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FCC authority over broadband regulation in flux: 3 options available

Following a Court of Appeals ruling that basically curbed FCC authority over broadband regulation and net neutrality efforts, the commission basically has three options. In this Q&A, telecom consultant Tom Nolle , president of CIMI Corp., explains the complex chain of events that led to the court decision and the three choices facing the FCC.

Following a Court of Appeals ruling that basically curbed FCC authority over broadband regulation and net neutrality efforts, the commission basically has three options. In this Q&A, telecom consultant Tom Nolle , president of CIMI Corp., explains the complex chain of events that led to the court decision and the three choices facing the FCC.

Moving forward with a national broadband plan was already a major topic even before the appeals court ruled that the FCC doesn't have the legal authority to tell service providers how to manage network traffic. Net neutrality and broadband regulation weren't mentioned specifically in the 26-page decision, but the appeals court ruling will affect the national broadband policy debate. For frequent updates, visit our Uncommon Wisdom and Telecom Timeout blogs.

There's a lot of confusion about why the FCC/Comcast case went straight to the U.S. Court of Appeals. Can you explain?

Tom Nolle, President, CIMI Corp.Tom Nolle: There's a pretty broad misunderstanding about the relationship between the FCC and the courts of appeal. The FCC is a quasi-judicial agency that acts as a court of fact in communications matters, sort of like a lower court. So the D.C. Court of Appeals is the normal path to appeal an FCC ruling. But it is a court of law, not a court of fact. The only thing the appeals court could do was rule whether the FCC had the authority to regulate Comcast's traffic management practices. It decided the FCC acted beyond its authority.

Why is this ruling having such a major effect throughout the telecom industry?

Nolle: When the Telecom Act was passed in 1996, it required the incumbent carriers to share their infrastructure with competitors, but it wasn't clear if they were supposed to share the infrastructure they built as a protected, rate-guaranteed monopoly or any new infrastructure they might deploy later -- like broadband. The FCC unsuccessfully tried to craft how things like broadband Internet were going to be regulated for nine years after the 1996 act so the incumbent carriers didn't find themselves building something at great expense and sharing it with someone who didn't spend anything at all. Because of that period of indecision, the U.S. lagged radically behind the rest of the world in broadband deployment.

How did the FCC resolution in 2005 sort out the broadband sharing issue?

Nolle: The FCC came up with a complicated definition that said broadband Internet was an information service with a telecommunications component. By doing that, the FCC effectively [held] the Internet and broadband [as] not subject to the Telecom Act because the FCC doesn't regulate information services. Herein lays the problem.

The court decision was about P2P traffic management, so why is the discussion all about net neutrality?

Nolle: When the FCC put its net neutrality principles together, it presumed it had vague statutory rights to enforce them, but the recent court order provide those statutory rights do not exist, which means that net neutrality regulation can't exist under current law. The ruling didn't mention net neutrality, but the traffic management ruling was based on the same assumption of authority as the FCC used to justify its net neutrality position. The 2005 net neutrality principle was designed to prevent the incumbent carriers from using their market strengths unreasonably.

Is the cable industry affected by the same regulations in terms of broadband infrastructure?

Nolle: The FCC made a similar ruling for cable providers, so finally both sources of broadband infrastructure were subject to the same regulations and had immunity from unbundling and sharing their infrastructure. So in 2005, the U.S. suddenly had a rapid acceleration in broadband deployment.

How do you sum up the FCC's problem and what can be done about it?

Nolle: The FCC is now in a situation where the fundamental balance it struck in 2005 has been broken because the net neutrality part of that balance is no longer enforceable. So the FCC has three basic choices:

  1. It can do nothing and assume that many of its principles could be enforced by a competitive market, which is not necessarily a dumb choice;
  2. It can go to Congress, which is a little bit like walking into a prison yard and asking someone to help you change your tire -- the consequences could be dire;
  3. It could reclassify broadband access as a telecommunications service that can be regulated, rather than its current classification as an information service, because broadband access serves more than one service at the other end.

Which option do you think the FCC will choose?

Nolle: In a Democratic administration, commissions have historically been activists. FCC Chairman Julius Genachoswki will probably take an activist role and move to reclassify broadband as a telecom service so the FCC can then exercise the only real remaining latitude that it has: Decide how the rates are set for sharing access to carriers' broadband network. If the rates are set reasonably, it could be good for the industry. But if those rates for sharing are botched, we're going to re-enter the dark ages of broadband. There would be a lot of hue and cry, but it's a better deal than other alternatives could be.

Can you explain the change in how we look at broadband since 2005?

Nolle: The FCC reasonably concluded in 2005 that broadband Internet service was only Internet. Now we have clearer, relevant market examples that show that broadband access is used to reach more than one service, so continuing to classify it as an information service with a telecom component can be done. Broadband now serves more than one service.

What do you think the FCC will do with that idea?

Nolle: The logical course for an activist FCC is to revisit the 2005 decision and determine that broadband access is a telecom service and conclude that it therefore has regulatory authority under Title II of the Telecom Act. No legislation would be required and no court decision. The FCC could do it tomorrow. It could use the procedural process already set in place by the Notice of Proposed Rulemaking (NPRM) that it issued in the fall on net neutrality and use that process to make the change. The FCC delayed the deadline for comments already, which I think was a signal it intends to do something with it. The beauty of it is that the FCC would be protecting the Internet from regulation but regulating the part that's at risk, which is the access piece. And that would address all of the principles of net neutrality.

Would a change in the FCC's classification of broadband be better than Congress getting involved?

Nolle: Section 706 of the Telecom Act gives the FCC authority to make sure there is availability of advanced services to all Americans on a non-discriminatory basis. But the Telecom Act never mentions the Internet or broadband; the guiding piece of legislation that defines one of the most important industries in the world doesn't even talk about the industry it regulates. My belief is that we could never hope to have enlightened telecom legislation. And let's face it, influences on both sides of the issue would probably add a bunch of stuff to the legislation that that could upset the delicate balance in investment in telecom infrastructure and essentially bring everything to a halt.

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