Net Neutrality: Is the Cease Fire Over?

By Stephen Díaz Gavin  *

The way the U.S. Government regulates the Internet is back in play again. The outcome of the long running battle over “net neutrality” and regulation of the Internet – now more than 15 years old — is still uncertain. However, it is clear that the Federal Communications Commission (FCC) is stepping back from the stronger supervision of Internet Service Providers (ISPs) adopted in March 2015 under former FCC Chairman Tom Wheeler at the insistence of former President Obama.
On May 18, 2017, the FCC voted to release a Notice of Proposed Rulemaking (NPRM) to step back from the agency’s controversial March 2015 decision to treat ISPs as “common carriers” under Title II of the Communications Act. Instead, the “proposed rule,” will revert to classifying ISPs as providers of an “information service” and return jurisdiction over ISPs privacy practices to the Federal Trade Commission (FTC) – a clear indication of the direction the FCC will take under the current administration.
Law professor Tim Wu coined the term “net neutrality” in 2003.  As the FCC’s current Chairman Pai recently noted in an interview in the Wall Street Journal, the term “[i]s one of the more seductive marketing slogans that’s ever been attached to a public policy issue”.  Who can be against “leaving the Internet alone?” (“Why ‘Net Neutrality’ Drives the Left Crazy,” Wall Street Journal).   Apparently, many believe that it should not be left alone: the FCC received nearly 1.25 million comments submitted via the Internet in the three weeks following FCC Chairman Pai’s announcement that he intended to reconsider the Title II rules; nearly all opposing the proposal.
At the core of the dispute is the tension between the ISPs on the one hand, and streaming content providers like Netflix and Amazon, as well as Internet giants like Google and Facebook on the other.
Consumers fear a slowdown in service. The ISPs maintain the March 2015 common carrier regulation decision will stifle investments and ultimately produce what consumers fear:  a slower Internet.  Indeed, in the NPRM the FCC cited a decline in investment since the March 2015 Order in support of changing the rules.  The clash of interests highlights how outdated the old ways of government oversight of telecommunications have become. The Communications Act of 1934, was originally enacted to monitor the monopoly telephone provider at the time (ATT), based on the model of regulating railroad service and freight rates under the Interstate Commerce Act of 1887 – hardly a relevant basis for overseeing the backbone of 21st century technology.
The common carrier regulatory model prohibits additional charges for streaming content providers, which could be viewed as discriminatory. However, such a regulatory structure does not account for how ISPs pay for upgrades to maintain service quality as consumer demand increases for such content streaming.  Video content producers that stream large volumes of data, slow up Internet connections. Although the largest ISPs have agreed voluntarily not to charge the Netflix and Amazons of the world for doing so, where must the money come from in order to continue to upgrade capacity to maintain high speed download?  Retail consumers are concerned about higher rates, surcharges or deliberate “slowing” of service, yet these same consumers are customers of over-the-top online video gaming and streaming services that consume huge amounts of capacity.  Consumers always want more and faster service and they want it at the lowest price.
Given the current Republican majority, the FCC will likely eliminate Title II regulation of ISPs as it has proposed.  However, the decision can and will again be challenged in the courts (as has every prior rule on net neutrality).  Even if upheld by the courts, only Congress can define ‘net neutrality’ once and for all and give some degree of regulatory certainty to the regulations (which can be changed by a Democratic majority just as easily as the current Republican controlled FCC has done to the Obama era rules).
Net neutrality is now a hot political issue and despite current Republican majorities in both the House and Senate, it is uncertain whether a working majority in both exists that can adopt legislation to guide the FCC.  No matter who you are, in the debate over net neutrality, clearly nobody is neutral. Until Congress acts to give some greater definition to the term, successive FCC Chairmen will be able to reinterpret net neutrality as they see fit.

* This post was derived and adapted from a Rimon Law Client Alert “No Peace in Sight for Net Neutrality” by Stephen Díaz Gavin, who you can contact directly for more information.  

FCC Opens Radio and Television Broadcasting to Foreign Entities

by Stephen Díaz Gavin

For more than 80 years, Section 310(b) of the Communications Act of 1934 has been interpreted as prohibiting direct foreign ownership of more than 20% and indirect ownership of 25% or more of US radio and television broadcast stations.  Effective January 31, 2017, this will change as the Federal Communications Commission (“FCC”) has removed longstanding prohibitions against these limitations on foreign ownership, although it has preserved the right, on a case-by-case basis, to block a foreign acquisition of a broadcast license in excess of 25% (e.g., for reasons of national security).

Foreign entities, for quite some time, have already been permitted to acquire control over non-broadcast licenses (e.g., nationwide cell carrier T-Mobile is majority owned by Deutsche Telekom). But the FCC has steadfastly enforced its longstanding foreign ownership control policies over broadcast station licenses.  Most famously, Rupert Murdoch had to become a U.S. citizen before being able to acquire control over what we know today as Fox Broadcasting.

Changes adopted to the rules of the FCC will enable approval of up to and including 100% aggregate foreign beneficial ownership (voting and/or equity) by foreign investors in the controlling U.S. parent of a broadcast licensee, subject to certain conditions.  The revised rules, which newly define and in certain respects create different rules for “named” and “un-named” investors, they will allow a named foreign investor that acquires less than 100% to increase its controlling interest to 100% at some time in the future.  If a named foreign investor acquires a “noncontrolling” interest, that investor will now be permitted to increase its voting and/or equity interest up to and including a “noncontrolling” interest of 49.99% in the future, if it chooses to do so.

Although the FCC’s expansive “public interest standard” in approving sales and investments in broadcast licenses, coupled with input from other Executive government agencies, could significantly delay or block investments from some countries, the strong support of this initiative by the remaining Republican members of the FCC would tend to indicate the FCC will be disposed to allow most transactions to proceed to closing.  Indeed, the FCC has already signaled its willingness to do so, by approving just such a foreign ownership acquisition in a recent declaratory ruling issued even before the new rules take effect, ending a decades long back-and-forth haggling over Mexican ownership of Univision.

For more information regarding the new FCC rules or assistance in handling the regulatory and transactional aspects of such an investment, contact the author, Stephen Díaz Gavin, or Phil Quatrini or Sandy Sterrett, all partners at Rimon, P.C.

Of course, you can always contact me, Joe Rosenbaum, the Editor!

Advocate General Asks EU Court of Justice WHAT?

The Advocate General of the Court of Justice of the European Union recently announced that it had delivered an opinion in connection with a number of proceedings calling for a preliminary ruling in cases involving Ireland and Austria. In Ireland, the owner of a mobile phone submits that the Irish authorities have unlawfully processed, retained and exercised control over data related to its communications. In Austria, three cases brought by the Province of Carinthia have alleged the Austrian Law on telecommunications is contrary to the Austrian Constitution.

Essentially, the top EU legal advocate is asking the EU court NOT to enforce a bad law so the legislature is afforded a chance to fix it. Seriously? That is like asking the U.S. Supreme Court not to strike down discriminatory laws and give Congress a chance to fix them. Seriously?

Continue reading “Advocate General Asks EU Court of Justice WHAT?”

Let’s be Frank! Actually, Let’s Be Dodd-Frank. Can You Hear Me Now?

Financial institutions need to worry about Dodd-Frank (the Dodd-Frank Wall Street Reform and Consumer Protection Act). After all, “Wall Street,” “Reform” and “Consumer Protection” don’t exactly conjure up images of phone, gas and electric lines being inspected and regulated by auditors wearing suits and carrying briefcases.

If you have been a loyal Legal Bytes reader, you probably know the next line:

Well guess what?

A section of the Dodd-Frank Act amended a section of the Fair Credit Reporting Act (the “FCRA”). The amendment, which becomes effective today, July 21, 2011, requires that anyone who issues a risk-based pricing notice to a consumer (a notice required when a credit report and credit score are used in connection with the extension of credit to a consumer) must now include the applicant’s credit score directly in or with the notice. So when a company sends you a notice under the FCRA in order to comply with the requirements of the Equal Credit Opportunity Act (“ECOA”), it needs to tell consumers it has used a credit report, “a record of your credit history” and “information about whether you pay your bills on time and how much you owe creditors.”

Public utilities, telecommunications companies and many others use credit scoring models, and even though these may not be based on your general credit history, the FTC is now taking the position that these companies are subject to the provisions of Dodd-Frank, and credit scores must be disclosed to the consumer.

Hey, don’t take my word for it. Read the entire Rimon Client Alert [PDF] authored by our experts: Roberta G. Torian in Philadelphia, Robert M. Jaworski in Princeton and Mark F. Oesterle in Washington, D.C. Then you will see how really complicated it is and can call them for help.

Of course, you can always contact me or the Rimon attorney with whom you regularly work, if you have any questions or require legal counsel or assistance.