It seems virtually certain that one or more parties will seek judicial review of the Open Internet Order. It is also likely that a party will ask an appellate court to “stay” (or temporarily suspend) the operation of some or all of the rules while legal review is ongoing. We will provide updates on any appellate activity. For now, however, affected entities should assume that the new rules will go into effect 60 days after notice is published in the Federal Register.
There are several key areas where controversy might develop in the near future. These are summarized below, with links to more detailed analysis of particular issues.
1. State and Local Taxes
The Order states that the federal Internet Tax Freedom Act bars the imposition of state or local taxes on Internet access service irrespective of whether that service is classified as a telecommunications service. The dissenters disagree. State and local governments are typically looking for additional tax revenues and, in some cases, broadband providers’ property taxes—not generally affected by the Internet Tax Freedom Act—may be affected. As a result, it seems likely that one or more taxing authorities may well claim that additional taxes of one form or another are due in light of the reclassification.
2. Universal Service Assessments
As of now, broadband is not subject to Universal Service assessments, which are currently set at 16.8% of revenue. The Order states that it is not changing that arrangement. While that is literally true, the question of whether Internet access should pay Universal Service assessments is pending before a “Joint Board” of FCC and state regulators, which is expected to make its recommendation in April. It would not be at all surprising if that recommendation, in light of the Order, is that assessments should apply.
3. Pole Attachment Issues
Today, cable operators providing broadband pay the so-called “cable rate” for pole attachments (in those jurisdictions that are subject to, or voluntarily follow, the federal rule). This conclusion has depended largely on the classification of broadband as an information service. With broadband now classified as a telecommunications service, it is likely that some pole owners will seek rate increases under the potentially higher “telecom rate” applicable in the 30 states subject to FCC pole authority, based on the fact that the facilities on the poles are being used for what is now a telecommunications service. The FCC stated in the Order that it did not want that to occur and that nothing in the reclassification ruling compelled that result. But nothing in the Order appears to directly forbid that from occurring.
4. New Transparency/Disclosure Obligations
As noted above, the Order significantly expands the transparency/disclosure obligations of broadband providers (subject to a temporary exemption, from the expanded requirements only, for broadband providers with fewer than 100,000 subscribers). The transparency regime established in the Order will require review of web postings regarding broadband, advertising claims, more details on promotional rates and roll off rates, more geographically focused disclosures, and new “packet loss” metrics, as well as more detailed descriptions of “specialized services” (that is, services like cable-operator-provided VoIP service that, while IP-based, do not provide access to the public Internet). As a result, large broadband providers will need to review their existing disclosures in light of the new requirements and provide updated disclosures by the time the new rules take effect or soon thereafter.
5. Disputes About End User Privacy
The Order does not forbear from the application of Section 222 of the Act, which generally protects “customer proprietary network information” (essentially, information about the nature and amount of telecommunications services a customer uses) from disclosure without customer consent. This section, and the Commission’s rules under it, has long been viewed as limited to information arising from customers’ use of telephone service, although the Commission is currently seeking to broaden the scope of its privacy jurisdiction. The Order recognizes that the FCC’s rules implementing Section 222 do not readily apply to broadband, and forbears from applying them. The statute itself, however, will apply to broadband. This creates a situation in which either private parties or the Commission might claim that broadband provider practices regarding, e.g., the use of information about customers’ Internet usage, browsing histories or other habits, violate the statute.
6. Role for the States
The Order rules that broadband is jurisdictionally interstate and under the authority of the FCC, not the states. While not literally foreclosing all possible state involvement with respect to the regulation of broadband, the Order makes clear that the FCC is prepared to preempt state actions that interfere with its ruling, including actions that impose greater regulation than the FCC believes to be in the public interest. Providers will need to be vigilant in this regard should state regulators attempt to assert authority over broadband.
7. Accessibility Requirements
The Order does not forbear from Section 225 (relating to Telecommunications Relay Service) or Section 255 (requiring that services be made “accessible to and usable by” persons with disabilities). Specifically, the “functional equivalent” obligations of the Telecommunications Relay Service requirements in Section 225 (and implementing regulations) were extended to broadband providers. However, broadband providers are not required to make contributions to support TRS, although the Order reserves the right to revisit contribution issues in the future.
The Order also subjects broadband providers to Section 255 (and implementing regulations) that services be made “accessible to and usable by” persons with disabilities, including those with vision, hearing, speech and physical disabilities. The Order indicates that the statute’s lower “readily achievable” standard will govern initially. This means that for services not previously covered under the category of “advanced communications services,” broadband providers must now incorporate accessibility into product design and development, ensure that all customer support is accessible, keep contemporaneous records of efforts to make covered services and products accessible and usable, and certify annually to compliance with the recordkeeping obligations. The fines for non-compliance are significant, up to $100,000 per day and $1 million per violation.
Finally, the Order does not forbear from Section 251(a)(2), meaning that broadband providers must refrain from installing network features, functions or capabilities that impede accessibility or usability of broadband, and must pass through industry-standard codes, translation protocols or other information necessary to provide broadband in an accessible manner, as required by Section 251(a)(2), Section 255, and the FCC implementing regulations.