Print 48 comment(s) - last by Lerianis.. on Jan 20 at 9:57 AM

Verizon triumphs over the FCC, the question is whether policy change or a Supreme Court appeal is in store

Amidst the fallout of the U.S. National Security Agency (NSA) domestic spying scandal, President Barack Obama (D) isn't exactly earning high praise from internet activists these days.
I. FCC's Net Neutrality: Protection or Market Manipulation?
But one policy he and former U.S. Federal Communications Commission Chief (FCC) chief Julius Genachowski pushed through does remain popular to this day among internet activists -- net neutrality.  In its current form, the rules -- set forth in Dec. 2010 -- ban large cable internet providers like Comcast Corp. (COMCSA) from forcing individual websites to pay "tolls" to have their data reach customers and/or make users pay a separate toll to receive the data.
Net neutrality, however, is not without its critics.  Spammers, for one, hate it as they say their email is being "discriminated" against and should not be exempt from the protections.  And some members of the U.S. House of Representatives claim net neutrality regulation is anti-capitalist.  These politicians complain that net neutrality regulation is preventing telecoms from aggressively pursuing monetization schemes, such as a charging users per website visit.

Pay per page visit
The FCC proposal is unpopular among some politicians and ISPs, who complain it would prevent a "free market" in which carriers could charge users per-website usage fees. 
[Source: Fierce Wireless Semina via Wired]

One had to wonder how long the FCC's bid to block Verizon and others from such schemes would last given the strong opposition.  After all, Comcast already sued the FCC and won in U.S. Court of Appeals for the D.C. Circuit.
Verizon Inc. (VZ) piled on, suing the FCC in DC federal court in Oct. 2011 (Verizon v. FCC).  The irony here was that the FCC's proposed guidelines -- while very dissatisfactory to pure cable service providers like Comcast -- were actually relatively close to the suggestions brought forth by wireless companies like Verizon and AT&T Inc. (T) in the sense that it was lenient towards mobile throttling, given the higher costs of mobile internet service.  Verizon hired Helgi G. Walker, the Washington D.C. attorney who won in the prior Comcast challenge to earlier FCC net neutrality policies.

Comcast Xfinity
Comcast sued to block FCC net neutrality rules in 2010 and won. [Image Source: Zachary Kaufman]
In fact, the proposal was so lenient that public activist group Free Press also filed suit against the FCC [PDF] because its plan was too much like the plan Verizon proposed, providing exemptions for mobile.  In other words, the FCC was living in Goldilocks land: one entity was suing it for too much net neutrality, the other was suing it for not enough net neutrality.
The FCC did its best to try to block these proposals.  In an Oct. 2011 counterfiling to Verizon's suit it claimed that Verizon lacked the jurisdiction to file the complaint against the so-called "Open Internet Order" (the net neutrality policy announced in Dec. 2010).
II. Understand the FCC's Power -- and its Nebulous Nature
To understand the debate over the FCC's power you must first look at the laws involved.
The FCC -- which governs wireless spectrum use, as well as wired communications in the U.S. -- was created by The Communications Act of 1934 [PDF], which replaced two federal agencies (one of which regulated radio, the other which regulated telephone) with a single agency empowered by bill of rights, interstate commerce, common defense, and other Constitutional clauses.

FDR radio
The FCC was created under President Roosevelt, merging two previous regulatory agencies, with power over radio and telephone communications.
To get to the meat of the bill you must go to the U.S. Code of Law, specifically 47 U.S.C. § 151 (Chapter 5, Subchapter I).  The text stated:

For the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges, for the purpose of the national defense, for the purpose of promoting safety of life and property through the use of wire and radio communications, and for the purpose of securing a more effective execution of this policy by centralizing authority heretofore granted by law to several agencies and by granting additional authority with respect to interstate and foreign commerce in wire and radio communication, there is created a commission to be known as the “Federal Communications Commission”, which shall be constituted as hereinafter provided, and which shall execute and enforce the provisions of this chapter.

In plain English, Congress -- and President Franklin Delano Roosevelt (D) who signed it in to law -- claimed that in order to ensure Constitutional freedoms, promote national security, and ensure free trade; there must be strong centralized federal/national regulation of the communications industry.
That policy sat unchanged more or less 62 years, as telephone, radio, and (later) broadcast television remained America's primary sources of media.  But by the 90s the internet, cellular networks, satellite television, and cable television had come along.  Communications had became much more complicated, so it was time to rethink the FCC's long-in-the-tooth current authorities.  The result of that rethinking was the Telecommunications Act of 1996.
 Fiber optic cable
The FCC's authorities were modernized in 1996. [Image Source: Guardian UK]

Passed by a Republican-controlled House of Representatives and Senate, the new bill was signed into law by President William Jefferson Clinton (D) in 1996.  While Republicans in Congress today have been among the fiercest opponents fighting to cut back on the FCC's authority and eliminate net neutrality, they actually championed the precursor to that policy in the form of universal services support provisions, which cracked down on "communications discrimination" such as fees for intercarrier calling on cellular networks, excessive long-distance charges, or charges for users in urban areas.
Overall the 1996 bill added some controversial provisions (such as the censorship of profanity and sexual content in cable television) and some less controversial ones (such as the regulation and sale of wireless spectrum).
But the crucial language at stake comes from 47 U.S.C. § 230 (Chapter 5, Subchapter II), which states:

(b) Policy
It is the policy of the United States—
(1) to promote the continued development of the Internet and other interactive computer services and other interactive media;
(2) 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;

What does that mean? 
Like an increasing number of laws that are today being plugged into the U.S. Code of Laws, the terms are so nebulous and ambiguous that it's basically an arbitrary call as to what the law is authorizing.  How does one define a "vibrant and competitive free market"?  And how does one enforce that definition?  It's an exercise in arbitrary governance, even if the policies enforced at times deliver positive effects.
 We The People
Vaguely worded laws make for arbitrary interpretation of the Constitution in the digtal age.
[Image Source: Jason Mick/DailyTech LLC]

Because U.S. politicians were too unwilling to sit down and negotiate with all parties -- civil liberties advocates, communications companies, etc. -- that negotiation process had been transferred, in effect to the courts who are left to determine whether the FCC's actions are in the spirit of the law (an arbitrary interpretation) and the Constitution (somewhat arbitrary, but hopefully more of a concrete target).
III. Judges Shoot Down Net Neutrality Rules Do to Arbitrary Enforcement
The arbitrary language prolonged the legal battle between Verizon and the FCC for some time at the U.S. Court of Appeals for the D.C. Circuit
Meanwhile the FCC continued to try to enforce its controversial policy, filing throttling complaints against AT&T for blocking FaceTime, and over other "data discrimination" incidents, as it saw fit.  In some cases these complaints worked -- perhaps on the grounds of generating publicity over controversial business policies as much as by the FCC's weak enforcement mechanisms.  AT&T, for example, dropped its exclusion of FaceTime on cheaper data plans.
But on Monday (Jan. 14), a trio of federal judges -- Circuit Judges David S. Tatel (appointed by President Clinton in Oct. 1994) and Judith W. Rogers (appointed by President Clinton in Mar. 1994), plus Senior Circuit Judge Laurence Hirsch Silberman (appointed by President Ronald Wilson Reagan in Oct. 1985) -- at last ruled on the legality of the policy after over a year of court hearings.

Judge Hirsch
Senior Judge Laurence Hirsch [Image Source: Getty Images]

Judge Judith Rogers
Judge Judith Rogers [Image Source: Georgestown]
The ruling should be viewed as much of a surprise. After all, Judge Tatel sat on the three-judge panel in the Comcast case and was in the majority ruling that the FCC lacked the authority to enforce net neutrality.  Back in the same court (regarding a similar case) he hardly rethought his decision and his two colleagues largely were unanimous in agreement, save for some minor points of debate.
Judge David Tatel
Judge David Tatel [Image Source: LegalTimes]

What was more interesting is why Judge Tatel, writing in the majority opinion, shot down the Open Internet Order.  He writes:

The Commission, we further hold, has reasonably interpreted section 706 to empower it to promulgate rules governing broadband providers’ treatment of Internet traffic, and its justification for the specific rules at issue here — that they will preserve and facilitate the “virtuous circle” of innovation that has driven the explosive growth of the Internet — is reasonable and supported by substantial evidence. 

That said, even though the Commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates.  Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such.  Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se [in itself] common carrier obligations, we vacate those portions of the Open Internet Order

In other words the Federal Judge had no problem with net neutrality in principle and felt it was reasonable within the law even.  But because he took issue with the FCC refusing to classify broadband firms like a common carrier (e.g. land-line telephone services, such as AT&T), he says the FCC orders are arbitrary and unlawful.

IV. FCC, Verizon, AT&T, and Free Press React

Reaction to the ruling was swift.  The Free Press President Craig Aaron crowed:

The FCC — under the leadership of former Chairman Julius Genachowski — made a grave mistake when it failed to ground its Open Internet rules on solid legal footing.  Internet users will pay dearly for the previous chairman's lack of political will.

The Free Press is pushing the FCC to classify broadband ISPs and cellular providers alike as "common carriers" and set forth a less arbitrary single universal set of rules.  In the meantime, they argue, it's better to have no net neutrality, rather than a broken half-measure.

New FCC Chairman Thomas ("Tom") Wheeler -- himself a former wireless industry lobbyist -- would not rule out a possibility of an appeal to the U.S. Supreme Court, writing:

I am committed to maintaining our networks as engines for economic growth, test beds for innovative services and products, and channels for all forms of speech protected by the First Amendment. We will consider all available options, including those for appeal, to ensure that these networks on which the Internet depends continue to provide a free and open platform for innovation and expression, and operate in the interest of all Americans.

FCC Tom Wheeler
Chairman Wheeler (D) (seen to the right of President Obama) once worked for the CTIA.
[Image Source:]

Comissioner Ajit Pai -- a member of the Republican minority -- comments:

For the second time in four years, the D.C. Circuit has ruled that the FCC exceeded its authority in attempting to regulate the Internet. It is time for the Commission to take no for an answer. Unless Congress acts, we should stay our hand and refrain from any further attempt to micromanage how broadband providers run their networks. We should focus on removing regulatory barriers to broadband deployment, not imposing unnecessary rules that chill infrastructure investment.
Ajit Pai
Commissioner Ajit Pai (R) [Image Source:]

His Republican colleague, Commissioner Michael O'Rielly, was more measured in his criticism, writing:

Once again, the D.C. Circuit has confirmed that the Commission’s authority to regulate is not boundless. Rather than continue to test those boundaries with “prophylactic” regulations, the Commission should look for ways to remove regulatory obstacles to the broadband innovation and investment that will benefit all consumers.

Michael O'Rielly
Commissioner Michael O'Rielly (R) [Image Source: Flickr/Energy and Commerce Committee]

Commissioner Jessica Rosenworcel, a Democratic member of the FCC, likewise differed a bit from her colleague.  She almost sounded to think the ruling was a good thing (perhaps for the same reasons as The Free Press).  She also notes that the Appeals Court did uphold the FCC's authority to regulate the internet in some cases.  She writes:

I support an open Internet that drives innovation, experimentation, and economic growth. I am pleased that the D.C. Circuit recognized the Commission’s authority to encourage the deployment of broadband infrastructure. I look forward to further studying the court’s opinion and working with my colleagues to ensure that the great ecosystem the Internet supports continues to create jobs, opportunity, and digital age prosperity.
Jessica Rosenworcel
FCC Comissioner Jessica Rosenworcel (D) [Image Source: Politico]

Mignon L. Clyburn, another Democrat, was also neutral in tone.  She reacts:

We must ensure that consumers do not become casualties in our efforts to balance competing interests.  Our actions should preserve consumer access to content of their choice, and our policies should advance competition, investment and innovation. The FCC’s public interest obligation requires us to seek solutions that are guided by these principles.  I look forward to working with Chairman Wheeler on next steps.

FCC Mignon Clyburn
Commissioner Mignon Clyburn (D) [Image Source: The Post and Courier]

Verizon interprets the ruling and reacts to it, stating:

Earlier today, the D.C. Circuit issued its much-anticipated decision in Verizon v. FCC. The court rejected Verizon’s position that Congress did not give the FCC jurisdiction over broadband access. At the same time, the court found that the FCC could not impose last century’s common carriage requirements on the Internet, and struck down rules that limited the ability of broadband providers to offer new and innovative services to their customers. The Court upheld the Commission’s disclosure rules.

It's the network
It's the network! -- Verizon Wireless

And it adds an insistence that it won't start charging "pay to play" fees for sites and services (see above) or discriminate against popular services (e.g. YouTube) in favor of its own lesser known alternatives.  The carrier -- which serves landline telephones, cable internet, and cellular customers -- writes:

One thing is for sure: today’s decision will not change consumers’ ability to access and use the Internet as they do now. The court’s decision will allow more room for innovation, and consumers will have more choices to determine for themselves how they access and experience the Internet. Verizon has been and remains committed to the open Internet that provides consumers with competitive choices and unblocked access to lawful websites and content when, where, and how they want. This will not change in light of the court’s decision.

We shall see if the carrier holds up that promise.

AT&T did not post a reaction to the decision, but at a panel Chairman and CEO Randall L. Stephenson commented:

This doesn’t really change anything for our business model or commitments we have made to deal with the FCC. We were part of that negotiating that arrangement when those rules were put into place and we said yesterday we will continue to abide by those rules.

Randall Stephenson
AT&T CEO and Chairman Randall L. Stephenson [Image Source: The Christian Scientist Monitor]

Other internet advocacy groups have yet to publicly blog or comment on the case.

Sources: U.S. Court of Appeals for the D.C. Circuit, Verizon, FCC, AT&T CEO comments

Comments     Threshold

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RE: History has shown...
By headbox on 1/16/2014 3:54:52 AM , Rating: 2
No, you do NOT end up with corporate monopolies. But that is what they want you to believe. In a true free market, a corporation will become too large and inefficient, so a smaller startup can swoop in and offer products/services for a better deal. In our highly managed market , the mega-corporations have manipulated a tax system that lets them write off a massive number of costs so that they operate at a "loss" and pay little tax, no tax, or even receive government aid. This allows them to undercut competitors and remain a monopoly. The USA has not had anything close to "capitalism" for over a hundred years.

Now if you'll excuse me, I'm going to use the internet as it was intended: watching girls like this take their pants off:

RE: History has shown...
By MrBlastman on 1/16/2014 11:55:37 AM , Rating: 2
If you're yearning for capitalism from 100 years ago, you are forgetting several things from history.

There were these guys called "Robber Barons" and were called such for good reason. They exploited the people to the fullest to shovel as much money possible in their pockets. They built entire business empires and monopolies during this time and the harm to the average citizen was noticeable.

Among many things, the one item I would like to cherry-pick from all of that period is company provided settlements and stores. See, back in the 1800s, America was still expanding. Many times when these Barons setup a new operation, there were no people living in the area. So they built towns for their workers to come and live in. These towns were basically full of shanties and were patrolled by company henchmen. At the proverbial heart of every one of these towns was the company store. See, given the remoteness of these locales, there were no other stores for the workers to buy anything from so they had no choice but to buy from the company.

Well, the company took advantage of the worker in every way they could. They sold goods at cutthroat prices, oftentimes reclaiming entire weeks or months pay for purchases. They fleeced their workers for the money they paid them and took it all back. The wealth at the top grew exponentially as a result, not having to pay fairly for anything.

Then there was the issue of child labor and unlimited work weeks. See, prior to 1840, Americans worked 14 hours a day, 6 days a week. It wasn't until Martin Van Buren issued an executive order that this was reduced to 10 hours a day, 6 days a week.

But, even then, it wasn't until 1919 that the maximum 48 hour workweek was established. It would not be until 1838, almost 100 full years after Van Buren that Roosevelt issued the fair labor act in which the 8 hour, 5 day a week standard was passed into law.

So, things right now at least work-wise are far better than they were in the 1800s. The only reason they are this way is due to the Government reigning in what companies can demand from their workers.

If you allow Capitalism to thrive alone without any limits, all sorts of nasty things begin to happen. The worst one of all is the commoditization of labor. If this were allowed to happen freely, those in power with all the money would ultimately set the net worth of any labor as close to zero as possible. Given they hold all the money, they could buy and pay for whatever they need to secure this foothold. Power and Greed corrupt and don't think for a minute, it wouldn't.

Our primal urges are survival. Humans have a nasty habit of harming whatever gets in their way of making it up to the top of the food chain. That means if another man tries to stop them, the other man is killed, hurt or sacrificed so they may do so. There are many of us that believe one another to be "civilized," but in a pure free-market world, they would be the victims crying in the streets led to the slaughter by those who don't care. Believe me, there are plenty who don't. While psychology might call them sociopaths or psychopaths, they're very real on they would conceivably be the ones running everything (if many of them aren't already).

Until mankind advances beyond our primitive system of "currency," which we must to succeed beyond the reaches of our Solar System, capitalism governed by modest policy proves so far to be the greatest inspirer of innovation and creation. Remember, we're all primal at our core and money feeds these urges. We're a product of our evolutionary environment which just so happened to be quite hostile and nasty one on this world. The symbiosis of organisms was quite small. Whoever controlled the organic matter the best, won.

I'm happy we have some laws watching over all this. I do feel we probably have too many in some areas, for sure. There's a fine line between what is "enough" and what is "too much." Legislate or manipulate too much and you begin to strangle business; not enough and you watch the people strangle under the might of the machine.

RE: History has shown...
By Reclaimer77 on 1/16/2014 12:04:50 PM , Rating: 2
There were these guys called "Robber Barons" and were called such for good reason. They exploited the people to the fullest to shovel as much money possible in their pockets.

Yeah and that's just unheard of today. Good point....

lol moving on.

If you allow Capitalism to thrive alone without any limits, all sorts of nasty things begin to happen.

If I had the choice between that and Government tyranny, I would take my chances. You're only focusing on the negative aspects of Capitalism. There are NO positive aspects of rampant Government control.

The Founders of this country would tell you we are already living under tyranny. I would agree with them.

RE: History has shown...
By MrBlastman on 1/16/2014 12:45:53 PM , Rating: 2
Reclaimer, you know me well enough that I'm absolutely against a large Government. ;)

I'm pretty disgusted by how the entire Federal system is at the moment. And you are right, there are no positive aspects of unbridled Government. None.

Communism and Fascism have shown us the endgame there. Look no further than Nazi Germany or Joseph Stalin/Nikita Khrushchev in Soviet Russia for that.

We absolutely are living under tyranny now. They disguise it well, however. They've the media in their pocket. It is appalling what you see on 7 PM news if you ever bother watching it. I do sometimes and the disparity between what I hear about over the airwaves and what I read in print is huge. Most Americans don't read their news. I get about 99% of my news from multiple print sources so for me, it is very easy to find.

The puppet media only strengthens the grip that both our Government and those behind the strings' control. The big question though is who is pulling the strings. Someone in the end is netting all the power and it sure as hell isn't the people.

RE: History has shown...
By Lerianis on 1/20/2014 9:02:03 AM , Rating: 2
You are kidding, right? At least on the Soviet Russia thing, you have to be.

Soviet Russia was NEVER communist. By the number and in reality, it was ELITIST, where a few people were held above all others.

Same thing for 'communist' China today, they are elitist as well.

We need to realize that having a big government is not a bad thing and yes, the robber baron era is coming back! You can see that by the WIDE DISPARITY and INCREASING DISPARITY between the income of the rich and the income of the poor and middle class.

"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il

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