Net Neutrality Sparring May Signal Partial FCC Victory

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By Lydia Beyoud

Dec. 4 — Oral argument in a court challenge to the Federal Communications Commission's net neutrality rules concluded Dec. 4 without a clear victory for the agency, though its reclassification of wireline broadband service providers like Comcast Corp. seems likely to be upheld by a federal court.

Internet service providers and others challenged the FCC order in April. A three-judge panel at the U.S. Court of Appeals for the D.C. Circuit pressed both sides on whether the agency had the authority to reclassify fixed and mobile broadband Internet access services (BIAS) as telecommunications services subject to more stringent regulations under Title II of the Communications Act of 1934.

Although the court seemed more favorable to the FCC's argument that it had the authority to reclassify fixed BIAS providers, the judges questioned the agency's attorneys on whether the FCC provided sufficient notice of intent to reclassify wireless services.

Judge David S. Tatel repeatedly asked attorney Peter Keisler, representing petitioners US Telecom Association and others, whether the U.S. Supreme Court, in its Brand X decision, hadn't granted the FCC authority to define what is a “telecommunications service.” Tatel, a Clinton appointee, wrote the court's decision rejecting the 2010 net neutrality rules in Verizon v. Federal Communications Commission, D.C. Cir., No. 11-1355, decision, 1/14/14.

Judge Sri Srinivasan, an Obama appointee, seemed concerned about a policy outcome wherein an individual's use of a mobile device would be subject to different regulatory regimes depending on whether they toggled between licensed networks and Wi-Fi.

The FCC's 2010 net neutrality rules largely exempted wireless broadband services. The court rejected those rules in January 2014 on the grounds the FCC chose the wrong legal framework to uphold the principles of no paid prioritization, blocking or throttling .

Tatel's and Srinivasan's line of questioning demonstrated clear skepticism toward broadband providers' positions that the FCC had improperly reclassified fixed broadband services, net neutrality advocates acting as intervenors for the FCC said during an afternoon press call.

Wireless Reclass Could Fall

However, opponents of the Title II regime pointed to the questions as a strong sign that the mobile reclassification piece could fall. “They were clearly more skeptical of the reclassification of wireless because there was a statute” exempting the rules from treatment as common carriers, Lawrence J. Spiwak, president and general counsel for the Phoenix Center for Advanced Legal and Economic Public Policy Studies, told Bloomberg BNA.

Even if the majority of judges agree with the FCC's policy result for equal treatment of fixed and mobile service, the judges may find that the law won't allow them to uphold it, a telecom attorney with clients involved in the case said.

A second telecom attorney, also speaking on background because of involvement in the case, said the tenor of the questioning on the wireless issue suggested the judges would look closely at whether the FCC's rulemaking process satisfied the Administrative Procedure Act.

The judges would not have asked the FCC whether not fully positing the option of reclassifying wireless was a matter of “harmless error,” thereby allowing judges to overlook a procedural defect, if they didn't take petitioners' claims of an APA violation as a serious matter, the attorney said.

“It's a real coin flip that there may be a reversal in part on wireless,” Andrew J. Schwartzman, senior counselor at the Georgetown University Law Center Institute for Public Representation in Washington, told Bloomberg BNA after the argument. The line of questions doesn't allow for reading into whether the judges have “a real problem, or they just want to be sure they got it right,” he said.

If the rules are reversed on notice, the FCC will have an opportunity to “fix” the issue by conducting another rulemaking proceeding, he said.

Interconnection Issues

The FCC's decision not to subject interconnection agreements between ISPs, edge providers and content delivery networks like Level 3 Communications Inc. to Title II reclassification also received scrutiny from the judges.

Tatel asked Keisler to explain why the FCC was wrong on the position that the offer of BIAS to consumers includes interconnection. Keisler responded that it was a separate service which the FCC is effectively regulating as a Title II service without actually reclassifying it as such.

Judge Stephen F. Williams, a Reagan appointee, called the FCC's decision not to also reclassify interconnection agreements “anomalous.” Williams also questioned FCC General Counsel Jonathan Sallet on the prohibition of paid prioritization arrangements, stating that some data sent across the networks deserved prioritization. Williams said there would have been simpler, competitive ways for the FCC to protect the “virtuous cycle” of investment without implementing that ban.

The court's skepticism that the FCC can regulate interconnection under Title II on the theory that the service is subsumed into the broadband Internet access service that is offered to consumers indicates the FCC may face a challenge on the issue, a senior telecom industry executive told Bloomberg BNA on background.

A loss by the FCC on the interconnection issue could have the domino effect of losing on paid prioritization and wireless reclassification, the executive said. “If you can't regulate wireless at all, what's the win?” the executive said.

“I think the FCC probably wins on the most important points,” Harold Feld, senior vice president of Public Knowledge, a public advocacy group, told Bloomberg BNA. “To the extent there are issues around the edges like interconnection, they're fixable,” Feld said. “Even if the FCC loses on that, they don't need to appeal them, it depends on what the grounds are,” he said.

Observers expect a decision by March or April, but possibly as early as February.

Lobbying Ahead

Congress could ultimately decide the issue, with ISPs and net neutrality opponents signaling that they will continue lobbying for a legislative alternative to Title II.

“It's time for Congress to step in to fix this issue by setting clear guidelines on the FCC's authority if we are to continue to have the world class mobile services, content, networks, and choice we now enjoy and we all deserve,” Mobile Future Chairman Jonathan Spalter said in a Dec. 4 blog post.

The telecom executive likewise indicated an interest in bringing moderate Republicans and Democrats to negotiate a bill that could look similar to the FCC's 2010 framework.

But that approach could be anathema to progressive Democrats, who have long pushed for strict net neutrality provisions and who may now have their sights set on a possible win for their party and the FCC. “From where we're sitting there's no political reason to negotiate,” a Senate Democratic aide told Bloomberg BNA on background.

Senior telecom policy staffers for the leaders of the House and Senate Commerce committees said Dec. 3 their offices were open to writing bipartisan legislation, but would likely await the court's decision before proceeding.

To contact the reporter on this story: Lydia Beyoud in Washington at

To contact the editor responsible for this story: Keith Perine in Washington at

For More Information 
An audio recording of the oral argument is at