Hidden in Plain View: The Threat Within the FCC's Enforcement of its Net Neutrality Rules
Now that the Sturm und Drang over the FCC’s new Net Neutrality Rules is in full throat, some lurking concerns warrant more attention – namely, concerns about the FCC’s enforcement of its new rules and the administration of its complaint process. The FCC states that it seeks “prompt and effective” enforcement of its new rules, but eyebrows are arching regarding whether the current structure will effectively promote this goal.
"The FCC states that it seeks 'prompt and effective' enforcement of its new rules, but eyebrows are arching regarding whether the current structure will effectively promote this goal."
First, some context. Assume for the moment that you provide fixed or mobile broadband service and that the new rules survive unscathed after the administrative, judicial and legislative battles that are almost certainly on the way. Someone believes that you have violated these rules – for example, your subscriber believes that you have failed to adequately disclose your network management practices, or an edge provider believes that you have blocked its lawful content (if you are a fixed provider) or an end user complains that you have unreasonably discriminated in transmitting their lawful network traffic over your network. How can this aggrieved party seek legal relief, and what relief is available?
The FCC has retained independent enforcement authority for the net neutrality rules, but as noted in Matthew Lasar’s overview at Ars Technica, the FCC's enforcement process is overwhelmingly complaint-driven. The new rules give the aggrieved party two “backstop mechanisms” at the FCC in the event that the interested parties cannot resolve their dispute privately: a formal complaint process and an informal complaint process.
- The formal complaint process imposes procedural obligations on the complainant and launches an adjudicatory proceeding. Formal complaints will be addressed through “accelerated docket” procedures. Before filing a formal complaint, the complainant must notify the respondent in writing that the complainant intends to file the complaint. The complaint must comply with FCC processes, and the complainant must pay a filing fee (which may be the FCC Enforcement Bureau’s version of “paid prioritization”). The complainant must “plead fully and with specificity the basis of its claims and to provide facts, supported when possible by documentation or affidavit, sufficient to establish a prima facie case of an open Internet violation.” The rules set forth a timetable for answers and replies, and the FCC will issue an order “determining the lawfulness of the challenged practice.”
- The informal complaint process, by contrast, is more akin to tossing “paper grenades.” Anyone with a computer may submit informal complaints (for example, via the FCC’s website or to the agency’s Consumer and Government Affairs division) in an effort to draw the FCC’s attention to challenged practices and perhaps spark an investigation. There are no “accelerated docket” procedures. The FCC has stated that individual informal complaints will not typically result in written Commission orders, and the potential remedies and sanctions are unclear.
As Larry Downes describes in his essay regarding the costs of enforcement of net neutrality rules, allowing “any person” to launch net neutrality complaints triggers inefficiencies and transaction costs because the filer can shift enforcement costs to the FCC or to ISPs. Its not hard to imagine a disgruntled group campaigning and recruiting others to file loosely worded complaints that tie up the resources of broadband providers as they respond to paper grenades launched via the FCC’s electronic transom. What is hard is running a small business or getting financing while buried in paper when an FCC decision on a complaint – even in a frivolous case – may be months away.
"Given the FCC's lack of resources (and authority?) to police the entire Internet and its long-standing enforcement track record, we should expect the process to remain complaint-driven..."
Given the FCC’s lack of resources (and authority?) to police the entire Internet and its long-standing enforcement track record, we should expect the process to remain complaint-driven; however, reliance on a formal complaint process alone would reduce the incentive for “any person” to file complaints in bad faith. The FCC’s decision to make available the “informal” process in addition to the “formal” process may turn out to be costly for broadband providers. Here’s why:
- While the FCC has stated that “any person” may file a complaint, the formal complaint process has more mechanisms in place to deter the filing of non bona fide complaints – for example, there’s a $200 filing fee, procedural requirements and an “abuse of process” sanction against parties who file “unlawful” frivolous pleadings. These mechanisms should make it much harder for competitors, disgruntled employees or others who suffer no actual harm to game the process.
- The availability of informal processes may encourage the filing of “cookie cutter” complaints, where persons or groups may seek to launch a barrage of nearly identical complaints in an effort to get the FCC staff’s attention for political purposes.
- The FCC does not set forth any particular remedy for an informal complaint other than saying that the FCC would “take appropriate enforcement action, including the issuance of forfeitures” for any net neutrality violation.
- The FCC did not adopt any specific forfeiture amounts for violations, so the penalty would likely be set on a case-by-case basis.
Also, if what is past is prologue, broadband providers should have concerns that the mere filing of an informal complaint, even a frivolous one, would have other consequences. Consider the case of those broadcasters who have found that meritless indecency complaints have hindered their ability to conduct legitimate business. The reason is the “enforcement hold” that the Enforcement Bureau imposes against broadcasters’ FCC applications (e.g., license renewals, approvals for transactions) when one or more complaints are filed against their broadcast station(s). Under FCC policy, the presence of this “red flag” can force the broadcaster to become involved in potentially protracted negotiations to get FCC clearance for their proposed transaction or license renewal. This pressure has resulted in some broadcasters giving up legal rights by entering into consent decrees (whereby the station pays a penalty to resolve the complaint but does not admit liability for the conduct) or tolling agreements (where the broadcaster agrees to forego its rights to challenge an FCC action that takes place outside of the statute of limitations; i.e., their “shot clock” for reaching a decision) with the FCC. Essentially, licensees often face intense pressure to agree to “voluntary” concessions and to raise the white flag in an effort to get the FCC to drop their red one.
One way for broadband providers to minimize liability is to be sure that they are complying with the FCC’s transparency requirements. Providers that make adequate disclosure of their network management practices, performance characteristics and commercial terms of service will enjoy greater latitude in negotiating with the FCC. And, so long as those practices are followed, a complaining party will find its burden a bit more difficult to meet.
Nevertheless, with the broadcast indecency lesson in mind, broadband providers should be concerned. It is reasonable to expect significant litigation over the rules, just as the FCC’s indecency policies have been heavily litigated. The FCC may hold up informal complaints for a protracted period as the legal challenges continue – recall that there is no “accelerated docket” for informal complaints and even if there was, the FCC may claim authority to waive any its internal timetables for “good cause.” Such a litigation tangle may result in stalled FCC enforcement and delays in application processing – delays that could apply differently to different categories of service providers because some are more dependent on FCC licensing than others.
In short, enforcing the FCC’s net neutrality rules represents a regulatory thicket for broadband providers and others – one that is worth the effort to navigate around given the uncertainty and the legal challenges to come.