Lawsuit Seen After FCC’s Comcast Ruling

Net neutrality

After last Friday’s finding that Comcast had violated federal broadband policies, what’s next? For one, a lawsuit against the Federal Communications Commission, analysts and pundits predict.

Why? Because the FCC’s ruling is the most significant step forward for advocates of Net neutrality since the debate began a few short years ago. The forces who think the FCC has no business — or legal authority — regulating Internet traffic are expected to push back.

After all, the government’s treatment of Net neutrality — the principle that broadband providers should handle all traffic on their networks equally — has been a highly partisan political stalemate. Several bills have either stalled or been shot down in floor votes, and, until Friday, the FCC’s involvement on the issue had been limited to seeking comments and holding hearings.

Then, by a 3-2 vote, the commission ruled that Comcast (NASDAQ: CMCSA) was in the wrong for selectively blocking peer-to-peer traffic, and then failing to tell its subscribers what it was doing.

As a result of the enforcement order, which has yet to be finalized, Comcast will have to detail “its discriminatory network-management practices,” submit a compliance plan by the end of the year describing how it will modify those practices and notify its customers about the policy changes.

Also, as a result, expect Comcast to sue over this issue in order to protect its turf and help shape the debate over who should regulate these issues, analysts note.

But what really changed? Depends who you ask.

On a conference call with reporters following the decision, Free Press Executive Director Josh Silver was jubilant.

“Today’s decision by the Federal Communications Commission will go down in history as one of the most important milestones in the fight for an open, accessible Internet,” he said.

It was the media-reform groups Free Press and Public Knowledge, after all, that brought the complaint to the FCC that kicked this whole process into motion.

In a statement responding to the decision, Comcast spokeswoman Sena Fitzmaurice said that, while the company was disappointed with the ruling, “the deadline established in the order is the same self-imposed deadline that we announced four months ago.” In March, Comcast announced that it would stop singling out peer-to-peer traffic by the end of the year, moving in favor of a “protocol-agnostic” approach to managing traffic.

So while Fitzmaurice defended Comcast’s practices as common throughout the industry, she also argued that the FCC ruling requires the company to do something it is moving toward on its own.

Fitzmaurice declined to comment beyond the statement, citing the absence of a final order from the commission. “We can’t progress in evaluating options without an order to review,” she explained.

While Free Press and many likeminded groups have declared a cautious victory, they realize that it was a battle, not a war, that they won. Asked by, both Silver and Public Knowledge Executive Director Gigi Sohn said that they would continue to agitate for legislation, and felt that the FCC ruling will advance that cause.

Blair Levin, an analyst with Stifel Nicolaus and Company and a former FCC chief of staff, also noted the limited impact of the ruling, though he suggested that it could recast the political debate over Net neutrality.

“Although we don’t think the FCC action will have much material effect on Comcast, the order does set a precedent that will likely reverberate politically and legally,” Levin wrote in a research note.

The legal reverberations got a preview on Friday, when the two dissenting commissioners — Republicans Robert McDowell and Deborah Taylor Tate — questioned the FCC’s legal authority to take action against Comcast.

Fitzmaurice said that “the commission’s order raises significant due process concerns and a variety of substantive legal questions,” and “we are considering all our legal options.”

Next page: Will Comcast sue? Well, yes…

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Does that mean that Comcast will sue?

“Yes,” said IDC analyst Amy Lind. “Comcast has no choice but to do that, just on principle alone.”

Lind told she thinks that in issuing a relatively benign ruling (there were no fines involved), the FCC’s action is well within its purview, and would likely hold up to a legal challenge.

A more cautious Levin said that while “it’s premature to speculate on the prospects, we believe such litigation would raise serious issues about the FCC’s statutory mandate and decision making.

“If the agency were found to lack authority to act in this area, it could spur network neutrality legislation in Congress,” he added. “If the FCC were found to have erred in not establishing clear rules, it could spur a future FCC to adopt rules that cable (and the telcos) would find far more troubling than today’s order.”

The dissenting commissioners protested that the majority was voting to enforce principles that had not gone through the formal rulemaking process, and was therefore exceeding its authority.

The complexion of the future FCC will likely hinge on the political climate of the next administration, which of course might see a dramatic change in January. Since commissioners are political appointees, Levin suggested that an Obama presidency could lead to an FCC that is unabashedly pro-Net neutrality.

An FCC spokeswoman told that there was no indication when the enforcement order would be finalized, but said that it was not looking “imminent.” Orders can sometimes take months to materialize, but since this one requires Comcast to act before the end of the year, it likely won’t drag on too long.

Lind, who believes it will survive a court challenge, doesn’t expect the compliance requirements to be too onerous, but that it could alter the way broadband operators charge their subscribers.

“The impact is going to be minimal — at least in the near-term,” she said. However, “it opens up the possibility going forward that service providers in general will look a little more closely at bandwidth metering, like what Time Warner Cable is doing.” In January, Time Warner Cable said it would begin a limited trial of metered broadband billing this year. That practice is common among foreign Internet service providers, but has only rarely been applied in the United States.

Another possible outcome will be Web content and service providers signing side agreements with network operators to ensure that there traffic is given priority. Internet phone provider Vonage has already reached such an agreement with Comcast. The FCC’s ruling does not appear to address the issue, though it could come up when the commission reviews Comcast’s compliance report.

But when it comes to network management, applications do not compete on a level playing field, according to Kurt Dobbins, CTO at network security provider Arbor Networks.

“The fact is that not all applications are the same; different applications have different tolerances for neutrality,” Dobbins wrote in a blog post. “A voice application is much more sensitive to packet latency, jitter, and packet loss then is a file sharing application, which can adapt its rate of transmission and recover lost packets.”

Metered billing and quality-of-service side deals invite their own set of controversies, but for Lind, who is sympathetic with broadband providers’ need to manage traffic on their networks, the chief lesson of the Comcast fracas is a point of transparency:

“The message that has come out of this is that you need to be more upfront with your subscribers.”

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