ISPs Knew Title II Rules Were on Table, FCC Says

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By Lydia Beyoud

Sept. 15 — Internet service providers can't claim to be surprised by the FCC's decision to reclassify broadband service under communications law, the agency told the federal court hearing a challenge to its Open Internet order.

“Broadband providers had every reason to foresee that the Commission might use Title II to achieve its policy goals” the Federal Communications Commission told the U.S. Court of Appeals for the District of Columbia Circuit in its brief arguing against broadband ISPs' and trade groups' claims that the Open Internet rulemaking process violated federal rulemaking procedures and legal precedent.

The agency brief, filed late Sept. 14, laid out its case for why the D.C. Circuit should uphold its rules reclassifying broadband Internet services under Title II of the Communications Act of 1934.

The FCC emphasized procedural and policy arguments, notably that the U.S. Supreme Court and Congress have granted it, as an “expert agency,” the legal authority to not only set telecommunications policy but also to change prior policy decisions.

In its rebuttal to arguments from the U.S. Telecom Association (USTA), the FCC said the Supreme Court's decisions in Nat'l Cable & Telecomms. Ass'n v. Brand X and Chevron USA, Inc. v. Natural Resources Def. Council, Inc. gave it “the right to view the same facts differently in light of changed or more pressing policy goals.” The FCC said its chief responsibility in establishing the net neutrality rules earlier this year was to ensure “the Internet, the central means of communication in the 21st Century, remains open to all Americans.”

The arguments mounted by Title II opponents, led by USTA, are “a frontal attack, plain and simple, on the Supreme Court's decision in Brand X, and is foreclosed by that decision,” the FCC said. “US Telecom argues that the Commission lacks the authority to recognize Broadband Internet Access Service as a telecommunications service subject to regulation under Title II of the Act, arguing that ‘[t]he 1996 Act makes clear that broadband Internet access is an information service,'” the agency said.

If USTA's argument that broadband services should be considered information services under Title I of the law were to stand, it would lead to the conclusion that “under its logic, telephony would have become an information service on March 10, 1876 when Mr. Watson answered Alexander Graham Bell’s famous first phone call,” the FCC said.

Investment Concerns

USTA and fellow opponents of the Open Internet order argue that the FCC misinterpreted its authority under Chevron and Brand X to reclassify not only wireline but also wireless ISPs as Title II telecommunications services. While the commission has stressed that it was engaged in “light touch” Title II regulations that wouldn't overly burden ISPs, petitioners have voiced concerns that the new rules would stymie investment in broadband networks and services, and that the FCC was upending industry reliance on previous regulations.

The agency said the petitioners' past reliance on a Title I regulatory regime for making investment decisions, prior to the commission's partisan 3-2 approval of the Open Internet order on Feb. 26, shouldn't prevent it from reassessing and changing its policies.

“Otherwise, broadband providers’ asserted reliance interests would freeze future communications policy, effectively nullifying the continuing interpretive and rulemaking authority that Congress has vested in the FCC,” the agency said.

The FCC said it had fully considered the rules' impact on future investment and determined that Title II regulation would not have a negative impact, had “reasonably balanced providers’ concerns against the benefits of its chosen regulatory framework,” and decided that the rules would not have a negative impact on the “Internet marketplace as a whole.”

It pointed to statements from Sprint Corp. and T-Mobile US Inc. that reclassification wouldn't harm their business plans. The agency has also relied on statements that Verizon Communications Inc.'s Chief Financial Officer Francis J. Shammo made in January that Title II wouldn't influence its investment decisions. Since then, Verizon has returned to expressing concerns about the rules' potential negative impact on investment.

The FCC's allies in the case, including Sprint and T-Mobile, among others, are expected to underscore the agency's argument that the Title II rules will encourage a “virtuous cycle” of innovation and investment, rather than hamper it, in briefs that are due Sept. 21.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

Text of the FCC's filing is at http://src.bna.com/in.