DC Circuit Upholds FCC Net Neutrality Rules

“Indeed, given the tremendous impact third-party Internet content has had on our society, it would be hard to deny its dominance in the broadband experience,” Tatel and Srinivasan wrote. “Over the past two decades, this content has transformed nearly every aspect of our lives,'from profound actions like choosing a leader, building a career, and falling in love to more quotidian ones like hailing a cab and watching a movie.'The same assuredly cannot be said for broadband providers' own add-on applications.”

Senior Judge Stephen Williams dissented, arguing that the commission's justification for the reclassification of broadband to a telecommunications service “fails for want of reasoned decisionmaking.”

The United States Telecom Association, which challenged the FCC regulations, said it is reviewing the decision and evaluating its legal options.

“Two judges on the court have unfortunately failed to recognize the significant legal failings of the Federal Communications Commission's decision to regulate the internet as a public utility, leaving in place regulation we believe will replace a consumer-driver internet with a government-run internet, threatening investment and innovation in years to come,” the industry group said. “Our industry strongly supports open internet principles and the FCC's order is wholly unnecessary to keeping the Internet open.”

Tom Wheeler, chairman of the FCC, hailed the decision as a “victory for consumers and innovators who deserve unfettered access to the entire Web, and it ensures the internet remains a platform for unparalleled innovation, free expression and economic growth.”

“After a decade of debate and legal battles, [the] ruling affirms the Commission's ability to enforce the strongest possible internet protections ' both on fixed and mobile networks ' that will ensure the Internet remains open, now and in the future,” he said in a statement.

The challengers could ask a full sitting of the DC Circuit to reconsider the case or could directly petition the U.S. Supreme Court. The panel split with two Democratic appointees, Tatel and Srinivasan, ruling for the government, and Williams, a Republican appointee, writing that the FCC overstepped.

Should the case go before the en banc DC Circuit, the challengers would face a bench with a majority of Democratic appointees. That would be true even if Chief Judge Merrick Garland did not participate (Garland has said he will sit out cases while his Supreme Court nomination is pending).

Provider Concerns

The net neutrality debate stems from fears by some that broadband providers such as Comcast Corp. or Time Warner Cable would restrict consumers' ability to access certain content if that content was produced by a competitor. Another concern is that broadband providers would charge consumers more for faster access to certain sites and services. Over the past decade, the FCC, sharing these concerns, attempted to adopt anti-discrimination and anti-paid-prioritization regulations and rules.

Peter Keisler of Sidley Austin, Brett Shumate of Wiley Rein and Earl Comstock, a former Eckert Seamans Cherin & Mellott partner who is now general counsel of VTCSecure LLC, argued for the challengers in the DC Circuit.

Title II of the Communications Act bars services classified as common carriers from 'unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services.' Broadband providers argued that they provided 'information services,' such as e-mail and cloud storage, which fell outside of Title II. See, 'Telecoms Poised to Fight Obama's Net-Neutrality Proposal,' National Law Journal (Nov. 17, 2014).

Tatel and Srinivasan said the commission presented enough evidence that consumers perceived broadband Internet access as independent of e-mail and other information services.

Before this win, the DC Circuit twice sent the FCC back to the drawing board to tailor its net neutrality rules. In a 2014 decision for Verizon Communications, the court found that although the FCC had the authority to make open-Internet rules, the agency overreached under its earlier legal framework. Tatel participated in the panel in all three net neutrality cases; the court said the judge's assignment was random each time. See, 'D.C. Circuit Judge David Tatel Confronts Net Neutrality for a Third Time,' National Law Journal (Dec. 4, 2015).

'The third time was the charm. The open Internet rules are here to stay,' Steptoe & Johnson LLP partner Pantelis Michalopoulos, who argued in support of the FCC at the December hearing, said in a statement.

'This time there is no doubt who is the winner: the open Internet,' he said. 'The gatekeepers may not block or throttle our information. They may not ask information to pay tolls. They may do nothing that unreasonably disadvantages users or content providers. And our iPhone is as safe as our PC: wireless Internet access providers are subject to the rules too.'

Beyond the myriad statutory challenges, the DC Circuit also rejected a First Amendment challenge to the rules. Broadband providers argued that the open-internet rules forced them to carry speech they might disagree with. But common carriers have long been subject to nondiscrimination rules under the Communications Act without raising a free speech challenge, Tatel and Srinivasan said.

'In effect, [the rules] require broadband providers to offer a standardized service that transmits data on a nondiscriminatory basis,' the judges wrote. 'Equal access obligations of that kind have long been imposed on telephone companies, railroads, and postal services, without raising any First Amendment issue.'

Williams in his dissent said that the FCC failed to show significant changes in the role and speed of internet service to justify the new regulatory regime. It was 'nothing new' for consumers to use broadband to access third-party content, he said. He also focused on the economic issues at play, faulting the FCC for failing to analyze broadband providers' market power.

'The ultimate irony of the commission's unreasoned patchwork is that, refusing to inquire into competitive conditions, it shunts broadband service onto the legal track suited to natural monopolies,' Williams wrote.

Zoe Tillman and C. Ryan Barber are reporters with the National Law Journal, an ALM sibling of Internet Law & Strategy. They can be reached at [email protected] (Twitter: @zoetillman) and [email protected], respectively.