Title II Would Be ‘Ticking Time Bomb,’ Lead to ‘Enormous’ Amounts of Litigation, FCBA Told

Using Title II of the Communications Act to ensure nondiscrimination on the Internet wouldn’t work, would lead to massive litigation and would be a “ticking time bomb” that would reverberate throughout the Internet ecosystem, said panelists at a Thursday FCBA event. It would also raise thorny USF issues as regulators try to determine which high-tech companies should pay into the fund if broadband becomes a telecom service and thus regulated under Title II, some said. But not everyone agreed that Title II classification would lead to the suggested parade of horribles.

The language of Title II “belies” the notion that the FCC could ban paid prioritization altogether, said Bob Quinn, AT&T senior vice president-federal regulatory. Carriers under Title II can charge different rates for service, as long as they make those rates available to similarly situated customers. So contrary to some arguments, Title II wouldn’t necessarily “protect the guys in the garage” who are building the next big thing, Quinn said. If the FCC wanted to use Title II to ban pay-for-priority, it would have to do “a bank shot” around 80 years of case law to explain why that Title II analysis doesn’t apply, Quinn said.

Then there’s the question of how Title II reclassification would affect who pays into USF, Quinn said. USF is mandatory on telecom services -- so Apple would have to allocate its revenue between transmission component and content component of iTunes songs; Netflix and HBO Go would have to do the same thing with the movies they offer, he said. “What portion of that subscription price is a telecommunications service” subject to filings at the Universal Service Administrative Co. and paying into USF, Quinn asked. The Title II path contains an “enormous amount of risk” to “every service that’s delivered via the Internet,” Quinn said, warning of “an enormous amount of litigation that results."

Section 706 provides a better path, Quinn said. It focuses on output. It incents edge providers to invest. It incents demand, which will result in more broadband. It gives the FCC the flexibility to ensure that “the types of paid prioritization that are everybody’s concern -- pay for play, prioritization of packets over the broadband Internet access pipe -- that those services are going to be deemed not to be commercially reasonable."

But Section 706 isn’t entirely cut and dried, some panelists said. One of the “open questions” is what will happen to the power of Section 706(b) “if and when the commission ultimately finds, someday, that advanced telecommunications capabilities are being deployed on a reasonable and timely basis,” said Sean Lev, former FCC general counsel, now a partner at Kellogg Huber. “What does that mean for existing rules in which the commission has invoked 706(b)?” he asked.

The FCC has embraced its authority to ensure ISP transparency, and FCC Associate General Counsel Stephanie Weiner highlighted a specific question asked in the NPRM about requiring ISPs to explain where Internet congestion is actually occurring. If consumers bought 5 Mbps and have performance issues, they might think they need to buy additional bandwidth, Weiner said. But if the real problem is happening at the point of interconnection, buying more bandwidth wouldn’t solve their issue, she said: Having more information would let the consumer make a more informed choice.

It will be interesting to see “how much teeth the commission tries to give to the transparency rule,” said Peter Karanjia, former FCC deputy general counsel and now co-chair of the appellate practice at Davis Wright. The idea of “different disclosures to different constituencies” is a “new twist” to transparency, he said, pointing to the notion of an ISP having separate disclosure obligations toward content delivery network providers. The disclosure rule could become a quite meaningful part of the discussion going forward, he said. Quinn said ISPs all still have to submit a statement of broadband practices, and the FCC can still enforce those statements against the ISPs.

"Title II is a ticking time bomb,” said panelist Scott Cleland, president of NetCompetition. ISPs have invested extensively in infrastructure over the past decade, and reclassifying now would be a “trillion dollar bait and switch,” he said. Title II classification would cut the value of the nation’s largest telecom companies in half, because they'd no longer be able to run their businesses without going to the FCC for a game of “Mother, May I?” Cleland said.

"The Internet was built under Title II,” said Earl Comstock, an attorney at Eckert Seamans who worked on the 1996 Telecom Act as legislative director for then Sen. Ted Stevens, R-Alaska. Comstock, who represents Pennsylvania ISP Full Service Network, discounted the “scary stories” propounded by Quinn and others. There was “a lot more investment” before than today, he said; the idea that investors “will run screaming” is “not supported by the evidence,” he said. There are 80 years of case law as to what Title II means, so there would be plenty of guidance for regulators on how to apply it to broadband, Comstock said. “How did Verizon or AT&T build their network across public rights of way?” They did it under Title II’s Section 214, he said. But “to use Section 214 you have to be a common carrier.” AT&T and Verizon already made the decision to hold themselves out to the public as a common carrier to get the advantages of Title II, he said. “It’s absolutely fair of the FCC to use the rock solid authority of Title II.”