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Telecommunications and internet access
Before 2015, the United States used a relatively light touch with respect to the regulation of internet service providers (ISPs) and broadband internet access providers (BIAPs), relying largely on market forces instead of prescriptive regulation. By many accounts, this hands-off approach contributed to the rapid growth of the US internet-based sector. Subsequent activity at the FCC – including in particular the agency’s imposition of net neutrality regulations and reclassification of retail broadband internet access services – suggested that it would play a more active role in the regulation of internet-based services. However, more recently the pendulum has swung in the other direction, with the FCC returning to a lighter touch with respect to internet access services (e.g., with respect to net neutrality regulation).
The covid-19 pandemic – and the US population’s attendant reliance on broadband connectivity for distance learning, remote work and telehealth – has reinvigorated ongoing efforts to ensure the availability of reliable and affordable internet access across the United States. Through the FCC’s Keep Americans Connected Pledge, more than 800 service providers agreed not to disconnect consumers and small business customers for non-payment and to waive such customers’ late fees incurred, in each case as a result of the crisis. A number of states (including Delaware, Indiana and Maryland) went further, issuing executive orders or enacting emergency legislation mandating that service providers take such steps. In March 2020, Congress enacted the Coronavirus Aid, Relief and Economic Security (CARES) Act, which among other things provided funds to states to support connectivity for schools, teachers and students to facilitate distance learning, and allocated US$200 million for the FCC to distribute to healthcare providers offering connected care services to their patients in response to the pandemic. Since then, Congress has appropriated additional funding to support distance learning and telehealth through continuing CARES Act initiatives as well as the adoption of new programmes. Moreover, in the first several months of 2021, the FCC implemented additional new statutory mandates by establishing the Emergency Broadband Benefit (EBB) programme, an approximately US$3.2 billion initiative to subsidise low-income consumers’ access to broadband connectivity, as well as the Emergency Connectivity Fund, a US$7 billion-plus programme to help schools and libraries facilitate remote learning during the pandemic. Policymakers’ focus on establishing and maintaining robust connectivity precipitated by the covid-19 pandemic likely will inform future policy debates concerning universal service and the appropriate regulatory treatment of broadband internet access service. Indeed, in November 2021, Congress passed and President Biden signed the Infrastructure Investment and Jobs Act (IIJA), which allocates US$65 billion in funding to federal and state agencies to further support broadband deployment. Most notable of the IIJA’s initiatives is the Broadband Equity, Access, and Deployment (BEAD) programme, through which the NTIA will provide more than US$42 billion to states to expand the availability of high-speed internet access across the United States. In addition, the FCC’s temporary EBB programme has been replaced by the permanent Affordable Connectivity Program, which continues to support access to broadband connectivity by low-income consumers.
The Communications Act directs the FCC to take steps to facilitate the universal availability of essential telecommunications services through, inter alia, the use of a federal universal service fund (USF). The USF supports various programmes that seek to promote the availability of quality telecommunications services at just, reasonable and affordable rates on a nationwide basis to high-cost areas, low-income individuals, schools, libraries and rural healthcare facilities. The USF is funded through revenue-based contributions from providers of interstate and international telecommunications and interconnected VoIP services, as well as certain other providers of telecommunications. The contribution factor (essentially, that rate at which interstate and international revenues are assessed for USF contribution purposes) varies during the course of the year, and fluctuated between approximately 24 and 33 per cent of covered revenues in 2022. Universal service programmes and contribution obligations are administered by the Universal Service Administrative Company, a legally independent entity that is subject to the FCC’s oversight.
The National Broadband Plan adopted in 2010 recommended that the FCC modify universal service high-cost subsidy programmes, which historically focused on voice telecommunications, to target broadband expansion into areas where the FCC asserts BIAPs would not find it economically viable to provide broadband service in the absence of this type of financial support. Consistent with this recommendation, the FCC established the Connect America Fund (CAF) to support the deployment of broadband infrastructure to areas that are currently unserved, and to phase out legacy universal service support mechanisms in the process. Under the FCC’s implementing rules, certain wireline incumbents called price cap carriers enjoy significant funding preferences through, inter alia, a right of first refusal in connection with available funding. As a result, a much smaller pool of support is available to competitive providers. In addition, the FCC implemented CAF rules for rate of return incumbent carriers. To implement Phase II of the CAF programme, the FCC held a reverse-auction in 2018 to distribute funding in areas where price-cap incumbents declined preferential funding. In the auction, more than 103 bidders were awarded more than US$1.49 billion of support to offer service to more than 700,000 locations in 45 states over the next decade. Over the course of 2019 and 2020, the FCC began disbursing funds to the reverse-auction’s winning bidders and, in April 2021, initiated a process of adjusting service providers’ deployment obligations to ensure the most efficient allocation of support. These broad changes to the high-cost programme were coupled with changes to the exceedingly complex intercarrier compensation scheme – under which local and long-distance service providers pay or receive compensation for traffic that is handed off to each other’s networks – to eliminate inefficiencies and arbitrage opportunities inherent in that payment regime.
In January 2020, the FCC established the new Rural Digital Opportunity Fund (RDOF) that it had proposed the previous year. Modelled after the CAF programme, the RDOF will provide US$20.4 billion over a 10-year period to support deployment of broadband service with minimum speeds of 25/3Mbps in rural areas, with the goal of improving connectivity for millions of US citizens. In the first of two RDOF auctions, which concluded in November 2020, the FCC provisionally awarded approximately US$9.2 billion in support to 180 winning bidders. In July 2021, the FCC began authorising the disbursement of these funds. A number of RDOF award recipients have since ‘defaulted’ on at least a subset of their bids where they no longer intend to pursue the supported deployments. And notably, in August 2022 the FCC rescinded more than US$2 billion in RDOF subsidies initially awarded to LTD Broadband LLC and Starlink Services, LLC (a SpaceX subsidiary) out of concern that the companies would be unable to meet their respective service obligations. Requests by LTD and Starlink for administrative review of this decision remain pending as of this writing.
The FCC also has a ‘Lifeline’ programme, which uses a portion of the USF to subsidise the costs of certain supported telecommunications services so that they can be purchased by individuals who otherwise would be unable to afford them. Broadband is included in the list of supported services, providing low-income consumers a means of obtaining internet access at reduced rates. Minimum standards exist for supported voice and broadband services for a service to qualify for the Lifeline subsidy. In November 2017, the FCC proposed modifications to Lifeline that would, among other changes, limit the ability of resellers (service providers that lease, rather than own, network capacity) to participate in the programme. Following the rejection of these proposals by the United States Court of Appeals for the District of Columbia Circuit in February 2019, however, the FCC largely abandoned its efforts to restrict resellers’ participation in the Lifeline programme.
The Communications Act subjects all providers of telecommunications services to common carrier regulation (e.g., the duty to provide service to all members of the public, including other carriers, without unreasonable discrimination). Telecommunications services are defined to include the provision of telecommunications to the public for a fee. Telecommunications, in turn, are defined to include the transmission, between or among points specified by the user, of information of the user’s choosing without change in the form or content of the information as sent and received. Notably, this definition does not encompass the creation or publication of mere content. Traditional telecommunications carriers tend to be heavily regulated by both the FCC and the state PUCs.
In contrast, information services are defined to include the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilising or making available information via telecommunications. These services typically involve what is called a net protocol conversion – essentially, a change in the form, structure or substance of the underlying communication. Providers of information services are not subject to common carrier regulation and traditionally have been lightly regulated at the federal level. State and local jurisdiction over internet services is severely circumscribed, as the services are considered interstate for most purposes.
As communications technologies have continued to evolve, the lines between telecommunications services and information services have blurred, and the FCC has been slow to classify new service offerings. The FCC thus far has declined to classify VoIP services, creating uncertainty as to which regulations apply at both the federal and state levels. This uncertainty has been exacerbated by the FCC’s attempted use of its ancillary authority to extend a number of common carrier-type requirements to such otherwise-unregulated services.
Because the classification of a service is of critical importance in determining the regulations applicable to that service, the reclassification of a service can have significant consequences. The FCC’s treatment of internet access services provides a vivid illustration of this fact. Broadband internet access services require, inter alia, the transmission of data between an end user and an ISP, and any number of other individuals or entities. For years, the FCC viewed this transmission capability as a telecommunications service, and required BIAPs to offer it to competitors on a stand-alone, common carrier basis. However, in a series of orders issued during the 2000s, the FCC reclassified broadband internet access services as information services functionally integrated with a telecommunications component, such that BIAPs are no longer required to make the transmission capability available to competitors (unless that capability is offered to the public voluntarily on a non-integrated, stand-alone basis).
The classification of broadband internet access service has remained an area of significant regulatory interest. In February 2015, the FCC reclassified retail broadband internet access service as a telecommunications service as part of the FCC’s net neutrality proceeding. This action was taken for the stated purpose of creating a clearer jurisdictional basis for the imposition of net neutrality rules on BIAPs, although it also automatically subjected BIAPs to various common carrier provisions appearing in Title II of the Communications Act, including privacy-related obligations. However, in January 2018, the FCC restored its prior classification of broadband internet access service as an information service, in conjunction with the FCC’s repeal of certain of those net neutrality rules, and in doing so also relieved BIAPs of Title II’s privacy obligations and other common carrier requirements. Appeals of the FCC’s 2015 decision accordingly became moot, although the 2018 order was appealed to the United States Court of Appeals for the District of Columbia Circuit. In October 2019, the DC Circuit upheld the majority of the FCC’s 2018 order, including its classification of broadband internet access service as an information service exempt from the requirements imposed on common carriers under Title II. After the DC Circuit denied various petitions for rehearing in early 2020, the parties ultimately declined to seek review by the US Supreme Court, thereby solidifying broadband internet access service’s information service classification for the time being. Following the election of President Biden in November 2020, the FCC was expected to swiftly reverse course and again classify broadband internet access service as a telecommunications service. However, because, as at the time of writing, the President still has yet to fill the vacant fifth seat at the FCC – widely seen as a prerequisite to the agency’s acting on this issue, given the political considerations involved – any such reclassification is likely to occur considerably later than many had anticipated. In this absence of action by the FCC, and as scepticism has grown in some corners about the agency’s statutory authority to subject BIAPs to common carrier regulation in light of the broad economic and societal impacts of such a decision, there have been renewed calls for federal legislative action on this issue.
The Communications Act gives the FCC the authority to regulate the rates charged by common carriers in connection with the telecommunications services they provide and ensure that those rates are just and reasonable. Prior to the passage of the Telecommunications Act of 1996, rate regulation was accomplished through the filing of tariffs with the FCC and state PUCs. More recently, the FCC has eliminated much of its tariffing regime and instead relied upon market competition (backed by a complaint mechanism) to ensure that rates are just and reasonable.
In other respects, the FCC has taken steps toward the re-regulation of certain services that are critical inputs to broadband services. In 2016, the FCC found that certain incumbents were abusing their market power and charging unreasonably high rates for the broadband ‘special access’ services necessary for business data service firms to function and serve their customers. The FCC subsequently proposed and adopted a new regulatory framework for such special access services in which individual geographic markets are classified as either competitive or non-competitive with the former subject to relatively lower levels of new regulation, and the latter subject to more onerous requirements and oversight. The new rules went into effect in August 2017 and were upheld in nearly all respects by the Eighth Circuit Court of Appeals in a ruling issued in August 2018.
The FCC also has taken a hands-on approach to the regulation of franchise fees that municipalities can charge CATV operators (which often offer broadband and voice services in addition to video service). By statute, such fees cannot exceed 5 per cent of the revenues that a CATV operator derives from providing video service in the municipality. In August 2019, however, the FCC clarified that the value of ‘in-kind exactions’ (e.g., services that CATV operators may be asked to provide without charge to government buildings and schools) count towards the 5 per cent cap. A number of municipalities challenged this decision at the United States Court of Appeals for the Sixth Circuit, which in May 2021 largely upheld the FCC’s determination that in kind assessments are subject to the 5 per cent cap.
Meanwhile, the state of New York has sought to subject broadband services to price regulation by enacting a law in April 2021 requiring virtually all BIAPs in the state to offer broadband service to qualifying low-income households for US$15 per month. BIAPs challenged that law in federal court and, in June 2021, obtained an injunction preventing enforcement of the law based on federal pre-emption grounds. The lower court’s ruling is now on appeal in the US Court of Appeals for the Second Circuit, where briefing concluded in March 2022 and oral arguments have yet to be held.
In recent years, one of the most significant policy debates at the FCC has focused on an open internet policy or net neutrality. Although the meaning of net neutrality is itself a subject of debate, net neutrality advocates generally aim to constrain the rights of broadband network providers to block, filter or prioritise lawful internet applications, websites and content.
The FCC’s direct involvement with a net neutrality policy began in 2005 with the issuance of its Broadband Policy Statement. Although the FCC’s authority under the Communications Act to regulate the internet was not clearly articulated, the Broadband Policy Statement expressed four principles that the FCC indicated were intended to preserve the ‘open’ nature of the internet for consumers, without discouraging broadband deployment by network operators. All subject to a service provider’s right to engage in reasonable network management, the FCC stated that consumers are entitled to gain access to the lawful internet content of their choice; run applications and use services of their choice, subject to the needs of law enforcement; connect their choice of legal devices that do not harm the network; and benefit from competition among network providers, application and service providers and content providers.
In 2008, the FCC ruled that Comcast Corp, the largest US CATV company, had violated the Broadband Policy Statement by inhibiting users of its high-speed internet service from using BitTorrent and other file-sharing software, a practice Comcast claimed was a type of reasonable network management designed to block pirated content and alleviate network congestion. Comcast appealed this decision, arguing, inter alia, that the FCC lacked the statutory authority to adopt or enforce net neutrality requirements. In early 2010, a US court of appeals agreed with Comcast and vacated the FCC’s order. In doing so, the court rejected the FCC’s attempt to rely on its ancillary authority as a basis for its enforcement of the Broadband Policy Statement against Comcast, insofar as the FCC had failed to identify a source for such authority in the Communications Act.
The FCC then adopted new rules on broadband internet access services, applicable only to mass-market retail services. Those rules:
In 2014, the US Court of Appeals for the District of Columbia Circuit vacated the FCC’s anti-discrimination and anti-blocking rules, finding that they amounted to impermissible common carrier regulation of internet access services, since the FCC had classified those services as information services not subject to Title II of the Communications Act (the Court upheld the FCC’s disclosure requirements). However, the Court also suggested that the FCC could adopt modified versions of these rules under Section 706 of the Telecommunications Act of 1996, which potentially grants the FCC relatively broad authority to promote the ‘virtuous circle’ of internet-related innovation.
In May 2014, the FCC launched a new rulemaking to explore whether new net neutrality rules could be adopted pursuant to Section 706, or whether the FCC instead should regulate BIAPs as Title II common carriers. In 2015, the FCC opted for the latter approach, reclassifying retail broadband internet access service as a telecommunications service subject to Title II. At the same time, the FCC exercised its forbearance authority to free BIAPs from much of the regulation that otherwise would apply under Title II (such as tariffing obligations and mandatory federal universal service contributions). Notably, several core common carrier regulations continued to apply notwithstanding such forbearance, including statutory requirements that charges and practices be just, reasonable and not unreasonably discriminatory; requirements to maintain the privacy of customer information; and the right of consumers to seek damages and pursue complaints in courts for claimed violations by common carriers. Soon after the FCC’s ruling, a broad coalition of BIAPs and trade associations filed an appeal in the US Court of Appeals for the District of Columbia Circuit. That Court upheld the FCC’s ruling in a decision issued in June 2016, and the US Supreme Court ultimately denied further review in November 2018.
In January 2018, the FCC revisited these issues yet again, this time restoring the classification of broadband internet access service as an information service and repealing its 2015 bans on blocking, throttling and paid prioritisation as well as its general internet conduct standard. In place of these prophylactic rules, the FCC adopted a revised transparency rule requiring BIAPs to disclose any blocking, throttling or paid prioritisation on their networks. The FCC also entrusted the FTC with the task of bringing enforcement actions for unfair and deceptive practices if BIAPs violate their own stated commitments not to engage in such conduct, and for unfair methods of competition if BIAPs otherwise engage in anticompetitive conduct. An appeal of this order was brought by a group of public advocacy organisations, internet content providers and state attorneys general in the US Court of Appeals for the District of Columbia Circuit.
In an opinion issued in October 2019, the DC Circuit upheld the majority of the FCC’s 2018 order, including its classification of broadband internet access service as an information service. The Court did, however, remand three discrete issues to the FCC for further review: the potential impacts of the order’s deregulatory reforms on public safety, pole attachments and BIAPs’ participation in the Lifeline programme. After soliciting comments on these issues, the FCC in October 2020 reaffirmed its classification of broadband internet access service as an information service, finding that such classification will not negatively affect public safety, BIAPs’ pole attachment rights or Lifeline participation. In January 2021, the California PUC sought review of this decision by the DC Circuit, but the state agency’s challenge is being held in abeyance pending the FCC’s consideration of petitions for reconsideration filed before the agency.
In the aftermath of the 2018 order, several states have attempted to establish their own net neutrality requirements for BIAPs in the form of either direct regulation (e.g., California’s SB-822) or conditions on government procurement contracts (e.g., Vermont’s EO 2-18 and S-289). The United States Court of Appeals for the Ninth Circuit rejected a request to preliminarily enjoin California’s net neutrality law on pre-emption grounds in January 2022, but a legal challenge by BIAPs to Vermont’s net neutrality law remains pending as of the time of this writing.
Because US commercial communications networks are privately owned, the FCC’s role in ensuring emergency preparedness primarily is one of gathering and disseminating information and coordinating among different governmental agencies. Facilities-based telecommunications service providers participate in industry-run working groups focused on developing best practices to ensure network reliability, to report network outages and to be prepared to restore network services as rapidly as possible in the event of an outage. The recommendations of these groups do not have the binding force of law, but have played an important role in shaping industry practice and have prompted some limited FCC rulemaking activity. For example:
The FCC is also responsible for the emergency preparedness of US network operators, the radiofrequency spectrum needs of non-federal first responders (police, fire, ambulance and emergency medical teams) and coordination among network operators and various governmental organisations to address cybersecurity concerns. Much of this activity has focused on ensuring adequate spectrum for public safety users, and ensuring the interoperability of different public safety networks.
Congress has authorised the creation of a nationwide, interoperable, high-speed network dedicated to public safety applications. This network is being managed by FirstNet, an independent entity within the NTIA that is overseen by a board including representation from the public safety community, wireless experts and current and former federal, state and local government officials. Notably, a significant portion of FirstNet operations is funded by the proceeds of spectrum auctions.
The Communications Assistance for Law Enforcement Act (CALEA) requires telecommunications carriers to implement specific capabilities in their networks to permit law enforcement agencies to intercept call identifying information and call content pursuant to a lawful authorisation. For this purpose, the term telecommunications carriers is defined broadly to include interconnected VoIP providers as well as facilities-based BIAPs. CALEA establishes both minimum capacity requirements and capability requirements. CALEA does not specify the means by which providers must comply with these capability requirements, but creates a safe harbour for carriers that implement industry standards. CALEA does not grant law enforcement agencies any surveillance authority beyond what otherwise exists under US law.
US cybersecurity policy, following the completion of the federal government’s Cyberspace Policy Review, has sought to:
Consistent with these goals, the FCC has explained that one of its core objectives is ‘to strengthen the protection of critical communications infrastructure’. In advancing this objective, the FCC has focused on educating consumers and small businesses about the importance of cybersecurity, developing cybersecurity best practices in cooperation with industry leaders and facilitating the ability of small businesses to develop their own cybersecurity plans.
The Children’s Online Privacy Protection Act of 1998 restricts the ability of website operators to collect personal information from children under 13 years of age. The type of verifiable parental consent that is required before collecting and using information provided by children under 13 is based upon a sliding scale set forth in an FTC regulation that takes into account the manner in which the information is being collected and the uses to which the information will be put. While children under 13 can legally give out personal information with their parents’ permission, many websites disallow underage children from using their services because of the regulatory burdens involved.
The Communications Act protects the privacy of customer proprietary network information, which includes the date, time, duration and location of a call, type of service used and other details derived from the use of a telecommunications service. US law also protects the contents of any telecommunications message from eavesdropping, recording, use or disclosure by a third party without a user’s consent. Users of online services enjoy similar protection from eavesdropping or disclosure of their communications. Exceptions apply where access to, or use or disclosure of, such information is necessary for law enforcement, which in most cases requires prior approval by a judge. In addition, the NTIA has formed an Internet Policy Task Force, which has recommended the adoption of voluntary codes of conduct by industry participants, and continues to examine ‘the nexus between privacy policy and innovation in the Internet economy’.
Notably, while updated and comprehensive privacy legislation has stalled at the federal level, certain states have pressed forward with privacy requirements of their own. For example, following on from the enactment of the California Consumer Privacy Act in 2018 – which imposes far-reaching privacy obligations on a wide range of businesses doing business in California, including broadband service providers and internet platforms – the California attorney general’s office issued regulations implementing the statute in June 2020. As of this writing, Colorado, Connecticut, Utah and Virginia also have passed their own consumer privacy laws, and such legislation is being considered in several other states.
The FCC has also tried to ensure that consumers can effectively block calls and text messages that they do not wish to receive, using authority provided by Congress in the Telephone Consumer Protection Act (TCPA). Among other things, in June 2015 the FCC attempted to strengthen restrictions on the practice of robocalling using automatic telephone dialling systems (i.e., ‘autodiallers’) by issuing a series of declaratory rulings. Among other things, the FCC ruled that a device is an impermissible autodialler if it had either the current ability or potential future ability to be used to store or produce telephone numbers to be called, using a random or sequential number generator, and to dial such numbers. Numerous parties sought review of this ruling in the US Court of Appeals for the District of Columbia Circuit, arguing, among other things, that the FCC’s action actually obfuscates matters and unreasonably expands the reach of the TCPA, because, for example, a smartphone could be classified as an impermissible autodialler simply because it could use an autodialling application. In March 2018, the Court struck down the FCC’s autodialler ruling and other aspects of the 2015 order. Despite having opened a new proceeding to consider reforms to its implementation of the TCPA in light of the Court’s ruling in May 2018, the FCC has yet to provide clarity on these issues. Over the course of late 2019 and early 2020, two challenges to the TCPA reached the US Supreme Court. Although it rejected a First Amendment challenge to the statute in July 2020, the Court resolved a longstanding dispute concerning the proper interpretation of the term autodialler in April 2021 by construing the term narrowly to include only devices that have the ability to store or produce telephone numbers using a random or sequential number generator.
In tandem with the FCC’s efforts to clarify the scope of the TCPA, other regulatory and legislative steps have been taken to facilitate voice service providers’ identification and blocking of illegal and unwanted robocalls. For example, in June 2019, the FCC issued a declaratory ruling permitting voice service providers to offer call-blocking functionality to their subscribers on an opt-out basis. Moreover, in December 2019, Congress passed the TRACED Act, which provides additional flexibility to service providers to block illegal and unwanted robocalls and imposed a June 2021 deadline for the implementation of STIR/SHAKEN, an end-to-end call authentication protocol aimed at curtailing unwanted ‘spoofed’ robocall traffic travelling on and among their networks. Pursuant to the TRACED Act, the FCC has established safe harbours (from liability for unintentional blocking of wanted calls) for a wide array of robocall mitigation initiatives, and has prohibited voice service providers from accepting traffic from other providers not appearing in the agency’s new robocall mitigation database. Many carriers – including the nation’s largest – met the TRACED Act’s June 2021 implementation deadline. Although all smaller voice providers initially were given until June 2023 to comply with the TRACED Act, the FCC subsequently accelerated the implementation deadline for non-facilities-based small voice providers to June 2022. And the FCC has announced that ‘gateway providers’, or intermediate carriers that receive foreign voice traffic in the United States for transmission to other, downstream US-based providers, will be required to comply with certain call authentication and robocall mitigation obligations – including implementation of STIR/SHAKEN – by June 2023.
This article is made available by Latham & Watkins for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. Your receipt of this communication alone creates no attorney client relationship between you and Latham & Watkins. Any content of this article should not be used as a substitute for competent legal advice from a licensed professional attorney in your jurisdiction.
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