Will Verizon defeat “net neutrality” rules?

September 10, 2013

net neutrality rulingYesterday, the D.C. Circuit Court of Appeals heard oral arguments in Verizon v. Federal Election Commission.  The case started as a challenge by Verizon to the FCC’s Open Internet Order, which was published on December 23, 2010.

The Order imposes “net neutrality” on Internet service providers (ISPs).  Net neutrality is a notion that governments and ISPs should treat all data on the Internet equally, instead of discriminating against certain users, content, applications, platforms, or websites.

For example, with net neutrality in place, an ISP such as Comcast couldn’t force content providers such as Netflix or Google to pay fees in exchange for allowing Comcast customers to access their respective websites.

If history is any indicator, though, the FCC faces an uphill battle.

Just over three years ago, the FCC lost a battle before another three-judge panel in the D.C. Circuit in Comcast v. FCC.  That case, like Verizon, began as a challenge to a similar set of FCC rules prohibiting discrimination by ISPs against certain content.

The court in Comcast found that the FCC lacked the statutory authority to regulate ISPs’ data management practices, and struck down the rules.

Will the new set of rules fare any differently?

It’s likely that we won’t know for sure for several more months, but there are several factors distinguishing this case from Comcast.

First, the Supreme Court issued a relevant holding in City of Arlington v. FCC this past May.  The Court held that a court must defer to a federal agency’s interpretation of a statutory ambiguity over the scope of the agency’s jurisdiction.

This ruling is pertinent to the Verizon case because Comcast was decided purely on jurisdictional grounds – that is, the 2010 ruling held that the FCC lacked the jurisdiction to enforce net neutrality on ISPs.

Naturally, for City of Arlington to be applicable, the D.C. Circuit panel has to find some statutory ambiguity to be present in the first place.

If the FCC simply rehashed its arguments from Comcast, there’s certainly no way that this would be the case.  However, the FCC has wisely decided to tie its asserted source of authority to a different source this time around.

Specifically, in Comcast, the FCC claimed that its authority to create its net neutrality rules stemmed from section 706(a) of the 1996 Telecommunications Act.  Section (a) was found by the court in Comcast to effectively amount to a policy statement that failed to convey any actual statutory authority.

In Verizon, the FCC is arguing that its authority in its 2010 rule derives from section 706(b).  Section (b), conversely, imposes on the FCC a mandatory duty to “initiate a notice of inquiry concerning the availability of advanced telecommunications capability to all Americans.”  This inquiry “shall determine whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion.”

If the determination is negative, the section mandates the FCC to “take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market.”

The FCC is arguing that net neutrality encourages the creation of new Internet services, which thereby encourages the construction of broadband networks.

Although this new line of reasoning could gain some traction with the D.C. Circuit this time around, the odds nonetheless remain in favor of Verizon.

The reason for this is because of a decision made by the FCC in 2002, then led by Republican Michael K. Powell: to classify ISPs as an “information service” rather than a “telecommunications service.”

Had the 2002 FCC opted to continue classifying ISPs as “telecommunications services” as they had been up to that point, there would be absolutely no question over the FCC’s authority to regulate ISPs’ network management practices.

So why didn’t the FCC just vote to reclassify ISPs before implementing these rules?  Because Republican opposition to enforcing net neutrality has been swift and harsh.

After the FCC approved its 2010 Order, Republicans in Congress mobilized to block its implementation.  It failed in the Senate, where Democrats hold the majority.

Had the FCC reclassified ISPs, there would have undoubtedly been a major frenzy whipped up by Republicans claiming that President Obama was attempting a “government takeover” of the Internet, (likely making analogies to the Chinese government’s control of the Internet within that country).

If the FCC fails in Verizon, however, it may have little other avenues available to it for enforcing net neutrality, and ISPs may soon find themselves reclassified as “telecommunications services” – especially if the public reaction to such a Verizon ruling is particularly negative.

We’ll know for sure how things will shake down when the D.C. Circuit hands down its ruling in the next few months.

Nevertheless, assuming that the Internet’s ability to “defend itself” hasn’t diminished since last year’s rally against SOPA and PIPA, a ruling in favor of Verizon shouldn’t set net neutrality back too much.