Back for its 10th year, our most popular webinar offers an in-depth discussion on the federal Universal Service Fund for participants in USF programs and for contributors to the Fund. This webinar will address major developments in the four support funds and discuss the pressures on the USF contribution system in an era of 20% contribution rates. In addition, as usual, we will offer tips and insights into managing audits and investigations in these highly scrutinized programs.
The Republican-led FCC’s effort to get out of the business of regulating broadband providers’ consumer practices took a step forward on Monday. In an appeal that has been proceeding in parallel with the FCC’s “Restoring Internet Freedom” reclassification proceeding, the U.S. Court of Appeals for the Ninth Circuit issued an opinion giving the Federal Trade Commission (FTC) broad authority over practices not classified by the FCC as telecommunications services. Specifically, the Ninth Circuit, sitting en banc, issued its long-awaited opinion in Federal Trade Commission v. AT&T Mobility, holding that the “common carrier exemption” in Section 5 of the FTC Act is “activity based,” exempting only common carrier activities of common carriers (i.e., the offering of telecommunications services), and not all activities of companies that provide common carrier services (i.e., rejecting a “status-based” exemption). The case will now be remanded to the district court that originally heard the case. Coupled with the FCC’s reclassification of Broadband Internet Access Services (BIAS) in the net neutrality/restoring internet freedom proceeding, the opinion repositions the FTC as top cop on the Open Internet and broadband privacy beats.
On Thursday, February 22, 2018, the Federal Communications Commission (FCC or Commission) published the Restoring Internet Freedom Order (the Order) in the Federal Register.
As we previously discussed, the Order effectively reverses the Commission’s 2015 Open Internet Order, reclassifying broadband Internet access service as a lightly regulated Title I “information service” and eliminating the 2015 Order’s open Internet rules (while retaining a modified version of the transparency requirement).
The Order will not go into effect until after the Office of Management and Budget completes its Paperwork Reduction Act review, which could take several months. However, last Thursday’s publication is significant because it triggers deadlines for challenges to the Order, both in the courts and in Congress.
As the second session begins, the 115th Congress will pick up where it left off on some key telecommunications and technology issues. In this episode of Kelley Drye’s Full Spectrum podcast, Partner John Heitmann and Jennifer McCadney, Special Counsel in Kelley Drye’s Government Relations and Public Policy group, examine the current status of these issues and the implications for what is likely to occur in the coming months. The three categories of legislation they cover are (1) Mobile, 5G and Spectrum, (2) Rural Broadband Access, and (3) Internet, Privacy, Cybersecurity and Data Security. To listen to this episode, please click here.
On December 14, 2017, the FCC voted 3-2 to roll back the 2015 Open Internet Order, with all Republican commissioners voting in favor of the item and both Democratic commissioners strongly dissenting. As we discussed in an earlier blog post in anticipation of the vote, the Restoring Internet Freedom Order (1) reclassifies broadband Internet access service (BIAS) as an information service (and mobile BIAS as a “private mobile service”), (2) vacates the bright-line rules in the 2015 Open Internet Order, as well as the “general conduct standard,” (3) retains, but refactors, the open Internet transparency rule, and (4) returns consumer protection authority over broadband to the Federal Trade Commission (FTC).
So what happens now? The FCC has not yet published the text of the Restoring Internet Freedom Order, but we don’t expect any significant changes between the draft item and the final item. Once the item is released, the Office of Management and Budget (OMB) must review the item and publish it in the Federal Register, which will trigger implementation dates (60 days from publication, except for items requiring further OMB approval) and start the clock for parties to challenge the order through an appeal or petition for reconsideration. Based on news reports and the trade press, we expect the following things to happen:
- Several parties will appeal the Order. As has happened after each of the open Internet orders, we expect parties will file federal appeals, and we expect the cases will be consolidated in a single appeal in the U.S. Court of Appeals for the D.C. Circuit. Several parties, including Public Knowledge, Free Press, Incompas, the National Hispanic Media Coalition, and New York Attorney General Eric Schneiderman on behalf of a multi-state lawsuit, are expected to file suit in the near term. The deadline for appeal—for all practical purposes—is ten days after publication in the Federal Register. As we discussed in our earlier blog post on this issue, appellate courts give substantial deference to agency decisions, so long as the ultimate decision addresses the relevant facts and arguments and the outcome is within the zone of reasonable interpretations of the statute. It is possible, therefore, that the court of appeals will uphold the 2017 rollback of the Title II classification without finding that the 2015 ruling was unreasonable.
- Democrats in Congress are working to nullify the Order. Democrats in Congress have already begun the process of trying to nullify the Order through a Congressional Review Act (CRA) resolution. While CRA resolutions are a powerful tool in the hands of the majority—as we saw with the rollback of the Broadband Privacy Order earlier this year—as the minority party, the Democrats are at a significant disadvantage. We don’t expect the CRA resolution to pass, or for the President to sign it if it did.
- Republicans in Congress will attempt to pass net neutrality legislation. We expect Republicans and BIAS providers to push for a bill that enshrines the basic bright-line net neutrality protections (i.e., blocking and throttling) in law, formally classifies BIAS as an information service, and otherwise prohibits the FCC from expanding its net neutrality authority and preempts the states from passing their own net neutrality protections. House Communications Subcommittee Chairman Marsha Blackburn of Tennessee introduced just such a bill on Wednesday (The Open Internet Preservation Act), raising significant concerns from Democrats and representatives of edge providers, such as the Internet Association, that the bill failed to address important protections, including a ban on paid prioritization.
- States will attempt to introduce their own net neutrality protections. In the wake of the Restoring Internet Freedom Order, several states announced initiatives to impose their own net neutrality protections on ISPs operating within their jurisdiction. For example, legislators in Washington state and California have introduced bills to reinstate net neutrality protections, although federal law may preempt such laws. Gov. Inslee of Washington State also suggested using the states’ power as a large purchaser of BIAS and telecommunications services to make net neutrality a condition of state contracting.
- The Federal Trade Commission and Department of Justice will fill the enforcement gap using general consumer protection and antitrust laws. As mentioned above, the Restoring Internet Freedom Order cedes most net neutrality enforcement authority to the FTC. In response to last week’s vote, FTC Acting Chairman Maureen Ohlhausen stated that the agency looks forward to serving as “the cop on the broadband beat.” However, as we’ve discussed in detail in earlier posts, the scope of the FTC’s jurisdiction is still undergoing review in the Ninth Circuit, where the entire court is reviewing (en banc) an earlier decision by the court that the “common carrier exemption” of Section 5 of the FTC Act exempts all activities of common carriers—e.g., telecommunications providers—from FTC jurisdiction (known as a “status-based exemption”). If the Ninth Circuit upholds the earlier panel decision, it would leave many ISPs outside the jurisdictional reach of the FTC and FCC, and would create a “circuit split” between the Ninth Circuit and the Second Circuit (which interprets the common carrier exemption as limited to the common carrier activities of common carriers). Then it would be up to the Supreme Court to resolve the split, unless Congress clarifies or eliminates the exemption. Nevertheless, last week the FTC and FCC forged ahead with a Memorandum of Understanding to coordinate and cooperate on net neutrality enforcement activities and consumer education efforts. Further, in the wake of the vote, the Antitrust Division of the Department of Justice noted that it “stands ready to vigilantly protect American consumers and free markets” from activities of ISPs that violate the antitrust laws. The House Antitrust Subcommittee recently held a hearing to explore the role of antitrust law in protecting consumers from net neutrality harms, which we covered in a separate post.
Net neutrality remains a red hot issue in the public sphere, and we don’t expect it to die down soon, particularly as claims about fake comments and flawed process persist. As we begin to enter the 2018 midterm elections, there is a possibility that net neutrality will continue to play a prominent role in public debates. For that reason, while it’s unclear how this issue will shake out, it’s clear that we will have another active year in the net neutrality saga. We will follow up with a thorough analysis of the Order when it is released.
The NY Chapter of the Federal Communications Bar Association (FCBA) held a “Meet and Greet” with FCC Commissioner Michael O’Rielly yesterday in Kelley Drye’s New York office. Jameson Dempsey, a Kelley Drye associate and co-chair of the NY FCBA Chapter, provided introductory remarks. John Heitmann, Chair of the Communications Practice group in Kelley Drye’s Washington D.C. office, led an armchair discussion with the Commissioner.
Discussion topics ranged from media ownership and net neutrality to spectrum policy and broadband deployment. The Commissioner also answered timely questions from the audience.
The video of the full discussion can be found here.
Last week, the Federal Communications Commission (FCC), in a 3-2 vote, approved an order allowing “television broadcasters to use the ‘Next Generation’ broadcast television (Next Gen TV) transmission standard, also called ‘ATSC 3.0.’” Described in the Order “as the world’s first Internet Protocol (IP)-based broadcast transmission platform,” the Next Gen TV standard is expected to allow broadcasters to provide more targeted advertisements to individual viewers. Some had expressed concerns over the collection of the demographic and consumer data necessary for Next Gen TV targeted advertising, and applicable privacy safeguards for the new standard. At this stage though, the FCC majority took a wait and see approach to privacy concerns.
On November 21, 2017, FCC Chairman Ajit Pai issued a statement announcing that he had circulated his draft Restoring Internet Freedom Order to his fellow commissioners. The draft Order will largely undo the 2015 Open Internet Order and limit FCC jurisdiction over broadband Internet access services, although it appears that the order will retain a transparency requirement for broadband providers. Fellow Republican FCC Commissioners Brendan Carr and Michael O’Rielly cheered the anticipated release, while Democratic Commissioners Mignon Clyburn and Jessica Rosenworcel opposed it. Commissioners of the FTC—which could be the largest jurisdictional beneficiary of the Order, subject to a pending en banc proceeding in the Ninth Circuit—were similarly split down party lines in their reaction to the news. Acting FTC Chairman Maureen Ohlhausen issued a statement expressing gratification that the FCC appeared to take the FTC Staff’s and Acting FTC Chairman’s public comments into consideration in formulating the draft Order. The FCC will release the draft item on November 22nd, and is set to vote on the item on December 14th. We will update you on the scope and implications of the draft Order when Chairman Pai releases it.
Partner John Heitmann will host an armchair discussion with FCC Commissioner Michael O’Rielly on Wednesday, November 29 from 12:30 – 2:00 p.m. at the offices of Kelley Drye, 101 Park Avenue, 27th Floor, New York, NY 10178. The discussion will be followed by a “Meet and Greet” brown-bag luncheon, providing an opportunity for attendees to meet the Commissioner in person.
This event is open to FCBA members and non-members but seats are limited and reservations are required.
To register, go to www.fcba.org.
On November 1, 2017 the House Antitrust Law Subcommittee held a hearing to discuss the role of federal agencies in preserving an open Internet.
The core question discussed at the hearing was whether current antitrust law is sufficient to ensure net neutrality absent FCC rules. The panelists—including FTC Acting Chairman Maureen Ohlhausen and Commissioner Terrell McSweeney; former FCC Commissioner Robert McDowell; and Michael Romano, NTCA Senior Vice President of Industry Affairs and Business Development—and committee members were generally divided down party lines, with Republicans arguing that FCC rules were both unnecessary and counterproductive and Democrats arguing that rules were necessary to ensure an open Internet, free expression, and innovation. Continue Reading House Antitrust Subcommittee Explores the Role of Antitrust Law in Net Neutrality