IP Democracy: FCC to Whack Comcast on P2P. The Games Begin.

Republican FCC Chairman Kevin Martin is ready to lower the boom on Comcast for its P2P "throttling" as part of what the company contends was well-intentioned network management practices. Martin leaked word to the AP yesterday that he will circulate an order to his fellow Commissioners recommending enforcement action against the company because it violated principles spelled out in a 2005 policy statement that calls for an open and non-discriminatory Internet.

By all accounts, Martin's two Democratic colleagues, Jonathan Adelstein and Michael Copps, will side with the Chairman on the order, thereby assuring it will become an official FCC order, mostly likely on August 1 when the Commission is tentatively slated to meet. The order will force Comcast to immediately stop throttling within a reasonable time frame, tell the FCC exactly what it did and the extent to which the network management technique was deployed and to disclose to consumers any network management plans going forward.

The order does not, apparently, include a fine or financial penalty and for probably a good reason: imposing financial punishment on Comcast would likely increase the already high chances that this order would be overturned on appeal. For all the headlines that this first net neutrality order is generating, most communications attorneys -- even those not representing Comcast and the cable industry -- think that Martin's order will get swatted down by the appeals court lickety-split.

Unfortunately for Comcast and the cable industry, a win in the appeals court would just be the beginning of what could turn out to be a decisive and bloody net neutrality battle in the Congress.

The question of whether the FCC has legal jurisidiction to issue net neutrality-type orders has surrounded the P2P controversy from the outset. Free Press and others petitioned (PDF) the Commission last fall to issue an order that Comcast's intentional degradation of P2P applications does not constitute "reasonable network management," which, under the 2005 principles is permitted.

Comcast, the cable industry and other parties argued that the "principles" are not rules per se and therefore cannot be enforced. Moreover Congress had not given the FCC sufficient authority to take this kind of action, they argued.

The FCC then held field hearings to examine the issue. As time progressed, it became clear to FCC attorneys and Commissioners that in fact in the absence of actual rules or Congressional mandate, it would be hard to justify taking action against the operator.

Free Press lent the FCC a big hand last month by submitting legal memoranda (PDF) that articulate detailed arguments to support the Commission's legal authority. Bolstered by these documents, Martin got ready to move on the order.

Although the company contends it had no advance knowledge of Martin's readiness to move on the order (and indeed Comcast may have spurred Martin to go public), Comcast yesterday submitted a 57-page detailed legal memo rebutting Free Press' arguments (PDF).

Given the complex, dueling arguments and the fact that the FCC hasn't actually released the order, it's difficult to say whether the FCC has the legal authority to punish Comcast for P2P throttling, attorneys say. The appeals court gives great deference to independent regulatory agencies except in circumstances where it has abused its discretion and behaved in an arbitrary and capricious manner.

Punishing Comcast for violating mere "principles" and not rules that were developed in a mature manner through orderly proceedings would very likely be judged arbitrary and capricious according to legal experts. But Free Press in its latest memoranda says, among other things, that even if the principles themselves aren't enforceable, the FCC is free to enforce the Communications Act through adjudication and therefore can take this action.

In an interview, Marvin Ammori, General Counsel of Free Press, said that before he delved into the details of the jurisdictional debate, he too was worried. The more he learned, however, the more convinced he became that the Commission is on solid legal grounds. "I’ve become a believer even though I was skeptical," he said.

Not all net neutrality advocates are so certain of victory. "You pays your money, you takes your chances," one leader* in this fight told me when asked whether the FCC's action would withstand appeal.

The irony is that even if Comcast manages to overturn the FCC's decision, it may very well end up losing the net neutrality war. If the appeals court says that Congress did not give the FCC authority to take this action, the momentum for Congressional action on this issue will accelerate.

If the FCC is overturned on appeal, "the first thing that happens is that the public and consumer groups and scholars call on Congress to immediately enact legislation that guarantees an open Internet," Free Press' Ammori said. Stifel Nicolaus analysts, in an analysis sent to clients this morning, concur, adding that a likely Democratic-controlled Congress combined with a likely Democratic president spells trouble for cable.

However the courts rule on the issue, the litigation is a bit of a double-edge sword for Comcast and the broadband network owners. To the extent that Comcast convinces a court that the FCC erred because it lacked a mandate to act, it invites Congress, which likely will be in Democratic hands, to pass a bill similar to what House Telecom Subcommittee Chairman Ed Markey (D-MA) has already drafted giving the FCC more explicit authority and direction. And to the extent Comcast convinces a court that, even if the FCC had statutory authority, it erred in taking an enforcement action on the basis of principles rather than rules, it invites the agency (which may openly support network neutrality if Barack Obama wins the presidency) to go ahead and turn its principles into more specific rules.

The cable industry is willing to take that chance. Even if you have an all-Democratic Congress and Democratic President, that doesn’t ensure legislation passage, industry sources say. All you got to do is find one person who will filibuster, they argue, pointing to the fact that Sen. Ron Wyden (D-OR) blocked the telecom reform bill last year by promising to filibuster it to death unless it incorporate net neutrality provisions. That legislation had the backing of a Republican-controlled Congress under a Republican president. There are members who feel as strongly about this issue to block legislation that has net neutrality provisions, they say.

*I got a follow-up email with the following clarification: "To make a less flip comment, we obviously think we have a strong case, or else we wouldn't have proceeded as we did. But if it goes to court, you never know how it will turn out. We think we would win it."

Posted by Cynthia Brumfield on July 11, 2008 12:11 PM to IP Democracy