FCC's Net Neutrality Rules Largely Overturned

By Jenny Paul, Marc Martin, and Marty Stern 

UPDATE 2/24/14
:  The Federal Communications Commission announced last week that it will not appeal the D.C. Circuit’s net neutrality ruling and instead is poised to open a new rulemaking proceeding to write different rules, relying on the D.C Circuit’s finding that the Communications Act of 1934, as amended, grants the commission limited authority to impose general “open Internet” regulations on broadband providers. 

In a statement, Chairman Tom Wheeler said that the Commission will work to write rules within its authority that would fulfill the goals of the anti-blocking and anti-discrimination provisions that the D.C. Circuit struck down in January.  Wheeler said the new rules should ensure that edge providers are not unfairly blocked, explicitly or implicitly, from reaching consumers.  To fulfill its anti-discrimination goal, he said, the Commission will consider (1) setting an enforceable legal standard that provides guidance and predictability to edge providers, consumers, and broadband providers; (2) evaluating on a case-by-case basis whether that standard is met; and (3) identifying key behaviors by broadband providers that the Commission would view with particular skepticism.

While the opening of the new proceeding means that the Commission is not moving to reclassify broadband and regulate it as a common carrier service, Wheeler made clear that he is not taking that option off the table just yet.  “As the Court of Appeals noted, as long as Title II – with the ability to reclassify Internet access service as a telecommunications service – remains a part of the Communications Act, the Commission has the ability to utilize it if warranted,” he said in a statement.

UPDATE 02/04/14:
 Days after the D.C. Circuit struck down the bulk of the Commission’s net neutrality rules, a group of Democrats in the House of Representatives have introduced a bill that would restore the rules the court threw out.  The bill, titled the “Open Internet Preservation Act of 2014,” would reinstate the rules until the Commission takes final action in its Open Internet proceedings.  Sen. Ed Markey (D-Mass.) plans to introduce a companion bill in the Senate.

While the bill likely won’t get very far in the House of Representatives, which in 2011 passed a resolution opposing the Commission’s net neutrality rules, the introduction alone may signal to FCC Chairman Tom Wheeler that Democrats in the House and Senate would back Commission action that would more aggressively regulate broadband providers.

The D.C. Circuit struck a blow to the Federal Communications Commission’s net neutrality rules last week, upholding the Commission’s jurisdiction to regulate broadband service providers’ network management practices, but striking down anti-discrimination and anti-blocking provisions that were designed to ensure equal treatment of Internet traffic by broadband providers.

The court ruled that the Communications Act of 1934, as amended, grants the Commission limited authority to impose general “open Internet” regulations on broadband providers.  The court found that the authority granted to the Commission is restricted by statute, first by Congress’s grant to the Commission of limited subject matter jurisdiction over only interstate and foreign communication by wire and radio, and second by the statutory directive that the Commission’s regulations in this arena must be designed to encourage the deployment of advanced telecommunications capability to all Americans on a reasonable and timely basis. 

Relying on this authority, the Commission had promulgated specific rules — anti-blocking and disclosure requirements which applied to both fixed and mobile broadband providers, as well as a set of anti-discrimination rules that applied only to fixed broadband providers.  The D.C. Circuit found, however, that the Commission’s specific anti-discrimination and anti-blocking rulesamounted to per se common carrier obligations that could not be applied to broadband providers because the Commission has not classified broadband providers as common carriers. 

It upheld the Commission’s disclosure requirements for broadband providers, another aspect of the net neutrality rules that required both fixed and mobile broadband providers to publicly disclose the network management practices, performance, and commercial terms of their broadband services.

“[T]he court found that the FCC could not impose last century’s common carriage requirements on the Internet, and struck down rules that limited the ability of broadband providers to offer new and innovative services to their customers,” Verizon, the appellant, said in a statement.  “We look forward to working with the FCC and Congress to keep the Internet a hub of innovation without the need for unnecessary new regulations that seek to manage the explosive dynamism of the Internet.”

The Commission’s next steps, and the future of net neutrality more broadly, remain unclear.  “My intention is to employ any necessary means among the wide variety of them given to the FCC by the Congress to sustain our jurisdiction,” FCC Chairman Tom Wheeler said on his blog.  “That the jurisdiction exists is not debatable. What path we take to assure it will be a function of circumstance, but whether we secure it should not be a source of doubt.”

In a separate release, the Chairman also raised the possibility of appealing the D.C. Circuit ruling to the Supreme Court.  The Commission could also pursue other regulatory options, such as proposing new rules that are more mindful of broadband’s status as a non-common carrier or pursuing a case-by-case enforcement approach.

Some net neutrality advocates, however, want the FCC to act more aggressively and reclassify broadband as a common carrier service.  “Internet service providers are common carriers, and as such they need government oversight and regulation,” Susan Crawford, a visiting professor at Harvard Law School, argued.  But some industry commentators believe that the Commission might be unwilling to wage the contentious battle that reclassification would spark.

Wireless Data Roaming Rules Upheld by D.C. Circuit

By J. Bradford Currier, Marc Martin, and Marty Stern

Mobile wireless data providers must offer roaming agreements to competing carriers on “commercially reasonable” terms following the D.C. Circuit Court’s decision to uphold rules first adopted by the Federal Communications Commission in 2011. The FCC’s data roaming requirements were designed to supplement existing roaming obligations on mobile carriers that only applied to voice services by facilitating access to data services when customers travel outside of their providers’ networks. As we reported previously, the data roaming rules were adopted by a closely-divided FCC and were subsequently challenged by Cellco Partnership, more commonly known as Verizon Wireless.

Verizon Wireless challenged the data roaming obligations on three grounds, arguing that: (1) the FCC lacked statutory authority to impose “common carrier” type rules on mobile data providers; (2) new rules were unnecessary because mobile data providers were already entering into voluntary roaming agreements with competing carriers; and (3) roaming obligations would reduce incentives to expand wireless infrastructure if providers must share their networks with competitors.  Verizon Wireless alleged that the roaming requirements would unfairly benefit smaller carriers with limited networks at the expense of larger providers. In response, the FCC stated that the new rules did not impose common carrier type regulations on mobile data providers and the requirements were necessary in order to prevent larger carriers from excluding smaller providers from their networks. 

The D.C. Circuit began by noting that the FCC may not impose common carrier type obligations on providers of “information services,” including mobile data providers. However, the court found that the data roaming rules allow providers to negotiate the terms of their roaming arrangements on an individualized basis and do not require providers to serve other carriers indiscriminately on standardized terms. While the court recognized that the data roaming requirements “plainly bear[] some marks of common carriage,” the court deferred to the FCC’s determination that the new rules did not amount to common carriage regulation because providers can negotiate flexible terms and conditions. The court further concluded that the data roaming rules did not constitute an unconstitutional taking of Verizon Wireless’s data network or represent arbitrary and capricious rulemaking. Although supporters of the roaming rules also suggested that the court’s decision supports the FCC’s net neutrality rules currently subject to a separate appeal, the court in the data roaming case found that the FCC has explicit jurisdiction over wireless carriers under its broad authority over radio communications under Title III of the Communications Act.

Opening Brief Filed by Net Neutrality Challengers

By J. Bradford Currier and Marc Martin

Verizon and MetroPCS filed their initial brief with the D.C. Circuit in their joint appeal of the net neutrality rules adopted by the Federal Communications Commission in its 2010 Open Internet Order. The briefs kick off the first legal challenge to the net neutrality rules which became effective in late 2011. The FCC is scheduled to respond in September, with final briefs due from the parties in November. The D.C. Circuit is not expected to rule on the appeal until 2013.

As we reported previously, the Open Internet Order focuses on three goals: (1) network transparency; (2) no blocking; and (3) no unreasonable discrimination. Under the rules, both fixed and mobile broadband Internet access providers must disclose the network management practices, performance, and commercial terms of their services.  Fixed providers are prohibited from blocking access to all lawful content and services, while mobile providers must not block lawful websites and applications that compete with their services. The “no unreasonable discrimination” provision applies solely to fixed providers, leaving mobile operators free to favor or disfavor certain types of network traffic.

The brief challenges the net neutrality rules on four grounds:

  • First, the brief alleges that the rules conflict with the Communications Act by imposing nondiscrimination requirements on fixed broadband Internet access providers. The brief emphasizes the Communication Act’s distinction between traditional “common carriers,” that must provide service to all customers on an equal basis, and private “information services,” such as broadband Internet access, that are normally outside of the FCC’s jurisdiction. The brief notes that the FCC previously refused to impose common carrier-type regulations on information services in order to foster developing technologies. 
  • Second, the brief alleges that the FCC lacked the statutory authority to adopt the net neutrality rules. The brief highlights the D.C. Circuit’s 2010 decision in Comcast v. FCC, which ruled that the FCC could not rely on its “ancillary” authority under the Communications Act to regulate broadband Internet access providers. The brief argues that the FCC failed to articulate any specific source of authority supporting the net neutrality rules, instead relying on “speculative inferences” rejected in the Comcast decision in support of the rules. 
  • Third, the brief alleges that the net neutrality rules violate the free speech rights contained in the First Amendment and the property protections set forth in the Fifth Amendment. The brief states that the net neutrality rules eliminate the “editorial discretion” held by Internet access providers to decide the types of speech they will transmit and how they will transmit it as part of their services. Under this view, Internet access providers should enjoy the same level of discretion as newspapers to feature specific content and the FCC should not impose uniform restrictions when customers have numerous outlets to access content on the Internet. The brief also contends that the rules constitute a “per se taking” of broadband Internet access providers’ property by allowing providers of content, applications, and devices to access private broadband networks for free.
  • Fourth, the brief alleges that the net neutrality rules are arbitrary and capricious. The brief suggests that the FCC failed to identify any competitive issues in the broadband Internet access market that necessitated industry-wide regulation. The brief argues that the FCC’s concerns of discrimination in Internet access service remain hypothetical and that the net neutrality rules will stifle innovation and harm the public interest.

While Verizon and MetroPCS moved forward with their challenge of the net neutrality order, public interest group Free Press voluntarily withdrew its petition to review the new rules. Free Press previously challenged the exemption for mobile wireless providers from the nondiscrimination provisions of the net neutrality rules.

Net Neutrality Briefing Schedule Set By D.C. Circuit

By J. Bradford Currier and Marc Martin

The United States Court of Appeals for the D.C. Circuit released an order today establishing the briefing schedule in MetroPCS and Verizon’s joint appeal of the net neutrality rules adopted by the Federal Communications Commission in late 2010.  Opening briefs from the appellants are due in early July, with the FCC scheduled to respond in September.  Final briefs will be due in late November and a final decision from the court may not come until 2013.