The Battle for Net Neutrality: The Legality of Express and Ancillary Grants of Powers to the Federal Communications Commission to Regulate Internet Service Providers

by inventuslaw

Advocates of Net Neutrality are preparing to battle the Federal Communications Commission (“FCC”) following the release of proposed new rules governing the internet released by Chairman Tom Wheeler on May 14, 2014. One underlying issue in the debate is if the FCC has the power to regulate the internet industry at all.

Net Neutrality is a term associated with the principle that all internet traffic should be treated the same. This prevents internet service providers (“ISP’s”) from slowing or denying access to certain or any websites on the basis of individual users. The reasoning behind the principle is that end users should have equal access to all the content on the internet without any additional fees. Many advocates, including many of the internet’s first developers, feel that equal access is the exact reason the internet has exploded as a center of commerce and learning over the last two decades. Opponents to such advocates argue that codifying it in any way would unduly regulate and burden private actors in the arena from operating their own networks. Because of this conflict Net Neutrality has been used as a rough guideline to govern internet regulations since the late 1980’s even though no federal legislation has ever been passed on the issue.

Instead, the FCC claimed a grant of authority over the internet under a broad reading of their power to regulate interstate and international radio, television, wire, and satellite communications. The FCC was created as an independent executive agency by Congress in the Communications Act of 1939. The agency itself did not pass any specific regulations on the issue of Net Neutrality, but operated under a list of guiding principles to provide for a free and open internet for the first few decades of Internet expansion across the globe.

This claimed grant of authority was challenged in Federal Appellate court in 2008 by Comcast, one of the largest ISP’s in the United States. The cast started in 2007 when several end users filed complaints with the FCC through two open internet advocacy organization after Comcast had slowed down their internet service based on claims that the assigned ISP addresses had been downloading large scale files from BitTorrent and other file transfer websites. Comcast argued the slow downs were necessary as the few heavy users were occupying a larger share of internet traffic than allotted and in turn was slowing down service to all customers on the network. The FCC sided with the end users on the principle of Net Neutrality and issued an order censuring Comcast from slowing down individual ISP addresses. It was the first attempt by the FCC to enforce any ofitsNet Neutrality guiding principles.

Comcast complied with the order, then immediately appealed in 2008 with the D.C. Circuit Court of Appealsin Comcast Corp. v. FCC, 600 F.3d 642 (D.C. 2010). The Communications Act of 1934 (“the Act”) had been amended several times over the last century by Congress to expressly grant regulatory power to the FCC over “common carrier services”, which included landline telephones (Title II of the Act); radio, television, and cellular transmissions (Title III of the Act); and cable television services (Title VI of the Act). In fact, the most recent FCC ruling on the issue at the time was in 2002 when the agency itself held that cable Internet service was not a telecommunications service under Title II or a cable service under Title VI. In re High-Speed Access to the Internet Over Cable and Other Facilities, 17 F.C.C.R. 4798, 4802 (2002).

The FCC was forced to rely on the broad grant of authority under section 47 U.S.C. §154(i) of the Act. The section reads; “Duties and powers. The Commission may perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions.

Comcast’s attorneys argued that the FCC lacked that ancillary authority to regulate their network management practices for individual users under the same section. They expressly argued that they were not classified as a “common carrier”but as “informational services”which kept them outside the regulatory umbrella that other telecoms dealt with. Without an express grant of authority from Congress or their own agency or ancillary authority under 154(i) of the Act the 2007 order against Comcast would be unenforceable.

The Circuit Court applied the two prong test from American LibraryAssn  v. FCC to establish if the FCC had ancillary power under 154(i). The first prong of general jurisdiction over the regulated subjected was granted in the FCC’s favor without discussion, but the second prong was explored by the Court in detail.

The second prong of American Library Ass’n reads that the FCC may exercise ancillary authority only if the regulations are reasonably ancillary to the Commission’s effective performance of its statutorily mandated responsibilities. Here, the Court favored Comcast’s stance that the FCC could not show evidence of statutory mandated responsibilities covering ISP management of their own network.

The FCC relied primarily on Section 230(b) of the Act, a provision that grants the FCC power of blocking offensive material, then goes on tostate the policies underlying this protection are to promote in the continued development of the internet to encourage new technology development and maximize control by end users on that information is sent and received over the internet. The agency also relied on Section 1 of the Act, where the FCC is granted broad authority to regulate communications to better establish a rapid, cohesive, world wide network of communication services at a reasonable price to consumers.

Comcast attacked the Section 230(b) and Section 1 arguments on the grounds that they were mere statements of policy, not operative conferences of powers granted by Congress. While admitting they were statements of policy, the FCC argued they were operative provisions that show and declare the will of the legislature to grant the agency the powers necessary to actually carry them out.

The Court found none of these declarations of legislative intent sufficient without a coupling of an expressed delegation of authority to the FCC by Congress. In fact, the Court points out that other similar cases where the Court did find ancillary powers granted to the FCC were argued in conjunction of the express grants of authority under Title II of the Act (telecommunications), Title III of the Act (wireless transmissions), and Title VI of the Act (cable services), which the FCC did not argue in their briefs.

The FCC named a secondary source of granted Congressional authority on the basis of section 706 of the Telecommunications Act of 1996. Section 706 reads, in part, that the FCC shall “encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americansby utilizingprice cap regulation, regulatory forbearance measures that promote competition in the local telecommunications market, or other regulating method that remove barriers to infrastructure investment.47 U.S.C. §1302(a).

Like in Title II, III, and VI though the FCC tied their source of power off in an earlier in-agency binding order from 1998 which found that section 706 was not an independent grant of authority but a directive to the FCC to use other granted provisions.

As such, the Court remanded the 1997 order against Comcast because of the FCC’s failure to show ancillary authority to carry it out as part of a specifically delegated power. The Court instead viewed the order and its arguments to support them as the FCC trying to pursue a stand-alone policy objective and such a grant would essentially untether them from requiring any showing of Congressional intent to carry out their objectives.

The 2010 Circuit Court decision was not the end of the issue of course. The FCC had failed in its first attempt to actually enforce its Net Neutrality policies and the ISP’s were feeling aggressive. In August of 2010, three months after the Circuit court decision in favor of Comcast, Verizon tempted Google away from its own in-house Net Neutrality stance by offering them a compromise that would exclude large chunks of the internet from protection, namely large scale streaming websites like Hulu and Netflix. The compromise failed to go through, but tensions were high enough about the future of Net Neutrality for the FCC that they released a revised and updated agency order titled The Open Internet three months later in December.

The FCC used several hints provided by Justice Tatel in the Comcast v. FCC written opinion about alternate sources of Congressional authority to wrangle ISP’s under their control. Namely, they relied on Title II and VI of the Act and brought in portions of broadband services covered by Section 706 Telecommunications of 1996 to enforce the three stated objectives. The ISP’s must 1) be transparent in their practices 2) not block or slow access to any lawful content in their network, and 3) showunreasonable discrimination internet traffic under their network. These were the sections that had been tied off from serving as sources of authority in the original decision by the agencies own in-agency orders.

Verizon came to bat next and filed suit against The Open Internet order as soon as it was published in the federal register in September of 2011. They argued many of the same points Comcast had earlier, namely that the FCC lacked express or ancillary authority to enact regulations against ISP’s over their network use. The case dragged on for years and the pro-Net Neutrality cause lost steam. The ISP’s, seeking to establish complete dominance over their networks without FCC regulation, continued to fund lobbyists in Washington D.C. In November of 2013 one long time telecomm lobbyist, Tom Wheeler, was appointed as FCC Chief by President Obama.

In early 2014 the D.C. Circuit court came down with their decision. The Court vacated the second “no blocking or slowing”and third “no discrimination”portions of The Open Internet order on the grounds that they were dependent on the ISP’s expressly being classified as common carriers in the telecommunications industry. The Court specified that they would have upheld both portions of the FCC andwould simply classify the ISP’s as telecommunication “common carriers”instead of “information service” providers. The Court upheld the first “transparency”portions of the order as they found it non-contingent on the ISP’s being classified as common carriers. The court also found the portions of the order relying on Section 706 of the Communications Act of 1996 as affirmative authority to enact measures encouraging the deployment of broadband infrastructure in the future.

That brings the story up to date in May of 2014. Pro-Net Neutrality activists have argued for the need to classify the ISP’s as “common carriers”under Title II of the Act, or at the least as “utilities”to bring them under the full umbrella of Section 706 of the Telecommunications Act to be able to fully access power over how they manage their private networks. ISP’s are weary of being brought under the regulatory framework that comes under the “common carrier”classification and the authority the FCC could then exercise over them. Instead, they urge the passing of a broad set of rules without reclassification. Under such broader, less strict rules many fear that the ISP’s could then initiate “toll”systems for internet traffic use, slowing down portions of the web to users or web hosts that pay less for services than others.

The new proposed rules from May 14, 2014 seem to be leaning the ISP’s way as there is no language regarding the reclassification of ISP’s away from information services to common carriers or utilities. This falls in line with earlier FCC actions, which have never seemed in favor of taking the step of reclassification. Exactly what powers would be relied on to enforce the rules is ambiguous under the new rules, but may become clear when the 120-day proposal period runs out and the order is either passed or denied. Until then opponents on both sides will battle over the summer for the future of the FCC’s regulatory role over the internet.

By Carlos F. Romero

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