Net Neutrality: The FCC's Authority to Regulate Broadband Internet Traffic Management

Net Neutrality: The FCC's Authority to Regulate Broadband Internet Traffic Management

Net Neutrality: The FCC’s Authority to
Regulate Broadband Internet Traffic
Management
Kathleen Ann Ruane
Legislative Attorney
March 26, 2014
Congressional Research Service
7-5700
www.crs.gov
R40234

Net Neutrality: The FCC’s Authority to Regulate Broadband Internet Traffic Management

Summary
A major debate over the government’s role with respect to the regulation of the Internet is
currently occurring. Legally, one of the biggest questions is to what extent the Federal
Communications Commission (FCC or Commission) currently has the authority to regulate the
ways in which Internet service providers (ISPs) manage Internet traffic over their networks. On
December 21, 2010, the Commission adopted new open Internet rules in its Open Internet Order.
The rules required broadband Internet service providers to disclose their network traffic
management policies and prohibited them from blocking any lawful content from travelling over
their networks. Furthermore, the rules prohibited fixed broadband Internet service providers from
unreasonably discriminating against any particular content.
The rules were challenged in federal court by a number of different industry participants. Verizon,
in its suit, argued that, policy considerations aside, the FCC had not asserted adequate statutory
authority to issue the rules. In January of 2014, the Court of Appeals for the District of Columbia
issued a decision finding that the FCC did have the authority under Section 706 of the
Telecommunications Act of 1996 to issue the rules. However, the court vacated both the anti-
blocking and anti-discrimination rules, nonetheless. The court found that, although the FCC had
reasonably interpreted the authority granted to it by Section 706, the agency could not promulgate
rules under that section that otherwise violated the Communications Act of 1934. Because the
anti-blocking and anti-discrimination rules were prohibited by another portion of the
Communications Act, the court struck down the rules. This report will review the Open Internet
Order and the court’s decision, as well as examine the FCC’s authority to regulate the
management of broadband Internet traffic in the wake of the decision.
For further information on the policy aspects of this issue, see CRS Report R40616, Access to
Broadband Networks: The Net Neutrality Debate, by Angele A. Gilroy.

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Net Neutrality: The FCC’s Authority to Regulate Broadband Internet Traffic Management

Contents
Introduction ...................................................................................................................................... 1
Broadband Internet Access Service Providers Under the Communications Act.............................. 2
The Open Internet Rules .................................................................................................................. 4
The Rules ................................................................................................................................... 5
Application .......................................................................................................................... 5
Wireline Rules ..................................................................................................................... 6
Wireless / Mobile Broadband .............................................................................................. 8
The FCC’s Authority to Issue the Rules .................................................................................... 9
Verizon v. FCC ............................................................................................................................... 11
Current Regulatory Options ........................................................................................................... 14
Enforce the Disclosure Rules .................................................................................................. 14
Reinstate the Anti-Blocking Rule ............................................................................................ 14
Reinstate the Anti-Discrimination Rule ................................................................................... 15
Reclassification of Broadband Internet Access Services ......................................................... 16

Contacts
Author Contact Information........................................................................................................... 16

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Net Neutrality: The FCC’s Authority to Regulate Broadband Internet Traffic Management

Introduction
Some degree of Internet traffic management is necessary for networks to function effectively. For
example, in order for voice conversations to occur over the Internet, the data packets encoding the
communications must arrive in rapid sequence. Long delays between the arrival of voice data
packets would make voice conversations over the Internet impossible to conduct. Prioritization of
voice data packets over other packets traveling simultaneously over the same network ensures
clear voice transmissions, while minimally delaying other network traffic. Logically, if network
managers have the power to prioritize data packets, they also have the power to subordinate them.
This means network managers have the power to render the applications that depend on packet-
prioritization (like voice or video applications) useless. Accordingly, there must be a line between
network management that is necessary to provide quality service to users, and network
management that is anti-competitive or otherwise harmful to the free exchange of information.
Some argue that it is necessary to regulate network management practices in order to ensure that
Internet users are able to receive any lawful content that exists on the Internet without fear that a
broadband Internet service provider might interfere to degrade the transmission of that content.1
Others argue that such regulation is unnecessary. The Federal Communications Commission
(FCC or Commission) has been attempting to address this issue for a number of years.
In 2005, the FCC issued its Internet Policy Statement.2 The Internet Policy Statement endeavored
to express the FCC’s opinion that broadband consumers should have access to all lawful content
on the Internet and that all lawful applications should be usable on those networks. The agency
also made clear that it believed users’ rights should be limited by the needs of broadband
providers to reasonably manage their networks. While the Policy Statement was not promulgated
into regulation, the FCC maintained that it had sufficient authority to enforce the principles
should the need to do so arise.3
Two years after the release of the Internet Policy Statement, through various experiments by the
media, most notably the Associated Press, it was discovered that Comcast Corporation (Comcast)
was intermittently interfering with the use of an application called BitTorrent™ and, possibly,
other peer-to-peer (P2P) file sharing programs on its network, as a method of traffic
management.4 In response to a petition from Free Press for a declaratory ruling that Comcast’s
blocking of P2P applications was not “reasonable network management,” the FCC conducted an
investigation into Comcast’s network management practices.5 The FCC determined that Comcast

1 For more information regarding the policy debate related to net neutrality see CRS Report R40616, Access to
Broadband Networks: The Net Neutrality Debate, by Angele A. Gilroy.
2 In the Matters of the Appropriate Framework for Broadband Access to the Internet over Wireline Facilities; Review
of Regulatory Requirements for Incumbent LEC Broadband Telecommunications Services; Computer III Further
Remand Proceedings: Bell Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory Review –
Review of Computer III and ONA Safeguards and Requirements; Inquiry Concerning High-Speed Access to the
Internet Over Cable and Other Facilities; Internet Over Cable Declaratory Ruling; Appropriate Regulatory Treatment
for Broadband Access to the Internet Over Cable Facilities, 20 FCC Rcd 14986 (2005) [hereinafter FCC’s Network
Management Principles].
3 Id.
4 Peter Svensson, Comcast Blocks Some Internet Traffic, AP Testing Shows, Associated Press, October 19, 2007.
5 In the Matters of Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation for Secretly
Degrading Peer-to-Peer Applications and Broadband Industry Practices Petition of Free Press et al. for Declaratory
Ruling that Degrading an Internet Application Violates the FCC’s Internet Policy Statement and Does Not Meet an
Exception for “Reasonable Network Management,” 23 FCC Rcd 13028 (2008) [hereinafter Comcast Decision].
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had violated the agency’s Internet Policy Statement when it blocked certain applications on its
network and that Comcast’s practices were not “reasonable network management.” Comcast
disputed the FCC’s authority to issue such a ruling and appealed the decision to the U.S. Court of
Appeals for the D.C. Circuit. The court held that the FCC did not make a proper argument for
asserting jurisdiction over network management practices and vacated the order against
Comcast.6
Following the Comcast ruling, the FCC issued what has come to be known as the Open Internet
Order, asserting a new primary basis for its authority to regulate broadband network
management.7 The Order codified into regulation general rules of the road for providers of
broadband Internet services similar to the principles the FCC had outlined previously in the
Internet Policy Statement. The rules were challenged in federal court by Verizon, and portions of
the rules were recently vacated by the Court of Appeals for the D.C. Circuit.8
Because the reasoning of the court’s opinion depends heavily upon a complicated regulatory
history, this report will begin by describing the regulatory and statutory framework of the
Communications Act as it applies to broadband Internet service providers. It will then describe
the Open Internet Rules and the FCC’s arguments for asserting the authority to issue the rules.
Finally, the report will discuss the court’s decision in Verizon v. FCC and the FCC’s options for
issuing regulations of broadband Internet service providers in the future.
Broadband Internet Access Service Providers Under
the Communications Act
No specific title of the Communications Act applies to broadband Internet access service
providers. Instead, the FCC’s authority to regulate broadband Internet access services has evolved
over time as a result of a combination of agency decisions, statutory changes, and case law. To
begin with the statute, the Communications Act of 1934, as amended by the Telecommunications
Act of 1996, grants the Federal Communications Commission jurisdiction over all interstate
communications via wire or radio.9 This language is broad, and places broadband Internet access
services within the jurisdiction of the Commission.10 However, the act does not authorize the FCC
to regulate all interstate communications equally. Certain forms of communication may be more
tightly regulated than others.
Most relevant to this discussion is the FCC’s authority to regulate pursuant to Titles I and II of the
Communications Act. Title I of the Communications Act provides very little authority for the
FCC to regulate directly.11 In fact, the FCC generally cannot impose regulations under Title I of
the act unless those regulations are shown to be “reasonably ancillary” to the performance of

6 Comcast v. Federal Communications Commission, 600 F.3d 642 (D.C. Cir. 2010).
7 In the Matter of Preserving the Open Internet, Broadband Industry Practices, FCC 10-201, GN Docket No. 09-191,
WC Docket No. 07-52 (2010) (hereinafter “Open Internet Order”).
8 Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014).
9 47 U.S.C. §152(a).
10 Verizon, 740 F.3d at 629.
11 Comcast, 600 F.3d at 642.
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another of the Commission’s statutorily obligated duties.12 Title II of the act allows the FCC to
place strict common carrier regulations on telecommunications services.13 Common carrier
regulations can include requirements that providers offer their services to all customers, that those
services be offered at reasonable prices, and that providers refrain from discriminating in the
provision of those services.14 The question of whether a form of communication should be
regulated under Title I or Title II is therefore an important one.
Prior to the Telecommunications Act of 1996, the FCC had faced the question of whether and
how to regulate providers of Internet services.15 Initially, the agency chose to distinguish between
what it termed “basic services” and “enhanced services.”16 Basic services were “pure
communications” services. That is to say that they were “virtually transparent in terms of [their]
interaction with customer supplied information.”17 The most common example of a basic service
would be a telephone call. Enhanced services, on the other hand, involved “computer processing
applications ... used to act on the content, code, protocol, and other aspects of the subscriber’s
information.”18 This definition encompassed services that provided end users with a connection to
the Internet. It may be worthwhile to point out that, at the time these definitions were
promulgated, most connections to the Internet were accomplished via a dial-up connection.
Therefore, the transmission component of a connection to the Internet was treated as distinct from
the service providing the actual Internet connection. Basic services, the transmission component,
were subject to common carrier requirements. Enhanced services, the connection component,
were not.
This regulatory regime was in place when Congress enacted the Telecommunications Act of 1996
and, in the act, Congress preserved a similar distinction. Under the Telecommunications Act,
telecommunications carriers, not unlike basic service providers, are subject to common carrier
regulation, but only to the extent that they are providing telecommunications services.19
Information services providers, not unlike enhanced service providers, are not subject to common
carrier regulation.20 Tracking its previous regulatory distinctions and the definitions in the
Telecommunications Act, the FCC generally treated the provision of the “pure transmission”
services as telecommunications services, but treated the provision of “Internet access service” as
information services.21
The Commission apparently changed course in 2002, when deciding how to treat the provision of
broadband Internet access by cable providers.22 Rather than treating the access service portion of

12 Id.
13 47 U.S.C. §201 et seq.
14 Id.
15 Verizon, 740 F.3d at 629.
16 See In Re Amendment of Section 64.702 of the Commission’s Rules and Regulations, 77 F.C.C. 2d 384, 387 (1980)
(“Second Computer Inquiry” or “Computer II”).
17 Id. at 420.
18 Id.
19 47 U.S.C. §153.
20 Id.
21 See, e.g., In re Deployment of Wireline Services Offering Advanced Telecommunications Capability, 13 F.C.C.R.
24013 (1998).
22 In the Matter of Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities; Internet
Over Cable Declaratory Ruling; Appropriate Regulatory Treatment for Broadband Access to the Internet Over Cable
(continued...)
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cable broadband service as an information service and the transmission service as a
telecommunications service, the Commission determined that cable companies were providing an
integrated information service when they provided cable broadband Internet service. As a result
of this interpretation, cable broadband service providers were exempt from Title II common
carrier regulations.
The Supreme Court upheld the FCC’s decision to classify cable broadband service as an
information service.23 The Court found that the definitions of telecommunications service and
information service in the Communications Act were ambiguous, and that the FCC had
reasonably interpreted these ambiguous provisions. As a result, it was within the FCC’s discretion
to determine whether Internet access services should be regulated under Title II as
telecommunications services, subject to common carrier regulation, or, less onerously, under Title
I as information services.
The FCC ultimately decided to treat all types of broadband Internet access services, both fixed
and mobile, as information services, effectively limiting its own authority to directly regulate
broadband Internet service providers.24 Nonetheless, the FCC maintained that, regardless of the
services’ classification as information services, the agency still possessed statutory authority to
impose regulations on Internet service providers if necessary.25 As discussed above, the FCC’s
first attempt to assert the authority to implement regulations of broadband Internet traffic
management practices was unsuccessful. Despite its loss in the Comcast case, the agency
continued to argue that it possessed the requisite authority to issue the rules without reclassifying
the services as telecommunications services. It was with this in mind that the FCC issued its Open
Internet Order.
The Open Internet Rules
On December 21, 2010, the FCC adopted its Open Internet Order.26 As noted above, the FCC
does not possess direct authority to regulate services classified under Title I,27 and was
unsuccessful in its initial attempt to assert authority over broadband Internet network
management in the Comcast case. As a result, the agency considered a number of options for
moving forward with issuing network management rules.28 Among them was the potential
reclassification of broadband services to bring them under the umbrella of telecommunications
services, which the FCC does have direct authority to regulate.29 In the end, however, the FCC

(...continued)
Facilities, 17 F.C.C.R. 4798, 4824 (2002). [hereinafter “Cable Broadband Order”]
23 National Cable & Telecommunications Ass’n v. Brand X Internet Services, 545 U.S. 967 (2005).
24 See, e.g., In re Appropriate Framework for Broadband Access to the Internet Over Wireline Facilities, 20 F.C.C.R.
14853 (2005), In re Appropriate Regulatory Treatment for Broadband Access to the Internet Over Wireless Networks,
22 F.C.C.R. 5901 (2007).
25 See Cable Broadband Order, 17 F.C.C.R. at 4842.
26 Open Internet Order, supra note 7.
27 Id.
28 Press Release, Chairman Julius Genachowski, FCC, The Third Way: A Narrowly Tailored Broadband Framework
(May 6, 2010). [“Genachowski Statement”]. Press Release, Austin Schlick, FCC, A Third-Way Legal Framework for
Addressing the Comcast Dilemma (May 6, 2010). [“Schlick Statement”].
29 Id.
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ultimately decided not to reclassify broadband services.30 Instead, the FCC argued that it had
sufficient authority to regulate broadband network management under Section 706 of the
Telecommunications Act. The rules and the FCC’s justification of its authority to issue them are
discussed in this section.
The Rules
The FCC adopted what it termed “basic rules of the road” for broadband Internet access services
and traffic management.31 The Commission contended that the rules were necessary to keep the
Internet open to all and to spur investment in new technologies and broadband infrastructure
deployment. While the Commission acknowledged that there is only “one Internet,” it also
conceded that there may be differences in network structure and capabilities. Particularly, the
Commission recognized the difference between the technological capabilities of wireline or fixed
broadband access providers and wireless broadband access providers.32 Wireless, in the
Commission’s view, is still in the development stages and does not have the large capacities that
wireline providers have. For that reason, more content management may be necessary on the part
of wireless providers. As a result, the rules the Commission would have applied to wireline and
wireless were slightly different.
Application
The term “broadband Internet access service” is defined as,
A mass market retail service by wire or radio that provides the capability to transmit data to
and receive data from all or substantially all Internet endpoints, including any capabilities
that are incidental to and enable the operation of the communications service, but excluding
dial-up Internet access service. This term also encompasses any service that the Commission
finds to be providing a functional equivalent of the service described in the previous
sentence, or that is used to evade the protections set forth in this Part.33
This definition applies to all broadband Internet access providers, be they cable, fiber, wireless, or
some other access method, that offer their services to retail customers. In other words, they offer
their services to residential customers, small businesses, and other end users. The term does not
include access services offered to large-scale enterprise customers. Furthermore, the rules apply
to all Internet traffic, not just to voice and video services.34
It is important to note that the rules apply only to Internet access services. They do not apply to
so-called “edge service” providers, which are application and Internet content providers.35 Edge
services could encompass anything from blogs, to Google, to so-called app stores. The

30 Federal Communications Commission, Chairman Julius Genachowski, Remarks on Preserving Internet Freedom and
Openness (December 1, 2010). Available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-303136A1.pdf.
31 Open Internet Order, supra note 7, at ¶ 1.
32 Id. at ¶ 49.
33 Id. at ¶ 44.
34 Id. at ¶ 45.
35 Id. at ¶ 46.
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Commission noted that the Communications Act grants the FCC jurisdiction over “the utilization
of networks and spectrum to provide communication by wire or radio.”36
Wireline Rules
The Commission imposed three basic rules on wireline (fixed) broadband service providers: a
transparency rule, a rule against blocking, and a rule against unreasonable discrimination. The
Commission characterized the rules as general principles, but gave guidance to industry regarding
what might be considered in compliance and in violation of the rules.
Disclosure
The Commission adopted a transparency rule requiring fixed broadband service providers to
supply to customers, both on their websites and at the time of sale, disclosure regarding the
network management practices the providers employ.37 This rule is geared toward providing the
Commission and the public with a barometer by which to gauge network management. The goal
appears to be to empower the public to hold broadband companies accountable to their own
descriptions of their network management practices. The final rule reads,
A person engaged in the provision of broadband Internet access service shall publicly
disclose accurate information regarding the network management practices, performance,
and commercial terms of its broadband Internet access services sufficient for consumers to
make informed choices regarding use of such services and for content, application, service,
and device providers to develop, market and maintain Internet offerings.38
The rule is intended to allow discretion to broadband providers in determining exactly what
information the providers will disclose. However, the Commission did provide suggestions for
the type of information it would expect to see in these disclosures. Specifically the Commission
identified three main topics the disclosures likely should cover: network practices, performance
characteristics, and commercial terms.39 Within the network management disclosures the
Commission suggested that companies provide information regarding their congestion
management practices, their application-specific management practices, and their device
attachment rules. Within the performance characteristics section, the Commission suggested
including a service description, including the expected performance level of the service, and the
impact of specialized services that may be offered. Within the commercial terms section, the
Commission has suggested inclusion of information such as pricing; privacy policies, including
information regarding how the data collected by the provider is utilized; and redress options for
resolving disputes.
The Commission stressed that these suggestions were neither mandatory nor all-inclusive of what
a broadband service provider should include in its disclosure. Rather, each broadband provider
should consider its own network and services and tailor information to fit its particular service.

36 Id. at ¶ 50.
37 Open Internet Order, supra note 7, at ¶ 53.
38 Id. at ¶ 54.
39 Id at ¶ 56.
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Furthermore, the Commission stressed that this rule does not require broadband providers to
disclose proprietary information.
No Blocking Rule
The no blocking rule was intended to ensure that end users can access any lawful content or
application they wish over the Internet.40 The Commission contended that the rule was necessary
to ensure openness and competition in the provision of broadband Internet access services.
Moreover, most, if not all, major broadband providers currently claim that they do not block any
lawful content over their networks. The rule read,
A person engaged in the provision of fixed broadband Internet access service, insofar as such
person is so engaged, shall not block lawful content, applications, services, or nonharmful
devices, subject to reasonable network management.41
The rule covers all lawful communication over the Internet, including those communications that
may not fit cleanly into the definition of application, services, or any other listed item.
Furthermore, “no blocking” also means “no impairing or degrading” lawful content so as to
render the content unusable, subject to reasonable network management.42 As an example,
applications that deliver video streaming over the Internet require a great deal of Internet
capacity. Slowing down the speed at which the video is delivered to the end user may make the
video unwatchable or otherwise disrupt the experience. Broadband service providers have the
capability to intentionally slow down these delivery speeds. The Commission makes clear that
such intentional slowing to the point that the video cannot be watched is a violation of the open
Internet rules. However, the rule is subject to reasonable network management. As an example, at
times of high volume of Internet traffic, in order to allow all of their customers to have Internet
access in a given area, the broadband provider may find it necessary to slow the delivery of online
products such as streaming video. Such slowing, when necessary as a management tool, likely
would not be considered to be a violation of the no blocking rule, according to the Commission.
No Unreasonable Discrimination Rule
The rule against unreasonable discrimination was distinct from, yet closely related to, the rule
against blocking. The unreasonable discrimination rule recognized that many fixed broadband
access providers are also Internet content providers; furthermore, they may have affiliations with
some Internet content providers, but not all. As a result, fixed broadband Internet providers have
both the capability and the incentive to favor the delivery of their own and their affiliates’ Internet
content over that of non-affiliated content to their subscribers. The rule, therefore, stated,
A person engaged in the provision of fixed broadband internet access service, insofar as such
person is so engaged, shall not unreasonably discriminate in transmitting lawful network
traffic over a consumer’s broadband Internet access service. Reasonable network
management shall not constitute unreasonable discrimination.43

40 Id. at ¶ 62.
41 Id. at ¶ 63.
42 Open Internet Order, supra note 7, at ¶ 66.
43 Id. at ¶ 68.
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The more transparent an access provider is about traffic management, the more likely it would
have been to be considered reasonable.44 Furthermore, the more control granted to the end user to
manage the content he or she wished to receive, the more likely the management would have
been considered to be reasonable. Also, the rule did not preclude fixed broadband Internet
providers from developing tiered levels of service, where heavy Internet users could pay more for
faster speeds, and lighter users might pay less.45 Nonetheless, the Commission expressed concern
for “pay for priority” agreements wherein a broadband provider and a third party (i.e., an edge
service provider) might agree to favor some traffic over other traffic.46 An example of this might
be if a cable broadband Internet access provider accepted money from Netflix to ensure Netflix
would be delivered over the cable provider’s network more quickly than any other online video
service provider, such as Hulu or Amazon. The Commission indicated that pay for priority
agreements between edge service providers and Internet access service providers might violate
the unreasonable discrimination prohibition.
Reasonable Network Management
To provide greater guidance as to what is permissible, the Commission also developed a
definition for what activities would be considered to be reasonable network management. The
definition read,
A network management practice is reasonable if it is appropriate and tailored to achieving a
legitimate network management purpose, taking into account the particular network
architecture and technology of the broadband Internet access service.47
Legitimate purposes included, but were not limited to, ensuring network security and integrity,
addressing traffic that is unwanted by end users, and reducing or mitigating the effects of
congestion on the network.
Wireless / Mobile Broadband
The rules the Commission established for mobile broadband were somewhat different than those
for fixed broadband services. In the Commission’s view, mobile broadband is at an earlier stage
of development than fixed broadband, and is evolving rapidly.48 Not only is it at an earlier
development stage, but it also currently has less overall capacity for delivery of advanced Internet
services, like streaming video, than fixed broadband services. As a result, the Commission has
applied to mobile broadband only the transparency and no blocking rules, subject to reasonable
network management.49

44 Id. at ¶ 70.
45 Id. at ¶ 72.
46 Id. at ¶ 76.
47 Open Internet Order, supra note 7, at ¶ 82.
48 Id. at ¶ 94.
49 Id. at ¶ 96.
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Disclosure
The transparency rule applies to mobile broadband in much the same way that the rule applies to
fixed broadband services.50 Mobile broadband providers are not required to allow all third-party
devices and applications to attach to their network, but mobile broadband providers must disclose
their certification procedures for such devices and applications.
No Blocking Rule
The rule against blocking was slightly different for mobile broadband providers than it was for
fixed broadband providers. The no blocking rule for mobile broadband read,
A person engaged in mobile broadband Internet access service, insofar as such person is so
engaged, shall not block consumers from accessing lawful websites, subject to reasonable
network management; nor shall such person block applications that compete with the
provider’s voice or video telephony services, subject to reasonable network management.51
This rule was narrower than the no blocking rule that had been applied to fixed services in that it
only prevented blocking of lawful websites, rather than preventing the blocking of all lawful
Internet content. Importantly, it also prevented blocking of Internet services that might compete
with a wireless provider’s voice and video telephony services.52 This likely would have meant
that wireless broadband providers could not block applications like Skype from operating over
their wireless networks.
Furthermore, the rule was subject to reasonable network management. Reasonable network
management had the same meaning as the definition above. The Commission stated that the
definition was broad enough to encompass different network architectures, and did not believe it
necessary to develop a different definition for mobile and fixed network management.53
The FCC’s Authority to Issue the Rules
The FCC centered its jurisdictional argument on Section 706 of the Telecommunications Act of
1996.54 Section 706(a), the Commission’s main source of authority under the section, reads,
In general, the Commission and each State commission with regulatory jurisdiction over
telecommunications services shall encourage the deployment on a reasonable and timely
basis of advanced telecommunications capability to all Americans (including, in particular,
elementary and secondary schools and classrooms) by utilizing, in a manner consistent with
the public interest, convenience, and necessity, price cap regulation, regulatory forbearance,
measures that promote competition in the local telecommunications market, or other
regulating methods that remove barriers to infrastructure investment.55

50 Id. at ¶ 97.
51 Id. at ¶99.
52 Open Internet Order, supra note 7, at ¶¶ 101 - 102.
53 Id. at ¶ 103.
54 Codified at 47 U.S.C §1302.
55 47 U.S.C. §1302(a).
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Advanced telecommunications capability is defined as follows:
without regard to any transmission media or technology, as high-speed, switched, broadband
telecommunications capability that enables users to originate and receive high-quality voice,
data, graphics, and video telecommunications using any technology.56
The Commission argued that this provision “provides the Commission with the specific
delegation of legislative authority to promote the deployment of advanced services, including by
means of the open Internet rules.”57 In the Comcast decision, cited above, the D.C. Circuit
acknowledged that Section 706 contains what could arguably be a “direct mandate.”58
Nonetheless, the D.C. Circuit believed that the Commission had already foreclosed on this
possibility by finding that Section 706 granted the Commission no new regulatory authority.
In addressing the court’s concerns that the agency had previously found Section 706 granted no
new regulatory authority, the FCC clarified that its previous interpretation of Section 706(a)
found only that Section 706 did not grant the FCC new forbearance authority.59 However, the
agency had never meant to find that Section 706 granted no new regulatory authority at all.
Instead, the FCC noted that the language of the statute directs the Commission also to use “price
cap regulation ... and other regulating methods that remove barriers to infrastructure
investment.”60 It is this language that the FCC contended grants it the regulatory authority to issue
and enforce the open Internet rules.
The Commission argued that Congress “necessarily invested the Commission with the statutory
authority to carry out” price cap regulation, regulatory forbearance, and other measures that
promote competition in the telecommunications market, as well as other regulatory methods that
would promote infrastructure investment when it enacted 706.61 The Commission, therefore read
Section 706(a) as an authorization “to address practices, such as blocking VoIP communications,
degrading or raising the cost of online video, or denying end users material information about
their broadband service, that have the potential to stifle overall investment.”62
The Commission further cited Section 706(b) as a source of authority for issuing the open
Internet rules. Section 706(b) reads,
The Commission shall, within 30 months after the date of enactment of this Act [enacted
Oct. 10, 2008], and annually thereafter, initiate a notice of inquiry concerning the availability
of advanced telecommunications capability to all Americans (including, in particular,
elementary and secondary schools and classrooms) and shall complete the inquiry within 180
days after its initiation. In the inquiry, the Commission shall determine whether advanced
telecommunications capability is being deployed to all Americans in a reasonable and timely

56 47 U.S.C. §1302(d).
57 Open Internet Order, supra note 7, at ¶ 122.
58 Comcast, 600 F. 3d at 658.
59 Open Internet Order, supra note 7, at ¶ 119. The Commission argued that it previously had found that Section 706(a)
did not grant the FCC the power to forbear from regulation above and beyond the authority already granted to the
Commission under Section 10 of the act. In other words, Section 706(a) directed the Commission to use its existing
forbearance authority and forbearance process to encourage the deployment of advanced services
60 47 U.S.C. §1302(a).
61 Open Internet Order, supra note 83, at ¶ 120.
62 Id.
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fashion. If the Commission’s determination is negative, it shall take immediate action to
accelerate deployment of such capability by removing barriers to infrastructure investment
and by promoting competition in the telecommunications market.63
Recently, the Commission found that broadband services are not being deployed to all Americans
in a reasonable and timely fashion.64 In light of its determination that broadband deployment has
been unsatisfactory, the Commission cited Section 706(b)’s mandate to “take immediate action to
accelerate deployment of such capability by removing barriers to infrastructure investment and by
promoting competition in the telecommunications market” as another source of authority for
issuing the rules.65 The Commission argued that the rules would promote competition in the
market by preventing anticompetitive activity such as blocking of unaffiliated applications or
discrimination against unaffiliated content providers, and that this would in turn have the effect of
increasing demand for broadband Internet services which would drive infrastructure investment.
Verizon v. FCC
Following the publication of the rules in the Federal Register, Verizon and others filed appeals in
various courts challenging the rules.66 The appeals were consolidated in the D.C. Circuit.67 In
January 2014, the court issued its ruling vacating the anti-discrimination and anti-blocking rules,
but upholding the disclosure rules.68 In its decision the Court found that Section 706 did grant the
FCC direct authority to regulate broadband Internet service providers. The Court also found that
the agency had reasonably concluded, based upon available evidence, that the Open Internet rules
would “protect and promote edge-provider investment and development, which in turn drives
end-user demand for more and better broadband technologies, which in turn stimulates
competition among broadband providers to further invest in broadband.”69 The court found,
therefore, that the FCC had reasonably interpreted its Section 706 authority to regulate broadband
Internet access service providers to include the authority to regulate their network management
practices. However, the court also found that the authority granted by Section 706 did not allow
the FCC to issue regulations that expressly contradicted another portion of the Communications
Act.70
As it applies to fixed broadband Internet access service providers, the Communications Act
provides that telecommunications carriers will be treated as common carriers, but only to the
extent that they are providing telecommunications services.71 Because fixed broadband Internet

63 47 U.S.C. §1302(b).
64 Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable
and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to §706 of the Telecommunications
Act of 1996, 25 FCC Rcd 9556, 9558 (2010).
65 Open Internet Order, supra note 7, at ¶ 123.
66 See Notice of Multicircuit Petitions for Review, Pet. for Rev. of FCC’s In the Matter of Preserving the Open
Internet, GN Docket No. 09-191; Broadband Industry Practices, WC Docket No. 07-52, Report and Order. 25 FCC Rcd
17905 (2010), MDL No. ___, DC/1:11 -ca-01356, (J.P.M.L., October 5, 2011).
67 Order Granting Mot. Cons., DC/1:11 -ca-01356, (J.P.M.L., October 6, 2011).
68 Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014).
69 Id. at 642.
70 Id. at 649.
71 47 U.S.C. 153(51) (“A telecommunications carrier shall be treated as a common carrier under this [Act] only to the
extent that it is engaged in providing telecommunications services.”).
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Net Neutrality: The FCC’s Authority to Regulate Broadband Internet Traffic Management

access services were classified by the FCC as information services, and not as
telecommunications services, it would violate the Communications Act to apply common carrier
regulations to broadband Internet services.72 Furthermore, as it applies to mobile services, the
Communications Act prohibits the treatment of providers of private mobile services as common
carriers insofar as they are providing such services.73 Because mobile Internet access services are
classified as private mobile services,74 it would violate the Communications Act to regulate
mobile broadband as common carriers, as well. The court, therefore, found it necessary to
examine whether the rules imposed by the Open Internet Order treated broadband Internet access
service providers as common carriers.
The act defines common carriers as those entities providing a common carrier service.75
Commission interpretation, court decisions, and common law have been used to further develop
the meaning of common carrier regulation. Generally, common carriage refers to a requirement
that all customers be offered service on a standardized and non-discriminatory basis, and may
include a requirement that those services be priced reasonably.76 There are reasonable limits to the
requirement that services be offered indiscriminately. Common carriers, for example, are not
required to provide service where such offering could damage or degrade the provision of that
service.77 Common carrier regulation is not monolithic, however. The court noted that “there is a
gray area in which, although a given regulation might be applied to common carriers, the
obligations imposed are not common carriage per se.” 78 In the space between clear common
carriage regulation and clear private carriage regulation, the court gives deference to the FCC’s
interpretation of whether the rule confers common carriage status. In other words, while the FCC
cannot impose per se common carriage regulations on information services like broadband
Internet access services, the court will grant deference to the agency’s interpretation of whether a
rule is treating a service provider as a common carrier if that rule is not per se a common carriage
regulation.
Turning to the individual rules in the Open Internet Order, the court had little trouble finding that
the FCC’s antidiscrimination rule regulated fixed broadband Internet services providers as
common carriers per se, because “by its very terms [it] compels those providers to hold
themselves out to ‘serve the public indiscriminately.’”79 The Commission had argued that the rule
was not a common carrier requirement because it allowed service providers to engage in
reasonable network management. The court disagreed finding that the allowance for reasonable
network management, instead, merely preserved “a common carrier’s traditional right to ‘turn
away [business] either because it is not of the type normally accepted or because the carrier’s
capacity has been exhausted.”80 The court also found that the anti-discrimination rule did not
allow for flexibility sufficient to interpret the rule as being more relaxed than common carrier
discrimination prohibitions. The Court observed that, as the Open Internet Order had intimated, if

72 Verizon, 740 F.3d at 650.
73 See 47 U.S.C. §332 (“A person engaged in the provision of a service that is a private mobile services shall not,
insofar as such person is so engaged, be treated as a common carrier for any purpose under” the Communications Act.).
74 See Wireless Broadband Order, 22 F.C.C.R. at 5921.
75 47 U.S.C. §153(11).
76 Verizon, 740 F.3d at 651.
77 See, Id. at 657.
78 Id. at 652 (citations omitted).
79 Id. at 656.
80 Id. at 657.
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the Commission likely would not allow an edge provider to pay an access provider for faster
delivery to end users, because doing so would violate the anti-discrimination rules, that rule
would effectively force all access providers to provide edge service providers with delivery
services to end users at a uniform cost of $0. Such a rule left no room for the individual
bargaining and flexibility usually associated with regulations of private carriers. Furthermore, the
rule strongly resembled Section 202 of the Communications Act which imposes non-
discrimination requirements on telecommunications services, a statute that is clearly a common
carrier regulation.81 Because the anti-discrimination rules applied a common carrier obligation on
the provision of an information service in violation of the Communications Act’s prohibition on
regulating any service except telecommunications services as common carriers, the court vacated
the rule.
Less clear to the court was whether the rule prohibiting blocking of any lawful Internet traffic by
fixed and mobile broadband access service providers was common carrier regulation per se.82 In
support of finding that the anti-blocking rule was a common carrier regulation the court noted that
the rules “establish a minimum level of service that broadband providers must furnish to all edge
providers,”83 requiring, essentially that all edge provider services be, at a minimum, usable.
Furthermore, the order prohibited the charging of a fee for that minimum level of service. For
these reasons, the court found that the anti-blocking rule was a per se common carriage
regulation. However, the court acknowledged that there may be an acceptable counterargument to
its conclusion, as long as the anti-discrimination rule was eliminated. The anti-blocking rule
requires only that a minimum level of service be provided to edge service providers free of
charge. Nothing in the rule would prohibit access service providers from charging edge service
providers for something more than the basic level. “For example, Verizon might, consistent with
the anti-blocking rule—and, again, absent the anti-discrimination rule—charge an edge provider
like Netflix for high-speed, priority access while limiting all other edge providers to a more
standard service.”84 Under this example, the anti-blocking rule could establish a minimum level
of service while allowing room for the individualized bargaining that might allow the rule to
avoid running afoul of the prohibition on common carrier regulation. The court did not accept this
reasoning, however, because the Commission did not assert it either in the Open Internet Order or
in its briefs to the court and the court was “unable to sustain the Commission’s action on a ground
upon which the agency itself never relied.”85 The court vacated the anti-blocking rule as a result.
The disclosure rules, however, were clearly not common carrier regulations and therefore did not
violate the prohibition. The Court upheld the rules because Section 706 of the Communications
Act granted the Commission the authority to promulgate them and the rules did not violate any
other provision of the Communications Act.

81 47 U.S.C.§202.
82 Verizon, 740 F.3d at 657-58.
83 Id.
84 Id.
85 Id. at 658-59.
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Current Regulatory Options
Following the court’s decision in Verizon v. FCC, it is clear that the FCC does have some
authority to promulgate regulations pursuant to Section 706 that encourage the deployment of
advanced telecommunications services. Included in the FCC’s authority to encourage
deployment, in the court’s estimation, is the authority to regulate providers of broadband Internet
access service to some extent. While the FCC has so far only attempted to assert Section 706 as a
source of authority for implementing regulations that would govern broadband Internet traffic
management practices, it is conceivable that Section 706 might be reasonably interpreted to allow
the FCC to regulate other practices of broadband Internet access service providers in such a way
that the agency believes broadband deployment would be encouraged. The agency has yet to
explore these options, however, and appears to currently be focusing on imposing regulations on
broadband Internet traffic management.
To that end, Chairman Thomas Wheeler has announced that the FCC would not appeal the court’s
decision in Verizon. Rather, the agency plans to enforce the rules upheld by the court, and
reexamine its options for legally imposing the rules vacated by the court.86 The Chairman
indicated that the FCC does not plan to reclassify broadband Internet access services as
telecommunications services, though the Chairman maintains that reclassification is an option
that remains “on the table.”87 Some of the FCC’s options for achieving its goals of imposing rules
of the road on the management of broadband Internet traffic follow. They are by no means an
exhaustive list of the agency’s options.
Enforce the Disclosure Rules
As noted above, the court upheld the agency’s authority to enforce disclosure rules related to
broadband Internet traffic management. The disclosure rules require broadband Internet access
service providers to disclose accurate information regarding their network management
practices.88 Such rules could be a useful tool for the Commission in the future. For example, if an
Internet access service provider had disclosed a policy of refraining from blocking any lawful
content, and it was later determined that the provider was actively blocking certain legal web sites
or software, as previously happened in the Comcast case, the access service provider could
arguably be in violation of these disclosure rules, because the disclosures provided by the
company were not accurate. The Commission would then be able to penalize the access service
provider for violating the Commission’s disclosure rules.
Reinstate the Anti-Blocking Rule
In the Verizon case, the FCC did not attempt to distinguish between the anti-blocking and anti-
discrimination rules when arguing that the rules were not common carriage regulations per se.
The D.C. Circuit indicated in its opinion that the anti-blocking rule, if enforced without the anti-

86 Statement, Chairman Thomas Wheeler, FCC, The FCC’s Open Internet Rules (February 19, 2014) available at
http://www.fcc.gov/document/statement-fcc-chairman-tom-wheeler-fccs-open-internet-rules.
87 Id.
88 Open Internet Order, supra note 6, at ¶ 54.
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Net Neutrality: The FCC’s Authority to Regulate Broadband Internet Traffic Management

discrimination rule, might not be common carriage regulation per se.89 The FCC could attempt to
reestablish the anti-blocking rule without the antidiscrimination rule and could argue, as the court
explained, that “while perhaps establishing a lower limit on the forms that broadband providers
arrangements with edge providers could take,” it nonetheless leaves “sufficient room for
individualized bargaining and discrimination in terms so as not to run afoul of the statutory
prohibition against common carrier treatment.”90 While prohibiting access service providers from
blocking the delivery of legal content, this interpretation of the rule might allow Internet access
service providers to charge edge service providers for faster delivery speeds to end users. “For
example, Verizon might, consistent with [this interpretation of] the anti-blocking charge an edge
provider like Netflix for high-speed, priority access while limiting all other edge providers to a
more standard service.”91 If a reviewing court agrees that the rule provides enough leeway to
access service providers for individualized bargaining such that it falls into the gray area between
common carriage and private carriage regulation, the court would give the FCC’s interpretation of
the rule deference92 and would likely uphold the rule.
Reinstate the Anti-Discrimination Rule
While the Verizon court found that the anti-discrimination rule in the Open Internet Order was
common carrier regulation per se, the court did not say that all anti-discrimination rules are
common carrier regulations per se.93 In fact, the D.C. Circuit has previously found that a
requirement that mobile data providers offer data roaming services to other mobile data providers
on a “commercially reasonable” basis was not an unlawful application of a per se common
carriage regulation.94 The Commission interpreted “commercially reasonable” to mean that the
rule permitted mobile data providers to negotiate the terms of each data roaming services contract
on an individualized basis, responding to market forces in particular situations. In the court’s
opinion, the rule, therefore, did not require mobile data providers to offer their services
indiscriminately or on standardized terms, as a common carrier would, and did not constitute
common carrier regulation.
With this standard as a reference, the FCC arguably could impose a more flexible anti-
discrimination rule under Section 706. If the rule allowed for sufficient individualized bargaining
and flexibility on the part of Internet access providers in their dealings with edge service
providers, it is possible that the regulation would not be classified as per se common carriage
regulation.95 However, it should be noted that if the FCC reinstated both the anti-blocking rule
and a more flexible version of the anti-discrimination rule, it would be important to craft the rules
in such a way that, taken together, they did not amount to per se common carriage regulation.

89 Verizon, 740 F.3d at 657-59.
90 Id.
91 Id.
92 Id. at 656.
93 Id. at 657 (citing Cellco P’ship v. FCC, 700 F.3d 534 (D.C. Cir. 2012) (finding that a standard permitting
“commercially reasonable” discrimination was not a per se common carrier regulation)).
94 See Cellco, 700 F.3d at 534.
95 See Verizon, 740 F.3d at 657.
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Reclassification of Broadband Internet Access Services
The Chairman of the FCC has stated that the agency does not currently plan to reclassify
broadband Internet access services as telecommunications services.96 However, the FCC has also
said that reclassification “remains on the table” and the Commission’s docket on its Title II
authority as it relates to broadband Internet access services remains open.97 As noted by the
Verizon court, Section 706 did grant the FCC authority to impose both the anti-blocking and anti-
discrimination rules in the Open Internet Order; however, it was broadband Internet access
services’ classification as information services instead of telecommunications services that made
the imposition of those rules illegal.98 If the FCC were to use its established discretion to
reclassify broadband Internet access services as telecommunications services, and the agency’s
reasons for reclassifying the services were reasonable,99 it appears that the agency then likely
could reinstate both the anti-blocking and anti-discrimination rules, consistent with the principles
set out in Verizon.

Author Contact Information

Kathleen Ann Ruane

Legislative Attorney
kruane@crs.loc.gov, 7-9135

96 Statement, Chairman Thomas Wheeler, FCC, The FCC’s Open Internet Rules (February 19, 2014) available at
http://www.fcc.gov/document/statement-fcc-chairman-tom-wheeler-fccs-open-internet-rules.
97 Id.
98 Verizon, 740 F.3d at 657.
99 See Brand X, 545 U.S. at 967.
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