At issue is how best to keep the Internet open and neutral to all while still giving Internet service providers sufficient incentive to expand their networks to serve more customers and to support an exploding array of data-hungry applications as futuristic as holographic videoconferencing used for home-based medical exams.
The FCC voted 3-to-2 to create a series of sweeping changes, including three open Internet conduct rules that block broadband providers, both wired and wireless, from blocking or throttling Internet traffic. The rules also ban broadband providers from taking payments to prioritize content and services over their networks.
The vote followed party lines, with Democrats Tom Wheeler, the chairman, and commissioners Mignon Clyburn and Jessica Rosenworcel voting in favor. Republican commissioners Ajit Pai and Michael O'Rielly dissented.
The main legal instrument used by the FCC to put these rules in place comes through Title II of the Communications Act of 1934. Many cable, phone and wireless providers, including strong voices at AT&T and Verizon, objected to use of Title II, saying the rules would subject them to arduous and costly reviews -- the same as other utilities like phone service -- that will detract from their investments in growth and expansion. Opponents also predict that future FCC commissioners will try to impose tariffs and fee-setting regulations on Internet providers, although the newly adopted rules do not explicitly say so. An FCC summary states that broadband providers "shall not be subject to utility-style rate regulation." (The full ruling of the FCC is not expected for weeks.)
Title II supporters included FCC Chairman Tom Wheeler, President Obama and many of the 4 million people, public interest groups and companies who submitted comments to the FCC on the issue. These supporters maintain that reclassifying broadband providers under Title II puts broadband, appropriately, in the category of other utilities, akin to a 21st century version of electricity or telephone service. The FCC outlined these so-called "Bright Line Rules" and other details in an online fact sheet and a press release.
Where it started
The primary motivation for Wheeler to propose these Open Internet rules was a U.S. Court of Appeals decision on Jan. 14, 2014 in the now-famous Verizon vs. FCC case which vacated existing FCC rules that preventing Internet blocking and unreasonable discrimination. Those earlier FCC rules had stemmed from two oft-cited FCC decisions: In 1995, the FCC found Madison River Communications had blocked Vonage Voice over IP services to some customers; In 2008, the FCC said Comcast was arbitrarily throttling BitTorrent traffic in violation of FCC principles. The FCC has outlined some of this history on its website.
Other provisions of new FCC rules
Also in its vote, the FCC decided to use Section 706 of the Telecommunications Act of 1996 to supplant Title II in its adoption of Open Internet rules. Section 706 was specifically cited by the Court of Appeals in the 2014 Verizon case as giving the commission an independent grant of authority to support such rules.
By using both Section 706 and Title II to invoke new rules, FCC senior officials have said they are employing a "tailored" approach to Open Internet enforcement that will withstand the inevitable lawsuits threatened by multiple ISPs. Title II allows the FCC to use a broad "just and reasonable" standard in its regulation of Internet providers.
One area that is sure to stir up controversy and lawsuits is how the FCC uses its Title II "just and reasonable" standard to act on complaints by so-called "edge" companies, such as Netflix, that connect their services to Internet providers like AT&T, Comcast and other broadband providers. For example, an edge provider could complain to the FCC that its Internet capacity was unreasonably limited by an Internet provider, opening up an FCC inquiry and possible ruling.
Title II also allows competitors to an Internet provider in a community to access the same utility poles and underground conduits, in hopes of boosting the deployment of new broadband networks.
What some supporters and opponents say
Supporting the new FCC order are a range of public interest groups that point to the Internet as the primary medium of free speech today.
In congratulating the grassroots movement that spurred the FCC's action, U.S. Sen. Ed Markey, D-Mass., called the effort a 21st-century battle where supporters acted as modern-day Paul Reveres. "You have sounded the alarm and called us to arms ... to advocate for this new set of rules," Markey said in a conference call with reporters. "This revolution was not only televised but it was tweeted ... around the world."
The new rules will help protect the economy and are as important as keeping our air, water and roads safe, Markey added. "Reclassifying under Title II is a major victory for consumers," he said.
During the FCC hearing, Tim Berners-Lee, founder of the World Wide Web, in a pre-recorded video statement , gave his support to the Title II reclassification as the means to keep "permissionless innovation" alive on the Web.
Etsy CEO Chad Dickerson also testified about the value of keeping an unrestricted Internet to support businesses like Etsy, a peer-to-peer e-commerce Web site that supports sales by online artists and designers. In an emotional highlight, Dickerson read a letter from a woman identified only as Nancy from California who had been injured in a traffic accident and was relying on sales of her goods from her chair at home via Etsy. "My dream is alive and viable because of the free Internet," she said.
Producer and writer Veena Sud described at the hearing how her video series The Killing had been canceled on AMC television, but gained renewed life with online streaming over Netflix. Such online series are able to promote more programming competition and bring more women into executive video production roles, she said.
Malkia Cyril, director of the Center for Media Justice, said the FCC order helps keep the Internet open to protect civil rights and promote fair policing in cities such as Ferguson, Mo., as well as fair wages in workplaces. "The Internet is where movements like Black Lives Matter are born and where dissent is protected and where underserved communities can plead our cause," she said in a conference call.
Like many other supporters, Cyril argued that enforcement of the FCC's rules will matter as much as the creation of the new rules.
Opponents to the FCC's new rules, meanwhile, have thrown out a wide range of objections.
Most critics call the FCC rules an over-regulation of a thriving Internet industry. A group of congressional Republicans had urged the FCC to delay its vote, while U.S. Rep. Marsha Blackburn, R-Tenn., described reliance on Title II as an outdated, 1930s-style utility regulation.
Picking up on that theme, Verizon posted a blog shortly after the FCC vote that was composed using old-fashioned Morse Code and titled, "FCC's 'Throwback Thursday' Move Imposes 1930s Rules on the Internet." (The blog includes a translation of the press release with a 1934 dateline and the typeface of a manual typewriter.)
Blackburn also argued that in the future, the FCC could impose rate regulation on Internet providers.
However, Pai and O'Rielly, the Republican FCC commissioners, both hammered on the likelihood of coming FCC rate regulation on Internet service providers. Pai predicted $11 billion each year in new fees would be imposed on consumers. O'Reilly argued that the "just and reasonable" review clause can be interpreted to grant the FCC the ability to regulate rates set by Internet providers.
To rebut their point, former FCC Commissioner Michael Copps, now with Common Cause, said that "regulation of rates is not what's being contemplated" by the FCC. He pointed out that the FCC has the potential to spur expansion of high speed, affordable broadband without controlling rates set by Internet providers. Measures the FCC can use to spur expansion include supporting municipal broadband by pre-empting state laws (as the FCC did in a separate 3-2 vote affecting communities in Tennessee and North Carolina) and slowing down industry mergers that can reduce the number of broadband competitors.
AT&T Chairman Randall Stephenson has emerged as one of the most vocal opponents of the new FCC rules. He has appeared many times in recent months on television programs to point out that litigation against the FCC's rules could last up to three years before real clarity emerges on how the regulation will work and what Internet providers will be allowed to do. Discussions are underway as to whether individual companies like AT&T and others would file separate suits or would join together in a massive lawsuit, he said recently.
A large number of Internet providers, including some small municipal broadband authorities, have argued that they already adhere to open Internet rules, making the new FCC rules unnecessary.
"There's not a shred of evidence that this [vote] is necessary," O'Reilly said. Meanwhile, Pai said that both the BitTorrent and Vonage VoIP infringement cases happened years ago and did not constitute much harm, especially in light of the proliferation of Internet services in recent years.
That's the same position that Verizon and other service providers have taken.
"What has been and will remain constant before, during and after the existence of any regulations is Verizon's commitment to an open Internet that provides consumers with competitive broadband choices and Internet access when, where and how they want," said Michael Glover, Verizon senior vice president for public policy.
Questions over FCC's interconnection oversight
One area of the new rules that is ripe for attack will be how the FCC deals with heavy traffic on public networks. The FCC will now prohibit paid prioritization for traffic, as in a case where an Internet provider allows, for a fee, an edge provider or other company to have a fast lane for its fat data video service. While fast lanes are out, the FCC will still allow an Internet provider to conduct "reasonable network management" that recognizes the need for broadband providers to manage the technical and engineering aspects of their networks.
(Of note: All of the FCC's Title II oversight applies to public Internet services and not data services that use private pipes, such as VoIP from a cable service or a dedicated heart-monitoring service. However, the FCC will still keep tabs on these kinds of services through new transparency rules on Internet providers to make sure such services don't undermine Open Internet rules.)
Some Internet providers and other businesses have said that prohibiting paid prioritization while still allowing reasonable network management will create a murky area for the FCC in an era with new technology such as Software Defined Networks (SDNs). For example, what if an Internet provider creates an SDN over a fiber cable normally used for the public Internet and then charges an edge provider a fee for using that fast lane SDN
As a result of the FCC rules, some analysts predict that Internet providers will be forced to create a profusion of private fast-lane networks of all varieties for their customers that are willing to pay a premium to push out fat content, especially byte-rich video, such as the real-time holographic video now on the technology horizon.
Private networks and reserved private pipes are already a reality, of course, but there are many quasi-public-private networks where a conflict is expected to arise.
For example, Gartner analyst Akshay Sharma posed the question of whether a doctor in surgery waiting for a critical MRI image to be sent over a public network would have the right to network prioritization over other users on the same network accessing games on BitTorrent. Likewise, in January, the FCC chairman was asked in a public forum at the International CES trade show if pornography on the Internet should be treated equally with medical records. Wheeler didn't answer directly, but repeatedly said the "just and reasonable" standard would apply.
There's not likely to be a much of a public discussion of any of these what-if scenarios, and only a lawsuit resulting from a particular dispute between an edge content provider and an Internet provider is likely to have much bearing.
The FCC has already allowed choke points on telephone networks for network management, Sharma noted. For example, when a radio station offers a prize and callers flood the phone lines, there is network management technology in place that still allows 911 calls to go through.
If the FCC does indirectly force creation of more paid, private networks for heavy traffic users, the emergence of SDN and other technologies will create gray areas, at least in a legal sense, if not a technological one. "The problem you will have is trying to define a public network from what is a private one," said Derek Peterson, chief technology officer for Boingo Wireless, which provides Wi-Fi access to more than 1 million hotspots globally.
Peterson said it is reasonable for the FCC to prohibit paid network prioritization because an Internet provider could hurt one business while helping another on a network link. "An ISP (Internet Service Provider) could sit there and say, 'I don't like that retailer,' which could be bad for it," Peterson said in an interview.
"It's going to be interesting to see how crazy the FCC gets and how technology providers work around rules to deliver the services they need to deliver," he added. "It will be interesting to see how the FCC balances all that and if they are successful at all."