Supreme Court Review of Net Neutrality Case No Slam Dunk, Court Watchers Say

It appears all but certain industry will appeal the U.S. Court of Appeals for the D.C. Circuit’s decision Tuesday upholding the FCC 2015 net neutrality rules (see 1606140023). Less certain is whether the Supreme Court will take the case. A complicating factor is that four of the remaining eight justices would have to agree to hear the case, and, with the death of Justice Antonin Scalia, that will be more difficult until his slot is filled, court watchers said in interviews Tuesday.

AT&T’s immediate reaction focused on an appeal (see 1606140012). “We have always expected this issue to be decided by the Supreme Court, and we look forward to participating in that appeal,” said AT&T General Counsel David McAtee in a blog post. “The wireless industry remains committed to preserving an open Internet and will pursue judicial and congressional options to ensure a regulatory framework that provides certainty for consumers, investors and innovators,” said CTIA President Meredith Baker, also in a blog post. Other reaction was in keeping with well-developed positions.

TechFreedom held a news conference Tuesday to announce it will appeal. TechFreedom and other petitioners will ask the full D.C. Circuit to rehear the case en banc “and press on to the Supreme Court if necessary,” said President Berin Szoka. “That legal process could take years. In the meantime, the FCC now has a blank check to regulate the internet however it sees fit.” TechFreedom’s brief will emphasize why the court was wrong to give the FCC deference, Szoka said. He predicted the Supreme Court likely won't hear the case before it gets a ninth member.

University of Pennsylvania Law School professor Christopher Yoo continues to believe the high court is unlikely to take the case (see 1510280052), he said in an interview, especially since there's no split in the federal circuits and the court takes fewer cases than in the past. Yoo said the Supreme Court doesn’t hear a case just because it has major policy or economic implications. Yoo has been skeptical of net neutrality rules.

The losing parties can petition for rehearing and suggest an en banc hearing before the entire D.C. Circuit, but that's unlikely to succeed, Yoo said. A rehearing would have to be based on new information that could not have been heard by the panel last year, he said. “To my knowledge, there is no new information.” Even if four Supreme Court justices want to hear the case, they would have to decide whether they have the votes to win on the merits, Yoo said. If the Supreme Court decides to hear the case, it would hear oral argument in November or December at the earliest, he added.

Daniel Lyons, associate professor at Boston College Law School, agreed odds are against Supreme Court review. But one issue that could be of interest to the court is the scope of the "major questions" exception to the Chevron doctrine, he said. “In the 2015 Affordable Care Act opinion, the Supreme Court seemed to announce that the Chevron doctrine, which requires courts to defer to agency interpretations of ambiguous statutes, does not apply to so-called major questions,” he told us. “The petitioners and amici raised the issue at the D.C. Circuit, but the court punted on the issue, explaining that it was bound by the Supreme Court's 2005 decision in Brand X that granted Chevron deference to the FCC on this very issue.” The Supreme Court’s 2005 Brand X decision upheld a Republican FCC’s classification of cable modem service as a Communications Act Title I information service. Lyons is also a net neutrality skeptic.

Computer and Communications Industry Association President Ed Black also doubts the Supreme Court will hear the case. It’s significant that the majority D.C. Circuit opinion was “very strong” and the partial dissent “focused on factual issues” while agreeing with other parts of the order, Black said in an interview.

“What would be available to review are really some of these factual differences of how things are considered at the FCC,” Black said. “That doesn’t present the kind of conflict that is often given cert,” he said. “But losing parties here are big companies, they’ve got deep pockets and they may well decide to try.” CCIA filed an amicus brief supporting the FCC.

Net neutrality supporters face an “uphill climb,” at the Supreme Court, said Kevin Russell of Goldstein & Russell, a former Supreme Court clerk who has argued nine cases there. “The opinion raises few questions of general applicability, and as others have observed, I’m not aware of the panel weighing in on any question upon which the circuits are divided,” Russell told us. “So I think the challengers will have to convince the Supreme Court that the net neutrality ruling is not only important, but likely wrong in the view of a majority of the court. ... That strikes me as a tall order.” Russell is a net neutrality supporter.

Net neutrality proponent Matt Wood, policy director at Free Press, agreed the Supreme Court likely won’t grant cert. “Dissents don't form the basis for appeals,” he said. “There is no circuit split and the D.C Circuit simply followed the Supreme Court's earlier ruling in Brand X.”

O’Rielly Expects Appeal

Commissioner Mike O’Rielly said he expects an appeal, while Commissioner Ajit Pai said he hopes there is one. “The D.C. Circuit’s decision is more than disappointing, but I expect it to be appealed to the U.S. Supreme Court so this opinion is not necessarily the final say,” O’Rielly said in a statement.

O’Rielly sharply criticized the judges who wrote the decision. “The majority opinion fails to apprehend the workings of the Internet, and declines to hold the FCC accountable for an order that ran roughshod over the statute, precedent, and any comments or analyses that did not support the FCC’s quest to deliver a political victory,” he said. “It also confirms why every parliamentary trick in Congress was used to pack this particular court.”

There’s plenty in the decision to pique the high court’s interest, said Fred Campbell, director of Tech Knowledge. “The D.C. Circuit’s conclusion that the mass media capability of the internet ‘does not meaningfully differentiate broadband from telephone networks for purposes of the First Amendment’ is novel and the reasoning supporting it is inconsistent with existing First Amendment precedent,” Campbell emailed. “Because the case involves a federal agency rule, it’s unlikely that this constitutional issue would ever result in a circuit split. In these circumstances, Supreme Court review is justified.”

“This order goes to the fundamental framework under which broadband providers are regulated, and certainly justifies an appeal, either en banc or with the Supreme Court,” said Doug Brake, telecom policy analyst at the Information Technology and Innovation Foundation. It's true the high court doesn’t usually take cases based on notoriety, but this one may interest the court, he said. Justice Anthony Kennedy and others on the court “have taken a particular interest in the fundamentals of Chevron deference in a number recent cases,” he said. “This opinion sets up quite nicely an opportunity to further explore the ‘major questions’ doctrine.”

Former FCC Chairman Reed Hundt said the likelihood of a further appeal is another reason the November election is critical. Presumptive Democratic nominee Hillary Clinton “would defend the order,” but “no one has any idea what [Republican Donald] Trump would do,” Hundt said. “The next president will pick the ninth member of the Supreme Court who probably will cast the deciding vote,” he said. “It is a very famous victory and on the merits it would be tough for the Supreme Court to reverse it.”

“The D.C. Circuit’s ruling is another step toward ensuring that consumers, content providers and telecommunications carriers enjoy the benefits of a level playing field,” said NARUC President Travis Kavulla, a Montana telecom regulator. “This ruling will doubtless be appealed, but given that even the dissenting judge agreed that the Telecommunications Act seemed to countenance the classification of broadband as a telecommunications service, the odds of these appeals [succeeding] seem pretty dim.”

Rate Regulation Likely?

The sweeping nature of the FCC win was hard to predict, emailed Craig Moffett, analyst at MoffettNathanson, to investors. The big question is whether the win will mean rate regulation for broadband, Moffett said. “The short answer is that broadband price regulation is now inarguably more likely, at least incrementally, if only because the most likely counter (a judicial overturn) is now off the table (at least barring a Supreme Court reversal),” Moffett wrote. “We are not arguing here that price regulation is imminent. We merely observe that the pendulum has today swung a bit further in the direction of long-term price regulation, extending a trend about which we have been writing for years.”

The decision was negative for major telecom carriers, though not entirely unexpected, wrote Wells Fargo analyst Jennifer Fritzsche. “In terms of next steps, we look for the industry to announce its appeal, and would note the process likely will span into a new administration, which might ultimately change the dynamic of the ruling and [net neutrality] rules.”

Net neutrality supporters were very pleased with the decision, which they saw as a sweeping win for their side and for the FCC majority.

“A victory for consumers & innovators!” tweeted FCC Chairman Tom Wheeler. “Court upholds Open Internet Order. No blocking, throttling or fast lanes online.” Commissioner Mignon Clyburn was “particularly pleased that the court upheld protections for mobile consumers, something for which I fought mightily during the lead-up to the Commission’s vote last year,” she said in a statement.

“The court clearly understood that at a time when most consumers rely primarily on mobile devices, different and weaker rules for wireless Internet access make no sense,” said Michael Calabrese, director of the Wireless Future Program at the Open Technology Institute, in a news release. “This decision means that as consumers increasingly move seamlessly between mobile carrier, Wi-Fi and wireline connections, they benefit from a common set of strong net neutrality protections.”

The ruling "underscores what’s possible when millions of consumers unite to be heard and government officials listen,” Netflix said in a statement. “By upholding all parts of the FCC’s net neutrality approach, the appeals court settled two decades of debate and legal uncertainty by ensuring the Internet remains open to all.” The FCC got some 4 million comments on its net neutrality NPRM.

Net neutrality opponents slammed the decision. It's "a huge step backward for the continued evolution of the internet that consumers enjoy today,” said Daniel Berninger, founder of VCXC and one of the parties that appealed the order. “The extent of the legal gymnastics in the 184-page opinion imposing a 1934 law on the modern internet illustrates the out-of-touch structural nature of the problem. This convoluted legal opinion ignores the reality that the internet prospered for 20 years without FCC policy intrusions.”

“The long arm of federal regulation now has the internet firmly in its grasp -- only a matter of time before it is choked to death by rate regulation,” said Adonis Hoffman, chairman of Business in the Public Interest and former aide to Clyburn. “One giant step for Silicon Valley. One giant leap backwards for society.” Hoffman said it's time for Congress to step in.

“Our industry strongly supports open internet principles and the FCC’s order is wholly unnecessary to keeping the internet open,” said Walter McCormick, president of lead petitioner USTelecom, in a statement.