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Dec 15 2017

Net Neutrality: Federal Communications Commission Issues Rules Proposal [Updated 2017-12-15]

Just in time for the holiday season, Ajit Pai – the Chairman of the U.S. Federal Communications Commission or FCC – published a draft document entitled "Restoring Internet Freedom." Its intent is to roll back the so-called Open Internet Order, a regulation that aimed to establish three basic principles concerning broadband networks in the U.S. and was adopted by the same FCC just two and a half years ago. While at first sight it may seem like a pure technicality that only affects the national market, Pai's proposal could also have some profound side effects.

The initiative is supposed to repeal a set of rules that were intended to strengthen consumer protection in the notoriously competitive U.S. telecommunications market. To achieve this, the FCC established three key principles that ISPs were supposed to adhere to if they didn't want to risk going to court:

  • Transparency – broadband service providers must not only publish terms and conditions as usual, but also performance characteristics and network management practices, regardless of whether they offer mobile, landline or combined services; the info had to be easily accessible via their websites
  • No blocking or throttling – under the terms of the OIO, broadband providers are not allowed to shut out (or trim customers' access to) lawful content, applications or services as well as non-harmful devices; in addition, mobile service providers may not interfere with lawful websites or applications that compete with their own telephony offerings
  • No paid prioritization – all network traffic must be treated equally; in particular, broadband providers are not allowed to favor specific services or content in exchange for money or because it benefits affiliated entities (read: their own extended business models)

What's more, the OIO also imposed a comparatively strict set of rules that were meant to protect the "privacy of consumer information." More specifically, it demanded that broadband providers "take reasonable precautions" to ensure that confidential data cannot be siphoned off too easily. As one might expect, most of this legislation was based on the U.S. Telecommunications Act and treated providers of broadband services as utilities, which means they're subject to tighter regulation and more rigorous oversight than other industries.

The OIO was well-liked among consumers and in Silicon Valley; however, it did lack fans among telecommunications firms themselves, which often complained that the order curbed their ability to do business. Consequently, they lobbied for its repeal as well as for a greater solution that would free them from the restrictions of the utilities regime and subject them to the easier-to-handle rules of the Federal Communications Act of 1934 and its amendments instead. Pai's new proposal follows that path, basically repeating these arguments and blaming "utility-style regulation of the Internet" for falling broadband investments and delayed new service offerings. To the keen observer, this shouldn't come as a surprise: Appointed to the FCC in 2012 by President Obama at the recommendation of then-Senate Minority leader Mitch McConnell, Pai – a one-time Associate General Counsel at Verizon Communications was always a free-market advocate and vocally opposed the OIO in the run-up to its adoption. If carried out, his plan would mean that broadband Internet access services would again be classified as information services and be overseen by the Federal Trade Commission (FTC), whose regime is seen as much laxer – in part because, as critics say, it lacks the technical knowledge required to deal with the fast-moving ICT and media industries that the FCC has amassed. Pai promises that revoking the existing regulation will help "create jobs, increase competition, and lead to better, faster, cheaper Internet access for all Americans."

However, there are several problems associated with such promises and with repealing current legislation after 30 months. Number 1 is that, as Pai dutifully notes, U.S. carriers enjoyed largely unfettered freedom during the Clinton and Bush years, and even up into Obama's second term. And yet, broadband Internet access hadn't matured to a level that consumers (or data-driven businesses) found satisfying. In fact, rural areas in the U.S. seem to be facing similar problems as their European counterparts: Mobile coverage can be spotty, and even some market leaders have been hesitant to dig up dirt, that is, invest in building and operating fiber networks needed to support IPTV or Industry 4.0 applications. Second, picking adequate broadband plans that suit individual needs has been, and still can be, extremely complicated – in that regard, the U.S. don't differ much from other countries. The existing regulation makes that choice at least somewhat easier, by prompting service providers to reveal their offerings' strengths and shortcomings as well as some details that could impact service quality. Pai's reform proposal doesn't eliminate this duty completely, but modifies transparency rules in an effort to "minimize the burdens" imposed on carriers through "additional reporting obligations." The new rule would allow firms to scrap those details from their own webpages and either post them on a "publicly available, easily accessible website" or send them to the FCC – customers who want to make an informed decision would have to take time-consuming additional steps to stay on top. Third, jurisdiction to regulate broadband privacy and data protection would be returned to the FTC, which had been in control of both areas until 2015 – albeit without much success, as many of the most disturbing data breaches and privacy violations happened during that period, among them the infamous attack on Target, the second-largest U.S. discounter, that affected up to 110 million customers in 2013.

Perhaps not surprisingly, the suggested policy reversals have drawn massive criticism from various camps of the political spectrum. Next to Mignon Clyburn and Jessica Rosenworcel, the remaining Democrats on the FCC Board, who have voiced their respective concerns here and here, the list of opponents contains many of the 'usual suspects,' among them civil and consumer rights organizations as well as Google and Facebook. Less expectable was that Pai's initiative would garner at best mixed responses on the far right – for example, Breitbart's attempts to give its reports on the topic a positive, pro-FCC and anti-media/anti-establishment spin met with outcries from readers stating that Pai's proposal would only benefit "Big Cable" – telecom carriers and cable TV companies like Comcast and Verizon. Besides, the FCC Chairman has come under fire for some technical peculiarities that overshadowed the proceedings: The so-called public comment process, which is required by law and took off last April, obviously got hijacked – hackers had found a way to inject fake comments posing as legit commentators, but using stolen identities. The violations began in May, and in June New York State Attorney General Eric T. Schneiderman started an investigation into the matter, asking the FCC to provide records related to the public comment system only to be rebuffed by the commission. According to an open letter from Schneiderman, this request was repeated at least eight more times before the proposal was released – to no avail.

To the casual observer, all this may look like a batch of homemade problems whose impact will only be felt in the U.S. market. But Pai's attempt to repeal net neutrality rules is very likely to cause broader consequences. On the one hand, it sets a precedent that will serve as a blueprint for similar legislation in other countries. On the other, it may even undermine international treaties like the EU-U.S. Privacy Shield, which were based on trust in a different legal foundation that halfway supported European privacy and data protection standards. If Pai's plan goes through – which isn't even remotely doubtful given the Republican majority among FCC Commissioners – then that agreement may be toast.

[UPDATE No. 1, 2017-12-12:] In the meantime, Internet and IT pioneers – including ICANN and ISOC co-founder Vint Cerf, W3C Director and "father of the WWW" Tim Berners-Lee, Apple co-founder Steve Wozniak, and Whitfield Diffie, the inventor of public-key cryptography – have sent an open letter to key players in the U.S. congress, commending to "urge FCC chairman Pai to cancel the FCC's vote," which, they say, is based on a "flawed and factually incorrect understanding of Internet technology." Whether this effort has any positive effect remains to be seen; in case Congress chooses not to interfere and Pai proceeds as scheduled, the vote is to take place this upcoming Thursday.

Additional reports and opinion pieces can be found on The Register and Quartz

[UPDATE No.2, 2017-12-15:] As expected, the FCC Commissioners voted strictly along party lines, to arrive at a 3 - 2 majority for repealing the OIO. More details about how the voting session ended a decision process many stakeholders found deeply flawed can be found at Ars Technica, Wired, and eWeek. For German readers, Bavarian daily Süddeutsche Zeitung offers a detailed account of how the public comment process was manipulated.

For those interested in further reading, we've attached the current legislation and Pai's proposal below.


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