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By Lydia Beyoud
June 14 — Broadband Internet service providers are weighing legal strategies after a sweeping federal appeals court victory for the Federal Communications Commission on its net neutrality rules ( U.S. Telecom Assoc. v. FCC, D.C. Cir., No. 15-1063, decision rendered 6/14/16 ).
The U.S. Court of Appeals for the District of Columbia Circuit upheld the agency's rules June 14, dealing a blow to broadband Internet service providers such as AT&T Inc. and Comcast Corp., which have chafed under commission rules requiring them not to discriminate when handling data traffic flowing over their networks.
The decision is a win for content companies such as Netflix Inc. and others who argue that Internet service providers shouldn't be allowed to treat Internet traffic differently based on its source or content, or in return for payment.
Opponents of the FCC's rules, including Verizon Communications Inc., Comcast and their trade associations, must weigh a number of factors in choosing their next legal moves, amid uncertainty about who will occupy the White House next year and when the U.S. Supreme Court will return to full strength.
That uncertainty is a boon to the FCC as it seeks to wrap up multiple other proceedings before the end of the Obama administration, but it also provides some time for broadband providers to determine their next steps in light of the November elections and the high court vacancy after the death of Justice Antonin Scalia.
The D.C. Circuit conducted a thorough analysis and wrote a detailed rebuttal of Internet service provider arguments against the rules in its June 14 decision, multiple sources said.
The court relied heavily upon agency discretion granted the FCC under the 2005 Brand X Supreme Court decision.
“We have concluded that the Commission’s reclassification of broadband service as common carriage is a permissible exercise of its Title II authority,” Judges David S. Tatel and Sri Srinivasan said in their majority opinion. Judge Stephen F. Williams concurred in part and dissented in part.
The D.C. Circuit broadly found that the FCC had satisfied Administrative Procedure Act requirements to provide adequate notice to stakeholders and build a sufficient record to justify its decision to reclassify wireline and wireless broadband Internet access service (BIAS) providers under Title II of the Communications Act of 1934. It also rejected the notion that BIAS providers' First Amendment rights were being infringed, stating that broadband providers serve as a conduit for other entities' speech, rather than their own.
The court said the FCC's rules were consistent with Brand X, which determined that statutory ambiguity entitled the FCC to exercise discretion in making policy decisions to interpret the statute and to change its policy to reflect changing market circumstances, particularly for reclassifying mobile broadband, several sources told Bloomberg BNA.
“There are no 100-page rubber stamps,” Pantelis Michalopoulos, a partner at Steptoe & Johnson LLP who represented several intervenors supporting the rules, told Bloomberg BNA. But, he said, the majority opinion served as such in its searching, well-grounded approach to examining the FCC's reclassification rationale.
FCC Chairman Tom Wheeler hailed the ruling, calling it a win for consumers and innovators. “After a decade of debate and legal battles, today’s ruling affirms the Commission’s ability to enforce the strongest possible Internet protections—both on fixed and mobile networks—that will ensure the Internet remains open, now and in the future,” Wheeler said in a statement.
The court also rejected wireless providers' arguments that the FCC lacked authority to reclassify their services under Title II. The decision dealt a blow to wireless industry trade group CTIA—The Wireless Association and member company AT&T Inc., which specifically sought to overturn that aspect of the FCC's rules.
The court found that a different regulatory treatment for wireline-based Wi-Fi and mobile wireless networks would be “counterintuitive” when consumer devices are able to transfer seamlessly between the two.
The across-the-board win for the FCC came as a particular surprise in the area of interconnection, Paul Werner, a partner at Sheppard, Mullin, Richter & Hampton LLP, told Bloomberg BNA.
Many observers thought that the FCC wouldn't prevail in extending its regulatory authority under Title II to settle interconnection disputes between BIAS providers and backbone networks or edge providers.
The court's opinion upholding that authority underscores the consumer perception of BIAS providers as a conduit to access third-party apps and services—the linchpin of reclassification—Robert M. Cooper, a partner at Boies Schiller & Flexner LLP, told Bloomberg BNA.
Cooper noted that interconnection issues between ISPs and other parties served as the original impetus for the FCC's efforts to create net neutrality rules. “Without interconnection, there is no Internet access,” said Cooper, who represented Cogent Communications Inc. in supporting the rules.
While the FCC's victory in the decision provides the agency with solid legal footing to proceed with its related proposal for broadband privacy rules, sources said the agency was still likely to proceed carefully and build a detailed record to support its policy decisions.
“It's not like they get a greenlight to go hog wild on anything,” said Harold Feld, senior vice president of intervenor Public Knowledge. The FCC is broadly expected to conclude that rulemaking by the end of the year.
TechFreedom, a free market think tank and an intervenor opposing the rules, said Williams's dissent would serve as a road map in its effort to appeal the decision to either the full D.C. Circuit or the Supreme Court.
Seeking en banc review within 45 days of the June 14 decision would grant additional time to net neutrality opponents to appeal the case to the Supreme Court, if necessary, TechFreedom President Berin Szoka said. Having more Republicans from among the 11-member circuit court hear the case could play in opponents' favor, requiring only a single Democrat to vote in favor of petitions to gain a 6-5 decision, Szoka noted.
Even if the full D.C. Circuit declines to hear the appeal, the process would allow petitioners three months after the initial 45 days to seek certiorari from the Supreme Court.
If the high court accepts the case, it would likely be well into 2017 before a decision could be rendered, probably after the Supreme Court would be restored to a full nine-member panel.
University of Pennsylvania Professor and Internet law authority Christopher Yoo sees the D.C. Circuit’s decision as being “a pretty expansive ruling and a surprisingly strong endorsement of the FCC’s order.” But in the absence of conflicting rulings from other courts, Yoo says that the Supreme Court is unlikely to hear the case.
As a result, he says, while AT&T said it expects the issue to go before the Supreme Court and plans to take part in that appeal, Yoo expects the important legal battles to focus on defining terms in the commission’s Open Internet Order, rather than overturning the ruling.
While opponents of the FCC rules weigh their options, supporters said that the decade-long dispute over net neutrality had been put to bed by the court.
“The court is clearly conscious of the fact that people will appeal to the Supreme Court. That's one of the reasons why the opinion is so thorough,” Feld told Bloomberg BNA.
But while the net neutrality decision may be important for stakeholders in the telecommunications community, it likely won't rank high enough as a novel legal issue for the Supreme Court to grant certiorari, Feld said. “In terms of legal issues raised it’s a fairly run of the mill agency discretion case,” he added.
[With assistance from Tim McElgunn.]
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Text of the D.C. Circuit opinion is at http://src.bna.com/fSF.
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