Title II Reality Check – Part 2: Legal Risks and Unintended Consequences


by Steve Morris and Jennifer McKee

One of the primary misconceptions in the debate about how to regulate broadband is that “reclassifying” it as a Title II telecommunications service would be a simple correction of the Commission’s decisions to treat cable modem and DSL as information services rather than telecommunications services. The parties supporting Title II are not seeking to reinstate a longstanding regulatory regime, but instead they are advocating an entirely new, untested approach that entails significant legal risk for the Commission and tremendous potential for unintended consequences.

"Imposing the pre-2005 regime on ISPs would not satisfy the concerns expressed by net neutrality advocates."

The first question the Commission would have to confront with Title II is how to define the “telecommunications service” that is subject to Title II regulation. In general, when telecommunications and information processing and storage capabilities are functionally integrated into a single retail service, that service has been treated as an information service. That is the approach the Commission adopted with cable modem service in 2002 based on its finding that “cable modem service is an offering of Internet access service, which combines the transmission of data with computer processing, information provision, and computer interactivity, enabling end users to run a variety of applications. . . . Cable modem service is not itself and does not include an offering of telecommunications service to subscribers.” The Supreme Court affirmed this determination in the 2005 Brand X decision, and the Commission reached the same conclusion for wireline broadband services in 2005, for broadband provided over power lines in 2006, and for wireless broadband services in 2007.

To be clear, before 2005, the Commission viewed the wholesale transmission capability provided by telephone companies to ISPs as a “telecommunications service.” This wholesale transmission was sold to ISPs so they could connect consumers to the Internet. But this framework never entailed classifying the retail broadband Internet access service provided by the ISP as a “telecommunications service.” In fact, the Commission consistently viewed ISP retail broadband service as an “information service”; the ISP purchased this transmission service for each of its retail customers, along with facilities connecting its own equipment to the carrier’s equipment, and combined it with other functionality (information processing and storage) necessary to provide an integrated Internet access service to the customer. Imposing the pre-2005 regime on ISPs would not satisfy the concerns expressed by net neutrality advocates regarding potential blocking or discrimination because the Internet access service provided in this scenario is not subject to Title II. Under the pre-2005 regime for DSL, which many rural telephone companies have chosen to follow, the ISP unquestionably is providing information services and is not subject to the non-discrimination requirement, or any other requirements, of Title II.

Consequently, to achieve their goal of regulating ISPs, Title II advocates would need the Commission to depart from the pre-2005 regime and instead regulate the entire end-to-end Internet access service offered to consumers as a Title II telecommunications service. But this approach has some very significant pitfalls.

First, it is legally risky because it is a significant departure from precedent. Such an approach would have to be based on a Commission finding that any information processing and storage functions provided by an ISP are so insignificant as to not warrant consideration. But the Commission has never made such a finding in two decades of decisions governing Internet access and there is no factual basis to make such a finding today. To the contrary, as NCTA has explained, and as the Commission has historically always agreed, information processing and storage capabilities are an integral part of the Internet access service offered to consumers that cannot be ignored in the Commission’s analysis. A decision to treat retail Internet access purely as a telecommunications service could have significant implications for numerous other types of services. While this proceeding has focused on residential broadband, this ruling would open the door to regulation of services offered to businesses as well.

For example, if broadband is considered a telecommunications service notwithstanding the additional information processing and storage functionality offered by ISPs, why would a different result apply to the integrated services offered by cloud providers like Amazon and Google, the CDN services of Akamai and Limelight, or communications services such as Skype? All of these services transmit information between points selected by customers using a mix of telecommunications and information processing and storage capabilities.

Treating information processing and storage functionality as inconsequential to the classification decision, as the Title II advocates are suggesting, could trigger a major reassessment of the regulatory status of key aspects of the Internet ecosystem. Perhaps that explains why major players in the Internet space have refused to jump on the Title II bandwagon and why the Commission should decline to pursue such a risky approach.

Steve Morris and Jennifer McKee both serve as Vice President and Associate General Counsel at NCTA