A federal appeals court in Washington will hear arguments on Dec. 4 over the Obama administration’s net neutrality rule, which boils down to a fairly simple question: Is Internet service like a hot pizza delivered to your door? And if so, how?
The last time the U.S. Supreme Court pondered this question was in the 2005 case NCTA v. Brand X. Back then the Federal Communications Commission wanted to exempt broadband cable from the regulations that cover conventional telephone service. The Supreme Court agreed that broadband was an integrated package of delivery and “information services” such as the DNS servers that help Web browsers look up specific sites and caching to speed information to a user’s screen. In pizza terms, the delivery and the pie were one product.
This time the FCC, prodded by officials in the Obama White House, is arguing that the pizza and the delivery are separate products. The Open Internet Order handed down on April 15 says broadband access is a “telecommunications service” no different than good old-fashioned telephone service, while the myriad websites, apps and other products at the end of the Internet pipe, which it calls “edge providers” are “information services” exempt from regulation under the Telecommunications Act of 1996.
The FCC isn’t the only one flip-flopping over these definitions. Back in the Brand X days, telephone companies including AT&T and some Internet services wanted to drag cable broadband into so-called Title II regulation as common carriers. The cable industry wanted to remain regulation-free. This time telecoms giants like AT&T and the cellular industry are arguing against the FCC, while Internet giants like Amazon, Google and Netflix are backing the agency’s new rules.
A three-judge panel of the D.C. Circuit Court of Appeals will hear arguments in U.S. Telecom Association v. FCC on Friday. That panel includes Judge David S. Tatel, the same judge who possibly created an opening for the FCC’s strategy in Verizon v. FCC, a 2014 decision that struck down the agency’s previous attempt to regulate broadband providers. In that decision, the court ruled that the FCC’s order prohibiting broadband providers from blocking or throttling content were per se common-carrier regulations, and the agency had already determined they were not.
Refusing to give up, the FCC declared broadband providers were common carriers. That eliminated Tatel’s objection to the first Open Internet rules, albeit in a way that administration opponents say still violates federal law.
In a brief penned by top-gun lawyers including Miguel Estrada and Theodore Olson of Gibson Dunn and Kathleen Sullivan of Quinn Emmanuel, they say Brand X and the FCC’s own long history mean it is settled law that broadband is an “information service.”
The reclassification ruling is not the result of objective analysis by the FCC of changed facts that undermined its longstanding position. It is a naked effort by the agency to achieve its desired result — subjecting broadband to “Modern Title II” — by relying on indefensible (or irrelevant) assertions of purportedly changed circumstances.
The FCC argues that conditions have indeed changed. Even back in 1996, the agency says, Congress recognized that a modern telecommunications network included computers that did some nominal processing to make sure information got to the right place on time. The term “information service” under the law does not include the “management, control or operation of a telecommunications system.”
Since then, the Internet has matured beyond the “walled gardens” of early services like AOL into a network that allows users at one end to reach millions of websites, apps and services at the other. What’s in between, the FCC now argues, is a telecommunications service not much different than the old phone network. Its proposed rules prevent broadband providers from discriminating based on content and accepting money to speed bits along (“paid prioritization”). The agency says it won’t regulate rates unless necessary.
The FCC’s challengers say the about-face is it is arbitrary and capricious. But they don’t get much help from Brand X, the case they are otherwise relying upon to preserve their exemption from Title II. “The Commission is free within the limits of reasoned interpretation to change course if it adequately justifies the change,” the majority wrote in that decision. “We find nothing arbitrary about the Commission’s providing a fresh analysis of the problem as applied to the cable industry, which it has never subjected to these rules.”
The judges hearing this latest challenge will likely focus on the evidence the FCC has come up with to support its changed view of what constitutes an “information service.” When a statute has ambiguous terms, courts are supposed to give broad leeway to federal agencies to determine what they mean under the Chevron doctrine, named after a famous Supreme Court decision. In Brand X, the Supreme Court ruled that Chevron deference was appropriate, and that the 1996 Telecom Act was ambiguous when it came to the precise definition of “telecommunications” versus “information service.”
Chevron has its limits, however, and the challengers say the FCC’s position has been too consistent for too many years, and supported by too many court decisions, to change now.
Back when Brand X was decided, Justice Antonin Scalia wrote a typically acid dissent accusing the majority of making a hash of a relatively simple question. If a customer called a pizza parlor and asked if they offered delivery, he said, it would be nonsense for the owner to deny it and say they offered an integrated “pizzeria-pizza-at-home service” instead.
“Any reasonable customer would conclude at that point that his interlocutor was either crazy or following some too-clever-by-half legal advice,” Scalia wrote then. Of course broadband access is a combination of two services, he said, just as a hot pizza delivered to your door is both a pizza and a delivery.
But Scalia’s alternative would be worrisome too, the majority noted. Suppose Congress passed a law subjecting delivery services like Federal Express to common-carrier regulations controlling their rates and who they do business with. “We doubt” such a law would sweep in pizza delivery, the majority said. And for good reason: A pizza delivery service separated into “pizza” and “delivery” could be compelled to pick up and deliver the competitor’s pies, raising costs and reducing efficiency.
If the FCC is empowered to poke into every detail of every broadband provider's service for evidence of "unreasonable" terms or discrimination, it could squelch otherwise valuable new products and services. While the agency's chief Tom Wheeler recently said he doesn't have a problem with T-Mobile's Binge On service, providing free streaming video, the New York Times, perhaps broadcasting the thinking of White House officials, has opinionated against it. A different commissioner might decide it's paid prioritization and declare it illegal.
In his dissent, Scalia railed at the majority for giving the FCC so much leeway to interpret the laws it operates under. But he did note one bright spot:
“ It is indeed a wonderful new world that the Court creates, one full of promise for administrative-law professors in need of tenure articles and, of course, for litigators,” he said.
