Thursday, June 16, 2016

Preliminary Summary of the D.C. Circuit Court of Appeals Network Neutrality Decision

By a 2-1 vote, reflecting vastly different legal philosophies and regulator expectations, the D.C. Circuit Court of Appeals rejected all challenges to the FCC’s Open Internet Order. [1] The majority deemed limited its review function and opted to apply ample case precedent that defers to regulatory agencies on both procedural and substantive areas. [2] In a nutshell, the majority opted not to second guess the FCC and expressed support for the Commission’s interpretation of law and its assessment of how consumers access the Internet and what they expect from service providers. [3] This decision supports a rare instance where the FCC substantially expands its regulatory wingspan, despite the general trend toward less government oversight. [4]

The partial dissent chided the FCC for poor economic analysis and its failure to provide adequate notice to affected parties, citing F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009).  Additionally, the partial dissent took an activist posture suggesting that the FCC wrongly applied common carriage obligations on a market that the FCC wrongly considered to evidence monopoly characteristics. [5]


 With unexpected uniformity, the court majority rejected claims that the FCC lacked legal authority to reclassify broadband internet access as a common carrier telecommunications service provided via either fixed or mobile carriers.  The court noted that, while the FCC previously had deemed broadband access an information service, it did reserve the option to revisit its classification [6] and had good reason to do so. [7]


 Additionally the court did not consider it a fatal flaw that the FCC extended its telecommunications service jurisdiction to include the upstream links from so-called last mile Internet Service Providers to content providers and distributors.  The court noted that in the Supreme Court’s Brand X review of the FCC’s determination that last mile access fit within the information service classification, the case applied the Chevron Doctrine analysis and determined that the definitions of telecommunications service and information service were ambiguous and the FCC’s interpretation and policy prescriptions were reasonable.[8]


 The court accepted the FCC’s rationale for reclassification, considering it reasonable [9] in light of how consumers rely on telecommunications links to access information services, largely offered by ventures other than the carrier providing access. Additionally, the majority decision considered and rejected many of the objections raised in the partial dissent.  In particular, the majority rejected the partial dissent’s reliance on assertions that reclassification would harm carriers’ incentives to invest in infrastructure.  The court held that “it was not unreasonable for the Commission to conclude that broadband’s particular classification was less important to investors than increased demand.” [10]  The partial dissent endorsed various filings that found flaws in the FCC’s economic and market analysis, but the majority refrained from rejecting the FCC’s overall assessments and replacing them with general criticisms on the appropriateness of the FCC’s analysis. [11]

 
The majority decision also found no defects in the FCC’s decision to apply its Open Internet access rules to mobile broadband access. The court rejected the rationale that the rules could only apply to fixed services, because the traditional understanding of common carrier delivered Public Switched Telephone Network services only applies to fixed service made available to the public.  The court considered mobile broadband as now generally available to the public as evidenced by the common use of smartphones that provide both voice and data services. [12]


The majority decision strongly rejected the argument that the FCC’s Open Internet rules   impermissibly constrain Internet Service Provider First Amendment freedom:
Common carriers have long been subject to nondiscrimination and equal access obligations akin to those imposed by the rules without raising any First Amendment question. Those obligations affect a common carrier’s neutral transmission of others’ speech, not a carrier’s communication of its own message. [13]

 

The court noted that telephone companies, railroads, and postal services have borne equal access obligations like that now applied to Internet Service providers “without raising any First Amendment issue.”  [14]



[1]           United States Telecom Association v. Federal Communications Commission, No. 15-1063, slip op., (D.C. Cir. June 14, 2016); available at: https://www.cadc.uscourts.gov/internet/opinions.nsf/3F95E49183E6F8AF85257FD200505A3A/$file/15-1063-1619173.pdf.
 
[2]              “[W]e think it important to emphasize two fundamental principles governing our responsibility as a reviewing court. First, our “role in reviewing agency regulations . . . is a limited one.” Ass’n of American Railroads v. Interstate Commerce Commission, 978 F.2d 737, 740 (D.C. Cir. 1992). Our job is to ensure that an 23 agency has acted “within the limits of [Congress’s] delegation” of authority, Chevron, 467 U.S. at 865, and that its action is not “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” 5 U.S.C. § 706(2)(A). Critically, we do not “inquire as to whether the agency’s decision is wise as a policy matter; indeed, we are forbidden from substituting our judgment for that of the agency.” Ass’n of American Railroads, 978 F.2d at 740 (alteration and internal quotation marks omitted). Nor do we inquire whether “some or many economists would disapprove of the [agency’s] approach” because “we do not sit as a panel of referees on a professional economics journal, but as a panel of generalist judges obliged to defer to a reasonable judgment by an agency acting pursuant to congressionally delegated authority.” City of Los Angeles v. U.S. Department of Transportation, 165 F.3d 972, 978 (D.C. Cir. 1999).” Id. at 22-23.
 
[3]              The court supported the FCC’s determination that Broadband Internet Access constitutes a separate and standalone service vis a vis the information services consumers acquire via telecommunications service links.  “That consumers focus on transmission to the exclusion of add-on applications is hardly controversial. Even the most limited examination of contemporary broadband usage reveals that consumers rely on the service primarily to access third-party content.” Id. at 22.  The court also noted that Broadband Internet Access providers use information services to facilitate links to content, but agreed with the FCC that such reliance does not convert the telecommunications service into an information service.
 
[4]              That brings us to our colleague’s suggestion that the Order embodies a ‘central paradox[]’  in that the Commission relied on the Telecommunications Act to ‘increase regulation’ even though the Act was “intended to ‘reduce regulation.’” Concurring & Dissenting Op. at 53. We are unmoved. The Act, by its terms, aimed to ‘encourage the rapid deployment of new telecommunications technologies.’ Telecommunications Act of 1996, Pub. L. 104–104, 110 Stat 56. If, as we reiterate here (and as the partial dissent agrees), section 706 grants the Commission rulemaking authority, it is unsurprising that the grant of rulemaking authority might occasion the promulgation of additional regulation. And if, as is true here (and was true in Verizon), the new regulation is geared to promoting the effective deployment of new telecommunications technologies such as broadband, the regulation is entirely consistent with the Act’s objectives.” Id. at 97.
 
[5]              “Given the Commission’s assertions elsewhere that competition is limited, and its lack of economic analysis on either the forbearance issue or the Title II classification, the combined decisions to reclassify and forbear—and to assume sufficient competition as well as a lack of it—are arbitrary and capricious. The Commission acts like a bicyclist who rides now on the sidewalk, now the street, as personal convenience dictates.” Id. Sr. Judge Williams Partial Dissent at 66.
 
[6]           Id. at 15. “Although the Commission’s classification decisions spared broadband providers from Title II common carrier obligations, the Commission made clear that it would nonetheless seek to preserve principles of internet openness. In the 2005 Wireline Broadband Order, which classified DSL as an integrated information service, the Commission announced that should it ‘see evidence that providers of telecommunications for Internet access or IP-enabled services are violating these principles,’ it would “not hesitate to take action to address that conduct.” 2005 Wireline Broadband Order, 20 FCC Rcd. at 14,904 ¶ 96. Simultaneously, the Commission issued a policy statement signaling its intention to ‘preserve and promote the open and interconnected nature of the public Internet.” In re Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, 20 FCC Rcd. 14,986, 14,988 ¶ 4 (2005).
 
[7]              The FCC concluded that in light of the Verizon case, which reversed the Commission on grounds that it could not impose common carrier regulations on information services, the Commission had to reclassify broadband access explicitly and not rely on Section 706 of the Telecommunications Act of 1996 that provided general authority to take affirmative steps to promote access to advanced telecommunications services throughout the nation. “[I]n light of Verizon,’ the Commission explained, ‘absent a classification of broadband providers as providing a ‘telecommunications service,’ the Commission could only rely on section 706 to put in place open Internet protections that steered clear of regulating broadband providers as common carriers per se.’ [citing 2015 Open Internet Order, 30 FCC Rcd. at 5614 ¶ 42]. This, in our view, represents a perfectly “good reason” for the Commission’s change in position.” Majority Decision at 43. The partial dissent did not challenge the legal right of the FCC to interpret and apply the ambiguous definitions of telecommunications service and information service in the Telecommunications Act of 1996.  The majority considered the interpretation and reclassification as reasonable, but the partial dissent vigorously disagreed.
 
[8]              [E]ven if the Brand X decision was only about the last mile, the Court focused on the nature of the functions broadband providers offered to end users, not the length of the transmission pathway, in holding that the “offering” was ambiguous. As discussed earlier, the Commission adopted that approach in the Order in concluding that the term was ambiguous as to the classification question presented here: whether the “offering” of broadband internet access service can be considered a telecommunications service. In doing so, the Commission acted in accordance with the Court’s instruction in Brand X that the proper classification of broadband turns “on the factual particulars of how Internet technology works and how it is provided, questions Chevron leaves to the Commission to resolve in the first instance.” Id. at 33, citing
National Cable & Telecommunications Ass’n v. Brand X Internet Services, 545
U.S. 991 (2005).
 
[9]              The problem in Verizon was not that the Commission had misclassified the service between carriers and edge providers but that the Commission had failed to classify broadband service as a Title II service at all. The Commission overcame this problem in the Order by reclassifying broadband service—and the interconnection arrangements necessary to provide it—as a telecommunications service.” Id. at 54-55.
[10]            Id. at 49.
[11]          Id. at 49, quoting Gas Transmission Northwest Corp. v. FERC, 504 F.3d 1318, 1322 (D.C. Cir. 2007): “We see no reason to second guess these factual determinations, since the court properly defers to policy determinations invoking the [agency’s] expertise in evaluating complex market conditions.” (internal quotation marks and alteration omitted).
 
[12]          “Aligning mobile broadband with mobile voice based on their affording similarly ubiquitous access, moreover, was in keeping with Congress’s objective in establishing a defined category of “commercial mobile services” subject to common carrier treatment: to ‘creat[e] regulatory symmetry among similar mobile services.’” Id. at 60 (citation omitted). “In mobile petitioners’ view, mobile broadband (or any non-telephone mobile service)—no matter how universal, widespread, and essential a medium of communication for the public it may become—must always be considered a ‘private mobile service’ and can never be considered a ‘commercial mobile service.’ Nothing in the statute compels attributing to Congress such a wooden, counterintuitive understanding of those categories.” Id. at 62.
 
[13]            Id. at 108-09.
[14]            Id. at 111.  The court did noted that in some instances, ISPs do create and distribute content, but in such instances common carriage requirements do not apply. “If a broadband provider nonetheless were to choose to exercise editorial discretion—for instance, by picking a limited set of websites to carry and offering that service as a curated internet experience—it might then qualify as a First Amendment speaker. But the Order itself excludes such providers from the rules.” Id. at 114.
 
 

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