Today, AT&T made a couple of filings at the FCC regarding its authority to reclassify Internet service providers (ISPs) as common carriers. Given that this decision seems driven by political considerations, I hold out little hope that the FCC will alter its course, but the letters nonetheless try to set out what we see as significant infirmities with reclassification.
The first letter addresses the substantive question of whether ISPs are information service providers, telecommunications service providers, or both. Much of the debate over this question has focused on the Supreme Court’s decision in Brand X and, in particular, Justice Scalia’s dissenting opinion. Putting aside the Constitutional Law 101 principle that dissenting opinions are not binding precedent, Justice Scalia’s dissent made clear that, in his view, ISPs provide both an information service and a telecommunications service and that the telecommunications service ends where the information service begins. This comes through loud and clear in the various analogies he used to explain why he thought that ISPs provided a transmission service in addition to an information service. At one point he compares ISPs to pizzerias that offer a combination of pizza and home delivery. At another point he compares them to a pet store that sells dogs with a leash. At no time did he suggest that there was no pizza or dog in the transaction.
We disagree with Justice Scalia’s view that ISPs simultaneously offer both an information service and a telecommunications service. The FCC has long adhered to an interpretation of the statute under which these definitions are mutually exclusive. Such a reading follows naturally from the fact that, according to the statute, information services are provided via telecommunications. As consequence, and as noted by the Brand X majority, without mutual exclusivity all information services would become vulnerable to the artificial separation of their information and telecommunications components. In this construct, the definitions, which are intended to serve as Congressionally-defined boundaries for the FCC’s jurisdiction, become little more than semantic speed bumps.
The elimination of mutual exclusivity could empower the FCC to regulate virtually every tech company that combines transmission with information to deliver digital goods and services to customers. Social networks, digital music, video chat, and even Internet search are all examples of information services that are provided via telecommunications, and thus have a transmission component that could be segregated and regulated under Title II if the mutual exclusivity of information and telecommunications services were breached. And since the FCC has long treated resellers of common carrier services as common carriers themselves, providers of connected devices, like e-readers and vehicles, are virtually indistinguishable from ISPs in their use of transmission as a way to deliver information. It’s no longer a question of how providers design their services and consumers perceive them, instead it becomes simply a question of whether the Commission wants to pry it apart or not. In this structure, the boundaries around the Commission’s jurisdiction become as broad as it wants them to be, at best loosely tethered to what Congress granted it.
Ironically however, adoption of Justice Scalia’s view by the FCC would not even impose Title II regulation on the purported service to which net neutrality rules, including paid prioritization, apply. To understand why, I encourage you to take a closer look at Justice Scalia’s opinion and his description of the delivery/transmission service that he thought cable companies provided. First, in analogizing cable modem service to dial-up Internet access and to DSL transmission service (which was regulated under Title II at the time) he cites an FCC working paper for the proposition that:
“In the case of Internet access, the end user utilizes two different and distinct services. One is the transmission pathway, a telecommunications service that the end user purchases from the telephone company. The second is the Internet access service, which is an enhanced service provided by an ISP… . Th[e] functions [provided by the ISP] are separate from the transmission pathway over which that data travels. The pathway is a regulated telecommunications service; the enhanced service offered over it is not.”
Justice Scalia then goes on to say that, with respect to cable modem service:
“Since the delivery service provided by cable (the broad-band connection between the customer’s computer and the cable company’s computer-processing facilities) is downstream from the computer-processing facilities, there is no question that it merely serves as a conduit for the information services that have already been ‘assembled’ by the cable company in its capacity as ISP. This is relevant because of the statutory distinction between an ‘information service’ and ‘telecommunications.’ The former involves the capability of getting, processing, and manipulating information. §153(20). The latter, by contrast, involves no ‘change in the form or content of the information as sent and received.’ §153(43). When cable-company-assembled information enters the cable for delivery to the subscriber, the information service is already complete. The information has been (as the statute requires) generated, acquired, stored, transformed, processed, retrieved, utilized, or made available. All that remains is for the information in its final, unaltered form, to be delivered (via telecommunications) to the subscriber.”
Thus, in Justice Scalia’s view, cable modem service actually consisted of two service offerings – one that ends where the other begins. The first included the ISP functions associated with generating, acquiring, storing, transforming, processing, retrieving, utilizing and making available information. The second consisted merely of the delivery of that information to the cable modem subscriber. According to Justice Scalia, the transmission component of cable modem service begins at the subscriber’s home and ends at the cable company’s “computer processing facility.” The rest of the cable company’s network falls on the ISP side of the line that Justice Scalia has drawn. Indeed, Justice Scalia’s reliance on the description of dial-up arrangements makes this distinction perfectly clear. In that case, the transmission component was literally the telephone connection between the subscriber’s home and the ISP’s modem bank.
The particular net neutrality rules that the FCC is considering, such as prohibitions on blocking and paid prioritization, relate largely to the functions of routers that fall on the ISP side of the line drawn by Justice Scalia, and thus the “information service” component of Internet access service (assuming, incorrectly, that Internet access service can, and should be, segregated into separate information and telecommunications service components).
In the era of the dial-up Internet, all routing functions were performed by ISPs, not phone companies. And even the most ardent supporters of reclassification have acknowledged that the ISPs of that time provided information services, not telecommunications services. But, as the D.C. Circuit made clear in Verizon, the FCC cannot impose common carrier regulation on an information service. As a consequence, reclassification of broadband Internet access services (or components thereof) as Title II telecommunications services is a road to nowhere that will not provide the FCC authority to adopt open Internet rules or even permit the imposition of common carrier-type net neutrality regulations pursuant to some other source of authority.
The second letter we filed today focuses on procedural infirmities with an attempt to reclassify ISPs as common carriers, even if the FCC finds that they are not information service providers. Under longstanding precedent, the FCC must make particularized findings with respect to the offerings of individual carriers in order for it to find that either they are operating as common carriers, or should be required to operate as common carriers. The FCC has not engaged in the kind of detailed analysis that would be needed to assess the offerings of every ISP that would be subject to its rules.
In order for the FCC to find that an ISP is operating as a common carrier, it would have to examine the terms on which that ISP holds itself out to customers to assess whether it offers to serve indifferently, or whether it retains the ability to decline to serve customers. The underlying record in this proceeding simply does not contain the level of detail needed for the FCC to determine that any ISP, let alone every ISP, holds itself out to serve customers indifferently. And in some markets, such as for peering and interconnection, the record is in fact quite clear that ISPs do not operate as common carriers, and expressly retain the right to refuse to provide service. These services are unique carrier-to-carrier arrangements commercially negotiated in a robustly competitive market and it would strain all logic to find that they instead are offered indiscriminately to the public for a fee, the core requirement of common carriage.
The FCC cannot mandate that a service be offered on a common carrier basis without, at a minimum, a finding that a particular provider has market power in a particular geographic market. Needless to say the FCC has engaged in no analysis of market power on a geographic market basis. Accordingly, this option is simply not available to the FCC.
As I said, I have no illusions that any of this will change what happens on February 26th. But when the FCC has to defend reclassification before an appellate court, it will have to grapple with these and other arguments. Those who oppose efforts at compromise because they assume Title II rests on bullet proof legal theories are only deceiving themselves.