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First Legal Shots Fired over Net Neutrality

On 13 April 2015, the Federal Register officially published the latest Open Internet order adopted by the Federal Communications Commission, starting a 60-day clock ticking until the new rules go into effect in the United States (see “FCC Goes All-in on Net Neutrality,” 7 Feb 2015). Among other things, the order aims to preserve the principles of net neutrality by barring broadband providers from discriminating against any lawful Internet traffic or creating so-called “fast lanes” to give preferred treatment to partners or affiliates. The rules do so by
reclassifying broadband services as common carriers under Title II of the Telecommunications Act, where the FCC has broad powers to regulate and enforce business conduct.

Challenging Net Neutrality — Official publication of the new rules clears the way for legal challenges, and the telecom industry has wasted no time starting the legal fight. In principle, petitions for review will likely make one of three arguments:

  1. That the FCC doesn’t have the authority to reclassify ISPs as common carriers

  2. That the FCC violated rule-making procedures by failing to provide proper notice that it might reclassify ISPs under Title II

  3. Attacks on specific elements of the new rules, like the ban on “fast lanes”

The first argument is chancy. The FCC’s authority to declare broadband providers are common carriers seems pretty solid. Back in 2002, the FCC classified broadband Internet as a lightly regulated information service rather than a telecommunication service, and a challenge to that ruling went all the way to the U.S. Supreme Court, which ruled the FCC could reclassify at their discretion. So, basically, if the FCC wants to declare that broadband providers are common carriers, the Supreme Court has its back, and there’s literally no higher authority.

The FCC’s authority in this regard was bolstered in 2014 when previous net neutrality rules were struck down (see “Net Neutrality is Down, but Not Out” 20 Jan 2014). The U.S. Court of Appeals for the District of Columbia Circuit essentially ruled that the FCC couldn’t regulate ISPs like common carriers unless they were common carriers, and affirmed the FCC’s ability to reclassify them. Thus, challenges to the FCC’s authority are probably more about buying time than a genuine hope to get the rules thrown out. That doesn’t mean it won’t happen; we’ll get to that in a minute.

The second argument — that the FCC didn’t provide adequate notice that Title II reclassification was on the table — emerges from President Obama’s unusual decision to insert himself into the net neutrality debate by urging the FCC to reclassify broadband and mobile operators as common carriers (see “President Obama Weighs In on Net Neutrality,” 14 Nov 2014). At that point, the FCC had already published a proposed set of open Internet rules that allowed so-called “fast lanes” and did not reclassify ISPs as common carriers. The FCC can make changes to rules after they’ve been formally proposed, but those changes are typically minor tweaks in response to
public feedback. An argument could be made that changing the rules to disallow paid prioritization deals and reclassify ISPs under Title II represents such a fundamental shift that the FCC basically ratified a wholly different set of rules than what it originally proposed — and those rules ought to have been subject to the full, formal rule-making process.

It’s an interesting idea, but the telecommunication industry cannot claim the notion of reclassifying broadband under common carrier rules came at them like a bolt from the blue. The FCC’s original notice of proposed rule-making had a whole section of detailed questions about Title II reclassification, and every commissioner commented on Title II options when the original rules were issued. Whether that’s enough to satisfy the letter of the law — probably defined by the 1946 Administrative Procedure Act — might be up to the courts, however.

The third route — challenges to specific elements of the new open Internet rules — may have to wait until the FCC tries to enforce a particular rule by finding a particular practice by an ISP that is not “just and reasonable.” That could take a while. First, the rules would have to go into effect, and someone would have to lodge a complaint about an ISP’s behavior or business practices. The FCC would need to review the complaint, conduct an investigation, conclude action is warranted, and then take action. That process would likely take a year or more; until then, challenges to specific provisions are probably too theoretical to go to court.

ISPS, Start Your Engines — Now that the FCC’s open Internet rules have been published, legal challenges are starting to pour in, including petitions from trade groups USTelecom, National Cable and Telecommunications Association, American Cable Association, and CTIA-The Wireless Association, as well as Texas ISP Alamo Broadband and communications giant AT&T — which is a member of some of the trade groups filing suit, but also decided to do its own thing.

These first filings are short, and merely intended to get a foot in the door. If the suits aren’t dismissed outright (which could happen — the FCC will almost certainly argue these suits are premature), the parties will file expanded briefs over the next several months outlining their arguments. So far, all the suits imply they’ll be pursuing one of the first two strategies noted above.

So why the rush to sue? Petitions for review of the new rules can be filed in the 60 days after official publication, but suits filed within the first 10 days are considered simultaneous and go into a lottery to determine where the case will be heard. Although challenges to the net neutrality rules will most likely end up before the D.C. Circuit, having the process start in another circuit will introduce more procedural steps in order to get the case transferred to the D.C. Circuit. And that takes time.

Right now, the broadband industry wants this process to take as much time as possible. As noted earlier, challenges to the FCC’s new open Internet rules are probably on thin ice: if the industry can delay the implementation of these rules, they buy time to adapt their business models to the new regulatory reality.

And buying time may also let the broadband industry change that reality. I noted earlier that there is no higher authority than the Supreme Court backing up the FCC’s authority to reclassify broadband. However, the United States will hold a national election in 2016. A change of presidential administration — and the election of new federal legislators — could create a climate where the laws granting authority to the FCC can be changed. It’s safe to bet that the broadband industry’s campaign donations and lobbying dollars are all headed in that direction.

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