Uncertainty for FCC's Net Neutrality in Wake of Comcast Ruling

In the wake of a stinging defeat in court, the Federal Communications Commission finds its ability to regulate the Internet in question, its signature “net neutrality” initiative hanging by a thread. Now, the agency faces several unpalatable options.

In Comcast Corp. v. FCC, D.C. Cir, No. 08-1291 (decided April 6, 2010), the U.S. Court of Appeals for the D.C. Circuit unanimously ruled that the FCC lacks the authority to regulate the network-management policies of Internet service providers.

FCC Still Hopeful

Telecommunication lawyers agree that the decision immediately jeopardizes the agency's proposed rules on net neutrality, which would require Internet service providers not to discriminate against particular content or applications, provided they are not harmful.

“Unless [the FCC] goes back to Congress for a legislative out, net neutrality is dead,” says Glenn Manishin, a partner in Duane Morris' Washington, DC, office.

But the FCC stressed that options still remain for the agency to move ahead. “Today's court decision invalidated the prior Commission's approach to preserving an open Internet. But the [c]ourt in no way disagreed with the importance of preserving a free and open Internet; nor did it close the door to other methods for achieving this important end,” spokeswoman Jen Howard said in a statement.

The court considered whether the FCC could bar Comcast from interfering with its customers' use of peer-to-peer networking applications. The FCC acknowledged it had no explicit regulatory authority to do so, but claimed it had “ancillary” jurisdiction over such network-management practices.

The court did not agree. “Were we to accept that theory of ancillary authority, we see no reason why the Commission would have to stop there, for we can think of few examples of regulations ' [it] would be unable to impose upon Internet service providers,” wrote Judge David Tatel for the panel, which also included Chief Judge David Sentelle and Senior Judge A. Raymond Randolph.

Options Limited

To S. Derek Turner, research director of Free Press, an intervenor in the case, the decision “has forced the FCC into an existential crisis, leaving the agency unable to protect consumers in the broadband marketplace.” He said in a statement: “As a result of this decision, the FCC has virtually no power to stop Comcast from blocking Web sites.”

Jenner & Block partner Samuel Feder, who was general counsel of the FCC from 2005 to 2008, paints a marginally brighter picture for the FCC's net-neutrality efforts. He says the decision was narrow enough to “still leave the FCC room to complete net neutrality,” though “none of the options are good.”

Feder argues that the FCC could still proceed under the theory of ancillary authority, but it would need to articulate different grounds. “They have to thread the needle and come up with a new basis of justifying ancillary authority,” he says. The key, he adds, is to tie it to an area where the FCC has express jurisdiction, rather than attempt to craft a stand-alone policy.

Another alternative, one that Feder calls “politically a terrible move,” would be for the FCC to reclassify broadband Internet as a common carrier service, like telephones. “The phone companies would fight it tooth and nail.”

Least likely, Feder says, was persuading the U.S. Supreme Court or an en banc panel to overturn the decision. Feder calls the decision “about as bad as an opinion could get [for the FCC] without having grounds to take it to the Supreme Court.”

Others, like Barbara Esbin, senior fellow at the Progress and Freedom Foundation, which submitted an amicus brief in the case, wants Congress to get involved. “This strongly suggests that the time has come for our elected representatives to take up the question of whether and how the FCC should regulate the provision of Internet services,” she said in a statement.

Comcast and NBC

The decision may also have ramifications for the pending merger of Comcast and NBC Universal, notes Mark Ostrau, co-chairman of the antitrust group at Fenwick & West in Mountain View, CA. If the FCC lacks the authority to enforce rules on net neutrality, he says, the antitrust review becomes more important as the way to ensure Comcast won't favor NBC content online.

“If there's a regulatory scheme in place that protects access, the antitrust laws can step back and say, 'There's no need for us to get involved and force Comcast to play with others,'” Ostrau says. “But if the FCC has no ability to regulate how Comcast manages its network, it means the antitrust [provisions] need to be more effective and have more influence.”

In the wake of a stinging defeat in court, the Federal Communications Commission finds its ability to regulate the Internet in question, its signature “net neutrality” initiative hanging by a thread. Now, the agency faces several unpalatable options.

In Comcast Corp. v. FCC, D.C. Cir, No. 08-1291 (decided April 6, 2010), the U.S. Court of Appeals for the D.C. Circuit unanimously ruled that the FCC lacks the authority to regulate the network-management policies of Internet service providers.

FCC Still Hopeful

Telecommunication lawyers agree that the decision immediately jeopardizes the agency's proposed rules on net neutrality, which would require Internet service providers not to discriminate against particular content or applications, provided they are not harmful.

“Unless [the FCC] goes back to Congress for a legislative out, net neutrality is dead,” says Glenn Manishin, a partner in Duane Morris' Washington, DC, office.

But the FCC stressed that options still remain for the agency to move ahead. “Today's court decision invalidated the prior Commission's approach to preserving an open Internet. But the [c]ourt in no way disagreed with the importance of preserving a free and open Internet; nor did it close the door to other methods for achieving this important end,” spokeswoman Jen Howard said in a statement.

The court considered whether the FCC could bar Comcast from interfering with its customers' use of peer-to-peer networking applications. The FCC acknowledged it had no explicit regulatory authority to do so, but claimed it had “ancillary” jurisdiction over such network-management practices.

The court did not agree. “Were we to accept that theory of ancillary authority, we see no reason why the Commission would have to stop there, for we can think of few examples of regulations ' [it] would be unable to impose upon Internet service providers,” wrote Judge David Tatel for the panel, which also included Chief Judge David Sentelle and Senior Judge A. Raymond Randolph.

Options Limited

To S. Derek Turner, research director of Free Press, an intervenor in the case, the decision “has forced the FCC into an existential crisis, leaving the agency unable to protect consumers in the broadband marketplace.” He said in a statement: “As a result of this decision, the FCC has virtually no power to stop Comcast from blocking Web sites.”

Jenner & Block partner Samuel Feder, who was general counsel of the FCC from 2005 to 2008, paints a marginally brighter picture for the FCC's net-neutrality efforts. He says the decision was narrow enough to “still leave the FCC room to complete net neutrality,” though “none of the options are good.”

Feder argues that the FCC could still proceed under the theory of ancillary authority, but it would need to articulate different grounds. “They have to thread the needle and come up with a new basis of justifying ancillary authority,” he says. The key, he adds, is to tie it to an area where the FCC has express jurisdiction, rather than attempt to craft a stand-alone policy.

Another alternative, one that Feder calls “politically a terrible move,” would be for the FCC to reclassify broadband Internet as a common carrier service, like telephones. “The phone companies would fight it tooth and nail.”

Least likely, Feder says, was persuading the U.S. Supreme Court or an en banc panel to overturn the decision. Feder calls the decision “about as bad as an opinion could get [for the FCC] without having grounds to take it to the Supreme Court.”

Others, like Barbara Esbin, senior fellow at the Progress and Freedom Foundation, which submitted an amicus brief in the case, wants Congress to get involved. “This strongly suggests that the time has come for our elected representatives to take up the question of whether and how the FCC should regulate the provision of Internet services,” she said in a statement.

Comcast and NBC

The decision may also have ramifications for the pending merger of Comcast and NBC Universal, notes Mark Ostrau, co-chairman of the antitrust group at Fenwick & West in Mountain View, CA. If the FCC lacks the authority to enforce rules on net neutrality, he says, the antitrust review becomes more important as the way to ensure Comcast won't favor NBC content online.

“If there's a regulatory scheme in place that protects access, the antitrust laws can step back and say, 'There's no need for us to get involved and force Comcast to play with others,'” Ostrau says. “But if the FCC has no ability to regulate how Comcast manages its network, it means the antitrust [provisions] need to be more effective and have more influence.”