Special Report: Open Internet Advisory Process Highlights Enforcement Bureau's Rising Prominence

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By Lydia Beyoud

July 8 — The Federal Communications Commission's Open Internet advisory opinion process shows the growing importance of the agency's Enforcement Bureau, but Title II opponents and supporters differ on how useful the procedures will be to the broadband Internet industry.

The FCC issued its public notice on the procedure on July 2. In it, the agency's Enforcement Bureau outlined procedures for broadband Internet service companies to seek an advisory opinion on whether or not a practice or service the companies may be contemplating would run afoul of the Open Internet rules. The procedures would also offer a faster alternative for Internet service providers (ISPs) than a petition for declaratory ruling, the FCC said.

The Enforcement Bureau noted that failure to seek an opinion won't be used as evidence that an entity's practices are inconsistent with the Open Internet rules.

Yet telecommunications practitioners who opposed the FCC's decision to reclassify broadband Internet providers ee a certain amount of threat, or at least risk, in the notice. Industry members view the Enforcement Bureau as zealously pursuing record-breaking fines.

The procedures are probably unattractive to companies not only because an advisory opinion wouldn't be binding on the commission, but also because an opinion could be rescinded anytime, at which point the Enforcement Bureau would know a company was engaged in a practice that was no longer approved, said Barbara Esbin, a partner at Cinnamon Mueller LLC in Washington.

Although the notice states the FCC won't take action against a party relying on an advisory opinion if it ceases the practice upon receiving notice of rescission or approval revocation, “it’s like sticking your head up out of the gopher hole,” said Esbin, who represents the American Cable Association, one of the many parties litigating the Open Internet order.

There is a concern that the Enforcement Bureau could start investigating a company that made a factual representation during the advisory opinion process that later changed, Esbin said. That may make companies more hesitant to use the process, she said.

On other issues, companies were often able to speak informally to a subject matter bureau, such as the Wireline Competition Bureau, to get clarity after new rules came out, but the public notice outlines “a very public process conducted by the Enforcement Bureau, whose mission is totally different than a policy bureau,” said Esbin.

“Given all the uncertainty the rules have created, and the potential downsides of bringing attention to practices that may be deemed inconsistent with the new rules for reasons hard for a company to predict, I would be extremely hesitant to advise a client to use this process,” she said.

Agency Discretion

Other companies may be discouraged from preparing a request by the fact that the bureau clearly signaled that it has discretion to refuse to consider a request, said Peter Karanjia, a partner at Davis Wright Tremaine LLP in Washington and former FCC deputy general counsel.

The FCC indicated it would be more likely to respond to requests involving substantial questions of fact or law where there is no clear FCC or court precedent, or when the request and publication of advice is of “significant public interest.”

Companies must submit “all material information” needed for the bureau to make a determination regarding the proposed conduct, including, but not limited to, documents describing the program, disclosures, advertisements, engineering analyses, rollout plans and schedules, and other documents, the FCC said in the public notice.

The bureau may seek additional information or ask competitors or other industry members to provide information relevant to the request to help with its decision, the FCC said.

The FCC will only make the initial request for guidance, along with any associated materials, available on its website when it releases the opinion, an FCC spokeswoman said.

Those provisions also raise questions of confidentiality and a wariness of a company potentially tipping its hand to competitors, said Lawrence J. Spiwak, president of the Washington-based Phoenix Center for Advanced Legal & Economic Public Policy Studies.

“Are carriers going to come in and start filing their business plans? I think not,” Spiwak said. “In this highly competitive business, no one wants to come in and publicize their business plan before they announce it to the public.”

The FCC did provide measures for companies to submit redacted advisory opinion requests and materials electronically through the agency's filing portal or to the commission secretary.

Spiwak said the advisory opinion procedures fed into the regulatory uncertainty caused by the FCC's decision to reclassify wireless and wireline broadband providers. The fact that the Enforcement Bureau would handle the nonbinding opinions, rather than the full commission, added to that uncertainty, he said.

“This goes to the crux of the investment decision,” said Spiwak. “Telecom assets are long-lived assets; the definition of fixed and sunk costs. If you’re going to invest that kind of money, you need to be certain you can get a return on investment,” he said.

Expedited Process

Conversely, the procedures could give companies more comfort than the declaratory ruling process in which anyone can comment publicly, said Harold Feld, vice president of Washington-based consumer advocacy group Public Knowledge.

There aren't firm deadlines or anticipated response times for a bureau response, the FCC spokeswoman said. Response times will vary based on the nature and complexity of the issues presented, the magnitude and sufficiency of the request and the supporting information provided, and the time it takes the requester to respond to the FCC's requests for additional information, she said.

The advisory opinion process appears to allow companies to seek an opinion without submitting their plans to a higher level of public scrutiny, and allows companies to withdraw their request if they don't like the answer they're getting during the process, said Feld, whose group was one of the driving proponents of Title II-based rules.

The procedures public notice “makes it easier for companies to seek informal advice and protect themselves from a fine or allegations of improper conduct,” said Feld.

“You can frame it around a hypothetical that contains enough detail for people to know what the conduct is without it necessarily betraying particular price points or more proprietary information,” he said. And nothing in the public notice prevents companies from using any of procedures to seek clarification already available, he said.

“On the whole, it will be a positive development for those businesses that are being very conservative about what they want to do in this space until more law is established,” Feld said.

Safe Harbors

You could imagine that some companies, given the recent enforcement activity by the bureau, may be wary of inviting the bureau to focus on some contemplated action they’re taking, even though the premise of the advisory opinions is that if you get the blessing, the opinion will effectively serve as a safe harbor, Karanjia said. “I could at the same time understand why companies would wish to not draw that scrutiny.”

A specific advisory opinion will apply only to the party that requested it, the FCC spokeswoman said. However, because the opinions will be publicly available, they should help provide guidance to other ISPs, the spokeswoman said. ISPs with questions about particular practices that differ from those addressed in an advisory opinion should submit a separate request, the spokeswoman said.

More clarity is needed about many aspects of the Open Internet order. The FCC essentially acknowledged that the rules will have to be fleshed out on a case-by-case basis, he said. “We'll have to see whether this new procedure really contributes to that in a useful way or not,” he added.

The practice of “zero rating” or sponsored data, wherein a carrier allows customers to use data-hungry applications like mobile video streaming without it counting toward their monthly data usage cap, stands out as one issue likely to be addressed through an advisory opinion request, Karanjia said. “The order wasn't crystal clear on what the treatment would be.” Another is the order's controversial general conduct rule, meant to address future issues. There may be some efforts to get a more concrete understanding of how that rule applies in particular facts and situations,” Karanjia said.

“It will just be interesting to see how this process plays out,” he said.

Enforcement Resources

Advisory opinions may be helpful to the industry, but the important decisions in the Open Internet rules will be decided at the commission, not at the bureau level, former FCC Commissioner Michael Copps told Bloomberg BNA.

A more pressing concern is the prospect of the Enforcement Bureau being underfunded or otherwise hampered by congressional appropriators and the ongoing court challenge to the Open Internet rules, he said. “I am always concerned about enforcement follow-through on important decisions the commission makes,” said Copps, now a special adviser for Common Cause's Media and Democracy Reform Initiative.

As the Internet evolves, the industry, regulators and the public will encounter scenarios that raise questions about the interpretation of the rules, said Copps, “Lawyers and businessmen will be coming up with all sorts of creative ways to interpret new rules,” he said.

To that extent, the advisory opinion option may be useful, but the full commission “always needs to have the opportunity to opine” on specific issues before it, he said.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

Text of the FCC's public notice is at http://op.bna.com/der.nsf/r?Open=tbay-9y8tk6.