Michael Huston, "The Internet Goes to Court: Litigating Net Neutrality"
With commentary by Professor Salen Churi
Michael Huston is an associate in the Washington, D.C. office of Gibson, Dunn & Crutcher. He is a member of the firm's Appellate and Constitutional Law and Administrative Law and Regulatory practice groups. Mr. Huston has represented clients before the Supreme Court of the United States, multiple United States Courts of Appeals, federal district courts, and state supreme courts. He has also represented clients in rulemakings and other proceedings before federal administrative agencies. He recently represented CTIA – The Wireless Association before the D.C. Circuit, challenging the FCC's net neutrality rules.
Mr. Huston served as a law clerk to the Honorable John G. Roberts, Jr., Chief Justice of the United States, and to the Honorable Raymond M. Kethledge of the United States Court of Appeals for the Sixth Circuit. He graduated first in his class from the University of Michigan Law School, where he received the Henry M. Bates Memorial Scholarship Award—the law school's highest honor. Mr. Huston graduated summa cum laude from the University of Arizona with a bachelor's degree in political science and philosophy. He was elected Phi Beta Kappa.
Salen Churi is Assistant Clinical Professor of Law at the University of Chicago Law School and the Bluhm-Helfand Director and founder of the Innovation Clinic. Prior to founding the Innovation Clinic, Salen served as Associate Director of the IJ Clinic on Entrepreneurship at the University of Chicago Law School. Previously, he practiced corporate law at Sidley Austin and Kirkland & Ellis, with a focus on mergers and acquisitions, private equity, and technology transactions. He received a BA cum laude from Miami University and a JD with honors from the University of Chicago Law School.
Presented by the Federalist Society on March 31, 2016.
Transcript
Announcer: This audio file is a production of the University of Chicago Law School. Visit us on the web at law.uchicago.edu.
Host: We're very happy to have Michael Huston here along with our own Professor Salen Churi. Michael is an associate in the Washington, DC office of Gibson, Dunn, & Crutcher where he's a member of the Appellate and Constitutional Law and Administrative Law and Regulatory practice groups . He's argued a number of cases before the Supreme Court, Courts of Appeals, federal district cours, state supreme courts, you name it. More relevant to what we have here in our net neutrality talk is he represented CTIA - The Wireless Association and Verizon sort of within them in the rule making process of the FCC. He was a graduate of Michigan Law, the first in his class, and graduated from the University of Arizona. Next we have our own Professor Churi who was the director and founder of the Innovation Clinic. Before that, he was the associate director of the IJ Clinic on Entrepreneurship. He was also a graduate of this law school. Before that, he was a graduate of Miami University of Ohio. We are very lucky to have them both. Let's give him a round of applause. Thank you!
Michael Huston: Well, thanks. Thanks a lot to the Federalist Society for having me out. It's a delight to be here with you and talk to you about this, this very important case. So, as you know, as Joe mentioned, I'm Michael, I work at Gibson Dod, I practice appellate and administrative law there. But you know this is a talk about the internet so more interesting than my firm bio page, that's my Bitmoji. And some people say it looks like John Oliver. Which it kind of does. And it turns out John Oliver is sort of an important player in this whole story. By the way, my voice is really bad. I'm not sick, but my voice is gone, so you'll just have to bear with me. So how many people saw the John Oliver did on net neutrality a couple of years ago? You guys see this? So I just thought I would provide you a brief reminder of what, what he had to say about the issue.
[Video Clip of John Oliver segment]
Michael Huston: Okay. So not a very high bar that I have to clear in order to do this talk interesting to you. So I'll try to do that. So what is net neutrality? If you don't already know, net neutrality is the idea that the internet should be open. You should be able to go online and access any lawful content that you want. For Internet service provider, Comcast, Verizon, AT&T, Sprint, Charter, those entities should not be able to block your access to any lawful website. And as a corollary, they shouldn't be able to affect the speed of which you access content, so they shouldn't be speeding up or slowing down your connection. A consistent worry has been, for example, that Comcast, a company like Comcast, would slow down your access to Hulu online in order to incentivize you to go and use Comcast's video on-demand service.
Michael Huston: Right? That could be an example of something that's contrary to net neutrality. Um, okay. So in order to understand this rule that the FCC made, and in order to understand the litigation about it, you have to go, you have to back up and... To be fair, a lot of it is really quite boring and technical, but I'm going to try to speed through it and help you understand kind of the lay of the land. So you really have to go to, to understand this, you really have to go and understand something about 19th century railroading because that's where it starts. So railroads are literal monopolies, right? There's only one railroad who owns track in a state and in a lot of places. And so in the 1800s, Congress said, look, we need to regulate these things so that people can use them and cannot charge extortionate prices.
Michael Huston: And so they said, um, if you're a railroad, you have to take anybody's stuff. Anybody that wants to ship anything on a railroad that's legal, you have to carry it, and your rates are going to be, are going to be subject to government regulation, just and reasonable rates. That broadly speaking, is what's called a Common Carrier Appreciate. It's a very intrusive form of government regulation that we only use for things like monopolies. Okay. And public utilities, that's another good example. So in the 1930s when the phone system became national, the copper wire telephone system, Congress passed the Telecommunications Act, and they said that phone lines in this country should be regulated as common carriers. That makes a lot of sense, right? Like you're on the phone lines need to be open, everybody should have equal access to the phones, and the companies should charge reasonable prices so that you can get access to it.
Michael Huston: This is the first big problem with the net neutrality rule that we have today. Its source is grounded in a statute that was passed 80 years ago to deal with a copper wire telephone system and tell like if you have an idea about what Congress had in mind for that statute and how the Congress that wrote that statute, you know, what their views would be about how broadband Internet access service as network management practices should be handled. You're, uh, you're better than me, because I just think like, they had no idea. Everybody thinks they had no idea. So the statute that we have is not equipped to deal with the technology that it's being applied to. That's a political problem, right? Congress, I think everybody on every on all sides of this debate, agrees that it would be better if Congress would get together and pass a statute about the Internet, but that's a big political fight as you can imagine and they haven't been able to do it.
Michael Huston: And so the FCC, which regulates telecommunications, is just taken it upon itself to deal with the problem. Okay, so we have the telephone statue and then fast forward to the '80s and the '90s when the Internet comes along. Remember dial up internet way back? When you have your phone light in your house and then connect the cable modems to it and that would be how you would get access to the Internet? So the FCC looked at that and said, we see two different services there. We see a phone line and we're going to treat that as what they call it, a telecommunications service, and we're going to continue to regulate it as a common carrier, very heavy handed government regulation. But we really don't want to stifle this new emerging internet technology so that we're going to treat as an information service and it is not going to be subject to common carrier treatment.
Michael Huston: We're going to have a light touch regulation. We're going to prevent companies from doing nefarious various things, but we're not gonna regulate the rates. We're not going to impose a lot of mandates. We're not going to expect them to get all this stuff that they do pre-cleared by us. Okay. Then the next thing that came along was mobile for mobile phones. Right, and there was a question. Yes. You see how, how should we regulate mobile phones? And the FCC said if what you're doing, well, I guess there's another, there's another, there's another thing that happened at the same time which was there were a lot of mobile technologies that we're growing, right? Pagers and cellphones and those NextTell push to talk things. Remember those? So there was a lot of different stuff. All this mobile technology and it had sort of various regulatory treatment. Congress passed a statute and said we need to like bring some order.
Michael Huston: to all of this. And their solution was what they said was, if what you're offering, Sprint is mobile voice service that shouldn't be regulated the same way that landline telephones are regulated. Why? Because it's basically the same service, right? I mean if you're buying a mobile phone, you want to be able to talk the landlines and vice versa, so it should all be in the same regulatory regime. And so if what you're offering is a wireless service that's connected to the public switch network, which everyone has always understood, means the network of 10 digit telephone numbers in North America. Then common carrier regulation applies, but if you offer any other kind of wireless service, there's a common carrier prohibition. You cannot regulate your common carrier. And the reason was because Congress again was very concerned not to stifle emerging wireless technologies. All right, so then in the Telecommunications Act of 1996, Congress looked at that two-step framework that the FCC had created for in the Internet for the Internet, and they said, that looks pretty good.
Michael Huston: We're going to write that into law. We're going to... We're going to create those two categories. So the law says there's two kinds of services, information services and telecommunications services. A telecommunications service is the offering as a service that offers transmission of content without change in its form. A phone call is that right? A phone, you know your phone call, you make a phone call, your voice travels along the line. The company doesn't change it. Telecommunications service gets regulated as common carrier under title two, but every other kind of services that are information services that offered the capacity for storing, manipulating, accessing, retrieving information, those. There's a common carrier prohibition again because Congress was very concerned not to stifle these emerging technologies so that the law as it stands in the United States today and then subsequent to that, the FCC looked repeatedly at broadband Internet and said, how should we treat it?
Michael Huston: And again and again and again. They said, this is an information service. What you're doing when you go online, what Verizon sells you is the capacity to retrieve, to store information, to manipulate it. And that's what the internet does, and in particular there's all sorts of technology built into the internet that enables it to be more user friendly so that you that manipulates the data in ways that benefit you. What is the example is DNS, right? You don't have to know the Ip address of the University of Chicago in order to access their website. You just type Chicago.edu or UChicago.edu. And the system knows where to go. Right? So that's something that the service was manipulating the data to help you have a better internet experience. So this is the second problem with the net neutrality rules. They are inconsistent with how the FCC has always regulated the Internet, and the FCC, you may normally think, especially if you've taken admin law, that when an agency changes its mind so drastically, it's good to have a good reason, it's going to come to court and say something about the world has changed that caused us to revisit our interpretation.
Michael Huston: But the FCC doesn't have that story in this case. All that they say is the Internet has become even more popular. It's become even better. And so because it has been so successful, they don't think we need to regulate it more. They don't, so they don't have a story to tell about why something has changed and they don't have a story to tell about why the very substantial reliance interests, the trillions of dollars of investment that was made on the understanding that broadband was going to be regulated one way, should now sort of go out the window. Because it costs a lot of money to lay pipe in the ground and why are we making it to convey broadband. Right? And one of the amazing things about the Internet is that basically everywhere in America today, including in very rural areas, customers have access to high speed broadband internet.
Michael Huston: That's amazing, and it costs a ton of money to make that happen and to operate it. But companies invested that money because they thought that this was a product that consumers would want. And it obviously is. And that, by the way, is why you had 2G, which was supplanted by 3G and 4G and LTE and wireless, right? These companies are falling all over themselves to invest money in this technology extremely rapidly, especially in the last 10 or 15 years. The Internet has become faster, better, cheaper, and it's done all of that without government, with basically with a light touch government regulation. Okay. So then then came the net neutrality fight and it started really with bittorrent in 2007. Comcast in particular started having a problem when people were using bittorrent to exchange high definition video because high definition video is very bandwidth intensive. And so the emergence of services like bittorrent created a problem in that the system Comcast's physical system just wasn't equipped to deal with it.
Michael Huston: It was too much data. And so they, you know, were sort of taking various steps to try to deal with that problem and the FCC sanctioned them. And then that was ultimately thrown out by the DC Circuit which said, hey, we read the Telecommunications Act passed in the 1930s and we don't see anything about the Internet in there. So if you want to regulate this, you got to at least make a rule. So they obviously did. In 2010 they put out the first net neutrality rule. Verizon and other companies sued to challenge that in the DC circuit. And the argument was, remember I said that, you know, there's the difference between information services and telecommunications services? ... said, hey, FCC you've always said that we're an information service and the one thing that you can't do is impose common carrier mandates and a lot of your net neutrality programs, fine.
Michael Huston: But you have imposed these very strict nondiscrimination standards that go too far. And the Court agreed, the DC Circuit, uh, in an opinion by Judge Tatel said, this is, this role is unlawful because it amounts to common carriage. But Judge Tatel said there's a solution. Actually. See, you just got to dial it back. You can basically have the, you have the ability to regulate the Internet, but you just can't have such a strong mandate. You have to dock, you know, you have to pull it back a little bit and this is called the Roadmap. So then the FCC went back and said, okay, we proposed to adopt the DC Circuit's Roadmap, now we're going to regulate the internet, but we're going to do it and we're going to get into in a heavier way that we've done before, but, but not in a common carrier way. That's when the John Oliver clip came out because he was worried, uh, that the FCC would take this lighter approach. Then Brooklyn and Obama came out and urged the FCC, which is an independent agency, to adopt the strictest possible form of regulation, and the way that do that will be to reclassify the Internet, not as an information service, which is what the FCC had always said, but as a telecommunications service and thus to apply common carrier regulation.
Michael Huston: Oh, the President did that, by the way, after the comment period was closed. 3.7 million comments were filed as the largest comment docket in the FCC's history, because the internet is really important. But after the comment period was closed, the White House urged them to reclassify essentially to take the strongest form of government regulation possible and that ultimately is what the FCC did in the 2014 Open Internet Order. So the Open Internet Order, which is this guy, 400 pages, says we're going to have three bright line rules: no blocking. I told you what that was in the beginning. Your Internet service provider can't deny you access to any lawful website. No throttling, which means your Internet service provider can't speed up or slow down your access to any lawful content. And no paid prioritization, which means they can't offer or receive special companies, other companies as providers.
Michael Huston: Google can't, excuse me, Google can't pay Comcast more to ensure that you get faster access to Google's content or Hulu is probably a better example. Hulu, Comcast can't work out a deal where Hulu pays for fast lane. Okay. So my, my clients don't object to any of those things. The basic principle of net neutrality is settled. It always has been settled. With companies, the Internet service providers have never wanted to do these types of things that people are worried about. They've never been interested in blocking your access to content or really in throttling it. Because they understand that that's not the service that you as the consumer want to buy. You want to be able to go anywhere and have, you have the control over the, you know, the speed at which you access. And they know that. So they have not sued to challenge those rules, but they have sued,
Michael Huston: the challenge is their reclassification as common carriers. They don't want to be regulated as commentary. They don't want to be subject to a program of rate regulation potentially and have very onerous nondiscrimination mandates and other intensive government regulation where they have to submit all of their broadband practices to FCC review. The FCC when they reclassified ... said, this is what we think we should do, but we we, there's a big problem which has, as I mentioned, Title II, a common carrier program, is meant to deal with a very different kind of technology is meant to do with the landline phone systems, and so there's all these provisions of the law that don't make any sense as applied to the internet. And just about everybody agrees about that. So the FCC did what they call the exercise, something called forbearance authority to turn off those various recurrence. Forbearance is something that allows an agency to say where there's a statute that has a lot of different requirements, but as applied to particular entities in particular times and places, it doesn't work.
Michael Huston: FCC has discretion to sort of turn those requirements off. That's fine. But the third big problem with the net neutrality rules, because when an agency has to say, we think your should be regulated under this statute: Title II of the Telecommunications Act, but the only way that we can make that work is to turn off more than half something like 80 percent of the requirements of Title II. That's a pretty good sign that Congress did not intend for you to be regulated under that statute. So why did the companies sue? For two reasons. Number one, because the rule's illegal. It's contrary to the text of the statute. The statute distinguishes information services and telecommunication services, and the Internet fits the definition of an information service. That's why the Commission has always said that. It doesn't fit the definition of a telecommunications service. The Internet is not a dumb pipe in which data just flows right? There is technological manipulation that is done in order to ensure that users have the best possible internet experience.
Michael Huston: There's a very serious notice problem that was in the rule, which is interesting only to people who are excited about administrative law like me, but in short, the FCC revise tons and tons of regulations in here, things that they had always relied on. They decided we're not going to do that anymore, and they didn't provide any notice that they were going to do that. The biggest one, the most egregious one, relates to mobile broadband carriers for the, for the, as Joe mentioned, the people that I specifically represent. So remember I said that there was that other statute just about mobile and if you were, if you were connected to the telephone network, the public switch, you know you were a common carrier, but if you work you can't be? So the FCC solution, the only way they could regulate mobile broadband services as a common carrier was to redefine the public switch network and they redefined it this way.
Michael Huston: They said, we now think that the public switch network is the single network that comprises all ten-digit phone numbers and all IP addresses. That makes no sense. Here's why, if what you have is a cell phone service and you don't have mobile broadband, you just have voice service, which like almost you can't get, but when you could get, but nobody has it been like you don't think of your grandparents, maybe they don't want the Internet on their phone. If that's what you have, you can't access an IP address. You can't call up a website, and similarly if you go and buy from Comcast at your house is a broadband Internet connection, you can't make a phone call, you can't talk to somebody on a 10 digit phone number. There's a crossover product, voice over Internet protocol technology, which allows you to use your Internet connection to make phone calls, but it's really sort of irrelevant here because it's not Comcast that sells that to you. It's a separate third party company. And so when you buy a broadband connection, you're not gaining the ability to make phone calls. No, you didn't. You didn't buy a telephone service anymore more than you bought a car service because there's an Uber app, right? There're selling you something different.
Michael Huston: So that's yet another example of the way in which the FCC rule just doesn't even pass the laugh test. They want to believe that there's one single unified network that comprises millions of people that can't talk to each other, and that's what a network is. It means everybody can talk to everybody. So the FCC has always said that's what everybody understands. So there were lots of problems with the rule. The other reason that the companies sued is that this whole thing is a solution in search of a problem. The Internet works and it works great. The technology has emerged and expanded and grown. It's become more user-friendly, cheaper, faster, better all the time, and in fact it's because of the light touch regulatory approach that they have been able to do those things. And the FCC in this order discipline this massively intrusive government program.
Michael Huston: They didn't have any examples of the kinds of net neutrality violations that people are worried about. That thing that I talked about at the beginning of my talk. It's like slowing down your connection to Hulu. It's not real. It never happened. People worry that it could happen and that's what the FCC said is like, the Comcast has the theoretical potential to do something like this even though they've never done it. The one counter example that comes up and that has to be discussed is Netflix because Netflix at bottom, all of this really grew up out of Netflix. Netflix offers high definition video streaming as you know, and that is very, very bandwidth intensive. When the second season of House of Cards dropped, there were major metropolitan areas in some places in the country where everyone's Internet connection slowed down. There are places in the country at various times where Netflix consumes as much as 30 percent of the bandwidth on the Internet, that's so big that it almost defies contemplation, right?
Michael Huston: You're talking about an amount of data that we've just never seen before, and that I would submit to you is not a net neutrality problem. It's a physics problem. There's a pipe and it can only accommodate so much data at one time. So when a company like Netflix turns on a fire hose of data, they need a solution and they were trying to work out in the market through negotiation. Some of the companies went to Comcast and said you were putting in orders of magnitude more bandwidth on our server than anybody else. If you want to do that, we're going to have to build new technology and engineering and things, but to Netflix, you should be helping to pay for it. It shouldn't be passed on to consumers to accommodate your one particular business model. And Netflix really turned that around and have portrayed it as an assault on integrity of the Internet and stuff.
Michael Huston: And they said these companies want to engage in net neutrality violations. They want to overturn the net neutrality regime, but they don't. They just want to deal with a problem that they have with streaming video. And that problem, by the way, isn't solved by this order and that problem isn't going away. So we still need a solution for how to deal with broadband video, with the high definition video and the amount of data that it puts on the strain that that puts in some places on the Internet, but the market will figure that out and it would have figured that out. What we didn't need and don't need is to regulate the entire future of the Internet in this heavy handed way. Why should you care about this? A lot of this is boring and a lot of it is technical. There's like really complicated statutory definitions.
Michael Huston: You should care because the Internet is hugely important to your life, and the government in this order has claimed, and not just the government by the way, an independent agency without a statutory mandate has claimed the authority to regulate everything with an IP address. Think about that for a second. Your cars, new cars have IP addresses, refrigerators have IP addresses. There are billions and billions of devices with IP addresses and there are billions more every year. This is a claim by an agency to regulate the most important technology in America and billions of devices, and it's not satisfying that they just say, we're not going to do it for now because who wants to stop them? And the fact that they're not particularly interested in doing rate regulation right now doesn't mean they won't be interested in it in the future. So again, I think the reason why we have had an internet that has grown so fast and become so successful is because of this light touch regulatory regime.
Michael Huston: You are not going to be able to see that kind of growth that we're going to need to build the Internet of the 21st century. To build it, to make it faster and more accessible, especially on wireless. If they're subject to heavy handed government regulation. That's what the net neutrality fight is really about. Is the future of the Internet going to be dictated by the government or by market forces as it always has been so successfully? So I obviously think the market should be the thing and consumer choice should be the thing that covers that. But even if you disagree with me about that, even if you're like, yeah, you know, I don't really trust these companies and I do think the government ought to be involved here. I would submit to you that this very, very important regulatory program has to come from Congress. So even if you're somebody who thinks that we need a net neutrality program that we should pass a statute about it, but we can't have is one agency taking a statute passed 80 years ago to deal with a copper wire telephone monopoly and using that without congressional section to regulate this technology that's so important to all of us. So I'd love to get the Professor's response.
Salen Churi: Thank you very much for that, Michael. I think that was a very interesting take on something that is I guess extremely boring in most people's formulation.
Michael Huston: Even by CSPAN standards, it's boring.
Salen Churi: Even by CSPAN standards, it's boring. I think that's a really interesting take on it. My take away from your argument is Netflix: and chill. I didn't come prepared with a bit-moji so I figured I would draw a meme. I'm not an expert on net neutrality, and it strikes me as one of those things that really only experts should talk too much about it, so I'll be brief in my comments. One of the more interesting things in all of all what you said for me is the question when to regulate, right? When you're talking about technology, it captures the imagination, right? By its nature, it makes us think about the future. There were two ways you're going to think about that, right?
Salen Churi: So venture capitalists, entrepreneurs, consumers think about the upsides. They think about, hey, there are potentials to make entire industries, to upend them, to create tremendous amounts of societal value, right? Regulators on the other side, on the other hand, are trained to see downsides, right? And their focus is on downsides because they don't get a pat on the back when an industry is revolutionized or when costs are driven dramatically down, expanding access to some new technology to some vast new swath of the market. Instead they get chastised when crises happen, right? And that's why you see a lot of regulations growing out of crises. And so what you're starting to see happen now as the speed of technological change increases, you're starting to see two responses, right? So response number one is this light touch regime that we saw early on in the net neutrality debate and for over a decade, and the other is sort of a more intrusive and front and ex ante regulatory approach, right?
Salen Churi: This is a problem because our projections about the future aren't necessarily grounded in the present. It's tricky to draft regulations about a technology whose effects aren't fully understood or a company who we haven't seen out in the market or an industry that isn't mature. And in many ways the internet isn't a fully mature industry. Right? And a lot of these debates do center on that question of whether the industry is mature. But I think the takeaway is that technology is tough to regulate because it's a moving target. Now it would be a mistake to conclude from this that because it's a tough target to regulate it, we should just try to shoe horn any new company into an old, antiquated regulatory regime. I think Uber, you mentioned them in passing, is the paradigmatic example of this, right? And if you know me, you know, Uber is my answer to everything, but Uber is interesting here, right?
Salen Churi: Because you're talking about centuries old regulatory regimes that imagined a world with horse and buggies running around the streets, right? And these established common cab companies are coming after Uber trying to regulate them out of existence by calling them cabs based on these centuries old regimes, right? And, and we all heard all the parades of horribles about how people getting into the with strangers or cars with strangers will lead to some crazy state of the world and everyone's going to get murdered and raped and it didn't happen, right? So, um, we're the hypothetical that didn't happen in this case, regulators are projecting based on the present that Comcast and Verizon will begin twisting their mustaches and extorting content providers in the same way they extort anyone of us who wants to watch game of thrones. And maybe we can see that happening. But we don't live in that world today.
Salen Churi: And as Michael said, we haven't lived in that world for the past over a decade that we've been debating net neutrality. The question becomes like, why now? Right? The Internet works fine. It's not broke. Why are we trying to fix it? Regulators don't have crystal balls. And we would have missed out on a major societal, a useful thing if we had just called an Uber a cab and regulated out of existence and not allow them to operate. Right? So it turns out that in many ways these startups are better at self regulating in a lot of cases, right? Uber does a much better job of regulating their service with their five star rating system and using this sort of dispersed method of discipline themselves then the cab commission ever did by its regulations in cabs, and there are a lot more regulations of cabs.
Salen Churi: Right? And if you use both the cab and Uber, you probably have the same opinion as I do that Uber is just better. Right? And so there may be a day when Verizon does start to twist it's mustache, but it's generally bad policy to preemptively regulate potentially societally valuable technologies out of existence using this ex ante regime. The idea is you have to wait and see what happens to some extent, right? You want to avoid systemic crises, but were not there. There's really no crisis. The Game of Thrones crisis doesn't justify regulating this preemptively out of existence and I think what we're really worried about here is antitrust, right? And we hear a lot of hypotheticals about antitrust. We hear about how Amazon is going to drive, ever went out of existence and then raise prices. Antitrust problems should be solved with antitrust law, not preemptive regulations.
Salen Churi: So I think we're going to see this interesting state of the world coming where regulators are going to have a hard time grappling with these questions. Do we shoehorn it into the old state of affairs? Do we wait and see and do this light touch thing? Where they've done the light touch thing, it's tended to work well. Drones are an example where the FAA hasn't really jumped in and tried to regulate it out of existence. The answer is you have to to some degree, wait and see. Um, it's difficult with technology, but it's better to allow new technology and innovation to flourish rather than enshrining the state of the world in statutory, using statutes to enshrine the state of the
Salen Churi: world that really only benefits large wealthy company corporations. And it's to the detriment of consumers and insurgent companies. Thanks.
Question One: Two questions. First, on your identification of it as a differentiation between a telecommunication and information carrier. I know another carrier is the electric transmission grid. In that, we have ... we can regulate the frequency of it, so we're changing it ever so slightly while it's in transmission. So why is that slight differences that we do with the information and technology that we've transferred through the Internet, changing our web address, why should that constitute such a degree of change that it shouldn't be required under a common carrier system. When we see government regulating carriers such as the electric grid when there is some sort of change that happens within that common carrier?
Michael Huston: So I don't think that it's true that the electric grid is an example of something that has common carrier treatment, but then the whole bit about the idea of the change in the form.
Michael Huston: That's not really an issue with respect to electricity. Electricity is regulated as a common carrier because it's a public utility and like people need electricity, they depend on it to survive and so it's not the sort of thing that can... it's just a classic example like water of the type of thing that is subject to they type of common carrier treatment. What Congress was trying to do in this particular, and so maybe maybe your point is, and I don't want to put words in your mouth, but one argument in favor of net neutrality regime is the internet is also really, really important and should similarly be regarded as a public entity. There are lots of serious people that think that. The problem is that that's not the statute that we have. Right? And the statute that we have does say that we want certain kinds of specifically as it relates to information technology we want certain kinds of information technologies to get common carrier treatment, but really only those that provide the sort of dumb pipes I guess.
Michael Huston: Where you have manipulation and computing of the data, we don't, we're not gonna allow that to be treated. So that isn't, that's thing is a, is a specific feature of this statute doesn't really have an analog. And at that point it's a statutory interpretation. Well, there's two things. There's a statutory interpretation question. What does the statute mean? Does the Internet fit the definition of an information service or telecommunication service? I would just say it fits the definition of an information service. So it does not fit the definition of telecommunication service. But then there's also a public policy question which is should it be regulated public utility because it's just as important to our lives as electricity and water. And again, my answer to that would also be no, but even if, I think there should be a statute about it, but my answer would be no, because as Professor Churi explained, I think you know these, this is not a fully developed service.
Michael Huston: There is, there is... competition is growing in the internet marketplace everyday, especially because of wireless competition. Even in those places where you only have one choice of wired broadband carrier, almost everyone in America has a competing mobile broadband carrier and even if that is the problem, it's an antitrust problem that should have an antitrust solution.
Question Two: Second, you mentioned that negotiations with Netflix to resolve that broadband issue. Do you have any idea what that was going to look like? Because you were saying that there wasn't going to be any sort of favoritism being played by the telecom, the Internet companies. Here, you just said that we're trying to negotiate with Netflix specifically around the problem that they've created. So what would that look like?
Michael Huston: It probably would have looked like the Internet service providers building more physical capacity, but the... It gets really confusing for me really quickly.
Michael Huston: It's an engineering problem about how the wires are connected and they build special kinds of pipe that goes directly to Netflix and that type of thing, so they would have called the Internet service providers would have spent money to make sure that Netflix could get all of its content out without disturbing and slowing down everyone else's content and they would have wanted Netflix to pay some of the costs of those engineering improvements. So it was. It was an example. Again, it's an. It's a, it's a, it's a physics problem. It's not about showing favoritism. It wasn't done. The Netflix thing didn't come up because Comcast was hoping to drive data away, drive consumers away from Netflix and onto its own things. They just had this data problem that they were trying to solve. Yeah.
Question Three: What stake do Comcast and Verizon have in this? So for example, what's something that they could do as an information service that they can't do as a common carrier?
Michael Huston: Oh,
Question Three: Why are they so upset?
Michael Huston: Why are they so upset? Yeah, because. Because I told you about those three, three bright line rules, right? Those are on page two of the order and then there's 400 more pages of stuff that they... So they have a massive regulatory program for you. And that's what common carriers about. There's pre-clearance requirements. Their broadband network management practices have to be submitted for FCC review. There's a new internet conduct standard that was built into this order, which literally almost, this is almost verbatim. It says an Internet Service Provider shall not act unreasonably, and if you act unreasonably as determined by the FCC or brought in a petition by a complainant consumer and we find that you act unreasonably, you're going to be fined really severely and the companies. So the companies are like, what the heck? We don't want to, you know, we don't want to be, we need to know how to run our business.
Michael Huston: So, uh, there were, there were lots of examples of oversight that the government has. And again, that's, that's the things that the FCC has latched on that it hasn't forbeared from which are these, which are the most striking example of which is rate regulation, the FCC forbeared it from rate regulation. But it claimed the authority to regulate and there's no reason we can't be sure that they won't get interested in that in the future. So there are things that they're subject to now. There are things that they could be subject to in the future that they don't think are lawful.
Question Four: So the administrative structure in this estuary structures is specifically United States, but lots of other countries are based under the same kind of model. Are there any models out there that we can look to to think through this?
Michael Huston: That's a good question. And I think, um, I mean the, on things like this, the world looks to us. Right? And so that's another part of the problem for this is I think, I think that's a concern of the companies is that if the United States thinks, you know, a market, a world leader in a, having a capitalist system, if the United States thinks this thing is so important and so problematic that it can't be trusted to operate without covering regulation, a lot of other companies that don't have similar free market commitments are going to follow. I don't really have a specific answer to your question about others, other countries that have solved this problem. Well, broadly speaking, company countries take one of two approaches. They say like, we're going to basically allow the markets in this in our country to develop broadband or they take a sort of more central planning. Um, and you know, of course there's a range within there as you might expect. So
Question Five: So something that that came up in this particular case but I don't think was raised by your client and sort of interested in is the free speech aspect of this. The argument being that locking and/or throttling this kind of data could be expressive in nature, sort of like cable companies in other cases, the Supreme Court has heard: A, what do you think of that? And B, why are your clients not as concerned about those arguments? Why do they maintain the "we're fine with the first three rules for the most part, we don't want to actually act like content curators in a First Amendment expressive capacity."
Michael Huston: So Judge Kavanaugh has an interesting concurring opinion about this. Essentially arguing that cable companies do operate as, um, as content providers or you know, as content curators and not as expressive value. And in my other work representing these companies, like we have made that argument in certain times and in certain places. Um, but I think, I think it depends, so I think it's a defensible argument, but it's not without difficulty. Um, and I think the reason why they, my clients did not make an argument that it is an argument, some petitioner. So there's like hundreds of petitioners that have challenged the rule. Some petitioners made that argument. It didn't come up in the DC circuit argument in December. My specific clients did not make it. And you know, one reason I think it's fair to say is that they don't in this, in this type, these types of rules, they're not interested in, in doing that.
Michael Huston: As I said, they have a corporate commitment and they've always had a corporate commitment to allowing the Internet to be as open as possible. They know that that is what consumers want and they're interested in selling that to them because that's what consumers want. So, you know, it would be, there would be cases and there have been cases where, um, the companies might assert their First Amendment rights in that, in that respect, but it really wasn't in play here because they're not interested in doing that and not interested in blocking or throttling. Um, and so, and they didn't want to fight for the power to do so on First Amendment grounds.
Question Six: I found it interesting that there's some anti-trust related to this. Is there any, is there any sort of express appetite, the DOJ or the FTC to start thinking about or acting on net neutraltiy. I know about the Comcast, NBC, Universal merger, but otherwise is there any other activity?
Michael Huston: No, no really, um, you know, this is, it's an area and I thought I thought Professor Churi was exactly right. It often comes up in defense of the net neutrality program that there are places where companies have a monopoly. There was some places, fewer and fewer all the time where you have access to only one service. There are a greater number of places where consumers had access to only two broadband, wired broadband providers. And you know, again, my, my first response would be that you're getting more and more competition all the time, especially through mobile, but I think, I think the Professor's point is right, which is, that's just an antitrust problem. And so if the FCC had said, look, we looked at the places in America where we see that there's not competition that is, you know, that's not per say problematic, but it's certainly it's cause for concern.
Michael Huston: And so we looked at what those companies were doing in those markets and we examined whether under traditional antitrust principles, whether they have the, you know, in partnership with DOJ or the FTC, we ask whether they have the capacity to engage in, you know, extortionary prices or engaging consumer harmful practices without the market constrained in their ability. And yeah, we think that that actually happens in some places. And so we'll have an antitrust solution. It'd be a whole different thing. But, but it's doesn't suffice to just gesture toward antitrust concerns. Gesture toward the presence of monopolies in some places or oligopolies more like it. And then say, as a result of that, without any serious consideration of whether companies have engaged in consumer harm unchecked by the market or could, um, just because we're fearful that we're going to totally change the regulatory frame.
Question Seven: What impact do you think the new classification will have on their ability to service providers to enter into negotiations with content producers?
Michael Huston: So, you know, there's a, there is a separate aspect of this order that, that I know I didn't want to get into. But um, there's a thing called interconnection agreements, which are basically have been around from her which are, which are one type of solution to the Netflix problem. It's a way in which individual companies, individual content providers negotiate. Well more often it's about the way in which the, you know, the servers, the Internet, a, it's a web of connected lines. And those things meet so broad. You know, Comcast provides a backbone in a lot of places, but then it runs off and other companies pick it up. They own other companies own the wiring that connects you to Google service.
Michael Huston: And that might be Google that owns that. And so, um, when you, those are those agreements for interconnection I have, are um, are, is another thing that the FCC is regulating in this order and it's another thing that's problematic because those agreements have always worked really well. Uh, and the, the, the company, well, I mean, not always, but basically always, you know, the people that own the various elements of the Internet. I think to answer your specific question about like what do we do about Netflix in particular? This company, you know, this one company that has so, so much data. I think the answer is going to be we still need a solution for that and it's just going to have to be government dictated. So Comcast doesn't want your ability, your use of the Internet to be slowed down just because Netflix traffic is high. So ever since the Netflix problem became a problem, they've been working on engineering solutions to try to make it better and better.
Michael Huston: And they're going to do that. They're going to do it anyway. They're going to build, you know, they're just going to build more infrastructure. And the brilliant people that work there are going to make the internet run, are going to create engineering solutions. The costs will be passed onto consumers. Probably that's probably the short answer, unless the FCC sees fit to, you know, allow Netflix to be charged more, which I think is unlikely. Interestingly the Wall Street Journal reported last week that Netflix has been throttling its customers' content on Verizon and AT&T for years and without telling their consumers and the reason that they said they're doing it just because they don't want you to exceed your data cap. Right? And so if you are a Verizon customer and you wash a few hours of Netflix straight, you're going to blow through your data usage cap, you're going to get a huge bill at the end of the month from Verizon.
Michael Huston: They're going to be mad and they're gonna watch less Netflix going forward. And Netflix knows that. So they have been slowing down your speed. And so there's been this concern a lot of people will say, notwithstanding these net neutrality rules, like my connection to Netflix is still measurably slower. Like they're not compliant, but it turns out it wasn't the Internet service providers that do what we're doing and it was Netflix that's been doing it. And even if you think that that is in fact a consumer friendly policy, uh, it certainly should have been disclosed to consumers and you should've had to know about. So I think what that proves, it's just that it's a particular problem about a particular company and it doesn't justify a whole regulatory problem. Yeah, of course.
Question Eight: I have a principles question for both of you. Which is: why is like why don't we see a company as making an argument that is paid preferences good? That it's good for consumers. It's like how we classify airplanes and everything that you want, more services you paid for it, rather than get these cross subsidies for all of Comcast. Comcast customers are gonna pay for Netflix users?
Salen Churi: So the first principles question is like, why aren't they arguing first principles?
Question Eight: And if so, why are they not saying this is good?
Salen Churi: So this is like a re-apportionment of a property, right? Like, that's what this boils down to. Um, and it's, you know, an extension of like a freedom of contract point. It's a better strategic question for Michael why you not arguing and my sense is that like you don't win arguing first principles or policy and you don't wait arguing that to consumers either, right? Consumers don't want to hear like I, Comcast, have the right to decide or to throttle or to whatever. I just want to watch Netflix, right? I just want to watch House of Cards at like, 4:00 PM, whenever it's released, right. Um, so I think it's not a winning argument, even though we can debate the policy here, I think you probably don't see it come out in the briefing and you don't see it come out in the media because that's not the perception that the ISPs want you to have either.
Michael Huston: It's not only that the ISPs don't want you to have it, they don't have it. I mean, people who work in telecom, I'm obviously generalizing, but um, have a commitment to openness, right? You know, the open source movement. My clients believe it and uh, and the people who work there think that that's really good and so it is a principle by which they do business to have very broad, very open rules. They're not interested in engaging in straight up capitalism. I guess I'd say, um, because they have a sort of corporate commitment to it and because as the Professor points out, consumers don't like it and these are very large companies that are publicly traded and they're, they're in business to be well liked by consumers and have consumers purchase more of. They're more of the service that they offer.
Michael Huston: So I think for both philosophical reasons that are perhaps not unique to telecom, but certainly more more pronounced in the technology space as well as the fact that they know consumers don't like it. They're not interested in, they're not interested in having that type of regime where everybody's content is subject to, you know, Facebook pays one price to get their stuff on Comcast and Google pays another like maybe they compete and the data flows to its highest and best use. That's just not the way that they, that they see the world. And um, and, and they share that with the FCC, what they don't share is the idea that they need to be micromanaged everyday. Yeah. So.
Question Nine: Counterfactual: let's say the FCC hadn't sort of reclassified or pass these regulations. What happens if the big companies, Comcast, Verizon, etc. then go and start doing this throttle? I think we can all agree that's a congressional problem with that should be solved by Congress. Uh, let's say Congress does what it's been doing, which is nothing. What can the FCC do as an institution and what should they do in either your opinion or in the opinion of your client?
Michael Huston: Well...
Question Nine: I understand. I understand the position of your client, which is we're all for open internet, but like the same argument with the FCC, which is, you know, like, oh, we're not, we're not hurting the companies now. We just need the power to. It's sort of the same thing.
Michael Huston: So you know, again, you know, Judge Tatel's opinion for the DC Circuit in Verizon v. FCC held that without reclassification, the FCC has authorIty to regulate broadband internet service in certain ways. They just can't impose things that rise to the level of common carrier. So I think, you know, I think if you saw a case of an internet provider doing something nefarious without reclassification, if the order is struck down, uh, by the DC Circuit or by the Supreme Court, if a cable company engaged in that type of conduct, I think the FCC already has tools in place in authority to, um, to address that. Now they particularly on tools because the no blocking, no throttling rules have already been enacted and like those aren't being challenged in court. So, so that stuff is the law. Um, and there are, and, and even, even if even before that rule, you know, they had authority to do, to, to handle this type of, this type of thing. It just, they just can't impose common carrier regulation. And there really is a very big difference between this light touch program where we're a company steps in and does something nefarious, we're going to get on it versus we're going to sort of be in, in their lives everyday all day.
Salen Churi: And you also have to remember there's a market discipline on this that you're probably forgetting here, which is let's say Verizon starts throttling you. Right? And so it's really easy to go to Facebook, but it's really hard to go to like a high school blog. Right. And if you really like going to high school blogs, you're going to switch from Verizon to some other provider or someone may spring up in the market with that as they're kind of competitive advantage and this doesn't always work perfectly in rural areas, et cetera. But there was a market discipline that takes place before this. So like you can't just assume a parade of horribles without assuming intervening market solutions to it.
Question Ten: Yeah. So if you see these problems with Netflix and I guess potentially free market principles, do you see these regulations putting enough throttling rules leading to a pricing system that's based on the amount of data that you use per month?
Michael Huston: You mean from the companies? Yeah, they kind of already have that. Right. And a lot of places there are, um, you go and you pay for a certain amount of data, um, or you pay for faster speed if you want. Sorry, if you want a faster connection at your house, Verizon charges you more versus if you want to sort of standard connection, right. That's already, that's already there. And that's not really. Nobody really thinks about that as bad or problematic. Um, it's really more about accessing content and those in them trying to institute those types of agreements with edge with content providers like Facebook, like Netflix. Oh, maybe I don't quite understand your question.
Question Ten: Well, I'm just thinking if there's a constant demand for Netflix at particular times of day and Comcast has to keep up the infrastructure to make sure that they can facilitate these connections, would it stay in kind of the pricing system that you're talking about where you're just paying for the most amount of data you can get at any one time? Or do you see them ever trying to monitor how much the consumer uses to make it easier on the infrastructure?
Michael Huston: Oh, I see. well I think that they will. It is a good question. I guess, I don't know for sure, um, it would depend on how severe the problem is and it would depend on what other solutions were available, whether there's an engineering solution that, you know, that is sort of easy fixes it or not, but it's possible that they would say that, you know, companies like Verizon that offered data caps, that data plans, data cap, consumer internet service with a cap on the amount of data that you get it, it's possible that that will become more popular as a business practice or you know, like here, you know, your first 50 gigs per month or at a certain price and then over that it jumps up to a y price or whatever. So that could happen. I, you know, there's all sorts. The market will dictate whether, how consumers react to that and um, and, and all sorts of things. So I don't, I don't, I don't feel equipped to make a prediction about how possible you know, how much it will be, how, how, how much that will come to be. But I mean it could.
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