Bad News For Net NeutralityBad News For Net Neutrality

In what seems to me to be an opinion that’s as politically charged as any I can recall, the U.S Court of Appeals for the Sixth Circuit threw out the Biden Administration’s attempt to restore network neutrality. Given the upcoming change of administration, and the current balance on the U.S. Supreme Court, it is extremely unlikely that the FCC will choose to appeal this decision one more time in an effort to restore what many—including me—believe a fair and equitable way to treat the internet as it should be treated, i.e. as the utility that it has become.  However, rather than cry over spilled milk, I would suggest that while many argue that regulation stifles innovation, I think that regulation only inspires it, especially since it establishes frameworks that offer unexpected and smaller players to compete with new ideas and implementations. However, in the absence of this sort of innovation-encouraging structure, perhaps there will be new ways for the federal government to tackle the issues that net neutrality sought to address head-on.

As has previously been discussed here, the 2024 Supreme Court decision in the Loper-Bright case will have a significant—and I suspect negative — impact on the role of federal regulatory agencies’ abilities to interpret ambiguous statutory language going forward.

In a ruling issued on January 2, 2025 (when most of us were still writing 2024), the U.S. Court of Appeals for the Sixth Circuit blocked the Federal Communications Commission (FCC) from restoring its net neutrality rules. The court cited the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimando, which overturned the precedent that gave deference to government agencies in interpreting the laws that they administer. “Applying Loper Bright means we can end the FCC’s vacillations,” the court said in its opinion. By “vacillations,” the Sixth Circuit decision refers to the political hot potato that the issue of net neutrality is.  Under President Obama, net neutrality was the law of the land. During President Trump’s first term, the rules were scrapped. They came back in a slightly different form during the Biden Administration, and now, as the next Trump administration approaches, net neutrality is once again out.  This is one of many issues whose favor—or disfavor--comes and goes with the bent of the occupant of the White House and his appointees.

In its decision, the court further found that the FCC’s net neutrality rules were inconsistent with the plain language of the Communications Act and therefore unenforceable.   This decision invalidates decades of deference to federal agencies when statutory language has been deemed imprecise and requires interpretation.  The shift of this role moves that obligation from the experts in federal agencies to the courts, where judges, who no doubt will exercise their best judgment based on whatever knowledge they have on the specific matter at hand and will be required to interpret vague or otherwise unclear statutory language without the benefit of years of technical training and expertise in the field in question.

Another complicating factor is simply the fact that regulation evolves much more slowly than the technology that it has been designed to address.  If you have any question about this, look simply to rules governing artificial intelligence. The European Union has been able to craft rules with teeth that manage AI reliance and deployment, while in the U.S., such efforts remain bogged down while special interests jockey in both state and federal legislatures. In the meantime, the technology becomes increasingly sophisticated and the risks increasingly great.

           Distinctions between “information services” and telecommunications services existed when the landmark Telecommunications Act of 1996 was enacted, but to a large extent they have vanished as increasing numbers of applications migrate to IP services. This leaves the traditional telecommunications services subject to increased regulatory scrutiny and also to the burdens of associated fees and surcharges that are based on usage and other elements of traditional phone service. 

As an example, when the first assessment of Universal Service Charges was assessed in Q2, 2000, the quarterly rate or “contribution factor: was 5.71%, while for Q1 or 2025, it’s a shocking 36.3%. To add to this, the USF contribution factor is subject to sales tax, making its impact that much greater. Since that time, not only have costs to support the worthy services of the Schools and Libraries Fund, Rural Health Care initiatives, service delivery in high-cost areas and support (in the form of subsidies) for low-income consumers, increased significantly, but the number of consumers--be they enterprise or civilian—who support these mandated and worthy obligations continues to plumet, as we migrate many of the traditional services to those that are IP-based. So the cost goes up, and the number of entities supporting those costs goes down, thus increasing the burden on those who are left.

             Under a new administration, the Universal Service Fund, which has been sustained through recent court action, may be modified in form, while the support that those designated funds provide for services deemed essential remains in place.  Will “information services” be subject to additional regulation to generate a more equitable method of sharing those costs?  Who knows, but it remains a possibility.

Certainly, since well before the pandemic, the internet has become a utility, whether the FCC chooses to classify it that way or not.  For now, consumers, be they enterprise or individual, will need to be very wary of how their access to the internet and the applications that ride on the internet pipe (remember the phrase “information superhighway” anyone?) is affected by the lack of appropriate, let alone enforceable, regulation.