Net Neutrality Litigation: Round 1 Goes To the FCC

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Good news! Late last week, the D.C. Circuit denied the request by the carriers suing the Federal Communications Commission (FCC) to prevent the FCC’s net neutrality rules and reclassification of broadband as a Title II telecom service. As of last Friday, the Net Neutrality rules are in effect, and broadband access is once again a Title II telecommunications service — pending the final outcome of the lawsuit challenging the the FCC’s actions.

So what does all this mean for the litigation and the ongoing machinations in Congress around net neutrality? Short version — the court was not impressed with the arguments of the carriers against the FCC. Mind you, that doesn’t mean the FCC will win. But it does mean that opponents of net neutrality and Title II might want to keep any victory dance in check. It also provides a psychological lift to the pro-net neutrality side that the FCC can win this even in the D.C. Circuit.

On the political side, Republicans had hoped that a stay would push Democrats to the bargaining table to avoid the litigation risk. Now that odds are in the FCC’s favor, Democrats will be more likely to wait for a court decision rather than try to strike a deal. This could either prompt Republicans to sweeten their offer, or double down on efforts for total repeal.

I provide the longer version below . . .

Recap: Our Story So Far

Unsurprisingly, the major broadband ISP trade associations (USTA, NCTA,CTIA, ACA, WISPA), some of the larger carriers in their individual capacity (AT&T, Centurylink) and a bunch of others filed Petitions for Review of the FCC’s February Open Internet Order. Many groups, including Public Knowledge, intervened on the side of the Federal Communications Commission (FCC). You can see the list (and other court documents) here. For those not familiar with legal lingo, “intervenors” are people who have a legally recognizable interest in the outcome (not just the general interest shared by everyone) who pick a side and become parties to the case.

The carriers opened with a fairly aggressive move, asking the court to stay the FCC’s reclassification of broadband as Title II and some (but not all) of the net neutrality rules. The FCC and Intervenors in support of the FCC opposed (filings here and here) (Carrier reply to opposition here). On June 11, one day before the FCC rules went into effect, the D.C. Circuit denied the carrier motion for stay.

Why Did The Court Deny The Stay Motion?

The court doesn’t have to explain its reasoning when it grants or denies a stay, doesn’t usually do so, and did not do so here. The Order contains only the standard boilerplate language: “Petitioners have not satisfied the stringent requirements for a stay pending court review.” So if we work back from what the standard requires, we can figure out what the broadband carriers failed to show.

In order to receive a stay, a petitioner needs to prove four things:

(1) Likelihood of success on the merits. Although not a determination on the actual merits, the party requesting a stay needs to show it has a fairly strong case that it will ultimately prevail.

(2) Threat of irreparable harm. If anyone could get a stay, then everyone would ask for one just to delay whatever they are suing to avoid. Therefore, the party asking for the stay has to show that they will suffer really awful harm if they don’t get a stay for the time it will take for the court to decide the merits. The archetypal example is that if the stay doesn’t go into effect, I will lose my business and therefore my ultimate win will be meaningless. In general, any harm that can be remedied after the case is over (through an injunction or a damages award) is not “irreperable.”

These are balanced against:

(3) Harm to other parties if the court grants the stay. It ain’t all about you, Petitioner. Litigation has two sides, and the court has to consider that not letting whatever is otherwise supposed to happen while the court is considering the case actually happen may harm others.

(4) Grant of the stay is not contrary to the public interest. This is sort of a catch-all for “sometimes a stay would have huge impact on people not before the court and would mess stuff up for the country. Don’t do that.”

The FCC and Intervenors for the FCC argued we would totally prevail on the merits; that Petitioners were talking big-time baloney burgers when they claimed they would suffer harm if the rules went into effect while the court considered the case; and that it would be intervenors and the public interest, not the Petitioners, who would suffer massive harm if the rules did not go into effect on schedule. We also submitted our own 200+ pages of supporting affidavits on why we were right.

Impacts of the Court Decision

From a legal standpoint, this means that the FCC order went into effect on schedule. You are now downloading this through your Title II broadband internet access service (“BIAS” as it is now called at the FCC). Your BIAS provider is now a Title II telecom provider. The FCC will now take complaints on any allegations of rule violations, but I don’t think the FCC is eager to process these until we get to the ultimate decision on the merits. No use working to process a complaint only to find out later the FCC didn’t have authority. But if the BIAS providers start trying to squeeze in last-minute outrageous conduct before the court makes its decision, the process is there and the FCC can act.

Additionally, BIAS providers have incentive to behave so the court doesn’t have more proof why the rules are necessary. Hence the sudden rush by major broadband providers to resolve their interconnection/peering disputes with backbone providers like Cogent and Level 3.

The biggest impact here is psychological and therefore political. The FCC and Title II supporters have now proven they can score a clean win in a net neutrality court fight — and in the D.C. Circuit no less! It has been an article of faith and a huge talking point among opponents of net neutrality and Title II that the FCC has consistently lost its every effort to impose net neutrality regulations because it is so obviously a regulatory over-reach, and that classification of BIAS as Title II was manifestly contrary to the Communications Act, the will of Congress, and the D.C. Circuit would never allow it.

Political Implications

Finally, this impacts the possible Congressional negotiations. Republicans recognize the President will veto a purely partisan bill repealing Net Neutrality, so they have gone to the negotiating table on legislation. The Republicans put out a discussion draft, which the Democrats explained they could not accept because it stripped the FCC of its rulemaking power and — as written — would preclude the FCC from making broadband eligible for universal service funding and the important consumer protections provided to the public under Title II. Republicans, while expressing willingness to negotiate on these points, have not put forward any proposed changes in response (at least not publicly). As a result, things remain at an impasse.

Had the carriers won the stay, the Republicans would have pressured the Democrats to come back to the negotiating table or risk losing everything. Now the tables are at least somewhat reversed and now Democrats have more reason to believe that the court will ultimately affirm the FCC. Republicans now have to decide if they want to seriously sweeten their offer on a legislative compromise, or double-down on explicitly partisan legislation to try to repeal net neutrality (such as the recent House Appropriations Bill that just passed out of the subcommittee).

Conclusion

Opponents of Title II are right when they say that the FCC’s win on the stay motion is a relatively small win in the overall litigation game. But it’s also the case that the carriers took a risk by opening the game with such an aggressive gambit, and now find themselves at an opening disadvantage. The FCC proved it could win an argument for net neutrality rules and Title II in the carriers’ chosen court, something that opponents of Title II insisted could never happen and which many observers doubted ever would.

We will get expedited briefing, which means we will probably have the briefing done by late fall and may get oral argument in January or February. With luck, we will see this case resolved by this time next year.

Stay tuned . . .

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