Internet thrived for decades under the light-touch regulatory regime in place before the Title II Order, as ISPs built networks and edge services were born. We find that the sparse evidence of harms discussed in the Title II Order—evidence repeated by commenters in this proceeding as the basis for adopting a Title II classification—demonstrates that the incremental benefits of Title II over light-touch regulation are inconsequential, and pale in comparison to the significant costs of public-utility regulation.
408110. The Internet as we know it developed and flourished under light-touch regulation. It is self-evident that the hypothetical harms against which the Title II Order purported to protect did not thwart the development of the Internet ecosystem. Edge providers have been able to disrupt a multitude of markets—finance, transportation, education, music, video distribution, social media, health and fitness, and many more—through innovation, all without subjecting the networks that carried them to onerous utility regulation. It is telling that the Title II Order and its proponents in this proceeding can point only
(Continued from previous page)million Americans subscribed to an online video distribution service—a category that did not even exist a decade earlier. And the percentage of Internet traffic devoted to online video spiked from 12 percent to 76 percent between 2006 and 2015.”); NCTA Comments at 28 (“[T]he Commission’s deliberate policy of minimal regulation [prior to 2015] was an unqualified success, as ISPs and edge providers made massive investments.”); Writers Guild of America West Comments at 2 (“With unfettered access to consumers, edge providers have invested billions in new content, services and applications.”).
404 Free Press Comments at 170-208.
405 Id. at 174, citing the Census Bureau’s Annual Capital Expenditure Survey.
406 Id. at 180.
407 Id at 184. According to Amazon’s 10-K filing with the SEC, the increase was 44% in 2013. See Amazon Inc., Annual Report (Form 10-K) (2013).
408 CenturyLink Comments at 8; AT&T Economic Declaration at 10. We therefore reject the argument that sparse evidence of harms is sufficient to justify the imposition of Title II. See IFTA Comments at 7
(“[Comcast-BitTorrent] may be “only one” incident—but it is illustrative of the risk that no new start-up video service and no consumer can afford to take.”).
to a handful of incidents that purportedly affected Internet openness, while ignoring the two decades of flourishing innovation that preceded the Title II Order.
409111. The first instance of actual harm cited by the Title II Order involved Madison River Communications, a small DSL provider accused in 2005 of blocking ports used for VoIP applications, thereby foreclosing competition to its telephony business. Madison River entered into a consent decree with the Enforcement Bureau, paying $15,000 to the U.S. Treasury and agreeing that it “shall not block ports used for VoIP applications or otherwise prevent customers from using VoIP applications.”
410Vonage, an over-the-top VoIP provider, later confirmed in press reports that it had initiated a complaint against Madison River at the Commission and that other small ISPs had blocked its VoIP services.
411112. Next, the Title II Order referenced Comcast’s throttling of BitTorrent, a peer-to-peer networking protocol. Comcast, which was at the time the nation’s second-largest ISP, admitted that it interfered with about a tenth of BitTorrent TCP connections, and independent investigations suggested that Comcast interfered with over half of BitTorrent streams.
412After receiving a formal complaint about the practice, the Commission found “that Comcast’s conduct poses a substantial threat to both the open character and efficient operation of the Internet, and is not reasonable,” and ordered Comcast to cease the interference.
413However, the D.C. Circuit vacated the Commission’s order in Comcast.
414113. Madison River and Comcast-BitTorrent—the anecdotes most frequently cited in favor of Title II regulation—demonstrate that any problematic conduct was quite rare.
415The more recent
incidents discussed in the Title II Order also show that since 2008, few tangible threats to the openness of the Internet have arisen.
416First, in 2012, AT&T restricted customers on certain data plans from
409 See Title II Order, 30 FCC Rcd at 5628, n.123.
410 Madison River Communications, File No. EB-05-IH-0110, Order, 20 FCC Rcd 4295 (Enforcement Bur. 2005) (Madison River Order).
411 Declan McCullagh, Telco agrees to stop blocking VoIP calls, CNET (Mar. 3, 2005) https://www.cnet.com/news/telco-agrees-to-stop-blocking-voip-calls/.
412 Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation for Secretly Degrading Peer-to-Peer Applications; 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,” File No. EB-08-IH-1518, WC Docket No. 07-52, Memorandum Opinion and Order, 23 FCC Rcd 13028, 13030, para. 5 (2008) (Comcast-BitTorrent Order).
413 Id. at 13058, para. 51. While the Commission found that OVDs using BitTorrent were a “competitive threat to cable operators such as Comcast,” there are strong arguments that Comcast interfered with BitTorrent in an attempt to manage its network, rather than to disadvantage OVDs. See NCTA Reply at 28 (asserting that “the intervention was not motivated by any anticompetitive objective, as even critics of Comcast concede”) (citing Harold Feld,
“Evaluation of the Comcast/BitTorrent Filing — Really Excellent, Except For The Gapping [sic] Hole Around the Capacity Cap” (Sept. 22, 2008) (“[I]t appears to me that Comcast did not block for anticompetitive reasons.”)), http://www.wetmachine.com/tales-of-the-sausage-factory/evaluation-of-thecomcastbittorrent-filing-really-excellent-except-for-the-gapping-hole-around-the-capacity-cap/).
414 Comcast, 600 F.3d at 642.
415 See Daniel Oglesby Comments at 1; AT&T Comments at 19–20; Comcast Reply at 29; ITIF Reply at 12; TPI Comments at 4; AT&T Reply at 17; cf. R Street Comments at 13 (“[M]any have argued that we have had de facto Net Neutrality for decades, because norms of transparency and fairness led broadband providers and edge providers to engage in open and fair competition, even without regulations.”) (citing Timothy B. Lee, The Durable Internet:
Preserving Network Neutrality Without Regulation, Cato Policy Analysis at 12 (Nov. 12, 2008)).
416 Indeed, three of the handful of concrete incidents cited in the Title II Order were cited in the Open Internet Order. Open Internet Order, 25 FCC Rcd at 17925, nn. 104–05. See AT&T Comments at 20–21 (“That the Title II Order had to rely on these “incidents” in the first place speaks volumes about the weakness of its purported
empirical justification for reclassification.”).
accessing FaceTime on its cellular network for three months.
417AT&T contended it did so due to network management concerns,
418while application developers argued the restriction limited consumer choice. Regardless of the merits, AT&T ultimately reversed its decision within three months and the decision did not affect consumers who had data caps.
419114. The final example—though not an example of harm to consumers—discussed in the Title II Order was Comcast’s Xfinity TV application for the Xbox, which was criticized for exempting
subscribers from their Comcast data caps. However, the service was provided as a specialized service, similar to certain VoIP and video offerings that use IP but are not delivered via the public Internet.
420Accordingly, the Xfinity Xbox application was not subject to the 2010 or 2015 rules, as it was a so-called
“non-BIAS data service.”
421However, the Title II Order further clouded this carve-out for innovative services by threatening to enforce the rules adopted under the Order against ISPs if it deemed after the fact, that those services were “functional equivalents” of broadband Internet access services, as the Open Internet Order had done in 2010.
422115. Certain commenters have claimed that there have been other harms to Internet openness, but most of their anecdotes do not entail harms that the Title II Order purported to combat.
423EFF and the Internet Engineers point to a number of alleged practices by ISPs, including stripping encryption from certain communications, inserting JavaScript code into third-party webpages, sending search data to third parties, and adding cookies.
424However, none of the bright-line rules promulgated in the Title II Order would have halted these practices, and whether they are covered by the “general conduct rule” is at best unclear.
425417 See Title II Order, 30 FCC Rcd at 5628, n.123.
418 See Jim Cicconi, AT&T Senior Executive Vice President of External and Legislative Affairs, A Few Thoughts on FaceTime (Nov. 8, 2012), https://www.attpublicpolicy.com/broadband/a-few-thoughts-on-facetime/.
419 Id.
420 See AT&T Comments at 20 (The Title II Order “did not mention that the Comcast Xbox service—much like AT&T’s U-verse IP video service or Comcast’s Stream service today—is a managed video service delivered over a closed network, not an over-the-top service delivered over the broadband Internet platform. The Commission has always carved such “specialized services” out of the scope of its net neutrality rules, including in the Title II Order itself.”); AT&T Reply at 20 (Comcast’s Xbox Xfinity was a “specialized service delivered over a closed IP platform.”); Jon Peha Comments at 14 (“A communications service can be considered a specialized service under Open Internet rules if the service is only used to provide a service that is subject to telephone regulations or to cable TV regulations.”).
421 See Title II Order, 30 FCC Rcd at 5696–97, para. 208–09; Open Internet Order, 25 FCC Rcd at 17965–66, paras.
112–114.
422 Title II Order, 30 FCC Rcd at 5697, para. 210; Open Internet Order, 25 FCC Rcd at 17966, para. 113.
423 See New Media Rights Comments at 10 (AT&T used web-streaming program that censored politically-charged Pearl Jam lyrics in 2007). We also reject the argument that evidence of harms in foreign countries is relevant in this proceeding. See Engine Comments at 20–21 (Canadian ISP blocked website of striking union, European ISPs restrict access to P2P and VoIP applications); Microsoft Comments at 14–15 (Skype blocked or degraded in foreign countries). As AT&T argues, that Title II proponents “perceive any need to cite these . . . foreign ‘incidents’ . . . simply underscores the paucity of ‘problems’ that require a regulatory solution of any kind.” AT&T Reply at 19.
We also recognize the existence of consumer complaints, but for the reasons discussed in Part VI.B below, we do not find them indicative of actual harm that the Commission’s net neutrality rules are intended to protect against.
424 See EFF Comments at 14
–
15; Internet Engineers Comments at 34–
40.425 See infra para. 245. Similarly, the claim among several commenters that certain mobile providers blocked Google Wallet is misleading. See, e.g., OTI New America Comments at 11-13; New Media Rights Comments at 10;
Engine Comments at 20. Mobile providers refused to support Google Wallet because it required integration with the secure element of the handset’s SIM card, which mobile providers believed introduced security vulnerabilities. See
(continued….)
116. Because of the paucity of concrete evidence of harms to the openness of the Internet, the Title II Order
426and its proponents have heavily relied on purely speculative threats.
427We do not believe hypothetical harms, unsupported by empirical data, economic theory, or even recent anecdotes, provide a basis for public-utility regulation of ISPs.
428Indeed, economic theory demonstrates that many of the practices prohibited by the Title II Order can sometimes harm consumers and sometimes benefit consumers; therefore, it is not accurate to presume that all hypothetical effects are harmful.
429Intrusive, investment-inhibiting Title II regulation requires a showing of actual harms, and after roughly fifteen years of searching, proponents of Title II have found “astonishing[ly]” few.
430Further, the transparency rule we adopt today will require ISPs to clearly disclose such practices and this, coupled with existing consumer protection and antitrust laws, will significantly reduce the likelihood that ISPs will engage in actions that would harm consumers or competition. To the extent that our approach relying on
transparency requirements, consumer protection laws, and antitrust laws does not address all concerns, we find that any remaining unaddressed harms are small relative to the costs of implementing more heavy-handed regulation.
117. Incentives. We find, based on the record before us, that ISPs have strong incentives to preserve Internet openness, and these interests typically outweigh any countervailing incentives an ISP
(Continued from previous page)David Ruddock, A Brief History Of Verizon And Google Wallet, And Why The Carrier Is Still Allowed To “Block”
It, Android Police (May 1, 2013), http://www.androidpolice.com/2013/05/01/a-brief-history-of-verizon-and-google-wallet-and-why-the-carrier-is-still-allowed-to-block-it/; AT&T Reply at 17-18; Will Rinehart Comments at 3.
OTI’s argument about AT&T blocking Slingbox—which “redirected a TV signal” to the iPhone app—from its 3G network in 2009 fails to provide support for Title II regulation for a similar reason, because as AT&T explained at the time, “we don’t restrict users from going to a Web site that lets them view videos. But what our terms and conditions prohibit is the transferring, or slinging, of a TV signal to their personal computer or smartphone.” See Engadget, AT&T issues official statement on SlingPlayer's 3G blackout for iPhone, (May 12, 2009),
https://www.engadget.com/2009/05/12/atandt-issues-official-statement-on-slingplayers-3g-blackout-for/. In an attempt to manage its 3G network, AT&T restricted slinging to Wi-Fi, while reiterating that consumers could still access video streaming websites.
426 See Title II Order, 30 FCC Rcd at 5629, para. 128 (“[B]roadband providers are in a position to function as a gatekeeper . . . [and] can exploit this role by acting in ways that may harm the open Internet); id. at 5632, para. 82 (“Broadband providers may seek to gain economic advantages by favoring their own or affiliated content . . . Such practices could result in so-called ‘tolls’ for edge providers . . . ); id. at 5645, para. 103 (“Paid prioritization agreements . . . have the potential to distort the market . . . .”) (emphases added).
427 See, e.g., Public Knowledge Comments at 76, 101 (an “ISP . . . can economically compel an edge service to pay monopoly rates”; “Absent clear instruction from the FCC, broadband providers will interfere with consumers’ ability to get online”); INCOMPAS Comments at 23 (“[I]magine a broadband provider that owns or has a financial interest in the success of an upstream supplier of network-dependent goods or services. . . . Disadvantaging could take the form of foreclosure, but it could also involve more subtle economic forms of preference . . . .); Internet Engineers Comments at 31 (“ISPs could degrade . . . certain protocols, content, or websites. . . . ISPs could decide to violate the end-to-end principle. . . . Developers and engineers would no longer be able to depend on the core assumption that the Internet will treat all data equally.”) (emphases added); ACLP Comments at 6 (“Net neutrality rules have always been framed as prophylactic protection against ‘threats’ rather than actual harms.”).
428 See, e.g., AT&T Comments at 21–22 (“[A] purely speculative claim of need for market intervention at some point in the future cannot outweigh the certain costs of imposing such regulation today.”)
429 See infra paras. 251-258.
430 See USTelecom, 825 F.3d at 761–62 (Williams, J., dissenting); Verizon, 740 F.3d at 664–65 (Silberman, J., dissenting) (“That the Commission was able to locate only four potential examples of such conduct is, frankly, astonishing. In such a large industry where, as Verizon notes, billions of connections are formed between users and edge providers each year, one would think there should be ample examples of just about any type of conduct.”).
Indeed, the comments of a major ISP’s CEO to a business magazine more than ten years ago figures prominently in the arguments of some Title II proponents. See, e.g., Microsoft Comments at 12–13; Techdirt Comments at 6.
might have.
431Consequently, Title II regulation is an unduly heavy-handed approach to what at worst are relatively minor problems. Although the Title II Order argued that ISPs were incentivized to harm edge innovation,
432it also conceded that ISPs benefit from the openness of the Internet. The Title II Order found that “when a broadband provider acts as a gatekeeper, it actually chokes consumer demand for the very broadband product it can supply.”
433We agree. The content and applications produced by edge providers often complement the broadband Internet access service sold by ISPs, and ISPs themselves recognize that their businesses depend on their customers’ demand for edge content.
434It is therefore no surprise that many ISPs have committed to refrain from blocking or throttling lawful Internet conduct notwithstanding any Title II regulation.
435Finally, to the extent these economic forces fail in any particular situation, existing consumer protection and antitrust laws additionally protect consumers.
436We therefore find that Title II, and the attendant utility-style regulation of ISPs, are an unnecessarily
431 See, e.g., Entertainment Software Association Comments at 8 (“Open Internet protections are most needed when broadband providers have an incentive to use their special position to advantage their own services. Without recourse against such anti-competitive behavior, third-party providers would be disadvantaged in reaching customers with competing online services.”); INCOMPAS Comments at 8, 23–24 (“Disadvantaging unaffiliated content providers is a well-recognized form of action that can harm competition and consumers.”); Peha Light-Touch Regulation Comments at 3 (“A BIAS provider can also extract monopoly or oligopoly rents from content, application, service or device markets even if the BIAS provider does not compete directly in any of these markets.”); AARP Reply at 32 (“Under the ICE theory, a broadband platform provider will recognize the
efficiencies that it gains from encouraging providers of complements (such as over-the-top video) on its broadband platform. . . . However, the ICE theory breaks down when the platform owner produces its own versions of the complementary services, and thus faces competition from the third-party providers for its own complementary services. Under those circumstances, the internalization of complementary efficiencies is outweighed by the broadband ISP’s desire to increase the profitability of its own offerings, e.g., its own video programming. This exception to the ICE theory is a growing phenomenon.”).
432Some commenters in this record assert this as well. See, e.g., AARP Comments at 14; INCOMPAS Comments at 72; OTI New America at 109; Free Press Comments at 66; Internet Association Comments at 19, 23; Public
Knowledge Comments at 105.
433 See Title II Order, 30 FCC Rcd at 5608, para. 20.
434 See Verizon Comments at 34; Charter Comments at 2; NCTA Comments at 51 (asserting that “it would be irrational for ISPs to undermine the very openness that has long buoyed their businesses for some short-term gain.”);
CenturyLink Comments at 8–9 (“In this environment, broadband providers have every incentive to design, maintain and manage their networks in a way that meets end user expectations for openness.”); ACLP Comments at 7–8 (“ISPs derive the lion’s share of their revenues from residential and business subscriptions to voice, video, and/or data products. This means that any effort to degrade or limit a person’s enjoyment of their user experience—by, for example, blocking a popular website or unnecessarily throttling a popular service—would harm their bottom lines, both from subscriber loss and public pressure that would likely harm their stock price.”); TPI Comments at 2; Cox Comments at 22 (“a BIAS provider that fails to adhere to principles of openness, thereby upsetting consumer expectations, would risk driving customers to rival providers.”); AT&T Reply at 23 (“No broadband provider has an interest in defeating consumers’ long-settled expectation of access to the full Internet because, if it did so, it would devalue its service and lose its customers to rivals in this highly competitive marketplace.”); Daniel Lyons, Net Neutrality and Nondiscrimination Norms in Telecommunications, 54 Arizona L.R. 1029, 1036–7 (2012)
(“[B]roadband providers generally have strong incentives not to block content or applications on their networks. At
(“[B]roadband providers generally have strong incentives not to block content or applications on their networks. At