D.C. Circuit Panel Appears Inclined To Toss Out FCC Net Neutrality Provision

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By Bryce Baschuk  


Sept. 9 --A three-judge federal appeals court panel questioned the Federal Communications Commission's authority to implement at least one major provision of its 2010 Open Internet order during oral arguments in a crucial case for the government's net neutrality rules (Verizon Communications Inc. v. Federal Communications Commission, D.C. Cir., No. 11-1355, oral argument 9/9/13).

Judge David Tatel and Senior Judge Laurence Silberman of the U.S. Court of Appeals for the District of Columbia Circuit said during the Sept. 9 arguments they were unconvinced that the FCC can prevent Internet service providers from discriminating against websites whose content is transmitted across their networks.

Tatel and Silberman asked attorneys for Verizon Communications Inc. and the FCC whether the anti-discrimination rule of the commission's Open Internet order [52 CR 1, 25 FCC Rcd 17905] can be separated from the no-blocking rule in the same order.

Judge Judith Rogers gave little indication as to her view.

Telecom analysts watching the arguments said the judges' line of questioning led them to believe the court would likely strike down the anti-discrimination provision in the FCC's Open Internet order. If the court does so, ISPs like Verizon could be permitted to throttle certain services or favor certain web content over others.

The court's decision could come as early as this winter or the spring of 2014, legal analysts said.

Common Carrier Issues

Tatel questioned whether the anti-discrimination provision amounts to common carrier regulations for ISPs like Verizon, which is forbidden by the Communications Act.

Tatel said he found it difficult to distinguish between the common carrier issues in the case and the issues that arose in the court's ruling in Cellco Partnership v. Federal Communications Commission, D.C. Cir., No. 11-1135, 12/4/12.

“It is the anti-discrimination rule that is the hardest problem for the common carriage principle,” Tatel said. “I don't understand why the commission made these rules.”

Tatel notably wrote a 2010 opinion rejecting the FCC's argument that federal laws, policy statements, and court cases provide the agency with implicit authority to penalize Comcast Corp. for blocking a high-bandwidth file-sharing service on its network (Comcast Corp. v. FCC, D.C. Cir., No. 08-1291, 4/6/10). Tatel said that accepting the commission's argument “would virtually free the Commission from its congressional tether.”

Silberman said it was dubious for the FCC to argue that the order's anti-discrimination rule did not amount to a common carriage principle if ISPs must offer service to all websites and cannot charge them if they refuse to pay for premium rates. “As a matter of law this regulation requires some level of access” and therefore is a common carrier regulation, said Silberman.

Verizon's attorney, Helgi Walker, urged the court to vacate the net neutrality rules because the FCC lacks the statutory authority under Section 706 of the Telecommunications Act to regulate Internet traffic. The decision of whether to regulate the Internet is for Congress to make and not for the FCC to decide entirely on its own, said Walker, a partner at Wiley Rein.

“These rules are at least three steps removed from congressional authority,” she said.

Pay For Priority

Walker said that if not for the net neutrality rules Verizon would explore commercial arrangements to offer increased broadband speed to entities that pay a premium for it. She added that the company has no interest in blocking legal Internet content.

Sean Lev, the FCC's general counsel, said the net neutrality rules are not preventing ISPs from entering into commercial agreements with providers of so-called edge services, like Google.com or Amazon.com. “It's important to remember that edge providers are not requesting service,” Lev said. “Those relationships are not barred.”

Walker countered that the FCC was conflating the issue: “It is unlikely that pay for priority would satisfy the anti-discrimination standard,” she said.

Free State Foundation President Randolph May said “Verizon is more likely than not to win on important aspects of its appeal” even though it wasn't a slam dunk for either side, according to a news release. The judges seemed to agree “that the FCC's rules, as a practical matter, amount to converting Verizon's Internet access service into a common carrier service and that this is prohibited by the Communications Act,” he said.

'Promising' for ISPs

Christopher King, a telecom analyst with Stifel Nicolaus, said such a decision would be a “very promising development for most cable and telco providers, particularly on the wireline side, given that only fixed providers are subject to anti-discrimination provisions,” according to a report filed Sept. 9.

The FCC conceded that the net neutrality rules are “de facto common carrier regulation,” former FCC Commissioner Robert McDowell said during a panel hosted by TechFreedom following the court debate. McDowell, now a visiting fellow at the Hudson Institute, said it was chilling to see the judges “trying to figure out where Internet governance should go.”

Public Knowledge President Gigi Sohn said in a news release that “if the federal court decides that the FCC doesn't have the power to create open Internet rules, there could be a residual impact on the FCC's ability to make decisions that involve the future of what has now become our main communications tool.”

To contact the reporter on this story: Bryce Baschuk in Washington at bbaschuk@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

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