Cinnamon Mueller Client Updates

 

FCC’s Open Internet Rules Now in Effect

On June 12, 2015, the FCC’s Open Internet Order went into effect, imposing three “bright line” Net Neutrality rules targeting behavior the FCC believes to impair Internet openness and imposing a new general standard for future conduct.  Also effective June 12th is the FCC’s decision to reclassify broadband Internet access service (“BIAS”) from a lightly regulated Title I “information service” to a Title II “telecommunications service,” subjecting providers of this service to a significant range of common carrier obligations.   

Although the FCC also exercised its statutory authority to forbear from applying many provisions of Title II, including its ability to prospectively regulate rates and require tariff filings, the Order subjects Internet service providers (“ISPs”) to utility-style regulation for the first time.  The Order also authorizes the FCC, for the first time, to address issues related to the exchange of Internet traffic – interconnection, peering, transiting arrangements – and increases ISPs’ network management disclosure obligations. 

Overview

The rules apply equally to both fixed and mobile BIAS.  BIAS is defined as “a mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all Internet endpoints.”  The FCC views the service to also include Internet traffic exchange and interconnection arrangements between the BIAS provider and Internet edge providers, transit providers or CDNs.  However, CDNs themselves are not subject to the Open Internet rules.  In addition, the FCC has preserved an exception for “managed” or “specialized” services provided over the broadband network by the BIAS provider, but re-named these “non-BIAS data services.”  Examples of such services are VoIP and IP video.

 

Open Internet Rules

 

The Order adopts three “net neutrality” prohibitions, creates a new “general conduct” standard and, for certain providers, enhances existing disclosure obligations.  Certain of these rules are subject to the “reasonable network management” qualification.

Bright Line Rules. The Order adopts three rules to “ban practices that are known to harm the Open Internet”:

  • No blocking of legal content, applications, services, or non-harmful devices.
  • No throttling (degrading, etc.) of traffic on the basis of content, applications, services, or non-harmful devices.
  • No paid prioritization or fast lanes:  broadband providers may not favor some lawful Internet traffic over other lawful traffic on their networks in exchange for consideration.

The “no blocking” and “no throttling” rules, similar to the 2010 Open Internet rules, are subject to “reasonable network management,” which, among other things, accounts for the attributes of the network technology involved (e.g., fiber, DSL, cable, Wi-Fi).  But the standard has been tightened up so that a network practice “must be primarily used for and tailored to achieving a legitimate network management – and not business – purpose” to pass muster with the FCC.

 General Internet Conduct Standard.  The Order adopts a vague new standard for conduct that does not fall under the three bright line rules, under which ISPs cannot “unreasonably interfere with or unreasonably disadvantage” consumers’ ability to select, access, and use lawful content, applications, and services, or edge providers’ ability to make lawful content, applications, services, and devices available to consumers.  The FCC will address practices alleged to harm Internet openness under this standard on a case-by-case basis using a multi-factor test.  Data allowances, zero-based rating and other pricing practices, among other things, will be judged under this vague new standard.

Interconnection.  The Order for the first time asserts FCC authority over Internet traffic exchange – interconnection, peering, and transiting.  Accordingly, ISPs are subject to FCC complaint procedures concerning their traffic exchange and interconnection arrangements with edge providers.  As with the general conduct standard, the FCC will enforce its authority on a case-by-case basis.

Increased Transparency

 

The Order enhances the existing Open Internet transparency rule, requiring ISPs additionally to disclose:  promotional rates, fees, and surcharges, and data caps; packet loss as a measure of network performance; and network management practices that can affect service. 

The transparency enhancements, which require approval from the Office of Management and Budget (“OMB”) to comply with the Paperwork Reduction Act, did not take effect on June 12th.  The new rule enhancements will not go into effect until the FCC publishes notice of OMB approval in the Federal Register.

Temporary partial transparency exemption for small ISPs until Dec. 15, 2015.  The Order provides a partial, temporary exemption from the enhancements to the 2010 transparency rule (but not from the existing transparency rule itself) for ISPs with no more than 100,000 subscribers, but delegates authority to the FCC’s Consumer and Governmental Affairs Bureau to determine whether to retain this exemption and, if so, at what level.  CGB has not yet released any proposals concerning retention or alteration of the small ISP exemption.

Title II Reclassification/Forbearance

The primary provisions of Title II that now govern the provision of BIAS are:

  • Section 201 – imposing a duty to serve upon reasonable request; mandating “just and reasonable” rates, terms, and conditions of service; authorizing the FCC to establish physical connection with other carriers; declaring any unjust or unreasonable charge, practice, classification, or regulation to be unlawful.
  • Section 202 – declaring as unlawful any “unjust or unreasonable discrimination in charges, practices, classification, regulations, facilities, or services for or in connection with” a common carrier service.
  • Sections 206, 207, 208, 216, 217 – allowing the FCC to investigate complaints and take enforcement action, including imposing monetary damages and allowing private rights of action in federal court.
  • Section 222 – addressing consumer privacy and imposing customer proprietary network information (“CPNI”) protections.
  • Section 224 – authorizing the FCC to regulate pole attachment rates applicable to cable operators and telecommunications carriers.
  • Sections 225 and 255 – creating protections for people with disabilities (no contributions to TRS at this time).
  • Section 254 – partial application of universal service programs (no USF contributions at this time).

The FCC exercised forbearance and refrained from imposing certain Title II obligations, including:

  • Section 203 – requiring carriers to file tariffs with the FCC.
  • Section 205 – authorizing the FCC to set rates for common carriers.
  • Sections 251, 252, 256 – governing resale, interconnection, unbundling of facilities, and market entry rules for telecommunications carriers and ILECs.

            The FCC also forbore from application of some 700 provisions of its own rules adopted under provisions of Title II that it has forborne from applying to BIAS, including its Part 61 tariffing rules and its Part 68 telephone terminal equipment rules.

            

Consumer Privacy/CPNI

            The FCC recognized that its CPNI rules adopted pursuant to Section 222 were written for voice services and could not easily be applied to BIAS and exercised forbearance from its current CPNI rules with respect to the provision of BIAS.  The Order indicates the FCC will commence a rulemaking to adopt new CPNI rules tailored to the provision of BIAS.  In the meantime, an FCC Enforcement Advisory was issued counseling providers to take “reasonable good faith steps to protect consumer privacy” consistent with the commands of Section 222.

No Small ISP Relief

The Order does not grant any relief from new Title II obligations for small ISPs.

If you have questions about the Open Internet rules, or would like more information on steps your company should be taking in light of reclassification and the newly effective rules, please contact Barbara Esbin at (202) 872-6811 or besbin@cinnamonmueller.com, Bruce Beard at (314) 394-1535 or bbeard@cinnamonmueller.com, or Scott Friedman or Jake Baldwin at (312) 372-3930 or sfriedman@cinnamonmueller.com or jbaldwin@cinnamonmueller.com.

FCC Revises Effective Competition Rules for Cable Operators

           

On June 2, 2015, the FCC adopted an Order implementing Section 111 of the STELA Reauthorization Act (“STELAR”).  While Section 111 required the FCC to streamline its effective competition rules for small cable operators, the FCC’s Order revises its effective competition rules for all cable operators by creating a rebuttable presumption that cable operators are subject to “effective competition.”  As a result, local franchising authorities (“LFAs”) will no longer be able to regulate basic tier rates unless they demonstrate to the FCC that a cable system is not subject to effective competition.

Background.  Section 543 of the Communications Act permits LFAs to regulate basic tier rates and equipment for a cable operator only if the FCC finds that the cable operator is not subject to effective competition.  The FCC’s current rules – which date back to 1993 – have presumed that effective competition does not exist, giving LFAs the right to regulate basic tier rates and equipment unless the cable operator successfully rebutted the presumption.  Under this regime, cable operators have the burden of proof to show that they have effective competition as defined in the Act in their service areas. 

Order Summary.  The FCC’s Order presumes that cable operators are subject to “Competitive Provider Effective Competition.”  Under Section 543, this means that a franchise area is:

    (i)    Served by at least two unaffiliated MVPDs who offer comparable service to at least 50 percent of the households in the franchise area, and

    (ii)    The number of households subscribing to programming services offered by MVPDs other than the largest MVPD exceeds 15 percent of the households in the franchise area. 

Under this new approach, cable operators will no longer be required to demonstrate that they are operating in an area with effective competition.  To the contrary, LFAs will now be required to show the FCC that there is no effective competition in the cable operator’s franchise area in order to impose basic tier regulation.  The FCC made this change based on the significant changes to the cable marketplace – in particular, the widespread presence of DirecTV and Dish Network – since it first adopted the effective competition rules over 20 years ago. 

Amended Rules.  Under the new rules, LFAs may obtain certification to regulate a cable operator’s basic service tier and associated equipment by filing a revised Form 328, which will include a demonstration rebutting the presumption of Competing Provider Effective Competition.  A cable operator may oppose a Form 328 by filing a petition for reconsideration of the form. 

The new rules will not go into effect until the FCC publishes notice of Office of Management and Budget approval in the Federal Register.

LFAs currently certified to regulate rates must recertify within 90 days of Federal Register publication to retain their existing authority.  Further procedures apply if a cable operator petition seeking a finding of effective competition is pending. 

If you have questions about the FCC’s effective competition rules, please contact Bruce Beard at (314) 394-1535 or bbeard@cinnamonmueller.com or Scott Friedman at (312) 372-3930 or sfriedman@cinnamonmueller.com.

FCC Grants Joint ACA and NAB Proposal Extending HD Carriage Exemption

            On June 10, 2015, the FCC adopted an Order granting a proposal filed jointly by the American Cable Association (“ACA”) and the National Association of Broadcasters (“NAB”) to extend the must-carry HD carriage exemption for certain small cable systems.  At the same time, the Order limits the classes of systems that may continue to utilize the exemption.

Background.  Under the Communications Act, cable operators must carry commercial and noncommercial broadcast stations without material degradation.  The FCC has interpreted this to mean that broadcast signals delivered in HD must be carried to viewers in HD.  In 2008, the FCC exempted cable systems serving fewer than 2,500 subscribers and not affiliated with an MVPD serving more than 10 percent of all MVPD subscribers, and those with an activated channel capacity of 552 MHz or less.  This exemption applied to all eligible systems including those that carried some programming in HD.  In 2012, the FCC extended the exemption until June 12, 2015. 

With the exemption’s deadline looming, ACA requested that the FCC launch a rulemaking to extend the exemption and clarify that analog-only cable systems were not required to transmit must-carry signals in HD.  In March 2015, the FCC released an NPRM tentatively concluding that it should extend the HD carriage for another three years.  At the same time, the FCC encouraged ACA and NAB to come to an agreement on a workable extension.  Accordingly, after a series of discussions between the FCC, ACA, and NAB, on May 14, 2015, ACA and NAB filed the joint proposal.

Changes to the HD Exemption.  The FCC’s Order adopting the joint ACA/NAB proposal makes two significant changes to the current HD carriage exemption.

First, the Order revises the definition of a “small” cable system, limiting the size of cable systems eligible to those serving fewer than 1,500 subscribers (rather than 2,500) and not affiliated with an MVPD serving more than two percent (rather than 10 percent) of all MVPD subscribers.  Cable systems that met the previous definition of a small cable system but are no longer eligible for the exemption must come into compliance by December 12, 2016.  Systems that become ineligible after December 12, 2016 are expected to promptly come into compliance.

Second, while the FCC confirmed that small cable systems not offering any programming in HD are exempt from the HD carriage requirement, small cable systems that offer some HD programming will no longer be eligible for the exemption beginning December 12, 2016.  Once a system begins offering HD programming, it must notify all in-market broadcast stations carried on the system, and the FCC expects these systems to promptly come into compliance.

If you have any questions about broadcast station carriage or the must-carry HD carriage exemption, please contact Scott Friedman at (312) 372-3930 or sfriedman@cinnamonmueller.com