FCC's Expansive New Rules Prohibiting "Digital Discrimination" in Broadband Access

On November 20, 2023, as required by Section 60506 of the Infrastructure Investment and Jobs Act of 2021 (Infrastructure Act), 47 U.S.C. § 1754, the Federal Communications Commission issued a Report and Order and Further Notice of Proposed Rulemaking (FNPRM) adopting new rules that prohibit "digital discrimination of access" to broadband internet services, subjecting internet access service for the first time to national rules that have the potential to regulate every aspect of internet access service. The rules will become effective 60 days after publication in the Federal Register. The Commission also voted to issue a Further Notice of Proposed Rulemaking, which proposes additional rules that would require internet service providers (ISPs) to submit annual reports of all construction-related projects and the communities in which they were built, as well as a rule for ongoing internal compliance and recordkeeping requirements to assess whether a provider's broadband-related policies and practices might differentially impact consumers' access to broadband in violation of the new rules described below.

Most fundamentally, the FCC's new rules expressly prohibit discrimination in the construction and operation of networks for the delivery of broadband internet access services. More broadly, the FCC prohibited "policies or practices, not justified by genuine issues of technical or economic feasibility, that differentially impact consumers' access to broadband internet access service based on their income level, race, ethnicity, color, religion, or national origin or are intended to have such differential impact." The rules specifically cover all activities related to the provision of internet access service, including construction, service quality, pricing, terms of service and termination or suspension of service, marketing and advertising, promotions, upgrades, technical service, onsite service, and customer service. In sum, the FCC has imposed a generally worded "no discrimination" requirement on every aspect of internet access service.

The rules will be enforced by the FCC on its own initiative and through informal consumer complaints filed with the agency against any entity involved in the construction or operation of a broadband network, the advertising or marketing of internet service, or providing internet service to customers. The rules also cover any entity or person – whether or not they are directly involved in the business of providing internet access service, and whether they are already subject to FCC jurisdiction – that could "affect consumer access" to internet services. The FCC will "bring to bear its full suite of available remedies, including the possibility of monetary forfeitures," but "will not initiate any enforcement investigation solely concerning conduct that produces differential impacts under these rules until at least six months after the effective date of the rules."

The entity accused of discrimination will have the burden to prove by a preponderance of evidence that a challenged policy or practice is justified by "genuine issues of technical or economic feasibility," which may include proof that less discriminatory alternatives were not reasonably achievable at the time the policy or practice was adopted, implemented, or utilized because of genuine technical or economic constraints.

As required by the statute, the Commission also adopted model policies and best practices that the Commission "strongly encourages" states, localities, and Tribal governments to implement to address perceived digital discrimination. As proposed in the Notice, the FCC adopted the guidelines recommended by the Communications Equity and Diversity Council.

"Digital Discrimination" Under the Rules

The new rules make it unlawful for any covered entity "to adopt, implement or utilize policies or practices, not justified by genuine issues of technical or economic feasibility, that differentially impact consumers' access to broadband internet access service based on their income level, race, ethnicity, color, religion, or national origin or are intended to have such differential impact."

While the Commission declined to define "genuine issues" that might justify a practice or policy, it defined both technical and economic feasibility in terms of the prior experiences of all "covered entities." Technical feasibility and economic feasibility are both defined as any policy or practice that is "reasonably achievable as evidenced by prior success by covered entities under similar circumstances … clearly indicating that the policy or practice in question may reasonably be adopted, implemented, and utilized." Thus, if a policy or practice is alleged to be discriminatory in a given situation, but any one provider has been able to "reasonably achieve" non-discriminatory service in that situation, then non-discriminatory service is likely to be deemed technically and economically feasible.

The rules expressly apply to "all policies and practices that affect a consumer's ability to have equal access to broadband internet access service, including but not limited to deployment, network upgrades, and maintenance." This covers all elements of service – both technical and non-technical – that may affect a consumer's ability to receive and use the service. The rules specify that the covered aspects of broadband service include, but are not limited to:

1. Deployment of broadband infrastructure, network upgrades, and network maintenance;
2. Service quality components and the terms and conditions on which broadband internet access service is provided (such as speeds, capacities, latency, data caps, throttling, pricing, promotional rates, imposition of late fees, opportunity for equipment rental, installation time, contract renewal terms, service termination terms, and use of customer credit and account history);
3. Marketing, advertising, and outreach; and
4. Technical service, onsite service, and other provision of customer service.

Consistent with the definition of "equal access" in the statute, treating different customers differently with respect to any available offering or service quality metric may provide a basis for liability under the rules, absent "genuine issues" of technical or economic feasibility.

Entities and Services Subject to the Rules

The rules certainly apply to "broadband internet access service providers and entities that provide services that facilitate and affect consumer access to broadband internet access service," but the universe of entities potentially covered by the rules is much broader. It expressly includes entities "working through partnership agreements or other business arrangements with" those ISPs, and also includes all entities:

• "facilitating or involved in the provision of broadband internet access service,"
• "maintaining and upgrading network infrastructure," or
• "that otherwise affect consumer access to broadband internet access service …"

With these broad definitions, the Commission appears to be asserting jurisdiction over entities that have not previously been subject to its regulatory authority. For example, the rules would seem to cover municipal and cooperative electric utilities that provide broadband Internet access services or affect those services in any way; ISPs that operate as pure fiber-based alternatives to traditional cable or telecommunications service providers; and independent contractors that perform work for an ISP (as long as the work "affect[s] consumer access to broadband"). Indeed, the inclusion of entities or persons that "otherwise affect consumer access to broadband internet service" could conceivably sweep in homeowners' associations, real estate developers, state and local broadband agencies, commissions, and task forces to the extent that their activities "affect consumer access" to internet service. The Report and Order did not discuss any of these potential applications of the rules, and it remains to be seen just how far the FCC considers its authority under the statute to extend. Notably, the Commission expressly adopted a "presumption of compliance for policies and practices that are in compliance with specific program requirements for the Broadband Equity, Access, and Deployment (BEAD) and Universal Service Fund (USF) high-cost programs" but did not adopt such a presumption for any of the other federal- and state-administered broadband programs.

Enforcement of the Rules and Adjudication of Digital Discrimination

The FCC will enforce these rules through FCC-initiated investigations and also through the agency's informal complaint process. Any allegation that a covered entity has violated the rules may be referred to the FCC's Enforcement Bureau. All FCC penalties and remedies will be available, including monetary forfeitures, upon a determination that the rules have been violated. The rules do not, at this time, create an additional process for the filing and adjudication of formal complaints, although the Commission indicated it is willing to revisit this decision if warranted and will not enforce the rules until six months after they have been published.

A policy or practice potentially violates the rules if it is motivated by discrimination or has discriminatory effects, based on income, race, ethnicity, color, religion, or national origin. Even in such cases, however, the provider will not be found liable for digital discrimination if the policy or practice is justified by genuine issues of technical or economic feasibility. Covered entities bear the burden of demonstrating to the FCC, by a preponderance of the evidence, that the policy or practice under investigation is justified on these grounds, including without limitation, "that available, less discriminatory alternatives were not reasonably achievable at the time the policy or practice was adopted, implemented, or utilized because of genuine technical or economic constraints." The FCC declined to adopt presumptions of feasibility in all or certain instances, finding it "premature to incorporate safe harbors or feasibility presumptions into … definitions of technical and economic feasibility."

State and Local Model Policies and Best Practices

Finally, the FCC adopted the Communications Equity and Diversity Council's Digital Empowerment and Inclusion Working Group report recommending both: (1) model policies and best practices to prevent digital discrimination by broadband providers; and (2) best practices to advance digital equity for states and localities. Notably, the model policies and practices are a floor, and states and localities may adopt additional measures to ensure equal access to broadband service in their communities. The FCC also suggests that Tribal governments are within the definition of "localities" in the Infrastructure Act, so that its best practices are recommended for "Native communities and Tribal lands through government-to-government coordination and collaboration, as well as, Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the United States Virgin Islands."

Further Notice of Proposed Rulemaking Accompanying the Report and Order

The FCC also adopted a Further Notice of Proposed Rulemaking seeking comment on additional matters pertaining to its facilitation of equal access to internet services, including, for example, affirmative obligations that might be imposed on broadband providers. The proposed additional rules are intended to "complement" the adopted rules "by focusing on providers' day-to-day business practices that might, in some instances, differentially impact consumers' access to broadband on prohibited bases."

The proposed rules set forth two affirmative obligations for broadband providers in which each broadband provider would be required to:

(1) submit an annual, publicly available supplement to the broadband data collection describing, on a state-by-state or territory-by-territory basis, any large-scale broadband deployment, upgrade, and maintenance projects that were completed or substantially completed during the preceding calendar year and the communities served by such projects; and

(2) establish a mandatory internal compliance program requiring regular internal assessment of (a) what communities are served by recent, pending, and planned large-scale projects and (b) whether the provider's broadband-related policies and practices might differentially impact consumers' access to broadband based on a listed characteristic and without adequate technical or economic justification.

Looking Ahead

The digital discrimination rules were adopted along partisan lines, with a 3-2 vote, but with sharp dissents from the two Republican commissioners. Commissioner Simington noted that "under the digital equity rules we are adopting today, every business practice or decision, by any company remotely connected to the provision of broadband, is prohibited unless any disparate impact is unavoidable due to 'technical or economic infeasibility.' This is an impossible standard to meet, and the only way for a company to even attempt to comply is to practice racial, ethnic, and religious discrimination in every business decision."

Commissioner Carr was even more concerned, finding the new rules give the FCC "veto power over every decision about the provision of Internet service in the country. Never before, in the roughly 40-year history of the public Internet, has the FCC (or any federal agency for that matter) claimed this degree of control over the Internet," noting that the statutory authorization to prevent digital discrimination extends to "terms and conditions" only, not rates. While the FCC denies it is attempting to institute rate regulation, the order argues that the statutory directive to evaluate "comparable" terms and conditions includes "pricing." The order further argues that "the Commission need not prescribe prices for broadband internet access service, as some commenters have cautioned against, in order to determine whether prices are 'comparable' within the meaning of the equal access definition" and that as a result, "digital discrimination of access" would include discrimination with regard to pricing.

Comments are due on the additional proposals in the FNPRM 30 days after publication of the Notice in the Federal Register, with replies due 30 days thereafter. And of course the clock will run on challenges in the courts to the new rules.