Losing Comcast Case Said to Augur New FCC Tack on Net Neutrality

The FCC is likely to change its approach to net neutrality after losing a case Tuesday where enforcement of 2005 principles of ISP conduct was at issue, advocates for and opponents of new mandates told us. The U.S. Court of Appeals for the D.C. Circuit ruled that the commission lacked ancillary authority to censure Comcast’s network management practice of blocking peer-to-peer transmissions, as was expected (CD Feb 3 p2). The D.C. Circuit said it was unpersuaded by commission arguments that Sections 1, 230(b), 623, 706 and other parts of the Communications Act made the 2008 order within the scope of its congressional authority. Congress’ role is to facilitate “fresh” discussion on net neutrality, get consensus among all stakeholders and write a law, said House Communications Subcommittee Chairman Rick Boucher, D-Va.

By concluding the commission lacks authority to regulate the network management of an ISP, the decision saps FCC ability to regulate net neutrality and perhaps other aspects of broadband behavior, public interest and industry lawyers said in interviews. Since oral argument in January, when observers and participants thought the commission seemed likely to lose Comcast v. FCC (CD Jan 11 p1), the regulator has apparently been studying what to do if that happened, communications lawyers said. Reclassification of broadband as a Title II common-carrier service instead of a Title I information service is one option the FCC has been said to be considering.

"Today’s court decision invalidated the prior Commission’s approach to preserving an open Internet” but the D.C. Circuit didn’t disagree “with the importance of preserving a free and open Internet, nor did it close the door to other methods for achieving this important end,” FCC Chairman Julius Genachowski said in a statement. “The only way the Commission can make lemonade out of this lemon of a decision is to do now what should have been done years ago: Treat broadband as the telecommunications service that it is,” said Commissioner Michael Copps. “We should straighten this broadband classification mess out before the first day of summer."

The two FCC Republicans opposed reclassification. The ruling “makes clear” Title I gives the FCC “no authority to regulate the network management practices” of an ISP, Commissioner Robert McDowell said. “I hope this decision will provide certainty in the marketplace and will not lead to the unnecessary classification of broadband service as a monopoly phone service under Title II of the Act.” Commissioner Meredith Baker “would oppose calls to use the court’s decision as a pretext to reclassify broadband Internet access services under monopoly-era Title II regulation,” she said. Commissioner Mignon Clyburn had no immediate comment.

The court said the order against Comcast’s treatment of BitTorrent content “rests on the premise that section 1 gives the Commission ancillary authority to ensure reasonable rates for all communication services, including those, like video-on demand, over which it has no express regulatory authority.” Judge David Tatel wrote the decision at http://xrl.us/bhfq77 on behalf of himself and Judges Raymond Randolph and David Sentelle. “Because the Commission has failed to tie its assertion of ancillary authority over Comcast’s Internet service to any ’statutorily mandated responsibility,'” he wrote, citing the American Library case, “we grant the petition for review and vacate the Order.” Although the regulator said authority over Comcast’s network management is ancillary to Section 201 common-carrier authority, that position before the court “is very different from the one appearing in the Order,” he wrote. “Whatever the merits of this position, the Commission has forfeited it by failing to advance it here."

As with Sections 230(b) and 1, FCC reliance on 706 “fails” because it’s “seeking to use its ancillary authority to pursue a stand-alone policy objective, rather than to support its exercise of a specifically delegated power,” the jurist wrote. The agency “relies principally on several Congressional statements of policy, but under Supreme Court and D.C. Circuit case law statements of policy, by themselves, do not create ’statutorily mandated responsibilities.'” The decision didn’t address whether the FCC, in enforcing a policy statement, followed the Administrative Procedure Act. “Policy statements are just that —- statements of policy,” Tatel wrote. “They are not delegations of regulatory authority."

The decision also said appellate and Supreme Court cases cited by the commission as upholding its order against Comcast don’t let it use ancillary authority in this case. Of the Supreme Court’s 2005 Brand X decision upholding commission treatment of cable modems as an information service, Tatel wrote, “By leaping from Brand X’s observation that the Commission’s ancillary authority may allow it to impose some kinds of obligations on cable Internet providers to a claim of plenary authority over such providers, the Commission runs afoul of Southwestern Cable and Midwest Video I.” Nothing in Brand X “suggests that the Court was abandoning the fundamental approach to ancillary authority set forth in Southwestern Cable, Midwest Video I, and Midwest Video II,” the judge wrote. “Accordingly, the Commission cannot justify regulating the network management practices of cable Internet providers simply by citing Brand X’s recognition that it may have ancillary authority to require such providers to unbundle the components of their services. These are altogether different regulatory requirements."

ISPs and their lobbying groups said the decision doesn’t change their support for the 2005 FCC principles. Comcast “remains committed to the FCC’s existing open Internet principles, and we will continue to work constructively with this FCC as it determines how best to increase broadband adoption and preserve an open and vibrant Internet,” a spokeswoman said. The cable operator’s “primary goal” in the case was “to clear our name and reputation,” she said. The ruling doesn’t change the ability of the government to protect consumers, NCTA President Kyle McSlarrow said. “We continue to embrace a free and open Internet as the right policy.”

The “narrow court ruling” has “no impact on our industry’s commitment to provide the optimum Internet experience to consumers” and USTelecom members will still ensure “consumers can access any lawful content they wish, run any application, and attach any device of their choice, consistent with the FCC’s longstanding policy principles,” said CEO Walter McCormick. The decision shows it’s “time to turn away from murky regulatory debates and focus on connecting all Americans and leading the world in broadband,” said CTIA CEO Steve Largent.

Legislators should “find a way to assure that the Internet remains open and that the FCC will be able to enforce” the existing four principles, Boucher said in an interview. Additional principles on nondiscrimination and transparency also are needed, but Congress must find consensus on how to implement them, he said. Boucher is “not ready to legislate” until consensus is reached among broadband providers, edge providers and the public interest community, he said. Broadband providers, which don’t want the FCC to reclassify broadband service under Title II, would be “better served” if they took part in a process to develop legislation “with terms and conditions they helped to structure,” he said. Boucher expects one or two hearings on the issue, but no plans have been made, he said. Rep. Ed Markey, D-Mass., said in a statement he already introduced legislation (HR-3458) that would give the FCC additional authority.

Senate Communications Subcommittee Chairman John Kerry called the ruling “a history-making decision.” The Massachusetts Democrat said he isn’t “advocating that the FCC reclassify broadband services as a result of this decision, but I absolutely believe they maintain that legal authority and it would be entirely consistent with the history of communications law in our country if they did."

House and Senate Republicans said the decision proved the FCC should keep its hands off Internet regulation. “It would be wrong to double down on excessive and burdensome regulations, and I hope the FCC chairman will now reconsider his decision to pursue expanded commission authority over broadband services in current proceedings before the agency,” said Senate Commerce Ranking Member Kay Bailey Hutchison, R-Texas. The court’s decision “will help maintain internet freedom,” said House Communications Subcommittee Ranking Member Cliff Stearns, R-Fla.: “The internet has flourished under market forces and without heavy-handed regulation."

The FCC could “try to thread the needle” by acting on net neutrality without reclassification, since the D.C. Circuit left open reliance on Section 201, said President Gigi Sohn of Public Knowledge. It was among complainants to the FCC on Comcast’s treatment of BitTorrent. “The problem with that is Section 201 talks about regulating common carriers” and Bells could oppose that in court, Sohn said in an interview. “If they continue to go down the Title I path, this is just going to be throwing spaghetti on the wall. They also left the door open to Title 3, but again that would not apply to wireline. The court has left them a tiny little opening."

"Until the FCC comes up with a different theory or there is further action from Congress or the Supreme Court” if the commission appeals, “the FCC appears to be out of the net neutrality business,” said lawyer Paul Feldman of Fletcher Heald, who represents subscription-video providers. “This was a direct attempt to enforce the closest thing that the FCC had to a net neutrality rule back in 2008. I think the court was unequivocal in saying the FCC completely lacked statutory authority to do so.” The D.C. Circuit “didn’t vacate the authority” for the FCC to regulate broadband, but ruled “if it ain’t in the statute, it ain’t in the statute” and thus the regulator can’t act under ancillary authority, said cable lawyer Dan Brenner of Hogan & Hartson.

If the FCC acts on net neutrality rules and is sued, it will have to show “it’s carrying out a specific statutory responsibility suggested by Congress,” said Brenner. His paper on network regulation recently was published in a journal at http://xrl.us/bhft2p. “This decision for them suggests that’s going to be very difficult to find,” he said. The decision means authority the commission contended it had in the recent net neutrality rulemaking doesn’t hold up, said Barbara Esbin of the Progress & Freedom Foundation. “If they want to go on with these particular proposed rules, it would seem to me they'd have to put out a further notice of proposed rulemaking and explain how their proposed rules are reasonably ancillary to some mandate that they have in the Communications Act” from Congress.