New FCC Rules Could Block Your E-Wallet

On June 14, a three-judge panel of the D.C. Court of Appeals rendered a surprise 2-to-1 decision that handed the Federal Communications Commission (FCC) complete authority to enforce Net Neutrality.

Also read: Kazakhstan Exploring ‘Number of Options’ for Blockchain Use

FCC as a ‘Social Regulator’

It was a surprise because only a partial FCC victory was predicted. But, as the Mercatus Center’s tech expert Brent Skorup explained, “legal challenges asserting that the [FCC’s] [Open Internet] order violated administrative law, the Communications Act, and the First Amendment failed to convince” two judges.

Thus, “[t]he decision ratifies the FCC’s decades-long transformation from economic regulator to social regulator and, if not reversed, will do lasting damage to U.S. technology and to free speech.” Another federal agency made de facto law without going through Congress.

Net Neutrality could affect everyone on the Internet, especially if the FCC uses its authority with the arrogance it displayed in censoring television during the 1960s. Enabled by Democrats, the FCC tossed most conservatives off the airwaves. It used the Fairness Doctrine. Ostensibly, the doctrine ensured that contrasting views would be presented by television and radio broadcasters. The reality was expressed by Bill Ruder, an official in the JFK administration. He admitted the policy had been created as a “massive strategy…to challenge and harass the right-wing broadcasters, and hope that the challenges would be so costly to them that they would be inhibited and decide it was too costly to continue.”

The doctrine was abolished in 1987 but Net Neutrality could impose a similarly biased administration on the Internet. Cryptocurrencies should be nervous. (For more on the threat, see “Banks Want to Turn Off Bitcoin as a ‘Public Utility’ for Money.” )

What is Net Neutrality?

Like the Fairness Doctrine, the implementation of Net Neutrality is likely to be the opposite of its public definition. The term was coined in 2003 by Columbia University media law professor Tim Wu. Net Neutrality means Internet service providers should provide access to content and applications without favoring or blocking any website or communication.

Reality will almost certainly contradict definition. Wu warned that the FCC’s Open Internet Order would give government the ability to shape “media policy, social policy, oversight of the political process, [and] issues of free speech.”

What is the reality of the Open Internet Order that went into effect on June 25, 2015 but was deferred pending a court challenge? Earlier, broadband had been reclassified as a utility under Title II of the Communications Act of 1934, which converted ISPs into “common carriers” to be regulated in the same manner as telecommunication providers. Mobile networks were reclassified as “common carriers” as well. The FCC had fought for the recategorizations for years because it gives the agency jurisdiction.

Having established FCC jurisdiction, the Order limits itself to five specific rules, three of which are called “bright-line”: no blocking; no throttling; and, no paid prioritization. A fourth rule addresses the need for “[a] person engaged in the provision of broadband Internet” to offer “transparency to the FCC.”

The fifth rule causes the most concern: the general conduct standard (47 C.F.R. § 8.11.) FCC chairman Tom Wheeler describes the catch-all rule as a way to prevent “new and novel threats to the internet.” Since the rule addresses unknown threats, it is worded vaguely enough to provide broad and flexible authority.

Any person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not unreasonably interfere with or unreasonably disadvantage end users’ ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice, or edge providers’ ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be considered a violation of this rule.

The FCC specifically refused to define “unreasonable” or “disadvantage.”

The Backlash

Recognizing the rule’s potential for abuse, the watchdog Electronic Freedom Frontier (EFF) submitted a February 19, 2015 letter to the FCC during its public comment period. The letter called for “clear, targeted, and transparent rules,“and for definition of the “contours and limits” of the general conduct rule, including the “specific circumstances” in which it would apply.

EFF continued:

“A ‘general conduct rule’, applied on a case by case basis with the only touchstone being whether a given practice ‘harms’ consumers or edge providers, may lead to years of expensive litigation to determine the meaning of ‘harm’ (for those who can afford to engage in it). What is worse, it could be abused by a future Commission to target legitimate practices that offer significant benefits to the public but could also be construed to cause some harm to a specific provider or consumer.”

Others point to the rule’s admonition that ISPs not “unreasonably interfere” with a user’s access to “lawful internet content.” The rule encourages ISPs to be gatekeepers and to be overzealous as a matter of self-protection.

For example, Bitcoin could be targeted because it is used in illegal activities, such as drug dealing. There is precedent. In December 2011, AT&T Wireless, T Mobile and Verizon blocked Google Wallet; at the time, they were developing their own mobile payment service.

Nick Grossman of Union Square Ventures commented, “We’ve seen cases where ISPs have historically degraded and blocked service for certain protocols (bittorrent) and services (Google Wallet), so bitcoin is certainly in the realm of technologies that could be threatened if ISPs are able to block and degrade technologies at will.”

Whether the Open Internet Order will be applied agnostically by the FCC and ISPs is of great concern.

Another concern: nothing prevents the FCC from imposing more regulation, including a tax on all financial transactions. In front of the D.C. Appeals court, the agency promised to use a “light touch” and not apply most of Title II’s provisions to the Internet; that promise is not binding.

One commenter observed, “Dissenting Judge Williams argued that the Commission’s extensive forbearance ‘highlight[ed] the dodgy character’ of the Commission’s reasons for reclassifying broadband service. The majority…[emphasized] that the Communications Act requires forbearance…and that forbearance is consistent with the public interest. Thus, the court took the position that the extensive forbearance fits into the statutory scheme.”

Decentralize for Freedom

Remedies are possible. Congress could push legislation such as H.R.2666, the No Rate Regulation of Broadband Internet Access Act.

Those who challenged the FCC in appeals court could call for an en banc hearing from the D.C. appeals court, which would consist of a full panel of eleven judges. Or they can request a hearing from the Supreme Court. The latter is risky. A vote of four Supremes is required for a case to be accepted. SCOTUS is not only notoriously biased in favor of government agencies but also lacks one judge at present. The empty seat was filled by the conservative Justice Scalia who penned the dissent for NCTA v. Brand X in which the court found the FCC to be within its authority to reclassify cable broadband service as an “information service.” A hearing on the Open Internet Order is likely to be denied.

Moreover, Brent Skorup suggests a powerful reason why challengers may decide to adapt rather than to fight.

“[T]he FCC has ways of breaking defiant firms. The most alarming is that the agency is increasingly using license and transaction approvals to coerce various policies…that it cannot, or will refuse to, enact via formal regulation…In the long run, Internet and technology companies, now FCC supplicants, will have to divert funds from new services and network design to fending off regulatory intrusions and negotiating with the Internet’s new zoning board.”

It is not clear how or if Net Neutrality will affect cryptocurrencies. Bitcoin Foundation’s Gavin Andresen stated, “I don’t worry about net neutrality. Bitcoin runs nicely inside Tor and other censorship-resistant networking technologies.”

(For information on how the FBI may de facto shut down TOR or eliminate its useful for Bitcoiners on December 1, see: “Bitcoiners Who Use Tor – Be Warned!” )

Other solutions include the BitSat network under construction and Bitcoin cards. But the real solution may lie in a recent IEEE Spectrum headline, “The Fathers of the Internet Revolution Urge Today’s Software Engineers to Reinvent the Web.”

The reinvention would hinge on one feature: radical decentralization to safeguard freedom and defeat government.

Do you think Net Neutrality legislation could hurt Bitcoin? Lets us know in the comments below! 

Images courtesy of  neutrality200.rssing.com, washingtonexaminer.com, time.com

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