The Good, the Bad and the Ugly of the Net Neutrality Oral Argument

If Monday's net neutrality oral argument in the DC Circuit foreshadowed the court's decision, opponents and supporters of the FCC's rules will each have something to cheer and something to fear. 

While some have portrayed the likely outcome of Monday’s DC Circuit oral argument on Verizon’s challenge to the Federal Communications Comission’s Open Internet order as a victory for anti-net neutrality forces and a loss for its supporters, the reality is much more complicated.   With the caveat that one can never rarely predict the ultimate outcome of a case – particularly one as difficult and multi-layered as this one – based solely on the oral argument, there are some pretty clear takeaways, some good, some bad and some just plain ugly.  For a comprehensive report on what happened in the courtroom, read Harold’s excellent blog post.

The Good

The good news – if you are someone who thinks the FCC should be able to protect consumers and promote competition with regard to broadband -  is that there seemed to be little appetite from the judges to question seriously the FCC’s power (or “authority”)  to regulate broadband internet access under Section 706 of the Telecommunications Act of 1996. To the extent that Section 706 gives the FCC the power to regulate in various ways to encourage the deployment of “advanced telecommunications capability,” the judges seem to take as a given that the open Internet rules would promote that goal.  Moreover, the recent City of Arlington Supreme Court decision requires courts to give deference when an agency like the FCC interprets the scope of its authority.

If the oral argument is any indication, then one of our biggest fears will likely not be realized – that the FCC would be rendered completely irrelevant.   The FCC should be able to, for example, regulate fraudulent billing, protect consumer privacy, promote universal service and (with the caveat discussed below), promote broadband competition. 

This should be cold comfort for anti-net neutrality groups, because their professed biggest fear – unbounded FCC power over broadband, may come to pass. I’ve never understood why groups concerned about the FCC having too much power under Section 706 wouldn’t prefer the agency treat broadband internet access as a telecommunications service under Title II of the Act.  The agency’s power to regulate under Title II is limited to the transmission layer of the network.  But you know what they say about consistency….

The Bad

Two of the three judges were very concerned that some or all of the open internet rules were really “common carriage” rules (which among other things, prohibit carriers from refusing service to anybody or unreasonably discriminating in charges, practices, etc.).  Under the Communications Act, it is impermissible to regulate non-common carriers (e.g, broadband access providers) like common carriers (e.g., telephone companies). 

This common carriage/non-common carriage distinction was most recently articulated in the DC Circuit decision upholding the FCC’s data roaming rule for wireless carriers.  The decision was written by one of the judges in the net neutrality case, Judge David Tatel.  In that case, Judge Tatel described common carrier status as one where “a carrier is forced to offer service indiscriminately and on general terms.” Because the data roaming rule, among other things, “leaves substantial room for individualized bargaining and discrimination in terms,” the court found them not to be common carriage.   

The FCC General Counsel Sean Lev tried gamely to explain why neither the anti-blocking nor the antidiscrimination rules are common carriage.  He argued that a common carrier relationship is established only when a “customer” requests service offered by a carrier, and the open Internet rules do not prohibit a broadband Internet access provider from refusing service or discriminating against any particular customer.  Furthermore, Lev asserted, edge providers (like Google, Twitter, Netflix) don’t request service from the end users’ internet access provider, so a rule that prohibits an end user’s access provider from blocking or imposing a second charge on an edge provider is not common carriage.

Judge Tatel and Judge Laurence Silberman pushed back hard against that argument.  Silberman scolded: “You divide up common carriage impermissibly.”  Judge Tatel kept pressing both the FCC’s and Verizon’s counsel Helgi Walker for answers as to whether the anti-blocking part of the rules could be upheld and the antidiscrimination rules struck down. This very long part of the argument raised the critical question: shouldn’t the judges defer to the judgment of the expert agency as to what constitutes common carriage?  One would think (and in fact the data roaming decision says that explicitly).  But again, this is the DC Circuit, where deference tends to be given to agency decisions the judges like, and refused to those they do not. 

The Ugly

We won’t know how truly ugly things may or may not be until we see the actual decision, and I would refer to Harold’s post for the range of possibilities.  And I haven’t up to this point mentioned the possible influence of Judge Judith Rogers, who appeared more inclined to defer to the FCC.  But it would be bad both for the internet and its users if the FCC were to win the war over authority but lose the battle over net neutrality.  What good is having authority over broadband access if you cannot use it to keep the internet an open network where the biggest companies and the smallest start-ups have an equal opportunity to succeed?  Michael’s post gives you a glimpse of the future if the FCC cannot craft effective and enforceable net neutrality rules.   

What is most ugly is that the FCC is responsible for the position in which it now finds itself. Had the Commission bit the bullet and treated broadband internet access providers as “telecommunications services” subject to common carrier obligations when it adopted the rules in 2010, the common carriage/ non-common carriage distinction would be irrelevant.  But rather than revisit that chapter in telecom policy right now, we hope that the panel will remember that it is the expert agency, and not the court, that best knows what common carriage is and isn’t.

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