Legalese Column: FCC's New Rules

This article originally ran in the April 2015 issue of AVN magazine. Click here to see the issue online. Recall from previous columns that there has existed a brouhaha in Washington over “net neutrality,” the concept of requiring broadband providers to furnish equal service to all customers. Otherwise, the providers could require extra money for premium speed. After the decision last year striking down the Federal Communications Commission’s net neutrality rules, Verizon v. F.C.C., 740 F.3d 623 (D.C. Cir. 2014), the turf battle in Washington has been on; and it looks like the neutrality proponents have pulled one off. The Obama administration has appointed all five of the current commissioners on the FCC; although the law requires that no more than three come from the same political party, when presidents are required to appoint someone from an opposing party, you can bet that they always look to its members who tend to favor that president’s position. So it is no surprise that the new FCC rules follow the Obama administration’s lead, essentially turning broadband providers into the functional equivalent of a public utility (although the decision appears to have come along party lines). Whether treating internet service providers like public utilities is good for you depends to some extent upon whether you are a city mouse or a country mouse. That should make complete sense when you stop to consider how public utilities work.Take electricity as an example: Putting aside places having municipal utility districts—that is, where you buy your electricity from the city—electric service cannot operate in an absolute free-market environment, at least as a practical matter. The capital requirements of generating stations, erecting power lines or subterranean utility services, and so on, are huge. As a result, dueling power companies are not likely to emerge; so government grants one company a franchise to operate the local power company, but regulates its rates. On a regular basis, the electric company goes to the local public utility commission and asks for rate concessions because the cost of fuel has risen or it needs to upgrade its local generating plant or whatever.The important thing about public utilities is that they are required to serve everyone at the regulated price. In the electricity example, an unregulated power industry might decide to not provide service to outlying areas or might decide to charge higher rates for them. Under the public utility model, everyone can get electricity at the regulated price.In a free market, a company is free to do business—or not—with whomever it pleases, with the exception of the constraints of anti-discrimination laws (race, religion, disability, etc.). A free-market electric company, then, could take the position that “we reserve the right to refuse service to anyone.” That can’t work.Also, a utility is not permitted to afford better service to a customer that is willing to pay higher rates. The rates are what they are—for everyone.The range war that has been going on about the internet is whether the service providers can favor some customers over others. The result of allowing that would have the effect of providers auctioning off connectivity. Want faster service? Pay more!The political battle, like all political battles, is over who gets the goodies. The administration is defending the little guy; everyone should have equal access to the Internet. The providers hate that because they can’t charge extra to the big guys for extra high-speed service.Where the city-mouse/country-mouse thing arises because of the ability to compete. If you are in a big city, there typically are multiple sources of broadband. In rural areas, a free market might be unable to support multiple sources—and maybe could not support any at all.The interesting thing about this battle is that both sides are claiming to be supporting freedom. The providers object to net neutrality because it deprives them of a free market. The proponents of net neutrality claim that it puts everyone on an equal footing, allowing all businesses an equal opportunity to thrive on the internet.Is broadband service like electricity—an indispensable element of human endeavor? The question answers itself.On the other hand, with the advent of technology, electrical service may become different, with the emerging potential of fuel cells, solar energy and so on. That may happen to broadband, as well. When it does, the arguments will change. Clyde DeWitt is a Las Vegas and Los Angeles attorney, whose practice has been focused on adult entertainment since 1980. He can be reached at ClydeDeWitt@earthlink.net. More information can be found at ClydeDeWitt.com. This column is not a substitute for personal legal advice. Rather, it is to alert readers to legal issues warranting advice from your personal attorney.