Results-driven Decisions that Do Not Pass the Smell Test: The D.C. Circuit Affirms Most of the FCC’s Restoring Internet Freedom Order

            Yet again, I will closely examine an appellate court review of FCC decision making with a variety of evaluative templates including the “smell test.”  Does the court buy into plausible rationales, because they comport with a deregulatory anti-government mind set, or does the court play it straight?  In Mozilla Corp. v. FCC, No. 18-1051 (D.C. Cir. Oct. 1, 2019), the court does a little bit of both.  See https://www.cadc.uscourts.gov/internet/opinions.nsf/FA43C305E2B9A35485258486004F6D0F/$file/18-1051-1808766.pdf.

            It will take me countless hours to parse through everything the court does and does not do.  In a nutshell, the court largely defers to FCC expertise and judgment using the so-called Chevron Doctrine.  This two-pronged judicial review model first considers whether applicable statutory language is ambiguous.  If no, the court must assess whether the FCC complied with clear enough statutory directions.  If yes, the court must consider whether the FCC’s chosen course of action was reasonable under the circumstances.  Because judges lack expertise in statistics, economics, electronic engineering, accounting, corporate management, finance etc. they must rely on the expertise others have, even though these experts may have ulterior motives and financial sponsors that precludes an unbiased assessment.

            The court offers a quite disappointing “punt” on the question whether the FCC lawfully relied on sponsored research and non-stop utterances by FCC Chairman Ajit Pai that network neutral regulation thwarts innovation and retards infrastructure investment.  The Chairman remarkably has isolated a single variable that he reports is the exclusive cause of declining innovation (however measured) and investment by telecommunications carriers.

The court all too willingly defers to the sponsored research that provided support for the Pai campaign.  The court dismisses countervailing research and in so doing it violated common sense.

            Consider this question: Would all the excitement and investment in fifth generation wireless upgrades decline measurably starting today had the court invalidated the Restoring Internet Freedom Order?  Of course not!  Corporations have to deal with perennial regulatory and legal uncertainty.  Additionally, there are far more impactful factors than a regulatory regime.  In the case of 5G wireless carriers HAVE to make substantial investments in both spectrum and plant, irrespective of the current political party majority at the FCC and where the arrow currently points on the continuum from regulation to unregulation.  Can you anticipate a major telecommunications carrier CEO state to Wall Street analysists and shareholders that the company will “sit on the sidelines on 5G” until the FCC gets a judicial “all clear” that “there won’t be any unconstitutional taking of property in the form of mandatory common carrier neutrality.”

            I know most of the economists mentioned by the FCC and the court who “proved” or endorsed the mantra that network neutrality singularly triggered adverse consequences for telecommunications innovation and investment.  They are smart, have a great sense of humor and make great dining and drinking partners.  Notwithstanding these fine characteristics, I see the merit in “agreeing to disagree” on matters where ideology, doctrine and financial sponsorship come into play.  Suddenly these fine friends become dogmatic and doctrinal. With straight faces, they insist that fewer competitors can generate “greater” competition.  They create and enforce economic rules as unimpeachable as laws.  They reject common sense smell tests as irrational, non-empirical and foolish.

            They have won again, because lots of jurists in this day want to see the virtue in unfettered markets and constrained government.

            There’s an irony and perhaps a silver lining in the today’s court decision. The majority decision refuses to uphold the FCC’s reclassification of broadband access as an information service AND the Commission’s attempt to preempt any degree of state regulation.  The FCC cannot have its cake and eat it too. If the FCC deems a service off limits and unregulatable, it cannot turn around and require states to comply with its statutory interpretation mandating non-regulation, particularly where Congress unambiguously retained states’ right of oversight.

            Of course, we are days away from someone coming up with a clever rationale for federal preemption, because interstate and intrastate information services are seamlessly integrated and what reasonable person does not hate California?