FCC’s LeBlanc Vows Net Neutrality Guidance; O’Rielly Skeptical

LeBlanc said the FCC couldn’t conduct a net neutrality rulemaking every year to keep pace with evolving broadband Internet technology. So the agency recognized the need to provide more guidance to industry, respond quickly when needed, and be flexible and creative in addressing concerns as business practices change, he said. LeBlanc said the bureau would respond to complaints and pursue notices of apparent liability, forfeiture orders and settlements, but he said the bureau would not go “off the range,” given all FCC procedures, including petitions for reconsideration and applications for review of bureau decisions. He said most enforcement actions require commissioners to vote, and companies can always litigate. “You have the check of the commission. You have the check of the courts,” he said.

Commissioner Mike O’Rielly, who dissented from the order, questioned the value of nonbinding guidance, which sometimes might require ISPs to provide business plans that give the agency a “blueprint” for enforcement action. He also called the FCC decision to forbear -- from applying most of Title II to broadband -- “fauxbearance,” given future FCC leadership changes and Section 201 authority amounting to a loophole. But he was hopeful the order would be overturned in court, where industry parties have filed challenges. If not, he predicted that net neutrality regulation eventually would ensnare Internet edge providers. Ross Lieberman, American Cable Association senior vice president, said FCC net neutrality regulation should extend to edge providers.

Brett Shumate, a Wiley Rein telecom lawyer involved in one of the court challenges, said there was a “good chance” some part of the order would be temporarily blocked by a court stay, pending further review. Berin Szoka, president of Tech Freedom, said a stay was needed to block the FCC’s “discretionary” regulatory model and spark serious congressional efforts to modernize the law. Absent a stay, Shumate expected the FCC to examine broadband privacy under Section 222 and possible broadband provider contributions to universal service funding under Section 254. He also expected parties to ask the FCC to resolve various issues under its new Internet conduct standard barring broadband providers from causing end users or edge companies to suffer “unreasonable interference/disadvantage.”

NTIA Administrator Larry Strickling defended the net neutrality order. “The FCC is not regulating the Internet”; it is overseeing broadband Internet access and service, he said. Critics are “comparing apples and oranges.” He also disputed arguments that U.S. net neutrality regulation would strengthen foreign government arguments for controlling the Internet.

FTC Commissioner Terrell McSweeny said the FCC’s net neutrality thrust promotes a “virtuous cycle” of Internet innovation and growth, but acknowledged enforcement was important. McSweeny was encouraged the FCC was reaching out to the FTC; she said both agencies had a role to play. She supported legislative repeal of the exemption prohibiting FTC oversight of common carriers -- now including telco and cable broadband ISPs -- which the FCC regulates under Title II.

Georgetown University visiting scholar Anna-Maria Kovacs said she thought net neutrality regulation would be much harder on wireless than wireline providers, particularly as mobile video ramps up. “You’re going to run head on into capacity constraints,” she said. Sarah Morris, a counsel at New America’s Open Technology Institute, said wireless/wireline differences were blurring due to “wireless offload.” Kovacs countered that spectrum was finite and mobile growth was huge.

Szoka said the FCC was asserting sweeping discretionary regulatory power unchecked by clear standards. He said lawmakers should enact legislation, which could give the FCC necessary but constrained authority. “That’s the real way out of this box,” he said, though he was skeptical Congress would act soon without a court stay of the order to motivate Democrats to play ball. O’Rielly agreed current net neutrality “winners” would resist legislative changes that undo their gains. “It’s hard to align the stars,” he said.

Responding to Szoka, LeBlanc said the FCC had given much thought to enforcement in the net neutrality rulemaking, unlike in many proceedings. “My role is to prevent wrongful activity;” it’s not just to respond to it, he said. The FCC must be nimble because it can’t predict every development, he said. The bureau needed to give industry more guidance, including through general enforcement advisories and case-specific advisory opinions, he said. O’Rielly said it wasn’t clear such advisories would do much good because they were nonbinding, leaving regulatory uncertainty.

Saying it sounded like the enforcement chief “doth protest too much,” Szoka said LeBlanc didn't cite substantive FCC constraints, “because there aren’t any.” Szoka said LeBlanc talked about thwarting “wrongful” activity, not “harmful” activity, which is what Szoka said the FCC should target, weighing the costs and benefits of regulation, filtered through a substantive standard and informed by economics. He worried the FCC would ignore “error costs.”

Both Szoka and O’Rielly predicted FCC pushback would force many companies to settle, particularly smaller ones or those with pending transactions. That interplay would effectively set precedents, Szoka said. “That leaves you with pure discretion that is only constrained by political forces,” he said. Morris said Title II was “grounded” in long-standing common-carriage principles that provided much precedent.

Lieberman said many different players made up the Internet, such as transit and edge providers, but the rules restrain only cable/telco ISPs, giving Netflix and others leverage to make market-altering demands on ISPs. When disruptions occur, consumers won’t know whom to blame, he said. The FCC erred in not applying the rules to all sides, he added. “Just wait,” quipped Szoka.

O’Rielly said tech companies generally supported the FCC order, but he believed regulators would “push the envelope” and expand net neutrality regulation from broadband ISPs to edge providers because the distinctions were eroding. “Eventually [regulation is] going to bleed into that area,” he said, citing the “natural gravitational” pull of an agency to accumulate power. While the FCC cites its three bright-line rules -- no blocking, no throttling, no paid prioritization -- much net neutrality regulation is “to be determined,” and “that’s a concern,” he said. Broadband providers are allowed to engage in “reasonable network management,” but he said “no one knows what that means.”

O’Rielly said the idea the FCC was going to broadly forbear from applying Title II to broadband was “complete malarkey.” He said agency leadership would change over time, so whatever the commission forbears from has no bearing going forward. Despite FCC assertions that it was forbearing from most of Title II, the agency could still regulate virtually any broadband practice it doesn’t like under its general Section 201 authority, he said.

Asked why he didn’t try to tie LeBlanc’s hands by reducing potential enforcement fines, O’Rielly laughed: “I’m always happy to tie Travis’s hands.” O’Rielly was concerned the Enforcement Bureau would engage in aggressive action without tapping the knowledge of sector-specific bureaus, but LeBlanc said his bureau would consult with them.

O’Rielly also said he wants the upcoming incentive auction to succeed, noting he worked on the statutory mandates as a congressional staffer. He said he generally preferred “simplicity” and welcomed FCC Chairman Tom Wheeler’s willingness to take another look at “dynamic reserve prices.” He also said he would continue to seek changes to FCC bidding restrictions on AT&T and Verizon. He didn't know if the FCC would hold the auction in 1Q, but said he was comfortable with the time line and opposed “delay for delay’s sake.” Yet he was open to taking more time to address legitimate concerns. He questioned whether there were enough tower crews to carry out broadcaster repacking in 39 months. He suspected the auction wouldn't raise as much revenue as one $87 billion estimate, but more than a Congressional Budget Office estimate of $25 billion.

O’Rielly called for FCC public release of draft items 21 days before open meetings. He said stakeholders know only what they’re told informally about draft items, leading to much confusion and misinformed lobbying, complicating last-minute regulatory fine-tuning. The FCC seems “kind of happy that people don’t know what’s going on,” he said. Public release of drafts would encourage more constructive feedback and targeted final lobbying, he said, and if the FCC occasionally needs more time to address real concerns, an item can be simply pushed back to the next meeting, resulting in better regulation.