Thursday, May 12, 2005 - The Progress & Freedom Foundation Blog

The Broadcast Flag and Minimum Requirements for Broadband

As Ray noted last week, the D.C. Circuit rebuffed the FCC (again) for asserting authority it does not have. Yet despite the angst and juibilation surrounding the "broadcast flag" decision, the case did little to undermine the already-tenuous basis for the FCC to assert its so-called "ancillary" authority to regulate broadband "information services" under the Communications Act. The decision does, however, add more kindling to the fiery debate over which, if any, baseline obligations should be imposed on broadband to the extent competition justifies protecting these services from more intrusive regulation.

The Court's opinion concluded that the FCC lacked authority to require digital TVs to recognize the flag -- basically computer code that prevents the TVs from redistributing broadcasters' content. The Court reasoned that the FCC's authority, which covers "communication by wire or radio," cannot support the flag because it operates after the "communication" is already complete (i.e., the flag cannot prevent TVs from redistributing programming until that programming has already reached the TV).

The Court drew a strict line between matters related to the "communication" and those that occur subsequently. But this line probably will not subject the FCC to any more legal risk than it already faces if it tries to impose rules on broadband after classifying it as an "information service," a category which the FCC has seldom regulated. This classification, of course, is being reviewed by the Supreme Court in the Brand X case. If the FCC prevails, it will achieve its goal of promoting investment in competing broadband networks by minimizing regulation.

Even if the FCC wins Brand X, however, a victorious FCC will find it tricky to justify imposing even baseline rules on broadband. This conclusion is borne out by examining how the FCC would have to assert authority.

To regulate information services, the FCC generally must pursue a policy goal that the Act specifies with respect to the regulation of traditional communications services, such as phone service. Having already classified broadband as an information service, the FCC would be hard-pressed to subject broadband to the most burdensome types of phone regulation, such as setting retail rates. If the FCC wanted to impose such rules, a court might ask, why did the agency classify broadband as an information service?

The FCC also would find it difficult to impose so-called "light touch" rules, such as requiring broadband providers to share their networks with other ISPs ("open access"), or to let consumers access the content, applications and devices of their choice ("net neutrality"). The most likely bases for imposing such obligations on information service providers are section 230 of the Act (which seeks to promote the Internet and technologies that maximize users control of Internet content), as well as section 706 (which requires the FCC to promote investment in broadband networks). These sections, however, also express Congress' expectation that the FCC would achieve these goals primarily by eliminating rules, not by adding them. Thus, the courts might look skeptically on any FCC attempts to mandate open access or net neutrality. Courts might be more comfortable permitting the FCC to adopt so-called "social" obligations, such as "911" emergency service and access by persons with disabiliites. Such judicial largesse, however, could be limited to obligations that have traditionally applied to phone service that the FCC seeks to apply to phone-like services, such as voice over IP.

The strict line drawn by the Court in the broadcast flag decision does little to weaken further these bases for regulating broadband. The obligations regulators might want to impose on broadband -- whether rate regulation, open access, net neutrality or "social" obbligations -- generally concern how networks and services operate. All of these potential obligations would directly affect "communications by wire and radio" as the D.C. Circuit described them last week.

The bigger impact of the flag decision for broadband instead may be its contribution to the resurging debate over what minimum responsibilities should apply to communications companies even when they are spared most forms of regulation. That debate -- already a familiar feature the FCC's DSL, cable modem and voice over IP proceedings -- has new momentum given allegations that the Bell Companies will "redline" poor neighborhoods in rolling out new video offerings, as well as the FCC's decision to deny SBC's request to escape heavy phone regulation when it provides services using the Internet Protocol.

For good or ill, most observers now expect that voice over IP, at the very least, will have to satisfy 911 and other social obligations. The process by which minimum requirements develop a sense of inevitability will likely affect the regulation of broadband much more than the D.C. Circuit's latest diatribe against the FCC for overstepping its bounds.

posted by Kyle Dixon @ 1:51 PM | Broadband , Communications , Internet , Net Neutrality , The FCC , VoIP