The D.C. Circuit Court Decision on the FCC’s Open Access Order

            The D.C. Circuit Court of Appeals has affirmed the FCC’s reading of Section 706 in the Communications Act, but also determined that the FCC could not extrapolate from that Section statutory authority to prohibit Internet Service Providers from engaging in discriminatory practices, including blocking access to specific content. See http://www.cadc.uscourts.gov/internet/opinions.nsf/3AF8B4D938CDEEA685257C6000532062/$file/11-1355-1474943.pdf.

            This is “damning with faint praise” at its finest, so much so that the author of the decision condescendingly notes that “even a federal agency is entitled to a little pride” (p. 20) when after losing the first case on network neutrality (Comcast v. FCC, 600 F.3d 642 (D.C. Cir. 2010) the Commission struggled onward to find lawful authority.  This decision offers the FCC a generally worthless victory that the Commission can lawfully find some statutory basis for jurisdiction over Internet Service Providers so long as the responsibilities imposed do not constitute common carriage. 

            The court again reminded the FCC that having classified Internet access as an information service, the Commission has no foundation whatsoever to impose common carrier duties:

even though the Commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates. Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order. (p.4)

            Some network neutrality advocates had expressed hope that the court would have considered nondiscrimination and anti-blocking rules as permissible in light of a recent case that approved as non-common carriage specific interconnection requirements on wireless carriers. In Cellco Partnership v. FCC, 700 F.3d 534, 541 (D.C. Cir. 2012) the court approved the FCC requirement that wireless carriers negotiate commercial terms and conditions for data roaming, Internet access via smartphones located outside the customer’s home service territory.  The FCC treats all forms of Internet access as non-common carriage by classifying the offering as an information service.  The court affirmed the FCC, because the imposition of some duties to deal, e.g., providing data roaming, does not rise to the level of compulsory carriage, particularly because the FCC only required commercial negotiations and recognized that the duty is not mandatory if technologically infeasible, or that the terms and conditions be uniform across all instances of interconnection.

            Even with a quasi-common carrier option, the FCC cannot expressly impose non-discrimination and anti-blocking duties.  Section 706(a) of the Communications Act requires  the FCC to “encourage the deployment on a reasonable and timely basis of advanced

telecommunications capability to all Americans . . ..” Section 706(b) requires the Commission to conduct a regular inquiry “concerning the availability of advanced telecommunications capability” and if it determines that access is not available on “a reasonable and timely fashion” “to take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market.”

            The court determined that the FCC could reasonably interpret Sec. 706 as providing statutory authority for some degree of private carrier oversight, despite the FCC having previously determined that this Section provided no such foundation when the Commission previously sought to classify ISPs as information service providers entitled to a largely deregulated status.  The court defers to the FCC and its later in time decision to consider Sec. 706(a) as providing a statutory basis for regulatory oversight: “Does the Commission’s current understanding of section 706(a) as a grant of regulatory authority represent a reasonable interpretation of an ambiguous statute? We believe it does.” (p.22)

            The court accepts the ability of the FCC to change course and even change factual determinations, as when the Commission determined that the Internet access market lacked sufficient competition having previously determined that it did. The court also does not dispute the FCC’s finding that ISPs have the ability to engage in discriminatory practices: “there appears little dispute that broadband providers have the technological ability to distinguish between and discriminate against certain types of Internet traffic,” p. 38 nor does the court dispute that the Internet access subscribers cannot or will not quickly change providers if potentially harmful discrimination actually occurs:  
For example, a broadband provider like Comcast would be unable to threaten Netflix that it would slow Netflix traffic if all Comcast subscribers would then immediately switch to a competing broadband provider. But we see no basis for questioning the Commission’s conclusion that end user are unlikely to react in this fashion. (p.39)

            However, the ability to discriminate does not automatically translate into illegal discrimination particularly when the FCC has determined that discrimination is something only common carriers cannot pursue.

            The FCC may seize upon the approval of its reliance on Sec. 706 to assert statutory authority to regulate ISPs.  However, the Commission will have little latitude and even less deference to craft quasi-common carrier duties on ISPs.  One permissible duty would require transparency and full disclosure of non-neutral service arrangements.  The Commission lawfully can require "truth in billing" by private carriers.  Perhaps the potential for consumer pushback in response to disclosed sweetheart deals with corporate affiliates and favored ventures might create a disincentive for ISPs not to go overboard.