FCC defends its “trojan horse” approach to net neutrality

Almost two years ago, the Federal Communications Commission (FCC) adopted a lite version of network neutrality in its "Open Internet" order. That order is now under legal attack from Verizon, which argues that it exceeds the agency's authority. Congress has never explicitly given the FCC the authority to enforce network neutrality, but the FCC contends that the power to mandate Internet openness is implicit in other powers Congress has granted to the agency.

This "ancillary jurisdiction" argument has been greeted with skepticism not only by Verizon, but also by the network neutrality supporters at the Electronic Frontier Foundation (EFF). EFF has warned that the FCC's argument is a "trojan horse" that could be used down the road to justify unilateral FCC regulation of topics such as online indecency or even piracy.

A long fight

The FCC's authority to enforce network neutrality regulations has been a topic of debate for the better part of a decade. In 2006, Congress considered, but did not enact, regulations explicitly authorizing the FCC to protect network neutrality.

When Comcast was caught interfering with BitTorrent traffic, the FCC tried to use its own 2005 "Internet policy statement" as a basis for punishing the company. But even though Comcast modified its behavior, courts later ruled that the principles announced in that statement weren't legally binding because the FCC hadn't conducted a formal rule-making process. In other words, they were merely "advice."

So in 2010, the FCC finally adopted a formal Open Internet Order that created an actual "rule" regarding network neutrality, though it granted broad discriminatory leeway to wireless networks. This too was challenged. Last year, Verizon asked the courts to rule that the FCC had exceeded its rulemaking authority.

The concept of network neutrality hadn't been invented yet when Congress last overheauled telecommunications law in 1996. But the FCC points to several different provisions of telecommunications law that it says justify its regulations. The centerpiece of its argument is Section 706 of the Telecommunications Act, which instructs the FCC to "encourage the deployment" of "advanced telecommunications capability."

Verizon has argued that this provision isn't relevant, since the Open Internet Order focuses on the management of existing broadband services, not the deployment of new ones. And Verizon has contended that, if anything, network neutrality regulations will discourage the deployment of new broadband networks by tying their owners up in red tape.

But in its Monday filing, the FCC argued that network neutrality rules actually promote the deployment of broadband access:

Historically, the Commission found, demand for Internet-based services has "led to major network improvements." The record showed that "the increasing availability of multimedia applications" (such as YouTube, Netflix, and Hulu) "helped create demand for residential broadband services," and that broadband providers "responded by adopting new network infrastructure, modem technologies, and network protocols." A paper by economist Nicholas Economides, submitted by Google, similarly concluded that preserving an open Internet "will be highly beneficial" in preserving consumer demand-driven investment in broadband infrastructure.

In other words: protecting the open Internet will increase innovation. More innovation will make broadband connections more valuable. That will increase demand for broadband service and spur the deployment of more broadband connections. So network neutrality regulations are, indirectly, a scheme for increasing broadband deployment—just as the law requires.

A "triple cushion shot"

Verizon has ridiculed this line of argument as a "triple cushion shot" which the FCC can use to get just about anywhere it wants on the regulatory billiard table. And the company hasn't been alone in raising concerns. In a blog post last year, the EFF also warned that accepting the FCC's argument "would give the FCC pretty much boundless authority to regulate the Internet for whatever it sees fit."

For example, suppose the FCC decided it wanted to regulate online indecency. If it could come up with a plausible explanation for how such regulation would increase demand for broadband connections—maybe more parents would sign up for access to a smut-free Internet!—then the FCC could regulate online indecency without explicit Congressional approval. The EFF draws a parallel to the FCC's (thankfully thwarted) efforts of a few years back to force television manufacturers to respect a "broadcast flag." In that case, the courts ultimately ruled that the design of televisions was beyond the FCC's authority.

"While promoting network openness may somehow result in the building of new infrastructure—laying more fiber, etc.—the suggestion that regulating the Internet is 'ancillary' to the effective performance of the FCC's 706 responsibilities is a stretch, and seems far beyond what Congress intended with this section," the EFF wrote last year.

The FCC's latest brief makes similar "ancillary jurisdiction" arguments about several other areas of FCC authority. For example, Congress has told the FCC to promote competition in the telephone market. The FCC argues that network neutrality rules could be interpreted as a way to shield VoIP services from anticompetitive behavior by incumbents. Similarly, Congress has given the FCC the authority to protect competition in video markets; the commission suggests that this authority could extend to enacting the Open Internet rules, allowing "over the top" Internet video services like Netflix to compete without interference from Internet providers who offer their own TV packages.

But these arguments seem legally shaky. There's little doubt that the FCC has the authority to protect network neutrality in certain situations. For example, few objected in 2005 when a small telephone incumbent, Madison River Communications, was penalized by the FCC for preventing its DSL customers from using VoIP applications; the incident had an obvious connection to the FCC's authority over the telephone market.

But the FCC's new Open Internet rules aren't limited to telephone incumbents or to VoIP applications. So while authority over telephone services might justify some types of network neutrality regulations, it seems unlikely to justify the broad regulations the FCC has actually adopted.

The best and clearest way to adopt network neutrality regulations would be to have Congress actually change the law. But network neutrality supporters tried and failed to get a law enacted back in 2006. Since then, Congress has become even more polarized and gridlocked, making current prospects for passing new telecommunications regulations even dicier.

If the FCC's Open Internet order comes crashing down, so does all real hope of general neutrality regulations on Internet access. But if it survives the court challenge, the orders's legal underpinnings could pave the way for future actions that its backers loathe as much as a discriminatory Internet.