Net Neutrality: An Overview and Current Developments

By Martin Vigodnier*

I. INTRODUCTION

The Internet plays a prominent role in our daily lives.[1]  Recently, news regarding the importance of the Internet’s influence has been tailored around network neutrality (“net-neutrality”) and the ongoing debate with respect to the government’s role in regulating the Internet.  This article will provide the reader with three things: a primer on net-neutrality, analysis of arguments for and against net-neutrality, and where net-neutrality stands today.

II. PRIMER ON NET-NEUTRALITY

A. What is Net-Neutrality?

The term net-neutrality was first coined by Professor Tim Wu[2] in 2003[3] and is a theory that holds that broadband providers should treat all Internet traffic equally, regardless of source.[4]  “Source” is essential to understanding net-neutrality, because data can come from multiple sources and in various forms.[5]  For example, data can come in the form of an email attachment, and video streaming data can identify Netflix as its source.[6]  Since broadband providers supply consumers with Internet access, they have the prerogative to either “block” certain data from reaching the consumer, or “throttle” the speed at which data reaches consumers.  Under a net-neutrality regulatory regime, however, broadband providers are forced to remain data-neutral when servicing their customers: i.e., they cannot discriminate based on the type of data[7] or the identity of its transmitter or recipient.[8]

B. The Government’s Role

The Federal Communications Commission (“FCC”) has attempted to regulate the Internet for about thirty years[9] and has asserted its legal authority to do so under the Communications Act of 1934[10] and the Telecommunications Act of 1996.[11]

The FCC’s role in net-neutrality began in their 1980s Second Computer Inquiry decision.[12]  In Second Computer Inquiry, the FCC created a regulatory regime[13] that divided services into “basic” and “enhanced.”[14]  The difference between the two was the extent to which they involved processing information, rather than simply transmitting it.[15]  Basically, the easier it was for the service to process or transmit information, the more likely the service would be classified as basic.[16]  Services that involved “computer processing applications . . . used to act on the content, code, protocol, and other aspects of the subscriber’s information,”[17] however, were classified as enhanced.[18]  If a service is classified as basic, then it is subject to FCC regulation under Title II of the Communications Act of 1934 as a “common carrier”[19]—which has the duty to “furnish . . . communication service upon reasonable request,”[20] engage in no “unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services,”[21] and charge “just and reasonable” rates.[22]  If classified as enhanced, it would be exempt from Title II regulation.[23]  The FCC did, however, impose certain limitations upon enhanced services, such as requiring enhanced service providers to offer their transmissions facilities to other enhanced service providers on a common carrier basis.[24]

In determining whether the Internet constituted a basic or enhanced service, the FCC eventually ruled that the services needed to connect an end-user—a consumer—to the Internet constituted enhanced services,[25] and were thus exempted from Title II regulation.  The FCC applied this regime to Internet services offered over telephone lines—predominantly through 56K modem[26]—for over twenty years.[27]

Notwithstanding the Internet’s Title II exemption, the FCC still imposed its enhanced services regulations on the Internet.  For example, telephone companies that provided the wireline facilities that transmitted data to and from consumers were limited in how they could provide the enhanced services necessary for consumers to access the Internet,[28] and were also required to permit third-party Internet Service Providers (“ISPs”), such as America Online, to access their wireline transmission facilities on a common carrier basis.[29]

It was against this background that Congress passed the Telecommunications Act of 1996.[30]  Similar to the Second Computer Inquiry regime, the Telecommunications Act of 1996 defined two categories: telecommunications carriers—the equivalent of basic services—and ISPs—the equivalent of enhanced services.[31]  Similar to the Second Computer Inquiry regime, telecommunications carriers were subjected to Title II regulations[32] while ISPs were exempt.[33]

The FCC subsequently classified Digital Subscriber Line (“DSL”) broadband Internet services[34] as telecommunications services[35] subject to Title II regulation,[36] while ruling that broadband Internet provided by cable companies (“cable-modem”) were ISPs[37] exempted from Title II regulation.[38]  This ruling was eventually upheld by the Supreme Court in Brand X.[39]  After Brand X, the FCC changed its course on DSL and not only re-classified DSL as ISPs,[40] but classified “mobile” broadband[41] as ISPs as well.[42]

Nevertheless, the FCC has a history of imposing regulations on ISPs.  In 2008, for example, upon discovering that Comcast was throttling the data traffic of cable-modem subscribers attempting to use certain “peer-to-peer” networking applications,[43] the FCC issued its Comcast Order decision, demanding Comcast adhere to several disclosure and compliance requirements.[44]  Comcast Order was later vacated by the D.C. Circuit because the FCC failed to demonstrate that it possessed statutory authority to regulate broadband providers’ network management practices.[45]

In response to the D.C. Circuit’s decision, the FCC adopted the Open Internet Order,[46] which established rules requiring transparency and prohibiting broadband providers from blocking or discriminating against data due to its form or source,[47] each of which lies at the heart of net-neutrality theory.[48]

This too was subsequently vacated by the D.C. Circuit, because the FCC imposed impermissible per se common carrier obligations, even though the FCC did not classify them as such.[49]  The D.C. Circuit did, however, provide the FCC with some flexibility by agreeing that Section 706 of the Telecommunications Act of 1996[50] “empower[s] [the FCC] to promulgate rules governing broadband providers’ treatment of Internet traffic”[51] in order to “preserve and facilitate the . . . innovation that has driven the explosive growth of the Internet[,]”[52] so long as the rules justified by Section 706 are not identical to common carrier rules.[53]

III. IS NET-NEUTRALITY DESIRABLE?

A. Those Who Say Yes

The arguments in favor of net-neutrality can be boiled down to three main concerns: innovation, competition, and consumer protection.

1. Net-Neutrality Fosters Innovation

A network that is as neutral as possible is predictable: all applications are treated alike.[54]  Since the FCC has it as their objective to maximize the incentives to invest in broadband applications,[55] proponents of net-neutrality argue the FCC should act to eliminate the unpredictability created by potential future restrictions on network usage.[56]

An example of this unpredictability and its hindrance on innovation can be seen in the bans over Virtual Private Networks (“VPNs”) that cable companies enacted some years ago.  Generally speaking, VPNs are a type of productivity-enhancing application that allows employees to work more efficiently from home.[57]  Indeed, VPNs are a good illustration of the kind of innovation that broadband application makes possible.[58]  However, when ISPs became aware of the usage of VPNs, the results were messy.[59]  Some ISPs decided to ban their usage outright, or demand additional fees, others banned them without any enforcement, and some allowed VPNs without comment.[60]  The unpredictability and variance in these restrictions was expensive as it imposed unnecessary costs on innovators of VPN technology—i.e., the developers of VPN technology and the companies who might benefit from VPN technology—in addition to placing costs on the employers of those employees toward whom the usage of VPN was targeted.[61]

Thus, this VPN episode is generally indicative of a problematic tendency: the restriction of new and innovative applications that ISPs see as unimportant, a competitive threat, or a chance to make money.[62]  The effects of these usage restrictions fall hardest on small and startup developers, who already have diminished resources.[63]  By definition, startup application developers push the envelope of what is possible under the Internet’s current architecture.[64]  Their funding depends on the existence of a stable, addressable market for their products.[65]  Such developers would benefit the most from knowing that they can rely on a broadband network that is consistent—that is, neutral—throughout homes and businesses.[66]

2. Net-Neutrality Fosters Competition

As a corollary to the innovation arguments illustrated above[67], proponents argue net-neutrality promotes innovation through competition.[68]

i. The Evolutionary Model of Innovation

The arguments in favor of net-neutrality as a means to foster competition are best understood as a theory of competition whereby innovation is its primary objective.[69]  Though this theory goes by many names[70], it is commonly known as the “evolutionary model”[71] of innovation.[72]

   a. Definition of Evolutionary Model of Innovation

Adherents to the evolutionary model view the innovation process as a survival-of-the-fittest competition between developers of new technologies and are suspicious of models of development that might vest power—namely, the power to direct the optimal path of innovation—in any initial prospect-holder, private or public, because they may have an incentive to minimize the degree of innovative competition.[73]  The suspicion arises from the belief that the most promising path of development is difficult to predict in advance and that any single prospect holder will suffer from cognitive biases,[74] preventing him or her from coming to the right decisions, even if he or she means well.[75]

   b. The Evolutionary Model of Innovation as it Relates to Net-Neutrality

The Internet can be seen as a platform for a competition among application developers.[76]  Indeed, email and streaming applications like Netflix, for example, battle for the attention and interest of consumers.[77]  Thus, to these “Internet Darwinians,”[78] it is important that the platform be neutral “to ensure the competition remains meritocratic.”[79]

For these reasons, Internet Darwinians argue that their innovation theory is embodied in the “end-to-end” design argument: “The End-to-End argument says ‘don’t force any service, feature, or restriction on the end-user; his application knows best what features it needs, and whether or not to provide those features itself.’”[80]  In other words, the Internet should be controlled by the producer and the end-user, not the intermediary network provider that provides them with access to it.[81]  Further, backers of the evolutionary approach to innovation take the Internet itself and the creativity that entailed its invention as examples of the superiority of a system designed along their evolutionary principles.[82]

Moreover, this theory of innovation through competition is a policy that the FCC has repeatedly endorsed.[83]  For example, in the FCC’s broadband infrastructure inquiries, the FCC has favored “multiple platform competition,” promoting a fair fight between DSL, cable, and other broadband access infrastructures.[84]  Proponents, thus, argue the same underlying principles—namely, an evolutionary model of technological innovation—favor the promotion of net-neutrality today.[85]

ii. Net-Neutrality Fosters Competition in the Global Economy

Proponents also argue that net-neutrality is critical to our nation’s competitiveness.  Indeed, as Google Vice President, Vinton Cerf, stated, “in places like Japan, Korea, Singapore, and the United Kingdom, higher-bandwidth and neutral broadband platforms are unleashing waves of innovation that threaten to leave the [United States] further and further behind in the global economy” because those nations have endorsed net-neutrality and their regulations reflect it.[86]

3. Net-Neutrality Protects Consumers

Finally, proponents argue net-neutrality is critical for consumers.  For example, most Americans today have few choices for broadband service.  Indeed, the FCC’s 2014 Report on consumer fixed broadband performance[87] notes that, of the four ISP broadband technologies examined[88], the fourteen largest broadband providers account for over eighty percent of the market.[89]  Further, the seventeen largest phone and cable operators control ninety-three percent of the broadband market[90], and only about half of consumers actually have a choice between even two providers.[91]  Unfortunately, there appears to be little near-term prospect for meaningful competition from alternative platforms and, as a result, the incumbent broadband providers are in a position to dictate how consumers and producers can use the on-ramps to the Internet.[92]

Further, as it relates to the innovation theory above, proponents stand for the principle that consumers “should be able to use the Internet connections that they pay for the way that they want.”[93]  Indeed, this principle—that users pick winners and losers in the Internet marketplace, not carriers—is an architectural and policy choice critical to innovation online.[94]  In the absence of any meaningful competition in the consumer broadband market, and without the net-neutrality tailored safeguards, one would expect carriers to have an economic incentive—and the opportunity—to control users’ online activity, thereby diminishing competition due to lack of consumer free choice.[95]

B. Those Who Say No

Opponents, on the other hand, argue that net-neutrality is not desirable based on a deep-seeded suspicion parallel to that held by proponents to the evolutionary model of innovation—namely, suspicious of the government’s general aptitude, or, rather, inaptitude, when it comes to regulating economic markets.  In general, opponents argue that the solution is not not-neutrality, which unacceptably entails promulgation of a new regulatory regime, but, instead, to do nothing and stick to the oft-repeated libertarian maxim: “let the free markets decide.”[96]

1. Net-Neutrality Hinders Competition, Innovation, and Consumer Welfare

Opponents argue that, in reality, net-neutrality hinders competition because the government has repeatedly shown that it is, one, inherently inefficient in regulating private economic markets[97], two, open to corruption,[98] and, three, regulations are more costly than an economic system premised on competitive markets, even when regulation’s aims are venerable.[99]

i. The Government is Inherently Inefficient in Regulating Private Economic Markets

Proponents say net-neutrality is essential because broadband providers, currently, enjoy too much power.[100]  Opponents like, Joshua Steimle, a self-described “tech-addicted entrepreneur,”[101] agree, noting that the power they enjoy is almost monopoly-level and that he would prefer a system with more competition in place.[102]  However, he disagrees with proponents in that the best way to ensure net-neutrality is through the FCC—i.e., the government—because the government is “the largest, most powerful monopoly in the world[.]”[103]  Thus, it is implied that Steimle is arguing that the case for net-neutrality seems hypocritical since proponents desire to eliminate monopolistic broadband providers by seeking the aid of what he calls the largest monopoly in the world: the government.

Further, Steimle also argues that the government’s history of regulating economic markets has been, and continues to be, markedly unsuccessful,[104] and, as such, is destined to fail when it comes to promulgating net-neutrality regulations.  Steimle adds that the same result is to be expected when it comes to the government promulgating regulations to ensure net-neutrality because, “This is by design.”

ii. The Threat of “Crony-Capitalism”

Furthermore, opponents argue that the current political climate regarding governmental regulations can be summarized as corrupt and an illustration of the modern trend known as “crony-capitalism.”[105]  As it applies to net-neutrality, opponents argue that this corrupt crony-capitalism would manifest itself in net-neutrality regulations and, consequently, hinder competition because most government regulations are written by large corporate interest, in collusion with officials in government, and are “designed to prevent small entrepreneurs from becoming real threats to large corporations.”[106]  Thus, as Steimle notes, “If [net-neutrality] comes to pass how can we trust it will not be written in a way that will make it harder for new companies to offer Internet services?  If anything, we’re likely to end up even more beholden to the large [broadband providers] than before.”[107]

iii. The Costs of Governmental Regulations are Unacceptably Large

Opponents also argue that even if the government’s goal is a well-intentioned one, such as preventing monopolies from forming, the use of regulations as a means to achieve that goal is more costly than a system that makes no pretense of putting in place the elaborate scheme of regulation that now applies to common carriers.[108]  Indeed, as noted opponent Professor Richard Epstein notes, the promulgation of a regulatory regime to ensure net-neutrality not only “leaves too much space for destructive political manipulation,”[109] but the FCC’s efforts in reclassifying broadband providers as common carriers may result in “millions of dollars [being] wasted in trying to shift . . . from one regime to another.”[110]

In order to prevent the costs associated with FCC regulations reclassifying broadband providers as common carriers, Professor Epstein argues the FCC should instead promulgate regulations premised on a strong system of property rights.[111]  The advantage of this property rights regime is that the concerns over political manipulation and costs associated with regulations are minimized because the government’s role is “limited to enforcing the exclusivity of the property rights, so that millions of dollars are not wasted in trying to shift ceaselessly from one regime to another.”[112]  More specifically, the property regime that Professor Epstein argues in favor for is based upon common law principles of common carrier regulation.[113]

Ideally, consumers would have a choice between broadband providers: “In competitive markets, a refusal to deal is what makes the economy work, because it prevents any forced interactions that could prove disastrous for one side or the other—hence the sensible rule that the customer who was refused service from one merchant could just do business with another.”[114]  But, if the market is not competitive but rather dominated by monopolies, similar to those seen in the net-neutrality context, then, under the common law principles of common carrier regulation, rate regulations would apply because “there is no other rival merchant next door.”[115]  Indeed, rate regulations in this context are promulgated in order to reduce monopoly rates to competitive levels.[116]

There are, nevertheless, risks associated with these common law rate regulations in the monopoly context.  Indeed, the enterprise of rate regulations in the monopoly setting “poses serious compensation risks [such that courts have,] for close to 125 years, imposed judicial review to see that the rates imposed allow the merchant in question to make a reasonable return on invested capital.”[117]  Thus, to ameliorate such concerns, Professor Epstein argues that “with the first whiff of competition[,] a strong case arises for dispensing with the rate regulation process altogether.”[118]  Professor Epstein admits that, in the short run, this might lead to higher rates, but in the long-run, “innovation from new entrants will tend to drive rates down to a competitive level that is likely unattainable under sclerotic rate regulation systems.”[119]

As this rule applies to net-neutrality, Professor Epstein argues the following:

So in the end, the key substantive decision should not turn on whether broadband providers: transmit or create information.  It should turn on whether or not they can exert any form of monopoly power in some relevant market.  As a general matter, the faster the technological transformation, the less desirable the monopoly regulation.  Firms like AOL and Blackberry, once thought to possess monopoly power are now footnotes in modern policy debates.  The great danger of regulation is that those intended to foster competition will further entrench the position of incumbent players.
. . . .

IV. THE STATUS OF NET-NEUTRALITY TODAY

After much public debate and political discourse, on February 26, 2015, the FCC sided with the proponents of net-neutrality by reclassifying broadband providers as common carriers such that Title II regulations apply.[120]  In general, the FCC now prohibits blocking, throttling, and paid prioritization[121] to both fixed and mobile broadband for smartphones.[122]  Further, the FCC will not get involved in pricing decisions or the engineering decisions companies make in managing their networks.[123]

In response, however, both USTelecom—a group that includes some of the nation’s largest Internet providers—and Alamo Broadband sued the FCC in the D.C. Circuit and Fifth Circuit, respectively, challenging the FCC’s authority to pass their net-neutrality rules.[124]  Both lawsuits were recently filed in March 23, 2015,[125] so time will only tell what happens next to the future of net-neutrality.

 


*Martin Vigodnier. University of Illinois College of Law, Class of 2015. Incoming Associate Attorney at Littler Mendelson, P.C., San Francisco, CA. Special thanks to my family: Stella, Norberto, David, and Dale Canalla. Many thanks also to JLTP Editors Iman Naim (Class of 2016) and Andrew Lewis (Class of 2015) for their help and guidance.

[1] See, e.g., Larry Magid, Ubiquitous Internet Approaching but Not Here Yet, Huffington Post (July 6, 2010, 12:34 AM), http://www.huffingtonpost.com/larry-magid/ubiquitous-internet-appro_b_635850.html (“The era of ubiquitous Internet access is fast approaching . . . . [For example,] I’m writing this column from 35,000 feet on a flight from Washington, D.C., to San Francisco aboard Virgin America, which has Gogo Internet access on all of its flights.”).

[2] Tim Wu, Network Neutrality, Broadband Discrimination, 2 J. on Telecomm & High Tech. L. 141 (2003). See also Jeff Sommer, Defending the Open Internet, N.Y. Times (May 10, 2014), http://www.nytimes.com/2014/05/11/ business/defending-the-open-internet.html?_r=0 (“A dozen years ago, . . . Mr. Wu developed a concept . . . [c]alled “net neutrality,” short for network neutrality, [and] it is essentially this: The cable and telephone companies that control important parts of the plumbing of the Internet shouldn’t restrict how the rest of us use it.”).

[3] Sommer, supra note 2.

[4] See Verizon v. FCC, 740 F.3d 623, 628 (D.C. Cir 2014) (noting the FCC’s “effort to compel broadband providers to treat all Internet traffic the same regardless of source—or to require . . . ‘net neutrality.’”).

[5] See, e.g., Wu, Network Neutrality, Broadband Discrimination, supra note 2, at 145 (“So what is attractive about a neutral network—that is, an Internet that does not favor one application (say, the world wide web), over others (say, email)?”); Brian Bergstein, Q&A: Lawrence Lessig, MIT Tech. Rev. (Oct. 27, 2010) http://www.technologyreview. com/qa/421384/qa-lawrence-lessig/ (noting that, under net-neutrality, “the networks that deliver the Internet to consumers must be equally open to all data packets, no matter whether these are part of an e-mail from your mother or a video from Hulu.”).

[6] Id.

[7] For example, blocking data via online video games, but allowing data via email attachment.

[8] See, e.g., Richard A. Epstein, The Problem With Net Neutrality, Hoover Institution (Jan. 20, 2014), http://www.hoover.org/research/problem-net-neutrality (“Many proponents of net neutrality argue that the power to exclude is fraught with the risk of abuse. Writing on Slate, Marvin Ammori raises this concern to a fever pitch, by insisting that only net neutrality prevents Comcast from blocking Facebook or Bing, or Verizon from offering better terms of service to the Huffington Post than Slate.” (citing Marvin Ammori, The Net Neutrality Battle Has Been Lost, Slate (Jan. 14, 2014 2:45 PM), http://www.slate.com/articles/technology/future_tense/2014/01/ net_neutrality_d_c_circuit_court_ruling_the_battle_s_been_lost_but_we_can.html)).

[9] See Verizon v. FCC, 740 F.3d 623, 629 (D.C. Cir 2014) (noting that one of the FCC’s early efforts to regulate the internet “occurred in 1980, when it adopted what is known as the Computer II regime.”).

[10] Communications Act of 1934, Pub.L. 73–416, 48 Stat. 1064.

[11] Telecommunications Act of 1996, Pub. L. 104–104, 110 Stat. 56.

[12] In re Amendment of Section 64.702 of the Comm’ns Rules & Regulations, 77 F.C.C.2d 384 (1980) (“Second Computer Inquiry”).

[13] Verizon, 740 F.3d at 630 (citing Second Computer Inquiry, 77 F.C.C.2d at 420).

[14] Second Computer Inquiry, 77 F.C.C.2d at 387 ¶ 5 (“Based on the voluminous record compiled in this proceeding, we adopt a regulatory scheme that distinguishes between the common carrier offering of basic transmission services and the offering of enhanced services.”).

[15] Verizon, 740 F.3d at 629.

[16] See, e.g., id. (“For example, the FCC characterized telephone service as a ‘basic’ service . . . because it involved a ‘pure’ transmission that was ‘virtually transparent in terms of its interaction with customer supplied information.’”) (citing Second Computer Inquiry, 77 F.C.C.2d at 419–20).

[17] Second Computer Inquiry, 77 F.C.C.2d at 420 ¶ 97.

[18] Id.

[19] Verizon, 740 F.3d at 629.

[20] 47 U.S.C. § 201(a) (2012).

[21] Id. at § 202(a)

[22] Id. at § 201(b).

[23] Id.

[24] Verizon, 740 F.3d at 630. (citing Second Computer Inquiry, 77 F.C.C.2d at 473–74).

[25] Id.

[26] Nat’l Cable & Telecomm. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 976–77 (2005) (“Consumers traditionally access the Internet through ‘dial-up’ connections provided via local telephone lines. Internet service providers (ISPs), in turn, link those calls to the Internet network, not only by providing a physical connection, but also by offering consumers the ability to translate raw data into information they may both view on their own computers and transmit to others connected to the Internet.”).

[27] Verizon, 740 F.3d at 630.

[28] Id. (citing Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, 17 F.C.C.R. 3019, 3040 (2002)).

[29] Id.

[30] Verizon, 740 F.3d at 630.

[31] 47 U.S.C. §§ 153(24), (50), (51), (53) (2012). See also Brand X, 545 U.S. at 976–77 (reviewing the FCC’s declaratory ruling that cable companies providing broadband Internet access did not provide “telecommunications service,” and hence were exempt from mandatory regulation under Title II of the Communications Act and holding that the FCC’s ruling was lawful construction of Communications Act under Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984), and the FCC’s ruling was not arbitrary or capricious under the Administrative Procedure Act of 1946, Pub.L. 79–404, 60 Stat. 237).

[32] 47 U.S.C. § 153(53) (2012).

[33] Brand X, 545 U.S. at 975–76.

[34] There are various forms of broadband Internet services. DSL is a form of broadband Internet service that is furnished over telephone lines. Verizon, 740 F.3d at 630. Other pre-dominant broadband Internet services include cable-modem, satellite, and fiber. Fed. Commc’n Comm., 2014 Measuring Broadband America Fixed Broadband Report 5 (2014), available at http://data.fcc.gov/ download/measuring-broadband-america/2014/2014-Fixed-Measuring-Broadband-America-Report.pdf. See also Press Release, Fed. Commc’ns Comm’n, FCC Finds U.S. Broadband Deployment Not Keeping Pace (Jan. 29, 2015), available at https://apps.fcc. gov/edocs_public/attachmatch/DOC-331760A1.pdf (defining broadband Internet as “benchmark speeds [of at least] 25 megabits per second (Mbps) for downloads and 3 Mbps for uploads.”).

[35] Deployment of Wireline Servs. Offering Advanced Telecomms. Capability, 13 F.C.C.R. 24012, 24014, 24029–30 (1998) (“Advanced Services Order”) (classifying DSL as telecommunications carriers because they involved pure transmission technologies).

[36] Id. at 24030–31.

[37] Inquiry Concerning High–Speed Access to the Internet over Cable and Other Facilities, 17 F.C.C.R. 4798, 4824 (2002) (“Cable Broadband Order”) (classifying cable-modems as ISPs because cable-modem providers provide a “single, integrated information service.”).

[38] Id. at 4802 ¶ 7.

[39] Brand X, 545 U.S. at 991–92.

[40] Marguerite Reardon, FCC Changes DSL Classification, CNET (Aug. 5, 2005, 12:54 PM), http://news.cnet.com/ FCC-changes-DSL-classification/2100-1034_3-5820713.html (“The [FCC] . . . voted to reclassify DSL broadband service, thus freeing phone companies of regulations that require them to share their infrastructure with Internet service providers. DSL will now be considered an [ISP] instead of a ‘telecommunications service,’ a distinction that puts DSL in line with the classification of cable modem services.”).

[41] I.e., those serving end-users—consumers—using mobile cellular phone stations to access the Internet, such as smart phones. Definition of: Wireless Broadband, PCMag, http://www.pcmag.com/encyclopedia/term/54763/ wireless-broadband (last visited Mar. 30, 2015).

[42] Verizon, 740 F.3d at 631 (citing Appropriate Framework for Broadband Access to the Internet Over Wireline Facilities, 20 F.C.C.R. 14853, 14862 (2005) (“2005 Wireline Broadband Order”); Appropriate Regulatory Treatment for Broadband Access to the Internet Over Wireless Networks, 22 F.C.C.R. 5901, 5901–02 (2007) (“Wireless Broadband Order”); United Power Line Council’s Petition for Declaratory Ruling, 21 F.C.C.R. 13281, 13281 (2006)).

More specifically, the peer-to-peer networking applications in question were file-sharing applications such as BitTorrent and Gnutella. Brad Stone, Comcast: We’re Delaying, Not Blocking, BitTorrent Traffic, N.Y. Times (Oct. 22, 2007, 9:41 PM), http://bits.blogs.nytimes.com/2007/10/22/comcast-were-delaying-not-blocking-bittorrent-traffic/?_php=true &_type=blogs&_r=0. These applications are often used, perhaps notoriously, for downloading illegally pirated material.See, e.g., BitTorrent Combats Piracy Shadow with Coder Tools, SFGate (Nov. 5, 2013 9:36 AM), http://www. sfgate.com/technology/article/BitTorrent-combats-piracy-shadow-with-coder-tools-4956271.php#photo-5414730 (“When most people hear the word “bittorrent” they think of illegal downloads, which is not a great situation for BitTorrent, the San Francisco company that launched the movement.”).

[44] Formal Complaint of Free Press and Public Knowledge Against Comcast Corp. for Secretly Degrading Peer–to–Peer Applications, 23 F.C.C.R. 13028, 13052–60 (2008) (“Comcast Order”) (finding that Comcast’s impairment of these applications “contravene[d] . . . federal policy,” and ordering Comcast to submit the following disclosure and compliance forms “(1) disclose to the [FCC] the precise contours of the network management practices at issue here, including what equipment has been utilized, when it began to be employed, when and under what circumstances it has been used, how it has been configured, what protocols have been affected, and where it has been deployed; (2) submit a compliance plan to the [FCC] with interim benchmarks that describes how it intends to transition from discriminatory to nondiscriminatory network management practices by the end of the year; and (3) disclose to the [FCC] and the public the details of the network management practices that it intends to deploy following the termination of its current practices, including the thresholds that will trigger any limits on customers’ access to bandwidth.”).

[45] Comcast Corp. v. FCC, 600 F.3d 642, 644, 661 (D.C. Cir. 2010) (holding that the FCC had identified no grant of statutory authority to which the Comcast Order, 23 F.C.C.R. at 13028, was reasonably ancillary).

[46] Preserving the Open Internet, 25 F.C.C.R. 17905 (2010) (“Open Internet Order”).

[47] See id. at 17906 (“i. Transparency. Fixed and mobile broadband providers must disclose the network management practices, performance characteristics, and terms and conditions of their broadband services; ii. No blocking. Fixed broadband providers may not block lawful content, applications, services, or non-harmful devices; mobile broadband providers may not block lawful websites, or block applications that compete with their voice or video telephony services; and iii. No unreasonable discrimination. Fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic.”). However, while all three of the rules applied to “fixed” broadband providers—i.e., those furnishing residential broadband service and, more generally, Internet access to end users “primarily at fixed end points using stationary equipment”—only two applied to mobile broadband providers—i.e., those “serv[ing] end users primarily using mobile stations,” such as smart phones. Id. at 17934.

[48] See Section II.a., supra.

[49] See Verizon v. FCC, 740 F.3d 623, 628 (D.C. Cir 2014) (“Because the [FCC] has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order[.] [25 F.C.C.R. at 17906].”); id. (“Given that the [FCC] has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act [of 1934] expressly prohibits the commission from nonetheless regulating them as such.”).

[50] See 5 U.S.C. § 706 (2012).

[51] Verizon, 740 F.3d at 628.

[52] Id.

[53] See Jon Brodkin, FCC Won’t Appeal Verizon Ruling, Will Regulate ’Net on “Case-By-Case Basis,” Ars Technica (Feb. 19, 2014, 11:44 AM), http://arstechnica.com/tech-policy/2014/02/fcc-wont-appeal-verizon-ruling-will-regulate-net-on-case-by-case-basis (“[T]he court decision affirmed the [FCC’s] belief that Section 706 of the Telecommunications Act of 1996 should ‘empower it to promulgate rules governing broadband providers’ treatment of Internet traffic.’ However, rules justified by Section 706 can’t be identical to common carriage rules.”).

[54] Letter from Tim Wu, Assoc. Professor, Univ. of Va. Sch. of Law, & Lawrence Lessig, Professor of Law, Stanford Law Sch., FCC Ex Parte Letter, to Marlene H. Dortch, Sec’y, Fed. Commc’n Comm’n 3 (Aug. 23, 2003), available at http://www.timwu.org/wu_lessig_fcc.pdf.

[55] Id. Again, in this context, “applications” means, for example, the world wide web, email, or mass online gaming. Id. at 2–3.

[56] Id. at 3.

[57] Id. at 4.

[58] Id.

[59] Id.

[60] Id.

[61] Id.

[62] Id. See also Wu, Network Neutrality, Broadband Discrimination, supra note 2, at 153 (listing the competitive reasons why ISPs would price discriminate on VPNs).

[63] Wu & Lessig, supra note 54, at 4.

[64] Id. (citing Clay Christiansen, The Innovator’s Dilemma (reprt. ed. 2011) (suggesting that large firms, focused on consumers’ present needs, will be unlikely to develop the products of the future)).

[65] Wu & Lessig, supra note 54, at 4.

[66] Id. See also Network Neutrality: Hearing on “Network Neutrality” Before the S. Comm. on Commerce, Sci, & Transp., 109th Cong. 1 (2006) (statement of Vinton G. Cerf, Vice President and Chief Internet Evangelist, Google Inc.) [hereinafter Cerf Statement] (“The Internet’s open, neutral architecture has proven to be an enormous engine for market innovation, economic growth, social discourse, and the free flow of ideas . . . . This ‘neutral’ network has supported an explosion of innovation at the edges of the network, and the growth of companies like Google, Yahoo, eBay, Amazon, and many others. Because the network is neutral, the creators of new Internet content and services need not seek permission from carriers or pay special fees to be seen online. As a result, we have seen an array of unpredictable new offerings – from Voice-over-IP to wireless home networks to blogging – that might never have evolved had central control of the network been required by design . . . . Google looks forward to working with this Committee to fashion carefully-tailored legislative language that protects the legitimate interests of America’s Internet users. And that includes the future interests of the next Google, just waiting to be born in someone’s dorm room or garage.”) (emphasis added).

[67] See Section III.a.i. titled “Innovation,” supra.

[68] Wu, Network Neutrality, Broadband Discrimination, supra note 2, at 145.

[69] Id.

[70] As Professor Wu stated, “a full treatment of the names given to evolutionary theories of innovation is beyond the scope of this [article].” Id. at 145, n.10. Nevertheless, “[s]ome adherents would ascribe such theories to economist Joseph Schumpeter, while in recent legal work the argument is stated as an argument over what should be owned and what should be free.” Id. at 145, n.10 (citing Lawrence Lessig, The Future of Ideas 3-17 (2001)).

[71] See, e.g., Joel Mokyr, Evolution and Technological Change: A New Metaphor for Economic History?, in Technological Change 63, 64 (Robert Fox, ed., 1996) (“The evolutionary method in technological change is not so much an analogy with biology as another application of Darwininan logic . . . .”) (emphasis in original).

[72] Wu, Network Neutrality, Broadband Discrimination, supra note 2, at 145.

[73] Id. at 146.

[74] For example, a predisposition to continue with current ways of doing business. Id.

[75] Id.

[76] Id.

[77] Id.

[78] Id.

[79] Id.

[80] Jerome H. Salinger, “Open Access” is Just the Tip of the Iceberg, Mass. Inst. Tech. (Oct. 22, 1999), http://web. mit.edu/saltzer/www/publications/openaccess.html. For a more in-depth discussion on what end-to-end arguments entail, see generally Jerome H. Salinger, David Reed, & David Clark, End-To-End Arguments in System Design, 2 ACM Transactions Computer Sys. 277 (1984). Additionally, the Internet Protocol suite (“IP”) upon which the Internet is founded was designed to follow the end-to-end principle, and is famously indifferent both to the physical communications medium “below” it, and the applications running “above” it. Cerf Statement, supra note 66 at 2 (“The use of . . . end-to-end design . . . and the ubiquitous Internet Protocol standard . . . together allow for the decentralized and open Internet that we have come to expect.”) (emphasis added). As Professor Wu states, “The metaphors of ‘above’ and ‘below’ come from the fact that in a layered model of the Internet’s design[:] the application layers are ‘above’ the TCP/IP layers, while the physical layers are ‘below.’” Wu, Network Neutrality, Broadband Discrimination, supra note 2, at 146 n.15. Data from the Internet runs over glass and copper, ATM and Ethernet, carrying, for example, .mp3 files, bits of web pages, and snippets of emails from one end (for example, a content provider such as a website) to the end-user (for example, a visitor on a website). Wu, Network Neutrality, Broadband Discrimination, supra note 2, at 146. As an explanatory note, ATM stands for “Asynchronous Transfer Mode,” Asynchronous Transfer Mode, Wikipedia, http://en.wikipedia. org/wiki/Asynchronous_Transfer_Mode (last visited Mar. 24, 2015), and, generally speaking, “is a cell-switching and multiplexing technology which combines the benefits of circuit-switching and packet-switching.” Tomi Mickelsson, ATM Versus Ethernet, Dep’t Electrical & Comm. Engineering, Helsinki Univ. Tech. (May 18, 1999), http://www.tml.tkk.fi/Opinnot/Tik-110.551/1999/papers/07ATMvsEthernet/iworkpaper.html.

[81] Ray Lin, Network Neutrality, Univ. Cal. Berkeley, https://www.ocf.berkeley.edu/~raylin/tieredinternet.html (last visited Mar. 24, 2015). See also Arshad Mohammed, Verizon Executive Calls for End to Google’s “Free Lunch”, Wash. Post (Feb. 7, 2006), http://www.washingtonpost.com/wp-dyn/content/article/2006/02/06/ AR2006020601624.html (“Vinton G. Cerf, a vice president . . . at Google, said in an interview that his company is worried that if net neutrality protections are not enacted, the Internet’s freedom could be compromised, limiting consumer choice, economic growth, technological innovation and U.S. global competitiveness. ‘In the Internet world, both ends essentially pay for access to the Internet system, and so the providers of access get compensated by the users at each end,’ said Cerf, who helped develop the Internet’s basic communications protocol. ‘My big concern is that suddenly access providers want to step in the middle and create a toll road to limit customers’ ability to get access to services of their choice even though they have paid for access to the network in the first place.’”).

[82] Id. at 146–47. See also Lessig, supra note 70, at 14–15 (“No modern phenomenon better demonstrates the importance of free resources to innovation and creativity than the Internet. To those who argue that control is necessary if innovation is to occur, and that more control will yield more innovation, the Internet is the simplest and most direct reply . . . . [T]he defining feature of the Internet is that it leaves resources free. The Internet has provided for much of the world the greatest demonstration of the power of freedom—and its lesson is one we must learn if its benefits are to be preserved.”).

[83] Wu & Lessig, supra note 54, at 5.

[84] Id. (citing Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, Universal Service Obligations of Broadband Providers, CC Docket No. 02-33, Notice of Proposed Rulemaking (“Wireline Broadband NPRM”) ¶ 4 (rel. Feb. 15, 2002)). Additionally, as Professors Wu and Lawrence Lessig note, academic literature also provides evidence that the FCC has endorsed the evolutionary model of innovation. Wu & Lessig, supra note 54, at 5 (citing John Ziman, Evolutionary Models for Technological Change, in Technological Innovation as an Evolutionary Process 3 (John Ziman ed., 2000); Richard Nelson, Understanding Technical Change as an Evolutionary Process (1987)).

[85] Wu & Lessig, supra note 54, at 5.

[86] Cerf Statement, supra note 66, at 1, 6–7 (“[W]e would do well to take important lessons from other countries. Whatever metric one uses, the United States lags behind other developed countries in the deployment and use of high-speed connections to the Internet. Ironically, many such countries employ the same principles of network openness and nondiscrimination that helped shape our own experience of the Internet. Certainly the incumbent providers in those countries do not appear to suffer from any lack of incentives under those principles. For example, in the United Kingdom, British Telecom has agreed to split itself into a retail arm and a wholesale business, with a fundamental policy of nondiscriminatory treatment governing the relationship between them and other providers. In a number of Asian countries, both incumbent and competitive providers operating in an unbundled environment sell huge amounts of bandwidth—100 Megabits or more per second—at a fraction of U.S. prices. By abandoning the principles that helped foster user choice and innovation, the United States risks falling further behind in the global economy.”).

[87] Fed. Commc’n Comm., supra note 34.

[88] That is, DSL, cable, fiber, and satellite.

[89] Id. at 5, 63 n.9 (listing the fourteen participating ISPs as the following: AT&T (DSL); Cablevision (cable); CenturyLink (DSL); Charter (cable); Comcast (cable); Cox (cable); Frontier (DSL/fiber); Insight (cable); Mediacom (cable); Qwest (DSL); TimeWarner Cable (TWC) (cable); Verizon (DSL and fiber-to-thehome); Windstream (DSL); and ViaSat (satellite)).

[90] Leichtman Research Grp., Nearly 1.2 Million Add Broadband in the First Quarter of 2014 1 (2014), available at http://www.leichtmanresearch.com/press/052014release.pdf. See also Leichtman Research Grp., 2.6 Million Added Broadband from Top Cable and Telephone Companies in 2013 1 (2014), available at http://www.leichtmanresearch.com/press/031714release.pdf (noting that the phone companies “AT&T and Verizon added 3.3 million fiber [broadband] subscribers (via U-verse and FiOS) in 2013 . . . .”) (emphasis added).

[91] Cerf Statement, supra note 66, at 2.

[92] Id.

[93] Id.

[94] Id.

[95] See id. at 5 (“Not surprisingly, this incentive is already manifesting itself. [For example, during the] spring [of 2005], the FCC found that the Madison River Telephone Company was blocking ports used by its DSL customers to access competing [Voice Over Internet Protocol (“VoIP”)] services . . . . More revealingly, . . . senior executives of major U.S. carriers have indicated publicly that they intend to force competing services and content providers to pay to be seen online. Together, these examples show that carrier discrimination is not a hypothetical concern.”) (citing Madison River Comm’cn, 20 FCC Rcd. 4295 (2005) (order adopting consent decree)). See also Cerf Statement, supra note 66, at 5 n.3 (“Just three months ago, AT&T CEO Edward Whitacre observed that only telephone carriers and cable companies have broadband pipes to customers. He insisted that Google and other companies ‘use my lines for free, and that’s bull.’ He then warned that ‘I ain’t going to let them do that’ because ‘there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using.’” (citing Spencer E. Ante & Roger O. Crockett, Rewired and Ready for Combat, Bloomberg Bus. (Nov. 6, 2005), http://www.bloomberg. com/bw/stories/2005-11-06/rewired-and-ready-for-combat; Online Extra: At SBC, It’s All About “Scale and Scope”, Bloomberg Bus. (Nov. 6, 2005), http://www.bloomberg.com/bw/stories/2005-11-06/online-extra-at-sbc-its-all-about-scale-and-scope)).

[96] See, e.g., Joshua Steimle, Am I The Only Techie Against Net Neutrality?, Forbes (May 14, 2014 10:09 AM), http://www.forbes.com/sites/joshsteimle/2014/05/14/am-i-the-only-techie-against-net-neutrality/ (“Internet bandwidth is, at least currently, a finite resource and has to be allocated somehow. We can let politicians decide, or we can let you and me decide by leaving it up to the free market. If we choose politicians, we will see the Internet become another mismanaged public monopoly, subject to political whims . . . . If we leave it up to the free market we will, in time, receive more of what we want at a lower price. It may not be a perfect process, but it will be better than the alternative.”).

[97] Id. (“The U.S. government has shown time after time that it is ineffective at managing much of anything. This is by design. The Founders intentionally created a government that was slow, inefficient, and plagued by gridlock, because they knew the greatest danger to individual freedom came from a government that could move quickly–too quickly for the people to react in time to protect themselves. If we value our freedom, we need government to be slow. But if government is slow, we shouldn’t rely on it to provide us with products and services we want in a timely manner at a high level of quality. The [broadband providers] may be bad, but everything that makes them bad is what the government is by definition.”).

[98] Id.

[99] Epstein, supra note 8 (“But in the monopoly setting, there is no other rival merchant next door; rate regulation was intended to reduce monopoly rates to competitive levels.”).

[100] See, e.g., Cerf Statement, supra note 66, at 5 (noting that net-neutrality is essential “In the absence of any meaningful competition in the consumer broadband market[.]”).

[101] Steimle, supra note 96.

[102] Id. (“Proponents of Net Neutrality say the [broadband providers] have too much power. I agree. Everyone seems to agree that monopolies are bad and competition is good, and just like you, I would like to see more competition.”).

[103] Id.

[104] Id. (“We’re talking about the same organization that spent an amount equal to Facebook’s first six years of operating costs to build a health care website that doesn’t work, the same organization that can’t keep the country’s bridges from falling down, and the same organization that spends 320 times what private industry spends to send a rocket into space. Think of an industry that has major problems. Public schools? Health care? How about higher education, student loans, housing, banking, physical infrastructure, immigration, the space program, the military, the police, or the post office? What do all these industries and/or organizations have in common? They are all heavily regulated or controlled by the government. On the other hand we see that where deregulation has occurred, innovation has bloomed, such as with telephony services. Do you think we’d all be walking around with smartphones today if the government still ran the phone system?”) (citing Andrew Couts, We Paid over $500 Million for the Obamacare Sites and All We Got Was This Lousy 404, Digital Trends (Oct. 8, 2013), http://www.digitaltrends.com/opinion/obamacare-healthcare-gov-website-cost/; Mike Baker & Joan Lowy, Bridge Safety: Many U.S. Spans Are Old, Risky And Rundown, Associated Press (Sep. 16, 2013, 5:56 AM), available at http://www.huffingtonpost.com/2013/09/16/bridge-safety_n_3933317.html; Phoenix McLaughlin, SpaceX Spends 320 Times Less on Building the Dragon than NASA Does on the Orion, Mic (July 19, 2012), http://www.mic.com/articles/11354/spacex-spends-320-times-less-on-building-the-dragon-than-nasa-does-on-the-orion). Steimle further adds that the same result is to be expected when it comes to the government promulgating regulations to ensure net-neutrality because “This is by design”: “The Founders intentionally created a government that was slow, inefficient, and plagued by gridlock, because they knew the greatest danger to individual freedom came from a government that could move quickly–too quickly for the people to react in time to protect themselves. If we value our freedom, we need government to be slow. But if government is slow, we shouldn’t rely on it to provide us with products and services we want in a timely manner at a high level of quality. The [broadband providers] may be bad, but everything that makes them bad is what the government is by definition. Can we put ‘bad’ and ‘worse’ together and end up with ‘better’?” Steimle, supra note 96.

[105] Id. (“Government regulations are written by large corporate interests which collude with officials in government. The image of government being full of people on a mission to protect the little guy from predatory corporate behemoths is an illusion fostered by politicians and corporate interests alike. [Thus,] [m]any, if not most, government regulations are the product of crony capitalism . . . .”).

[106] Id. See also Epstein, supra note 8 (noting that the FCC’s prerogative on whether to classify broadband providers as common carriers subject to Title II regulation is ripe for political manipulation: “[P]olitical pressures currently are mounting on all sides of [the FCC’s] reclassification effort . . . . This unfolding spectacle is in itself a strong condemnation of the entire system of telecom regulation, which leaves too much space for destructive political manipulation.”) (emphasis added).

[107] Steimle, supra note 96.

[108] Epstein, supra note 8.

[109] Id.

[110] Id.

[111] Id.

[112] Id.

[113] Id. (“Under the banner of businesses ‘affected with the public interest,’ [the] venerable [common law] authorities held that a requirement that a party provide services, to use the modern phrase, on reasonable and nondiscriminatory terms, worked as an offset to monopoly power that arose for some ‘essential facility’ that has no close substitutes.”) (emphasis added) (citing Allnut v. Inglis, 104 E. R. 206, 209 (K.B. 1810) (relying on the earlier work of Sir Matthew Hale, De Portis Maribus, cited therein)).

[114] Epstein, supra note 8 (emphasis added).

[115] Id.

[116] Id.

[117] Id. (citing Fed. Power Comm’n v. Hope Nat. Gas Co., 320 U.S. 591 (1944)).

[118] Epstein, supra note 8.

[119] Id.

[120] Protecting and Promoting the Open Internet, GN Docket No. 14-28, FCC 15-24 (Feb. 26, 2015), available at http://transition.fcc.gov/Daily_Releases/Daily_Business/2015/db0312/FCC-15-24A1.pdf.

[121] Id. at 7 ¶ 14. See id. at ¶ 15 (listing the anti-blocking order as follows: “A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not block lawful content, applications, services, or nonharmful devices, subject to reasonable network management.”); id. at ¶ 16 (listing the anti-throttling order as follows: “A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not impair or degrade lawful Internet traffic on the basis of Internet content, application, or service, or use of a non-harmful device, subject to reasonable network management.”); id. at 7–8 ¶ 18 (listing the anti-paid prioritization order as follows: “A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not engage in paid prioritization. ‘Paid prioritization’ refers to the management of a broadband provider’s network to directly or indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an affiliated entity.”). See also id. at 8 n.18 (“Unlike the no-blocking and no-throttling rules, there is no “reasonable network management” exception to the paid prioritization rule because paid prioritization is inherently a business practice rather than a network management practice.”).

[122] Id. at 9 ¶ 25 (“The open Internet rules described above apply to both fixed and mobile broadband Internet access service.”) (emphasis added).

[123] Rebecca R. Ruiz & Steve Lohr, F.C.C. Approves Net Neutrality Rules, Classifying Broadband Internet Service as a Utility, N.Y. Times (Feb. 26, 2015), http://www.nytimes.com/2015/02/27/technology/net-neutrality-fcc-vote-internet-utility.html.

[124] Brian Fung, Here Are the First Lawsuits to Challenge the FCC’s Net Neutrality Rules, Wash. Post (Mar. 23, 2015), http://www.washingtonpost.com/blogs/the-switch/wp/2015/03/23/the-first-of-the-net-neutrality-lawsuits-has-now-been-filed.

[125] Id.