Client Bulletin: FCC’s Deregulatory Restoring Internet Freedom Order Prioritizes Transparency Disclosures by Broadband Providers

By Douglas G. Bonner and Katherine Barker Marshall

The FCC’s much ballyhooed December 14, 2017 reversal of its 2015 Title II classification of broadband Internet access services (“BIAS”) (“Title II Order”) means a much lighter FCC regulatory touch consistent with the current FCC Commission’s view that it has limited statutory authority to regulate the Internet.  Nevertheless, the Commission has adopted a “recalibrated” transparency rule that will require greater ISP disclosure to help ensure that market forces will deter conduct contrary to the Commission’s Open Internet principles.  Ahead of its meeting on December 14th, the Commission released a public draft version of its Order (WC Docket 17-108, FCC-CIRC1712-04, copy of which can be found here.) (“Draft Order”).  While some of the more burdensome reporting obligations under the Title II Order have been eliminated in the Draft Order, new disclosures have been added.  Broadband providers will need to review and revise their public disclosures in compliance with the new transparency rule, typically by revising their published broadband policies on their websites.

The Commission reasons, as it did in the original Open Internet Order, that transparency will make it more likely that “harmful practices will not occur in the first place and that, if they do, they will be quickly remedied.”  Thus, the new draft transparency rule requires:

Any person providing broadband Internet access service shall publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient to enable consumers to make informed choices regarding the purchase and use of such services, and for entrepreneurs and other small businesses to develop, market, and maintain Internet offerings.  Such disclosure shall be made via a publicly available, easily accessible website or through transmittal to the Commission.

Draft Order, Para. 211 (emphasis added).  The Commission argues that the rule will provide businesses and entrepreneurs “the technical information necessary” to create online content, applications, services and devices, and to make the “most educated” choices about the broadband service that best meets their needs.  The FCC also believes that disclosure “increases the likelihood” that ISPs will abide by the Open Internet principles by reducing incentives and the ability to violate them.  To prevent gaming or avoidance strategies, the FCC also intends to apply the rule to “functional equivalents” of BIAS service or any service that could be “used to evade” the transparency requirements.  Id. Para. 213.

The FCC requires ISPs to “prominently disclose” network management practices, performance and commercial terms of their broadband Internet access service.

Network Management Practices

The FCC’s Order embraces and adopts the requirements of its 2010 Open Internet Order requiring ISPs to disclose:

  • A description of any congestion management practices, including indicators and frequency of congestion, and any usage limits that will trigger a management practice;
  • Application-specific behavior, such as why the ISP blocks or rate-controls specific protocols or favors certain applications or classes of applications;
  • Device attachment rules; and
  • End-user or network security practices.

It also expands these disclosures to include disclosure of any of the following practices:

  • Blocking;
  • Throttling;
  • Prioritization practices that benefit an affiliate, including identification of the affiliate (likely to include popular “zero rating” practices or unlimited access to certain affiliated content of the ISP provider); or
  • Paid prioritization practices that favor some traffic over other traffic, through the use of such techniques as traffic shaping, prioritization or resource reservation, in exchange for monetary or other consideration.

Performance Characteristics

The FCC retained performance metric disclosures of the Open Internet Order which it considers beneficial to consumers without being unduly burdensome. All ISPs will be required to disclose:

  • Service description – a general description of the service, including the broadband technology, “expected and actual” access speed and latency, and suitability for real-time applications; and
  • Impact of non-BIAS data services – if existing, what non-mass market BIAS data services are offered to end users and how they may affect last mile capacity available and performance of BIAS service.Significantly, the FCC eliminated additional reporting obligations required under its 2015 Title II Order which it considered unduly burdensome to ISPs, in particular the performance metric which required disclosure of “packet loss, geographically-specific disclosures, and disclosure of performance at peak usage times.”  The FCC observed that the Obama Administration’s OMB declined to approve packet loss as a reporting obligation for mobile ISPs due to high cost versus minimal consumer benefit, since packet loss is less of concern to consumers than whether the BIAS service supports real time applications.  Id. Para. 222.

Commercial Terms

The Commission also retained the Open Internet Order required disclosures of commercial terms of service, including:

  • Price (including fees for early termination or additional network services);
  • Privacy Policies (including whether any network management practices involve inspection of network traffic, and whether traffic is stored, provided to third parties, or used for non-network management purposes); and
  • Redress Options (practices for resolving customer complaints and questions)

Impact on Small Providers

The Commission declined to maintain a small provider exemption given its elimination of what it considers the most burdensome additional reporting obligations of the transparency rule under the 2015 Title II Order.  It therefore considers an exemption for small providers unnecessary, reasoning that universal disclosure will avoid entry barriers by entrepreneurs and other small businesses that rely on BIAS services.

Means and Format of Disclosure

With over 4500 ISPs offering BIAS service in the U.S., the FCC continues to require public disclosure of transparency rule requirements so that entrepreneurs and businesses can have necessary information to select an ISP.  The Commission provides two options for ISP disclosures: (1) on a publicly available website (and also accessible by the disabled); or (2) transmit them to the Commission for the FCC to publish on a publicly available website.  Draft Order, Para. 225.  For the latter option, the Consumer and Government Affairs and Wireline Competition Bureaus will issue a future Public Notice.

The FCC is expected to release its final approved version of the Restoring Internet Freedom Order in the coming weeks. We will update this Alert based upon the text of the final Order, which will be effective 60 days following publication in the Federal Register.

If you have questions or need help supplementing and revising your company’s transparency disclosures, please contact Doug Bonner or Katherine Barker Marshall of Potomac Law Group.