On January 14, 2014, the U.S. Court of Appeals for the D.C. Circuit issued a decision in Verizon v. FCC, striking down key parts of the FCC’s 2010 Open Internet Order, also known as the “Net Neutrality” Order. 

The Court determined that the FCC generally has authority to regulate broadband providers.  But the Court struck down the FCC's anti-blocking and anti-discrimination rules because they amounted to common carrier regulation of an “information service.”  At the same time, the transparency rule was left in place.

Because the transparency rule survived challenge, the Court’s ruling serves as a reminder to review your company’s Net Neutrality disclosures and ensure they are up-to-date.  Below, we provide a brief overview of the FCC’s rules and the D.C. Circuit’s decision.

            Background.  In December 2010, the FCC adopted an Order implementing its “Open Internet” or net neutrality rules.  Specifically, the FCC adopted three “high-level” rules:  transparency, no blocking, and no unreasonable discrimination:

• Transparency – Fixed and mobile broadband providers must disclose their network management practices, performance characteristics, and terms and conditions of their broadband service
• No Blocking – Fixed and mobile broadband providers may not block lawful content, applications, services or non-harmful devices
• No Discrimination – Fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic.

The no blocking and no unreasonable discrimination rules were each subject to the broadband provider’s use of “reasonable network management” practices, and the FCC provided some examples of behaviors it was unlikely to find reasonable, including charging edge providers for “pay for priority” delivery or imposing “terminating access” charges to deliver their traffic to end users.

D.C. Circuit Decision.  A majority of the Court upheld the FCC's conclusion that the Communications Act gives the FCC authority to regulate broadband providers to the extent regulation can be shown to be required to ensure the deployment of broadband facilities and services.  

However, the Court also found that because the FCC had previously classified all broadband Internet services as “information” rather than “telecommunications” services, it was prohibited under the Act from regulating broadband providers as common carriers.  The court found that the FCC’s anti-discrimination and anti-blocking rules impose per se common carrier status on information service providers.  The court viewed such action by the FCC to contravene the Act’s prohibition on imposing common carrier status on entities that are not “telecommunications carriers.”  The dissent agreed that the FCC has some authority to regulate broadband providers, but that it did not go so far as to support the anti-discrimination and anti-blocking rules on the record under review.

What the Decision Means for Broadband Providers.  Overall, the opinion is a mixed bag for broadband Internet service providers.  While the court found that the FCC has authority to regulate broadband Internet providers, it also imposed limits on the ways in which the FCC may exercise that authority.  Most notably for the network neutrality debate, the prohibition of common carriage obligations appears to leave little room for the FCC to impose a new anti-discrimination rule, although the Court left the FCC a clear opening to make a different argument supporting an anti-blocking rule, should it move to re-impose some form of the stricken rules. 

One possibility that remains after the Court’s decision is that the FCC could re-classify broadband service as a “telecommunications” service under the Communications Act and regulate it accordingly, although that would likely be politically unpopular.  The FCC is more likely to explore the limits of its newly-confirmed jurisdiction to regulate the economic relationship between Internet broadband and edge providers either through informal or formal means.

The parties to the case have several options before them in terms of seeking further appeal of the D.C. Circuit’s decision, and the Commission could also take administrative action in response.  We will be monitoring the developments.

In the meantime, the “transparency” rule remains and broadband providers should review their disclosures and make sure they reflect current practices, service characteristics, and terms and conditions.

If you have questions about the Court’s decision or broadband service disclosures, please contact Barbara Esbin at (202) 872-6811 or besbin@cinnamonmueller.com, or Elvis Stumbergs at (202) 872-6881 or estumbergs@cinnamonmueller.com.

FCC Proposes $200,000 Forfeiture for Simulated EAS Alerts

            This week, the FCC proposed a $200,000 forfeiture against programmer Turner Broadcasting System, Inc. for transmitting simulated Emergency Alert System (“EAS”) codes without an actual emergency or authorized test.

            The EAS is the national public warning system that requires broadcasters, cable operators, and other MVPDs to give federal, state, and local authorities the ability to communicate emergency information to the public.  The Communications Act prohibits the transmission of any “false or fraudulent signal of distress.”  Further, FCC rules prohibit the transmission of the EAS codes or attention signal “or a recording or simulation thereof, in any circumstance other than in an actual” emergency or authorized test of the EAS. 

            In this case, the FCC received complaints related to a commercial on Turner’s Cartoon Network that included the EAS attention signal or codes.  Turner admitted that it aired the commercial but asserted that it did not include an actual EAS code.  Turner further claimed that it was “unable to determine the nature or source of the ‘sound effect’” but admitted that it was not transmitted in connection with an actual emergency or authorized EAS test.

            The FCC found that the commercial included a simulation of the EAS codes, creating a “cry wolf” scenario that could desensitize the public to the “serious implications of the EAS codes” and attention signal.

The base forfeiture for this type of violation is $8,000. The FCC adjusted that amount upwards based on its review of the circumstances.  First, EAS violations “undermine the integrity of the EAS” and “implicate substantial public safety concerns.”  Moreover, Turner had aired the commercial seven times on each of its East and West Coast feeds, totaling 14 simulated EAS codes, reaching approximately 98.8 million households.  The FCC also increased the forfeiture based on Turner’s revenues and the fact that the FCC had received complaints about simulated EAS tests on another Turner network less than a year before this incident. Accordingly, the FCC proposed a $200,000 forfeiture.  Turner has 30 days to pay or seek a reduction in the forfeiture amount.  The FCC appears to be sending a strong signal with this decision that repeat offenders will face harsh fines.

            If you have any questions about the EAS, please contact Scott Friedman or Jake Baldwin at (312) 372-3930 or sfriedman@cinnamonmueller.com or jbaldwin@cinnamonmueller.com.

FCC Cites Two Hotels for Signal Leakage and Aeronautical Frequency Violations

The FCC Enforcement Bureau’s Detroit Office recently cited two hotels for failing to notify the FCC of its non-cable MVPD system’s operation in the aeronautical band and for exceeding the FCC’s cable signal leakage limits.

Under the FCC’s signal leakage rules, cable and non-cable MVPDs operating within frequency bands 108-137 MHz and 225-400 MHz must comply with specific reporting and technical requirements.  In this case, agents from the Detroit Field Office inspected a Red Roof Inn in Farmington Hills, Michigan and a Victory Inn in Mount Clement, Michigan.  In both bases, the agents found that the hotel operated a non-cable MVPD system using aeronautical frequencies, but had not filed FCC Form 321 (Aeronautical Frequency Notification) to notify the FCC of its operation in the aeronautical band.

In addition, the agents conducted field strength measurements and determined that the signal leakage emitted at each hotel violated the FCC’s allowable limits. 

The citations require both hotels to take immediate steps to come into compliance and to provide to the FCC, within 30 days, descriptions of specific actions taken to correct the violations and preclude recurrence, and a time line for completion of pending corrective actions.  Both hotels must also immediately register as an MVPD and file an FCC Form 321.  Future violations may result in monetary forfeitures, seizure of equipment, or criminal sanctions.

If you have questions regarding the FCC’s signal leakage rules, please contact Scott Friedman at (312) 372-3930 or sfriedman@cinnamonmueller.com.