Net Neutrality Rollback No Slam Dunk for GOP

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By Kyle Daly

The Federal Communications Commission’s net neutrality rules are widely seen as an early casualty of the Republican drive to scrap or scale back a raft of Obama administration policies.

But when it comes to the regulations barring broadband providers such as AT&T Inc. and Comcast Corp. from blocking or throttling data traffic, Democrats have reasons to be optimistic.

GOP FCC Chairman Ajit Pai has jump-started the process of rewriting the rules, amid opposition from Democrats and tech giants, including Alphabet Inc.'s Google and Facebook Inc. Republican lawmakers are hoping Democrats will start negotiating on legislation to write new rules soon. But Republicans are confronting a series of hurdles in all three branches of the federal government.

At stake are the rules of the road for internet service providers (ISPs) and the technology companies, including Netflix Inc. and Amazon.com Inc., that sell services on the providers’ networks. Lighter-touch rules, proponents say, could drive billions in new network investments. They say the current rules have chilled investment in broadband as the industry works to ensure any new broadband offering or network technology doesn’t violate the rules. Supporters of the existing regime dispute the claims of decreased investment and say any increased ISP flexibility under new rules would come at the expense of everyone else in the internet ecosystem, as ISPs may look to charge for traffic quality and priority.

It’s unclear whether Pai can secure an FCC majority for a rules rewrite. If he does, the commission’s move is virtually certain to be challenged in the U.S. Court of Appeals for the District of Columbia Circuit. That court upheld the current rules last June. A new case may drag on for months, and likely would not be resolved before the 2018 mid-term elections.

Republicans on Capitol Hill want to end the regulatory uncertainty by writing lighter-touch net neutrality rules into law. But the status quo favors the Democrats, who can still block legislation not to their liking in the Senate. And it’s too early to predict which party will control the House and Senate after the mid-term balloting.

“There was a very long process under the Obama administration for the FCC to arrive where they did in 2015 and get a final decision from the D.C. Circuit that they did have that authority,” said Evan Franke, an administrative law professor at George Washington University. “It seems we’re starting the cycle again under the new administration.”

Pai is working on a plan to end the FCC’s classification of broadband as a common-carrier service under communications law and re-examine the 2015 net neutrality rules issued with that regulatory underpinning. Those rules include bans on broadband providers blocking, slowing or creating paid “fast lanes” for internet traffic on its way to consumers. The agency could finalize its plan to rethink those rules and classification and vote on it as soon as this fall.

The FCC’s effort to unwind Obama-era net neutrality regulations is part of a complex dance involving all three branches of government. Pai has to land on an approach that satisfies his own desire for lighter regulation of ISPs’ network practices. But that approach also must be on strong enough legal footing to withstand an inevitable challenge, and it will likely be caught up in court no matter what, potentially for years.

Some Republicans hope the uncertainty alone will spur reluctant Democratic lawmakers to come to the table on legislation that would settle U.S. net neutrality policy for good. But Democrats, who have filibuster power in the Senate to block any bill they don’t like, are likely to wait for the FCC and courts to finish the lengthy rulemaking and challenge processes before even thinking about writing a bill.

Pai might aim simply to reverse the common-carrier classification and make changes to rules he’s criticized, such as a general conduct standard that bans unreasonable activities among ISPs but doesn’t explicitly say what the FCC considers unreasonable. Or he could try to kill the rules in their entirety—and even try to argue the FCC has no authority to make net neutrality rules to begin with.

O’Rielly on the Fence

It’s not yet clear just how far Pai hopes to go. But it’s also unclear whether Pai’s fellow Republican commissioner, Michael O’Rielly, will back a particular approach. O’Rielly told reporters after the FCC voted May 18 to launch the rollback process that not only does he not believe the FCC had the authority to classify broadband providers as common carriers in 2015, he’s not sure the agency has authority to make net neutrality rules at all.

“It may get back to” net neutrality being “an issue for Congress to decide,” O’Rielly said. “There are many areas I’ve said over the past where I may or may not want to, or would personally be interested in, taking action, but the statute doesn’t allow us to do so.”

Two telecom industry sources told Bloomberg BNA on background they believe O’Rielly likely can be swayed from concluding that the FCC has no authority in net neutrality. But whatever the Republican majority ends up doing, it will almost certainly be subject to a drawn-out court challenge from tech companies, public-interest groups and others opposed to relaxing net neutrality regulations.

Court Ruling Weighs on FCC Process

The D.C. Circuit dealt Republicans and ISPs a blow last year when it affirmed the FCC’s current ISP classification and net neutrality rules against an ISP-led challenge. The full bench stood by that panel ruling earlier this month, denying a request to rehear the case ( U.S. Telecom Ass’n v. FCC , D.C. Cir., 15-01063, en banc denied 5/1/17 ).

That leaves Pai trying to undo a construct that the D.C. Circuit has already blessed. The FCC can’t just say it believes it lacks any net neutrality authority without another decision contradicting the D.C. Circuit, telecom and administrative law attorneys told Bloomberg BNA. Telecom attorneys and other stakeholders see the U.S. Supreme Court as highly unlikely to review the case now.

The D.C. Circuit decision is “the law of the land. Policy makers don’t have the luxury to make decisions based on how they believe a court should have ruled,” said Kevin Werbach, who teaches internet policy at the University of Pennsylvania’s Wharton School and supports the existing rules.

Capitol Hill Eyes Uncertainty

A Democratic House Energy and Commerce Committee aide told Bloomberg BNA that congressional Democrats plan to wait for the court battle to be resolved before contemplating legislation. Rep. Frank Pallone (D-N.J.), ranking member of that panel, has said he doesn’t believe Republicans will negotiate a net neutrality bill in good faith and sees no reason to work on one now. His Senate counterpart, Sen. Bill Nelson (D-Fla.), ranking member of the Senate Commerce, Transportation and Science Committee, has said he doesn’t believe the climate is right for a net neutrality bill.

“There’s got to be a window where it’s at least possible” to arrive at bipartisan legislation “because the election is far enough away and there’s enough incentive to try to do something to illustrate that it’s possible,” said Geoffrey Manne, executive director of the International Center for Law and Economics and an opponent of the current rules. “But it’s kind of unlikely.”

Senate Democrats likely could muster enough votes to sustain a filibuster of any bill they think waters down net neutrality rules. Senate Minority Leader Charles E. Schumer (D-N.Y.) issued a statement in late April saying congressional Democrats would not “tolerate the FCC conspiring with industry insiders to roll back critical consumer protections for an open Internet. We will fight it tooth and nail.”

The earliest the FCC could possibly conclude its rulemaking would be late September, when it holds its first open meeting after the public comment period closes. Then opponents will have to wait for the final order to be published in the Federal Register before suing to get it overturned. Such a challenge would almost certainly be tied up in court for a while. It would likely be 2019, at the earliest, before it’s clear if Pai’s action on net neutrality survives judicial review. If it’s even later, Democrats may have incentive to wait and see how the 2020 presidential and congressional elections shake out before working on a net neutrality bill.

Pai has long criticized the existing regime for introducing uncertainty into the broadband industry. The administrative, judicial and congressional hurdles that lie ahead all but guarantee that uncertainty will continue.

To contact the reporter on this story: Kyle Daly in Washington at kdaly@bna.com

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

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