DC Circuit Rules 6-2 to Deny Appeals of Net Neutrality, Title II; Pai Cites FCC Authority

A court denial of further challenges to the FCC 2015 net neutrality order was decided 6-2 by the active judges of the U.S. Court of Appeals for the D.C. Circuit (see 1705010013). The six judges voted Monday to deny petitions for en banc rehearing of a June ruling by a three-judge panel that upheld the FCC order, which also reclassified broadband to be under Title II of the Communications Act. Two judges dissented and three others didn't participate in the ruling in USTelecom v. FCC, No. 15-1063.

The D.C. Circuit's per curiam order was one page accompanied by three separate opinions totaling 107 pages. The court generally was expected to deny rehearing, but some critics were hopeful of dissents that could be helpful in a possible Supreme Court review (see 1608020045). Sen. Ed Markey, D-Mass., and House Commerce Committee ranking member Frank Pallone, D-N.J., hailed the ruling in tweets (here, here).

FCC Chairman Ajit Pai said the decision showed the commission has the authority to classify broadband internet access service as a Title I information service, as he has proposed to do in a draft rulemaking notice (see 1704260054 and 1704270044). Commissioner Michael O'Rielly said he disagreed with both the June and Monday rulings but said the issue "is somewhat moot for now" given the new direction of the FCC. Advocates on both sides issued reaction. TechFreedom President Berin Szoka said the dispute should be resolved by the Supreme Court, but Andrew Schwartzman, Georgetown Law Institute for Public Representation senior counselor, called high court review unlikely, since Pai was moving to abandon the 2015 order. Schwartzman said it's "notable" only two of 11 active judges voted for rehearing.

Concurring Judges Sri Srinivasan and David Tatel issued an opinion to respond to certain dissenting arguments. Three fellow Democratic appointees -- Judith Rogers, Patricia Millett and Robert Wilkins -- and one Republican appointee, Thomas Griffith, also backed denial but didn't issue or join an opinion. Republican appointees Brett Kavanaugh and Janice Rogers Brown dissented and issued separate opinions. Tatel and Srinivasan were part of the three-judge panel that affirmed the FCC order in June and also issued a brief order (in Pacer) Monday denying panel rehearing; Senior Judge Stephen Williams, a panel member and Republican appointee, would have granted rehearing.

"En banc review would be particularly unwarranted at this point in light of the uncertainty surrounding the fate of the FCC’s Order," wrote Srinivasan, in an opinion joined by Tatel. The commission will soon consider an NPRM aimed at replacing "the existing rule with a markedly different one," so the "en banc court could find itself examining, and pronouncing on, the validity of a rule that the agency had already slated for replacement," said their opinion. They said they were responding to a dissenting colleague who argued that Supreme Court decisions require clear congressional authorization for rules like net neutrality and that the authority is absent here. They said their colleague "contends that the rule conflicts with Supreme Court decisions ostensibly arming" ISPs "with a First Amendment shield against net neutrality obligations."

"Both lines of argument are misconceived," wrote Srinivasan. "The Supreme Court, far from precluding the FCC’s Order due to any supposed failure of congressional authorization, has pointedly recognized the agency’s authority under the governing statute to do precisely what the Order does. ... No Supreme Court decision supports the counterintuitive notion that the First Amendment entitles an ISP to engage in the kind of conduct barred by the net neutrality rule -- i.e., to hold itself out to potential customers as offering them an unfiltered pathway to any web content of their own choosing, but then, once they have subscribed, to turn around and limit their access to certain web content based on the ISP’s own commercial preferences."

Dissents

Kavanaugh called the 2015 "net neutrality rule" unlawful and said it should be vacated. "Congress did not clearly authorize the FCC to issue the net neutrality rule," he wrote. "Congress has debated net neutrality for many years, but Congress has never enacted net neutrality legislation or clearly authorized the FCC to impose common-carrier obligations on Internet service providers. ... In a series of important cases over the last 25 years, the Supreme Court has required clear congressional authorization for major agency rules of this kind. ... The major rules doctrine helps preserve the separation of powers and operates as a vital check on expansive and aggressive assertions of executive authority."

"In the alternative, the net neutrality rule violates the First Amendment," wrote Kavanaugh. "Under the Supreme Court’s landmark decisions in Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622 (1994), and Turner Broadcasting System, Inc. v. FCC, 520 U.S. 180 (1997), the First Amendment bars the Government from restricting the editorial discretion of Internet service providers, absent a showing that an Internet service provider possesses market power in a relevant geographic market. Here, however, the FCC has not even tried to make a market power showing."

Brown offered her critique in a longer dissenting opinion. "Abandoning Congress’s clear, deregulatory policy does more than subject Internet access to a regulatory framework fit for the horse and buggy," she wrote. "The FCC’s statutory rewrite relegates the Constitution’s vital separation of powers framework to 'a mere parchment delineation of the boundaries;' a hollow guarantee of liberty. ... If we take the Constitution’s structural restraints seriously, we cannot wish the Commission bon voyage on its Presidentially-imposed journey to become the Federal Cyberspace Commission."

Pai said the denial of rehearing wasn't surprising, in light of the FCC's planned May 18 vote on beginning the process to undo Title II regulations, as he said Srinivasan and Tatel pointed out. "Their opinion is important going forward, however, because it makes clear that the FCC has the authority to classify broadband Internet access service as an information service, as I have proposed to do," Pai's statement said. "I also agree with many of the points made by Judges Brown and Kavanaugh in their compelling opinions explaining why the Commission’s Title II Order was unlawful.”

O'Rielly Reacts

O'Rielly said he disagreed with the June split decision of the panel and also "with the split decision not to reconsider the matter en banc," his statement said. "This issue is somewhat moot for now as the Commission is under new leadership and headed in a far better direction. Rehashing old history here makes little sense, except to highlight the questionable degree of deference the court afforded the Commission -- which, in all fairness, should also apply in the event that any future Commission action on net neutrality is reviewed."

Pai spoke more generally about net neutrality during a brief interview Monday on Fox Business News. Pai wasn’t asked and didn’t comment on the opinion. “The core question is who do you want to control how the internet operates,” Pai said. “If you want it to be bureaucrats and lawyers in Washington, then you adopt heavy-handed rules that were inspired to regulate the Ma Bell monopoly in the 1930s.” The question is one of economics, Pai said. “If you want a more market-oriented approach, the approach that produced the internet economy that’s the envy of the world, then you want light-touch regulation, you want the market to make those decisions.”

The government can still step in but only when there are “problems,” Pai said. “That’s the approach we had for 20 years, starting under a Democratic administration.” President Bill Clinton and his FCC “got it exactly right,” Pai said. “They said, ‘We don’t want to pre-emptively regulate every single company in the United States as if it were Ma Bell, because they’re not.’”

Stakeholders Comment

USTelecom is "gratified that three of the D.C. Circuit judges wanted to rehear the case and that the FCC itself is now considering new rules to move back to investment and consumer-friendly net neutrality policies," said CEO Jonathan Spalter. "We will continue to review our legal options going forward to fully protect our open internet, and to connect all Americans to the promise and potential of broadband."

TechFreedom expected the ruling, "which shifted dramatically in favor of deference to agency power under the previous administration," said Szoka in a statement. "We’re gratified to see that both dissenting judges focused on the argument made by TechFreedom alone: that the FCC’s power over the Internet is a ‘major question’ on which courts ought not grant normal Chevron deference to the agency. We look forward to taking that question to the Supreme Court.”

Schwartzman played down those chances. "The likelihood that Chairman Pai will seek to abandon the Commission's 2015 decision greatly diminishes the already low likelihood that the Supreme Court would want to hear the case," he emailed. Asked about Pai's assertions, Schwartzman replied, "I agree that the FCC has authority to classify broadband service under Title I if it finds that the facts and circumstances justify such a determination. That is, after all, what the Supreme Court said in Brand X. However, it will be very, very hard to make the requisite findings just two years after the FCC determined otherwise."

Free Press, Public Knowledge, the Center for Democracy & Technology and Incompas were among those issuing statements welcoming the ruling. “Great news for Net Neutrality," said Free Press Policy Director Matt Wood. "It’s a big win at this interim appeal stage, which the ISPs pursued before potentially asking for a Supreme Court review. Today’s decision is yet another recognition of how sound Title II is. The full D.C. Circuit has now agreed with the Congress that wrote the law in Title II, and with the prior FCC on the legal classification of internet access as a telecom service. That leaves only Ajit Pai, bought-and-paid telecom-funded economists, and the ISP lobbyists on the wrong side."