By Mark Conrad
(Editor’s Note: What follows is Part 1 of the article. Part 2, which will address The Potential Effect on Sports Media, will be published in Vol. 11, Iss. 12 of Sports Litigation Alert in two weeks.)
The saga of the Federal Communications Commission’s attempts to establish rules of the road for the Internet can be summarized by a paraphrase of the famous Winston Churchill quote about Russia: a ten-year regulatory riddle, wrapped in an mystery of complex administrative law questions, inside an enigma of skeptical court rulings and considerable disagreement among communications policy wonks and economists. While this issue would seem to be far from the radar screens of the sports industry, those who are or will be involved in digital streaming sports content may have a lot at stake. This article is an attempt to unwrap the riddle of “net neutrality” for those who are not techno-savvy geeks, but wish to get a general handle on a very elusive topic.
Before discussing present standards and proposed rules involving net neutrality, we have to try to grasp what it involves. According to the FCC, net neutrality constitutes “a level playing field where consumers can make their own choices about what applications and services to use, and where consumers are free to decide what content they want to access, create, or share with others.”[1] The concept centers on three goals: (1) Disclosure of relevant information by broadband Internet Service Providers (“ISPs”); (2) No blocking of legal content; and (3) No favoring of traffic from affiliated entities over other information.” [2] In other words, broadband providers cannot discriminate by creating advantages for certain content over others. In its purest form, it’s open access for all at the same speed.
Let’s think of the Internet broadband as a highway. The highway entitles all to access the Internet and all who participate in the Internet — whether a website, video service, blog or tweet — as able to ride on the highway at the same rate of speed. If the highway is jammed (and sometimes it can be), then speeds can slow down; if not, speeds can be relatively quick, depending on the technical capabilities of the ISP. Note there is no national “broadband” interstate highway funded by the government. No I-80 from New Jersey to California. Broadcast ISPs involve investment by private firms, the great majority of which are telephone companies or cable providers. In many markets, there is some consumer choice. For example, in Manhattan one can choose between Verizon’s Fios or Time-Warner Cable’s “Road Runner” service. In other markets, there could be other providers who engage in such services.
But for our example, let’s assume that broadband providers, whoever they may be, offer the same capabilities. That means that the highway could be used by 20-year old Fords of Chevys and 2 year old Ferraris. They all go the same speed, but the Ferrari could certainly travel faster than the others. Yet, the speed limit is the same — one can’t go above it. [3]
So, a Ferrari-level website offering streaming content such as movies or sports events is subject to the same restrictions as the blog, website, or even the sleazier “torrent”-type sites that allow the illegal downloads of copyrighted materials and porn sites that are often filled with malware. There is no fee for going on the highway — it is free for all. Set up your Internet server and you are in.
But let’s say that the broadband provider wants to play favorites and create an “express lane” for the Ferrari, which the Ferrari will pay for. Extra revenue for the broadband provider, and faster, better reception for the Ferrari’s service. Now let’s change the Ferrari example to that of a service that providers streaming of sports events, interactive gaming or movies. If they get a faster lane (or at least a portion of the highway that is faster) than anyone else, is that fair to others? Does it unfairly discriminate against the lowly service that cannot afford the higher speeds? Or, are broadband ISPs a business that should operate without any constraints as to speeds or payments for those speeds? Basically, a utility (regulated) or a freely competitive business? (not as regulated) That is the heart of the issue.
For those who believe is equality in the Internet, not having a level playing field of net neutrality leads to a power play by the ISP industry to get an advantage and discriminate between rich and poor; for the industry, this is what capitalism is all about. Many, particularly of free market persuasion, feel that a mandated non-discriminatory rule is nonsense; let the market decide. Netizens who preach an idealistic view of the Internet as a way for all content to ring through without corporate priorities, feel that the open access, no-discrimination ideal should be strictly enforced.
The FCC, the body in charge of regulating broadband, has been put in a tricky regulatory position, part of it its own doing. In 1998, when cable services first began to market what is now known as broadband services, a legitimate question occurred as to whether the cable broadband could have to provide “open access” because as a common carrier (like the traditional phone company or utility), it could be regulated more stringently than if it was considered an “information service carrier.” (a non-utility, in effect) The Commission opted to consider it the less regulatable “information service” — the non-utility — under the 1996 Telecommunications Act,[4] and subject to the more stringent regulations under Title II of the act. Notably, but somewhat peculiarly, ‘mobile” Internet broadband would not be subject to the anti-discrimination rules sought for “fixed” Internet broadband (an issue we won’t address in this article).
This non-utility status was challenged and the case ultimately went to the Supreme Court, which upheld the FCC’s “non-utility” determination.[5] So, broadband cable service as an “information service,” but not a “telecommunications carrier” under the 1996 Act, was not subject to mandatory Title II common-carrier regulation. This turned out to have a major effect on the subsequent history of net neutrality.
When the Obama Administration came to office, its FCC chair Julius Genachowski sought to enforce “net neutrality” more stringently but was hamstrung because of the non-common carrier designation. But he tried nevertheless. In 2010, Genachowski announced a “National Broadband Policy” to ensure equal access to content on broadband. When Comcast tried to limit access of a bit torrent service, the FCC penalized the firm and Comcast challenged the policy. The D.C. Circuit invalidated the FCC’s policy, concluding that it had no statutory power to impose it on a non-common carrier (the information services designation).[6] Although First Amendment concerns were argued by Comcast, the court never had to address them because the administrative law issues served to invalidate the proposed rules.
The FCC tried again in 2011 in a somewhat altered (or watered-down, depending on your point of view) proposal, which was approved in a divided 3-2 vote along party lines. (The party in power at the White House has three members and the party out of office has two.) The Democratic majority of the FCC proposed keeping portions of the old rules (basically the non-controversial issues of transparency), but eased the non-discrimination standard. The proposed rules would prohibit “paid traffic prioritization” at least in theory, but it created some wiggle room by allowing such arrangements they were “commercially reasonable” but did not really define what that constituted. Not surprisingly, this revised and confusing net neutrality rule was challenged (this time by Verizon) and the same DC Circuit invalidated it, although it left open the opportunity for the FCC to come up with future rules that fit within the powers of the Communications Act for non-common carriers.[7] Given the difficult statutory and administrative hurdles to do so, it is a task easier said than done.
Yet, the Commission soldiered on. In May, the FCC tried for a third time to come up with some semblance of a net neutrality, non-discrimination policy. By this time, the commission’s internal divisions were even more pronounced and the new chairman, Tom Wheeler had a hard time even cobbling a bare majority of his fellow Democratic commissioners together. The May rules — with one other commissioners in full agreement, a third concurring, but not in total agreement and two strong dissents (by the Republican nominees) produced a document that has been hard to categorize. Some have said it is a further deregulation of net neutrality while others say that it is a form of mandatory net neutrality.
Chairman Wheeler’s views were encapsulated in his portion of the notice of proposed rulemaking focus on the potential for broadband providers to limit openness. While he sought comment on specifics (typical for such a notice), his views point to what he sees as the greater concentration and threats of providers to take unilateral action to slow or limit the information highway.[8]
Noting that “sound public policy requires that Internet openness be the touchstone of a new legal standard,” Chairman Wheeler “tentatively concluded that the prior transparency and non-discrimination remain goals, but the Commission should adopt a rule requiring broadband providers to use “commercially reasonable” practices in providing some speed prioritization of broadband Internet access service, in an attempt to be more “focused and flexible” than the rule vacated by the DC Circuit in Verizon[9] and under the purview of section 706 of the 1994 Act.[10]
In sum, the proposed rules, broadband operations cannot slow the speed below the rate the consumer bought; cannot block access to lawful content; and allows paid priorization under circumstances not entirely clear. However, only one other commissioner besides Chairman Wheeler approved the proposal. Commissioner Rosenworcel (also a Democrat) concurred, but cautioned that the approach was done in a hasty way and would have given more time for deliberations. The two Republican commissioners, Pai and O’Reilly, felt the matter should be ideally determined by Congress, not the FCC and that the proposed rules are “vague and unclear.”[11]
Mark Conrad, director of the sports business specialization at the Gabelli School of Business Associate Professor & Acting Area Chair, is an associate professor of law and ethics at Fordham University’s Schools of Business. Professor Conrad joined the Fordham faculty in 1987 and, in addition to teaching sports law at the Gabelli School, also has taught courses covering contracts, business organizations, and media law.
Mark Conrad, director of the sports business specialization at the Gabelli School of Business Associate Professor & Acting Area Chair, is an associate professor of law and ethics at Fordham University’s Schools of Business. Professor Conrad joined the Fordham faculty in 1987 and, in addition to teaching sports law at the Gabelli School, also has taught courses covering contracts, business organizations, and media law.
[1] See Statement of Chairman Tom Wheeler, Before the Subcommittee on Communications and Technology Committee on Energy and Commerce, U.S. House of Representatives, May 20, 2015, http://www.fcc.gov/guides/open-internet, accessed May 31, 2014
[2] See See Preserving the Open Internet et al., GN Docket No. 09-191, WC Docket No. 07-52, Notice of Proposed Rulemaking, 24 FCC Rcd 13064, 13067-68, 13100-15, paras. 10, 16, 88-141 (2009) (Open Internet NPRM).
[3] In reality, that is not the case as many rural ISPs have lesser bandwidth and cannot easily transit heavy content.
[4] 47 USC sec. 153 et seq.
[5] See FCC v. Brand X, 545 U.S. 967 (2005).
[6] See Comcast v. FCC, 600 F. 3d 643 (D.C. Cir. 2010).
[7] See Verizon v. F.C.C., 740 F.3d 623 (D.C. Cir. 2014).
[8] See Preserving the Open Internet et al, supra, n. 2 at paras. 44-45
[9] See Id. At n.2, para. 116.
[10] See Pub. L. No. 104-104, § 706, 110 Stat. 56, 153 (1996) (1996 Act), as amended in relevant part by the Broadband Data Improvement Act (BDIA), Pub. L. No. 110-385, 122 Stat. 4096 (2008), is now codified as 47 U.S.C. § 1301 et seq.
[11] Id. At p. 96-99 (Dissenting statements of commissioners Pai and O’Reilly)
