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FCC approves net neutrality rules for wireless, putting future zero-rating plans on notice

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WASHINGTON--The FCC voted, 3-2, to codify new net neutrality regulations for wireless and wireline networks that would bar blocking and throttling of content and ban carriers and ISPs from striking deals with content companies to zip their content faster to consumers. In doing so, the FCC is reclassifying broadband as a telecommunications service under Title II of the Telecommunications Act, instead of a lightly-regulated information service, a move that carriers and ISPs have said will stifle innovation.

Under the new regulations, wireless carriers will be able to maintain current plans like zero-rating and sponsored data, which exempt certain apps and data usage from counting toward users' data charges. However, future plans that carriers implement along those lines will likely be put under the microscope on a case-by-case basis.

FCC Chairman Tom Wheeler said that the Internet is "too important to be left without rules or a referee on the field." He said nothing the FCC is doing will change ISPs' revenue streams.

The rules will apply equally to wireless and wireline networks. The FCC is going to include wireless by redefining mobile broadband as a "Commercial Mobile Radio Service," subject to Title II regulations. The FCC's action, with the panel's three Democrats voting in favor and its two Republicans sharply dissenting, will lead to several new rules, including:

  • No blocking: broadband providers will not be able to block access to legal content, applications, services, or non-harmful devices.
  • No throttling: broadband providers will not be able "impair or degrade" lawful Internet traffic on the basis of content, applications, services, or non-harmful devices.
  • No paid prioritization: broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for payment, i.e. there will be no "fast lanes."
  • The rules include a general "standard for future conduct," which will be a standard for ensuring that broadband providers are not "unreasonably interfering with or unreasonably disadvantaging" the ability of consumers and content providers to access and use the Internet. Such future practices will be judged on a case-by-case basis.

Republican Commissioner Ajit Pai said the "future conduct" standard is "pernicious" because it will give the FCC "a roving mandate to review business models and upend pricing plans that benefit consumers."

"Usage-based pricing plans and sponsored data plans are the current targets. So if a company doesn't want to offer an expensive, unlimited data plan, it could find itself in the FCC's cross hairs," he said. "Our standard should be simple: If you like your current service plan, you should be able to keep your current service plan. The FCC shouldn't take it away from you. Banning diverse service plans would just hurt consumers, especially the middle-class and low-income Americans who are the biggest beneficiaries of these plans."

CTIA and the wireless carriers have long argued that carriers should have greater flexibility to manage their networks than wired ISPs because of spectrum constraints and inherent differences in how their networks are architected.

The FCC says it will take into account whether a network is running on fiber, DSL, cable, unlicensed wireless, licensed wireless or another network medium in determining how carriers and ISPs can manage their networks. Nevertheless, the rules take a hard line in defining what constitutes "reasonable network management."

The agency says such network management practices must be "primarily used for and tailored to achieving a legitimate network management--and not commercial--purpose. For example, a provider can't cite reasonable network management to justify reneging on its promise to supply a customer with 'unlimited' data."

That would seem to nix wireless carriers' ability to throttle the speeds of customers on legacy unlimited data plans simply because they are not on usage-based plans.

For wireless carriers, the new rules represent a major shift from the last time the FCC tried to implement net neutrality rules to ensure that all Internet content is treated equally. In 2010, wireless was largely exempt from regulations, but the FCC argues that since then mobile broadband has grown significantly and that with a majority of Americans' Internet traffic running on wireless networks, mobile operators need to be covered. "Mobile is a critical pathway and it must be open and fair," Wheeler said.

Legal fights ahead

The rules are likely going to be challenged in court by one or more ISPs, which are likely to argue strongly against the FCC's decision to reclassify broadband under Title II. The FCC is also grounding its rules in Section 706 of the Communications Act, which focuses on expanding broadband deployments.

The FCC said it will use "forbearance" to abstain from many of the more onerous regulations under Title II, especially rate regulation. The FCC said it is not going to impose new tariffs or other forms of rate regulation. However, Pai said that will not be the case. "For the first time, the FCC will regulate the rates that ISPs may charge and will set a price of zero for certain commercial agreements. And the Order goes out of its way to reject calls to forbear from section 201's authorization of rate regulation and expressly invites parties to file such complaints with the Commission. A government agency deciding whether a rate is lawful is the very definition of rate regulation."

CTIA has argued that the FCC would be overstepping its bounds if it reclassified mobile broadband as a telecommunications service under Title II, since Congress explicitly separated mobile voice from mobile broadband and said mobile broadband could not be put under Title II. However, the FCC does not think Section 332 of the Communications Act bars the agency from redefining mobile broadband as a "Commercial Mobile Radio Service" subject to Title II regulations. FCC officials have argued that Congress has given the agency the flexibility to redefine certain terms based on changes to how networks are used, and the FCC is updating its definitions based on factors such as how much consumers are using mobile broadband than they have in the past.

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