that the public switched network is continuously growing and
changing, but also ensures that, as it grows and evolves, the public
switched network remains a single integrated network incorporating the
traditional local and interexchange telephone networks and enabling
users to send or receive messages to or from all other users. Further,
although the Title II Order found that the revised definitions
[[Page 7866]]
adopted at that time were warranted as better reflecting current
technological developments, including the ``rapidly growing and
virtually universal use of mobile broadband service'' and the
``universal access provided . . . by and to mobile broadband,'' the
Commission expressly noted that its determination was ``a policy
judgment that section 332(d) expressly delegated to the Commission,
consistent with its broad spectrum management authority under Title
III.'' We find that this analysis places undue weight on the wide
availability of a mobile service, as being effectively available to a
substantial portion of the public is merely one of the definitional
criteria. The Commission found that the updated definitions would be
consistent with Congress's intent to create a symmetrical regulatory
framework among mobile services that were similarly ``broadly
available'' to the public. While we agree that Congress intended, in
adopting Section 332, to regulate similar mobile services
symmetrically, we do not believe that Congress intended for the
Commission to regulate mobile services symmetrically simply because
they are similarly ``broadly available.'' First, being ``effectively
available to a substantial portion of the public'' is a necessary, but
not sufficient, requirement for classification as commercial mobile
service. Second, as noted, Congress set as the touchstone for
regulatory symmetry only those mobile services that are ``functionally
equivalent.'' In light of definitional analysis discussed above, as
well as the public policy considerations that we have found to support
our decision to classify broadband internet access service as an
information service, we find under the same authority that such
developments do not persuade us to retain the modified definitions.
60. We find that mobile broadband internet access service does not
meet the regulatory definition of ``interconnected service'' that the
Commission originally adopted in 1994 and which we readopt today, and
therefore it does not meet the definition of commercial mobile service.
As the Commission found in the Wireless Broadband Internet Access
Order, ``[m]obile wireless broadband Internet access service in and of
itself does not provide the capability to communicate with all users of
the public switched network'' because it does ``not use the North
American Numbering Plan to access the Internet, which limits
subscribers' ability to communicate to or receive communications from
all users in the public switched network.'' Accordingly, it is ``not an
`interconnected service' as the Commission has defined the term in the
context of section 332.''
61. We disagree with the conclusion in the Title II Order that,
because an end user can use a separate application or service that
rides on top of the broadband internet access service for
interconnected communications, mobile broadband internet access service
meets the definition of ``interconnected service.'' We find that the
definition of ``interconnected service'' focuses on the characteristics
of the offered mobile service itself. Thus, the service in question
must itself provide interconnection to the public switched network
using the NANP to be considered an interconnected service. Our
interpretation is consistent with Commission precedent that, prior to
the Title II Order, had classified a service based on the nature of the
service itself. This interpretation is also consistent with Section
332(d)(1), which defines commercial mobile service as a service that
itself ``makes interconnected service available . . . to the public,''
and with Section 332(d)(2), which defines ``interconnected service'' as
``service that is interconnected with the public switched network.''
These statutory definitions focus on the functions of the service
itself rather than ``whether the service allows consumers to acquire
other services that bridge the gap to the telephone network.'' Thus, we
are not persuaded by arguments that ``applications such as Google Voice
reflect the fully interconnected nature of the mobile broadband and
legacy telephone networks.'' Our determination reflects that the
relevant service must itself be an ``interconnected service,'' and not
merely a capability to acquire interconnection. We further note that
viewing broadband internet access service as a distinct service from
application layer services that may be accessed by it, even if the
applications are pre-installed in the mobile device offered by the
provider, ensures that similar mobile broadband internet access
services are not regulated in a disparate fashion based on what
applications a particular provider chooses to install in their offered
devices. This is consistent with the fundamental purpose under Section
332 of regulatory symmetry between similar mobile services, and also
avoids regulatory inconsistencies that would result when mobile devices
are brought to a particular service provider by the consumer that do
not include the provider's choice of pre-installed apps. While OTI New
America argues that the need to obtain such apps to make an
interconnected call does not make mobile broadband internet access
service different from traditional telephone service, which has always
required customer premises equipment to complete an interconnected
call, we find the analogy inapt. With traditional CMRS, even where
consumers obtain their premises equipment or mobile devices separately,
the function of interconnection is provided by the purchased mobile
service itself. Because the focus is solely on the relevant service
provided, we also disagree that physical connections between networks,
in and of themselves, establish that the relevant services are
interconnected, and we further disagree that mobile broadband internet
access service should be considered an interconnected service simply
because a separate interconnected voice service may be provided using
the same packet-switched network layer.
62. Consistent with the Commission's analysis in the Wireless
Broadband Internet Access Order, the fact that ``consumers are now able
to use a variety of Internet-enabled applications that allow them to
send calls and texts to NANP end-points'' does not make mobile
broadband internet access service itself an interconnected service as
defined by our rules. The increased use and availability of mobile VoIP
applications does not change the fact that mobile broadband internet
access as a core service is distinct from the service capabilities
offered by applications (whether installed by a user or hardware
manufacturer) that may ride on top of it. When viewed as a distinct
service, it is apparent that today's mobile broadband internet access
service itself does not enable users to reach NANP telephone numbers
and therefore cannot be considered an interconnected service. We do not
here address whether IP-based services or applications such as Wi-Fi
Calling or VoLTE would meet the definition of ``interconnected
service'' under Section 332 and the Commission's rules. We disagree
with OTI New America's argument that the growing availability of Wi-Fi
Calling provided by mobile carriers that also offer mobile broadband
internet access service supports the classification of mobile broadband
internet access service as a commercial mobile service. The two are
distinct services and subject to separate classification
determinations. Similarly, even if providers are increasingly offering
voice service and mobile broadband internet access service
[[Page 7867]]
together, this does not support classifying and regulating the latter
in the same way as the former. Providers have long offered multiple
services of mixed classification, subject to the rule that they are
regulated as common carriers to the extent they offer services that are
subject to Title II regulation.
63. Moreover, in light of the determination above that mobile
broadband internet access service should be restored to its
classification as an information service, and consistent with our
findings today that reinstating this classification will serve the
public interest, we also find that it will serve the public interest
for the Commission to exercise its statutory authority to return to its
original conclusion that mobile broadband internet access is not a
commercial mobile service. We note that commenters who support the
Title II Order's revised definition of ``public switched network'' do
not dispute that Congress expressly delegated authority to the
Commission to define the key terms, i.e., ``public switched network''
and ``interconnected service.'' No one disputes that, consistent with
the Commission's previous findings, if mobile broadband internet access
service were a commercial mobile service for purposes of Section 332
and were also classified as an information service, such a regulatory
framework could lead to contradictory and absurd results. Among these
problems, as the Commission explained in 2007, is that a contrary
reading of the Act would result in an internal contradiction within the
statutory framework, because Section 332 would require that the service
provider be treated as a common carrier insofar as it provides mobile
wireless broadband internet access service, while Section 3 clearly
would prohibit the application of common carrier regulation of such a
service provider's provision of that service. Indeed, the Title II
Order, like the 2007 Wireless Broadband Internet Access Order,
recognized and sought to avoid the significant problems in construing
Section 332 in a manner that set up this ``statutory contradiction''
with the scope of Title II. Construing the CMRS definition to exclude
mobile broadband internet access service as an information service
similarly avoids this contradiction, furthers the Act's overall intent
to allow information services to develop free from common carrier
regulations, and is consistent with the public policy analysis in
connection with our determination to reclassify mobile broadband
internet access as an information service. Further, it avoids the
absurd result of singling out mobile providers of broadband internet
access service for such common carrier regulation while freeing fixed
broadband internet access services from such regulation,
notwithstanding that, as discussed elsewhere in this Order, there is
generally greater competition in the provision of mobile broadband
internet access service than in fixed broadband internet access
service. We note that wireless services similar to mobile broadband
internet access service were not available in the market place in 1993
when Congress adopted Section 332 or, in 1996, when Congress adopted
the Section 3 definition of ``telecommunication carrier.''
64. In addition to finding that mobile broadband internet access is
not a commercial mobile service, we also adopt our proposal to
reconsider the Commission's analysis regarding functional equivalence
in the Title II Order. For the same reasons discussed below with
respect to our authority to revisit the classification of broadband
internet access service, we disagree with arguments regarding limits on
the Commission's ability to revisit the Title II Order's findings
regarding functional equivalence. In addition, we note that the Title
II Order, in reaching the conclusion that mobile broadband internet
access was a commercial mobile service, relied in part on the need to
avoid a statutory contradiction with its determination that the service
was a telecommunications service. Given our decision to restore the
original classification of mobile broadband internet access service as
an information service, this change additionally warrants revisiting
our conclusions with regard to the classification of mobile broadband
internet access service under Section 332. We find that the test for
functional equivalence adopted in the Second CMRS Report and Order
reflects the best interpretation of Section 332. Under this test, a
variety of factors will be evaluated to make a determination whether
the mobile service in question is the functional equivalent of a
commercial mobile radio service, including: Consumer demand for the
service to determine whether the service is closely substitutable for a
commercial mobile radio service; whether changes in price for the
service under examination, or for the comparable commercial mobile
radio service would prompt customers to change from one service to the
other; and market research information identifying the targeted market
for the service under review. In contrast, as noted above, the Title II
Order based its finding of functional equivalence on the notion that
``like commercial mobile service, [mobile broadband Internet access] is
a widely available, for profit mobile service that offers mobile
subscribers the capability to send and receive communications on their
mobile device to and from the public.'' Commenters who support the
classification of mobile broadband internet access service as a
commercial mobile service similarly contend that mobile broadband
internet access service shares no similarities with other private
mobile services such as taxi dispatch services and that, in contrast,
``there is no networked service more open, interconnected, and
universally offered than mobile broadband Internet access service.'' We
note that the statute directs us to determine whether mobile broadband
internet access is functionally equivalent to a commercial mobile
service, not whether it is functionally dissimilar from certain systems
classified as private mobile.
65. We believe the test of functional equivalence adopted in the
Second CMRS Report and Order hews much more faithfully to the intent of
Congress than the approach applied in the Title II Order or the
analyses in the record focusing on the extent of service availability.
If Congress meant for widespread public access to a widely used service
to be the determining factor for what is ``functionally equivalent'' to
a commercial mobile service, it would not have included being
``interconnected with the public switched network'' in the statutory
definition of the service. Indeed, the relevant House Report, in
describing ``private carriers'' that under the current law were
offering service ``[f]unctionally . . . indistinguishable'' from
carriers classified as common carriers, highlighted that these private
carriers were offering services interconnected with the public switched
network. Although the Commission has discretion to determine whether
services are functionally equivalent, we find that the Title II Order's
reliance on the public's ``ubiquitous access'' to mobile broadband
internet access service alone was insufficient to establish functional
equivalency. In contrast, the test established in the Second CMRS
Report and Order provides a thorough consideration of factors that are
indicative of whether a service is closely substitutable in the eyes of
consumers for a commercial mobile service.
66. Applying the test adopted by the Commission in the Second CMRS
Report and Order, we find that mobile broadband internet access service
today is not the functional equivalent of
[[Page 7868]]
commercial mobile service as defined by the Commission. We note again
that, under this test, services not meeting the definition of
commercial mobile service are presumed to be not functionally
equivalent, a presumption particularly intuitive here in light of the
functional differences between traditional commercial mobile services
like mobile voice and today's mobile broadband services. The evidence
on demand substitutability only reinforces this presumption. First,
mobile broadband internet access service and traditional mobile voice
services have different service characteristics and intended uses.
Consumers purchase mobile broadband internet access service to access
the internet, on-line video, games, search engines, websites, and
various other applications, while they purchase mobile voice service
solely to make calls to other users using NANP numbers. Pricing and
marketing information similarly support the conclusion that today
mobile broadband internet access service and traditional mobile voice
services are not ``closely substitutable.'' Such evidence suggests, for
example, that mobile service providers target different types of
customer groups when advertising voice, as opposed to mobile broadband
internet access service. Moreover, at this time, voice-only mobile
services tend to be much less expensive than mobile broadband internet
access services, and they appear to be targeted to consumers who seek
low-cost mobile service. Currently, for example, unlimited voice and
text only plans may range from $15 to $25 per month. In contrast,
unlimited mobile broadband internet plans may range from $60 to $90 per
month for a single line. Nothing in the record suggests that changing
the price for one service by a small but significant percentage would
prompt a significant percentage of customers to move to the other
service. Accordingly, under the functional equivalence standard adopted
in the CMRS Second Report and Order, we find that mobile broadband
internet access today is not the functional equivalent of commercial
mobile service. The two services have different service characteristics
and intended uses and are not closely substitutable for each other, as
evidenced by the fact that changes in price for one service generally
will not prompt significant percentages of customers to change from one
service to the other. We make a conforming revision to the definition
of ``commercial mobile radio service'' in Section 20.3 of the
Commission's rules to reflect our determination that mobile broadband
internet access service is not the functional equivalent of commercial
mobile service.
C. Public Policy Supports Classifying Broadband Internet Access Service
as an Information Service
67. While our legal analysis concluding that broadband internet
access service is best classified as an information service under the
Act is sufficient grounds alone on which to base our classification
decision, the public policy arguments advanced in the record and
economic analysis reinforce that conclusion. We find that reinstating
the information service classification for broadband internet access
service is more likely to encourage broadband investment and
innovation, furthering our goal of making broadband available to all
Americans and benefitting the entire internet ecosystem. For almost 20
years, there was a bipartisan consensus that broadband should remain
under Title I, and ISPs cumulatively invested $1.5 trillion in
broadband networks between 1996 and 2015. Commenters who claim recent
growth in online video streaming services is evidence of the need for
Title II regulation ignore the fact that the growth of online video
streaming services was largely made possible by the network investments
made under Title I and as such demonstrates instead the success of the
longstanding light-touch framework under Title I. During that period of
intense investment, broadband deployment and adoption increased
dramatically, as the combined number of fixed and mobile internet
connections increased from 50.2 million to 355.2 million from 2005 to
2015, and even as early as 2011, a substantial majority of Americans
had access to broadband at home. As of 2016, roughly 91 percent of
homes had access to networks offering 25 Mbps, and there were 395.9
million wireless connections, twenty percent more than the U.S.
population. Mobile data speeds have also dramatically increased, with
speeds increasing 40-fold from the 3G speeds of 2007. Cable broadband
speeds increased 3,200 percent between 2005 and 2015, while prices per
Mbps fell by more than 87 percent between 1996 and 2012.
68. Based on the record in this proceeding, we conclude that
economic theory, empirical studies, and observational evidence support
reclassification of broadband internet access service as an information
service rather than the application of public-utility style regulation
on ISPs. We find the Title II classification likely has resulted, and
will result, in considerable social cost, in terms of foregone
investment and innovation. At the same time, classification of
broadband internet access service under Title II has had no discernable
incremental benefit relative to Title I classification. The regulations
promulgated under the Title II regime appear to have been a solution in
search of a problem. Close examination of the examples of harm cited by
proponents of Title II to justify heavy-handed regulation reveal that
they are sparse and often exaggerated. Moreover, economic incentives,
including competitive pressures, support internet openness. We find
that the gatekeeper theory, the bedrock of the Title II Order's overall
argument justifying its approach, is a poor fit for the broadband
internet access service market. Further, even if there may be potential
harms, we find that pre-existing legal remedies, particularly antitrust
and consumer protection laws, sufficiently address such harms so that
they are outweighed by the well-recognized disadvantages of public
utility regulation. As such, we find that public policy considerations
support our legal finding that broadband internet access service is an
information service under the Act.
1. Title II Regulation Imposes Substantial Costs on the Internet
Ecosystem
69. The Commission has long recognized that regulatory burdens and
uncertainty, such as those inherent in Title II, can deter investment
by regulated entities and, until the Title II Order, its regulatory
framework for cable, wireline, and wireless broadband internet access
services reflected that reality. Congress has similarly recognized the
burdens associated with regulation. For example, the 1996 Act states
its purpose is to ``reduce regulation,'' and directs the Commission to
regularly review regulations and repeal those it deems unnecessary or
harmful to investment, competition, and the public interest. This
concern is well-documented in the economics literature on regulatory
theory, and the record also supports the theory that the regulation
imposed by Title II will negatively impact investment. The balance of
the evidence in the record suggests that Title II classification has
reduced ISP investment in broadband networks, as well as hampered
innovation, because of regulatory uncertainty. The record also
demonstrates that small ISPs, many of which serve rural consumers, have
been particularly harmed by Title II. And there is no convincing
evidence of increased investment in the edge that
[[Page 7869]]
would compensate for the reduction in network investment.
70. Investment by ISPs. As the Commission has noted in the past,
increased broadband deployment and subscribership require investment,
and the regulatory climate affects investment. The mechanisms by which
public utility regulation can depress investment by the regulated
entity are well-known in the regulatory economics literature. The
owners of network infrastructure make long-term, irreversible
investments. In theory, public utility regulation is intended to curb
monopoly pricing just enough that the firm earns a rate of return on
its investments equivalent to what it would earn in a competitive
market. In practice, public utility regulation can depress profits
below the competitive rate of return for a variety of reasons. This
reduction in the expected return reduces the incentive to invest.
Importantly, the risk that regulation might push returns below the
competitive level also creates a disincentive for investment.
71. We first look to broadband investment in the aggregate and find
that it has decreased since the adoption of the Title II Order. ISP
capital investment increased each year from the end of the recession in
2009 until 2014, when it peaked. In 2015, capital investment by
broadband providers appears to have declined for the first time since
the end of the recession in 2009. And investment levels fell again in
2016--down more than 3 percent from 2014 levels. Although declines in
broadband capital investments have occurred in the past with changes in
the business cycle, the most recent decline is particularly curious
given that the economy has not experienced a recession in recent years
but rather has been growing. While observing trends in the data by
itself cannot establish the cause of directional movements, the stark
trend reversal that has developed in recent years suggests that changes
to the regulatory environment created by the Title II Order have
stifled investment. In addition to data trends, the record contains a
variety of other studies, using different methodologies which seek to
determine how imposition of public-utility style regulation might
affect ISPs' investments.
72. Comparisons of ISP investment before and after the Title II
Order suggest that reclassification has discouraged investment.
Performing such a comparison, economist Hal Singer concluded that ISP
investment by major ISPs fell by 5.6 percent between 2014 and 2016.
Singer attempted to account for a few significant factors unrelated to
Title II that might affect investment, by subtracting some investments
that are clearly not affected by the regulatory change (such as the
accounting treatment of Sprint's telephone handsets, AT&T's investments
in Mexico, and DirecTV investments following its acquisition by AT&T in
the middle of this period). In contrast, Free Press presents statistics
that it claims demonstrate that broadband deployment and ISP investment
``accelerated'' to ``historic levels'' after the Commission approved
the Title II Order. But Free Press fails to account for factors such as
foreign investment and the appropriate treatment of handsets as capital
expenditures, as Singer did.
73. A comparative assessment that adjusted the Free Press and
Singer numbers so that they covered the same ISPs, spanned the same
time period, and subtracted investments unaffected by the regulatory
change, found that both sets of numbers demonstrate that ISP investment
fell by about 3 percent in 2015 and by 2 percent in 2016. A Free State
Foundation calculation using broadband capital expenditure data for 16
of the largest ISPs reached a result similar to Singer's, but this
analysis simply compared actual ISP investment to a trend extrapolated
from pre-2015 data. These types of comparisons can only be regarded as
suggestive, since they fail to control for other factors that may
affect investment (such as technological change, the overall state of
the economy, and the fact that large capital investments often occur in
discrete chunks rather than being spaced evenly over time), and
companies may take several years to adjust their investment plans.
Nonetheless, these comparisons are consistent with other evidence in
the record that indicates that Title II adversely affected broadband
investment. A separate comparison of the United States' ISP investment
with ISP investment in Europe also suggests that ISP investment might
decline further if the U.S., under the Title II Order, moves toward a
regulatory system more like Europe's. A USTelecom research brief finds
that European investment per capita is about 50 percent lower than
broadband investment in the U.S. per capita. As some commenters point
out, this study compares the U.S. with the much more regulatory
European system, which includes mandatory unbundling at regulated
rates. Thus, it presents a picture of how investment could change if
the U.S. moves toward the European system under Title II, not an
assessment of the direct results of the Title II Order.
74. The record also contains analyses attempting to assess the
predicted causal effects of Title II regulation on ISP investment and/
or output. Some of these studies are ``natural experiments'' that seek
to compare outcomes occurring after policy changes to a relevant
counterfactual that shows what outcomes would have occurred in the
absence of the policy change. No single study is dispositive, but
methodologies designed to estimate impacts relative to a counterfactual
tend to provide more convincing evidence of causal impacts of Title II
classification. Having reviewed the record of these studies, the
balance of the evidence indicates that Title II discourages investment
by ISPs--a finding consistent with economic theory. The record does not
provide sufficient evidence to quantify the size of the effect of Title
II on investment. An additional type of evidence is the effect of the
Title II Order on stock prices. According to that study, in the short
term, the decision appears to have had little direct effect on stock
prices, except for a few cable ISPs. That may reflect the forward-
looking, predictive capabilities of market players.
75. Prior FCC regulatory decisions provide a natural experiment
allowing this question to be studied. Scholars employing the natural
experiment approach found that prior to 2003, subscribership to cable
modem service (not regulated under Title II) grew at a far faster rate
than subscribership to DSL internet access service (the underlying
`last mile' facilities and transmission which were regulated under
Title II). After 2003, when the Commission removed line-sharing rules
on DSL, DSL internet access service subscribership experienced a
statistically significant upward shift relative to cable modem service.
A second statistically significant upward shift in DSL internet access
service subscribership relative to cable modem service occurred after
the Commission classified DSL internet access service as an information
service in 2005. This evidence suggests that Title II discourages not
just ISP investment, but also deployment and subscribership, which
ultimately create benefits for consumers. While some commenters contend
that deployment and subscribership continued to increase after the
Title II Order, such that nothing is amiss, this casual observation
does not compare observed levels of subscribership and deployment to a
relevant counterfactual that controls for other factors.
[[Page 7870]]
76. An assessment of how ISP investment reacted to news of
impending Title II regulation suggests that the threat of Title II
regulation discouraged ISP investment. Such statistical analysis allows
one to compare the actual level of investment with a counterfactual
estimate of what investment would have been in the absence of the
change in risk. This study found that Chairman Genachowski's 2010
announcement of a framework for reclassifying broadband under Title
II--a credible increase in the risk of reclassification that surprised
financial markets--was associated with a $30 billion-$40 billion annual
decline in investment in the U.S. Bureau of Economic Analysis'
``broadcasting and telecommunications'' category between 2011 and 2015.
The study attributes the decline to the threat of Title II regulation,
rather than net neutrality per se, because no similar decline occurred
when the FCC adopted the four principles to promote an open internet in
2005. Because the study's measure of investment data covers the entire
broadcasting and telecommunications industries, the change in
investment measured in this study might be larger than the change in
broadband investment associated with the threat of Title II regulation.
Accordingly, the findings may be a more reliable indicator of the
direction of the change in investment than the absolute size of the
change. At the very least, the study suggests that news of impending
Title II regulation is associated with a reduction in ISP investment
over a multi-year period.
77. Some commenters have argued that this study does not identify
the effect of Title II on ISP investment, because the ``last mile''
facilities and transmission underlying DSL internet access service
(essentially incumbent LEC broadband supply) were under Title II before
2005, during the study's pre-treatment period. However, to the extent
that a fraction of the industry was subject to Title II (and at the
time the bulk of broadband subscribers used cable modem services that
were not regulated under Title II), this would imply Ford's negative
result for investment was understated.
78. The study is also disputed by the Internet Association, which
submitted an economic study arguing that the threat and eventual
imposition of Title II status on broadband internet service providers
in 2010 and 2015 did not have a measurable impact on telecommunications
investment in the U.S. While we appreciate the alternative method and
data sources introduced by that study, several elements lead us to
discount its findings. The estimation of the impact of events in both
2010 and 2015 relies partially on forecast rather than actual data,
which likely lessens the possibility of finding an effect of Title II
on investment. In addition, when examining cable and telecommunications
infrastructure investment in the U.S., the study relies on a regression
discontinuity over time model, thereby eliminating the use of a
separate control group to identify the effect of policy changes. We
believe use of such a model in these circumstances is unlikely to yield
reliable results. The Internet Association study claims that its test
of the 2010 effect did not use forecast data. However, comparing the
reported number of observations in Tables B1 and B2 of the study
clearly indicates that the same datasets were used to estimate 2010 and
2015 effects. Furthermore, we note that the Phoenix Center attempted to
replicate the results of Table B1 and obtained strikingly different
results when excluding the forecast data. Unfortunately, the Phoenix
Center chose to only estimate Hooton's baseline model, which did not
control for obviously confounding factors such as the business cycle,
and therefore we place limited weight on the Phoenix Center's
revisions.
79. In light of the foregoing record evidence, we conclude that
reclassification of broadband internet access service from Title II to
Title I is likely to increase ISP investment and output. The studies in
the record that control the most carefully for other factors that may
affect investment (the Ford study and the Hazlett & Wright study)
support this conclusion. Ford controls for macroeconomic factors that
influence the overall economy using a two-way fixed-effects model.
Hazlett & Wright's analysis of the effects of Title II on DSL
subscribership cites regression analysis that controls for factors
influencing the overall economy by including Canadian DSL
subscribership as an explanatory variable. Consequently, we disagree
with commenters who assert that Title II has increased or had no effect
on ISP investment, given the failure of other studies to account for
complexity of corporate decision-making and the macroeconomic effects
that can play a role in investment cycles. We also disagree with
commenters who assert that it may be too soon to meaningfully assess
the economic effects that Title II has had on broadband infrastructure
investment.
80. Regulatory Uncertainty. The evidence that Title II has
depressed broadband investment is bolstered by other record evidence
showing that Title II stifled network innovation. Among the unseen
social costs of regulation are those broadband innovations and
developments that never see the light of day. ISP investment does not
simply take the form of greater deployment, but can also be directed
toward new and more advanced services for consumers. Research and
development is an inherently risky part of any business, and the
Commission's actions should not introduce greater uncertainty and risk
into the process without a clear need to do so. Numerous commenters
have stated that the uncertainty regarding what is allowed and what is
not allowed under the new Title II broadband regime has caused them to
shelve projects that were in development, pursue fewer innovative
business models and arrangements, or delay rolling out new features or
services. Even large ISPs with significant resources have not been
immune to the dampening effect that uncertainty can have on a firm's
incentive to innovate. Charter, for instance, has asserted that it has
``put on hold a project to build out its out-of-home Wi-Fi network, due
in part to concerns about whether future interpretations of Title II
would allow Charter to continue to offer its Wi-Fi network as a benefit
to its existing subscribers.'' Cox has also stated that it has
approached the ``development and launch of new products and service
features with greater caution'' due to the uncertainty created by the
Title II classification. And while new service offerings can take a
while to develop and launch, Comcast cites ``Title II overhang'' as a
burden that delayed the launch of its IP-based transmission of its
cable service, due to a year-long investigation.
81. Utility-style regulation is particularly inapt for a dynamic
industry built on technological development and disruption. It is well
known that extensive regulation distorts production as well as
consumption choices. Regulated entities are inherently restricted in
the activities in which they may engage, and the products that they may
offer. Asking permission to engage in new activities or offer new
products or services quickly becomes a major preoccupation of the
utility. This is apparent upon a casual observation of heavily-
regulated utilities, such as the U.S. power, water, and mass transit
systems. These are industries where competition has been effectively
deemed impossible, run by quasi-public monopolies that lack incentives
to invest, innovate, or even properly maintain their facilities.
[[Page 7871]]
Within the communications industry, it is apparent that the most
regulated sectors, such as basic telephone service, have experienced
the least innovation, whereas those sectors that have been
traditionally free to innovate, such as internet service, have greatly
evolved. In the communications industry, incumbents have often used
Commission regulation under the direction of the ``public interest'' to
thwart innovation and competitive entry into the sector and protect
existing market structures. Given the unknown needs of the networks of
the future, it is our determination that the utility-style regulations
potentially imposed by Title II run contrary to the public interest.
82. The record confirms that concern about ``regulatory creep''--
whereby a regulator slowly increases its reach and the scope of its
regulations--has exacerbated the regulatory uncertainty created by the
Title II Order. Even at the time of adoption, the Commission itself did
not seem to know how the Title II Order would be interpreted. As then-
Chairman Wheeler stated in February 2015, ``we don't really know. No
blocking, no throttling, no fast lanes. Those can be bright-line rules
because we know about those issues. But we don't know where things go
next.'' With future regulations open to such uncertainties, Title II
regulation adds a risk premium on each investment decision, which
reduces the expected profitability of potential investments and deters
investment. For example, the Title II Order did not forbear from ex
post enforcement actions related to subscriber charges, raising
concerns that ex post price regulation was very much a possibility.
Further, providers have asserted that although the Commission forbore
from the full weight of Title II in the Title II Order, they were less
willing to invest due to concerns that the Commission could reverse
course in the future and impose a variety of costly regulations on the
broadband industry--such as rate regulation and unbundling/open access
requirements--placing any present investments in broadband
infrastructure at risk. These concerns were compounded by the fact that
while the Title II Order itself announced forbearance from ex ante
price regulation, at the same time it imposed price regulation with its
ban on paid prioritization arrangements, which mandated that ISPs
charge edge providers a zero price. These threats to the ISP business
model have been felt throughout financial markets. As Craig Moffett of
MoffettNathanson explained, ``[i]t would be na[iuml]ve to suggest that
the implication of Title II, particularly when viewed in the context of
the FCC's repeated findings that the broadband market is non-
competitive, doesn't introduce a real risk of price regulation.'' These
risks are not merely theoretical: As CenturyLink contends, financial
analysts lowered industry stock ratings due in part to the major risks
Title II posed to the industry, which resulted in lower stock prices
and lost market capitalization.
83. For these reasons, ``any rational ISP will think twice before
investing in innovative business plans that might someday be found to
violate the Commission's undisclosed policy preferences and thus give
rise to a cease-and-desist order and perhaps massive forfeiture
penalties.'' We conclude that this ever-present threat of regulatory
creep is substantially likely to affect the risk calculus taken by ISPs
when deciding how to invest their shareholders' capital, potentially
deterring them from investing in broadband, and to encourage them to
direct capital toward less inherently-risky business operations. Many
ISPs are part of integrated multi-sector holding companies, which
allows them to more easily shift capital away from sectors where their
investments would face greater regulatory risk, and toward more
investment-friendly sectors. We find unpersuasive the alleged
inconsistencies between ISPs claiming that the Title II Order decreased
their willingness or ability to invest in broadband infrastructure, and
their statements to investors that the Title II Order has not had a
negative impact on their broadband deployments. First, some of the
comments claiming that corporate officers' statements to investors
prove that Title II has increased investment use highly selective
quotations that ignore other statements to investors that imply the
opposite. Second, as other commenters point out, the latter often
constitute statements susceptible to multiple interpretations, such as
AT&T CEO Randall Stephenson stating that his company planned to
``deploy more fiber next year than [it] did this year.'' Third, these
ambiguous statements do not take into account the relevant
counterfactual scenario in which Title II regulation had not been
adopted. Fourth, we observe that some of the comments attempting to
highlight a discrepancy between statements to investors and statements
in this proceeding simply show executives stating that their business
practices will not change because they were not engaged in the conduct
prohibited by the Title II Order, not that the firms' investment
priorities remained the same after the Title II Order. As such, we
disagree with commenters who assert that maintaining the Title II Order
regime is the best means of addressing regulatory uncertainty.
84. Small ISPs and Rural Communities. The Commission's decision in
2015 to reclassify broadband internet access service as a
telecommunications service has had particularly deleterious effects on
small ISPs and the communities they serve, which are often rural and/or
lower-income. The record reflects that small ISPs and new entrants into
the market face disproportionate costs and burdens as a result of
regulation. Many small ISPs lack the extensive resources necessary to
comply with burdensome regulation, and the record evinces a widespread
consensus that reclassification of broadband internet access service as
a telecommunications service has harmed small ISPs by forcing them to
divert significant resources to legal compliance and deterring them
from taking financial risks.
85. Small ISPs state that these increased compliance costs and
regulatory burdens have forced them to divert money and attention away
from planned broadband service and network upgrades and expansions,
thus delaying, deferring, or forgoing the benefits they would have
brought ``to their bottom lines, their customers, and their
communities.'' A coalition of National Multicultural Organizations
highlights that the uncertainty inherent under Title II ``already has
produced results that slow needed innovation and broadband adoption,
effects that are most acutely felt in rural and socioeconomically-
challenged urban communities.'' The record is replete with instances in
which small ISPs reduced planned, or limited new, investment in
broadband infrastructure as a result of the regulatory uncertainty
stemming from the adoption of the Title II Order. Because the logical
expectation that Title II regulation would have particularly harmful
effects on small ISPs and the communities they serve in is borne out by
strong record evidence from a wide range of small ISPs, we are
unpersuaded by speculative suggestions that small ISPs' investment
decisions can be fully or primarily explained based on other
considerations such that the effect of Title II regulation can be
neglected. The Wireless Internet Service Providers Association (WISPA)
surveyed its members and found that over 80 percent had ``incurred
additional expense in complying with
[[Page 7872]]
the Title II rules, had delayed or reduced network expansion, had
delayed or reduced services and had allocated budget to comply with the
rules.'' The threat of ex post rate regulation has hung particularly
heavily on the heads of small ISPs, ``who are especially risk-averse,
causing them to run all current and planned offerings against the
`just' and `reasonable' and unreasonably discriminatory standards of
sections 201 and 202 of the Act.'' The effects have been strongly felt
by small ISPs, given their more limited resources, leading to depressed
hiring in rural areas most in need of additional resources.
86. Compounding the difficulties faced by small ISPs, the record
also reflects that the `` `black cloud' of common carriage
regulations'' resulted in increased difficulties for small ISPs in
obtaining financing. A coalition of 70 small wireless ISPs cited the
uncertainty created by the Title II Order as a major reason that their
costs of capital have risen, preventing them from further expanding and
improving their networks. The new regulatory burdens, risks, and
uncertainties combined with ``diminished access to capital create a
vicious cycle--the regulatory burdens make it more difficult to attract
capital, and less capital makes it more difficult to comply with
regulatory burdens.'' A coalition of 19 municipal ISPs cited high legal
and consulting fees necessary to navigate the Title II Order, as well
as regulatory compliance risk as a reason for delaying or abandoning
new features and services. While, of course, not all small ISPs have
faced these challenges, there is substantial record evidence that
regulatory uncertainty resulting from the Commission's reclassification
of broadband internet access service in 2015 risks stifling innovation,
and that it has already done so with respect to small ISPs, which
ultimately harms consumers.
87. We anticipate that the beneficial effects of our decision today
to restore the classification of broadband internet access service to
an information service will be particularly felt in rural and/or lower-
income communities, giving smaller ISPs a stronger business case to
expand into currently unserved areas. Enabling ISPs to freely
experiment with services and business arrangements that can best serve
their customers, without excessive regulatory and compliance burdens,
is an important factor in connecting underserved and hard-to-reach
populations. We are committed to bridging the digital divide, and
recognize that small ISPs ``disproportionately provide service in rural
and underserved areas where they are either the only available
broadband service option or provide the only viable alternative to an
incumbent broadband provider.'' We anticipate that returning broadband
internet access service to a light-touch regulatory framework will help
further the Commission's statutory imperative to ``encourage the
deployment on a reasonable and timely basis of advanced
telecommunications capability to all Americans'' by helping to
incentivize ISPs to expand coverage to underserved areas. We therefore
reject arguments that our classification decision harms low-income
communities.
88. Investment at the Edge. Finally, to more fully discern the
impact of Title II, we must look at investment throughout the broadband
ecosystem, including investment and innovation at the edge, as well as
with other ecosystem participants (manufacturers, etc.). We agree with
commenters who assert that looking only at ISP investment ignores
investment that is occurring at the edge. While there is tremendous
investment occurring at the edge, the record does not suggest a
correlation between edge provider investment and Title II regulation,
nor does it suggest a causal relationship that edge providers have
increased their investments as a result of the Title II Order. Free
Press argues that since adoption of the Title II Order, innovation and
investment at the edge has increased. While high growth rates are
associated with the internet industry, the evidence presented does not
show the imposition of Title II regulation on internet access service
providers caused recent edge provider investment. That requires an
estimate as to what would have happened in the absence of Title II
regulation (e.g., analysis following the methods employed in the
studies of Ford, and of Hazlett & Wright).
89. In fact, one could argue that in the absence of Title II
regulation, edge providers would have made even higher levels of
investment than they undertook. In many cases, the strongest growth for
a firm or industry predates the Title II Order. For example, Free Press
highlights that the data processing, hosting, and related services
industry increased capital expenditures by 26 percent in 2015, a
significant increase in investment. However, in 2013, well before the
2014 Open Internet NPRM that led to the Title II Order, that industry
increased investment by over 100 percent. Similarly, Netflix's greatest
relative increase in capital expenditures occurred in 2013. Amazon
increased its spending on technology and content, which consists
primarily of research and development expenses, by 28 percent in 2016,
while in 2013 the increase was 41 percent. We do not claim that these
data points prove that edge provider investment would have been greater
in the absence of the Title II Order, but we find that Free Press does
not demonstrate that there is a significant difference in the
investment behavior of edge providers due to the Title II Order.
2. Utility-Style Regulation of Broadband Is a Solution in Search of a
Problem
90. The internet was open before Title II, and many economic
factors support openness. The internet thrived for decades under the
light-touch regulatory regime in place before the Title II Order, as
ISPs built networks and edge services were born. We find that the
sparse evidence of harms discussed in the Title II Order--evidence
repeated by commenters in this proceeding as the basis for adopting a
Title II classification--demonstrates that the incremental benefits of
Title II over light-touch regulation are inconsequential, and pale in
comparison to the significant costs of public-utility regulation. We
therefore reject the argument that sparse evidence of harms is
sufficient to justify the imposition of Title II.
91. The internet as we know it developed and flourished under
light-touch regulation. It is self-evident that the hypothetical harms
against which the Title II Order purported to protect did not thwart
the development of the internet ecosystem. Edge providers have been
able to disrupt a multitude of markets--finance, transportation,
education, music, video distribution, social media, health and fitness,
and many more--through innovation, all without subjecting the networks
that carried them to onerous utility regulation. It is telling that the
Title II Order and its proponents in this proceeding can point only to
a handful of incidents that purportedly affected internet openness,
while ignoring the two decades of flourishing innovation that preceded
the Title II Order.
92. The first instance of actual harm cited by the Title II Order
involved Madison River Communications, a small DSL provider accused in
2005 of blocking ports used for VoIP applications, thereby foreclosing
competition to its telephony business. Madison River entered into a
consent decree with the Enforcement Bureau, paying $15,000 to the U.S.
Treasury and agreeing that it ``shall not block ports used for VoIP
applications or otherwise prevent customers from using VoIP
applications.'' Vonage, an over-the-top
[[Page 7873]]
VoIP provider, later confirmed in press reports that it had initiated a
complaint against Madison River at the Commission and that other small
ISPs had blocked its VoIP services.
93. Next, the Title II Order referenced Comcast's throttling of
BitTorrent, a peer-to-peer networking protocol. Comcast, which was at
the time the nation's second-largest ISP, admitted that it interfered
with about a tenth of BitTorrent TCP connections, and independent
investigations suggested that Comcast interfered with over half of
BitTorrent streams. After receiving a formal complaint about the
practice, the Commission found ``that Comcast's conduct poses a
substantial threat to both the open character and efficient operation
of the internet, and is not reasonable,'' and ordered Comcast to cease
the interference. However, the D.C. Circuit vacated the Commission's
order in Comcast.
94. Madison River and Comcast-BitTorrent--the anecdotes most
frequently cited in favor of Title II regulation--demonstrate that any
problematic conduct was quite rare. The more recent incidents discussed
in the Title II Order also show that since 2008, few tangible threats
to the openness of the internet have arisen. First, in 2012, AT&T
restricted customers on certain data plans from accessing FaceTime on
its cellular network for three months. AT&T contended it did so due to
network management concerns, while application developers argued the
restriction limited consumer choice. Regardless of the merits, AT&T
ultimately reversed its decision within three months and the decision
did not affect consumers who had data caps.
95. The final example--though not an example of harm to consumers--
discussed in the Title II Order was Comcast's Xfinity TV application
for the Xbox, which was criticized for exempting subscribers from their
Comcast data caps. However, the service was provided as a specialized
service, similar to certain VoIP and video offerings that use IP but
are not delivered via the public internet. Accordingly, the Xfinity
Xbox application was not subject to the 2010 or 2015 rules, as it was a
so-called ``non-BIAS data service.'' However, the Title II Order
further clouded this carve-out for innovative services by threatening
to enforce the rules adopted under the Order against ISPs if it deemed
after the fact, that those services were ``functional equivalents'' of
broadband internet access services, as the Open Internet Order had done
in 2010.
96. Certain commenters have claimed that there have been other
harms to internet openness, but most of their anecdotes do not entail
harms that the Title II Order purported to combat. Electronic Frontier
Foundation and the Internet Engineers point to a number of alleged
practices by ISPs, including stripping encryption from certain
communications, inserting JavaScript code into third-party web pages,
sending search data to third parties, and adding cookies. However, none
of the bright-line rules promulgated in the Title II Order would have
halted these practices, and whether they are covered by the ``general
conduct rule'' is at best unclear. Similarly, the claim among several
commenters that certain mobile providers blocked Google Wallet is
misleading. Mobile providers refused to support Google Wallet because
it required integration with the secure element of the handset's SIM
card, which mobile providers believed introduced security
vulnerabilities. OTI's argument about AT&T blocking Slingbox--which
``redirected a TV signal'' to the iPhone app--from its 3G network in
2009 fails to provide support for Title II regulation for a similar
reason, because as AT&T explained at the time, ``we don't restrict
users from going to a website that lets them view videos. But what our
terms and conditions prohibit is the transferring, or slinging, of a TV
signal to their personal computer or smartphone.'' In an attempt to
manage its 3G network, AT&T restricted slinging to Wi-Fi, while
reiterating that consumers could still access video streaming websites.
We also recognize the existence of consumer complaints, but for the
reasons discussed in Part IV.B below, we do not find them indicative of
actual harm that the Commission's net neutrality rules are intended to
protect against.
97. Because of the paucity of concrete evidence of harms to the
openness of the internet, the Title II Order and its proponents have
heavily relied on purely speculative threats. We do not believe
hypothetical harms, unsupported by empirical data, economic theory, or
even recent anecdotes, provide a basis for public-utility regulation of
ISPs. Indeed, economic theory demonstrates that many of the practices
prohibited by the Title II Order can sometimes harm consumers and
sometimes benefit consumers; therefore, it is not accurate to presume
that all hypothetical effects are harmful. Intrusive, investment-
inhibiting Title II regulation requires a showing of actual harms, and
after roughly fifteen years of searching, proponents of Title II have
found ``astonishing[ly]'' few. Further, the transparency rule we adopt
today will require ISPs to clearly disclose such practices and this,
coupled with existing consumer protection and antitrust laws, will
significantly reduce the likelihood that ISPs will engage in actions
that would harm consumers or competition. To the extent that our
approach relying on transparency requirements, consumer protection
laws, and antitrust laws does not address all concerns, we find that
any remaining unaddressed harms are small relative to the costs of
implementing more heavy-handed regulation.
98. Incentives. We find, based on the record before us, that ISPs
have strong incentives to preserve internet openness, and these
interests typically outweigh any countervailing incentives an ISP might
have. Consequently, Title II regulation is an unduly heavy-handed
approach to what, at worst, are relatively minor problems. Although the
Title II Order argued that ISPs were incentivized to harm edge
innovation, it also conceded that ISPs benefit from the openness of the
internet. The Title II Order found that ``when a broadband provider
acts as a gatekeeper, it actually chokes consumer demand for the very
broadband product it can supply.'' We agree. The content and
applications produced by edge providers often complement the broadband
internet access service sold by ISPs, and ISPs themselves recognize
that their businesses depend on their customers' demand for edge
content. It is therefore no surprise that many ISPs have committed to
refrain from blocking or throttling lawful internet conduct
notwithstanding any Title II regulation. Finally, to the extent these
economic forces fail in any particular situation, existing consumer
protection and antitrust laws additionally protect consumers. We
therefore find that Title II, and the attendant utility-style
regulation of ISPs, are an unnecessarily heavy-handed approach to
protecting internet openness.
99. The Open Internet and Title II Orders claimed to base their
actions on a theory that broadband adoption is driven by a ``virtuous
cycle,'' whereby edge provider development ``increase[s] end-user
demand for [Internet access services], which [drive] network
improvements, which in turn lead to further innovative network uses.''
While the primary reason for this seems to be concern about the
exercise of market power, footnote 68 suggests a secondary reason: ISPs
``will typically not take into account the effect that reduced edge
provider investment and innovation has on the attractiveness of the
internet to
[[Page 7874]]
end users that rely on other broadband providers--and will therefore
ignore a significant fraction of the cost of foregone innovation.''
However, neither the Open Internet Order nor our record provide a
mechanism to explain how this would occur, and why the impact on the
ISP would not be proportional to its own business, and so be fully
accounted for in its decisions, and provides no evidence that even if
possible, there was a measurable impact from such an effect. The Title
II Order concluded that Commission action was necessary to protect this
virtuous cycle because ``gatekeeper'' power on the part of ISPs might
otherwise thwart it, as ISPs ``are unlikely to fully account for the
detrimental impact on edge providers' ability and incentive to innovate
and invest.'' However, the economic analysis in the Open Internet Order
and Title II Order was at best only loosely based on the existing
economics literature, in some cases contradicted peer-reviewed
economics literature, and included virtually no empirical evidence.
100. We find it essential to take a holistic view of the market(s)
supplied by ISPs. ISPs, as well as edge providers, are important
drivers of the virtuous cycle, and regulation must be evaluated
accounting for its impact on ISPs' capacity to drive that cycle, as
well as that of edge providers. The underlying economic model of the
virtuous cycle is that of a two-sided market. Notably, the two-sided
market we discuss here is the economic concept; we are not attempting
to define a market for antitrust purposes. In a two-sided market,
intermediaries--ISPs in our case--act as platforms facilitating
interactions between two different customer groups, or sides of the
market--edge providers and end users. The Open Internet Order takes the
position that edge provider innovation drives consumer adoption of
internet access and platform upgrades. The key characteristic of a two-
sided market, however, is that participants on each side of the market
value a platform service more as the number and/or quality of
participants on the platform's other side increases. (The benefits
subscribers on one side of the market bring to the subscribers on the
other, and vice versa, are called positive externalities.) Thus, rather
than a single side driving the market, both sides generate network
externalities, and the platform provider profits by inducing both sides
of the market to use its platform. In maximizing profit, a platform
provider sets prices and invests in network extension and innovation,
subject to costs and competitive conditions, to maximize the gain both
sides of the market obtain from interacting across the platform. The
more competitive the market, the larger the net gains to subscribers
and edge providers. Any analysis of such a market must account for each
side of the market and the platform provider.
101. Innovation by ISPs may take the form of reduced costs, network
extension, increased reliability, responsiveness, throughput, ease of
installation, and portability. These types of innovations are as likely
to drive additional broadband adoption as are services of edge
providers. In 2016, nearly 80 percent of Americans used fixed internet
access at home. There is no evidence that the remaining nearly one-
fifth of the population are all waiting for the development of
applications that would make internet access useful to them. Rather,
the cost of broadband internet access service is a central reason for
non-adoption. ISP innovation that lowers the relative cost of internet
access service is as likely as edge innovation, if not more so, to
positively impact consumer adoption rates. Indeed, ISPs likely play a
crucial role by offering, for example, low-margin or loss-leading
offers designed to induce skeptical internet users to discover the
benefits of access. In response to a larger base of potential
customers, the returns to innovation by edge providers would be
expected to rise, thereby spurring additional innovative activity in
that segment of the market.
102. Accordingly, arguments that ISPs have other incentives to take
actions that might harm the virtuous cycle, and hence might require
costly Title II regulation, need to be explained and evaluated
empirically. In a two-sided market, three potential reasons for Title
II regulation arise: The extent to which ISPs have market power in
selling internet access to end users; the extent to which ISPs have
market power in selling to edge providers access to the ISP's
subscribers (end users), which seems to primarily be to what the
Commission and others appear to be referring when using the term
``gatekeeper''; and the extent to which the positive externalities
present in a two-sided market might lead to market failure even in the
absence (or because of that absence) of ISP market power. In
considering each of these, we find that, where there are problems, they
have been overestimated, and can be substantially eliminated or reduced
by the more light-handed approach this order implements.
103. Our approach recognizes our limits as regulators, and is
appropriately focused on the long-lasting effects of regulatory
decisions. Thus, we seek to balance the harms that arise in the absence
of regulation against the harms of regulation, accounting for, in
particular, the effects of our actions on investment decisions that
could increase competition three to five or more years from now. This
is different from forbidding certain behavior or a merger on antitrust
grounds due to the likelihood of imminent, non-transitory price
increases. As a result, our discussion of competition need not have any
implications for conventional antitrust analysis. We note that our
reclassification of broadband internet access service as an information
service leaves the usual recourse of antitrust and consumer protection
action available to all parties. That is, heavy-handed Title II
regulation is unnecessary to enforce antitrust and consumer protection
laws.
104. Fixed ISPs Often Face Material Competitive Constraints. The
premise of Title II and other public utility regulation is that ISPs
can exercise market power sufficient to substantially distort economic
efficiency and harm end users. However, analysis of broadband
deployment data, coupled with an understanding of ISPs' underlying cost
structure, indicates fixed broadband internet access providers
frequently face competitive pressures that mitigate their ability to
exert market power. Therefore, the primary market failure rationale for
classifying broadband internet access service under Title II is absent.
Furthermore, the presence of competitive pressures in itself protects
the openness of the internet. The theory that competition is the best
way to protect consumers is the ``heart of our national economic
policy'' and the premise of the 1996 Act. We therefore find that the
competition that exists in the broadband market, combined with the
protections of our consumer protection and antitrust laws against
anticompetitive behaviors, will constrain the actions of an ISP that
attempts to undermine the openness of the internet in ways that harm
consumers, and to the extent they do not, any resulting harms are
outweighed by the harms of Title II regulation. Our discussion of
competitive effects, unless otherwise specified, does not rely on or
define any antitrust market.
105. ISP Competition in Supplying Internet Access to Households.
Starting with fixed internet access, including fixed satellite and
terrestrial fixed wireless service, competition, with
[[Page 7875]]
whatever limitations may be inherent in these different technologies,
appears to be widespread, at lower speeds for most households (we make
no finding as to whether lower speed fixed internet access services are
in the same market as higher speed fixed internet access services):
Percent of U.S. Population in Developed Census Blocks in Which Residential Fixed Broadband ISPS Reported
Deployment
[as of December 31, 2016]
----------------------------------------------------------------------------------------------------------------
Number of providers
Speed of at least: ---------------------------------------------------------------
3+ (%) 2 (%) 1 (%) 0 (%)
----------------------------------------------------------------------------------------------------------------
3 Mbps down and 0.768 Mbps up................... 97.0 2.8 0.1 0.1
10 Mbps down and 1 Mbps up...................... 93.6 5.7 0.6 0.1
25 Mbps down and 3 Mbps up...................... 43.9 32.6 19.1 4.4
----------------------------------------------------------------------------------------------------------------
106. However, because there are questions as to the extent fixed
satellite and fixed terrestrial wireless internet access service are
broadly effective competitors for wireline internet access service, we
do not rely on this data, except to note that these services, where
available, place some competitive constraints on wireline providers.
Fixed wireless and satellite subscriptions decisions suggest that
consumers generally prefer fixed wireline services to these, even at
lower speeds. For example, at bandwidths of 3 Mbps downstream and 0.768
Mbps upstream, satellite providers report deployment in 99.1 percent of
developed census blocks, but only account for 1.7 percent of
subscriptions, while terrestrial fixed wireless providers report
deployment in 38.5 percent of developed census blocks, but only account
for 0.9 percent of all subscriptions. Focusing on competition among
wireline service providers, and excluding DSL with speeds less than 3
Mbps down and 0.768 Mbps up, shows less, but still widespread,
competition:
Percent of U.S. Population in Developed Census Blocks in Which Residential Broadband Wireline ISPS Reported
Deployment
[as of December 31, 2016]
----------------------------------------------------------------------------------------------------------------
Number of providers
Speed of at least: ---------------------------------------------------------------
3+ (%) 2 (%) 1 (%) 0 (%)
----------------------------------------------------------------------------------------------------------------
3 Mbps down and 0.768 Mbps up................... 12.1 67.2 16.2 4.4
10 Mbps down and 1 Mbps up...................... 9.0 58.5 26.3 6.2
25 Mbps down and 3 Mbps up...................... 5.9 45.2 39.6 9.2
----------------------------------------------------------------------------------------------------------------
107. While not reported, the percent of households in developed
census blocks closely tracks the entries for the percent of population
in developed census tracts. For example, approximately 79.7 percent of
U.S. households are in a census block where at least two wireline
suppliers offer speeds of at least 3 Mbps down and 0.768 Mbps up. This
table understates competition in several respects. First, even two
competing wireline ISPs place competitive constraints on each other.
ISPs' substantial sunk costs imply that competition between even two
ISPs is likely to be relatively strong. Thus, to the extent market
power exists, it is unlikely to significantly distort what would
otherwise be efficient choices. A wireline ISP, anywhere it is active,
necessarily has made substantial sunk investments. Yet, the cost of
adding another customer, or of carrying more traffic from the same
customers, is relatively low. Accordingly, a wireline ISP has strong
incentives, even when facing a single competitor, to capture customers
or induce greater use of its network, so long as its current prices
materially exceed the marginal cost of such changes. In addition,
empirical research finds that the largest benefit from competition
generally comes from the presence of a second provider, with added
benefits of additional providers falling thereafter, especially in the
presence of large sunk costs. Indeed, a wireline provider may be
willing to cut prices to as low as the incremental cost of supplying a
new customer. Thus, in this industry, even two active suppliers in a
location can be consistent with a noticeable degree of competition, and
in any case, can be expected to produce more efficient outcomes than
any regulated alternative. We do not claim that a second wireline
provider results in textbook perfect competition, but rather, given ISP
recovery of sunk investments becomes more difficult as competition
increases, and the critical nature of allowing such recovery, market
outcomes may well ensure approximately competitive rates of return.
Other industries with large sunk costs have shown that ``price declines
with the addition of the first competitor, but drops by very little
thereafter.'' Nothing in this order should be construed as finding that
these statements appropriately characterize the addition of the first
fixed wireline competitor in a particular context, only that in general
such an addition likely will have a material impact on moving prices
toward competitive levels.
108. Second, competitive pressures often have spillover effects
across a given corporation, meaning an ISP facing competition broadly,
if not universally, will tend to treat customers that do not have a
competitive choice as if they do. This is because acting badly in
uncompetitive areas may be operationally expensive (i.e., requiring
different equipment, different policies, different worker training, and
different call centers to address differing circumstances) and
reputationally expensive (e.g., even if behavior is confined to an
uncompetitive market,
[[Page 7876]]
customers in competitive markets may churn after learning about such
behavior). Accordingly (and unsurprisingly), most ISPs actively try to
minimize the discrepancies in their terms of service, network
management practices, billing systems, and other policies--even if they
offer different service tiers or pricing in different areas.
Approximately 79 percent of U.S. households are found in census blocks
that at least two wireline ISPs report serving, and approximately
another 8 percent of households are in census blocks where the unique
wireline ISP providing service in the census block faces competition
from a rival in 90 percent of the blocks it serves. Such ISPs included
the top ten ISPs when ranked by covered census blocks, and also when
ranked by households in covered census blocks, except the ninth,
Windstream. Our conclusions do not hinge on finding effective
competition everywhere. We find that competition exists in various
forms nearly everywhere and to the extent that effective competition is
not universal, the costs of Title II regulation outweigh the benefits
of our more light-touch approach.
109. The Commission's prior findings on churn in the broadband
marketplace do not dissuade us from concluding that wireline broadband
ISPs often face competitive pressures. Although the Commission has
previously found voluntary churn rates for broadband service to be
quite low, a view which some commenters echo, substantial, quantified
evidence in the record dissuades us from repeating that finding here.
Regardless, even if high churn rates make market power unlikely, low
churn rates do not per se indicate market power. For example, they may
reflect competitive actions taken by ISPs to attract customers to sign
up for contracts, and to retain existing customers, such as discount
and bonus offers. Moreover, actions such as these, and others, are
indicative of competition. For example, ISPs engage in a significant
degree of advertising, aiming to draw new subscribers and convince
subscribers to other fixed ISPs to switch providers. Similarly, ISPs
employ ``save desks'' often taking aggressive actions to convince
subscribers seeking service cancellation to continue to subscribe,
often at a discounted price. Thus, the record indicates material
competition for customers regardless of churn levels.
110. There is even greater competition in mobile wireless. Mobile
wireless ISPs face competition in most markets, with widespread and
ever extending head-to-head competition between four major carriers. As
of January 2017, at least four wireless broadband service providers
covered approximately 92 percent of the U.S. population with 3G
technology or better. Even in rural areas at least four service
providers covered approximately 69 percent of the population. These
coverage estimates represent deployment of mobile networks and do not
indicate the extent to which providers offer service to residents in
the covered areas.
111. Both the Title II Order and its supporters in the current
proceeding fail to properly account for the pressure mobile internet
access exerts on fixed, including fixed wireline, internet access
supply. While we recognize that fixed and mobile internet access have
different characteristics and capabilities, for example, typically
trading off speed and data caps limits against mobility, increasing
numbers of internet access subscribers are relying on mobile services
only. In 2015, one in five households used only mobile internet access
service to go online at home (up from one in ten in 2013), and close to
15 percent of households with incomes in excess of $100,000 (up from
six percent in 2013), exclusively used mobile internet access service
at home. New America/OTI notes that this study states that low-income
Americans are far more likely to become mobile dependent than consumers
who have higher levels of income. However, as noted above, this same
study by the U.S. Census Bureau, which includes data collected from
nearly 53,000 households, also found a significant increase in mobile-
only use by higher-income households, and that the growth in the
proportion of high-income households that exclusively use mobile
internet service at home is accelerating. Several commenters discussed
their own views on the extent to which mobile wireless might exert
competitive pressure in some instances. Competition constrains a firm's
prices if the firm is prevented from raising price to levels that
absent switching to competitors, would increase the firm's profits. The
extent of the switching need not be large. For example, with constant
unit costs, a 5% price increase would be prevented if that would lead
to slightly less than 5% of the firm's customers to either stop
consuming altogether or to switch to a rival. Suppliers of internet
access service are likely to be more sensitive to customer loss than
the case with constant marginal cost, since in general the marginal
costs of internet access service fall as subscriber numbers increase,
meaning, in addition to the revenues lost due to leaving customers,
profits are also eroded due to a rise in the average cost of supplying
those who remain. With the advent of 5G technologies promising sharply
increased mobile speeds in the near future, the pressure mobile exerts
in the broadband market place will become even more significant.
112. ISP Competition in Supplying Edge Providers Access to End
Users. On the other side of the market, to the extent ISPs have market
power in supplying edge providers, ISP prices to edge providers could
distort economic efficiency (a potential harm that is distinct from
anticompetitive behavior or because of a failure to internalize a
relevant externality). Loosely speaking, such power over an edge
provider can arise under one of two conditions: The ISP has
conventional market power over the edge provider because it controls a
substantial share of (perhaps a specific subset of) end-user
subscribers that are of interest to the edge provider, or that edge
provider's customers only subscribe to one ISP (a practice known as
single homing).
113. Narrowly focusing on fixed ISPs, Comcast, the largest wireline
ISP, has approximately one quarter of all residential subscribers in
the US, while at speeds of at least 25 Mbps down and 3 Mbps up, the
Herfindahl-Hirschman Index measure of concentration for the supply of
access to residential fixed broadband internet access service
subscribers meets the Department of Justice (DOJ) designation of
``moderately concentrated'' (DOJ considers a market with an HHI value
of between 1,500 and 2,500 to be moderately concentrated):
HHI of Served Residential Fixed Broadband Internet Access Service
Subscribers
[as of December 31, 2016]
------------------------------------------------------------------------
Speed HHI
------------------------------------------------------------------------
3 Mbps down and 0.768 Mbps up........................... 1,473
10 Mbps down and 1 Mbps up.............................. 1,743
25 Mbps down and 3 Mbps up.............................. 2,208
------------------------------------------------------------------------
114. Large shares of end-user subscribers, and/or market
concentration, however, do not seem a likely source or indicator of
conventional market power capable of significantly distorting efficient
choices, with the possible exception of edge providers whose services
require characteristics currently only available on high-speed fixed
networks (such as video, which requires both high speeds and
substantial monthly data
[[Page 7877]]
allowances, and gaming and certain other applications, which require
high speeds and low latency). Given Comcast's market share, even a
fledgling edge provider that can only be viable in the long term if it
offers service to three quarters of broadband subscribers, may not
depend on gaining access to any single provider. And calculating market
shares for wireline ISPs based on their end users may be too simplistic
if edge providers can reach end users at locations other than their
homes, such as at work, or through a mobile ISP. We reject claims that
we should entirely neglect this possibility based on assertions that
users might be limited in their ability or willingness to switch
between different options for broadband internet access in unspecified
circumstances and for unspecified reasons. In addition, ISPs have good
incentives to encourage new entrants that bring value to end users,
both because such new entrants directly increase the value of the
platform's service, and because they place competitive pressure on
other edge providers, forcing lower prices, again increasing the value
of the platform's service. Moreover, those smaller edge providers may
benefit from tiered pricing, such as paid prioritization, as a means of
gaining entry. If the entrant offers a more valuable service than an
incumbent, then this would be a profitable strategy, and while it is
common to claim new entrants would not have the deep pockets necessary
to implement such an entry strategy, new economy startups have
demonstrated that capital markets are willing to provide funds for
potentially profitable ideas, despite high failure rates, presumably
because of the large potential gains when an entrant is successful.
Examples of successful new entrants that started behind dominant
incumbents, include Google (against established search engines such as
Yahoo, and the map provider, MapQuest), Amazon (against traditional
bricks and mortar storefronts), and Facebook (against MySpace). In
fact, some edge providers might consider reaching end users on mobile
devices to be roughly as valuable as, or more valuable than, reaching
end users on wireline networks.
115. In addition, larger edge providers, such as Amazon, Facebook,
Google and Microsoft, likely have significant advantages that would
reduce the prospect of inefficient outcomes due to ISP market power.
For example, the market capitalization of the smallest of these five
companies, Amazon, is more than twice that of the largest ISP, Comcast,
and the market capitalization of Google alone is greater than every
cable company in America combined. Action by these larger edge
providers preventing or reducing the use of ISP market power could
spill over to smaller edge providers, and in any case, is unlikely to
anticompetitively harm them given existing antitrust protections (since
arrangements between an ISP and a large established edge provider must
be consistent with antitrust law). Consequently, any market power even
the largest ISPs have over access to end users is limited in the extent
it can distort edge provider decisions (or those of their end users).
116. Despite the preceding analysis, a second claim is made that
relies solely on the second factor, single homing: ``regardless of the
competition in the local market for broadband internet access, once a
consumer chooses a broadband provider, that provider has a monopoly on
access to the subscriber . . . Once the broadband provider is the sole
provider of access to an end user, this can influence that network's
interactions with edge providers, end users, and others.'' Commenters
have echoed this ``terminating access monopoly'' concern. This argument
is often conflated with arguments about retail competition more
generally, but it is a distinct concept that has been endorsed by the
FCC and the courts in various contexts. The focus on edge providers'
bargaining position vis-[agrave]-vis ISPs is warranted in light of the
fact that any gatekeeper power applies to edge providers, not end
users. The Title II Order contended that these forces applied to all
ISPs, whether large or small, fixed or mobile, fiber or satellite, and
``therefore [it] need not consider whether market concentration gives
broadband providers the ability to raise prices.''
117. As a blanket statement, this position is not credible. It is
unlikely that any ISP, except the very largest, could exercise
substantial market power in negotiations with Google or Netflix, but
almost certainly no small wireless ISP, or a larger but still small
rural cable company or incumbent LEC, could do so. Further, from the
perspective of many edge providers, end users do not single home, but
subscribe to more than one platform (e.g., one fixed and one mobile)
capable of granting the end user effective access to the edge
provider's content (i.e., they multi-home). As the Title II Order
acknowledges, to the extent multihoming occurs in the use of an
application, there is no terminating monopoly.
118. Moreover, to the extent a terminating monopoly exists for some
edge providers, and it is not offset or more than offset by significant
advantages, there is the question of the extent to which the resulting
prices are economically inefficient. A terminating (access) monopoly
arises when customers on one side of the market, roughly speaking end
users in our case, single home with little prospect of switching to
another platform in the short run, while customers on the other side,
roughly speaking edge providers in our case, find it worthwhile to
multi-home. The terminating monopoly differs from conventional market
power because it can arise despite effective competition between
platforms. In that case, platforms must vigorously compete for single-
homing end users, but have less need to compete for edge providers, who
subscribe to all platforms. Such an arrangement is mutually
reinforcing. Single homers can reach all the multi-homers despite only
subscribing to one platform. Multi-homers must subscribe to all
platforms to reach all single homers. This means each ISP faces strong
pressures to cut prices to end users, but does not face similar
pressures in pricing to edge providers. However, ISPs are unlikely to
earn supranormal profits, so any markups earned from edge providers in
excess of total costs are generally passed through to end users. While
such an outcome generally will not be efficient, there is no general
presumption about the extent of that inefficiency, or even if prices to
the multi-homers ideally should be lower than would emerge in the
absence of a termination monopoly. In the present case, there is no
substantive evidence in the record that demonstrates how different
efficient prices to edge providers would be from the prices that would
emerge without rules banning paid prioritization or prohibiting ISPs
from charging providers at all.
119. Lastly, we find the record presents no compelling evidence
that any inefficiencies, to the extent they exist, justify Title II
regulation. There is no empirical evidence that the likely effects from
conventional market power or the terminating monopoly, to the extent
they exist, are likely to be significant, let alone outweigh the
harmful effects of Title II regulation. For all these reasons, we find
no case for supporting Title II regulation of ISP prices to edge
providers. We note that the terminating monopoly problem in voice
telecommunications is one created by common-carriage regulation, not
one solved by it. Specifically, carriers must interconnect with each
other and originating carriers must pay
[[Page 7878]]
terminating carriers rates set by the terminating carrier in their
tariff (with some government oversight). That leads to a ``bargaining''
situation where one party sets the terms of the deal and the other must
accept it or complain to the regulator--in other words, the regulations
prohibit a normal free market from developing. Such regulatory
requirements do not exist in broadband. Furthermore, two additional
aspects unique to the traditional telephone market created those
problems: (1) Voice call originators, who are (with the exception of
reverse charge calls) the analogue to edge providers in voice-
telecommunications, do not directly negotiate with the carrier that
sets call termination charges, but rather only have a relationship with
the call originating carrier. However, the originating carrier gains
from high call termination charges when it terminates calls on its own
network, so faces a conflict of interest when negotiating call
termination charges on behalf of its subscribers. In fact, such a
regime provides carriers with a mechanism for using the input price of
call termination to collude on retail prices. In contrast, edge
providers can directly connect with an ISP to reach that ISP's end
users, without seeking the ISP's help to terminate on another ISP's
network (unlike in voice telecommunications), or can use intermediaries
such as Cogent and Akamai, who largely do not terminate traffic to
their own end users, so do not face the conflict that voice carriers
face when negotiating termination charges. (2) Even if call originating
carriers had good incentives to negotiate reasonable termination
charges, regulation that requires interconnection, but does not
appropriately regulate termination charges, seriously weakens their
ability to obtain reasonable rates. Threatening to not interconnect is
not an available negotiating ploy in telecommunications, but is one
available to edge providers, especially larger ones, in negotiating
with ISPs. Moreover, historically voice telephony consisted of
geographic monopolies, making it pointless for one carrier to threaten
another with disconnection since the end users of the disconnected
carrier could not switch to a different carrier. Again, this is not
true for internet access.
120. Externalities Associated With General-Purpose Technologies Are
Not a Convincing Rationale for Title II Regulation. Some commenters
make somewhat inchoate arguments that ISPs should not be permitted to
treat different edge providers' content differently or charge more than
a zero price because the internet is a ``general purpose technology''
and/or the services of some edge providers create positive
externalities that the edge providers cannot appropriate. Hogendorn may
propose the most coherent version of this argument: Because the
internet is a general purpose technology (GPT), when an ISP sets a
price to any edge provider, the ISP does not take into account the
positive externalities generated by the broad (e.g., GPT) use of those
edge providers' applications (just as edge providers do not).
Unfortunately, these commentators fail to define or substantiate the
extent of the problem, if any; fail to demonstrate how much the
situation would be improved by requiring nondiscriminatory treatment of
all edge providers; do not explain why, if nondiscriminatory treatment
is required, it should be at a zero price; do not assess whether the
costs of such an intervention would be offset by the benefits; and do
not consider whether other less regulatory measures would be more
appropriate. For example, ISPs are one of many input suppliers to edge
providers, so taxing only ISPs would create distortions in edge
provider provision which could offset any (undemonstrated) benefits
such tax would bring. These problems are more acute if only specific
(as yet unidentified) edge providers generate positive externalities in
supply. Instead, these commenters seek to apply Title II regulation to
all ISPs, and consider the solution to their concern that certain
services or the internet itself might be inefficiently undersupplied
(for reasons well beyond the control of ISPs) to be a ban on ISPs only
(and not other input suppliers of edge providers) charging edge
providers any price. We reject this approach as unreasonable and
unreasoned.
3. Pre-Existing Consumer Protection and Competition Laws Protect the
Openness of the Internet
121. In the unlikely event that ISPs engage in conduct that harms
internet openness, despite the paucity of evidence of such incidents,
we find that utility-style regulation is unnecessary to address such
conduct. Other legal regimes--particularly antitrust law and the FTC's
authority under Section 5 of the FTC Act to prohibit unfair and
deceptive practices--provide protection for consumers. These long-
established and well-understood antitrust and consumer protection laws
are well-suited to addressing any openness concerns, because they apply
to the whole of the internet ecosystem, including edge providers,
thereby avoiding tilting the playing field against ISPs and causing
economic distortions by regulating only one side of business
transactions on the internet.
122. Consumer Protection. The FTC has broad authority to protect
consumers from ``unfair or deceptive acts or practices.'' As the
nation's premier consumer protection agency, the FTC has exercised its
authority, which arises from Section 5 of the FTC Act, to protect
consumers in all sectors of the economy. The FTC has used its Section 5
authority to enjoin some of the practices at issue in this proceeding,
such as throttling. The FTC is prohibited under the FTC Act from
regulating common carriers. As a result, the Commission's
classification of broadband internet access service as a common
carriage telecommunications service stripped the FTC of its authority
over ISPs. Therefore, as discussed in greater detail below, the return
to Title I will increase the FTC's effectiveness in protecting
consumers. Today's reclassification of broadband internet access
service restores the FTC's authority to enforce any commitments made by
ISPs regarding their network management practices that are included in
their advertising or terms and conditions, as the FTC did so
successfully in FTC v. TracFone. The FTC's unfair-and-deceptive-
practices authority ``prohibits companies from selling consumers one
product or service but providing them something different,'' which
makes voluntary commitments enforceable. The FTC also requires the
``disclos[ur]e [of] material information if not disclosing it would
mislead the consumer,'' so if an ISP ``failed to disclose blocking,
throttling, or other practices that would matter to a reasonable
consumer, the FTC's deception authority would apply.'' Today's
reclassification also restores the FTC's authority to take enforcement
action against unfair acts or practices. An unfair act or practice is
one that creates substantial consumer harm, is not outweighed by
countervailing benefits to consumers, and that consumers could not
reasonably have avoided. A unilateral change in a material term of a
contract can be an unfair practice. The FTC's 2007 Report on Broadband
Industry Practices raises the possibility that an ISP that starts
treating traffic from different edge providers differently without
notifying consumers and obtaining their consent may be engaging in a
practice that would be considered unfair under the FTC Act.
123. Many of the largest ISPs have committed in this proceeding not
to block or throttle legal content. These
[[Page 7879]]
commitments can be enforced by the FTC under Section 5, protecting
consumers without imposing public-utility regulation on ISPs. As
discussed below, we believe that case-by-case, ex post regulation
better serves a dynamic industry like the internet and reduces the risk
of over-regulation. We also reject assertions that the FTC has
insufficient authority, because, as Verizon argues, ``[i]f broadband
service providers' conduct falls outside [the FTC's] grant of
jurisdiction--that is, if their actions cannot be described as
anticompetitive, unfair, or deceptive--then the conduct should not be
banned in the first place.'' In addition to rejecting claims that the
FTC's authority is insufficient, we also reject arguments that it lacks
the necessary expertise to protect consumers in this area. The comments
by the FTC's Acting Chairman in this proceeding persuade us of that
agency's understanding of the issues and of its ability to resume
oversight of ISP practices. Just as importantly, any loss of expertise
is outweighed by the benefits of having a single expert consumer
protection agency overseeing the entire internet ecosystem. We
anticipate sharing information and expertise with the FTC as we work
together to protect consumers under the framework adopted today. And
the transparency rule that we adopt today should allay any concerns
about the ambiguity of ISP commitments, by requiring ISPs to disclose
if the ISPs block or throttle legal content. For the same reasons, the
transparency rule allows us to reject the argument that antitrust and
consumer protection enforcers cannot detect problematic conduct.
Finally, we expect that any attempt by ISPs to undermine the openness
of the internet would be resisted by consumers and edge providers. We
also observe that all states have laws proscribing deceptive trade
practices.
124. Antitrust. The antitrust laws, particularly Sections 1 and 2
of the Sherman Act, as well as Section 5 of the FTC Act, protect
competition in all sectors of the economy where the antitrust agencies
have jurisdiction. When challenged as anticompetitive under the
antitrust laws, the types of conduct and practices prohibited under the
Title II Order would likely be evaluated under the ``rule of reason,''
which amounts to a consumer welfare test. The Communications Act
includes an antitrust savings clause, so the antitrust laws apply with
equal vigor to entities regulated by the Commission. Should the
hypothetical anticompetitive harms that proponents of Title II imagine
eventually come to pass, application of the antitrust laws would
address those harms.
125. Section 1 of the Sherman Act bars contracts, combinations, or
conspiracies in restraint of trade, making anticompetitive arrangements
illegal. If ISPs reached horizontal agreements to unfairly block,
throttle, or discriminate against internet conduct or applications,
these agreements likely would be per se illegal under the antitrust
laws. EFF argues that the single entity doctrine means that a
vertically-integrated ISP could collude with its affiliated content arm
without fear of the antitrust laws. This argument is inapposite,
however, because such a claim against a vertically-integrated ISP would
likely be based on Section 2 of the Sherman Act under an attempted
monopolization theory, rather than as a Section 1 collusion claim.
Section 2 of the Sherman Act, which applies if a firm possesses or has
a dangerous probability of achieving monopoly power, prohibits
exclusionary conduct, which can include refusals to deal and exclusive
dealing, tying arrangements, and vertical restraints. Section 2 makes
it unlawful for a vertically integrated ISP to anticompetitively favor
its content or services over unaffiliated edge providers' content or
services. Treble damages are available under both Section 1 and Section
2. We note that FTC enforcement of Section 5 is broader and would apply
in the absence of monopoly power.
126. Most of the examples of net neutrality violations discussed in
the Title II Order could have been investigated as antitrust
violations. Madison River Communications blocked access to VoIP to
foreclose competition to its telephony business; an antitrust case
would have focused on whether the company was engaged in
anticompetitive foreclosure to preserve any monopoly power it may have
had over telephony. Whether one regards Comcast's behavior toward
BitTorrent as blocking or throttling, it could have been pursued either
as an antitrust or consumer protection case. The Commission noted that
BitTorrent's service allowed users to view video that they might
otherwise have to purchase through Comcast's Video on Demand service--a
claim that could be considered an anticompetitive foreclosure claim
under antitrust. Comcast also failed to disclose this network
management practice and initially denied that it was engaged in any
throttling--potentially unfair or deceptive acts or practices. If an
ISP that also sells video services degrades the speed or quality of
competing ``Over the Top'' video services (such as Netflix), that
conduct could be challenged as anticompetitive foreclosure.
127. Among the benefits of the antitrust laws over public utility
regulation are (1) the rule of reason allows a balancing of pro-
competitive benefits and anti-competitive harms; (2) the case-by-case
nature of antitrust allows for the regulatory humility needed when
dealing with the dynamic internet; (3) the antitrust laws focus on
protecting competition; and (4) the same long-practiced and well-
understood laws apply to all internet actors.
128. Reasonableness. The unilateral conduct that is covered by
Section 2 of the Sherman Act would be evaluated under a standard
similar to the rule of reason applicable to conduct governed by Section
1, ``an all-encompassing inquiry, paying close attention to the
consumer benefits and downsides of the challenged practice based on the
facts at hand.'' We believe that such an inquiry will strike a better
balance in protecting the openness of the internet and continuing to
allow the ``permissionless innovation'' that made the internet such an
important part of the modern U.S. economy, as antitrust uses a welfare
standard defined by economic analysis shaped by a significant body of
precedent. Compare this to the Internet Conduct Standard, which would
examine a variety of considerations broader than consumer welfare, as
well as factors yet to be determined.
129. The case-by-case, content-specific analysis established by the
rule of reason will allow new innovative business arrangements to
emerge as part of the ever-evolving internet ecosystem. New
arrangements that harm consumers and weaken competition will run afoul
of the Sherman Act, and successful plaintiffs will receive treble
damages. The FTC and DOJ can also bring enforcement actions in
situations where private plaintiffs are unable or unwilling to do so.
New arrangements benefiting consumers, like so many internet
innovations over the last generation, will be allowed to continue, as
was the case before the imposition of Title II utility-style regulation
of ISPs.
130. We reject commenters' assertions that the case-by-case nature
of antitrust enforcement makes it inherently flawed. A case-by-case
approach minimizes the costs of overregulation, including tarring all
ISPs with the same brush, and reduces the risk of false positives when
regulation is necessary. We believe the Commission's bright-line and
internet conduct rules are more likely to inhibit innovation before it
occurs, whereas antitrust enforcement can adequately remedy harms
should they occur. As
[[Page 7880]]
such, we reject the argument that innovation is best protected by ex
ante rules and command-and-control government regulation. Further,
while a handful of ISPs are large and vertically integrated with
content producers, most ISPs are small companies that have no leverage
in negotiations with large edge providers, which include some of the
most valuable companies in the world. Regulating these companies is
unnecessarily harmful. The antitrust laws can be tailored to the ISP's
circumstances. We reject as fundamentally speculative claims that
significantly different behavior is likely from entities that were
subject to antitrust suits, as compared to those that have not yet
been--but still could be--subject to such suits, or based on the theory
that antitrust authorities are likely to negotiate materially different
resolutions even for similarly situated entities or circumstances.
131. Moreover, the case-by-case analysis, coupled with the rule of
reason, allows for innovative arrangements to be evaluated based on
their real-world effects, rather than a regulator's ex ante
predictions. Such an approach better fits the dynamic internet economy
than the top-down mandates imposed by Title II. Further, the antitrust
laws recognize the importance of protecting innovation. Indeed, the FTC
has pursued several cases in recent years where its theory of harm was
decreased innovation. Accordingly, we believe that antitrust law can
sufficiently protect innovation, which is a matter of particular
importance for the continued development of the internet. Some
commenters argue that antitrust law is more limited in scope than the
rules in the Title II Order, antitrust enforcement necessarily takes
place after some harm has already occurred, and proving an antitrust
violation can be expensive and time-consuming. However, with a body of
established and evolving precedent, the FTC's antitrust enforcement is
fact-based, flexible and applicable to internet-related markets before
the Title II Order. We find that the antitrust framework will strike a
better balance by protecting competition and consumers while providing
industry with greater regulatory certainty. We also find that the
combination of the transparency rule, ISP commitments, and their
enforcement by the FTC sufficiently address the argument made by
several commenters that antitrust moves too slowly and is too expensive
for many supposed beneficiaries of regulation.
132. Additionally, the existence of antitrust law deters much
potential anticompetitive conduct before it occurs, and where it occurs
offers recoupment through damages to harmed competitors. Some
commenters have cast doubt on the effectiveness of ex post enforcement,
preferring ex ante rules. Yet as the FTC staff noted in its comments,
this is a false dichotomy. ``Effective rule of law requires both
appropriate standards--whether established by common law court,
Congress in statute, or by an agency in rules--and active enforcement
of those standards.'' Even the ``bright line'' rules in the Title II
Order contain an exception for ``reasonable network management.'' An
ISP accused of violating those rules would be the subject of an ex post
FCC enforcement action. The FCC would have to determine ex post whether
a challenged practice constituted technical network management or not.
133. Moreover, economic research has demonstrated that the threat
of antitrust enforcement deters anticompetitive actions. Block et al.
find that an increase in the likelihood of antitrust enforcement in the
U.S. has a significant effect on lowering prices to consumers.
Similarly it has been found that countries with vigorous antitrust
statutes and enforcement, such as the United States, reduce the effects
of anticompetitive behavior when it does occur. There is also evidence
that firms, once they have been subject to an enforcement action, are
less likely to violate the antitrust laws in the future. Overall, we
have confidence that the use of antitrust enforcement to protect
competition in the broadband internet service provider market will
ensure that consumers continue to reap the benefits of that
competition. We conclude that the light-touch approach that we adopt
today, in combination with existing antitrust and consumer protection
laws, more than adequately addresses concerns about internet openness,
particularly as compared to the rigidity of Title II. Some commenters
have raised issues about the feasibility of antitrust as applied to
some potential harms. CompTIA and OTI claim that the unilateral refusal
to deal and essential facilities cases are more difficult to bring
after Verizon Commc'ns, Inc. v. Law Offices of Curtis V. Trinko, 540
U.S. 398 (2004) and Pacific Bell Tel. Co. v. linkLine Commc'ns, Inc.,
555 U.S. 438 (2009). To the extent these commenters are correct, the
transparency rule and FTC enforcement of the commitments (based on
Section 5 of the FTC's Act broader reach than antitrust) remain to
protect the openness of the internet, and the shifts in antitrust
doctrine do not support the imposition of Title II.
134. Focus on protecting competition. One of the benefits of
antitrust law is its strong focus on protecting competition and
consumers. If a particular practice benefits consumers, antitrust law
will not condemn it. The fact that antitrust law protects competition
means that it also protects other qualities that consumers value.
``[The] assumption that competition is the best method of allocating
resources in a free market recognizes that all elements of a bargain--
quality, service, safety, and durability--and not just the immediate
cost, are favorably affected by the free opportunity to select among
alternative offers.'' The market competition that antitrust law
preserves will protect values such as free expression, to the extent
that consumers value free expression as a service attribute and are
aware of how their ISPs' actions affect free expression. The lack of
evidence of harms to free expression on the internet also bolsters our
belief that Title II is unnecessary to protect social values that are
not the focus of antitrust. The anecdotes of harms to internet openness
cited by supporters of the Title II Order almost exclusively concern
business decisions regarding network management, rather than being
aimed at or impacting political expression. In any case, the
transparency rule and the ISP commitments backed up by FTC enforcement
are targeted to preserving free expression, particularly the no-
blocking commitment. Therefore, we believe that the argument that
antitrust law does not consider non-economic factors such as free
expression and diversity fails to support Title II regulation.
135. Finally, applying antitrust principles to ISP conduct is
consistent with longstanding economic and legal principles that cover
all sectors of the economy, including the entire internet ecosystem.
Applying the same body of law to ISPs, edge providers, and all internet
actors avoids the regulatory distortions of Title II, which ``impos[ed]
asymmetric behavioral regulations . . . on broadband ISPs under the
banner of protecting internet openness, but le[ft] internet edge
providers free to threaten or engage in the same types of behavior
prohibited to ISPs free of any ex ante constraints.'' Our decision
today to return to light-touch Title I regulation and the backstop of
generally-applicable antitrust and consumer protection law ``help[s] to
ensure a level, technology-neutral playing field'' for the whole
internet.
[[Page 7881]]
D. Restoring the Information Service Classification Is Lawful and
Necessary
136. The Commission has the legal authority to return to the
classification of broadband internet access service as an ``information
service.'' The Supreme Court made clear when affirming the Commission's
original information service classification of cable modem service that
Congress ``delegated to the Commission authority to execute and enforce
the Communications Act, as well as prescribe the rules and regulations
necessary in the public interest to carry out the provisions.'' This
delegation includes the legal authority to interpret the definitional
provisions of the Communications Act. Nothing in the record
meaningfully contests this fundamental point. Relying on that
authority, we change course from the Title II Order and restore the
information service classification of broadband internet access
service, which represents the best interpretation of the Act. We reject
arguments against reclassification based on alleged shortcomings in the
justification for changing course provided in the Internet Freedom NPRM
given that we fully explain here our rationale for revisiting the Title
II Order's classification of broadband internet access service. As
discussed above, this action is supported by the text, structure, and
history of the Act, the nature of ISP offerings, judicial and
Commission precedent, and the public policy consequences flowing from
reclassification. For this reason, and for those set forth more fully
in Section III above, we reject claims that an information service
classification is unambiguously precluded. Such assertions are contrary
to our interpretation of the statutory language and our application of
it to the facts before us and also find no support in the relevant
court precedent addressing prior classification decisions, which either
affirmed an information service classification or affirmed the recent
telecommunications service classification as merely a permissible
interpretation of ambiguous statutory language. In making these
arguments, commenters do not dispute the Commission's general authority
to interpret and apply the Act, but merely present arguments regarding
the reasonableness or permissibility of interpreting or applying the
Act in particular ways.
137. An agency of course may decide to change course, and such a
decision is not, as some commenters suggest, inherently suspect. The
Supreme Court has observed that there is ``no basis in the
Administrative Procedure Act or in our opinions for a requirement that
all agency change be subjected to more searching review. . . . [I]t
suffices that the new policy is permissible under the statute, that
there are good reasons for it, and that the agency believes it to be
better, which the conscious change of course adequately indicates.''
Relevant precedent holds that we need only ``examine the relevant data
and articulate a satisfactory explanation for [our] action,'' a duty we
fully satisfy here. The ``possibility of drawing two inconsistent
conclusions from the evidence does not prevent an administrative
agency's finding from being supported by substantial evidence.'' As
such, we reject arguments that reclassification must be premised on
changed factual circumstances or preceded by a significant gap in time.
Rather, we are ``entitled to assess administrative records and evaluate
priorities'' in light of our current policy judgments. As the Court
recognized in Brand X, ``in Chevron itself, the Court deferred to an
agency interpretation that was a recent reversal of agency policy.''
The USTelecom decision supports our understanding of the relevant legal
standard, affirming the Title II Order's reclassification of broadband
internet access service irrespective of whether any facts had changed.
138. Such a change in course can be justified on a variety of
possible grounds. The Supreme Court observed in Brand X that ``the
agency . . . must consider varying interpretations and the wisdom of
its policy on a continuing basis, for example in response to . . . a
change in administrations.'' In addition, if an agency's predictions
``prove erroneous, the Commission will need to reconsider'' the
associated regulatory actions ``in accordance with its continuing
obligation to practice reasoned decision-making.'' In short, the
Commission's reasoned determination today that classifying broadband
internet access service as an information service is superior both as a
matter of textual interpretation and public policy suffices to support
the change in direction--even absent any new facts or changes in
circumstances. But even assuming such new facts were necessary, the
record provides several other sufficient and independent bases for our
decision to revisit the classification of broadband internet access
service.
139. For example, we find that the Title II Order's regulatory
predictions have not been borne out. Although purporting to adopt a
`light-touch' regulatory framework for broadband internet access
service, this view of the Title II Order's action faced skepticism at
the time, and we find those concerns confirmed in practice. For
example, the Wireless Telecommunications Bureau initiated inquiries
into wireless ISPs' sponsored data and zero-rated offerings, leading to
a report casting doubt on the legality of certain types of such
offerings. That report was later retracted. And the Commission
proceeded, in the wake of the reclassification in the Title II Order,
to adopt complex and highly prescriptive privacy regulations for
broadband internet access service, which ultimately were disapproved by
Congress under the Congressional Review Act. The amorphous and
potentially wide-ranging implications of the Title II-based regulatory
framework have hindered (or will likely hinder) marketplace innovation,
as the record here indicates and as one logically would expect. We thus
reject the suggestion that the Title II Order yielded ``legal and
economic certainty.'' That certain specific steps eventually were
rolled back is no cure--rather, those initial actions provide cause for
significant concerns that the regulatory framework adopted in the Title
II Order would be anything but ``light-touch'' over time. Given the
evidence that the Title II-based framework prompted additional
regulatory action and was not living up to its ``light-touch'' label,
we disagree with claims that ``[t]here has been no material change of
circumstance since the adoption of the'' Title II Order, or that the
shortcomings inherent in the Title II approach could be addressed
adequately through minor adjustments to the rules adopted in the Title
II Order.
140. Further, we are not persuaded that there were reasonable
reliance interests in the Title II Order that preclude our revisiting
the classification of broadband internet access service. Contrary to
Twilio's assertion that bright-line rules are over a decade old, we
note that the Commission did not establish any rules until 2010--just
seven years ago--and did not establish enforceable bright-line rules
until 2015--just two years ago. Assertions in the record regarding
absolute levels of edge investment do not meaningfully attempt to
attribute particular portions of that investment to any reliance on the
Title II Order. Nor are we persuaded that such reliance would have been
reasonable in any event, given the lengthy prior history of information
service classification of broadband internet access service, which we
are simply restoring here after the brief
[[Page 7882]]
period of departure initiated by the Title II Order.
141. ``[A]n agency literally has no power to act . . . unless and
until Congress confers power upon it.'' And so our role is to achieve
the outcomes Congress instructs, invoking the authorities that Congress
has given us--not to assume that Congress must have given us authority
to address any problems the Commission identifies. However, rather than
looking to Congress to address its statutory authority after the 2010
Comcast decision, the Commission instead attempted increasingly-
regulatory approaches under existing statutory provisions, culminating
in the Title II Order's application of a legal regime that was ill-
suited for broadband internet access service. Returning to the
Commission's historically sound approach to interpreting and applying
the Act to broadband internet access service corrects what we see as
shortcomings in how the Commission, in the recent past, conceptualized
its role in this context.
142. We also conclude that the Commission should have been
cautioned against reclassifying broadband internet access service as a
telecommunications service in 2015 because doing so involved ``laying
claim to extravagant statutory power over the national economy while at
the same time strenuously asserting that the authority claimed would
render the statute `unrecognizable to the Congress that designed' it.''
Such interpretations ``typically [are] greet[ed] . . . with a measure
of skepticism'' by courts, and we believe they should be by the
Commission, as well. We rely on these principles to inform what
interpretation constitutes the best reading of the Act independent of
any broader legal implications that potentially could result from such
considerations. Thus, although the separate opinions in the denial of
rehearing en banc in USTelecom debated the application of such
principles here--including with respect to issues of agency deference
and the permissibility of the Commission's prior classification--we
need not and do not reach such broader issues. As relevant here, the DC
Circuit in Verizon observed that ``regulation of broadband internet
providers''--there, rules that required per se common carriage--
``certainly involves decisions of great `economic and political
significance.' '' That seems at least as apt a description of the Title
II Order decision classifying broadband internet access service as a
common carrier telecommunications as one adopting rules compelling the
service to be offered in a manner that is per se common carriage. In
particular, the Title II Order recognized that classification of
broadband internet access service as a telecommunications service
would, absent forbearance, subject the service and its providers to a
panoply of duties and requirements ill-suited to broadband internet
access service. Thus, not only did reclassification involve what we see
as a claim of extravagant statutory power, but the Commission found
that much of the resulting power was not sensibly applied to broadband
internet access service--a view we believe also would be held by
Congress itself. Restoring the information service classification that
applied for nearly two decades before the Title II Order does not
require any claim by the Commission of extravagant statutory power over
broadband internet access service and eliminates the anomaly that ill-
fitting Title II regulation would apply by default to broadband
internet access service. These considerations thus lend support to our
decision to reclassify broadband internet access service as an
information service.
E. Effects on Regulatory Structures Created by the Title II Order
143. In this section, we clarify the regulatory effects of today's
reinstatement of broadband internet access service as a Title I
``information service'' on other regulatory frameworks affected or
imposed by the Title II Order, including the effects on: (1) Internet
traffic exchange arrangements; (2) the Title II Order's forbearance
framework; (3) privacy; (4) wireline broadband infrastructure; (5)
wireless broadband infrastructure; (6) universal service; (7)
jurisdiction and preemption; and (8) disability access. We do not
intend for today's classification to affect ISPs' obligations under the
Communications Assistance for Law Enforcement Act, the Foreign
Intelligence Surveillance Act, or the Electronic Communications Privacy
Act. No commenter identifies any such effect of reclassification, nor
does such a change appear to have justified the classification decision
in the Title II Order. We also are not persuaded that our
classification decision will itself have material negative consequences
as it relates to safe harbor protections for ISPs under the Digital
Millennium Copyright Act (DMCA). Our actions here return to the
analysis in Brand X and other pre-2015 classification decisions and the
associated successful regulatory framework, and we are not persuaded
that the DMCA would apply materially differently now so as to render
the regulatory framework for broadband internet access service less
successful today.
1. Ending Title II Regulation of Internet Traffic Exchange
144. The Title II Order applied, for the first time, the
requirements of Title II to internet traffic exchange ``by an edge
provider . . . with the broadband provider's network.'' OTI's argument
that internet traffic exchange was not classified as a Title II service
is unpersuasive. The Title II Order did not subject internet traffic
exchange to Title II obligations but, as OTI acknowledges, interpreted
broadband internet access services to include internet traffic exchange
between an ISP and an edge provider or its transit provider as ``a
portion'' of the service, or alternatively as used ``for and in
connection with'' that service. In doing so, the Title II Order applied
certain Title II requirements to these internet traffic exchange
arrangements. We make clear that as a result of our decision to restore
the longstanding classification of broadband internet access service as
an information service, internet traffic exchange arrangements are no
longer subject to Title II and its attendant obligations. We thus
return internet traffic exchange to the longstanding free market
framework under which the internet grew and flourished for decades.
145. Background. As the Title II Order acknowledges, the market for
internet traffic exchange between ISPs and edge providers or their
intermediaries ``historically has functioned without significant
Commission oversight.'' We disagree with assertions that withdrawing
from regulation of interconnection agreements would represent a break
with longstanding Commission precedent. The Commission made clear in
the Open Internet Order that it did not intend the open internet rules
``to affect existing arrangements for network interconnections,
including existing paid peering arrangements.'' For many years, both
ISPs and edge providers largely paid third-party backbone service
providers for transit, and backbone providers connected upstream until
they reached Tier 1 backbone service providers which provided access to
the full internet. In recent years, particularly with the rise of
online video, edge providers increasingly used CDNs and direct
interconnection with ISPs, rather than transit, to increase the quality
of their service. At the same time, ISPs have increasingly built or
acquired their own backbone services, allowing them to interconnect
with
[[Page 7883]]
other networks without paying for third-party transit services.
146. Notwithstanding these developments, but in line with other
aspects of the Title II Order seeking to extend the Commission's
regulatory authority, the Commission seized on a handful of anecdotes
to extend utility-style regulation to internet traffic exchange
arrangements. The Title II Order applied eight different sections of
Title II, including Sections 201, 202, and 208, to traffic exchange
between ISPs and edge providers or their intermediaries. We reject the
argument that this application of Title II, which includes potential
Commission mandates ``to establish physical connections with other
carriers, to establish through routes and charges applicable thereto
and the divisions of such charges, and to establish and provide
facilities and regulations for operating such through routes,'' was
light-touch, measured regulation. Although the Title II Order did not
apply the bright-line rules to internet traffic exchange, it stated
that the Commission would be ``available to hear disputes regarding
arrangements for the exchange of traffic with a broadband internet
access provider raised under Sections 201 and 202 on a case-by-case
basis.'' The Commission did not articulate specific criteria that it
would apply when hearing such disputes.
147. Deregulating Internet Traffic Exchange. Today, we return to
the pre-Title II Order status quo by classifying broadband internet
access service as an information service and, in doing so, reverse that
Order's extension of Title II authority to internet traffic exchange
arrangements. As was the case before the Title II Order, we retain
subject-matter jurisdiction over internet traffic exchange under Title
I, to the extent such exchange arrangements are ``wire'' or ``radio
communications.'' There is no dispute that ISPs, backbone transit
providers, and large edge providers are sophisticated, well-capitalized
businesses. Indeed, the Title II Order acknowledged as much, and
refused to impose ``prescriptive rules'' or even ``draw policy
conclusions concerning new paid internet traffic arrangements.''
Notwithstanding these acknowledgments, the Title II Order cast a shadow
on new arrangements in this sector by applying a range of common
carrier requirements to internet traffic exchange.
148. We believe that applying Title II to internet traffic exchange
arrangements was unnecessary and is likely to unduly inhibit
competition and innovation. As the court in USTelecom observed, the
Title II Order's oversight of interconnection was premised on the
concern that ISPs could evade the restrictions imposed via regulation
of the ``last mile'' through actions taken in connection with internet
interconnection arrangements. Here, however, we conclude that Title II
regulation and conduct rules are not warranted even as to the ``last
mile.'' The Title II Order itself recognized that the need for
intervention in matters of internet interconnection was less certain
than its conclusions regarding ISP actions in the ``last mile.''
Against that backdrop, along with our finding that Commission
regulation of ISP conduct in the ``last mile'' is unwarranted, we see
no grounds for finding that Title II regulation of internet traffic
exchange is necessary here. And absent Title II as a hook for
regulation of internet traffic exchange, we can identify no other
source of statutory authority to impose market-wide prophylactic
regulation on these arrangements. To the extent we have previously
proposed conditions on internet traffic exchange activities in the
context of specific mergers, those conditions were based on the
circumstances of specific entities in specific transactions and were
agreed to by those entities to facilitate a proposed merger. Those
conditions were not, however, predicated on any statutory provision
giving the Commission general authority to engage in prophylactic
regulation of all interconnection arrangements.
149. Instead, we find that freeing internet traffic exchange
arrangements from burdensome government regulation, and allowing market
forces to discipline this emerging and competitive market is the better
course. It is telling that, in the absence of Title II regulation, the
cost of internet transit fell over 99 percent on a cost-per-megabit
basis from 2005 to 2015. We do not rely on transit pricing alone, but
consider it in combination with the other factors discussed in this
section, and thus reject as inapposite claims that transit pricing
alone is an inadequate way of evaluating internet traffic exchange.
Further, we find that even those commenters that insist that ISPs wield
undue power in the interconnection market have offered no evidence that
ISPs generally charge supra-competitive prices for internet traffic
exchange arrangements. Moreover, we reject the proposition that prior
examples of settlement-free peering necessarily mean that a transit
price above zero is inherently anti- or supra-competitive. While the
move to paid peering may affect the bottom line of Tier 1 transit
providers, those effects cannot justify ex ante regulation unless they
are anti-competitive and harm end users. The record is devoid of
evidence of consumer harm in this regard since the resolution of the
Netflix congestion issues in 2014. Indeed, the new case-by-case dispute
process has gone unused, even as OVDs--which ISPs presumably might view
as competitors to affiliated video programming products or services--
have proliferated. Moreover, contrary to these unsubstantiated claims
of harm, we find that there are substantial pro-competitive and pro-
consumer benefits to alternative internet traffic exchange
arrangements. Because we conclude that this is the wiser course, we
reject comments asserting that a dispute resolution process is needed.
150. We welcome the growth of alternative internet traffic exchange
arrangements, including direct interconnection, CDNs, and other
innovative efforts. All parties appear to agree that direct
interconnection has benefited consumers by reducing congestion,
increasing speeds, and housing content closer to consumers, and allowed
ISPs to better manage their networks. CDNs play a similar role. We
believe that market dynamics, not Title II regulation, allowed these
diverse arrangements to thrive. Our decision to reclassify broadband
internet access service as an information service, and to remove Title
II utility-style regulation from internet traffic exchange, will spur
further investment and innovation in this market. Returning to the pre-
Title II Order light-touch framework will also eliminate the
asymmetrical regulatory treatment of parties to internet traffic
exchange arrangements. As NTCA explains, the Title II Order imposed a
one-sided interconnection duty upon last-mile ISPs--even though,
especially in rural areas, ``many ISPs are a tiny fraction of the size
of upstream middle mile and transit networks or content and edge
providers.'' The record reflects that the asymmetric regulation imposed
under the Title II Order unjustifiably provided edge providers, many of
whom are sophisticated entities with significant market power due to
high demand for their content, with additional leverage in negotiating
interconnection. We anticipate that eliminating one-sided regulation of
internet traffic exchange and restoring regulatory parity among
sophisticated commercial entities will allow the parties to more
efficiently negotiate mutually-acceptable arrangements to meet end user
demands for network usage.
151. We find that present competitive pressures in the market for
internet
[[Page 7884]]
traffic exchange mitigate the risk that an ISP might block or degrade
edge provider traffic through arrangements for internet traffic
exchange sufficiently to undermine the need for regulatory oversight
through Title II regulation. We thus disagree with generalized
assertions by some commenters to the contrary. In drawing this
conclusion, we recognize that the Commission previously imposed
internet interconnection conditions in the AT&T/DirecTV Order and
Charter/TWC Order to address claimed risks that the merged entity could
use internet interconnection to disadvantage rivals, particularly
competing providers of over-the-top video services. We decline to draw
judgments about the nature of the market as a whole from individual
determinations made in the context of particular merger orders. As an
initial matter, the Commission made these determinations pursuant to
its authority to impose conditions on transfers of licenses or
authorizations. As noted above, the Commission has identified no
broader general authority to impose these conditions on the
interconnection market as a whole. In addition, those orders were based
on an analysis of specific issues raised in those adjudications and
application of a public-interest statutory standard that differs from
the competition-based standard applied by the Department of Justice's
Antitrust Division during merger review. Further, those orders were
based on a narrowly-focused analysis of specific issues raised in those
adjudications. As we explain above, based on the record here, we
decline to repeat that finding of high switching costs. Finally,
because those orders were adopted without the benefit of notice-and-
comment rulemaking, we decline to make general inferences from
conditions contained in such documents, when the voluminous record
submitted in this proceeding persuades us that the interconnection
market is competitive. We thus are unpersuaded that the actions taken
in the AT&T/DirecTV Order and Charter/TWC Order should guide our
decisions here. Interconnection concerns generally focus on the
possibility that an ISP could block or allow congestion on paths used
to deliver traffic to that ISP as a way of harming rivals or extracting
unreasonable payments associated with that interconnection. Edge
providers have a variety of options in deciding how to deliver their
content to ISPs, including a large number of transit providers, CDNs,
and direct interconnection. Edge providers also can shift the path for
their traffic in response to congestion in real time. To address the
possibility that edge providers could simply shift their traffic away
from a blocked or congested path, it appears in most cases that the ISP
would need to engage in blocking or allow congestion on essentially all
paths to its network, affecting all traffic to and from the ISP's
customers. To the extent that some theorize that an ISP might harm
rivals with particularly high volumes of internet traffic through
actions taken with respect to a smaller number of interconnection
paths, we are not persuaded that such large providers of internet
traffic would lack sufficient leverage to achieve a reasonable
marketplace resolution, particularly given the increased likelihood
that such a large source of internet traffic would be highly valued by
end-users with which it could communicate directly regarding any
interconnection dispute. In addition, although certain forms of traffic
might be particularly sensitive to the quality of interconnection such
that some alternative interconnection paths would be inferior, it is
likely that blocking or allowing degradation of a substantial number of
paths to the ISP still would be necessary for such conduct to
effectively impact such traffic given that the concerns in the record
center on large ISPs, that are more likely than small ISPs to have
multiple viable interconnection paths. Further, that is but one of many
considerations that would affect the relative incentives and
marketplace leverage of the relevant ISP and interconnecting network
and/or edge provider. The practical viability of such a strategy thus
depends in general on an ISP's willingness to undermine the performance
of all or virtually all internet traffic to and from its customers. An
ISP's incentive to take such a step would involve a complex marketplace
evaluation requiring it to account for the associated risk of customer
dissatisfaction. Although this consideration alone does not necessarily
guarantee that no ISP ever would engage in such conduct, we reject
interconnection-related concerns that fail to meaningfully grapple with
this factor. Further, this factor must be considered in conjunction
with the overlay of legal protections, such as antitrust and consumer
protection laws discussed below. We find that these marketplace
dynamics are likely to impede, if not preclude, any effort by an ISP to
harm a specific edge provider's traffic.
152. Insofar as certain commenters contend that incidents such as
Cogent's experience delivering Netflix traffic in 2014 suggest
otherwise, we note that the origin of the Cogent-Netflix congestion is
disputed and that Cogent admitted to de-prioritizing certain types of
traffic for the congestion. In any event, there is ample evidence that
major edge providers, including Netflix, YouTube, and other large OVDs,
are some of the ``most-loved'' brands in the world. Their reputations
and the importance of reputation to their business and brand gives them
significant incentive to inform consumers and work to shape consumer
perceptions in the event of any dispute with ISPs. This incentive
mitigates potential concerns that consumers lack the knowledge and
ability to hold their ISPs accountable for interconnection disputes.
Further, as NCTA explains, ``the edge providers that send enough
traffic to impact interconnection--e.g., Netflix, Google/YouTube,
Facebook, and Amazon--are entities critical for a broadband provider to
meet its customers' needs.'' As another commenter explains, edge
providers, including OVDs, are complementary to ISPs' broadband
business, and reducing the value of these complementary products would
harm ISPs by reducing demand for their services. For all of these
reasons, we find that market dynamics are likely to mitigate the risk
that ISPs will block, degrade, or deprioritize specific edge providers'
traffic.
153. In addition, if an ISP attempts to block or degrade traffic in
a manner that is anti-competitive, such conduct may give rise to
actions by federal or state agencies under antitrust or consumer
protection laws. Some commenters have called for continued ex post
regulation of internet traffic exchange between ISPs and transit or
edge providers, potentially under Title I, or disclosure requirements.
For the reasons discussed here, we reject these arguments. As to
antitrust laws, antitrust authorities are empowered to police anti-
competitive conduct by ISPs (conduct that would be particularly salient
in cases where ISP competition was limited or nonexistent). We reject
the argument that the Commission's decision in the Charter-Time Warner
Cable Merger Order compels us to apply Title II regulation to
interconnection for the reasons discussed herein, infra Part VI.A. In
addition, the backstop of generally-applicable consumer protection laws
continues to protect consumers and edge providers. These laws,
particularly antitrust laws which prevent certain refusals to deal,
will also protect small, rural ISPs which may face difficulties
interconnecting with edge providers, transit providers, and larger
[[Page 7885]]
ISPs. Accordingly, assertions that public-utility regulation of
internet traffic exchange arrangements is necessary to allow consumers
to reach content of their choice are unpersuasive.
154. Even assuming that economic incentives and antitrust and
consumer protection remedies may not prevent or redress all potential
harms in the interconnection market, we find the regulatory approach
adopted in the Title II Order fatally overbroad as it relates to the
interconnection concerns identified in the record here. The Title II
Order's legal basis for oversight of interconnection depended on the
definition of broadband internet access service to include traffic
exchange and the classification of that entire service as a
telecommunications service subject to Title II--a classification that
applied to all ISPs, regardless of size or other characteristics. Here,
however, we have already rejected the Title II Order's rationales for
Title II regulation and explained the harms that flow from that regime.
The record reveals that retaining the Title II Order approach to
interconnection would be overbroad in other ways, as well. The
classification decision in that Order applied to all ISPs regardless of
size, while the concerns about ISPs in the record here center on a few
of the largest ISPs. The Title II Order classification also applied
irrespective of the specific traffic being carried, while some
advocates of interconnection oversight here express particular concerns
about certain subsets of traffic, like video traffic. Particularly
given the marketplace complexities associated with whether a given ISP
would, in fact, engage in harmful conduct, we are not persuaded that
the inchoate interconnection concerns identified in the record here
would justify retaining the Title II Order's approach to
interconnection with its sweeping, preemptive--and harmful--resulting
consequences.
2. Forbearance
155. As we have reinstated the information service classification
of broadband internet access service, the forbearance granted in the
Title II Order is now moot. We return to the pre-Title II Order status
quo and allow providers voluntarily electing to offer broadband
transmission on a common carrier basis to do so under the frameworks
established in the Wireline Broadband Classification Order and the
Wireless Broadband Internet Access Order. We also clarify that carriers
are no longer permitted to use the Title II Order forbearance framework
(i.e., no carrier will be permitted to maintain, or newly elect, the
Title II Order forbearance framework).
156. Prior to the Title II Order, some facilities-based wireline
carriers chose to offer broadband transmission services on a common
carrier basis subject to the full range of Title II requirements. In
the 2005 Wireline Broadband Classification Order, the Commission ruled
that broadband internet access was an information service, but at the
same time permitted facilities-based wireline carriers to voluntarily
elect to offer the transmission component of broadband internet access
service (often referred to as digital subscriber line or DSL) on a
common carrier basis. Operators choosing to offer broadband
transmission on a common carriage basis could do so under tariff or
could use non-tariff arrangements. The Commission permitted facilities-
based carriers to choose whether to offer wireline broadband internet
access transmission as non-common carriage or common carriage to
``enable facilities-based wireline internet access providers to
maximize their ability to deploy broadband internet access services and
facilities in competition with other platform providers, under a
regulatory framework that provides all market participants with the
flexibility to determine how best to structure their business
operations.'' Generally, ISPs that chose to elect common carrier status
were smaller carriers that served ``rural, sparsely-populated areas''
and obtained significant benefits from the provision of broadband
transmission services on a common carriage basis, including the ability
to participate in common tariff arrangements via the NECA pools and the
availability of high-cost universal service support.
157. We agree with NTCA and NECA that the broadband transmission
services currently offered by rural LECs under tariff differ
substantially from the broadband internet access services at issue in
this proceeding, and as such are not impacted by our decision to
reclassify broadband internet access service as an information service.
The term ``wireline broadband internet access service'' refers to ``a
mass-market retail service by wire 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.'' Broadband transmission services do
not provide end users with direct connectivity to the internet backbone
or content, but instead enable data traffic generated by end users to
be transported to an ISP's Access Service Connection Point over rural
LEC local exchange service facilities for subsequent interconnection
with the internet backbone.
158. Carriers offering broadband transmission service have never
been subject to the Title II Order forbearance framework. The Title II
Order forbearance framework with respect to broadband internet access
service did not encompass broadband transmission services and permitted
carriers to voluntarily elect to offer transmission services on a
common carriage basis pursuant to the Wireline Broadband Classification
Order. The Title II Order made clear that broadband transmission
services would continue to be subject to the full panoply of Title II
obligations (e.g., USF contributions), including those from which the
Commission forbore from in the Title II Order. Thus, only carriers that
elected to cease offering broadband transmission services and instead
offer broadband internet access services (including a transmission
service component) were subject to the Title II Order forbearance
framework (e.g., forbearance from USF contributions applied to such
carriers). Over one hundred providers opted-into the Title II Order
forbearance framework and in their letters to the Commission, they
noted that the transmission component would only be provided as part of
the complete broadband internet access service.
159. Today, we return to the pre-Title II Order status quo and
allow carriers to elect to offer broadband transmission services on a
common carrier basis, either pursuant to tariff or on a non-tariffed
basis. We find the reasoning in the Wireline Broadband Classification
Order for offering these options persuasive. Irrespective of the
regulatory classification of broadband internet access services, the
Commission has continuously permitted facilities-based wireline
carriers to provide broadband internet transmission services on a Title
II common carriage basis, with substantial flexibility in deciding how
such services may be offered (i.e., on a tariffed or non-tariffed
basis). Providing these options offers small carriers much-needed
regulatory certainty as they have sought to deploy and maintain
broadband internet access services to their customers. We reiterate
that broadband transmission services are not impacted by our decision
to reclassify broadband internet access service as an information
service.
160. We clarify that carriers that choose to offer transmission
service on a common carriage basis are, as under the Wireline Broadband
Classification
[[Page 7886]]
Order, subject to the full set of Title II obligations, to the extent
they applied before the Title II Order. Similarly, a wireless broadband
internet access provider may choose to offer the transmission component
as a telecommunications service and the transmission component of
wireless broadband internet access service as a telecommunications
service only if the entity that provides the transmission voluntarily
undertakes to provide it indifferently on a common carrier basis. Such
an offering is a common carrier service subject to Title II. In
addition, a wireless broadband internet access provider that chooses to
offer the telecommunications transmission component as a
telecommunications service may also be subject to the ``commercial
mobile service'' provisions of the Act. Further, we clarify that those
carriers that had previously been offering a broadband transmission
service (subject to the full panoply of Title II regulations) and that
elected to instead offer broadband internet access service after the
Title II Order now will be deemed to be offering an information
service. The Commission has never allowed carriers offering broadband
transmission services on a common carrier basis to opt in to the Title
II Order forbearance framework for those transmission services.
Carriers that prefer light-touch regulation may elect to offer
broadband internet access service as an information service. Although
WTA argues that allowing rural LECs to opt into the forbearance
framework will ``enable a much more level competitive playing field in
the retail marketplace,'' no other carriers are subject to that
framework, and we find that allowing carriers to opt into the
forbearance framework will result in a regulatory disparity. We
therefore reject WTA's argument that the Commission should continue to
permit opting into the Title II Order forbearance. To the extent that
other related issues are raised in the record, we find that those
issues are better addressed in the appropriate proceeding.
161. We also reject AT&T's assertion that the Commission should
conditionally forbear from all Title II regulations as a preventive
measure to address the contingency that a future Commission might seek
to reinstate the Title II Order. Although AT&T explains that
``conditional forbearance would provide an extra level of insurance
against the contingency that a future, politically motivated Commission
might try to reinstate a `common carrier' classification,'' we see no
need to address the complicated question of prophylactic forbearance
and find such extraordinary measures unnecessary.
3. Returning Broadband Privacy Authority to the FTC
162. By reinstating the information service classification of
broadband internet access service, we return jurisdiction to regulate
broadband privacy and data security to the Federal Trade Commission
(FTC), the nation's premier consumer protection agency and the agency
primarily responsible for these matters in the past. Restoring FTC
jurisdiction over ISPs will enable the FTC to apply its extensive
privacy and data security expertise to provide the uniform online
privacy protections that consumers expect and deserve.
163. Historically, the FTC protected the privacy of broadband
consumers, policing every online company's privacy practices
consistently and initiating numerous enforcement actions. In fact, the
FTC has ``brought over 500 enforcement actions protecting the privacy
and security of consumer information, including actions against ISPs
and against some of the biggest companies in the internet ecosystem.''
When the Commission reclassified broadband internet access service as a
common carriage telecommunications service in 2015, however, that
action stripped FTC authority over ISPs because the FTC is prohibited
from regulating common carriers. The effect of this decision was to
shift responsibility for regulating broadband privacy to the
Commission. And in lieu of an even playing field, the Commission
adopted sector-specific rules that deviated from the FTC's longstanding
framework. In March 2017, Congress voted under the Congressional Review
Act (CRA) to disapprove the Commission's 2016 Privacy Order, which
prevents us from adopting rules in substantially the same form.
164. Undoing Title II reclassification restores jurisdiction to the
agency with the most experience and expertise in privacy and data
security, better reflects congressional intent, and creates a level
playing field when it comes to internet privacy. Restoring FTC
authority to regulate broadband privacy and data security also fills
the consumer protection gap created by the Title II Order when it
stripped the FTC of jurisdiction over ISPs. Consumers expect
information to be ``treated consistently across the internet ecosystem
and that their personal information will be subject to the same
framework, in all contexts.'' Under the FTC's technology neutral
approach to privacy regulation, consumers will have the consistent
level of protection across the internet ecosystem that they expect.
With over 100 years of experience, only the FTC can apply consumer
protection rules consistently across industries. As NTCA contends, the
FTC has not only the legal jurisdiction, but also the subject matter
expertise. In 2007, the FTC issued a 167-page report that delved into
both the technical and legal bases of the internet and how the law
approaches it. Moreover, the FTC has been involved in numerous
initiatives that address consumer protection in the broadband
marketplace. The FTC's ``flexible, enforcement-focused approach has
enabled the agency to apply strong consumer privacy and security
protections across a wide range of changing technologies and business
models, without imposing unnecessary or undue burdens on industry.''
Moreover, the flexibility of the FTC's enforcement framework ``allows
room for new business models that could support expensive, next-
generation networks with revenue other than consumers' monthly bills.''
The FTC has already ``delivered the message to entities in a range of
fields--retailers, app developers, data brokers, health companies,
financial institutions, third-party service providers, and others--that
they need to provide consumers with strong privacy and data security
protections.'' The same approach should apply to ISPs. We also observe
that ISPs are not uniquely positioned with respect to their insight
into customers' private browsing behavior. As the FTC found in 2012,
``ISPs are just one type of large platform provider that may have
access to all or nearly all of a consumer's online activity. Like ISPs,
operating systems and browsers may be in a position to track all, or
virtually all, of a consumer's online activity to create highly
detailed profiles.'' And only the FTC operates on a national level
across industries, which is especially important when regulating
providers that operate across state lines. In light of the FTC's
decades of successful experience, including its oversight of ISP
privacy practices prior to 2015, we find arguments that we should
decline to reclassify to retain sector-specific control of ISP privacy
practices unpersuasive. The FTC has previously brought enforcement
actions against ISPs regarding internet access and related issues. The
FTC has also ``brought enforcement actions in matters involving access
to content via broadband and other internet access services,'' such as
the FTC's challenge to the proposed AOL and Time Warner merger, in
part, over concern for potential harm to consumers' broadband
[[Page 7887]]
internet access. We also note that while it may be true that the
Commission itself has longstanding privacy experience with respect to
traditional telephone service providers, we disagree that this history
uniquely qualifies the Commission to regulate the privacy practices of
ISPs or other online providers, when prior to 2015, the Commission did
not, and indeed lacked the authority to, regulate such providers. We do
not believe that experience with traditional telephone service
providers necessarily translates to experience or expertise with
respect to all communications providers. Some commenters object that
the FTC is not suited to protect privacy on the internet, citing the
FTC's narrower authority and fewer resources than the Commission and
the absence of specific statutory directive from Congress to the FTC to
regulate privacy. As discussed above, these criticisms are unfounded.
Furthermore, the uncertainty related to the Commission's current
authority over broadband privacy regulation created by the CRA
resolution of disapproval also weighs in favor of returning
jurisdiction to the FTC.
165. We also reject arguments that rely on the Ninth Circuit panel
decision holding that the common carrier exemption precludes FTC
oversight of non-common carriage activities of common carriers. As the
FCC's amicus letter explained in that case, the panel decision erred by
overlooking the textual relationship between the statutes governing the
FTC's and FCC's jurisdiction. We note that commenter concerns focus not
just on the FTC's privacy authority but its authority more generally.
We reject those arguments for the reasons stated above. Consistent with
the Commission's request, the Ninth Circuit granted rehearing en banc
of the panel decision, and in doing so it set aside the earlier panel
opinion. This en banc order means that the Title II Order's
reclassification of broadband internet access service serves as the
only current limit on the authority of the FTC to oversee the conduct
of internet service providers. We note that at any given time there
always may be some litigation pending somewhere in the country
challenging the scope or validity of various laws--whether the
Communications Act, FTC Act, or state consumer protection laws--that
the FCC might seek to rely on directly (in the case of the Act) or
indirectly (where relying in part on the availability of protections
provided by other laws). The Commission would be paralyzed if it had to
wait for all such litigation to be resolved before it acted. Because
the panel decision has been set aside in FTC v. AT&T Mobility, we do
not view that case as materially different than any other such pending
litigation--so we likewise do not view it as necessary to wait on the
resolution of that case before acting here. In light of these
considerations and the benefits of reclassification, we find objections
based on FTC v. AT&T Mobility insufficient to warrant a different
outcome.
4. Wireline Infrastructure
166. To the extent today's classification decision impacts the
deployment of wireline infrastructure, we will address that topic in
detail in proceedings specific to those issues. The importance of
facilitating broadband infrastructure deployment indicates that our
authority to address barriers to infrastructure deployment warrants
careful review in the appropriate proceedings. We disagree with
commenters who assert that Title II classification is necessary to
maintain our authority to promote infrastructure investment and
broadband deployment. Because the same networks are often used to
provide broadband and either telecommunications or cable service, we
will take further action as is necessary to promote broadband
deployment and infrastructure investment. Further, Title I
classification of broadband internet access services is consistent with
the Commission's broadband deployment objectives, whereas the Title II
regulatory environment undermines the very private investment and
buildout of broadband networks the Commission seeks to encourage.
Additionally, in the twenty states and the District of Columbia that
have reverse-preempted Commission jurisdiction over pole attachments,
those states rather than the Commission are empowered to regulate the
pole attachment process.
167. We are resolute that today's decision not be misinterpreted or
used as an excuse to create barriers to infrastructure investment and
broadband deployment. For example, we caution pole owners not to use
this Order as a pretext to increase pole attachment rates or to inhibit
broadband providers from attaching equipment--and we remind pole owners
of their continuing obligation to offer ``rates, terms, and conditions
[that] are just and reasonable.'' We will not hesitate to take action
where we identify barriers to broadband infrastructure deployment. We
have been working diligently to remove barriers to broadband deployment
and fully intend to continue to do so.
5. Wireless Infrastructure
168. When the Commission first classified wireless broadband
internet access as an information service in 2007, it emphasized that
certain statutory provisions in Section 224 (regarding pole
attachments) and 332(c)(7) (local authority over zoning) of the Act
would continue to apply where the same infrastructure was used to
provide a covered service (e.g., cable or telecommunications service)
as well as wireless broadband internet access. Section 224 gives cable
television systems and providers of telecommunications services the
right to attach to utility poles of power and telephone companies at
regulated rates. Section 332(c)(7) generally preserves state and local
authority over ``personal wireless service facilities'' siting or
modification, but subjects that authority to certain limitations. Among
other limitations, it provides that state or local government
regulation (1) ``shall not unreasonably discriminate among providers of
functionally equivalent services,'' (2) ``shall not prohibit or have
the effect of prohibiting the provision of personal wireless services''
and (3) may not regulate the siting of personal wireless service
facilities ``on the basis of the environmental effects of [RF]
emissions to the extent that such facilities comply with the
Commission's regulations concerning such emissions.''
169. As to Section 224, the Commission clarified in the Wireless
Broadband Internet Access Order that where the same infrastructure
would provide ``both telecommunications and wireless broadband internet
access service,'' the provisions of Section 224 governing pole
attachments would continue to apply to such infrastructure used to
provide both types of service. The Commission similarly clarified that
Section 332(c)(7)(B) would continue to apply to wireless broadband
internet access service where a wireless service provider uses the same
infrastructure to provide its ``personal wireless services'' and
wireless broadband internet access service.
170. We reaffirm the Commission's interpretations regarding the
application of Sections 224 and 332(c)(7) to wireless broadband
internet access service here. The Commission's rationale from 2007,
that commingling services does not change the fact that the facilities
are being used for the provisioning of services within the scope of the
statutory provision, remains equally valid today. This clarification
will alleviate concerns that wireless broadband internet access
providers not face increased barriers to infrastructure
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deployment as a result of today's reclassification. This clarification
also is consistent with our commitment to promote broadband deployment
and close the digital divide.
171. Although the wireless infrastructure industry has changed
significantly since the adoption of the Wireless Broadband Internet
Access Order, it remains the case that cell towers and other forms of
network equipment can be used ``for the provision'' of both personal
wireless services and wireless broadband internet access on a
commingled basis. These communications facilities are sometimes built
by providers themselves, but are increasingly being deployed by third-
parties who then offer the use of these facilities to wireless service
providers for a variety of services, including telecommunications
services and information services. To remove any uncertainty, we
clarify that Section 332(c)(7) applies to facilities, including DAS or
small cells, deployed and offered by third-parties for the purpose of
provisioning communications services that include personal wireless
services. Consistent with the statutory provisions and Commission
precedent, we consider infrastructure that will be deployed for the
provision of personal wireless services, including third-party
facilities such as neutral-host deployments, to be ``facilities for the
provision of personal wireless services'' and therefore subject to
Section 332(c)(7) as ``personal wireless service facilities'' even
where such facilities also may be used for broadband internet access
services.
172. We reiterate our commitment to expand broadband access,
encourage innovation and close the digital divide. We will closely
monitor developments on broadband infrastructure deployment and move
quickly to address barriers in a future proceeding if necessary.
6. Universal Service
173. The reclassification of consumer and small business broadband
access as an information service does not affect or alter the
Commission's existing programs to support the deployment and
maintenance of broadband-capable networks, i.e., the Connect America
Fund's high-cost universal service support mechanisms. As explained in
the USF/ICC Transformation Order, the Commission has authority to
ensure that ``the national policy of promoting broadband deployment and
ubiquitous access to voice telephony services is fully realized'' and
require that ``carriers receiving support . . . offer broadband
capabilities to customers.'' What services a particular customer
subscribes to is irrelevant as long as high-cost support is used to
build and maintain a network that provides both voice and broadband
internet access service. Thus, the classification of broadband internet
access as an information service does not change the eligibility of
providers of those services to receive federal high-cost universal
service support.
174. Lifeline. We conclude that we need not address concerns in the
record about the effect of our reclassification of broadband internet
access service as an information service on the Lifeline program at
this time. In November 2017, we adopted an NPRM in the Lifeline
proceeding (Lifeline NPRM) (83 FR 2075) in which we proposed limiting
Lifeline support to facilities-based broadband service provided to a
qualifying low-income consumer over the eligible telecommunication
carrier's (ETC's) voice- and broadband-capable last-mile network, and
sought comment on discontinuing Lifeline support for service provided
over non-facilities-based networks, to advance our policy of focusing
Lifeline support to encourage investment in voice- and broadband-
capable networks. As explained in the Lifeline NPRM, we ``believe the
Commission has authority under Section 254(e) of the Act to provide
Lifeline support to ETCs that provide broadband service over
facilities-based broadband-capable networks that support voice
service'' and that ``[t]his legal authority does not depend on the
regulatory classification of broadband internet access service and,
thus, ensures the Lifeline program has a role in closing the digital
divide regardless of the regulatory classification of broadband
service.'' We thus find that today's reinstatement of the information
service classification for broadband internet access service does not
require us to address here our legal authority to continue supporting
broadband internet access service in the Lifeline program, as such
concerns are more appropriately addressed in the ongoing Lifeline
proceeding.
7. Preemption of Inconsistent State and Local Regulations
175. We conclude that regulation of broadband internet access
service should be governed principally by a uniform set of federal
regulations, rather than by a patchwork that includes separate state
and local requirements. Our order today establishes a calibrated
federal regulatory regime based on the pro-competitive, deregulatory
goals of the 1996 Act. Allowing state and local governments to adopt
their own separate requirements, which could impose far greater burdens
than the federal regulatory regime, could significantly disrupt the
balance we strike here. Federal courts have uniformly held that an
affirmative federal policy of deregulation is entitled to the same
preemptive effect as a federal policy of regulation. In addition,
allowing state or local regulation of broadband internet access service
could impair the provision of such service by requiring each ISP to
comply with a patchwork of separate and potentially conflicting
requirements across all of the different jurisdictions in which it
operates. Just as the Title II Order promised to ``exercise our
preemption authority to preclude states from imposing regulations on
broadband service that are inconsistent'' with the federal regulatory
scheme, we conclude that we should exercise our authority to preempt
any state or local requirements that are inconsistent with the federal
deregulatory approach we adopt today.
176. We therefore preempt any state or local measures that would
effectively impose rules or requirements that we have repealed or
decided to refrain from imposing in this order or that would impose
more stringent requirements for any aspect of broadband service that we
address in this order. This includes any state laws that would require
the disclosure of broadband internet access service performance
information, commercial terms, or network management practices in any
way inconsistent with the transparency rule we adopt herein. Our
transparency rule is carefully calibrated to reflect the information
that consumers, entrepreneurs, small businesses, and the Commission
needs to ensure a functioning market for broadband internet access
services and to ensure the Commission has sufficient information to
identify market-entry barriers--all without unduly burdening ISPs with
disclosure requirements that would raise the cost of service or
otherwise deter innovation within the network. Among other things, we
thereby preempt any so-called ``economic'' or ``public utility-type''
regulations, including common-carriage requirements akin to those found
in Title II of the Act and its implementing rules, as well as other
rules or requirements that we repeal or refrain from imposing today
because they could pose an obstacle to or place an undue burden on the
provision of broadband internet access service and conflict with the
deregulatory approach we adopt today. The terms ``economic regulation''
and ``public utility-type regulation,'' as used here, are terms of art
that the
[[Page 7889]]
Commission has used to include, among other things, requirements that
all rates and practices be just and reasonable; prohibitions on unjust
or unreasonable discrimination; tariffing requirements; accounting
requirements; entry and exit restrictions; interconnection obligations;
and unbundling or network-access requirements. We are not persuaded
that preemption is contrary to Section 706(a) of the 1996 Act, 47
U.S.C. 1302(a), insofar as that provision directs state commissions (as
well as this Commission) to promote the deployment of advanced
telecommunications capability. For one thing, as discussed infra, we
conclude that Section 706 does not constitute an affirmative grant of
regulatory authority, but instead simply provides guidance to this
Commission and the state commissions on how to use any authority
conferred by other provisions of federal and state law. For another,
nothing in this order forecloses state regulatory commissions from
promoting the goals set forth in Section 706(a) through measures that
we do not preempt here, such as by promoting access to rights-of-way
under state law, encouraging broadband investment and deployment
through state tax policy, and administering other generally applicable
state laws. Finally, insofar as we conclude that Section 706's goals of
encouraging broadband deployment and removing barriers to
infrastructure investment are best served by preempting state
regulation, we find that Section 706 supports (rather than prohibits)
the use of preemption here.
177. Although we preempt state and local laws that interfere with
the federal deregulatory policy restored in this order, we do not
disturb or displace the states' traditional role in generally policing
such matters as fraud, taxation, and general commercial dealings, so
long as the administration of such general state laws does not
interfere with federal regulatory objectives. We thus conclude that our
preemption determination is not contrary to Section 414 of the Act,
which states that ``[n]othing in [the Act] shall in any way abridge or
alter the remedies now existing at common law or by statute.'' Under
this order, states retain their traditional role in policing and
remedying violations of a wide variety of general state laws. The
record does not reveal how our preemption here would deprive states of
their ability to enforce any remedies that fall within the purview of
Section 414. In any case, a general savings clause like Section 414
``do[es] not preclude preemption where allowing state remedies would
lead to a conflict with or frustration of statutory purposes.'' Indeed,
the continued applicability of these general state laws is one of the
considerations that persuade us that ISP conduct regulation is
unnecessary here. Nor do we deprive the states of any functions
expressly reserved to them under the Act, such as responsibility for
designating eligible telecommunications carriers under Section 214(e);
exclusive jurisdiction over poles, ducts, conduits, and rights-of-way
when a state certifies that it has adopted effective rules and
regulations over those matters under Section 224(c); or authority to
adopt state universal service policies not inconsistent with the
Commission's rules under Section 254. We find no basis in the record to
conclude that our preemption determination would interfere with states'
authority to address rights-of-way safety issues. We note that we
continue to preempt any state from imposing any new state universal
service fund contributions on broadband internet access service. We
appreciate the many important functions served by our state and local
partners, and we fully expect that the states will ``continue to play
their vital role in protecting consumers from fraud, enforcing fair
business practices, for example, in advertising and billing, and
generally responding to consumer inquiries and complaints'' within the
framework of this order.
178. Legal Authority. We conclude that the Commission has legal
authority to preempt inconsistent state and local regulation of
broadband internet access service on several distinct grounds.
179. First, the U.S. Supreme Court and other courts have recognized
that, under what is known as the impossibility exception to state
jurisdiction, the FCC may preempt state law when (1) it is impossible
or impracticable to regulate the intrastate aspects of a service
without affecting interstate communications and (2) the Commission
determines that such regulation would interfere with federal regulatory
objectives. Here, both conditions are satisfied. Indeed, because state
and local regulation of the aspects of broadband internet access
service that we identify would interfere with the balanced federal
regulatory scheme we adopt today, they are plainly preempted.
180. As a preliminary matter, it is well-settled that internet
access is a jurisdictionally interstate service because ``a substantial
portion of internet traffic involves accessing interstate or foreign
websites.'' Thus, when the Commission first classified a form of
broadband internet access service in the Cable Modem Order, it
recognized that cable internet service is an ``interstate information
service.'' Five years later, the Commission reaffirmed the
jurisdictionally interstate nature of broadband internet access service
in the Wireless Broadband Internet Access Order. And even when the
Title II Order reclassified broadband internet access service as a
telecommunications service, the Commission continued to recognize that
``broadband internet access service is jurisdictionally interstate for
regulatory purposes.'' The record continues to show that broadband
internet access service is predominantly interstate because a
substantial amount of internet traffic begins and ends across state
lines.
181. Because both interstate and intrastate communications can
travel over the same internet connection (and indeed may do so in
response to a single query from a consumer), it is impossible or
impracticable for ISPs to distinguish between intrastate and interstate
communications over the internet or to apply different rules in each
circumstance. Accordingly, an ISP generally could not comply with state
or local rules for intrastate communications without applying the same
rules to interstate communications. We therefore reject the view that
the impossibility exception to state jurisdiction does not apply
because some aspects of broadband internet access service could
theoretically be regulated differently in different states. Even if it
were possible for New York to regulate aspects of broadband service
differently from New Jersey, for example, it would not be possible for
New York to regulate the use of a broadband internet connection for
intrastate communications without also affecting the use of that same
connection for interstate communications. The relevant question under
the impossibility exception is not whether it would be possible to have
separate rules in separate states, but instead whether it would be
feasible to allow separate state rules for intrastate communications
while maintaining uniform federal rules for interstate communications.
Thus, because any effort by states to regulate intrastate traffic would
interfere with the Commission's treatment of interstate traffic, the
first condition for conflict preemption is satisfied. OTI insists that
broadband service ``can easily be separated into interstate and
intrastate'' communications based on ``the location of the ISP.'' In
OTI's view, if ``the closest ISP headend, tower, or other facility to
the customer'' is in the same state as the customer, then the
customer's internet
[[Page 7890]]
communications are all intrastate. This view misapprehends the end-to-
end analysis employed by the Communications Act to distinguish
interstate and intrastate communications, which looks to where a
communication ultimately originates and terminates--such as the server
which hosts the content the consumer is requesting--rather than to
intermediate steps along the way (such as the location of the ISP).
Indeed, OTI's view that a communication is intrastate whenever the
``last mile'' facilities between the customer and the communications
carrier are within the same state would improperly deem virtually all
communications to be intrastate, including interstate telephone calls,
contrary to long-settled precedent.
182. The second condition for the impossibility exception to state
jurisdiction is also satisfied. For the reasons explained above, we
find that state and local regulation of the aspects of broadband
internet access service that we identify would interfere with the
balanced federal regulatory scheme we adopt today.
183. Second, the Commission has independent authority to displace
state and local regulations in accordance with the longstanding federal
policy of nonregulation for information services. For more than a
decade prior to the 1996 Act, the Commission consistently preempted
state regulation of information services (which were then known as
``enhanced services''). When Congress adopted the Commission's
regulatory framework and its deregulatory approach to information
services in the 1996 Act, it thus embraced our longstanding policy of
preempting state laws that interfere with our federal policy of
nonregulation.
184. Multiple provisions enacted by the 1996 Act confirm Congress's
approval of our preemptive federal policy of nonregulation for
information services. Section 230(b)(2) of the Act, as added by the
1996 Act, declares it to be ``the policy of the United States'' to
``preserve the vibrant and competitive free market that presently
exists for the internet and other interactive computer services''--
including ``any information service''--``unfettered by Federal or State
regulation.'' The Commission has observed that this provision makes
clear that ``federal authority [is] preeminent in the area of
information services'' and that information services ``should remain
free of regulation.'' To this same end, by directing that a
communications service provider ``shall be treated as a common carrier
under [this Act] only to the extent that it is engaged in providing
telecommunications services,'' Section 3(51)--also added by the 1996
Act--forbids any common-carriage regulation, whether federal or state,
of information services.
185. Finally, our preemption authority finds further support in the
Act's forbearance provision. Under Section 10(e) of the Act, Commission
forbearance determinations expressly preempt any contrary state
regulatory efforts. It would be incongruous if state and local
regulation were preempted when the Commission decides to forbear from a
provision that would otherwise apply, or if the Commission adopts a
regulation and then forbears from it, but not preempted when the
Commission determines that a requirement does not apply in the first
place. Nothing in the Act suggests that Congress intended for state or
local governments to be able to countermand a federal policy of
nonregulation or to possess any greater authority over broadband
internet access service than that exercised by the federal government.
Some commenters note that Section 253(c), 47 U.S.C. 253(c), preserves
certain state authority over telecommunications services. But that
provision has no relevance here, given our finding that broadband
internet access service is an information service. Although Section
253(c) recognizes that states have historically played a role in
regulating telecommunications services, there is no such tradition of
state regulation of information services, which have long been governed
by a federal policy of nonregulation.
8. Disability Access Provisions
186. The Communications Act provides the Commission with authority
to ensure that consumers with disabilities can access broadband
networks regardless of whether broadband internet access service is
classified as telecommunications service or information service. The
Twenty-First Century Communications and Video Accessibility Act of 2010
(CVAA) already applies a variety of accessibility requirements to
broadband internet access service. Congress adopted the CVAA after
recognizing that ``internet-based and digital technologies . . . driven
by growth in broadband . . . are now pervasive, offering innovative and
exciting ways to communicate and share information.'' Congress thus
clearly had internet-based communications technologies in mind when
enacting the accessibility provisions of Section 716 (as well as the
related provisions of Sections 717-718) and in providing important
protections with respect to advanced communications services (ACS). ACS
means: ``(A) interconnected VoIP service; (B) non-interconnected VoIP
service; (C) electronic messaging service; and (D) interoperable video
conferencing service.'' In particular, to ensure that people with
disabilities have access to the communications technologies of the
Twenty-First Century, the CVAA added several provisions to the
Communications Act, including Section 716 of the Act, which requires
that providers of advanced communications services (ACS) and
manufacturers of equipment used for ACS make their services and
products accessible to people with disabilities, unless it is not
achievable to do so. These mandates already apply according to their
terms in the context of broadband internet access service. The CVAA
also adopted a requirement, in Section 718, that ensures access to
internet browsers in wireless phones for people who are blind and
visually impaired. In addition, the CVAA directed the Commission to
enact regulations to prescribe, among other things, that networks used
to provide ACS ``may not impair or impede the accessibility of
information content when accessibility has been incorporated into that
content for transmission through . . . networks used to provide
[ACS].'' Finally, new Section 717 creates new enforcement and
recordkeeping requirements applicable to Sections 255, 716, and 718.
Section 710 of the Act addressing hearing aid compatibility and
implementing rules enacted thereunder also apply regardless of any
action taken in this Order. To the extent that other accessibility
issues arise, we will address those issues in separate proceedings in
furtherance of our statutory authority to ensure that broadband
networks are accessible to and usable by individuals with disabilities.
9. Continued Applicability of Title III Licensing Provisions
187. We also note that our decision today to classify wireless
broadband internet access service as an information service does not
affect the general applicability of the spectrum allocation and
licensing provisions of Title III and the Commission's rules to this
service. Title III generally provides the Commission with authority to
regulate ``radio communications'' and ``transmission of energy by
radio.'' Among other provisions, Title III gives the Commission the
authority to adopt rules preventing interference and allows it to
classify radio stations. It also establishes the basic licensing scheme
for radio stations, allowing the Commission to grant, revoke, or modify
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licenses. Title III further allows the Commission to make such rules
and regulations and prescribe such restrictions and conditions as may
be necessary to carry out the provisions of the Act. Provisions
governing access to and use of spectrum (and their corresponding
Commission rules) do not depend on whether the service using the
spectrum is classified as a telecommunications or information service
under the Act.
II. A Light-Touch Framework To Restore Internet Freedom
188. For decades, the lodestar of the Commission's approach to
preserving internet freedom was a light-touch, market-based approach.
This approach debuted at the dawn of the commercial internet during the
Clinton Administration, when an overwhelming bipartisan consensus made
it national policy to preserve a digital free market ``unfettered by
Federal or State regulation.'' It continued during the Bush
Administration, as reflected in the ``Four Freedoms'' articulated by
Chairman Powell in 2004 and was then formally adopted by a unanimous
Commission in 2005 as well as in a series of classification decisions
reviewed above. These include the freedoms for 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.''
And it continued for the first six years of the Obama Administration.
We reaffirm and honor this longstanding, bipartisan commitment by
adopting a light-touch framework that will preserve internet freedom
for all Americans.
189. To implement that light-touch framework, we next reevaluate
the rules and enforcement regime adopted in the Title II Order. That
reevaluation is informed--as it must be--by the return of jurisdiction
to the Federal Trade Commission to police ISPs for anticompetitive acts
or unfair and deceptive practices. Against that backdrop, we first
decide to retain the transparency rule adopted in the Open Internet
Order with slight modifications. History has shown that transparency is
critical to openness--consumers and entrepreneurs are not afraid to
make their voices heard when ISPs engage in practices to which they
object. And we conclude that preexisting federal protections--alongside
the transparency rule we adopt today--are not only sufficient to
protect internet freedom, but will do so more effectively and at lower
social cost than the Title II Order's conduct rules. In short, we
believe the light-touch framework we adopt today will pave the way for
additional innovation and investment that will facilitate greater
consumer access to more content, services, and devices, and greater
competition.
A. Transparency
190. ``Sunlight,'' Justice Brandeis famously noted, ``is . . . the
best of disinfectants.'' This is the case in our domain. Properly
tailored transparency disclosures provide valuable information to the
Commission to enable it to meet its statutory obligation to observe the
communications marketplace to monitor the introduction of new services
and technologies, and to identify and eliminate potential marketplace
barriers for the provision of information services. Such disclosures
also provide valuable information to other internet ecosystem
participants; transparency substantially reduces the possibility that
ISPs will engage in harmful practices, and it incentivizes quick
corrective measures by providers if problematic conduct is identified.
Appropriate disclosures help consumers make informed choices about
their purchase and use of broadband internet access services. Moreover,
clear disclosures improve consumer confidence in ISPs' practices while
providing entrepreneurs and other small businesses the information they
may need to innovate and improve products.
191. Today, we commit to balanced ISP transparency requirements
based on a sound legal footing. We return, with minor adjustments, to
the transparency rule adopted in the 2010 Open Internet Order, which
provides consumers and the Commission with essential information while
minimizing the burdens imposed on ISPs. In so doing, we modify the
existing transparency rule to eliminate many of the burdensome
additional reporting obligations adopted by the Commission in the Title
II Order. We find that those additional obligations do not benefit
consumers, entrepreneurs, or the Commission sufficiently to outweigh
the burdens imposed on ISPs. The transparency rule we adopt will aid
the Commission in ``identifying . . . market entry barriers for
entrepreneurs and other small businesses in the provision and ownership
of . . . information services.'' We also conclude that our transparency
rule readily survives First Amendment scrutiny. The disclosure
requirements we adopt apply to both fixed and mobile ISPs.
1. History of the Transparency Rule
192. The Open Internet Order. The transparency rule, first adopted
in the Open Internet Order, requires both fixed and mobile ISPs to
``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.'' In addition, the Open Internet Order provided
guidance on both what information should be disclosed and how those
disclosures should be made. The Commission described the types of
information that should be included in each category, but emphasized
the importance of flexibility in implementing the rule, making clear
that ``effective disclosures will likely include some or all'' of the
listed types of information. Though the other rules adopted in the Open
Internet Order were overturned, the D.C. Circuit upheld the
transparency rule in Verizon.
193. 2011 Advisory Guidance. On June 30, 2011, the Enforcement
Bureau and Office of General Counsel released guidance ``regarding
specific methods of disclosure that will be considered to comply with
the transparency rule,'' addressing concerns about the scope of
required disclosures and potential burdens on small providers. The 2011
Advisory Guidance provided detail on methods for disclosure of actual
performance metrics, and the contents of the disclosures regarding
network practices, performance characteristics, and commercial terms,
and clarified the requirement that disclosures be made ``at the point
of sale.'' The 2011 Advisory Guidance clarified that disclosure of the
information listed in paragraphs 56 and 98 of the Open Internet Order
was sufficient to satisfy the transparency rule notwithstanding the
Open Internet Order's assertion that the list was ``not necessarily
exhaustive, nor is it a safe harbor.'' Paragraph 56 of the Open
Internet Order provided the following non-exhaustive list of
disclosures: network practices, including congestion management,
application-specific behavior, device attachment rules, and security;
performance characteristics, including a service description and the
impact of specialized services; and commercial terms, including
pricing, privacy policies, and redress options. Paragraph 98 made clear
that mobile ISPs must comply with the transparency requirements and
states that such providers must ``disclose their third-party device and
application certification procedures, if any'';
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``clearly explain their criteria for any restrictions on use of their
network''; and ``expeditiously inform device and application providers
of any decisions to deny access to the network or of a failure to
approve their particular devices or applications.''
194. 2014 Advisory Guidance. In July 2014, in the wake of the
Verizon decision, the Enforcement Bureau issued further guidance
emphasizing the importance of consistency between an ISP's disclosures
under the transparency rule and that provider's advertising claims or
other public statements. The 2014 Advisory Guidance explained that the
transparency rule ``prevents a broadband internet access provider from
making assertions about its service that contain errors, are
inconsistent with the provider's disclosure statement, or are
misleading or deceptive.''
195. Title II Order. In the Title II Order, the Commission
broadened the transparency rule's requirements by interpreting the rule
to mandate certain additional reporting obligations it termed
``enhancements.'' These additional reporting obligations, although
falling within the same broad categories as those listed in the Open
Internet Order, required that providers include far greater technical
detail in their disclosures. For example, all ISPs, except small
providers exempt under the Small Provider Waiver Order, were required
to make specific disclosures regarding the commercial terms (including
specific information regarding prices and fees), performance
characteristics (including, for example, packet loss and a requirement
that these disclosures be reasonably related to the performance a
consumer could expect in the geographic area in which they are
purchasing service), and network practices (including, for example,
application and user-based practices) of the broadband internet access
services they offer. The Open Internet Order, read together with the
2011 Advisory Guidance, limited the performance characteristic
disclosures to a service description (``[a] general description of the
service, including the service technology, expected and actual access
speed and latency, and the suitability of the service for real-time
applications'') and the impact of specialized services. The Open
Internet Order included specific disclosures related to congestion
management, application-specific behavior, device attachment rules, and
security. The Title II Order also established a safe harbor for the
form and format of disclosures intended for consumers and delegated
development of the format to the agency's Consumer Advisory Committee
(CAC). The 2016 Advisory Guidance, released on delegated authority,
provided examples of acceptable methodologies for disclosure of
performance characteristics and offered guidance regarding compliance
with the point of sale requirement. For example, the guidance notes
that for many fixed providers, performance is likely to be consistent
across the provider's footprint so long as the same technology is
deployed and that in such a case a single disclosure for the full
service area may be sufficient. By contrast, mobile performance may
vary, and the guidance suggested the use of CMA as an appropriate
geographic area on which to base disclosures.
2. Refining the Transparency Rule
196. Today, we retain the transparency rule as established in the
Open Internet Order, with some modifications, and eliminate the
additional reporting obligations of the Title II Order. We find many of
those additional reporting obligations significantly increased the
burdens imposed on ISPs without providing countervailing benefits to
consumers or the Commission. As a result, we recalibrate the
requirements under the transparency rule. Specifically, we adopt the
following rule:
Any person providing 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 to enable consumers to make informed choices
regarding the purchase and use of such services and entrepreneurs and
other small businesses to develop, market, and maintain internet
offerings. Such disclosure shall be made via a publicly available,
easily accessible website or through transmittal to the Commission.
For purposes of these rules, ``consumer'' includes any subscriber
to the ISP's broadband internet access service, and ``person'' includes
any ``individual, group of individuals, corporation, partnership,
association, unit of government or legal entity, however organized.''
197. In doing so, we note that the record overwhelmingly supports
retaining at least some transparency requirements. Crucially, the
transparency rule will ensure that consumers have the information
necessary to make informed choices about the purchase and use of
broadband internet access service, which promotes a competitive
marketplace for those services. Disclosure supports innovation,
investment, and competition by ensuring that entrepreneurs and other
small businesses have the technical information necessary to create and
maintain online content, applications, services, and devices, and to
assess the risks and benefits of embarking on new projects. We reject
commenter assertions that we should not maintain any transparency
requirements. CenturyLink does not identify which requirements from the
2010 transparency rule it believes could arguably be ``onerous.''
Further, as discussed above, we find that a transparency requirement is
necessary and sufficient to protect internet openness, given that we
lack authority to adopt conduct rules and in addition find that an
enforceable transparency rule obviates the need for bright line conduct
rules.
198. What is more, disclosure increases the likelihood that ISPs
will abide by open internet principles by reducing the incentives and
ability to violate those principles, that the internet community will
identify problematic conduct, and that those affected by such conduct
will be in a position to make informed competitive choices or seek
available remedies for anticompetitive, unfair, or deceptive practices.
Transparency thereby ``increases the likelihood that harmful practices
will not occur in the first place and that, if they do, they will be
quickly remedied.'' We apply our transparency rule to broadband
internet access service, as well as functional equivalents or any
service that is used to evade the transparency requirements we adopt
today. As the Commission explained in the Open Internet Order, ``a key
factor in determining whether a service is used to evade the scope of
the rules is whether the service is used as a substitute for broadband
internet access service. For example, an internet access service that
provides access to a substantial subset of internet endpoints based on
end users' preference to avoid certain content, applications, or
services; internet access services that allow some uses of the internet
(such as access to the World Wide Web) but not others (such as email);
or a `Best of the Web' internet access service that provides access to
100 top websites could not be used to evade the open internet rules
applicable to `broadband internet access service.' '' We caution ISPs
that they may not evade application of the transparency rule ``simply
by blocking end users' access to some internet points.''
[[Page 7893]]
a. Content of Required Disclosures
199. We require ISPs to prominently disclose network management
practices, performance, and commercial terms of their broadband
internet access service, and find substantial record support (including
from ISPs) for following the course set out by the Open Internet Order.
We find that the elements of the transparency rule we adopt today help
consumers make the most educated decision as to which ISP to choose and
keep entrepreneurs and other small businesses effectively informed of
ISP practices so that they can develop, market, and maintain internet
offerings. Although we agree with the Open Internet Order that ``the
best approach is to allow flexibility in implementation of the
transparency rule,'' we describe the specific requirements to guide
ISPs and ensure that consumers, entrepreneurs, and other small
businesses receive sufficient information to make our rule effective.
200. Network Management Practices. In the Open Internet Order, the
Commission required ISPs to disclose their congestion management,
application-specific behavior, device attachment rules, and security
practices. We adopt those same requirements and further require ISPs to
disclose any blocking, throttling, affiliated prioritization, or paid
prioritization in which they engage. Although requiring disclosure of
network management practices imposes some burden on ISPs, we find the
benefits of enabling the public and the Commission to identify any
problematic conduct and suggest fixes substantially outweigh those
costs. The record generally supports disclosure of ISP network
practices.
201. We specifically require all ISPs to disclose:
Blocking. Any practice (other than reasonable network
management elsewhere disclosed) that blocks or otherwise prevents end
user access to lawful content, applications, service, or non-harmful
devices, including a description of what is blocked.
Throttling. Any practice (other than reasonable network
management elsewhere disclosed) that degrades or impairs access to
lawful internet traffic on the basis of content, application, service,
user, or use of a non-harmful device, including a description of what
is throttled.
Affiliated Prioritization. Any practice that directly or
indirectly favors some traffic over other traffic, including through
use of techniques such as traffic shaping, prioritization, or resource
reservation, to benefit an affiliate, including identification of the
affiliate.
Paid Prioritization. Any practice that directly or
indirectly favors some traffic over other traffic, including through
use of techniques such as traffic shaping, prioritization, or resource
reservation, in exchange for consideration, monetary or otherwise.
Congestion Management. Descriptions of congestion
management practices, if any. These descriptions should include the
types of traffic subject to the practices; the purposes served by the
practices; the practices' effects on end users' experience; criteria
used in practices, such as indicators of congestion that trigger a
practice, including any usage limits triggering the practice, and the
typical frequency of congestion; usage limits and the consequences of
exceeding them; and references to engineering standards, where
appropriate.
Application-Specific Behavior. Whether and why the ISP
blocks or rate-controls specific protocols or protocol ports, modifies
protocol fields in ways not prescribed by the protocol standard, or
otherwise inhibits or favors certain applications or classes of
applications.
Device Attachment Rules. Any restrictions on the types of
devices and any approval procedures for devices to connect to the
network.
Security. Any practices used to ensure end-user security
or security of the network, including types of triggering conditions
that cause a mechanism to be invoked (but excluding information that
could reasonably be used to circumvent network security). We expect
ISPs to exercise their judgment in deciding whether it is necessary and
appropriate to disclose particular security measures. The Commission's
primary concern is those security measures likely to affect a
consumer's ability to access the content, applications, services, and
devices of his or her choice. As a result, we do not expect ISPs to
disclose internal network security measures that do not directly bear
on a consumer's choices.
We do not mandate disclosure of any other network management
practices. Notably, we define ``reasonable network management'' to mean
a practice ``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 record reflects an overwhelming preference for this approach from
the Open Internet Order, which provides ISPs greater flexibility and
certainty.
202. Performance Characteristics. In the Open Internet Order, the
Commission required ISPs to disclose a service description as well as
the impact of specialized services (non-broadband internet access
service data services) on performance. We find that the Open Internet
Order's performance metric disclosures benefit consumers without
placing an undue burden on ISPs.
203. We specifically require all ISPs to disclose:
Service Description. A general description of the service,
including the service technology, expected and actual access speed and
latency, and the suitability of the service for real-time applications.
For purposes of satisfying this requirement, fixed ISPs that choose to
participate in the Measuring Broadband America (MBA) program may
disclose their results as a sufficient representation of the actual
performance their customers can expect to experience. Fixed ISPs that
do not participate may use the methodology from the MBA program to
measure actual performance, or may disclose actual performance based on
internal testing, consumer speed test data, or other data regarding
network performance, including reliable, relevant data from third-party
sources. Mobile ISPs that have access to reliable information on
network performance may disclose the results of their own or third-
party testing. Those mobile ISPs that do not have reasonable access to
such network performance data may disclose a Typical Speed Range (TSR)
representing the range of speeds and latency that can be expected by
most of their customers, for each technology/service tier offered,
along with a statement that such information is the best approximation
available to the broadband provider of the actual speeds and latency
experienced by its subscribers.
Impact of Non-Broadband Internet Access Service Data
Services. If applicable, what non-broadband internet access service
data services, if any, are offered to end users, and whether and how
any non-broadband internet access service data services may affect the
last-mile capacity available for, and the performance of, broadband
internet access service.
204. Commercial Terms. In the Open Internet Order, the Commission
required ISPs to disclose commercial terms of service, including price,
privacy policies, and redress options. The record in this proceeding
supports retaining these disclosures. These disclosures inform the
Commission, consumers, entrepreneurs, and other small businesses about
the parameters of the service, without imposing costly
[[Page 7894]]
burdens on ISPs. We therefore require ISPs to make the following
disclosures:
Price. For example, monthly prices, usage-based fees, and
fees for early termination or additional network services.
Privacy Policies. A complete and accurate disclosure about
the ISP's privacy practices, if any. For example, whether any network
management practices entail inspection of network traffic, and whether
traffic is stored, provided to third parties, or used by the ISP for
non-network management purposes.
Redress Options. Practices for resolving complaints and
questions from consumers, entrepreneurs, and other small businesses.
205. Eliminating the Title II Order's Additional Reporting
Obligations. Today, we return to a more balanced approach--one that
provides sufficient information for the Commission to meet its
statutory requirements, enables consumers to make informed choices
about the purchase and use of broadband internet access service, and
ensures entrepreneurs and other small businesses can develop, market,
and maintain internet offerings, while minimizing costly and
unnecessary burdens on ISPs.
206. We eliminate the additional reporting obligations adopted in
the Title II Order and the related guidance in the 2016 Advisory
Guidance and return to the requirements established in the Open
Internet Order. We find that these additional reporting obligations
unduly burden ISPs without providing a comparable benefit to consumers.
That is especially true for the performance metric, which mandated
disclosure of packet loss, geographically-specific disclosures, and
disclosure of performance at peak usage times among other things.
207. The record supports the elimination of these additional
reporting obligations and our return to the requirements under the Open
Internet Order. The record indicates that the additional performance
disclosures are among the most burdensome. CenturyLink estimated that
during the two-year period from February 2015 through February 2017,
1,650 hours of employee time were required to comply with the
additional reporting obligations, compared to 860 additional hours
spent complying with the other new requirements of the Title II Order.
Disclosure of packet loss, for example, requires providers to conduct
additional engineering analysis. Notably, the Office of Management and
Budget (OMB) in the prior Administration declined to approve packet
loss when reviewing these additional reporting obligations for mobile
ISPs, suggesting concern that the additional reporting obligations
provided little consumer benefit relative to their cost. After all,
consumers have little understanding of what packet loss means; what
they do want to know is whether their internet access service will
support real-time applications, which is the consumer-facing impact of
these performance metrics. Although some commenters argue that
additional reporting of these esoteric metrics are valuable to some
consumers and entrepreneurs, they provide inadequate support for these
benefits. In addition, providing such information imposes significant
costs on providers. Weighing the additional costs to ISPs against the
limited incremental benefits to consumers, entrepreneurs, and small
businesses, we conclude that the net benefits of these additional
reporting obligations are likely negative. The approach we take today
achieves the benefits of transparency at much lower cost than the Title
II Order.
208. Small Providers. Small providers have asked us to maintain the
exemption found in the Small Provider Order to the extent that any of
additional reporting obligations still apply. Because the requirements
we adopt today eliminate all of these additional obligations and do not
impose disparately high burdens on small providers, we find an
exemption for small providers unnecessary. Further, the requirements
are critical to ensuring that consumers have sufficient information to
make informed choices in their selection of ISPs and to deter ISPs from
secretly erecting barriers to market entry by entrepreneurs and other
small businesses. As a result, we decline to provide an exemption for
smaller providers at this time.
b. Means and Format of Disclosure
209. Means of Disclosure. The Commission relies on ISP disclosures
to identify market-entry barriers for entrepreneurs and small
businesses and ensure consumers have the information they need in
selecting an ISP. And given the sheer number of ISPs offering service
throughout the country--4,559 at last count--we believe the most
effective way to monitor for any such barriers is to require the public
disclosure of an ISP's practices so that Commission staff can review
them while letting consumers, entrepreneurs, and other small businesses
report to the Commission any market-barriers they discover.
Accordingly, ISPs must publicly disclose the information required by
our transparency rule.
210. We give ISPs two options for disclosure. First, they may
include the disclosures on a publicly available, easily accessible
website. Consistent with Commission precedent, we expect that ISPs will
make disclosures in a manner accessible by people with disabilities.
ISPs doing so need not distribute hard copy versions of the required
disclosures and need not file them with the Commission, which can
review the disclosures as needed on the ISPs' websites. For ISPs
electing this option, we reaffirm the means of disclosure requirement
from the Open Internet Order and the clarification found in the 2011
Advisory Guidance. Alternatively, ISPs may transmit their disclosures
to the Commission, and we will make them available on a publicly
available, easily accessible website. We direct the Consumer and
Governmental Affairs Bureau, in coordination with the Wireline
Competition Bureau, to issue a Public Notice explaining how ISPs can
exercise this option. We also note that ISPs that do not transmit their
disclosures to the FCC will be deemed as having elected the first
option (and may later elect that option despite prior transmittal by
informing the Commission in a manner specified in the aforementioned
Public Notice). By offering these two options, we allow ISPs (and
especially smaller ISPs) the ability to choose the least burdensome
method of disclosure that will nonetheless ensure that Commission
staff, consumers, entrepreneurs, and other small businesses have access
to the information they need in carrying out our obligation to identify
market-entry barriers.
211. We also eliminate the direct notification requirement adopted
in the Title II Order. We find the direct notification requirement
unduly burdensome to ISPs and unnecessary in light of the other forms
of public disclosure required. In contrast, we find that the
disclosures adopted in the Open Internet Order and 2011 Advisory
Guidance appropriately balance making information easy to reach and the
costs of disclosure for ISPs.
212. Format of Disclosure. We eliminate the consumer broadband
label safe harbor for form and format of disclosures adopted in the
Title II Order. Adopting the label could require some ISPs to expend
substantial resources to tailor their disclosures to fit the format.
And limited adoption, caused by the potentially high burdens associated
with adapting disclosures to a particular format, significantly reduces
the value of the uniform format. Moreover, mandating such a format
would increase the burden for those ISPs required to
[[Page 7895]]
revise their existing disclosure to conform to the mandated format. We
find that requiring all ISPs to disclose the same information,
regardless of format, will allow for comparability between offerings,
and enable the Commission to meet its statutory reporting requirements.
3. Authority for the Transparency Rule
213. Just as the Commission did in the Open Internet Order, we rely
on Section 257 of the Communications Act as authority for the
transparency requirements we retain. Section 257(a) directs the
Commission to ``identify[ ] and eliminat[e] . . . market entry barriers
for entrepreneurs and other small businesses in the provision and
ownership of telecommunications services and information services, or
in the provision of parts or services to providers of
telecommunications services and information services.'' Section 257(a)
set a deadline of 15 months from the enactment of the 1996 Act for the
Commission's initial effort in that regard, and Section 257(c) directs
the Commission, triennially thereafter, to report to Congress on such
marketplace barriers and how they have been addressed by regulation or
could be addressed by recommended statutory changes. Consistent with
the Commission's longstanding view, Section 257(c) is properly
understood as imposing a continuing obligation on the agency to
identify barriers described in Section 257(a) that may emerge in the
future, rather than limited to those identified in the original Section
257(a) proceeding. Because Sections 257(a) and (c) clearly anticipate
that the Commission and Congress would take steps to help eliminate
previously-identified marketplace barriers, limiting the triennial
reports only to those barriers identified in the original Section
257(a) proceeding could make such reports of little to no ongoing value
over time. We thus find it far more reasonable to interpret Section
257(c) as contemplating that the Commission will perform an ongoing
market review to identify any new barriers to entry, and that the
statutory duty to ``identify and eliminate'' implicitly empowers the
Commission to require disclosures from those third parties who possess
the information necessary for the Commission and Congress to find and
remedy market entry barriers. Although Section 257 does not specify
precisely how the Commission should obtain and analyze information for
purposes of its reports to Congress, we construe the statutory mandate
to ``identify'' the presence of market barriers as including within it
direct authority to collect evidence to prove that such barriers exist.
While this direct authority suffices to support the Commission's
adoption of the transparency rule, Sections 4, 201(b), and 303(r) of
the Act also give us rulemaking authority to implement the Act,
including the provisions we rely on as authority for our transparency
requirements. In his partial concurrence and partial dissent in
Verizon, Judge Silberman stated with respect to the transparency rule
that ``[t]he Commission is required to make triennial reports to
Congress on `market entry barriers' in information service, and
requiring disclosure of network management practices appears to be
reasonably ancillary to that duty.''
214. Our disclosure requirements will help us both identify and
address potential market entry barriers in the provision and ownership
of information services and the provision of parts and services to
information service providers. In particular, some internet
applications and services previously have been found to be information
services, and, more generally, entrepreneurs and small businesses
participating in the internet marketplace could be seeking to act as
either providers of information services or providers of parts and
services to information services (or both). The language of Section
257(a) appears reasonably read to encompass those entrepreneurs' and
small businesses' services under one or more of the covered categories,
and there is no dispute in the record in that regard. Because we find
that internet entrepreneurs and small businesses that depend on their
customers using broadband internet access service are covered by
Section 257(a) in any case, we need not and do not address with greater
specificity the specific category or categories into which particular
edge services fall. In addition, the manner in which an ISP provides
broadband internet access service, including but not limited to its
network management practices, can affect how well particular internet
applications or services of entrepreneurs and small businesses perform
when used by that ISP's subscribers. Aspects of the performance of
broadband internet access services, particularly if undisclosed, thus
could constitute barriers within the scope of Section 257(a) in the
future, depending on how the marketplace evolves, regardless of whether
or not particular practices do so today. For example, if ISPs do not
disclose key details of how they provide broadband internet access
service, that could leave entrepreneurs and small businesses
participating in the internet marketplace unable to determine how well
particular existing or contemplated offerings are likely to perform for
users, and thus unable to determine if their service will be usable to
a sufficient number of potential customers to make the offering viable.
Such undisclosed practices also can leave consumers unable to judge
which broadband internet access service offerings will best meet their
needs given the applications and service they wish to use. As a result,
even if a sufficient number of consumers theoretically are accessible
by a broadband internet access service offering with sufficient
technical characteristics to make a given internet application or
service viable, an entrepreneur's or small business's entry into the
market for that service could be undermined if consumers are unable to
identify which of the various broadband internet access services
offerings has the required technical characteristics. By contrast, the
record reveals that the disclosure of practices and service
characteristics we require today helps entrepreneurs and small
businesses understand how well particular internet application or
service offerings are likely to work with particular ISPs' broadband
internet access services and helps consumers make the most educated
choice among ISPs and particular broadband internet access service
offerings, especially if they have particular interests in using
internet applications or services that are highly dependent on
broadband internet access service performance. The disclosures
themselves thus are likely to reduce any potential risk of particular
practices being such a barrier--had they not been publicly disclosed--
and also enable us to recommend to Congress any legislative changes
that we might find warranted based on our analysis of these practices.
While we observe that the transparency rule will help eliminate
potential barriers, our reliance on Section 257 as authority for the
transparency rule centers on the need for that rule to identify
barriers and report to Congress in that regard. Contrary to some
arguments, we thus do not interpret Section 257 as an over-arching
grant of authority to eliminate any and all barriers we might identify.
We also are not persuaded by summary claims that Section 257 does not
grant us authority here insofar as those claims lack meaningful
analysis of the text of that provision. Thus, we continue to believe
that Section 257 provides us authority for the rule we adopt.
215. We believe that eliminating market entry barriers in the
provision
[[Page 7896]]
and ownership of information services and the provision of parts and
services to information service providers will help bring the benefits
of new inventions and developments to the public. In addition, we
conclude that the oversight over ISPs' practices that the Commission,
FTC, and other antitrust and consumer protection authorities can
exercise as a result of the transparency rule likewise will promote
innovation and competition, spreading the benefits of technological
development to the American people broadly.
216. The Transparency Requirements Are Consistent With the First
Amendment. We conclude that the transparency requirements represent
permissible regulation of commercial speech. The ultimate effect of the
required disclosures is to ensure that key details regarding service
characteristics, rates, and terms of broadband internet access service
offerings are available to potential customers before they make their
purchasing decisions. As stated above, ISPs have two options for
complying with the transparency requirements. One is to make the
disclosures on a publicly available, easily accessible website.
Alternatively, ISPs can elect to simply provide that information to the
Commission, which will then itself make the information publicly
available. The Title II Order evaluated the transparency rule at issue
there under Zauderer v. Office of Disciplinary Counsel of Supreme Court
of Ohio, and there is some record support for applying that framework.
We recognize that there remains some debate regarding the application
of Zauderer, as opposed to the Central Hudson framework that generally
governs First Amendment review of commercial speech regulation. We need
not resolve that here, because we find that our rule would withstand
scrutiny even under Central Hudson. In particular, our transparency
rule directly advances substantial government interests and is no more
extensive than necessary.
217. The transparency requirements we retain directly advance
substantial government interests in encouraging competition and
innovation. The Act itself reveals the significance of these interests.
In Section 257 of the Act, Congress specifically directed the
Commission to identify market entry barriers in the provision of
information services and their inputs, eliminating them where possible,
and reporting to Congress on the need for any statutory changes
required to address such barriers. In carrying out our responsibilities
under Section 257, Congress directed us to advance, among other things,
``vigorous economic competition'' and ``technological advancement.''
Such interests are similar to those recognized as substantial by
courts, as well.
218. The disclosure of information regarding broadband internet
access service characteristics, rates, and terms directly advance those
statutory directives. We thus disagree with arguments that there is
insufficient justification for our transparency requirements to
withstand First Amendment scrutiny. Moreover, commenters do not cite
precedent demonstrating that only ``systematic or enduring problem[s]''
can provide the basis for requirements that withstand First Amendment
scrutiny. Broadband internet access service subscribers will be able to
use the disclosed information to evaluate broadband internet access
service offerings and determine which offering will best enable the use
of the applications and service they desire. This helps guard against
the potential barrier to entry and deterrent to technological
advancement that otherwise could be faced by entrepreneurs' and small
business' innovative internet applications and service offerings, which
may be dependent on the technical characteristics of broadband internet
access service. The information disclosed by ISPs also is relevant to
internet application and service providers' purchase of services from
those ISPs. The record reveals evidence that a number of the internet
applications and services that might be particularly sensitive to the
manner in which an ISP provides broadband internet access service
potentially could benefit from the freedom this order provides for
providers of such services and ISPs to enter prioritization
arrangements to better ensure the performance of those internet
applications and services. Thus, the disclosures enable entrepreneurs,
small businesses, and other participants in the internet marketplace to
evaluate how well their offerings will perform by default relative to
the prioritization services that ISPs offer them. Enabling internet
application and service providers to evaluate their options in this way
helps reduce barriers to entry that otherwise could exist and
encourages entrepreneurs' and small businesses' ability to compete and
develop and advance innovating offerings in furtherance of our
statutory objectives. In addition to those considerations, as the
Commission has recognized, disclosures help ensure accountability by
ISPs and the potential for quick remedies if problematic practices
occur. The disclosures also provide the Commission the information it
needs for the evaluation required by Section 257 of the Act, enabling
us to spur regulatory action or seek legislative changes as needed. The
transparency rule we retain thus directly advances the substantial
government interests identified in Section 257 of the Act.
219. The transparency requirements also are no more extensive than
necessary. The disclosures covered by our transparency rule are tied to
our duties under Section 257 of the Communications Act. We also observe
in this regard that the most significant concerns were raised with
respect to the additional reporting obligations adopted in the Title II
Order and here we eliminate those requirements in favor of a rule
consistent in scope with the 2010 transparency rule. In addition, an
ISP's direct public disclosure of the information encompassed by the
transparency rule is just one option; it may instead submit the
information to the Commission, which would then make public. We thus
conclude that the transparency requirements are appropriately tailored
to the Congressionally-recognized goals that we seek to advance.
B. Bright-Line and General Conduct Rules
220. We eliminate the conduct rules adopted in the Title II Order--
including the general conduct rule and the prohibitions on paid
prioritization, blocking, and throttling. We do so for three reasons.
First, the transparency rule we adopt, in combination with the state of
broadband internet access service competition and the antitrust and
consumer protection laws, obviates the need for conduct rules by
achieving comparable benefits at lower cost. Second, scrutinizing
closely each prior conduct rule, we find that the costs of each rule
outweigh its benefits. Third, the record does not identify any legal
authority to adopt conduct rules for all ISPs, and we decline to
distort the market with a patchwork of non-uniform, limited-purpose
rules.
1. Transparency Leads to Openness
221. Transparency, competition, antitrust laws, and consumer
protection laws achieve similar benefits as conduct rules at lower
cost. The effect of the transparency rule we adopt is that ISP
practices that involve blocking, throttling, and other behavior that
may give rise to openness concerns will be disclosed to the Commission
and the
[[Page 7897]]
public. As the Commission found in the Open Internet Order,
``disclosure increases the likelihood that broadband providers will
abide by open internet principles, and that the internet community will
identify problematic conduct and suggest fixes . . . thereby
increas[ing] the chances that harmful practices will not occur in the
first place and that, if they do, they will be quickly remedied.'' The
transparency rule will also assist ``third-party experts such as
independent engineers and consumer watchdogs to monitor and evaluate
network management practices.''
222. History demonstrates that public attention, not heavy-handed
Commission regulation, has been most effective in deterring ISP threats
to openness and bringing about resolution of the rare incidents that
arise. The Commission has had transparency requirements in place since
2010, and there have been very few incidents in the United States since
then that plausibly raise openness concerns. It is telling that the two
most-discussed incidents that purportedly demonstrate the need for
conduct rules, concerning Madison River and Comcast/BitTorrent,
occurred before the Commission had in place an enforceable transparency
rule. And it was the disclosure, through complaints to the Commission
and media reports of the conduct at issue in those incidents, that led
to action against the challenged conduct.
223. As public access to information on ISP practices has
increased, there has been a shift toward ISPs resolving openness issues
themselves with less and less need for Commission intervention. In
2005, the Enforcement Bureau entered into a consent decree to resolve
the allegations against Madison River. In 2008, Comcast reached a
settlement with BitTorrent months before the Commission issued Comcast-
BitTorrent. By 2012, with a transparency rule in place, AT&T reversed
its blocking of access to FaceTime over its cellular network on certain
data plans of its own accord within approximately three months. This
trend toward swift ISP self-resolution comes, admittedly, from only a
few data points because, with transparency in place, almost no
incidents of harm to internet openness have arisen, suggesting that
ISPs are ``resolving'' issues by not letting them occur in the first
place.
224. We think the disinfectant of public scrutiny and market
pressure, not the threat of heavy-handed Commission regulation, best
explain the paucity of issues and their increasingly fast ISP-driven
resolution. Since the Commission adopted a transparency rule in the
Open Internet Order, conduct requirements have varied substantially,
from the rules adopted in the Open Internet Order, to no conduct rules
after the Verizon court case, to the rules adopted in the Title II
Order. Yet through all that time, the Commission released only one
Notice of Apparent Liability, against AT&T for allegedly violating the
transparency rule. The dearth of actions enforcing conduct rules is
striking. Further, the Title II Order and Open Internet Order do not,
and could not, claim an epidemic or even uptick of blocking or
degradation of traffic in the wake of the Comcast or Verizon court
decisions vacating the Commission's prior attempts at openness
regulation. These time periods provide a natural experiment disproving
the notion that conduct rules are necessary to promote openness. We
thus reject arguments to the contrary.
225. Although we think transparency promotes openness and empowers
consumers, we recognize that regulation has an important role to play
as a backstop where genuine harm is possible. In particular,
transparency amplifies the power of antitrust law and the FTC Act to
deter and where needed remedy behavior that harms consumers. While some
commenters assert that proof is difficult in antitrust proceedings, our
transparency rule requires ISPs to outline their business practices and
service offerings forthrightly and honestly. This requirement both
deters ISPs from engaging in anticompetitive, unfair, or deceptive
conduct and gives consumers and regulators the tools they need to take
action in the face of such behavior. Many ISPs have committed to abide
by open internet principles. By restoring authority to the FTC to take
action against deceptive ISP conduct, reclassification empowers the
expert consumer protection agency to exercise the authority granted to
them by Congress if ISPs fail to live up to their word and thereby harm
consumers.
226. Transparency thus leads to openness and achieves comparable
benefits to conduct rules. Moreover, the costs of compliance with a
transparency rule are much lower than the costs of compliance with
conduct rules. We therefore decline to impose this additional cost
given our view that transparency drives a free and open internet, and
in light of the FTC's and DOJ's authority to address any potential
harms. To the extent that conduct rules lead to any additional marginal
deterrence, we deem the substantial costs--including costs to consumers
in terms of lost innovation as well as monetary costs to ISPs--not
worth the possible benefits.
2. Costs of Conduct Rules Outweigh Benefits
a. General Conduct Rule
227. We find that the vague Internet Conduct Standard is not in the
public interest. Following adoption of this Order, the FTC will be able
to vigorously protect consumers and competition through its consumer
protection and antitrust authorities. Given this, we see little
incremental benefit and significant cost to retaining the Internet
Conduct Standard. The rule has created uncertainty and likely denied or
delayed consumer access to innovative new services, and we believe the
net benefit of the Internet Conduct Standard is negative. As such, we
find commenters urging the Commission to retain this standard, even
with modifications, unpersuasive.
228. Based on our experience with the rule and the extensive
record, we are persuaded that the Internet Conduct Standard is vague
and has created regulatory uncertainty in the marketplace hindering
investment and innovation. Because the Internet Conduct Standard is
vague, the standard and its implementing factors do not provide
carriers with adequate notice of what they are and are not permitted to
do, i.e., the standard does not afford parties a ``good process for
determining what conduct has actually been forbidden.'' The rule simply
warns carriers to behave in accordance with what the Commission might
require, without articulating any actual standard. Even ISP practices
based on consumer choice are not presumptively permitted; they are
merely ``less likely'' to violate the rule. Moreover, the uncertainty
caused by the Internet Conduct Standard goes far beyond what supporters
characterize as the flexibility that is necessary in a regulatory
structure to address future harmful behavior. We thus find that the
vague Internet Conduct Standard subjects providers to substantial
regulatory uncertainty and that the record before us demonstrates that
the Commission's predictive judgment in 2015 that this uncertainty was
``likely to be short term and will dissipate over time as the
marketplace internalizes [the] Title II approach'' has not been borne
out.
229. Increasing our concerns about the Internet Conduct Standard,
other agencies already have significant experience protecting against
the harms to competition and to consumers that the Internet Conduct
Standard purports to reach. The FTC, for example, has authority over
unfair and deceptive practices, both with respect to competition and
consumer protection.
[[Page 7898]]
We find that the FTC's authority over unfair and deceptive practices
and antitrust laws, with guidance from its ample body of precedent,
already provides the appropriate flexibility and predictability to
protect consumers and competition and addresses new practices that
might develop with less harm to innovation. We also observe that
because FTC and antitrust authority apply across industries, further
precedent is likely to develop more quickly, while a sector-specific
general conduct rule is likely to develop more slowly. While antitrust
laws use a consumer welfare standard defined by economic analysis to
evaluate harmful conduct, the Internet Conduct Standard includes a non-
exhaustive grab bag of considerations that are much broader and hazier
than the consumer welfare standard, and leaves the door open for the
Commission to consider other factors or unspecified conduct it would
like to take into account.
230. We anticipate that eliminating the vague Internet Conduct
Standard will reduce regulatory uncertainty and promote network
investment and service-related innovation. As we discussed above,
regulatory uncertainty serves as a major barrier to investment and
innovation. The record reflects that ISPs and edge providers of all
sizes have foregone and are likely to forgo or delay innovative service
offerings or different pricing plans that benefit consumers, citing
regulatory uncertainty under the Internet Conduct Standard in
particular. Indeed, these harms are not limited to ISPs--the rule
``creates paralyzing uncertainty for app developers and other edge
providers,'' as well as equipment manufacturers. Even some proponents
of Title II acknowledge these public interest harms. Commenters also
note that ``money spent on backward-looking regulatory compliance is
money not spent on more productive uses, such as investments in
broadband plant and services.'' We anticipate that eliminating the
Internet Conduct Standard will benefit consumers, increase competition,
and eliminate regulatory uncertainty that has ``a corresponding
chilling effect on broadband investment and innovation.''
231. The now-rescinded Zero-Rating Report issued by the Wireless
Telecommunications Bureau illustrates the uncertainty ISPs experience
as a result of the Internet Conduct Standard adopted in the Title II
Order. As described in the Report, ``zero-rated'' content,
applications, and services are those that end users can access without
the data consumed being counted toward the usage allowances or data
caps imposed by an operator's service plans. But following a thirteen-
month investigation during which providers were left uncertain about
whether their zero-rating practices complied with the Internet Conduct
Standard, the Report still did not identify specific evidence of harm
from particular zero-rating programs that increased the amount of data
that consumers could use or provide certainty about whether particular
zero-rating programs were legally permissible. Instead, it offered a
``set of overall considerations'' that it said would help ISPs assess
whether a particular zero-rating plan violates the Title II Order. The
now-rescinded Zero-Rating Report demonstrated that under the Internet
Conduct Standard ISPs have faced two options: Either wait for a
regulatory enforcement action that could arrive at some unspecified
future point or stop providing consumers with innovative offerings.
232. We anticipate that eliminating the vague Internet Conduct
Standard will also lower compliance and other related costs. The
uncertainty surrounding the rule ``establishes a standard for behavior
that virtually requires advice of counsel before a single decision is
made'' and raises ``costs [especially for smaller ISPs that] struggle
to understand its application to their service prices, terms,
conditions, and practices.'' Smaller ISPs contend that they cannot
``afford to be the subject of enforcement actions by the Commission or
defend themselves before the Commission as a result of consumer
complaints, because the costs of having to defend their actions before
the Commission in Washington are enormous, relative to their
resources.'' ISPs ``that are required to defend themselves against
arbitrary enforcement actions and/or frivolous complaints will not have
the time or financial resources to invest in their business. The costs
of such compliance will likely be passed onto consumers via higher
prices and/or limited service offerings and upgrades.'' The record
reflects widespread agreement from commenters with otherwise-divergent
views that the Internet Conduct Standard creates significant harm
without countervailing benefits.
233. We are further persuaded that the advisory opinion process
introduced in the Title II Order ``offers no real relief from the
unintended consequences of the Internet Conduct Standard.'' The record
reflects that the Internet Conduct Standard and the advisory opinions
available under it ``[are] completely divorced from the rapid pace of
innovation in the mobile marketplace'' because ISP innovations would be
indefinitely delayed while the Commission conducts a searching analysis
of any such offering that might violate the standard. The fact that no
ISP has requested an advisory opinion in the two years since the launch
of the advisory opinion process reinforces our conclusion that the
process is too uncertain and costly. As such, we reject commenters'
assertions to the contrary.
b. Paid Prioritization
234. We also decline to adopt a ban on paid prioritization. The
transparency rule we adopt, along with enforcement of the antitrust and
consumer protection laws, addresses many of the concerns regarding paid
prioritization raised in this record. Thus, the incremental benefit of
a ban on paid prioritization is likely to be small or zero. On the
other hand, we expect that eliminating the ban on paid prioritization
will help spur innovation and experimentation, encourage network
investment, and better allocate the costs of infrastructure, likely
benefiting consumers and competition. For these reasons and because we
find that eliminating the ban on paid prioritization arrangements could
lead to lower prices for consumers for broadband internet access
service, we find that our action benefits low-income communities and
non-profits, and we reject arguments to the contrary. We reject the
argument that the benefits of our elimination of the paid
prioritization ban must be ``uniform across providers or geographic
areas.'' This is an unnecessarily high and rigid threshold. The
public--including low-income communities--benefits, and that is enough.
Thus, the costs (forgone benefits) of the ban are likely significant
and outweigh any incremental benefits of a ban on paid prioritization.
235. Innovation. We anticipate that lifting the ban on paid
prioritization will increase network innovation, as the record
demonstrates that the ban on paid prioritization agreements has had,
and will continue to have, a chilling effect on network innovation
generally, and on the development of high quality-of-service (QoS)
arrangements--which require guarantees regarding packet loss, packet
delay, secure connectivity, and guaranteed bandwidth--in particular. As
CTIA argues, the Title II Order implicitly recognized this point, but
its insistence that these arrangements be treated as non-broadband
internet access data services reduced the flexibility of ISPs and edge
providers, created uncertainty about the line between non-broadband
internet access data services and broadband internet access services,
and likely reduced innovation. The record reflects that the
[[Page 7899]]
ban on paid prioritization has hindered the deployment of these
services by denying network operators the ability to price these
services, an important tool for appropriately allocating resources in a
market economy. We reject commenter assertions that banning the use of
price as a signal provides more accurate price signals. Relatedly, we
reject the argument that non-price signals, including user-directed
prioritization, are by themselves sufficient to allow innovation and
development in this area, because in a market system, price signals are
generally necessary to efficiently allocate resources. Further, as
commenters note, there has been significant uncertainty about the scope
of the prohibition on paid prioritization arrangements. Some commenters
contend that this uncertainty surrounding network operators' ability to
provide ``differentiated services'' has cast a shadow on the
development of next generation networks.
236. We also expect that ending the flat ban on paid prioritization
will encourage the entry of new edge providers into the market,
particularly those offering innovative forms of service differentiation
and experimentation. As ITTA explains, ``[i]t is routine for entities
that do business over the internet to pay for a variety of services to
provide an optimal user experience for their customers. Companies have
been doing so for years without disturbing the thriving internet
ecosystem.'' We therefore reject arguments that the ban is necessary to
provide a level playing field for edge providers. Indeed, in other
areas of the economy, paid prioritization has helped the entry of new
providers and brands. It is therefore no surprise that paid
prioritization has long been used throughout the economy. Paid
prioritization could allow small and new edge providers to compete on a
more even playing field against large edge providers, many of which
have CDNs and other methods of distributing their content quickly to
consumers. We thus reject arguments that allowing pro-competitive paid
prioritization will reduce the entry and expansion of small, new edge
providers. In so finding, we do not mean to suggest that CDN services
themselves constitute paid prioritization.
237. Efficiency. We find that a ban on paid prioritization is also
likely to reduce economic efficiency, also likely harming consumer
welfare. This finding is supported by the economic literature on two-
sided markets such as this one, and the record. If an ISP faces
competitive forces, a prohibition against two-sided pricing (i.e., a
zero-price rule), while benefiting edge providers, typically would harm
both subscribers and ISPs. Moreover, the level of harm to subscribers
and ISPs generally would exceed the gain obtained by the edge providers
and, thus, would lead to a reduction in total economic welfare. The
reasons for this are straightforward. Some edge services and their
associated end users use more data or require lower latency; this may
be the case, for example, with high-bandwidth applications such as
Netflix, which in the first half of 2016 generated more than a third of
all North American internet traffic. Without paid prioritization, ISPs
must recover these costs solely from end users, but ISPs cannot always
set prices targeted at the relevant end users. The resulting prices
create inefficiencies. Consumers who do not cause these costs must pay
for them, and end users who do cause these costs to some degree free-
ride, inefficiently distorting usage of both groups. When paid
prioritization signals to edge providers the costs their content or
applications cause, edge providers can undertake actions that would
improve the efficiency of the two-sided market. For example, they could
invest in compression technologies if those come at a lower cost than
paid prioritization, enhancing efficiency, or, if they have a pricing
relationship with their end users, they could directly charge the end
user for priority, leading those end users to adjust their usage if the
user's value does not exceed the service's cost, again enhancing
economic efficiency. We disagree with commenters asserting that this is
likely to significantly burden edge providers by requiring them to
negotiate with hundreds of ISPs because as discussed, paid
prioritization is likely to be focused only on applications that
require special QoS guarantees. And to the extent an ISP has market
power, antitrust and consumer protection laws could be used to address
ISPs' anti-competitive paid prioritization practices. Given the extent
of competition in internet access supply, we find a ban on paid
prioritization is unlikely to improve economic efficiency, and if it
were to do so it would only be by accident (i.e., if the efficient
second-best was to require ISPs to provide access to edge providers at
a zero price).
238. Network investment. The mere possibility that charging edge
providers may sometimes be economically inefficient is not sufficient
to overcome the general presumption that allowing firms additional
pricing tools generally enhances economic efficiency, especially when
investments must be made as demand rises to reduce congestion. The
economic literature and the record both suggest that paid
prioritization can increase network investment. For example, one study
presents a model in which two competing ISPs serve a continuum of edge
providers. It finds that allowing ISPs to offer paid prioritization
leads to higher investment in broadband capacity as well as greater
innovation on the edge provider side of the market. According to the
authors, paid prioritization causes the ISP to invest more in network
capacity, reducing congestion and thereby inducing congestion-sensitive
edge providers to enter the market. The increased ISP investment occurs
for two reasons: Incremental investment is more profitable because the
ISP can now charge edge providers in addition to subscribers, and paid
prioritization allows more edge providers who need a high quality of
service to enter the market. Another study also develops a theoretical
model in which paid prioritization always results in higher ISP
investment. We anticipate that lifting the ban on paid prioritization
may also increase the entry of new ISPs and encourage current providers
to expand their networks by making it easier for ``ISPs [to] benefit
from their new investments.'' Thus, we reject the argument that the ban
is necessary to ensure long-term network investment.
239. We reject assertions that allowing paid prioritization would
lead ISPs to create artificial scarcity on their networks by neglecting
or downgrading non-paid traffic. This argument has been strongly
criticized as having ``no support in economic theory that such
incentives exist or are sufficiently strong as to outweigh
countervailing incentives.'' Moreover, as discussed above, in practice
paid prioritization is likely to be used to deliver enhanced service
for applications that need QoS guarantees. As AT&T explains, ``[l]ast-
mile access is not a zero-sum game, and prioritizing the packets for
latency-sensitive applications will not typically degrade other
applications sharing the same infrastructure,'' such as email, software
updates, or cached video. We thus reject arguments premised on the
theory that ISPs could and would act to create artificial scarcity on
their networks and thereby broadly require paid prioritization. Because
of these practical limits on paid prioritization, we reject the
argument that non-profits and independent and diverse content
producers, who may be less likely to need QoS guarantees, will be
harmed by lifting the ban.
[[Page 7900]]
240. Reduction in price to consumers. Eliminating the ban on paid
prioritization arrangements could lead to lower prices for consumers
for broadband internet access service, as ISPs may be able to recoup
some of their costs from edge providers. Although we do not premise our
analysis on the expectation of a total pass-through of these revenues
to end-users, we find no support for assumptions that there would be no
pass-through of revenues at all. As one study explains, the Title II
Order's ban on paid prioritization arrangements ``can lead to higher
prices that are charged to all end users--regardless of whether or not
the end user subscribes to the content service that causes the
congestion.''
241. Closing the digital divide. Paid prioritization can also be a
tool in helping close the digital divide by reducing broadband internet
access service subscription prices for consumers. The zero-price rule
imposed by the blanket ban on paid prioritization ``imposes a
regressive subsidy, transferring wealth from the economically
disadvantaged to the comparatively rich by forcing the poor to support
high-bandwidth subscription services skewed towards the wealthier.''
One study concludes that ``[a]t the margin, this would cause the
lowest-end users to simply stop subscribing to internet services, which
would further exacerbate the existing digital divide.'' Accordingly,
economic ``models . . . suggest that network neutrality regulation is
more likely to worsen than improve the digital divide.'' Because ending
the ban on paid prioritization is likely to help close the digital
divide, we reject assertions to the contrary that ending the paid
prioritization rule's effective subsidization of high-bandwidth
services will harm consumers overall. We reject the contrary argument
that ISPs will engage in ``virtual redlining'' because, as discussed,
paid prioritization is likely to lead to increased network investment
and lower costs to end users, particularly benefiting those on the
wrong side of the digital divide. Allowing ISPs to charge both sides of
the market could also enable additional arrangements to provide special
low-cost broadband access, increasing broadband adoption among lower-
income consumers. For example, permitting ``differential pricing'' may
enable the development of ``[p]latforms that are both free and tailored
to [people without internet access],'' similar to Facebook's Free
Basics program in developing countries. Nokia suggests that ``a start-
up company that wants to reach new customers with a bandwidth intensive
application that will not work as intended below a certain service tier
. . . should be allowed to offer to boost [a] consumer's bandwidth so
he or she can experience their product as intended,'' and argues such
arrangements ``are most likely to benefit lower-income consumers, since
those that already purchase high-tier services are less likely to
benefit from third-party-pays QoS enhancements.''
242. Addressing Harms. We find that antitrust law, in combination
with the transparency rule we adopt, is particularly well-suited to
addressing any potential or actual anticompetitive harms that may arise
from paid prioritization arrangements. The transparency rule will
require ISPs to disclose any practices that favor some internet traffic
over other traffic, if the practices are paid or benefit any affiliated
entity. The transparency rule will provide greater information to all
participants in the internet ecosystem and empower them to act if they
identify any potential anticompetitive conduct. Antitrust law is
ideally situated to determine whether a specific arrangement, on
balance, is anti-competitive or pro-competitive. We therefore reject
the argument that the paid prioritization ban should be modified to
more squarely focus on anticompetitive conduct. While these alternative
formulations may not be as problematic as the blanket ban, for the
reasons discussed above, antitrust law is better placed than ex ante
regulations to balance the potential benefits and harms of new
arrangements. Moreover, to the extent that they exist, the potential
harms to internet openness stemming from paid prioritization
arrangements are outweighed by the distortions that banning paid
prioritization would impose. Under the antitrust laws, a paid
prioritization agreement challenged as anticompetitive would be
evaluated under the case-specific rule of reason. Paid prioritization
would be prohibited only when it harms competition, for example, by
inappropriately favoring an affiliate or partner in a way that
ultimately harms economic competition in the relevant market. The case-
by-case, deliberative nature of antitrust is well-suited for this area,
as it is difficult to determine on an ex ante basis which paid
prioritization agreements are anticompetitive, and in fact, no internet
paid prioritization agreements have yet been launched in the United
States, rendering any concerns about such practices purely theoretical
at this time. We therefore reject arguments that ex ante rules are
preferable.
243. Lastly, antitrust laws would not prevent an ISP from
exercising legally-acquired market power to earn market rents, so long
as it is not used anticompetitively, but we do not consider any harms
that might result from this to be so large as to justify the harms that
a total prohibition on paid prioritization would entail. For harms from
the exercise of legally-acquired market power to arise, the ISP must
have market power over the edge provider. However, as shown above, ISPs
usually face at least moderate competition, and all the more so taking
a medium-term perspective. Consequently, the harms that could possibly
occur from exercise of such power are not likely to be large. Further,
the extent to which any harms actually occur will be muted by two
factors. First, ISPs have strong incentives to keep edge provider
output high (as this increases the value end users see in subscribing
to the ISP, and signals to edge providers that the ISP recognizes their
contribution to the platform). Thus, harm will only occur to the extent
the ISP is unable to devise pricing schemes that preserve edge
providers' incentives to bring content while maximizing the ISP's
profit (the exercise of market power is only harmful when it excludes
what would otherwise be efficient purchases of access). Second, as
discussed above, increased prices from edge providers are to a
potentially significant extent passed through to end users in the form
of lower prices for broadband internet access service, with the result
that end user demand for edge provider content is increased. The extent
of such pass-through offsets these harms. Accordingly, we expect the
harms from dictating pricing uniformity to edge providers exceed any
harms that may emerge from a lack of such regulation.
c. Blocking and Throttling
244. We find the no-blocking and no-throttling rules are
unnecessary to prevent the harms that they were intended to thwart. We
find that the transparency rule we adopt today--coupled with our
enforcement authority and with FTC enforcement of ISP commitments,
antitrust law, consumer expectations, and ISP incentives--will be
sufficient to prevent these harms, particularly given the consensus
against blocking practices, as reflected in the scarcity of actual
cases of such blocking. For the same reasons, we reject alternative
formulations of the no-blocking and no-throttling rules.
245. Transparency rule. As discussed above, the transparency rule
we adopt, combined with antitrust and consumer
[[Page 7901]]
protection laws, obviate the need for conduct rules by achieving
comparable benefits at lower cost. In addition, several factors
specific to blocking and throttling will work to prevent the potential
harms that could be caused by blocking and throttling. First, most
attempts by ISPs to block or throttle content will likely be met with a
fierce consumer backlash. As one commenter explains, such blocking or
throttling is ``unlikely to occur, because it must be sufficiently
blatant to be of any benefit to the ISP, that [it] only increases the
likelihood of getting caught.'' Second, numerous ISPs, including the
four largest fixed ISPs, have publicly committed not to block or
throttle the content that consumers choose. The transparency rule will
ensure that ISPs reveal any deviation from these commitments to the
public, and addresses commenter concerns that consumers will not
understand the source of any blocking or throttling. Violations of the
transparency rule will be subject to our enforcement authority.
Furthermore, the FTC possesses the authority to enforce these
commitments, as it did in TracFone. Third, the antitrust laws prohibit
anticompetitive conduct, and to the extent blocking or throttling by an
ISP may constitute such conduct, the existence of these laws likely
deters potentially anticompetitive conduct. Finally, ISPs have long-
term incentives to preserve internet openness, which creates demand for
the internet access service that they provide.
246. Consensus against blocking and throttling. We emphasize once
again that we do not support blocking lawful content, consistent with
long-standing Commission policy. The potential consequences of blocking
or throttling lawful content on the internet ecosystem are well-
documented in the record and in Commission precedent. Stakeholders from
across the internet ecosystem oppose the blocking and throttling of
lawful content, including ISPs, public interest groups, edge providers,
other content producers, network equipment manufacturers, government
entities, and other businesses and individuals who use the internet.
This consensus is among the reasons that there is scant evidence that
end users, under different legal frameworks, have been prevented by
blocking or throttling from accessing the content of their choosing. It
also is among the reasons why providers have voluntarily abided by no-
blocking practices even during periods where they were not legally
required to do so. As to free expression in particular, we note that
none of the actual incidents discussed in the Title II Order squarely
implicated free speech. If anything, recent evidence suggests that
hosting services, social media platforms, edge providers, and other
providers of virtual internet infrastructure are more likely to block
content on viewpoint grounds. Furthermore, in the event that any
stakeholder were inclined to deviate from this consensus against
blocking and throttling, we fully expect that consumer expectations,
market incentives, and the deterrent threat of enforcement actions will
constrain such practices ex ante. To the extent that these incentives
prove insufficient and any stakeholder engages in such conduct, such
practices can be policed ex post by antitrust and consumer protection
agencies.
247. Additionally, as urged by the prior Commission when defending
the Title II Order, and as confirmed in the concurrence in the denial
of rehearing en banc by the two judges in the majority in USTelecom,
the Title II Order allows ISPs to offer curated services, which would
allow ISPs to escape the reach of the Title II Order and to filter
content on viewpoint grounds. In practice, the Title II Order
``deregulates curated Internet access relative to conventional Internet
access [and] may induce ISPs to filter content more often,'' rendering
the no-blocking and no-throttling rules ineffectual as long as an ISP
disclosed it was offering curated services. The curated services
exemption arising from the Title II Order confirms our judgment that
transparency requirements, rather than conduct rules, are the most
effective means of preserving internet openness.
3. The Record Does Not Identify Authority for Comprehensive Conduct
Rules
248. The record in this proceeding does not persuade us that there
are any sources of statutory authority that individually, or in the
aggregate, could support conduct rules uniformly encompassing all ISPs.
We find that provisions in Section 706 of the 1996 Act directing the
Commission to encourage deployment of advanced telecommunications
capability are better interpreted as hortatory rather than as
independent grants of regulatory authority. We also are not persuaded
that Section 230 of the Communications Act is a grant of regulatory
authority that could provide the basis for conduct rules here. Nor does
the record here reveal other sources of authority that collectively
would provide a sure foundation for conduct rules that would treat all
similarly-situated ISPs the same.
a. Section 706 of the 1996 Act
249. We conclude that the directives to the Commission in Section
706(a) and (b) of the 1996 Act to promote deployment of advanced
telecommunications capability are better interpreted as hortatory, and
not as grants of regulatory authority. We thus depart from the
interpretation of those provisions adopted by the Commission beginning
in the Open Internet Order, and return to a reading of that language in
Section 706 of the 1996 Act consistent with the Commission's original
interpretation.
250. We adopt this reading in light of the text, structure, and
history of the 1996 Act and Communications Act. Section 706(a) directs
that:
The Commission and each State commission with regulatory
jurisdiction over telecommunications services shall encourage the
deployment on a reasonable and timely basis of advanced
telecommunications capability to all Americans (including, in
particular, elementary and secondary schools and classrooms) by
utilizing, in a manner consistent with the public interest,
convenience, and necessity, price cap regulation, regulatory
forbearance, measures that promote competition in the local
telecommunications market, or other regulating methods that remove
barriers to infrastructure investment.
In turn, Section 706(b) provides in pertinent part that ``[i]f the
Commission's determination'' under an annual inquiry into deployment of
advanced telecommunications capability ``is negative, it shall take
immediate action to accelerate deployment of such capability by
removing barriers to infrastructure investment and by promoting
competition in the telecommunications market.''
251. The relevant text of Section 706(a) and (b) of the 1996 Act is
reasonably read as exhorting the Commission to exercise market-based or
deregulatory authority granted under other statutory provisions,
particularly the Communications Act. The Commission otherwise has
authority under the Communications Act to employ price cap regulation
for services subject to rate regulation; to employ regulatory
forbearance; to promote competition in the local telecommunications
market; and to remove barriers to infrastructure investment. The
Commission thus need not interpret Section 706 as an independent grant
of regulatory authority to give those provisions meaning. Further,
consistent with
[[Page 7902]]
normal canons of statutory interpretation, the language ``other
regulating methods'' in Section 706(a) is best understood as consistent
with the language that precedes it, and thus likewise reasonably is
read as focused on the exercise of other statutory authority like that
under the Communications Act, rather than itself constituting an
independent grant of regulatory authority. This view also comports with
the Commission's original interpretation of the language of Section
706(a), avoids rendering the provisions of Section 706(a) or (b)
surplusage, and does not otherwise conflict with the statutory text.
Although the term ``shall'' ``generally indicates a command that admits
of no discretion,'' because the Commission has other authority under
the Communications Act that it can exercise consistent with the
direction in Section 706(a) and (b) of the 1996 Act, our interpretation
is not at odds with the use of ``shall encourage'' in Section 706(a) or
``shall take immediate action'' in Section 706(b). In particular,
Section 706(a) provides a general, ongoing exhortation for the
Commission to encourage deployment of advanced telecommunications
capability through exercise of other authority, while Section 706(b)
directs the Commission to do so by taking ``immediate action'' in the
event of a negative finding under the Section 706(b) inquiry. The
direction in Section 706(b) of the 1996 Act that the Commission
exercise other authority by taking ``immediate action'' in the event of
a negative finding under the Section 706(b) inquiry could, for example,
form part of the basis for petition(s) for Commission rulemaking based
on such other authority in the wake of a negative finding in the
Section 706(b) inquiry. Although the Tenth Circuit concluded that the
possibility of such an interpretation of Section 706(b) would not
unambiguously compel the conclusion that the provision is hortatory,
the court's decision does not limit our ability to rely on that as a
factor that persuades us that Section 706(b) is better read as
hortatory.
252. We not only find that the relevant language in Sections 706(a)
and (b) of the 1996 Act permissibly can be read as hortatory, but are
persuaded that is the better interpretation. Arguments in the record
supporting Section 706 of the 1996 Act as granting regulatory authority
generally contend that this is a permissible interpretation but do not
persuade us it is the better reading. For one, although the relevant
provisions in Section 706(a) and (b) identify certain regulatory tools
(like price cap regulation and regulatory forbearance) and marketplace
outcomes (like increased competition and reduced barriers to
infrastructure investment), they nowhere identify the providers or
entities whose conduct could be regulated under Section 706 if
interpreted as a grant of such authority. This lack of detail stands in
stark contrast to Congress's approach in many other provisions enacted
or modified as part of the 1996 Act that clearly are grants of
authority to employ similar regulatory tools or pursue similar
marketplace outcomes and that directly identify the relevant providers
or entities subject to the exercise of that regulatory authority. The
absence of any similar language in Section 706(a) and (b) of the 1996
Act supports our view that those provisions are better read as
directing the Commission regarding its exercise of regulatory authority
granted elsewhere. Our consideration of this as one factor persuading
us that Section 706 of the 1996 Act is better read as hortatory is not
undercut by our reliance on Section 257 as authority for disclosure
requirements that provide us information needed to identify potential
barriers to entry and investment while also helping mitigate any such
barriers. Although Section 257 does not expressly identify entities
from which we can obtain information, other aspects of Section 257
persuade us that our interpretation of that provision as a grant of
authority to obtain the information we require from ISPs is necessary
for us to carry out our duties under that provision for the reasons
discussed above. Here, by contrast, this consideration combines with
many others to collectively persuade us that Section 706 of the 1996
Act is better read as hortatory.
253. Indeed, under the Open Internet Order's theory of Section
706(a) and (b) as independent grants of authority, the Commission could
rely on those provisions to impose duties or adopt regulations
equivalent to those directly addressed by the provisions of the
Communications Act focused on promoting competition and/or deployment
that go beyond the entities, contexts, and circumstances that bounded
the Communications Act provisions. Section 706(a) and (b) direct the
Commission to promote competition in the local telecommunications
market and otherwise encourage the deployment of advanced
telecommunications capability. Promoting local competition and/or
encouraging the deployment of telecommunications networks likewise are
key objectives of a number of provisions added to the Communications
Act by the 1996 Act, each of which were limited in scope to address the
actions of particular, defined entities and were triggered in
particular, defined circumstances. For example, the 1996 Act amended
Section 224 of the Communications Act to expand specified
communications providers' access to utilities' poles, ducts, conduit,
and rights-of-way to ``ensure that the deployment of communications
networks and the development of competition are not impeded by private
ownership and control of the scarce infrastructure and rights-of-way
that many communications providers must use in order to reach
customers.'' The market-opening framework in Sections 251(a)-(c), 252,
and 271 of the Communications Act, applicable respectively to
telecommunications carriers, LECs, incumbent LECs, and BOCs, also were
added by the 1996 Act. The 1996 Act also added provisions to the
Communications Act to eliminate regulatory barriers to competition and
network deployment in certain defined circumstances. We are skeptical
that at the same time Congress enacted carefully-tailored regulatory
regimes codified in various provisions of the Communications Act, it
simultaneously granted the Commission redundant authority to impose
those same duties or adopt similar regulatory treatment largely unbound
by that tailoring in a ``Miscellaneous'' provision of the same
legislation.
254. Our interpretation of Section 706 of the 1996 Act as hortatory
also is supported by the implications of the Open Internet Order's
interpretation for the regulatory treatment of the internet and
information services more generally. The interpretation of Section
706(a) and (b) that the Commission adopted beginning in the Open
Internet Order reads those provisions to grant authority for the
Commission to regulate information services so long as doing so could
be said to encourage deployment of advanced telecommunications
capability at least indirectly. A reading of Section 706 as a grant of
regulatory authority that could be used to heavily regulate information
services--as under the Commission's prior interpretation--is undercut
by what the Commission has found to be Congress' intent in other
provisions of the Communications Act enacted in the 1996 Act--namely,
to distinguish between telecommunications services and information
services, with the latter left largely unregulated by default.
[[Page 7903]]
255. In addition, the 1996 Act added Section 230 of the
Communications Act, which provides, among other things, that ``[i]t is
the policy of the United States . . . to preserve the vibrant and
competitive free market that presently exists for the internet and
other interactive computer services, unfettered by Federal or State
regulation.'' The Open Internet Order asserted that ``[m]aximizing end-
user control is a policy goal Congress recognized in Section 230(b) of
the Communications Act.'' In full, however, Section 230(b)(3) states
that ``[i]t is the policy of the United States--. . . to encourage the
development of technologies which maximize user control over what
information is received by individuals, families, and schools who use
the Internet and other interactive computer services.'' Although the
rules in the Open Internet Order would have considered the extent to
which a network management practice is subject to end-user control when
evaluating the reasonableness of discrimination, that Order does not
explain why that (or conduct rules more generally) would better
encourage the development of technologies for end-user control than
would be the case without such rules. The Title II Order is similar in
this regard. Assertions of the sort in those Orders thus provide no
basis for concluding that regulating ISPs is likely to better
``encourage the development of technologies which maximize user
control'' than the absence of such regulations. A necessary implication
of the prior interpretation of Section 706(a) and (b) as grants of
regulatory authority is that the Commission could regulate not only
ISPs but also edge providers or other participants in the internet
marketplace--even when they constitute information services, and
notwithstanding Section 230 of the Communications Act--so long as the
Commission could find at least an indirect nexus to promoting the
deployment of advanced telecommunications capability. For example, some
commenters argue that ``it is content aggregators (think Netflix, Etsy,
Google, Facebook) that probably exert the greatest, or certainly the
most direct, influence over access.'' Section 230 likewise is in
tension with the view that Section 706(a) and (b) grant the Commission
regulatory authority as the Commission previously claimed. These
inconsistencies are avoided, however, if the deployment directives of
Section 706(a) and (b) are viewed as hortatory.
256. Prior Commission guidance regarding how it would interpret and
apply the authority it claimed under Section 706(a) and (b) of the 1996
Act does not allay our concerns with the interpretation of those
provisions as grants of regulatory authority. For example, the Open
Internet Order stated that Section 706 authority only would be used to
regulate ``communication by wire or radio,'' consistent with Sections 1
and 2 of the Communications Act. Other provisions enacted in the 1996
Act that clearly grant authority to promote competition or network
deployment themselves generally address either facilities being used to
engage in communications or the communications themselves, however.
Thus, applying Section 706 of the 1996 Act only to communication by
wire or radio would not prevent the Commission from replicating such
requirements. In addition, broadband internet access service itself
involves communications by wire or radio--as do many other internet
information services. Consequently, this Commission guidance also does
not resolve tensions between the Commission's prior theory of Section
706 authority and the 1996 Act's general deregulatory approach to
information services or Section 230's enunciation of the federal policy
``to preserve the vibrant and competitive free market that presently
exists for the Internet and other interactive computer services,
unfettered by Federal or State regulation.''
257. Nor are the specific, problematic implications we identify
with the Commission's prior interpretation of Section 706 as a grant of
authority avoided by the Commission's explanation that its use of such
authority must encourage the deployment of advanced telecommunications
capability by promoting competition or removing barriers to
infrastructure investment. Given the already-recognized nexus between
the relevant Communications Act provisions and the promotion of network
deployment and/or local competition, the record provides no reason to
believe the Commission would have difficulty demonstrating at least an
indirect effect on the deployment of advanced telecommunications
capability should it wish, as a policy matter, to impose equivalent
requirements under an assertion of authority under Section 706(a) and
(b) without adhering to limitations or constraints present in the
Communications Act provisions. Perhaps if the Commission required a
tighter connection between a given regulatory action and promoting
deployment of advanced telecommunications capability, it might reduce
the magnitude of the inconsistency somewhat, but the record does not
reveal that such an approach would eliminate it entirely or even
diminish it to such an extent as to materially strengthen the argument
for interpreting the relevant provisions of Section 706(a) and (b) as
grants of regulatory authority. Such proposals also do not address the
other reasons for viewing Sections 706(a) and (b) as hortatory in light
of the statutory text and structure. Likewise, the Open Internet Order
shows that the Commission can readily find that criterion met in order
to regulate an information service like broadband internet access
service notwithstanding the 1996 Act's general deregulatory approach
for information service and the deregulatory internet policy specified
in Section 230 of the Act.
258. Guidance in the Open Internet Order also asserted that the
exercise of Section 706 authority could not be ``inconsistent with
other provisions of law,'' but effectively viewed that as a very low
bar to satisfy, finding it reasonable to exercise Section 706 authority
to impose duties on information service providers that did not
meaningfully ``differ[ ] from the nondiscrimination standard applied to
common carriers generally.'' So long as regulations fall outside the
constraints of Sections 3(51) and 332(c)(2) of the Act--upon which the
reversal in Verizon was based--neither precedent nor the record here
demonstrate that the reference to ensuring that any Section 706
authority be exercised ``[ ]consistent with other provisions of law''
would meaningfully preclude the types of requirements that we find
difficult to square with the carefully tailored authority in the
Communications Act. Conversely, if the fact that a matter is addressed
by the Communications Act were a more serious constraint on claimed
Section 706(a) and (b) authority, it is unclear how meaningful such
claimed authority would be in practice. It thus likewise would be
unclear what affirmative reason we would have for interpreting them as
grants of authority contrary to the other indicia that they are
hortatory. For example, Sections 201(b) and 202(a) of the Act prohibit
unjust and unreasonable rates and practices and unjust an unreasonable
discrimination with respect to common carrier services. If that
precluded reliance on Section 706(a) and (b) to impose analogous
restrictions unbounded by the self-described scope of Sections 201(b)
and
[[Page 7904]]
202(a), the Commission seemingly would be left with no authority to
adopt conduct rules of the sort at issue here after reclassification.
Nor do commenters citing other possible uses of Section 706(a) and (b)
as authority explain how such exercise of authority could be reconciled
with the view that it would be a serious constraint on claimed Section
706(a) and (b) authority if a matter is addressed by the Communications
Act (such as in Sections 201 and 202, the market-opening provisions in
Sections 251-261, provisions designed to address barriers to
infrastructure deployment like Sections 224 and 254, or other
provisions). Thus, interpreting the Communications Act as a more
serious constraint might partially address one basis for interpreting
Section 706(a) and (b) as hortatory, but simultaneously would undercut
the arguments in the record for interpreting them as grants of
authority.
259. We also are unpersuaded by the Open Internet Order's citation
of legislative history to support its interpretation of Section 706(a)
and (b) as grants of regulatory authority. The Open Internet Order
cited a Senate report for the proposition that those provisions of
Section 706 ``are `a necessary fail-safe' to guarantee that Congress's
objective is reached.'' The Commission itself previously noted the
ambiguous significance of that language. In addition, the relevant
Senate bill at the time of the Senate report would have directed the
Commission, in the event of a negative finding in its deployment
inquiry, to ``take immediate action under this section'' and stated
that ``it may preempt State commissions that fail to act to ensure such
availability.'' The final, enacted version of Section 706(b), by
contrast, omitted the language ``under this section,'' and also omitted
the express preemption language, leaving it ambiguous whether the
statement in the Senate report was premised on statutory language
excluded from the enacted provision. For its part, the conference
report neither repeats the ``fail-safe'' language from the Senate
report nor elaborates on the modifications made to the language in the
Senate bill. Even if it were appropriate to consult legislative
history, we conclude that that history is ultimately ambiguous and are
not persuaded that it supports interpreting Section 706(a) and (b) of
the 1996 Act as grants of regulatory authority.
260. The inability to impose penalties to enforce violations of
requirements adopted under Section 706(a) and (b) of the 1996 Act also
undercuts arguments that those provisions should be interpreted as
grants of regulatory authority. Section 706 of the 1996 Act was not
incorporated into the Communications Act, nor does the 1996 Act provide
for it to be enforced as part of the Communications Act. Where Congress
intended a statute outside the Communications Act to be enforced as if
it were part of the Communications Act, it has expressly stated that in
the relevant statute. Thus, the Communications Act provisions generally
authorizing penalties do not apply to Section 706 of the 1996 Act or
rules adopted thereunder. In pertinent part, to enforce rules under
Section 503(b)(1) of the Communications Act, the rules must be ``issued
by the Commission under [the Communications] Act.'' Other penalty
provisions in the Communications Act are specific to narrower topics or
the statutory section in which they appear, and thus also would not be
authorized penalties for violations of rules implementing Section 706
of the 1996 Act. Although the Title II Order claimed that Section 706
of the 1996 Act included an implicit grant of enforcement authority,
even under that theory, an `implicit' grant of enforcement authority
might enable actions like declaratory rulings or cease-and-desist
orders, but would not appear to encompass authority to impose penalties
given the absence of statutory language clearly granting that
authority. As a fallback, the Title II Order asserted, without
elaboration, that by relying on the grant of rulemaking authority in
Section 4(i) of the Communications Act to adopt rules implementing
Section 706 of the 1996 Act, the resulting rules would be within the
scope of those for which forfeitures could be imposed under the
Communications Act.
261. We believe that the better view is that reliance on the
Communications Act for rulemaking authority alone would not render the
resulting rules ``issued by the Commission under [the Communications]
Act'' as required to trigger the forfeiture provisions of Section 503
of the Act. Given that Section 503 is about enforcement consequences
from violating standards of conduct specified by, among other things,
relevant Commission rules, we think that language is best read as
focused on rules implementing the Commission's substantive regulatory
authority under the Communications Act. Insofar as the substantive
standard to which an entity is being held flows not from the
Communications Act but from the Commission's assertion of authority
under the 1996 Act, we believe that our forfeiture authority under
Section 503 of the Communications Act consequently would not encompass
such rules. The practical inability to back up rules implementing
Section 706 with penalties thus undercuts the Open Internet Order's
claim that its interpretation would mean that Section 706 of the 1996
Act could serve as a `` `fail safe' that `ensures' the Commission's
ability to promote advanced services.'' Under our interpretation, by
contrast, Section 706(a) and (b) of the 1996 Act exhort the Commission
to use Communications Act authority that it does, in fact, have
authority to enforce through penalties. We thus are persuaded that
Section 706(a) and (b) of the 1996 Act are better interpreted as
hortatory, rather than as grants of regulatory authority. Because we
otherwise find ample grounds to conclude that Section 706(a) and (b) of
the 1996 Act are not grants of regulatory authority, we need not, and
thus do not, address arguments claiming additional reasons to reach
that same conclusion. Likewise, because we conclude that Section 706(a)
and (b) do not grant regulatory authority at all, we need not, and do
not, address the issue of whether any authority under those provisions
is, at most, deregulatory authority. We also reject arguments that we
should wait on the completion of the latest inquiry under Section
706(b) before evaluating the interpretation of Section 706. Under the
prior interpretation, Section 706(a) was a grant of authority
independent of Section 706(b), and particularly insofar as we would not
interpret Section 706(b) as a grant of authority in any case, we see no
reason to wait on the results of the inquiry under that provision.
262. Our conclusion that Section 706 of the 1996 Act is better read
as hortatory is not at odds with the fact that two courts concluded
that the Commission permissibly could adopt the alternative view that
it is a grant of regulatory authority. Those courts did not find that
the Commission's previous reading was the only (or even the most)
reasonable interpretation of Section 706, leaving the Commission free
to adopt a different interpretation upon further consideration. Indeed,
the DC Circuit in Verizon observed that the language of Section 706(a)
``certainly could be read'' as hortatory. The court also recognized as
much with respect to Section 706(b), given its lack of clarity. Those
cases thus leave us free to act on our conclusion here that Section 706
is most reasonably read as hortatory, not as an independent grant of
regulatory authority.
[[Page 7905]]
263. We also disagree with arguments that we should keep in place a
misguided and flawed interpretation of Section 706(a) and (b) of the
1996 Act to preserve any existing rules or our ability going forward to
take regulatory action based on such assertions of authority. We are
not persuaded by concerns that reinterpreting Section 706(a) and (b) of
the 1996 Act in this manner could undercut Commission rules adopted in
other contexts because such arguments do not identify circumstances--
nor are we otherwise aware of any--where the prior interpretation of
the relevant provisions of Section 706(a) and/or (b) was, in whole or
in part, a necessary basis for the rules. Similarly, concerns that our
interpretation will limit states' regulatory authority do not identify
with specificity any concrete need for such authority beyond any
authority provided by state law, even assuming arguendo that such
authority could have flowed from the prior interpretation of Section
706(a). MMTC and NABOB express concerns that disavowing Section 706 as
a source of authority could constrain the Commission's ability to
address ``digital redlining.'' They do not explain, however, why other
statutory provisions such as Section 254 are inadequate to address
issues of unserved or underserved communities should more ultimately be
found to be needed beyond the Commission's other efforts to promote
broadband deployment more generally. We also are unpersuaded by
arguments for maintaining the prior interpretation in a general effort
to retain greater authority to regulate ISPs. Given that agencies like
the Commission are creatures of Congress, and given our responsibility
to bring to bear appropriate tools when interpreting and implementing
the statutes we administer, we find it more appropriate to adopt what
we view as the far better interpretation of Section 706(a) and (b)
given both the specific context of Section 706 and the broader
statutory context. If Congress wishes to give the Commission more
explicit direction to impose certain conduct rules on ISPs, or to
impose such rules itself within constitutional limits, it is of course
free to do so. We decline to read such wide-ranging authority, however,
into provisions that, on our reading today, are merely hortatory, and
are at best ambiguous.
264. Independently, we also are not persuaded that the prior
interpretation of Section 706(a) and (b) of the 1996 Act would better
advance policy goals relevant here. We have other sources of authority
on which to ground our transparency requirements without adopting an
inferior interpretation of Section 706(a) and (b). With respect to
conduct rules, in addition to our decision that limits on our legal
authority counsel against adopting such rules, we separately find that
such rules are not otherwise justified by the record here.
Consequently, we need not stretch the words of Section 706 of the 1996
Act because we can protect internet freedom even without it. Rather, we
are persuaded to act in the manner that we believe reflects the best
interpretation given the text and structure of the Act, the legislative
history, and the policy implications of alternative interpretations.
b. Section 230 of the Communications Act
265. We are not persuaded that Section 230 of the Communications
Act grants the Commission authority that could provide the basis for
conduct rules here. In Comcast, the DC Circuit observed that the
Commission there ``acknowledge[d] that Section 230(b)'' is a
``statement [ ] of policy that [itself] delegate[s] no regulatory
authority.'' Although the Internet Freedom NPRM sought comment on
Section 230, the record does not reveal an alternative interpretation
that would enable us to rely on it as a grant of regulatory authority
for rules here. Instead, we remain persuaded that Section 230(b) is
hortatory, directing the Commission to adhere to the policies specified
in that provision when otherwise exercising our authority. In addition,
even assuming arguendo that Section 230 could be viewed as a grant of
Commission authority, we are not persuaded it could be invoked to
impose regulatory obligations on ISPs. In particular, Section 230(b)(2)
provides that it is U.S. policy ``to preserve the vibrant and
competitive free market that presently exists for the internet and
other interactive computer services, unfettered by Federal or State
regulation.'' Adopting requirements that would impose federal
regulation on broadband internet access service would be in tension
with that policy, and we thus are skeptical such requirements could be
justified by Section 230 even if it were a grant of authority as
relevant here. Consequently, although Section 230 is relevant to our
interpretation and implementation of other statutory provisions, the
record does not reveal a basis for relying on it as a source of
regulatory authority for conduct rules here.
c. Other Provisions in Titles II, III, and VI of the Communications Act
266. Other identified sources of potential authority appear
significantly limited and not capable of bringing all ISPs under one
comprehensive regulatory framework. The Open Internet Order cited
provisions in Titles II, III, and VI of the Communications Act in
support of the conduct rules adopted there, and some commenters echo
those theories--generally without elaboration. Some comments identified
possible sources of authority for rules other than the sorts of conduct
rules at issue in this proceeding, and we do not discuss such other
sources of authority here. We also are not persuaded by claims that
Section 1 of the Act is a grant of regulatory authority here. In this
very context, the DC Circuit has held that Section 1 is better
understood as a statement of Congressional policy. A number of those
assertions of authority appear of uncertain validity on this record.
The identified additional sources of potential authority, even
collectively, do not appear to provide a sound basis for conduct rules
that would encompass all ISPs. We do not formally resolve the potential
scope and contours of those claims of authority given the significant
limitations in the record here and the potential for unanticipated
spill-over effects, but the potential weaknesses--unresolved on this
record--nonetheless make us cautious about seeking to rely on them at
this time. Insofar as our position regarding these additional potential
sources of authority is at least a partial change in course from the
positions taken in the Open Internet Order--which reflected a broader
and/or less questioning view of these theories--we conclude that such a
change in course is warranted by our analysis here, which identifies
details or nuances in the required analysis that were not adequately
addressed in the Open Internet Order or resolved on this record.
Further, even as to those ISPs that could be subject to conduct rules
under those statutory theories, in many cases the scope of conduct that
could be addressed appears quite limited. The result of an attempt to
exercise the identified potential authority thus would appear, at best,
to result in a patchwork framework that appears unlikely to materially
address many of the concerns historically raised to justify conduct
rules while being likely to introduce regulatory distortions in the
marketplace.
267. Authority over ISPs That Also Offer Telecommunications
Services. On this record, claims of authority to adopt
[[Page 7906]]
conduct rules governing ISPs that also offer telecommunications
services have many shortcomings. The Open Internet Order contended that
ISPs that also offer telecommunications services might engage in
network management practices or prioritization that reduces competition
for their voice services, arguably implicating Section 201(b)'s
prohibition on unjust or unreasonable rates or practices in the case of
common carrier voice services and/or Section 251(a)(1)'s
interconnection requirements for common carriers. The Open Internet
Order never squares these legal theories with the statutory prohibition
on treating telecommunications carriers as common carriers when they
are not engaged in the provision of telecommunications service or with
the similar restriction on common carrier treatment of private mobile
services. That Order also is ambiguous whether it is relying on these
provisions for direct or ancillary authority. If claiming direct
authority, the Open Internet Order fails to reconcile its theories with
relevant precedent and to address key factual questions. With respect
to Section 201, in the Computer Inquiries, for example, when the
Commission concluded that facilities-based carriers' actions when
offering enhanced services might affect the justness and reasonableness
of their common carrier offerings under Section 201, it responded by
exercising ancillary authority, rather than direct authority under
Section 201. With respect to Section 251(a)(1), the Commission has held
that that provision only involves the linking of networks and not the
transport and termination of traffic. The Open Internet Order does not
explain why telecommunications carriers would seek to link their
networks with other carriers by delivering traffic through a broadband
internet access service rather than through normal means of direct or
indirect interconnection. Even in the more likely case that these
represented theories of ancillary authority, the Open Internet Order's
failure to forthrightly engage with the theories on those terms leaves
it unclear how conduct rules are sufficiently ``necessary'' to the
implementation of Section 201 and/or Section 251(a)(1) to satisfy the
standard for ancillary authority under Comcast. The limited, indirect
references to Section 201 and 251(a)(1) authority in the record here do
not resolve these questions about possible Section 201- or 251(a)(1)-
based theories, either.
268. The Open Internet Order also noted that Section 256 of the Act
addresses coordinated network planning related to interconnection, but
did not put forward a theory for relying on that as authority for
conduct rule. To the contrary, it cited the holding in Comcast
``acknowledging Section 256's objective, while adding that Section 256
does not `expand[ ] . . . any authority that the Commission[ ]
otherwise has under law.' '' To the extent that commenters here mention
Section 256 at all, they do not explain how the Commission could
overcome that holding in Comcast for purposes of relying on that
provision as authority for rules here.
269. An alarm company urges us to rely on Section 275 of the Act,
but we see substantial shortcomings in using as a basis for ancillary
authority for conduct rules. Section 275 of the Act imposes certain
nondiscrimination requirements on incumbent LECs related to alarm
monitoring services, along with restrictions on all LECs' recording or
use of data from calls to alarm monitoring providers for purposes of
marketing competing alarm monitoring services. Arguments that ancillary
authority based on Section 275 could support rules that prohibit ISPs
that also offer alarm monitoring services from blocking or throttling
alarm monitoring traffic or engaging in anticompetitive paid
prioritization of alarm monitoring traffic are premised on a reading of
Section 275 as a far broader mandate to protecting alarm monitoring
competition than the specifics of its language support. Given the
Commission's existing ability to directly apply the duties and
restrictions of Section 275 to the specific entities covered by that
Section, the record leaves us unable to conclude that the proposed
alarm monitoring-related ISP conduct rules are sufficiently
``necessary'' to our implementation of Section 275 to satisfy the
standard for ancillary authority under Comcast. Nor does the record
demonstrate what basis we have for the proposed exercise of ancillary
authority to regulate any ISPs that fall outside the scope of Section
275 but that offer alarm monitoring services.
270. Authority With Respect to Audio and Video. The Open Internet
Order's theories of authority related to Commission oversight of audio
and video offerings have significant deficiencies, as well. In that
Order, the Commission argued that because local television stations and
radio stations distributed their content over the internet, actions by
ISPs to block, degrade, or charge unreasonable fees for carrying such
traffic would interfere with certain statutory responsibilities. Once
again, the Commission was unclear whether it was asserting direct or
ancillary authority. The Open Internet Order cited policy
pronouncements from provisions of the Act and associated precedent
without any clear indication how the underlying authority directly
applied to ISPs' conduct. To the extent that the Open Internet Order
was claiming ancillary authority, its failure to forthrightly engage
with an ancillary authority theory again leaves it unclear how conduct
rules are sufficiently ``necessary'' to its implementation of these
provisions to satisfy the standard for ancillary authority under
Comcast, nor are these issues adequately addressed by the limited
references to this potential authority in the record.
271. We find significant limitations to the Open Internet Order's
theories based on direct authority under Title VI of the Act, as well.
The Commission contended in the Open Internet Order that ``MVPD
practices that discriminatorily impede'' competing online video are a
``related practice'' to video program carriage agreements and thus
subject to the restrictions in Section 616(a) of the Act. That
expansive view of a ``related practice'' seems challenging to square
with the overall structure and approach of Section 616, which is
focused on facilitating program carriage agreements between video
programming vendors and MVPDs. But the Open Internet Order suggests
that an MVPD/ISP could violate rules implementing Section 616(a) with
respect to the programming of a video programming vendor that never
even sought a program carriage agreement with that MVPD. In such cases,
there appears to be no actual or potential program carriage agreement
to which the MVPD/ISP's conduct would be a ``related practice[ ].'' To
the contrary, the broader structure of Section 616(a) seems to
contemplate that there would be some effort by the video programming
vendor to obtain carriage, subject to the possibly of a complaint.
Neither the Open Internet Order nor the record here provides a response
enabling us to address these concerns.
272. The Open Internet Order's legal theory under Section 628 of
the Act also appears to have substantial shortcomings. The Open
Internet Order contended that ``[a] cable or telephone company's
interference with online transmission of programming by DBS operators
or stand-alone online video programming aggregators that may function
as competitive alternatives to traditional MVPDs would frustrate
Congress's stated goals in enacting Section 628 of the Act'' and
``[t]he Commission therefore is authorized to adopt open internet rules
under Section 628(b), (c)(1), and (j).'' Under the terms of the
statute, that at most could restrict
[[Page 7907]]
such entities' conduct if it constitutes ``unfair or deceptive acts or
practices the purpose or effect of which is to prevent or hinder
significantly the ability of an MVPD to deliver satellite cable
programming or satellite broadcast programming.'' The cursory
discussion in the Open Internet Order, while suggesting that ISP
practices could have some effect on the viability of stand-alone MVPDs
like DISH, does not provide any meaningful explanation why particular
conduct would rise to the level of ``prevent[ing] or significantly
hinder[ing]'' DISH (or others) from being able to deliver satellite
cable programming or satellite broadcast programming. The minimal
discussion of this Title VI authority in the record here does not
remedy that shortcoming either.
273. Authority With Respect to Wireless Licensees. Although the
Commission could rely on Title III licensing authority to support
conduct rules as it has in the past, that historical approach would
result in disparate treatment of ISPs, enabling conduct rules
encompassing wireless ISPs, but not wireline ISPs. For the reasons set
forth below, we decline to adopt a patchwork of rules that subjects
different categories of ISPs to different treatment. In addition,
applying conduct rules just to such providers would have the anomalous
result of more heavily regulating providers that face among the most
competitive marketplace conditions.
d. Our Evaluation of Possible Authority for Conduct Rules Confirms That
Such Rules Are Inappropriate
274. Our analyses of potential theories of legal authority for
conduct rules (other than Title II authority relied upon in the Title
II Order) persuades us on the record here that ISP conduct rules are
unwarranted. The two provisions most directly on point--Section 706 of
the 1996 Act and Section 230(b) of the Communications Act--are better
read as policy pronouncements rather than grants of regulatory
authority. In addition, Section 230(b)(2) identifies Congress'
deregulatory policy for the internet, explaining that ``[i]t is the
policy of the United States . . . to preserve the vibrant and
competitive free market that presently exists for the internet and
other interactive computer services, unfettered by Federal or State
regulation.'' This policy is reinforced by the deregulatory objectives
of the 1996 Act more generally. Against that policy backdrop, had
Congress wanted us to regulate ISPs' conduct we find it most likely
that they would have spoken to that directly. Thus, the fact that the
Commission would be left here to comb through myriad provisions of the
Act in an effort to cobble together authority for ISP conduct rules
itself leaves us dubious such rules really are within the authority
granted by Congress. Because we decline to adopt conduct rules here, we
need not reach the arguments in the record that imposing such rules on
ISPs would violate the First Amendment. We are unpersuaded by the
suggestion that allowing ISPs to enter paid prioritization
arrangements, even if subject to a commercial reasonableness standard,
would trigger First Amendment scrutiny as a restriction on entities
wishing to transmit speech on the internet. The failure to restrict
ISPs' actions through conduct rules does not require ISPs to act in any
particular manner, and those arguments do not reveal why allowing ISPs
to decide whether and when to enter paid prioritization arrangements
would constitute state action triggering the First Amendment.
275. In addition, the absence of demonstrated statutory authority
that could support comprehensive conduct rules would leave us with, at
most, a patchwork of non-uniform rules that would have problematic
consequences and doubtful value. Virtually all of the remaining sources
of possible authority identified in the Open Internet Order or the
record here would encompass only discrete subsets of ISPs, such as ISPs
that otherwise are providing common carrier voice services; ISPs that
otherwise are cable operators or MVPDs; or ISPs that hold wireless
licenses, among others. Individually, each of these sources of
authority would leave substantial segments of ISPs unaddressed by any
conduct rules. In addition, most of the remaining sources of authority
would, at most, enable the Commission to target narrow types of
behaviors, including, among other examples, actions by ISPs that
otherwise offer common carrier voice services to interfere with
competing over-the-top voice services or actions by certain ISPs that
otherwise are video providers that harm the distribution of satellite
programming. Importantly, substantial questions also remain on the
record here about the merits of most of those theories of legal
authority. For example, most if not all wired ISPs would appear to fall
outside the scope of any sound basis of authority for conduct rules
addressing the theories of harm identified in the Open Internet Order.
This would leave substantial portions of the marketplace unaddressed by
conduct rules including a number of the largest ISPs.
276. Imposing conduct rules on only some, but not all, ISPs risks
introducing regulation-based market distortions by limiting some ISPs'
ability to participate in the marketplace in a manner equivalent to
other ISPs. ISPs subject to conduct rules would be limited in the ways
in which they could manage traffic on their networks and/or the
commercial arrangements they could enter related to their carriage of
traffic beyond the requirements to which other ISPs are subject. As a
result, they are likely to face increased network costs and network
management challenges and see decreased revenue opportunities from
commercial arrangements relative to existing or potential competitors
not similarly constrained by conduct rules. In various contexts, the
Commission previously has recognized that such artificial regulatory
distinctions can distort the marketplace and undercut competition. The
primary objectives of the 1996 Act are ``[t]o promote competition and
reduce regulation,'' and the Commission likewise has observed that
``[c]ompetitive markets are superior mechanisms for protecting
consumers by ensuring that goods and services are provided to consumers
in the most efficient manner possible and at prices that reflect the
cost of production.'' Thus, the risk that disparate regulatory
treatment under patchwork conduct rules could harm existing or
potential competition is a significant concern. Even assuming arguendo
that the record demonstrated harms for which conduct rules were
warranted--which it does not--the record does not demonstrate that any
incremental benefits from patchwork regulation would outweigh the harm
from the resulting potential for marketplace distortions.
277. Patchwork conduct rules also would not appear to address many
of the theories of harm identified in the Open Internet Order. A number
of those theories of harm would need to be addressed by comprehensive
or near-comprehensive conduct rules. Here, by contrast, substantial
segments of the marketplace would be left unaddressed by patchwork ISP
conduct rules. Thus, patchwork conduct rules that conceivably might be
supported by authority identified here would not meaningfully address
such concerns, even assuming arguendo that the record here supported
such theories of harm.
C. Enforcement
278. In light of the modifications to our regulations, we also
revise our enforcement practices under them. The Internet Freedom NPRM
sought comment on the Commission's
[[Page 7908]]
Ombudsperson, formal complaint rules, and advisory opinions established
in the Title II Order. For the reasons discussed below, we remove these
enforcement mechanisms. Our existing informal complaint procedures
combined with transparency and competition, as well as antitrust and
consumer protection laws, will ensure that ISPs continue to be held
accountable for their actions, while removing unnecessary and
ineffective regulatory processes and unused mechanisms.
279. Open Internet Ombudsperson. We find that there is no need for
a separate Ombudsperson and thereby eliminate the Ombudsperson
position. The Title II Order created the role of an Ombudsperson ``to
provide assistance to individuals and organizations with questions or
complaints regarding the open internet to ensure that small and often
unrepresented groups reach the appropriate bureaus and offices to
address specific issues.'' In particular, the Title II Order tasked the
Ombudsperson with ``conducting trend analysis of open internet
complaints and, more broadly, market conditions, that could be
summarized in reports to the Commission regarding how the market is
functioning for various stakeholders . . . . [and] investigat[ing] and
bring[ing] attention to open internet concerns, and refer[ing] matters
to the Enforcement Bureau for potential further investigation.'' We
agree that it is important for the Commission to have staff who monitor
consumer complaints and provide consumers with additional information;
however, we disagree that a separate Ombudsperson role is necessary to
perform this function specifically for transparency complaints.
Instead, as suggested in the record, we determine that the existing
consumer complaint process administered by the Commission's Consumer
and Governmental Affairs Bureau is best suited to and will process all
informal transparency complaints. We reject as unsupported any
suggestions that only an Ombudsperson, and not other professional staff
from the Consumer and Governmental Affairs Bureau, would be able to
engage with consumers in beneficial ways. Indeed, the name, purpose,
and well-established track record for that Bureau make clear its
understanding of and responsiveness to consumer concerns.
280. We find that staff from the Consumer and Governmental Affairs
Bureau--other than the Ombudsperson--have been performing the
Ombudsperson functions envisioned by the Title II Order. Since the
existing rules became effective in June 2015, the Consumer and
Governmental Affairs Bureau has engaged in an ongoing review of
informal consumer complaints submitted to the Ombudsperson and to the
Commission's Consumer Complaint Center. Many complaints convey
frustration or dissatisfaction with a person or entity or discuss a
subject without actually alleging wrongdoing on which the Commission
may act; others represent isolated incidents that do not form a trend
that allow judicious use of our limited resources. Staff from the
Consumer and Governmental Affairs Bureau review all informal open
internet complaints received by the Commission, and work with staff in
the Enforcement Bureau who also monitor media reports and conduct
additional research to identify complaint trends so the Commission can
best target its enforcement capabilities toward entities that have a
pattern of violating the Communications Act and the Commission's rules,
regulations, and orders. The Commission's decision not to expend its
limited resources investigating each complaint that consumers believe
may be related to the open internet rules does not mean that the
Commission ``has not taken the time to analyze these materials'' as
alleged by some parties in the record. Rather, this ongoing review has
helped identify trends in this subject matter as well as the many
others over which we have jurisdiction and which generate far more
consumer complaints.
281. We emphasize that we are not making any changes to our
informal complaint processes. Our decision to eliminate the Open
Internet Ombudsperson does not impact the existing review of trends or
existing responses to consumer complaints by the Consumer and
Governmental Affairs Bureau and the Enforcement Bureau. Instead, it
reduces confusion by making clear that staff specifically trained to
work with consumers, known as Consumer Advocacy and Mediation
Specialists (CAMS), are best suited to help consumers by providing them
with understandable information about the issue they might be
experiencing and to help file a complaint against a service provider if
the consumer believes the service provider is violating our rules. When
a consumer needs additional information that the CAMS cannot provide,
that complaint is often shared with the expert Bureau or Office to
provide additional information to the consumer.
282. Our experience also persuades us that the demand for a
distinct Ombudsperson is not sufficient to retain the position. For the
10 month period from December 16, 2016 through November 16, 2017, the
email address and phone number associated with the Ombudsperson
received only 38 emails and 10 calls related to the open internet--with
only 7 emails and 2 calls coming in during the 5 month period between
mid-July and mid November 2017. By comparison, during that same time
period, the Consumer and Governmental Affairs Bureau's Consumer
Complaint Center received roughly 7,700 complaints that consumers
identified as relating to open internet. This figure includes
complaints filed through the Consumer Complaint Center and the FCC Call
Center for which the consumer self-selected the issue ``Open Internet/
Net Neutrality'' or the call center agent selected ``Open Internet''
based on the consumer's description of the issue, and does not exclude
open internet campaigns. These statistics make clear that consumers
have generally not been seeking out the Ombudsperson position for
assistance with concerns about internet openness and that consumers are
comfortable working with the Consumer and Governmental Affairs Bureau
to protect their interests.
283. Formal Complaint Rules. We similarly find that it is no longer
necessary to allow for formal complaints under Part 8 of the Act as we
believe that the informal complaint process is sufficient in this area.
We encourage consumers to file informal complaints for apparent
violations of the transparency rule in order to assist the Commission
in monitoring the broadband market and furthering our goals under
Section 257 to identify market entry barriers. We also note that under
the revised regulatory approach adopted today, consumers and other
entities potentially impacted by ISPs' conduct will have other remedies
available to them outside of the Commission under other consumer
protection laws to enforce the promises made under the transparency
rule.
284. Advisory Opinions. Because we are eliminating the conduct
rules, we find that the justification for enforcement advisory opinions
no longer exists. Moreover, our experience with enforcement advisory
opinions and the evidence in the record would lead us to eliminate the
use of advisory opinions in the context of open internet conduct in any
event. The record indicates that enforcement advisory opinions do not
diminish regulatory uncertainty, particularly for small providers.
Rather they add costs and uncertain timelines since there is no
specific timeframe within which to act, which can also inhibit
innovation. Further, the fact that no ISP has requested an advisory
opinion since
[[Page 7909]]
they first became available further demonstrates that they are not
needed.
III. Cost-Benefit Analysis
285. The Internet Freedom NPRM solicited input for a cost-benefit
analysis in this proceeding, with special emphasis on identifying
``whether the decision will have positive net benefits.'' There was
generally favorable record support for conducting this analysis.
Relying on the findings discussed above in light of the record before
us and as a result of our economic analysis, we use a cost-benefit
analysis framework to evaluate key decisions. While the record provides
little data that would allow us to quantify the magnitudes of many of
the effects, our findings with respect to the key decisions we make in
this Order allow for a reasonable assessment of the direction of the
effect on economic efficiency (i.e. net positive or net negative
benefits). This assessment is equivalent to conducting a qualitative
cost-benefit analysis, because the purpose of comparing benefits and
costs is to identify whether a policy change improves economic
efficiency. We reject the argument that the Internet Freedom NPRM
provided inadequate notice regarding our cost-benefit analysis here.
The Commission made clear in that NPRM that it ``propose[d] to compare
the costs and the benefits'' of each of the ``changes for which we seek
comment above.'' It also provided detailed guidance to commenting
parties about the way in which the Commission proposed to conduct its
cost-benefit analysis, and the nature of the information it was seeking
in order to do so. The result is a robust record on we have based our
analysis. Moreover, that NPRM plainly provided ``the terms or substance
of the proposed rule,'' and also provided ``sufficient factual detail
and rationale for the rule to permit interested parties to comment
meaningfully.'' Nor can there be any question that ``[t]he final rule''
is a ``logical outgrowth'' of the notice.
286. As proposed in the Internet Freedom NPRM, we evaluate
maintaining the classification of broadband internet access service as
a telecommunications service (i.e., Title II regulation); maintaining
the internet conduct rule; maintaining the no-blocking rule;
maintaining the no-throttling rule; and maintaining the ban on paid
prioritization. Throughout this section, when discussing maintaining
broadband internet access service as a telecommunications service, we
mean as implemented by the Title II Order, where the Commission forbore
from applying some sections of the Act and some Commission rules. We
also evaluate the benefits and costs associated with transparency
regulations. We make each of these evaluations by organizing the
relevant economic findings made throughout the Order into a cost-
benefit framework.
287. The primary benefits, costs, and transfers attributable to
this Order are the changes in the economic welfare of consumers, ISPs,
and edge providers that would occur due to our actions. In our analysis
of the net benefits of maintaining the Title II classification, the
internet conduct rule, and the bright-line rules, we compare against a
state we would expect to exist if we did not maintain the
classification or a particular rule. As explained in the Internet
Freedom NPRM, we ``recognize that in certain cases repealing or
eliminating a rule does not result in a total lack of regulation but
instead means that other regulations continue to operate or other
regulatory bodies will have authority.'' As discussed elsewhere in this
Order, when analyzing the net benefits of maintaining the Title II
classification, our comparison is to a situation where a Title I regime
for broadband internet access service, and antitrust and consumer
protection enforcement, remain in place. Further, given this Order's
adoption of a transparency rule, when considering net benefits of the
current rules we compare against a state where the transparency rule we
adopt is in effect (as well as the antitrust and consumer protection
enforcement that exists under a Title I classification). We also
recognize that the actions we analyze separately could potentially be
interdependent, but we believe a separate consideration of each is a
reasonable way to approximate the net benefits. We believe that
attempting to assert the nature of these interdependencies,
particularly given the limited record on such matters, would introduce
considerable subjectivity while not likely improving the ability of the
analysis to guide our decisions. Moreover, we consider additional
regulation, for example, adding an additional rule to a baseline
package of Title II regulation and another rule (or none) is likely to
have greater negative impacts in terms of regulatory uncertainty, and
distortion of efficient choices, than the baseline package, while at
best having little or no additional impact on the positive impacts (if
any) of each element of the baseline package. That is, the interactions
increase uncertainty and the unintended side effects of each element,
without making each element materially more effective.
288. To conduct the cost-benefit analysis, we first consider the
question of maintaining the Title II classification of broadband
internet access service. We next consider approaches to transparency.
Then to evaluate the internet conduct rule and the bright-line rules,
we assume that we will not maintain the Title II classification and we
will adopt our transparency rule. This approach allows us practically
to evaluate the rules in a way that incorporates the decisions on
classification and transparency that we have come to in this Order.
289. Maintaining Title II Classification of Broadband Internet
Access Service. We have found that the Title II Order decreased
investment and is likely to continue to decrease investment by ISPs.
These decreases in investments are likely to result in less deployment
of service to unserved areas and less upgrading of facilities in
already served areas. For consumers, this means some will likely not
have access to high-speed services over fixed or mobile networks and
some will not experience better service as quickly as they otherwise
would under a Title I classification. While the evidence in the record
on the effect of Title II is varied in terms of details due to
different methodologies, data, etc., we found that the Title II
classification did directionally decrease investment by ISPs. Since the
Title II Order classified broadband internet access service under Title
II and adopted rules simultaneously, it is difficult methodologically
to make a clear delineation between the effect of the classification
and the rules. However, the theoretical underpinnings of our finding
about the effect of Title II specifically also support the finding of a
negative impact on investment as a result of Title II per se.
290. As the Internet Freedom NPRM noted, ``the networks built with
capital investments are only a means to an end . . . the private costs
borne by consumers and businesses of maintaining the status quo [i.e.,
Title II classification] result from decreased value derived from using
the networks.'' Ideally, we would estimate consumers' and businesses'
valuations of the service or service improvements foregone caused by
Title II classification. Unfortunately, the record before us does not
allow for such estimation. We can reasonably conclude, however, that
providers expect to recoup their investments over time through revenues
generated by employing the networks resulting from the investment.
Since these revenues come from consumers and businesses who are willing
to pay
[[Page 7910]]
at least their value of the service, the investment foregone due to
Title II is a lower bound on the value consumers lose if the FCC
maintains the Title II classification. This is a conservative estimate
as the social welfare impact of this forgone investment would likely
have been positive, because frequently (1) a customer's willingness to
pay exceeds what the customer actually pays, and (2) the provider may
make an economic profit. We therefore conclude that the private costs
of maintaining a Title II classification due to foregone network
investment are directionally negative and likely constitute at least
several billion dollars annually based on the record.
291. The Commission also asked in the Internet Freedom NPRM about
additional costs that could result from foregone network investments.
When regulation discourages investment in the network, society is
likely to lose some spillover benefits that the purchasers of broadband
internet access do not themselves capture. Such forgone benefits can
include network externalities (the network becomes more valuable the
more users are on the network, but individual ISPs do not capture all
of these, as they are obtained by end users on other ISPs' networks),
and improvements in productivity and innovation that occur because
broadband is a general-purpose technology. The record provides little
information that could be used to quantify such costs, but it is
reasonable to conclude that there are social costs beyond the private
costs associated with the foregone investment.
292. Next, we consider the benefits associated with maintaining the
Title II classification. The relevant comparison is what incremental
benefit the Title II classification provides over and above the Title I
scenario. In the Title I scenario, the FTC has jurisdiction over
broadband internet access service providers. The record does not
convince us that Title II classification per se provides any benefit
over and above Title I classification. We also find above that the
record does not provide evidence supporting the conclusion that the
Title II classification affects edge investment. To the extent Title II
provides a benefit, it appears to do so by serving as a legal basis
relied upon to adopt rules. Therefore, in this cost-benefit analysis we
conclude the incremental benefits of maintaining the Title II
classification are approximately zero.
293. Finding that the benefits of maintaining the Title II
classification are approximately zero, coupled with our finding that
the private and social costs are positive, we conclude that maintaining
the Title II classification would have net negative benefits. Thus,
maintaining the Title II classification would decrease overall economic
welfare, and our cost-benefit analysis supports the decision to
reclassify broadband internet access service as a Title I service.
294. Evaluating Transparency Rules. As discussed already, we find
that the benefits of a transparency rule are positive based on the
record. Given our decision to classify broadband internet access
service under Title I, the benefits of a transparency rule are expected
to be of considerable magnitude since it is a key element of our
approach of relying on enforcement under antitrust and consumer
protection law to prevent and remedy harmful behaviors by ISPs.
Numerous commenters indicate the benefits of a free and open internet
are large, so to the extent a transparency rule under our Title I
approach is important for maintaining a free and open internet, we can
conclude the benefits are positive and considerable. Furthermore,
transparency can provide other benefits in terms of consumer welfare.
Namely, if transparency helps mitigate economic deadweight loss due to
information asymmetry or if it helps consumers better satisfy their
preferences in their purchasing decisions, then additional benefits
will accrue. We therefore conclude that our transparency approach, as
well as the transparency approaches in the Open Internet Order and the
Title II Order, all have positive benefits.
295. The costs of the transparency rules may vary given differences
in their implementation. Comparing the transparency approach in the
Open Internet Order and the Title II Order, we conclude the costs were
greater for the latter. Based on the record, we determined above that
the additional transparency requirements in the Title II Order were
particularly burdensome. Although the record is limited on the costs of
these transparency rules, the Commission's Paperwork Reduction Act
(PRA) filings indicate the Title II Order transparency rule increased
the burden on the public by thousands of hours per year, costing
hundreds of thousands of dollars. While we do not have specific
information on our transparency rule's costs, it is fairly similar to
that in the Open Internet Order. Therefore, we conclude that a
reasonable approximation for the PRA burden associated with our rule is
approximately half the preceding burden estimate. We recognize there
are other costs to this requirement not accounted for in the PRA
estimate, though the PRA estimate provides a starting point for sizing
the costs, particularly as we compare several alternative transparency
approaches.
296. Combining our conclusion about the benefits of a transparency
rule with our assessments of the costs of the several transparency
rules, we conclude that the transparency rule in the Title II Order
would have the smallest net positive benefit of the three. That is
because we do not believe the additional elements of the Title II Order
transparency regime have significant additional benefits but they do
impose significant additional costs. However, our transparency rule
would have a larger net positive benefit than the transparency rule in
the Title II Order. Therefore, our cost-benefit analysis of the
transparency alternatives supports our decision to adopt a transparency
rule more limited than the one in the Title II Order.
297. Maintaining the Internet Conduct Rule. We have determined
elsewhere that the internet conduct rule has created uncertainty and
ultimately deterred innovation and investment. The record does not
provide sufficient information for us to estimate the magnitude of this
effect. However, we do find that maintaining the internet conduct rule
imposes social costs in terms of increased uncertainty, reduced
investment, and reduced innovation.
298. We also find above that the benefits of the internet conduct
standard are limited if not approximately zero. In this cost-benefit
analysis, we consider the incremental benefit of the internet conduct
standard relative to the regulatory environment created by this Order.
The regulatory environment created by this Order will have antitrust
and consumer protection enforcement in place through the FTC. We find
that the internet conduct standard provides approximately zero
additional benefits compared to that baseline.
299. Based on the record available, we conclude that maintaining
the internet conduct standard would impose net negative benefits. The
costs of the rule are considerable as the evidence shows that it had
large effects on consumers obtaining innovative services (as
demonstrated by the zero-rating experiences). The innovations that were
delayed or never brought to market would likely have cost many millions
or even billions of dollars in lost consumer welfare. At the same time,
for the reasons explained already, the benefits of the conduct rule are
approximately zero. This leads us to conclude that the internet conduct
standard has a net negative effect on economic welfare,
[[Page 7911]]
and supports our decision not to maintain the internet conduct rule.
300. Maintaining the Ban on Paid Prioritization. We have determined
elsewhere in this Order that the ban on paid prioritization has created
uncertainty and reduced ISP investment. We also find that the ban is
likely to prevent certain types of innovative applications from being
developed or adopted. The record does not provide sufficient
information for us to estimate the magnitude of these effects. However,
we do find that maintaining the ban on paid prioritization imposes
substantial social costs.
301. We also find above that the benefits of the ban on paid
prioritization are limited. In this cost-benefit analysis, we consider
the incremental benefit of the ban on paid prioritization relative to
the regulatory environment created by this Order. The regulatory
environment created by this Order will have antitrust and consumer
protection enforcement in place. So we must ask what the ban on paid
prioritization provides in additional benefits when compared to that
baseline. We concluded that transparency combined with antitrust and
consumer enforcement at the FTC will be able to address the vast
majority of harms the ban on paid prioritization is intended to
prevent. To the extent there are harms not well addressed by this
enforcement, we would expect those cases to be infrequent and involve
relatively small amounts of harm, though the record does not allow us
to estimate this magnitude. Antitrust law, in combination with the
transparency rule we adopt, is particularly well-suited to addressing
any potential or actual anticompetitive harms that may arise from paid
prioritization arrangements. While antitrust law does not address harms
that may arise from the legal use of market power, we have found that
such market power is limited, and ISPs also have countervailing
incentives to keep edge provider output high and keep subscribers on
the network. The record therefore supports a finding of small to zero
benefits.
302. Based on the record available, we conclude that maintaining
the ban on paid prioritization would impose net negative benefits. The
record shows that in some cases innovative services and business models
would benefit from paid prioritization. At the same time, for the
reasons explained already, the benefits of maintaining the ban are
small or zero. We therefore conclude that the ban on paid
prioritization has a net negative effect on economic welfare. This
conclusion supports our decision to not maintain the ban on paid
prioritization.
303. Maintaining the Bans on Blocking and Throttling. We find that
the costs of these bans are likely small. This is supported by the fact
that ISPs voluntarily have chosen in some cases to commit to not
blocking or throttling. However, we also recognize that these rules may
create some compliance costs nonetheless. For example, when considering
new approaches to managing network traffic, an ISP must apply due
diligence in evaluating whether the practice might be perceived as
running afoul of the rules. As network management becomes increasingly
complex, the compliance costs of these rules could increase.
304. Having adopted a transparency rule, we find the benefits of
bans on blocking and throttling are approximately zero since the
transparency rule will allow antitrust and consumer protection law,
coupled with consumer expectations and ISP incentives, to mitigate
potential harms. That is, we have determined that replacing the
prohibitions on blocking and throttling with a transparency rule
implements a lower-cost method of ensuring that threats to internet
openness are exposed and deterred by market forces, public opprobrium,
and enforcement of the consumer protection laws. We conclude therefore
that maintaining the bans on blocking and throttling has a small net
negative benefit, compared to the new regulatory environment we create
(i.e. Title I classification and our transparency rule).
IV. Order
A. Denial of INCOMPAS Petition To Modify Protective Orders
305. INCOMPAS requests that we modify the protective orders in four
recent major transaction proceedings involving internet service
providers to allow confidential materials submitted in those dockets to
be used in this proceeding. INCOMPAS argues that the materials ``are
necessary to understanding and fully analyzing incumbent broadband
providers' ability and incentives to harm edge providers.'' The motion
is opposed by the three companies whose materials would be most
affected--Comcast, Charter and AT&T--as well as by Verizon. For the
reasons set forth below, after carefully ``balancing . . . the public
and private interests involved,'' we deny INCOMPAS's request.
306. The Commission's protective orders limit parties' use of the
materials obtained under the protective order solely to ``the
preparation and conduct'' of that particular proceeding, and expressly
prohibit the materials being used ``for any other purpose, including .
. . in any other administrative, regulatory or judicial proceedings.''
The terms of the relevant protective orders therefore prohibit INCOMPAS
from using the confidential materials it obtained in those prior
dockets in the current proceeding. Further, parties reasonably expect
that the information they submit pursuant to the strictures of a
protective order will be used in accordance with the terms of that
order and that the order's explicit prohibitions will not be changed
years later. That is not to imply, however, that the Commission cannot
request the submission of information in a proceeding simply because it
has been provided pursuant to a protective order in another proceeding.
307. Before discussing the substance of INCOMPAS's request, we note
that, as a formal matter, the Commission does not modify protective
orders to allow materials to be used in a different proceeding. Rather,
where we find that the public interest is served by submitting certain
materials into a docket, we do so, subject to a protective order
specific to that proceeding if the material is confidential. That is
true whether the materials have been submitted in prior proceedings or
not. The question before us, then, is whether we will require the
relevant parties to submit into this docket the presumptively
confidential information INCOMPAS has identified.
308. The Commission is not required to enter into the record and
review every document that a party to a proceeding deems relevant,
especially where, as here, those documents may number in the tens of
thousands. Nor, as a general matter, does the Commission allow for
discovery by parties--which is essentially what INCOMPAS seeks here--
except in adjudications that have been set for hearing. The Commission
has broad discretion in how to manage its own proceedings, and we find
several problems with requiring the materials INCOMPAS seeks to be
submitted into this rulemaking docket.
309. First, much of the material INCOMPAS seeks is now several
years old and INCOMPAS has offered little demonstration of its
relevance to this proceeding. For example, Comcast's ability to
discriminate against online video providers in 2009 and 2010 shines
little light on its ability to do so now. Also, as the opponents argue,
many of the confidential materials cited by the Commission in its prior
transaction
[[Page 7912]]
decisions were cited as part of a larger group of mostly publicly
available information. Having the competitively sensitive information
from those transactions in this record would therefore not
significantly add to the Commission's understanding of the issues,
especially since the participants in the current proceeding and the
Commission already have available the Commission's prior conclusions
and reasoning, as well as the underlying public information.
310. Second, INCOMPAS asks for information only from the few
industry participants who happen to have had large transactions before
the Commission. But where the Commission has sought information in
large rulemaking proceedings, it sought information from the entire
industry, not just from a select few participants. Transaction review
is an adjudicatory matter, involving the entities engaging in the
transaction--not the entire industry or marketplace. Particularly given
that there are thousands of ISPs doing business in the United States,
INCOMPAS does not address how a quite incomplete picture of industry
practices could meaningfully improve the Commission's analysis.
311. Third, granting the request would pose several administrative
difficulties. It is unclear how much of the material INCOMPAS seeks is
still in the possession of the parties: The relevant portions of the
proceedings are finished, and many of the materials may have been
destroyed. And what is available at the Commission would be difficult
and costly to produce. Making the information available to others also
would be administratively difficult. For example, in the recent
Business Data Services proceeding, the Commission made the
competitively sensitive data available for review only through a secure
data enclave, a process which took significant time and resources to
establish. And in most Commission proceedings, the parties who own the
confidential information are required to provide that material directly
to persons who seek to review it pursuant to terms outlined in the
applicable protective order. Here, in contrast, it is likely that the
Commission itself would have to make the confidential information
available, further depleting scarce Commission resources.
312. Finally, as noted above, the materials INCOMPAS seeks were
provided pursuant to express assurances against their use in future
proceedings.
313. INCOMPAS cites two examples in which the Commission staff
placed into the record competitively sensitive materials originally
submitted in another docket. We find both inapposite. As an initial
matter, we note that the Commission is not bound by its staff's prior
decisions. The first example INCOMPAS cites involved a series of
spectrum license transfers between wireless telecommunications
companies where the Commission added confidential data to the docket
under a new protective order. When evaluating transactions such as
these, the Commission regularly uses subscriber data derived from
regular periodic confidential filings made by all telecommunications
companies to determine market shares. In such transactions, this use of
subscriber data is often the only way to calculate market share, which
is a critical element to analyzing the potential competitive harms of
the proposed transaction. Balancing that need against the potential
competitive harm to providers, we have determined that allowing that
material to be reviewed pursuant to a protective order best serves the
public interest. For the reasons expressed above, we do not reach the
same conclusions with respect to the materials here.
314. INCOMPAS also cites the recent investigation of certain
business data services tariffs, in which the Commission placed the
record of the contemporaneous business data services rulemaking
proceeding into the docket of the tariff investigations. As the
opponents note, the tariff investigation was not only related to the
rulemaking proceeding, it actually was determined by the staff to be
``an outgrowth'' of that proceeding. Further, there was no Commission
decision in the rulemaking proceeding on which the participants in the
tariff proceeding could rely; the proceeding was still ongoing. All of
the participants in the tariff proceeding, moreover, were participating
in the rulemaking proceeding. Here, by contrast, the current rulemaking
is not related to the prior transactions; the parties may rely on prior
written Commission decisions; and literally millions more comments have
been submitted in this rulemaking than in the prior transaction
proceedings. Finally, we note that none of the parties that owned the
confidential information in the Business Data Services rulemaking
proceeding raised confidentiality concerns with respect to that
information being placed into the tariff investigation docket. Here,
they do.
315. Even absent the legal and administrative barriers discussed
above, the substance of the past transaction orders compels us to deny
INCOMPAS' motion. When, as it has in the past, the Commission
determines a specific transaction involving certain large broadband
providers is likely to create competitive or other public interest
harm, the conditions imposed are applicable only to those entities
engaging in the transaction. Those proceedings involved some of the
nation's largest broadband providers, and the Commission's conclusions
were based on the specific circumstances involved. This is because
transaction review is an adjudicatory matter, involving the motives,
plans, and capabilities of the entities engaging in the transaction--
not the entire industry or marketplace. Indeed, transaction reviews
specifically do not address issues that are not transaction-specific
but are industry-wide. The targeted and flexible approach the
Commission used to ameliorate the potential harms it found in those
transactions is not transferable to a permanent, one-size-fits-all
approach in this rulemaking applicable to hundreds of ISPs.
316. Further, in those limited instances in which the Commission
found conduct remedies necessary, it almost always applied them on a
temporary basis, in recognition that markets change over time. That is
true even more so in industries that are characterized by rapidly
changing technologies. Similarly, the Commission often has provided
that it will ``consider a petition for modification of this condition
if it can be demonstrated that there has been a material change in
circumstance or the condition has proven unduly burdensome, rendering
the condition no longer necessary in the public interest,'' and has
acted accordingly. None of this would be the case with respect to the
regulations that some commenters urge us to adopt in this rulemaking.
317. INCOMPAS argues that ``[l]ooking to the past is the standard
way for administrative agencies to make predictive judgments.''
However, the analysis supporting our decision to re-classify broadband
internet access service as an information service is quite different
from the analysis the Commission employs when conducting a transaction
review. In this rulemaking, we are not considering whether, as a result
of a transfer of a Commission license, a licensee is likely to gain
market power, allowing it to take anticompetitive actions that it
otherwise could not. Instead, we are reasonably considering the long-
term costs and benefits of Title II and other ex ante regulation in an
increasingly dynamic market. As such, we choose a conservative and
administrable approach to formulating a light-touch
[[Page 7913]]
regulatory framework--which is appropriate in a rulemaking.
318. In addition to rejecting the INCOMPAS petition on the merits,
we find that the petition is procedurally flawed. Although some of the
companies that objected to INCOMPAS's request were the applicants in
the proceedings from which INCOMPAS seeks confidential information,
they are not the only owners of confidential information submitted in
those dockets. INCOMPAS did not file its request in those dockets--
which are long dormant--and others whose confidential information would
be disclosed if we were to grant INCOMPAS's request have not been
notified of the request to have the opportunity to object. That would
need to occur before any of their information could be made available,
even pursuant to a protective order.
319. Taking into account and sensibly balancing the factors
discussed above, we find that the public interest would not be served
by requiring the submission into the docket of the current proceeding
the presumptively confidential information INCOMPAS seeks. We therefore
deny INCOMPAS's request.
B. Denial of NHMC Motion Regarding Informal Consumer Complaints
320. The National Hispanic Media Coalition (NHMC) requests that we
incorporate in the record of this proceeding the informal complaint
materials released as part of NHMC's Freedom of Information Act (FOIA)
request and establish a new pleading cycle for public comment on those
materials. NHMC argues that the materials ``are directly relevant to
the [NPRM's] questions regarding the effectiveness of the [Title II
Order]'' and that if we deny NHMC's request, ``any decision in this
proceeding would be based on an insufficient and fundamentally flawed
record.'' The motion is opposed by several parties who argue that the
informal complaint materials are not relevant to this proceeding, and
that the motion ``appears to be . . . aimed [ ] at prolonging this
proceeding unnecessarily.'' For the reasons set forth below, we deny
NHMC's request.
321. In responding to NHMC's underlying FOIA requests, we produced
nearly 70,000 pages of records responsive to the requests. The
documents we provided to NHMC included informal consumer complaints
filed with the Consumer and Governmental Affairs Bureau, data relating
to the complaints, responses to the informal complaints from the
carrier involved in a specific complaint--all filed by the consumer
under the category of Open Internet/Net Neutrality--and consumer
complaint correspondence with the Open Internet Ombudsperson. We
provided this large quantity of documents to NHMC on a rolling basis
and made all of the documents available to the public in our FOIA
Electronic Reading Room.
322. Under Commission rules, and as noted by opponents to the
motion, ``NHMC is free to put into the record whatever it believes to
be relevant via ex parte letters.'' NHMC began receiving the documents
it claims are relevant to the proceeding on June 20, 2017. During the
following months, NHMC engaged with Commission staff to discuss the
consumer complaint documents. NHMC also conducted an Expert Analysis of
the consumer complaint documents and submitted the analysis along with
the complaints it found relevant in the record, in addition to
submitting the full universe of consumer complaints it received under
the FOIA request into the record on December 1--nearly three months
after the Commission produced them all. Thus, we remain unpersuaded
that NHMC requires additional time to review the documents and instead
agree with commenters that NHMC has raised ``the mere existence of
these complaints as a pretext for delay.''
323. The Internet Freedom NPRM sought comment on consumer harm in a
variety of contexts and, in response, received over 22 million comments
discussing consumers' view of the Title II Order, including any harm
that may or may not have occurred under its rules. After routinely
reviewing the consumer complaints over the past two years, and
conducting a robust review of the voluminous record in this proceeding,
we agree with opponents to the motion that ``it is exceedingly unlikely
that these informal complaints identify any net neutrality `problem'
that [advocates] have somehow overlooked in their many massive
submissions in this docket.'' The Commission takes consumer complaints
seriously and finds them valuable in informing us about trends in the
marketplace, but we reiterate that they are informal complaints that,
in most instances, have not been verified. Further, the overwhelming
majority of these informal complaints do not allege conduct implicating
the Open Internet rules. Of the complaints that do discuss ISPs, they
often allege frustration with a person or entity, but do not allege
wrongdoing under the Open Internet rules. The consumer complaints NHMC
submitted in the record as part of the Expert Analysis further support
this point. Further, we are not required to resolve all of these
informal complaints before proceeding with a rulemaking. Since we do
not rely on these informal complaints as the basis for the decisions we
make today, we do not have an obligation to incorporate them into the
record.
324. We are convinced that we have a full and complete record on
which to base our determination today without incorporating the
materials requested by NHMC. Further, because the record remained open
for over three months after the complete production of documents under
NHMC FOIA's request, and NHMC filed an analysis the materials it deemed
relevant in the record, we believe that NHMC had ample opportunity to
``meaningfully review the informal complaint materials and provide
comment.''
V. Procedural Matters
A. The Administrative Record
325. In reviewing the record in this rulemaking, the Commission
complied with its obligations under the Administrative Procedure Act
(APA), including the obligation to consider all ``relevant matter''
received, to adequately consider ``important aspect[s] of the
problem,'' and to ``reasonably respond to those comments that raise
significant problems.'' Consistent with these obligations, the
Commission focused its review of the record on the submitted comments
that bear substantively on the legal and public policy consequences of
the actions we take today. Thus, our decision to restore internet
freedom did not rely on comments devoid of substance, or the thousands
of identical or nearly-identical non-substantive comments that simply
convey support or opposition to the proposals in the Internet Freedom
NPRM.
326. Because we have complied with our obligations under the APA,
we reject calls to delay adoption of this Order out of concerns that
certain non-substantive comments (on which the Commission did not rely)
may have been submitted under multiple different names or allegedly
``fake'' names. The Commission is under no legal obligation to adopt
any ``procedural devices'' beyond what the APA requires, such as
identity-verification procedures. In addition, the Commission has
previously decided not to apply its internal rules regarding false
statements in the rulemaking context because we do not want ``to hinder
full and robust public participation in such policymaking proceedings
by encouraging collateral wrangling over
[[Page 7914]]
the truthfulness of the parties' statements.'' To the extent that
members of the public are concerned about the presence in the record of
identical or nearly-identical non-substantive comments that simply
convey support or opposition to the proposals in the Internet Freedom
NPRM, those comments in no way impeded the Commission's ability to
identify or respond to material issues in the record. Indeed, the Order
demonstrates the Commission's deep engagement with the substantive
legal and public policy questions presented in this proceeding.
B. Final Regulatory Flexibility Analysis
327. As required by the Regulatory Flexibility Act (RFA), an
Initial Regulatory Flexibility Analysis (IRFA) was incorporated into
the Internet Freedom NPRM. The Commission sought written public comment
on the possible significant economic impact on small entities regarding
the proposals addressed in the Internet Freedom NPRM, including
comments on the IRFA. Pursuant to the RFA, a Final Regulatory
Flexibility Analysis is set forth in the Order.
C. Paperwork Reduction Act Analysis
328. This document contains new or modified information collection
requirements subject to the Paperwork Reduction Act of 1995 (PRA),
Public Law 104-13. It will be submitted to the Office of Management and
Budget (OMB) for review under Section 3507(d) of the PRA. OMB, the
general public, and other federal agencies will be invited to comment
on the new information collection requirements contained in this
proceeding. In addition, we note that pursuant to the Small Business
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C.
3506(c)(4), we previously sought specific comment on how the Commission
might further reduce the information collection burden for small
business concerns with fewer than 25 employees.
329. In this present document, we require any person providing
broadband internet access service to publicly disclose accurate
information regarding the network management practices, performance,
and commercial terms of their broadband internet access services
sufficient to enable consumers to make informed choices regarding the
purchase and use of such services and entrepreneurs and other small
businesses to develop, market, and maintain internet offerings. We have
assessed the effects of this rule and find that any burden on small
businesses will be minimal because (1) the rule gives ISPs flexibility
in how to implement the disclosure rule, (2) the rule gives providers
adequate time to develop cost-effective methods of compliance, and (3)
the rule eliminates the additional reporting obligations adopted in the
Title II Order.
D. Congressional Review Act
330. The Commission will send a copy of the Report and Order to
Congress and the Government Accountability Office pursuant to the
Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
E. Data Quality Act
331. The Commission certifies that it has complied with the Office
of Management and Budget Final Information Quality Bulletin for Peer
Review, 70 FR 2664, January 14, 2005, and the Data Quality Act, Public
Law 106-554 (2001), codified at 44 U.S.C. 3516 note, with regard to its
reliance on influential scientific information in the Declaratory
Ruling, Report and Order, and Order in WC Docket No. 17-108.
F. Accessible Formats
332. To request materials in accessible formats for people with
disabilities (braille, large print, electronic files, audio format),
send an email to fcc.gov">fcc504@fcc.gov or call the Consumer & Governmental
Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty). Contact the
FCC to request reasonable accommodations for filing comments
(accessible format documents, sign language interpreters, CARTS, etc.)
by email: FCC504@fcc.gov; phone: (202) 418-0530 (voice), (202) 418-0432
(TTY).
VI. Final Regulatory Flexibility Analysis
333. As required by the Regulatory Flexibility Act of 1980 (RFA),
as amended, Initial Regulatory Flexibility Analysis (IRFAs) was
incorporated in the Notice of Proposed Rule Making (Internet Freedom
NPRM) for this proceeding. The Commission sought written public comment
on the proposals in the Internet Freedom NPRM, including comment on the
IRFA. The Commission received comments on the Internet Freedom NPRM
IRFA, which are discussed below. This present Final Regulatory
Flexibility Analysis (FRFA) conforms to the RFA.
A. Need for, and Objectives of, the Final Rules
334. In order to return the internet to the light-touch regulatory
environment that allowed investment to increase and consumers to
benefit, we return broadband internet access service to its
longstanding classification as an information service, and eliminate
several rules adopted in the Title II Order, including the general
conduct standard, the ban on paid prioritization, and the no-blocking
and no-throttling rules. We retain the transparency rule adopted in the
Open Internet Order, with modifications, while eliminating the
additional reporting obligations created in the Title II Order, the
Title II Order's direct notification requirement, and the broadband
label ``safe harbor.''
335. We also eliminate the formal complaint procedures under Part 8
of the Act, because the informal complaint procedures are sufficient.
We eliminate the other components of the enforcement regime created in
the Title II Order, including the position of Open Internet
Ombudsperson and the issuance of advisory opinions. We also return
mobile broadband internet access service to its longstanding definition
as a private mobile radio service under Section 332 of the
Communications Act.
The transparency rule we adopt is necessary because properly
tailored transparency disclosures provide valuable information to the
Commission to enable it to meet its statutory obligation to observe the
communications marketplace to monitor the introduction of new services
and technologies, and to identify and eliminate potential marketplace
barriers for the provision of information service. Such disclosures
also provide valuable information to other internet ecosystem
participants; transparency substantially reduces the possibility that
ISPs will engage in harmful practices, and it incentivizes quick
corrective measures by providers if problematic conduct is identified.
Appropriate disclosures help consumers make informed choices about
their purchase and use of broadband services. Moreover, clear
disclosures improve consumer confidence in ISPs' practices, ultimately
increasing user adoption and leading to additional investment and
innovation, while providing entrepreneurs and other small businesses
the necessary information to innovate and improve products.
336. Our enforcement changes will ensure that ISPs will be held
accountable for any violations of the transparency rule. We eliminate
the formal complaint procedures because the informal complaint
procedure, in conjunction with other redress options including consumer
protection laws, will sufficiently protect consumers. Additionally, we
eliminate the position of Open Internet Ombudsperson because the staff
from the Consumer and
[[Page 7915]]
Governmental Affairs Bureau--other than the Ombudsperson--have been
performing the Ombudsperson functions envisioned by the Title II Order.
We also eliminate the issuance of enforcement advisory opinions,
because enforcement advisory opinions do not diminish regulatory
uncertainty, particularly for small providers. Instead, they add costs
and uncertain timelines since there is no specific timeframe within
which to act, which can also inhibit innovation.
337. We return mobile broadband internet access service to its
original classification as a private mobile radio service because we
find that the definitions of the terms ``public switched network'' and
``interconnected service'' that the Commission adopted in the 1994
Second CMRS Report and Order reflect a better reading of the Act.
Accordingly, we readopt those definitions.
338. We restore the definition of interconnected service that
existed prior to the Title II Order. Prior to that Order, the term
``interconnected service'' was defined under the Commission's rules as
a service ``that gives subscribers the capability to communicate to or
receive communication from all other users on the public switched
network.'' The Title II Order modified this definition by deleting the
word ``all,'' finding that mobile broadband internet access service
should still be considered an interconnected service even if it only
enabled users to communicate with ``some'' other users of the public
switched network rather than all. We conclude that the better reading
of ``interconnected service'' is one that enables communication between
its users and all other users of the public switched network.
339. The legal basis for the rules we adopt today includes sections
3, 4, 201(b), 230, 231, 257, 303, 332, 403, 501, and 503 of the
Communications Act of 1934, as amended, 47 U.S.C. 153, 154, 201(b),
230, 231, 257, 303, 332, 403, 501, 503. The transparency rule we adopt
today relies on Section 257 of the Communications Act. Section 257
requires the Commission to make triennial reports to Congress, and
those triennial reports must identify ``market entry barriers for
entrepreneurs and other small businesses in the provision and ownership
of telecommunications services and information services.''
B. Summary of Significant Issues Raised by Public Comments to the IRFA
340. The Wireless Internet Service Providers Association (WISPA)
argued that the IRFA was incomplete and inaccurate. We find that this
FRFA sufficiently addresses WISPA's concerns and explains how we
``alleviate many of the significant financial harms on small providers
imposed by the [Title II Order].''
C. Response to Comments by the Chief Counsel for Advocacy of the Small
Business Administration
341. Pursuant to the Small Business Jobs Act of 2010, which amended
the RFA, the Commission is required to respond to any comments filed by
the Chief Counsel of the Small Business Administration (SBA), and to
provide a detailed statement of any change made to the proposed rule(s)
as a result of those comments.
342. The Chief Counsel did not file any comments in response to the
proposed rule(s) in this proceeding.
D. Description and Estimate of the Number of Small Entities To Which
the Final Rule May Apply
343. 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 that: (1) Is independently owned
and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the Small Business
Administration (SBA). Nationwide, there are a total of approximately
28.2 million small businesses, according to the SBA. A ``small
organization'' is generally ``any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.''
1. Total Small Entities
344. Small Entities, Small Organizations, Small Governmental
Jurisdictions. Our actions, over time, may affect small entities that
are not easily categorized at present. We therefore describe here, at
the outset, three comprehensive small entity size standards that could
be directly affected herein. First, while there are industry specific
size standards for small businesses that are used in the regulatory
flexibility analysis, according to data from the SBA's Office of
Advocacy, in general a small business is an independent business having
fewer than 500 employees. These types of small businesses represent
99.9 percent of all businesses in the United States which translates to
28.8 million businesses. Next, the type of small entity described as 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 August 2016, there were approximately
356,494 small organizations based on registration and tax data filed by
nonprofits with the Internal Revenue Service (IRS). Finally, the small
entity described as a ``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.'' U.S. Census Bureau data from the 2012 Census of
Governments indicates that there were 90,056 local governmental
jurisdictions consisting of general purpose governments and special
purpose governments in the United States. Of this number there were
37,132 General purpose governments (county, municipal and town or
township) with populations of less than 50,000 and 12,184 Special
purpose governments (independent school districts and special
districts) with populations of less than 50,000. The 2012 U.S. Census
Bureau data for most types of governments in the local government
category shows that the majority of these governments have populations
of less than 50,000. Based on this data we estimate that at least
49,316 local government jurisdictions fall in the category of ``small
governmental jurisdictions.''
2. Broadband Internet Access Service Providers
345. The rules we adopt apply to broadband internet access service
providers. The 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
$32.5 million or less. These are labeled non-broadband. Census data for
2012 show that there were 3,117 firms that operated
[[Page 7916]]
that year. Of this total, 3,083 operated with fewer than 1,000
employees. For the second category, census data for 2012 show that
there were 1,442 firms that operated for the entire year. Of those
firms, a total of 1,400 had annual receipts less than $25 million.
Consequently, we estimate that the majority of broadband internet
access service provider firms are small entities.
346. The broadband internet access service provider industry has
changed since this definition was introduced in 2007. The data cited
above may therefore include entities that no longer provide broadband
internet access service, and may exclude entities that now provide such
service. To ensure that this FRFA describes the universe of small
entities that our action might affect, we discuss in turn several
different types of entities that might be providing broadband 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
347. Wired Telecommunications Carriers. The U.S. Census Bureau
defines this industry as ``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 communications
networks. Transmission facilities may be based on a single technology
or a combination of technologies. Establishments in this industry use
the wired telecommunications network facilities that they operate to
provide a variety of services, such as wired telephony services,
including VoIP services, wired (cable) audio and video programming
distribution, and wired broadband internet services. By exception,
establishments providing satellite television distribution services
using facilities and infrastructure that they operate are included in
this industry.'' The SBA has developed a small business size standard
for Wired Telecommunications Carriers, which consists of all such
companies having 1,500 or fewer employees. Census data for 2012 show
that there were 3,117 firms that operated that year. Of this total,
3,083 operated with fewer than 1,000 employees. Thus, under this size
standard, the majority of firms in this industry can be considered
small.
348. Local Exchange Carriers (LECs). Neither the Commission nor the
SBA has developed a size standard for small businesses specifically
applicable to local exchange services. The closest applicable NAICS
Code category is for Wired Telecommunications Carriers, as defined in
paragraph 12 of this FRFA. Under that size standard, such a business is
small if it has 1,500 or fewer employees. Census data for 2012 show
that there were 3,117 firms that operated that year. Of this total,
3,083 operated with fewer than 1,000 employees. The Commission
therefore estimates that most providers of local exchange carrier
service are small entities that may be affected by the rules adopted.
349. 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 closest
applicable NAICS Code category is Wired Telecommunications Carriers as
defined in paragraph 17 of this FRFA. Under that size standard, such a
business is small if it has 1,500 or fewer employees. According to
Commission data, 3,117 firms operated in that year. Of this total,
3,083 operated with fewer than 1,000 employees. Consequently, the
Commission estimates that most providers of incumbent local exchange
service are small businesses that may be affected by the rules and
policies adopted. One thousand three hundred and seven (1,307)
Incumbent Local Exchange Carriers reported that they were incumbent
local exchange service providers. Of this total, an estimated 1,006
have 1,500 or fewer employees.
350. 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 NAICS Code category is Wired
Telecommunications Carriers, as defined in paragraph 17 of this FRFA.
Under that size standard, such a business is small if it has 1,500 or
fewer employees. U.S. Census data for 2012 indicate that 3,117 firms
operated during that year. Of that number, 3,083 operated with fewer
than 1,000 employees. Based on this data, the Commission concludes that
the majority of Competitive LECs, CAPs, Shared-Tenant Service
Providers, and Other Local Service Providers are small entities.
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. 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
this total, 70 have 1,500 or fewer 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 the adopted rules.
351. 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.
352. Interexchange Carriers (IXCs). Neither the Commission nor the
SBA has developed a definition for Interexchange Carriers. The closest
NAICS Code category is Wired Telecommunications Carriers as defined in
paragraph 17 of this FRFA. The applicable size standard under SBA rules
is that such a business is small if it has 1,500 or fewer employees.
According to Commission data, 359 companies reported that their primary
telecommunications service activity was the provision of interexchange
services. Of this total, 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 interexchange service providers are
small entities that may be affected by rules adopted.
353. 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
[[Page 7917]]
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
adopted rules.
354. Other Toll Carriers. Neither the Commission nor the SBA has
developed a definition for small businesses specifically applicable to
Other Toll Carriers. This category includes toll carriers that do not
fall within the categories of interexchange carriers, operator service
providers, prepaid calling card providers, satellite service carriers,
or toll resellers. The closest applicable NAICS Code category is for
Wired Telecommunications Carriers as defined above. Under the
applicable SBA size standard, such a business is small if it has 1,500
or fewer employees. Census data for 2012 shows that there were 3,117
firms that operated that year. Of this total, 3,083 operated with fewer
than 1,000 employees. Thus, under this category and the associated
small business size standard, the majority of Other Toll Carriers can
be considered small. According to internally developed Commission data,
284 companies reported that their primary telecommunications service
activity was the provision of other toll carriage. Of these, an
estimated 279 have 1,500 or fewer employees. Consequently, the
Commission estimates that most Other Toll Carriers are small entities
that may be affected by rules adopted pursuant to the Order.
4. Wireless Providers--Fixed and Mobile
355. The broadband internet access service provider category
covered by these rules 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 service, 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.
356. Wireless Telecommunications Carriers (except Satellite). This
industry comprises establishments engaged in operating and maintaining
switching and transmission facilities to provide communications via the
airwaves, such as cellular services, paging services, wireless internet
access, and wireless video services. The appropriate size standard
under SBA rules is that such a business is small if it has 1,500 or
fewer employees. For this industry, Census data for 2012 show that
there were 967 firms that operated for the entire year. Of this total,
955 firms had fewer than 1,000 employees. Thus under this category and
the associated size standard, the Commission estimates that the
majority of wireless telecommunications carriers (except satellite) are
small entities. Similarly, according to internally developed Commission
data, 413 carriers reported that they were engaged in the provision of
wireless telephony, including cellular service, Personal Communications
Service (PCS), and Specialized Mobile Radio (SMR) services. Of this
total, an estimated 261 have 1,500 or fewer employees. Consequently,
the Commission estimates that approximately half of these firms can be
considered small. Thus, using available data, we estimate that the
majority of wireless firms can be considered small.
357. The Commission's own data--available in its Universal
Licensing System--indicate that, as of October 25, 2016, there are 280
Cellular licensees that will be affected by our actions today. The
Commission does not know how many of these licensees are small, as the
Commission does not collect that information for these types of
entities. Similarly, according to internally developed Commission data,
413 carriers reported that they were engaged in the provision of
wireless telephony, including cellular service, Personal Communications
Service, and Specialized Mobile Radio Telephony services. Of this
total, an estimated 261 have 1,500 or fewer employees, and 152 have
more than 1,500 employees. Thus, using available data, we estimate that
the majority of wireless firms can be considered small.
358. 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.
359. 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.
360. 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.
361. 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.
362. 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
[[Page 7918]]
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 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.
363. 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.
364. 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.
365. 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.
366. 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.
367. In 2007, the Commission reexamined its rules governing the 700
MHz band in the 700 MHz Second Report and Order. 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.
368. 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.
369. 700 MHz Guard Band Licensees. In 2000, in the 700 MHz Guard
Band Order, 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
[[Page 7919]]
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 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.
370. 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.
371. 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.
372. 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.
373. 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. The Commission does not have data
specifying the number of these licensees that have more than 1,500
employees, and thus is unable at this time to estimate with greater
precision the number of fixed microwave service licensees that would
qualify as small business concerns under the SBA's small business size
standard. Consequently, the Commission estimates that there are up to
36,708 common carrier fixed licensees and up to 59,291 private
operational-fixed licensees and broadcast auxiliary radio licensees in
the microwave services that may be small and may be affected by the
rules and policies adopted herein. We note, however, that the common
carrier microwave fixed licensee category includes some large entities.
374. 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.
375. 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
[[Page 7920]]
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 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.
5. Satellite Service Providers
376. Satellite Telecommunications Providers. Two economic census
categories address the satellite industry. Both categories have a small
business size standard of $32.5 million or less in average annual
receipts, under SBA rules.
377. Satellite Telecommunications. This category comprises firms
``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.'' The category
has a small business size standard of $32.5 million or less in average
annual receipts, under SBA rules. For this category, Census Bureau data
for 2012 show that there were a total of 333 firms that operated for
the entire year. Of this total, 299 firms had annual receipts of less
than $25 million. Consequently, we estimate that the majority of
satellite telecommunications providers are small entities.
378. All Other Telecommunications. ``All Other Telecommunications''
is defined as follows: ``This U.S. industry is comprised of
establishments that are 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.
Establishments providing internet services or voice over internet
protocol (VoIP) services via client supplied telecommunications
connections are also included in this industry.'' The SBA has developed
a small business size standard for ``All Other Telecommunications,''
which consists of all such firms with gross annual receipts of $32.5
million or less. For this category, Census Bureau data for 2012 show
that there were 1,442 firms that operated for the entire year. Of those
firms, a total of 1,400 had annual receipts less than $25 million.
Consequently, we conclude that the majority of All Other
Telecommunications firms can be considered small.
6. Cable Service Providers
379. 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.
380. Cable and Other Subscription Programming. This industry
comprises establishments primarily engaged in operating studios and
facilities for the broadcasting of programs on a subscription or fee
basis. The broadcast programming is typically narrowcast in nature
(e.g., limited format, such as news, sports, education, or youth-
oriented). These establishments produce programming in their own
facilities or acquire programming from external sources. The
programming material is usually delivered to a third party, such as
cable systems or direct-to-home satellite systems, for transmission to
viewers. The SBA size standard for this industry establishes as small,
any company in this category which has annual receipts of $38.5 million
or less. According to 2012 U.S. Census Bureau data, 367 firms operated
for the entire year. Of that number, 319 operated with annual receipts
of less than $25 million a year and 48 firms operated with annual
receipts of $25 million or more. Based on this data, the Commission
estimates that the majority of firms operating in this industry are
small.
381. Cable Companies and Systems (Rate Regulation). The Commission
has 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 indicate that there are currently 4,600 active cable
systems in the United States. Of this total, all but nine cable
operators nationwide are small under the 400,000-subscriber size
standard. In addition, under the Commission's rate regulation rules, a
``small system'' is a cable system serving 15,000 or fewer subscribers.
Current Commission records show 4,600 cable systems nationwide. Of this
total, 3,900 cable systems have fewer than 15,000 subscribers, and 700
systems have 15,000 or more subscribers, based on the same records.
Thus, under this standard as well, we estimate that most cable systems
are small entities.
382. Cable System Operators (Telecom Act Standard). 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
one 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 are approximately 52,403,705 cable
video subscribers in the United States today. Accordingly, an operator
serving fewer than 524,037 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 nine 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 annual
revenues exceed $250 million. Although it seems certain that some of
these cable system operators are affiliated with entities whose gross
annual revenues exceed $250,000,000, we are unable at this time to
estimate with greater precision the number of cable system operators
that would qualify as small cable operators under the definition in the
Communications Act.
7. All Other Telecommunications
383. ``All Other Telecommunications'' is defined as follows: ``This
U.S. industry is comprised of establishments that are 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. Establishments providing internet services or voice over
internet
[[Page 7921]]
protocol (VoIP) services via client supplied telecommunications
connections are also included in this industry.'' The SBA has developed
a small business size standard for ``All Other Telecommunications,''
which consists of all such firms with gross annual receipts of $32.5
million or less. For this category, Census Bureau data for 2012 show
that there were 1,442 firms that operated for the entire year. Of those
firms, a total of 1,400 had annual receipts less than $25 million.
Consequently, we conclude that the majority of All Other
Telecommunications firms can be considered small.
E. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements for Small Entities
384. Today's action requires broadband internet access service
providers to ``publicly disclose accurate information regarding the
network management practices, performance, and commercial terms of its
broadband internet access services sufficient to enable consumers to
make informed choices regarding the purchase and use of such services
and entrepreneurs and other small businesses to develop, market, and
maintain internet offerings.''
385. Broadband internet access service providers must disclose
performance characteristics, network practices, and commercial terms.
The required disclosures must either be posted on a publicly available,
easily accessible website, or they must be submitted to the Commission,
which will post the disclosures on a publicly available, easily
accessible website.
386. Because the disclosure requirements we adopt today eliminate
the additional reporting obligations found in the Title II Order, we
decline to provide an exemption for smaller providers at this time.
While a commenter emphasized that small broadband internet access
service providers had an even more pressing need to be classified as
information service providers, today's action applies equally to all
providers of broadband internet access service, and therefore does even
more than the initial comment requested.
F. Steps Taken To Minimize the Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
387. Today's action restores broadband internet access service's
original classification as an information service. This will
significantly decrease the burdens on small entities. Additionally, the
removal of the additional reporting obligations, the direct
notification requirement, and the broadband provider safe harbor form
will minimize the burdens providers face.
388. The transparency rule we adopt today strikes an appropriate
balance by requiring ISPs to disclose information that will allow
consumers to make informed choices and that will enable the Commission
to enable it to meet its statutory obligation to observe the
communications marketplace to monitor the introduction of new services
and technologies and to identify and eliminate potential marketplace
barriers for the provision of information service, while simultaneously
freeing providers from onerous burdens that produce little public
benefit. While retaining the transparency rule, with modifications,
from the Open Internet Order, we eliminate the additional reporting
obligations, the direct notification requirements, and the broadband
label ``safe harbor,'' all of which will reduce the burdens on ISPs.
The additional reporting obligations, the direct notification
requirement, and the ``safe harbor'' all required ISPs to expend
significant resources without a corresponding gain to consumers,
entrepreneurs, or other small businesses.
389. We also eliminate several rules adopted in the Title II Order,
including the general conduct standard, the ban on paid prioritization,
and the no-blocking and no-throttling rules. We eliminate these rules
for three reasons. First, the transparency rule we adopt, in
combination with the state of broadband internet access service
competition and the antitrust and consumer protection laws, obviate the
need for conduct rules by achieving comparable benefits at lower cost.
Second, the record does not identify any legal authority to adopt
conduct rules for all ISPs, and we decline to distort the market with a
patchwork of non-uniform, limited-purpose rules. Third, scrutinizing
closely each prior conduct rule, we find that the costs of each rule
outweigh its benefits.
390. We also eliminate the position of Open Internet Ombudsperson,
the formal complaint process, and the issuance of advisory opinions,
because the work of the Open Internet Ombudsperson is more
appropriately handled by Commission staff, and because the issuance of
advisory opinions and the formal complaint process have not been shown
to provide any benefit to broadband internet access service providers
or consumers.
391. Finally, we return mobile broadband internet access service to
its original classification as a private mobile radio service and
restore the definition of interconnected service that existed prior to
the Title II Order. This will remove regulatory burdens from providers
of mobile broadband internet access service, including small providers.
G. Report to Congress
392. The Commission will send a copy of this Declaratory Ruling,
Report and Order, and Order, including this FRFA, in a report to be
sent to Congress pursuant to the SBREFA. In addition, the Commission
will send a copy of this Declaratory Ruling, Report and Order, and
Order, including the FRFA, to the Chief Counsel for Advocacy of the
SBA. A copy of the Declaratory Ruling, Report and Order, and Order, and
the FRFA (or summaries thereof) will also be published in the Federal
Register.
VII. Ordering Clauses
393. Accordingly, it is ordered that, pursuant to Sections 3, 4,
201(b), 230, 231, 257, 303, 332, 403, 501, and 503 of the
Communications Act of 1934, as amended, 47 U.S.C. 153, 154, 201(b),
230, 231, 257, 303, 332, 403, 501, 503, this Declaratory Ruling, Report
and Order, and Order is adopted.
394. It is further ordered that parts 1, 8, and 20 of the
Commission's rules are amended as set forth in the Final Rules of the
Order.
395. It is further ordered that this Declaratory Ruling, Report and
Order, and Order, including those amendments which contain new or
modified information collection requirements that require approval by
the Office of Management and Budget (OMB) under the Paperwork Reduction
Act will become effective upon the effective date announced when the
Commission publishes a document in the Federal Register announcing such
OMB approval and the effective date. It is our intention in adopting
the foregoing Declaratory Ruling and these rule changes that, if any
provision of the Declaratory Ruling or the rules, or the application
thereof to any person or circumstance, is held to be unlawful, the
remaining portions of such Declaratory Ruling and the rules not deemed
unlawful, and the application of such Declaratory Ruling and the rules
to other person or circumstances, shall remain in effect to the fullest
extent permitted by law.
396. It is further ordered that the incompas Petition to Modify
Protective Orders is denied.
[[Page 7922]]
397. It is further ordered that the National Hispanic Media
Coalition (NHMC) Motion Regarding Informal Consumer Complaints is
denied.
398. It is further ordered that the Commission's Consumer &
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Declaratory Ruling, Report and Order, and Order to
Congress and the Government Accountability Office pursuant to the
Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
399. It is further ordered that, pursuant to 47 CFR 1.4(b)(1), the
period for filing petitions for reconsideration or petitions for
judicial review of this Declaratory Ruling, Report and Order, and Order
will commence on the date that a summary of this Declaratory Ruling,
Report and Order, and Order is published in the Federal Register.
List of Subjects in 47 CFR Parts 1, 8, and 20
Administrative practice and procedure, Cable television, Common
carriers, Communications common carriers, Reporting and recordkeeping
requirements, Satellites, Telecommunications, Telephone, Radio.
Federal Communications Commission.
Marlene H. Dortch,
Secretary, Office of the Secretary.
Final Rules
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR parts 1, 8, and 20 as follows:
PART 1--PRACTICE AND PROCEDURE
0
1. The authority citation for part 1 continues to read as follows:
Authority: 47 U.S.C. 34-39, 151, 154(i), 154(j), 155, 157, 160,
201, 225, 227, 303, 309, 332, 1403, 1404, 1451, 1452, and 1455.
0
2. Amend Sec. 1.49 by revising paragraph (f)(1)(i) to read as follows:
Sec. 1.49 Specifications as to pleadings and documents.
* * * * *
(f) * * *
(1) * * *
(i) Formal complaint proceedings under section 208 of the Act and
in Sec. Sec. 1.720 through 1.736, and pole attachment complaint
proceedings under section 224 of the Act and in Sec. Sec. 1.1401
through 1.1424;
* * * * *
PART 8--INTERNET FREEDOM
0
3. The authority citation for part 8 is revised to read as follows:
Authority: 47 U.S.C. 154, 201(b), 257, and 303(r).
0
4. Amend part 8 by revising the part heading to read as set forth
above.
0
5. Revise Sec. 8.1 to read as follows:
Sec. 8.1 Transparency.
(a) Any person providing broadband internet access service shall
publicly disclose accurate information regarding the network management
practices, performance characteristics, and commercial terms of its
broadband internet access services sufficient to enable consumers to
make informed choices regarding the purchase and use of such services
and entrepreneurs and other small businesses to develop, market, and
maintain internet offerings. Such disclosure shall be made via a
publicly available, easily accessible website or through transmittal to
the Commission.
(b) Broadband internet access service is 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) 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. Sec. 8.2, 8.3, 8.5, 8.7, 8.9, 8.11, 8.12, 8.13, 8.14, 8.15, 8.16,
8.17, 8.18, and 8.19 [Removed]
0
6. Remove Sec. Sec. 8.2, 8.3, 8.5, 8.7, 8.9, 8.11, 8.12, 8.13, 8.14,
8.15, 8.16, 8.17, 8.18, and 8.19.
PART 20--COMMERCIAL MOBILE SERVICES
0
7. The authority citation for part 20 continues to read as follows:
Authority: 47 U.S.C. 151, 152(a) 154(i), 157, 160, 201, 214,
222, 251(e), 301, 302, 303, 303(b), 303(r), 307, 307(a), 309,
309(j)(3), 316, 316(a), 332, 610, 615, 615a, 615b, 615c, unless
otherwise noted.
0
8. Amend Sec. 20.3 by:
0
a. In the definition of ``Commercial mobile radio service,'' revising
paragraph (b);
0
b. In the definition of ``Interconnected Service,'' revising paragraph
(a); and
0
c. Revising the definition of ``Public Switched Network.''
The revisions read as follows:
Sec. 20.3 Definitions.
* * * * *
Commercial mobile radio service. * * *
* * * * *
(b) The functional equivalent of such a mobile service described in
paragraph (a) of this definition.
* * * * *
Interconnected Service. * * *
(a) That is interconnected with the public switched network, or
interconnected with the public switched network through an
interconnected service provider, that gives subscribers the capability
to communicate to or receive communication from all other users on the
public switched network; or
* * * * *
Public Switched Network. Any common carrier switched network,
whether by wire or radio, including local exchange carriers,
interexchange carriers, and mobile service providers, that uses the
North American Numbering Plan in connection with the provision of
switched services.
* * * * *
[FR Doc. 2018-03464 Filed 2-21-18; 8:45 am]
BILLING CODE 6712-01-P