New Internet Regulation Rules Hold Great Significance for Advertisers

February 27, 2015

Yesterday’s approval by the Federal Communications Commission of new internet rules is a landmark change in the internet regulatory landscape. It is almost certain to turn out to hold great significance for ANA’s members. The “devil still is in the details” of the 300-plus page document just approved. Although it’s not yet been posted by the FCC for public review, a few observations are already possible. In short, the FCC has now classified broadband services under Title II of the 1934 Communications Act, which means that high-speed services – previously largely unregulated  will now be regulated in a similar manner to telephone companies (e.g., they must charge “just and reasonable” rates, they can’t unreasonably discriminate in charges or services). The FCC also relied on section 706 of the 1934 Communications Act (which permits the FCC to accelerate broadband deployment) and on certain other legal provisions that apply to mobile services, as the rules apply to wireless carriers as well. This is the FCC’s third attempt to adopt internet regulations, since the two previous efforts were overturned by the courts.

Under the new rules, companies will be prevented from blocking access to content and services; they can’t impair or degrade traffic based on content/service; and they can’t give priority to particular traffic or content over others in return for payment. The FCC also will now be enforcing privacy policies, enabling the construction of new broadband pipes, and protecting those with disabilities. The FCC decided today to forbear for now (though not relinquish authority, so future changes could occur) from applying rate regulation, requiring automatic contributions to the Fund that ensures universal service for consumers, and applying internet taxation.

Several new legal standards appear to be included in the new regulations, including an Open Internet conduct standard that precludes carriers from harming consumers, as well as a prohibition on unreasonable interference with internet use. Both of these new standards will require additional interpretation and application in particular cases, so it’s unclear just now precisely what they mean and how far they will go. Also, until we see the actual language of the new rules, it’s not clear what will be the relationship between the FCC’s regulation and that carried out by the Federal Trade Commission. Under the FTC Act, the FTC cannot regulate an entity that is otherwise regulated as a common carrier by the FCC. The FCC’s action today seems to be partial common carrier application, so it’s quite possible that the FCC and FTC will now share some jurisdiction, with two potential “cops on the beat” for broadband. That could very well make it more difficult to ascertain where regulation by one agency starts and the other ends, as well as create potential compliance conflicts when and if the agencies impose differing requirements. So, we could have two privacy regulators, two entities determining what is unfair or unreasonable, and the like.  

Supporters claim the regulation is necessary to insure against a world of internet “haves” and “have-nots,” and point to the fact that some entities have been operating under Title II, continuing to invest in their infrastructure, and doing just fine. Critics complain that the internet doesn’t need heavy-handed regulation, that this action will stifle innovation in products and services, and that this is just the beginning of increasing regulation of the internet. What seems certain is that the new rules will face substantial challenges in court. Furthermore, as was stated in a Washington Post article, “Other groups and companies are contemplating whether to ask for a stay of the rules — a legal order that would temporarily prevent the FCC’s regulation from taking effect.” Clearly, it is likely there will be several years of litigation yet to come. This time period would allow Congress ample time, if it so chose, to craft a proposal to supersede the FCC’s regulation. House Speaker John A. Boehner (R-Ohio) and Majority Whip Steve Scalise (R-La.) have already signaled that they plan to work on an alternative approach to net neutrality that doesn’t allow for broadband to be classified as a utility service.

Stay tuned; we’ll be reviewing the details of the new rules and closely consulting with our members as the issues raised by this new major initiative begin to become clearer.

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