The FCC and the Internet:

Yesterday, as you are probably aware, the DC Circuit, in a unanimous opinion, held that the FCC’s action in 2008 — ordering an Internet Service Provider (Comcast) to stop interfering with its customers’ use of peer-to-peer networking applications — was ultra vires and unsupported by any statutory grant of authority to the agency. The decision has been greeted with a veritable explosion of commentary — in the NY Times, the Washington Post, and all over the blogosphere — e.g., here, here, and here – mostly in connection with questions about the implications of the decision for the FCC’s overall regulation of Internet services and, more specifically, for it’s announced intention to formulate “net neutrality” (or “open Internet”) rules.

Now, telecommunications law is, generally speaking, not for the faint of heart. The Communications Act, and its 1996 successor the Telecomm Reform Act of 1996, set forth as complicated a statutory regime as can be imagined — added on to which are the numerous FCC interpretive actions (sometimes contradictory of one another), court interpretations of agency interpretations, and on and on. I’m no specialist in the area, but I know enough about it to know what I know and what I don’t know, and I have enough friends who are specialists to understand the broad outlines, in most cases, of what people are fighting about.

Fortunately, the opinion in this case — authored by Judge David Tatel — is a particular terrific example of judicial exposition. It’s not an easy read, to be sure, but that’s because it’s complicated stuff; but Judge Tatel does a wonderful job of making the complicated as simple as possible (heeding Einstein’s famous admonition — make things as simple as possible, but no simpler). My guess is that anyone with an interest (but no background) in the area could sit down with Tatel’s opinion and get through to the end with a pretty decent understanding of what the court is saying — a significant achievement in this area of the law.

What is the court saying? Here’s my take on that, and what it means for net neutrality regulation. The 2008 FCC Order that was under review ruled that Comcast had “significantly impeded consumers’ ability to access the content, and use the applications, of their choice” and that its method of bandwidth management “contravened federal policy.” Comcast had, by the time the Order was issued, already abandoned its discriminatory practices against peer-to-peer users, so the Order merely required it to disclose certain details of its network management policies and the company’s progress towards implementing those policies. The question presented here was: What provision of law gives the FCC the authority to regulate Comcast’s network management practices?

There are two possible sources of express statutory authority in the 1934 Communications Act: Title II (which gives the FCC authority to regulate “telecommunications services”) and Title VI (authority over “cable services”). The FCC, however, relied on neither of those to support its actions here — in (large) part probably because it had earlier taken the position that cable Internet services are neither “telecommunications services” OR “cable services,” but rather “information services” subject to much less stringent regulatory review. [The FCC’s earlier decision was upheld by the Supreme Court in the 2005 Brand X decision]. Instead, the agency relied on its “ancilllary jurisdiction,” set forth in sec. 4(i) of the Communications Act: “The Commission may perform any and all acts, . . . and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions.”

The bottom line in the court’s decision is that this “ancillary jurisdiction” has to be truly “ancillary” to be lawful – that is, that the agency has to point to some express authority in the statute to which its actions are indeed “ancillary” in order to have jurisdiction to proceed, and that it was unable to do so here (in light of its earlier and still-binding decision to cast Internet service as niether a “telecommunications” nor a “cable” service).

So what does this portend for net neutrality rules? Can the Commission proceed with its rulemaking efforts along those lines, or does it need some additional statutory authorization from Congress before it can do so? That’s the million dollar question, and I’m not sure that anyone can say for sure at this point what the answer is. There are (at least) two good arguments the agency might rely on to support that rulemaking. First, it can change its mind about the classification of Internet services. If Internet service were classified as a “telecomm service,” there would be no doubts about the FCC’s regulatory authority. The Supreme Court has just recently endorsed the view that the agency can change its mind in matters such as this (FCC v. Fox), as long as it does so in a reasonable manner and explains why it has done so. The other possibilities are discussed in part IV(B) of the Court’s opinion. There are a number of statutory provisions that might well have supported the FCC’s actions here: sec. 706 (which provides that the Commission “shall encourage the depoloyment on a reasonable and timely basis of advanced telecommunications capability to all Americans . . .”), sec. 201(b) (which allows the commission to regulate common carrier charges, which plausibly could have been affected by Comcast’s actions insofar as they might have shifted traffic to other carriers). But in both cases, the Court found that the FCC had waived those arguments by not presenting them in the Comcast Order itself. That, of course, may provide an opening, in any future proceeding, for the Commission to be a little more careful about finding, citing, and explaining its authority before acting, and might provide the agency a way out of this apparent jurisdictional conundrum