On Dec. 1 Julius Genachowski, chairman of the U.S. Federal Communications Commission, announced that the FCC would pursue enactment of rules to ensure “Net Neutrality — unblocked, non-discriminatory access to the Internet. The rules, released Dec. 23, will be reviewed in March — and debated for a long time.

Whether law or regulation should guarantee Net Neutrality is critical for the development of satellite broadband service. Net Neutrality opponents, the owners of the Internet backbone — the fiber optic and coaxial cables, routers and switches over which Internet traffic travels, such as Verizon, AT&T and the major cable operators — argue that they should be free to charge differential rates for high bandwidth users of their networks and, in some cases, block some users in favor of others who pay to be hosted. Net Neutrality proponents, the high traffic, content and application providers, such as Google/YouTube, Amazon, Ebay, and Facebook, which do not pay the backbone owners to host their traffic, argue that the Internet must remain an open network that guarantees non-discriminatory access to all users. The Obama administration and the FCC officially are pro-Net Neutrality.

In the Dec. 1 announcement, Genachowski stated that the FCC would proceed without attempting to reclassify broadband from its existing classification as Communications Act of 1934 Title I Information Service to Title II Telecommunications Service. The FCC, in making its announcement, tacitly abandoned the “third-way” approach it proposed in May, which attempted to reverse its own winning position before the U.S. Supreme Court in the 2005 Brand X decision, in which the FCC successfully argued that broadband service was Information Service and not subject to telephone-like common carrier regulation set out in Title II. At the time, the FCC saw the substantially unregulated Information Service classification as the best way to preserve the Internet’s open-access, low-entry barrier structure.

Subsequent events convinced the FCC that it had made a mistake. In April, the Comcast v. FCC decision by the D.C. Circuit U.S. Court of Appeals threw out the FCC’s claim of “ancillary authority” under Title I to impose common carrier-like regulation on broadband service providers, in a case in which the FCC had taken action against cable operator Comcast for blocking the use by subscribers on its cable modem lines of certain peer-to-peer networking software.

The FCC a month later announced the third-way plan, by which the data transport part of broadband service would be reclassified as Telecommunications Service but with the FCC exercising its authority to forebear from all but the most basic access-assuring regulation. The data processing aspect of broadband service would be unbundled from the data transport part and would continue to be treated as Information Service. The plan was based on the dissenting opinion in Brand X, which contemplated that kind of unbundling.

During the following comment period, this column argued that the FCC’s effort was doomed to fail, but not before subjecting Net Neutrality proponents, opponents and consumers to years of litigation, much like that which followed the FCC’s ill-fated 1996 Local Competition Order, another attempt at unbundling packaged services which ultimately failed to achieve a competitive local telecommunications market (see “Broadband Pendulum Swings: FCC Hoist with its own Petard,” Via Satellite, June 2010).

In particular, we argued that the FCC, having pushed successfully for a broadband Information Service classification only five years ago, and having, at the time, refuted opponents’ attempts to impose a Telecommunications Service classification, taken together with the 40-year history of the Computer Inquiries FCC regulatory proceedings, which led to the Brand X decision, would doom the third-way reclassification attempt. The new opponents would put before the court the FCC’s own arguments and record of five years ago. We argued that the FCC instead should follow the majority decision in Brand X, that the FCC’s classification of broadband as Information Service was reasonable and that it should be accorded deference in asserting its statutory ancillary authority. The Brand X majority recognized not only ancillary authority as a legitimate way to regulate broadband service but the right of an administrative agency to change its position on regulatory paradigms based on changing conditions and still be afforded judicial deference.

It is this position that the FCC has now adopted as the way to proceed in its Net Neutrality rulemaking.

Owen D. Kurtin is a founder and principal of private investment firm The Vinland Group LLC and a practising attorney in New York City.
He may be reached by e-mail at [email protected].