The
D.C. Circuit Court of Appeals affirmed most of the FCC’s Restoring Internet
Freedom Order [1]
largely on Chevron Doctrine deference
grounds. This two-pronged judicial
review model first considers whether applicable statutory language is
ambiguous. If applicable law is clear
and unambiguous, the court must assess whether the FCC complied with the
legislative mandate. If the applicable
law has ambiguities, 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 resident at the regulatory agency and which advocacy and sponsored
research it embraces. In this case, the
court opted not to second guess the FCC’s legal and economic rational, despite
the agency’s clear preference for the filings that support its deregulatory
agenda. [2]
Put
another way, experts at the FCC and ones financed by stakeholders will have
ulterior motives precluding an unbiased assessment, but appellate courts will
not reject selective and even one-sided evaluation unless the process exceeds
generous deference and a basic assessment of reasonableness. In this case, the court opted not to question
the FCC’s reclassification of broadband Internet access as an information
service, wireless broadband access as a private, non-common carrier mobile
service and the limited scope of new transparency requirements in lieu of prior
open-ended general conduct standard and the specific rules prohibiting
blocking, throttling, and paid prioritization of traffic.
The
court did reverse the FCC on four specific areas where the court determined
that the agency failed to set out its legal authority or address the
implications and impact of its deregulatory initiative. The court vacated the FCC’s blanket
preemption of state laws and that would impose regulatory requirements, despite
the FCC’s near complete abdication of jurisdiction. The court also remanded to the FCC the duty
to address three discrete issues that the agency largely ignored:
(1) The Order failed to examine
the implications of its decisions for public safety; (2) the Order does not
sufficiently explain what reclassification will mean for regulation of pole
attachments; and (3) the agency did not adequately address Petitioners’
concerns about the effects of broadband reclassification on the Lifeline
Program. [3]
The court fully embraced the FCC’s
legal, technical and economic rationales for reclassifying broadband Internet
access as a largely unregulated information service. The decision validates the FCC’s emphasis
that Internet Protocol domain name identity queries (“DNS”) and temporary
storage of traffic—caching—justify an overall information service
classification. Because these two
information service functions are inextricably linked with other functions,
which do include a telecommunications transport function, the overall composite
service cannot be functionally subdivided into separate information services
and telecommunications service elements. [4]
In making this finding, the court
heavily relied on the Brand X case
precedent [5] for
guidance and validation. In this prior
case, the Supreme Court also relied heavily on the Chevron Doctrine to support a prior reclassification of broadband
Internet access from telecommunications, common carriage to the largely unregulated
information services designation. Brand X also determined that DNS and
caching were “inextricably intertwined” with high speed bit transmission that
the FCC could reasonably conclude that Internet Service Providers did not offer
a telecommunications service on a standalone basis, a conclusion reached by
Justice Scalia in dissent. [6]
The court also rejected the view
that these two functions fit within an exception to the normal application of
the information service classification for a subset of information processing
functions that satisfy necessary telecommunication management requirements, rather
than constitute part of an information service.
The court refers to its prior affirmance of the FCC’s common carrier
reclassification decision, United States Telecommunications Ass’n. v. FCC, 825
F.3d 674 (D.C. Cir. 2016) to emphasize that the case only permitted Title II
common carrier attribution to functions like domain name look ups and caching,
but did not mandate it. [7]
The court also validated the FCC’s
reclassification of mobile broadband Internet access as a private, non-common
carrier service, despite an amendment to the Communications Act creating a
definition for Commercial Mobile Service provided by cellular companies in
their provision of voice and text services accessible to and from the wireline
public switched telephone network (“PSTN”). [8]
The court was predisposed to side with the FCC so that the Commission would not
have to confront a “statutory
contradiction” [9]
of having reclassified wired broadband access an information service, but not
its wireless counterpart that the FCC increasingly believes constitutes a
functional and competitive alternative.
Such regulatory asymmetry could adversely impact the commercial
attractiveness of wireless services, particularly if one believes any sort of
government oversight imposes costs, such as reduced innovation, infrastructure
investment and flexibility.
The court addresses three areas that
support the FCC’s information services reclassification. First, the court notes that the applicable
statutory language uses public switched network and not public switched
telephone network. The absence of
telephone, in conjunction with the Chevron
Doctrine and the Brand X case
precedent, supports “leaving the door open to a different, adequately
supported, reading, which the Commission has provided here.” [10]
The FCC now considers the use of IP addresses, in conjunction with telephone
numbers, as sufficiently uncoupling wireless broadband networks from the
telecommunications service classification even though cellular telephone
networks surely provide voice telephony, including access to the wired PSTN, in
addition to broadband Internet access.
The court also accepts the FCC’s argument that even though Voice over
the Internet Protocol services make it possible to originate and receive
telephone calls, that functionality by itself does not make wireless networks
fully interconnected with the PSTN, nor does it deemphasize the core,
non-telecommunications nature of broadband Internet access. In a nutshell, “blurring [of information and
telecommunications services] is not erasing.” [11]
Lastly, the court supports the FCC’s determination that mobile broadband does
not qualify as a functional equivalent to mobile voice even though consumers
use a single handset and wireless network to access both services.
Arguably the most questionable aspect
of the court’s decision lies in its endorsement of sponsored research claiming
to show that network neutrality regulation had a direct and significant impact
on infrastructure investment and innovation. As part of its analysis to
determine whether the FCC acted reasonably and not in violation of the
Administrative Procedure Act prohibition on arbitrary and capricious decision
making, the court reviews the evidentiary record. The court did not question the validity,
significance, methodology, or rigor of research supporting the Commission’s
view that network neutrality rules and regulations created significant
disincentives for innovations and investment.
Instead it appears to downplay the scope, nature and reliance of the
Commission’s reference to sponsored research supporting its views established
well before the issuance of a decision.
While deeming the FCC’s references and reliance on these studies as
reasonable, the court also appears to characterize the Commission’s use of the
research as minor and fully apprised of the “modest probative value to studies
attempting to draw links between the Title II Order and broadband investment .
. ..”[12] This characterization does not jibe with the many
instances where FCC rulings [13] and
statements by Chairman Pai [14]
and others emphasized the disastrous impact on network neutrality regulation. The
FCC and D.C. Circuit refer to Title II regulation as “utility-style regulation,”
[15] even
though the FCC had established rules that substantially exempted broadband
Internet access providers from conventional oversight including the elimination
of any regulation of rates for service, or profit margins. [16]
The court did not entirely endorse
the FCC’s world view and deregulatory agenda.
The court
rejected as unlawful the FCC’s attempt to foreclose any state regulation
inconsistent with the Commission’s policy including efforts to impose network
neutrality regulations for over which he Commission now lacks jurisdiction. [17]
In effect, the FCC cannot abandon jurisdiction over broadband Internet access
and then foreclose states from asserting jurisdiction over intrastate service:
“[I]n any area where the Commission
lacks the
authority to regulate, it equally lacks the power to preempt state law.” [18]
We can expect
some states, such as California, New York and Vermont to enact network
neutrality regulations that the FCC probably will reject as unlawful despite
the clear direction provided by the D.C. Circuit.
Additionally, the court considered
it arbitrary and capricious for the FCC not to have considered the implication for
public safety in light of the Commission’s statutory duty to promote “safety of
life and property through the use of wire and radio communications.” [19] The court noted that Verizon had deliberately
slowed the data speeded available to first responders in California as they
tried to contain forest fires. Such
“throttling” is now permissible under the FCC rules, but the court required the
Commission to address its impact on public safety.
The court also recognized that the
FCC left unresolved issues pertaining to pole attachments, because the FCC
shares jurisdiction with states and municipalities on this matter and providers
of cable, telecommunications and information services seek access to utility
poles even though the directly applicable statutory mandate, 47. U.S.C. § 224(a)(4) refers only
to Title II regulated telecommunications services. [20]
The court also required the FCC to
address the impact of the largely deregulated information services
classification on the Lifeline Program that subsidizes low-income consumers’
access primarily to Title II regulated telephone service and handsets. [21] The court determined that the FCC left
unanswered important questions whether stand alone broadband service providers
can qualify for universal service funding despite eligibility criteria limiting
eligibility to Title II regulated common carriers. [22]
[1] Mozilla
Corp. v. FCC, No. 18-1051 (D.C. Cir. Oct. 1, 2019); Retrieved from: https://www.cadc.uscourts.gov/internet/opinions.nsf/FA43C305E2B9A35485258486004F6D0F/$file/18-1051-1808766.pdf [hereinafter cited as Mozilla Corp. v. FCC].
[2] “Regulation of broadband Internet has
been the subject of protracted litigation, with broadband providers subjected
to and then released from common carrier regulation over the previous decade.
We decline to yet again flick the on-off switch of common-carrier regulation
under these circumstances.” Id. at
145-46.
[4] “[J] just as the USTA petitioners ‘fail[ed] to provide an unambiguous answer to’
whether ‘broadband providers make a standalone offering of telecommunications,’
USTA, 825 F.3d at 702, Petitioners
have not done so here. Nor have they shown the Commission’s stance to be
unreasonable. We conclude, under the guidance of Brand X, that the Commission permissibly classified broadband
Internet access as an ‘information service’ by virtue of the functionalities
afforded by DNS and caching.” Id. at
45.
[6] See Rob
Frieden, What Do Pizza Delivery and Information Services Have in Common? Lessons from
Recent Judicial and Regulatory Struggles with Convergence, 32 RUTGERS COMPUTER & TECH L.J., No. 2,
247-296 (2006).
[7] “To begin with, Petitioners misconstrue USTA. As they do persistently, they
gloss passages that find parts of the Title II Order to be permissible readings
of the statute as mandating those readings—when the passages plainly do not do
so. A case in point is the treatment of the TME. Petitioners say that ‘[t]his
Court has already agreed that DNS and caching fall within the terms of the
telecommunications management exception.’ Mozilla Br. 43 (emphasis added)
(citing USTA, 825 F.3d at 705). Yet
all we said in USTA was that we were ‘unpersuaded’
that the FCC’s ‘use of the telecommunications management exception was * * *
unreasonable.’ USTA, 825 F.3d at 705.
The Title II Order, in other words, adopted a permissible reading, though not a
required one.” Mozilla Corp. v. FCC at
23.
[10] Id.
at 50. “Similarly in USTA we rejected
a claim that 47 U.S.C. § 1422(b)(1)(ii)’s use of the term “public switched
network”— in a context pretty clearly meaning only the telephone network—meant
that the Commission was required to so limit its definition for purposes of
Section 332. Id. at 52.
[12] Id. at 76. Empirical studies are available that measure
actual investment outcomes. See, e.g., Christopher Alex Hooton, Testing the economics of the net neutrality
debate, TELECOM POL’Y (Sep., 2019); retrieved from: https://doi.org/10.1016/j.telpol.2019.101869.
[13] “[T]he
record shows that the existing regulations constrain technological advances and
deter broadband infrastructure investment by creating disincentives to the
deployment of facilities capable of providing innovative broadband Internet
access services.” Appropriate Framework for Broadband Access to the Internet
Over Wireline Facilities, Report and Order and Notice of Proposed Rulemaking, 20
F.C.C. Rcd. 14853, 14865 (2005).
[14]
“These Internet regulations will
work another serious harm on consumers. Their broadband speeds will be slower
than they would have been without these regulations.
The record is replete with evidence that Title II
regulations will slow investment and innovation in broadband networks.” Protecting
and Promoting the Open Internet, Report and Order on Remand, Declaratory
Ruling, and Order, Dissenting Statement of Commissioner Ajit Pai, 30 F.C..C
Rcd. 5601, 5927 (2015).
[16] The court did find troubling “the
Commission’s failure to grapple with the fact that, for much of the past two
decades, broadband providers were subject to some degree of open
Internet restrictions,” arguably ample time to adjust
to any regulatory restrictions. See, Id. at 86.
Preemption Directive—which goes far beyond conflict
preemption—in a lawful source of statutory authority. That failure is fatal.” Id. at 121.
[20] Id. at 104. “The Commission offered, at
best, scattered and unreasoned observations in response to comments on this
issue. Because the Commission did not adequately address
how the reclassification of broadband would affect the
regulation of pole attachments, we remand for the Commission to do so.” Id. at 104-05.
[21] In
the Telecommunications Act of 1996, Congress codified and expanded the FCC’s
universal service mission to cover “an evolving level of telecommunications
services that the Commission shall establish periodically * * *, taking into
account advances in telecommunications and information technologies and
services.” 47 U.S.C. § 254(c)(1).
[22] “[B]roadband’s eligibility for Lifeline
subsidies turns on its common-carrier status. See In re FCC 11-161, 753 F.3d 1015, 1048–1049 (10th Cir. 2014) . .
. As a matter of plain statutory text, the 2018 Order’s reclassification of
broadband—the decision to strip it of Title II common-carrier status—facially
disqualifies broadband from inclusion in the Lifeline Program.” Mozilla v. FCC
at 111.
