United States: Third Time's A Charm For Net Neutrality: D.C. Circuit Upholds FCC's Reclassification Of Broadband

After seven years and three tries, the Federal Communications Commission ("FCC") appears to have found the winning combination for a defensible net neutrality policy. In a sweeping 2–1 decision, the U.S. Court of Appeals for the D.C. Circuit upheld the 2015 "Open Internet Order," in which the FCC reclassified broadband access as a common carrier service under Title II of the Communications Act. Under Title II regulation, broadband access service is subject to the same nondiscriminatory service obligations traditionally reserved for utility services like telephone and electric companies. Petitions for review of the FCC's order tested the FCC's jurisdiction and the adequacy of its reasoning in reversing its decade-long policy, but the court agreed with the FCC on each point.

As we reported in 2015 ("FCC Doubles Down on Open Internet"), the D.C. Circuit ruled that common carrier-style regulations simply could not be applied to a service that was not regulated under Title II. In doing so, the court signaled that the FCC's Open Internet policies would be on stronger legal ground if it reclassified broadband access providers as common carriers. The FCC accepted the D.C. Circuit's invitation in its 2015 Open Internet Order, which consisted of three components: (i) reclassification of fixed and mobile broadband internet access service as a regulated "telecommunications service" (rather than an unregulated "information service"); (ii) forbearance from applying certain Title II provisions, principally the mandatory unbundling requirement; and (iii) imposition of five "Open Internet Rules," which included the bright-line rules of no blocking, throttling, or paid prioritization.

In the 115-page majority opinion released on June 14, 2016, the court upheld the FCC's jurisdiction and discretion on each of the three points.

Reclassification

Judges David Tatel and Sri Srinivasan found that reclassification of broadband access as a telecommunications service was justified because customers of broadband access services "focus on transmission" and that the function of broadband access service was "primarily as a conduit" to internet content made available by third parties.

The court ruled that this classification extended to interconnection arrangements between broadband providers, as well as to mobile broadband service. Interconnection arrangements were within the FCC's jurisdiction because it had justifiably reclassified broadband access service, and "interconnection arrangements [were] necessary to provide" such service. Likewise, the court upheld the FCC's "authority to define—and hence necessarily update and revise" the definition of "public switched network" and "interconnected service" to include mobile broadband service. The inclusion of mobile broadband access as a Title II common carrier service also avoids a "statutory contradiction" between the treatment of mobile broadband and wired broadband.

Forbearance

The court concluded that the FCC's decision to forebear from applying certain traditional Title II provisions, such as interconnection and unbundling requirements, is adequately supported by the FCC's obligation under Section 10 of the Communications Act to forbear from applying any provision of the Act when to do so would not serve the provisions of the Act or the public interest.

Open Internet Rules

The court also rejected challenges to two of the FCC's Open Internet Rules. The court upheld the rule against paid prioritization, reaffirming its earlier decision that the justification for those rules—"that they will preserve and facilitate the 'virtuous circle' of innovation that has driven the explosive growth of the Internet"—was reasonable and supported by substantial evidence. The court also upheld the FCC's "General Conduct Rule," which prohibits broadband providers from "unreasonably interfer[ing] with or unreasonably disadvantag[ing]" end users' or edge provider's ability to access lawful content or services. Although petitioners argued that the rule was impermissibly vague, the court agreed with the FCC that the General Conduct Rule "serves as a complement to the bright-line rules and advances the central goal of protecting consumers." The other three of the FCC's Open Internet Rules, relating to blocking, throttling, and transparency, were not challenged by petitioners.

First Amendment

The court also rejected a First Amendment argument that the Open Internet Rules impermissibly force broadband access providers to "transmit speech with which they might disagree." The court explained that nondiscrimination obligations "affect a common carrier's neutral transmission of others' speech, not a carrier's communication of its own message."

The Road Ahead

Given the lengthy, voluminous, and contentious history of the net neutrality rules, it would appear naive to expect that this decision, no matter how resounding, will be the end of it. The lengthy 69-page dissent by Senior Judge Stephen Williams attacked the factual basis for the FCC's rulings, laying out a roadmap for a possible Supreme Court appeal. In a press release, the wireless industry stated that it would "pursue judicial and congressional options," and AT&T released a statement that "[w]e have always expected this issue to be decided by the Supreme Court, and we look forward to participating in that appeal." Meanwhile, as the appeal process continues, the FCC and the broadband industry alike will have plenty of work to do adjusting to the new world of a common carrier internet.

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