| Open Internet Rules :: Litigation
© Cybertelecom ::
Verizon v. FCC, DC Cir. Jan. 14, 2014
TATEL, Circuit Judge: For the second time in four years, we are confronted with a Federal Communications Commission effort to compel broadband providers to treat all Internet traffic the same regardless of source — or to require, as 4 it is popularly known, “net neutrality.” In Comcast Corp. v. FCC , 600 F.3d 642 (D.C. Cir. 2010), we held that the Commission had failed to cite any statutory authority that would justify its order compelling a broadband provider to adhere to open network management practices. After Comcast , the Commission issued the order challenged here — In re Preserving the Open Internet , 25 F.C.C.R. 17905 (2010) ( “the Open Internet Order” ) — which imposes disclosure, anti - blocking , and anti - discrimination requirements on broadband providers . As we explain in this opinion, the Commission has established that section 706 of the Telecommunications Act of 1996 vests it with affirmative authority to enact measures encouraging the deployment of broadband infrastructure. The Commission, we further hold , has reasonably interpreted section 706 to empower it to promulgate rules governing broadband providers’ treatment of Internet traffic , and its justification for the specific rules at issue here — that they will preserve and facilitate the “virtuous circle” of innovation that has driven the explosive growth of the Internet — is reasonable and supported by substantial evidence. That said, even though the Commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates. Given 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. Because the Commission has failed to establish that the anti - discrimination and anti - blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order.
"We nonetheless vacated the anti-blocking and antidiscrimination rules because they unlawfully subjected broadband providers to per se common carrier treatment. Id. at 655, 658–59. As we explained, the Communications Act provides that “[a] telecommunications carrier shall be treated as a common carrier . . . only to the extent that it is engaged in providing telecommunications services.” Id. at 650 (quoting 47 U.S.C. § 153(51)). The Commission, however, had classified broadband not as a telecommunications service, but rather as an information service, exempt from common carrier regulation. Id. Because the anti-blocking and antidiscrimination rules required broadband providers to offer service indiscriminately—the common law test for a per se common carrier obligation—they ran afoul of the Communications Act. See id. at 651–52, 655, 658–59. We upheld the transparency rule, however, because it imposed no per se common carrier obligations on broadband providers. Id. at 659." [USTA v. FCC Slip 19 DC Cir. 2015]
FCC Summary from 2015 OI Rules
70. Verizon subsequently challenged the Open Internet Order in the U.S. Court of Appeals for the D.C. Circuit, arguing, among other things, that the Open Internet Order exceeded the Commission’s regulatory authority and violated the Act. In January 2014, the D.C. Circuit upheld the Commission’s determination that section 706 of the Telecommunications Act of 1996 granted the Commission authority to regulate broadband Internet service providers, and that the Commission had demonstrated a sound policy justification for the Open Internet Order. Specifically, the court sustained the Commission’s findings that “absent rules such as those set forth in the Open Internet Order, broadband providers represent a threat to Internet openness and could act in ways that would ultimately inhibit the speed and extent of future broadband deployment.”
71. Despite upholding the Commission’s authority and the basic rationale supporting the Open Internet Order, the court struck down the no-blocking and antidiscrimination rules as at odds with section 3(51) of the Communications Act, holding that it prohibits the Commission from exercising its section 706 authority to impose common carrier regulation on a service not classified as a “telecommunications service,” and section 332(c)(2), which prohibits common carrier treatment of “private mobile services.” The D.C. Circuit vacated the no-blocking and antidiscrimination rules because it found that they impermissibly regulated fixed broadband providers as common carriers, which conflicted with the Commission’s prior classification of fixed broadband Internet access service as an “information service” rather than a telecommunications service. Likewise, the court found that the no-blocking rule as applied to mobile broadband conflicted with the Commission’s earlier classification of mobile broadband service as a private mobile service rather than a “commercial mobile service.” The Verizon court held that the “no unreasonable discrimination” standard adopted in the Open Internet Order was insufficiently distinguishable from the “nondiscrimination” standard applicable to common carriers. Central to the court’s rationale was its finding that, as formulated in the Open Internet Order, both rules improperly limited fixed broadband Internet access providers’ ability to engage in “individualized bargaining.”
- Jurisdiction: FCC claims Sec. 706 constitutes an affirmative grant of regulatory authority. Affirmed.
- Court reviews FCC interpretation of authority per Chevron and Arlington. "if we determine that the Commission’s interpretation of section 706 represents a reasonable resolution of a statutory ambiguity, we must defer to that interpretation." Slip at 18
- The FCC had previously concluded that Sec. 706(a) granted it no authority to act. Advanced Services Order.
- Agencies can change their minds if they give a reasoned explanation. In OI Order, FCC offered a reasoned explanation for its changed understanding of Section 706. Verizon, Slip at 20 (D.C. Cir. 2014).
- FCC Argument:
- 706(a) “encourage the deployment . . . of advanced telecommunications capability . . . by utilizing . . . price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.” 47 U.S.C. § 1302(a).
- one might reasonably think that Congress, in directing the Commission to undertake certain acts, “necessarily invested the Commission with the statutory authority to carry out those acts.” Open Internet Order, 25 F.C.C.R. at 17969 ¶ 120.
- Leg. His.: "The Senate Report describes section 706 as a “necessary fail-safe” “intended to ensure that one of the primary objectives of the [Act]—to accelerate deployment of advanced telecommunications capability—is achieved.” S. Rep. No. 104-23 at 50–51. As the Commission observed in the Open Internet Order, it would be “odd . . . to characterize Section 706(a) as a ‘fail-safe’ that ‘ensures’ the Commission’s ability to promote advanced services if it conferred no actual authority.” 25 F.C.C.R. at 17970 ¶ 120." Verizon v. FCC, No. 11-1355, Slip at 25 (D.C. Cir. Jan. 14, 2014)
- Sec. 706(b): directs the FCC to take immediate action to accelerate deployment of advanced telecommunications capability if the FCC concludes that it is not being deployed to all Americans in a reasonable and timely fashion.
- In the Sixth Sec. 706 report, the FCC concluded for the first time that the deployment of advanced services is not reasonable and timely. Slip at 27.
- "in the Open Internet Order the Commission made clear that this statutory provision does not limit the Commission to using other regulatory authority already at its disposal, but instead grants it the power necessary to fulfill the statute’s mandate. See Open Internet Order, 25 F.C.C.R. at 17972 ¶123. Emphasizing the provision’s “shall take immediate action” directive, the Commission concluded that section 706(b) “provides express authority” for the rules it adopted. Id. " Slip at 29.
- "we believe the Commission has reasonably interpreted section 706(b) to empower it to take steps to accelerate broadband deployment if and when it determines that such deployment is not “reasonable and timely.”" Slip at 29 (citing Chevron)
- The FCC justified its Open Internet rules based on the Virtuous Cycle: An open Internet leads to innovation at the edge; innovation at the edge increases demand for broadband infrastructure; greater broadband infrastructure promotes greater edge innovation.
- FCC: "edge-provider innovation leads to the expansion and improvement of broadband infrastructure. The Internet is, “[l]ike electricity and the computer,” a “‘general purpose technology’ that enables new methods of production that have a major impact on the entire economy.” Certain innovations—the lightbulb, for example—create a need for infrastructure investment, such as in power generation facilities and distribution lines, that complement and further drive the development of the initial innovation and ultimately the growth of the economy as a whole. The rise of streaming online video is perhaps the best and clearest example used to illustrate that the Internet constitutes one such technology: higher-speed residential Internet connections in the late 1990s “stimulated” the development of streaming video, a service that requires particularly high bandwidth, “which in turn encouraged broadband providers to increase network speeds.” The Commission’s emphasis on this connection between edge-provider innovation and infrastructure development is uncontroversial. " Slip at 35
- "The Commission’s finding that Internet openness fosters the edge-provider innovation that drives this “virtuous cycle” was likewise reasonable and grounded in substantial evidence. Continued innovation at the edge “depends upon low barriers to innovation and entry by edge providers,” and thus restrictions on edge providers’ “ability to reach end users . . . reduce the rate of innovation.” This conclusion finds ample support in the economic literature on which the Commission relied, as well as in history and the comments of several edge providers. For one prominent illustration of the relationship between openness and innovation, the Commission cited the invention of the World Wide Web itself by Sir Tim Berners-Lee, who, although not working for an entity that operated the underlying network, was able to create and disseminate this enormously successful innovation without needing to make any changes to previously developed Internet protocols or securing “any approval from network operators.” It also highlighted the comments of Google and Vonage—both innovative edge providers—who emphasized the importance of the Internet’s open design to permitting new content and services to develop at the edge. The record amassed by the Commission contains many similar examples, and Verizon has given us no basis for questioning the Commission’s determination that the preservation of Internet openness is integral to achieving the statutory objectives set forth in Section 706." Slip at 36.
- Absent Open Internet Rules, Broadband providers have the incentive and the opportunity to threaten Internet openness and could act in ways that would ultimately inhibit the speed and extent of future broadband deployment." Slip at 37
- "there appears little dispute that broadband providers have the technological ability to distinguish between and discriminate against certain types of Internet traffic." Slip at 38
- "The Commission also convincingly detailed how broadband providers’ position in the market gives them the economic power to restrict edge-provider traffic and charge for the services they furnish edge providers. Because all end users generally access the Internet through a single broadband provider, that provider functions as a “‘terminating monopolist,’” id. at 17919 ¶ 24 n.66, with power to act as a “gatekeeper” with respect to edge providers that might seek to reach its end-user subscribers, id. at 17919 ¶ 24. As the Commission reasonably explained, this ability to act as a “gatekeeper” distinguishes broadband providers from other participants in the Internet marketplace—including prominent and potentially powerful edge providers such as Google and Apple—who have no similar “control [over] access to the Internet for their subscribers and for anyone wishing to reach those subscribers.”" Slip at 38
- The Commission pointed to established incidents of discriminatory gatekeeper behavior. Slip at 42. See Not Neutral.
- Commission OI Rules impermissibly impose Common Carrier obligations
- The Commission may not impose common carrier obligations on non common carriers. 47 U.S.C. § 153(51); 47 U.S.C. §332(c)(2)
- The Commission has concluded that broadband Internet Service Providers are not common carriers. Advanced Services Order.
- The Commission has not revisited that conclusion
- The OI No-blocking and Non-discrimination rules constitute common carrier obligations
- The imposition of the OI rules on broadband internet service providers obligates them to act as common carriers. Slip at 52.
- Under the OI rules, broadband internet service providers must "furnish... communications service upon reasonable request therefore" to edge providers. 47 U.S.C. 201(a). Slip at 52.
- No Discrimination:
- "We have little hesitation in concluding that the anti-discrimination obligation imposed on fixed broadband providers has “relegated [those providers], pro tanto, to common carrier status.” Midwest Video II, 440 U.S. at 700–01. In requiring broadband providers to serve all edge providers without “unreasonable discrimination,” this rule by its very terms compels those providers to hold themselves out “to serve the public indiscriminately.”" Slip at. 56
- "the language of the Open Internet Order’s anti-discrimination rule mirrors, almost precisely, section 202’s language establishing the basic common carrier obligation not to “make any unjust or unreasonable discrimination.”" Slip at 59.
- No Blocking: "The anti-blocking rules establish a minimum level of service that broadband providers must furnish to all edge providers: edge providers’ “content, applications [and] services” must be “effectively usable.” Open Internet Order, 25 F.C.C.R. at 17943 ¶ 66. The Order also expressly prohibits broadband providers from charging edge providers any fees for this minimum level of service. Id. at 17943–44 ¶ 67. In requiring that all edge providers receive this minimum level of access for free, these rules would appear on their face to impose per se common carrier obligations with respect to that minimum level of service. See Midwest Video II, 440 U.S. at 701 n.9 (a carrier may “operate as a common carrier with respect to a portion of its service only”)." Slip. at 60.
- STATEMENT FROM FCC CHAIRMAN JULIUS GENACHOWSKI ON T-MOBILE WITHDRAWING THEIR CHALLENGE TO FCC'S OPEN INTERNET RULES. STMT. OCHJG TXT
- Sec. 706 (FCC based its authority for the Network Neutrality rules in part on Sec. 706);
- Title II (telecommunications carriage);
- Common Carriage.
- Computer Inquiries; Computer II
- Gregory S. Crawford,The Economics of Television and Online Video Markets, Working Paper No. 197, June 2015 P 46 In January 2014, the U.S. Court of Appeals for the District of Columbia Circuit vacated the anti-blocking and anti-discrimination aspects of the Open Internet Order. Netflix saw its share price drop by 5% on the morning of the news and by 13% from its pre-Christmas peak analysts envisioned “hundreds of millions of dollars in data subsidies” (SNL Kagan (2014b)