United States: FCC Internet Deregulation Survives Court Challenge

Last Updated: October 9 2019
Article by Scott Feira, John P. Elwood and Peter J. Schildkraut

On October 1, 2019, the US Court of Appeals for the DC Circuit largely upheld the 2018 Restoring Internet Freedom Order, in which the Federal Communications Commission (FCC) classifies internet access as an Information Service under Title I of the Communications Act and adopts a market-based "light touch" policy for governing the internet. The FCC's 2018 Order was a departure from the FCC's 2015 Open Internet Order, which had classified internet access as a Telecommunications Service under Title II of the Communications Act to protect "net neutrality" and thus potentially opened the way for utility-style regulation of internet service providers. The case—Mozilla Corp. v. FCC, No. 18-1051—was decided in an unsigned per curiam opinion, probably because multiple judges on the panel wrote parts of the 186-page opinion.

The court did vacate part of the 2018 Order that would have barred states from imposing any rule or requirement that the FCC repealed (or decided to refrain from imposing) in the 2018 Order or that is more stringent than the 2018 Order. Taking a broad reading of this result, Judge Stephen F. Williams noted the incongruity in ruling that the FCC "acted lawfully in rejecting the heavy hand of Title II for the Internet, but that each of the 50 states is free to impose just that."

Opponents of the 2018 Order had a similarly expansive reading of the court's rejection of the attempt at preemption. FCC Commissioner Jessica Rosenworcel, for example, noted that "states and localities have been stepping in" and "protecting an open internet for their citizens," and said the court's decision "vacates the FCC's unlawful effort" to stop this. FCC Commissioner Geoffrey Starks called the vacatur of the preemption directive "a validation of those states that have already sought to protect consumers."

The court, however, made clear that state and local efforts to regulate the internet remain subject to conflict preemption. The problem with the 2018 Order's preemption directive, the court said, is that it "goes far beyond conflict preemption" while failing to ground itself in a lawful source of statutory authority. The preemption directive, the court said, "conveys more than a mere intent for the agency to preempt state laws in the future if they conflict with the 2018 Order." "[T]he Commission meant for that preemptive effect to wipe out a broader array of state and local laws than traditional conflict preemption principles would allow." With "no particular state law . . . at issue in this case," the court said, it is "wholly premature to pass on the preemptive effect" of the 2018 Order. At the same time, the court confirmed that conflict preemption is still available: "If the Commission can explain how a state practice actually undermines the 2018 Order, then it can invoke conflict preemption."

Pending cases about the California and Vermont net neutrality laws likely will clarify the preemptive reach of the 2018 Order. Those two states, as well as a number of others, passed laws regulating internet access services after the 2018 Order was adopted. The Department of Justice sued in the US District Court for the Eastern District of California (Case 2:18-cv-02660-JAM-DB) to block the California law, citing the conflict between the federal and state approaches to internet regulation, and trade groups did the same (Case 2:18-cv-02684-JAM-DB), but the court stayed the litigation pending the resolution of this case. The same thing happened in a lawsuit brought by industry groups against the Vermont law in the US District Court for the District of Vermont (Case No. 2:18-cv-00167-CR). The California and Vermont cases presumably will move ahead after the time for appealing this decision passes, and conflict preemption likely will be a central issue.

In addition to vacating the preemption directive, the court remanded the 2018 Order to the FCC for further proceedings on "three discrete points" about the 2018 Order's implications for: (1) public safety; (2) pole attachments; and (3) the Lifeline Program, which subsidizes internet access for low-income consumers. FCC Chairman Ajit Pai said: "We look forward to addressing on remand the narrow issues that the court identified."

Review of the court's decision by the US Supreme Court also is possible. Indeed, two of the judges on the panel seemed to invite it. Judge Patricia A. Millet noted in a separate concurrence that the court's opinion on the 2018 Order was driven by a 2005 Supreme Court case, NCTA v. Brand X, from what she called "the bygone era of iPods, AOL, and Razr flip phones." Judge Millet said she joined the court's opinion "not without substantial reservation," and was "deeply concerned that the result is unhinged from the realities of modern broadband service." Judge Robert L. Wilkins wrote separately to express similar sentiments, observing that "critical aspects of broadband Internet technology and marketing underpinning [Brand X] have drastically changed since 2005," but "revisiting Brand X is a task for the [Supreme] Court—in its wisdom—not us."

Any Supreme Court review would take time (not to mention require a party to petition for certiorari, and the Supreme Court to grant the petition). Absent an extension, petitions for certiorari would be due 90 days after the issuance of the opinion (i.e., by December 30, 2019), and the earliest the Supreme Court could hear the case would be October 2020, which means a decision would be unlikely before 2021.

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