Legalese Column: War on Neutrality

This interview originally ran in the March 2014 issue of AVN magazine. To see the rest of the print coverage of the AVN Awards Show, click here. The Federal Communications Commission, as the name makes clear, is in charge of regulating communications. The FCC is a creature of Congress, created under its constitutionally vested power to regulate interstate commerce. If you have communication consisting of anything much more than a string and two empty tin cans, you are under the FCC’s jurisdiction: television, radio, telephone and, of course, the internet. Amongst its internet-regulating activities, the FCC enacted what’s called a “Net Neutrality Rule” in 2010, requiring ISPs to give all of their customers the same service—no ISP customer gets preference. Of late, the United States Court of Appeals for the District of Columbia Circuit struck down that rule. Verizon v. Federal Communications Commission, ___ F.3d ___, 2014 WL 113946 (D.C. Cir., January 14, 2014). As a result, according to many pundits, all hell is about to break loose in the internet world. And if you are in the web business (isn’t everyone?), know that it likely will impact you. Oh, and by the way, this whole thing is intensely political. Predicting how internet commerce will be altered is akin to predicting the outcome of the Super Bowl if five minutes before the kickoff they changed to Canadian rules. First, Civics 101: Commissions—the Federal Trade Commission, Securities and Exchange Commission and others, including the FCC—are created by Congress. They are different from agencies (like the Federal Aviation Agency) and departments (like the Department of the Treasury and the Department of Justice), which are part of the executive branch of the federal government. Commissions are quasi-legislative bodies that are governed by—you guessed it—commissioners. Commissions also enforce applicable laws and their own regulations. As the FCC explains, “The FCC is directed by five commissioners appointed by the president of the United States and confirmed by the U.S. Senate for five-year terms, except when filling an unexpired term. The president designates one of the commissioners to serve as chairman. Only three commissioners may be members of the same political party, and none can have a financial interest in any commission-related business.” Parenthetically, all five of the current commissioners were appointed by President Obama—although two of them, as required by law, are Republicans. That was the lineup in 2010, when the FCC jumped into the net neutrality fray. The concept of “net neutrality” in essence tells ISPs that they must charge the same rates to everyone, rather than negotiating different rates with various subscribers. Without net neutrality, an ISP could, for example, tell adult sites that they need to pay a higher rate to have good service—“Stick ’em up, you dirty sidewinder!” Between 2006 and 2009, Congress debated seven bills that would impact net neutrality, all of which died for one reason or another until the FCC jumped in with its 2010 proclamation. Now, why is this important? Well, if a giant ISP can negotiate prices on a customer-by-customer basis, bad things can happen. For example, suppose Rupert Murdoch owns an ISP; and he doesn’t like adult. So he charges a higher rate—or a prohibitively high rate—for adult as opposed to other video. Or, he wants to charge higher rates for MSNBC than for Fox. Hey, an ISP is a private business. So long as there is no violation of the civil rights laws, businesses can do business or not with whomever they want. Net neutrality was a good thing. For that reason, in 2010 the FCC promulgated (“promulgating” regulations is one of the things that commissions do) its Net Neutrality Rule. In re Preserving the Open Internet, 25 F.C.C.R. 17905 (2010). The rule derailed any plans for ISPs to impact the content of the internet, by enacting into law the prevailing practice of even-handed treatment by ISPs of all of its customers. The dismantling of net neutrality stands to turn internet commerce on its head, although nobody is quite sure what will happen. We know several things. One is that ISPs are clothed with all kinds of immunity from being sued for copyright infringement, defamation and other misdeeds of their subscribers. But without net neutrality, might they charge bit torrents giant fees to propagate their massive piracy operations, effectively profiting on theft with impunity? Second, we know that the commission is fond of net neutrality, so figure it will do what it can to encourage neutrality within the constraints of the opinion. Third, the opinion is subject to challenge on three fronts. Front One is a motion for rehearing “en banc.” The decision, like most all first decisions of a federal court of appeals, was decided by a three-judge panel, although the court has several times that many judges. An en banc rehearing is before all of the judges of the court. While such a rehearing is rare, typically one in 20, it is more likely when a federal statute or regulation is dismantled; but when granted, it does not necessarily change the result. Front Two is to petition for review to the United States Supreme Court. The odds of review and then of a change in result are about the same as that of an en banc rehearing. Front Three is Congress. What Congress could do is ... Wait a second! Congress doing something? Well, maybe there are only two fronts. While the ruling was based upon the powers of the Commission granted it by Congress, net neutrality could be restored by Congress—in theory. What will happen with the ISPs being allowed to charge variable prices and have variable speeds is anybody’s guess. Pundits have predicted everything from soup to nuts; but it is doubtful that even the ISPs now have any idea of how they are going to exploit this newfound freedom. 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.