An FCC about-face on net neutrality

CYBERSLEUTH

Last week the Federal Communications Commission did an about-face of its previous about-face when it told the U.S. Circuit Court of Appeals for the D.C. Circuit that the agency lacks legal authority to impose net neutrality rules. The FCC's argument was put forth in a brief defending against a lawsuit challenging the so-called Restoring Internet Freedom Order that repealed the FCC's net neutrality rules.

The FCC argued that it was correct in finding that broadband is not a telecommunications service as defined in federal law, and instead classifying it as an information service. If broadband is indeed an information service, the FCC argued, then it lacks jurisdiction to impose regulations, including net neutrality rules. In 2010, the FCC tried to implement net neutrality rules without classifying broadband as a telecommunications service, but Verizon sued and the D.C. Circuit reversed the FCC. Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014). The court held "[g]iven that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such."

The FCC now harkens back to the Verizon decision and argues that Section 3(51) of the Communication Act "forbids common-carriage regulation of information services" and Section 332(c)(2) further forbids common-carriage treatment of private mobile services." The FCC argued in its brief that the Verizon decision "further confirms that the Title II Order's conduct rules effectively require broadband providers to operate as common carriers. Maintaining the conduct rules would therefore contravene the Act."

This argument, of course, is exactly the opposite of what the previous FCC held when it imposed net neutrality rules in 2015. In re Preserving the Open Internet, 25 F.C.C.R. 17905 (2010). In the Open Internet Order, the FCC classified broadband as a telecommunications service subject to Title II regulations. The D.C. Circuit agreed and upheld the net neutrality rules. United States Telecom Ass'n v. FCC, 825 F.3d 674; 674 (D.C. Cir. 2016), pets. for reh'g en banc denied, 855 F.3d 381 (D.C. Cir. 2017), pets. for cert. pending. What a strange contortion act for the FCC's attorneys.

The irony is that in its zeal to defend its repeal of federal net neutrality rules, the FCC may have given a legal boost to state efforts to replace them. If the FCC lacks authority regulate information services, then how does it have authority to block states from doing so?

When the FCC eliminated its own net neutrality rules in the Restoring Internet Freedom Order, it included a broad preemption provision repealing federal network neutrality rules. The provision bars states from enacting their own regulations that might require any semblance of controls over ISP conduct, including "requirements that all rates and practices be just and reasonable; prohibitions on unjust or unreasonable discrimination; tariffing requirements; accounting requirements; entry and exit restrictions; interconnection obligations; and unbundling or network-access requirements." Declaratory Ruling, Report and Order and Order, FCC 17-166, at ¶195 and fn. 730 (released Jan. 4, 2018).

Whether the FCC has authority to preempt state regulation of information services may hinge on the following section of the federal code. Under 47 U.S.C. Section 160(e) states may be prevented from regulating an area for which the FCC had decided to forbear. FCC 17-166, at ¶¶ 200-204. It should be noted, however, that Section 160(e) only prevents states from issuing regulations where the FCC has decided to forebear because regulations are not needed to ensure that practices of telecommunications carriers are just and reasonable, consumers are protected and the public interest is served. 47 U.S.C. Section 160(a). Of course, now that the FCC has reclassified broadband as an information service, it's unclear whether Section 160(e), which explicitly applies to telecommunications carriers, enables the FCC to preempt state regulation of an information service.

California recently became the third state to enact its own Net Neutrality Act, when Gov. Jerry Brown signed it into law on Sept. 30. The act bars a wide range of techniques to block, impair or degrade data speeds to a fixed endpoint or a mobile broadband station in California. Even before it was signed into law, FCC Chairman Ajit Pai labeled the Net Neutrality Act as "a radical, anti-consumer" piece of legislation passed by "nanny-state California legislators." He fretted that "California's micromanagement poses a risk to the rest of the country" because "if individual states like California regulate the Internet, this will directly impact citizens in other states."

The FCC made the same argument to the D.C. Circuit in its brief last week -- though more elegantly than Chairman Pai. The FCC argued that its "calibrated federal regulatory regime ... could be upset by inconsistent state or local regulatory efforts." For example, the FCC mused, "if one state forbids prioritizing any class of Internet traffic, but a neighboring state requires providers to prioritize certain types of traffic (such as traffic to government websites), what rules govern Internet communications between the two states?" Or, "if a broadband provider uses overlapping physical transmission facilities to supply Internet service to consumers in each state, how can it simultaneously comply with both laws?

In other words, state laws such as the Net Neutrality Act will likely set a minimum standard for any internet provider that wants to operate in California because it will be too difficult to configure its networks to throttle data only outside of California. How is that a bad thing?