The
D.C. Circuit Court of Appeals affirmed most of the FCC’s Restoring Internet
Freedom Order
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.
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.
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.
In making this finding, the court
heavily relied on the
Brand X case
precedent
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.
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.
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”).
The court was predisposed to side with the FCC so that the Commission would not
have to confront a “statutory
contradiction”
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.”
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.”
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 .
. ..”
This characterization does not jibe with the many
instances where FCC rulings
and
statements by Chairman Pai
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,”
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.
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.
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.”
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.”
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.
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.
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.
