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.
[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.
[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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