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Will FCC Lock-in Net Neutrality Gains in Legislation or Risk All in Court & Ballot Box?

The appellate process will only get tougher for the FCC’s Title II Open Internet Order from here, which means both legal and electoral uncertainty over the permanence of the FCC’s net neutrality authority will only grow as the appellate process plays out and the 2016 Presidential election approaches.

Simply, do the FCC and its congressional supporters essentially cash in and keep their net neutrality gains long term for consumers in bipartisan net neutrality legislation now, or do they double down by waiting and maybe losing it all in either the Supreme Court or the 2016 Presidential election?

From their current position of relative strategic negotiating strength, an operative Open Internet Order empowering the FCC to enforce protection of net neutrality, the FCC and its congressional supporters, need to take stock of their situation and ask themselves if they want to lock-in their bright-line net neutrality protections now and permanently protect consumers against blocking, throttling, and paid prioritization, in bipartisan legislation?

Or do they want to roll both the court and electoral dice that their relative strategic negotiating position will improve from here and risk losing most all their net neutrality gains and authority, in the next 18-24 months to an ultimate court loss in the Supreme Court or to a Republican elected President in 2016, who would likely overturn the Order in 2017?  

If one estimates a ~50% chance of a Republican President, and a ~50% chance that the Supreme Court could overturn the order, that would be a 75% chance that the FCC and its congressional allies could lose all their net neutrality protection gains in the next 18-24 months.

If they somehow judge their odds better at either or both, they would still face a 33-50% cumulative risk of losing all net neutrality gains by not legislating now while the getting is good.    

While the presidential election outcome is anyone’s guess at this stage, the court case on the merits has more clarity.

Why does the appellate process get tougher for FCC Title II Order from here?

The appellate process gets tougher for the FCC’s Open Internet Order from here, because industry petitioners no longer have to overcome the special, very high bar for a stay -- i.e. that the FCC Order causes substantial net irreparable harm and is not in the public interest.

Now they only have to prove that the order exceeds the FCC’s authority, is illegal or unconstitutional, like petitioners successfully did twice previously in overturning the FCC in Comcast v. FCC in 2010 and Verizon v. FCC in 2014.

In denying a stay of the FCC’s Title II reclassification in its Open Internet Order, the D.C. Court of Appeals explained the “petitioners have not satisfied the stringent requirements for a stay pending court review.” However, the court did grant expedited review of the case.

FCC Commissioner Ajit Pai responded in Politico: “The bar for granting any stay is quite high, and I am pleased that the court did not suggest the rules are in fact legally valid.”   

My mistakes in misjudging the likelihood of a stay were first under-appreciating how high the bar was for meeting irreparable harm and the public interest, and second that the profound weaknesses of the FCC’s legal case on the merits would weigh on the court’s balancing of harms.  

As I have written consistently about the merits of this case for the last three months (See PrecursorBlogs: 3-2-15, 3-16-15, 5-4-15, 5-14-15, & 5-27-15), I continue to believe the FCC’s reclassification of broadband under Title II, and the Open Internet Order in general, remains very vulnerable on the merits before the D.C. Circuit’s “merits panel,” and even more vulnerable ultimately when it goes before the Supreme Court.   

Summary of why the appellate process gets tougher for FCC Title II Order from here. 

  1. The rest of the legal process is no longer stacked in favor of the FCC/Government. 

  2. Petitioners’ arguments will no longer be limited to those that fit the stay test factors.

  3. Unlike the non-transparent stay, the FCC can expect an extensive grilling in oral arguments.  

  4. The FCC’s legal mistakes in its Order could imperil its 706 net neutrality authority too.

  5. The Supreme Court is tougher territory for the FCC; it ruled differently on Title II in Brand X.

The rest of the legal process is no longer heavily stacked in the FCC/Government’s favor.

As I have acknowledged before, court stays of government decisions normally are rare (~10%) because there is a strong implicit court due process presumption in stay reviews that the government warrants the-benefit-of-the-doubt that it represents the public interest.

So in addition to proving that the petitioner is likely to prevail on the merits of its appeal, a stay petitioner also has to overcome three more difficult hurdles: show irreparable harm without stay; show others would not be harmed by a stay; and that a stay is in the public interest.

However in a full court case on the merits the petitioner must only prove the FCC Order is illegal, that due process was violated or it is unconstitutional. On the legal merits, the FCC’s legal case remains very vulnerable on appeal as I have explained in detail in PrecursorBlogs: 3-2-15, 3-16-15, 5-4-15, 5-14-15, & 5-27-15.

 

Petitioners’ arguments will no longer be limited to those that fit the stay test factor

The essential need to thread-the-needle of the four-factor test for a stay, is inherently limiting because some valid arguments on the merits may be partially at cross-purposes with one or more of the harms factors in the stay process.

In a case only on the merits, petitioners will be able to present all of their best arguments.

The petitioners’ already exceptionally strong filing on the merits in the stay will get stronger because it won’t have to waste precious page space on the harms analysis and it won’t be limited to the more difficult stay construct.

No one should be surprised when industry petitioners also assert that the FCC’s classification of the Internet as a Title II common carrier violates their Constitutional First and Fifth Amendment rights.

To appreciate the very strong Constitutional reinforcements the industry will enjoy in their case on the merits, consider for example, Fred Campbell’s analysis: “FCC's Open Internet Order Won't Stand Up To The First Amendment;” and Verizon’s Title II White Paper submitted to the FCC entitled: “Title II Reclassification and Variations on that Theme: a Legal Analysis.”

Importantly, the FCC is due no administrative Chevron deference on its interpretation of the Constitution.

Unlike the non-transparent stay, the FCC can expect an extensive grilling in oral arguments.

Given the tough grilling the FCC endured in the relevant FCC predecessor cases, Comcast v. FCC in 2010 and Verizon v. FCC in 2014, one can expect the FCC to face a very skeptical grilling in oral arguments before the court, that will likely confirm publicly to the media covering the case that the court believes the FCC has misread the law and Supreme Court precedent again, resulting in the FCC exceeding its statutory authority – for a third time.

The lack of oral arguments in a stay proceeding, combined with the lack of detailed explanation of the court’s thinking and legal analysis, can make a stay decision a poor indicator for how the case on merits will go.

The FCC’s legal mistakes in its Open Internet Order could imperil its 706 net neutrality authority.

The FCC in its stay opposition brief, effectively put its section 706 fallback authority for net neutrality at greater legal risk by unwisely admitting that the FCC does not think that their net neutrality rules can survive under section 706 authority, if the court rules its Title II reclassification illegal.

On page 3 of the FCC’s stay opposition brief the FCC said: “Petitioners’ stay motion is not what it seems. It asks the Court to halt the application of Title II of the Communications Act to broadband, while allowing three bright-line rules to go into effect. But those bright-line rules are precisely the kind of regulation this Court held could not be applied until and unless broadband was reclassified as a “telecommunications service.” See Verizon, 740 F.3d at 650.”

The FCC is playing a very high risk game with the D.C. Appeals Court on the record by implying that it would be the court’s fault if the net neutrality rules were found illegal, not the FCC’s fault, when it was the FCC that recklessly did not follow the Verizon court’s clear section 706 roadmap to net neutrality legality.

This portends that the FCC’s Open Internet Order may be inappropriately, too-heavily-reliant on Verizon v. FCC, which is a much more of a section 706 relevant precedent than a straight Title II classification relevant precedent, like the Supreme Court’s Brand X decision, which was solely focused on FCC classification.  

Importantly, both the FCC and industry did not brief the Verizon court about the legality of reclassifying broadband as a Title II service, after the FCC repeatedly found the detailed facts and law warranted an information services classification. That’s because the FCC primarily asserted 706 authorities and did not assert Title II common carrier authority to promulgate its 2010 net neutrality rules.

To this court, reclassifying broadband as a telecommunications service, after a decade of being legally classified as an information service, is a new legal and constitutional question that Verizon v. FCC did not rule on.

Why the FCC may find the D.C. Appeals Court a tough panel is that the FCC’s Open Internet Order effectively and incorrectly argues that Verizon v. FCC is a major Title II, classification-relevant precedent, when it is a really a very different section 706-briefed, net neutrality precedent. 

The Supreme Court is tougher territory for the FCC; it ruled on this Title II issue in Brand X.

While the FCC may imagine they are only asking for deference to change their mind, the FCC effectively is asking for a complete do-over of the Supreme Court’s 2005 Brand X decision.

The FCC eventually will be going before the SCOTUS and saying effectively: everything we said to you about broadband service in 2005 in Brand X, and everything we have done legally since with broadband service for the decade before the FCC’s latest Open Internet Order, was totally wrong and now the FCC believes that the same facts and statute that Supreme Court ruled on in Brand X in 2005, can actually be interpreted to mean the exact opposite of what past FCC’s and the Supreme Court concluded was reasonable in Brand X 

And by the way the FCC does not have to give much justification for this 180 degree abrupt whipsaw in core U.S. Internet policy that runs counter to the 1996 Telecom Act, or take into account serious reliance interests on the FCC’s and SCOTUS’ Brand X precedents.

The Supreme Court, including sitting justices who ruled in Brand X, don’t need the FCC to lecture them on what they got totally wrong in their legal analysis underlying their 2005 Brand X decision.

The FCC’s biggest problem with SCOTUS is this.

Initially in deciding cable broadband was an information service, the FCC concluded that a combined service of transmission and computer processing could rightly be ruled only an information service because it fit snugly within the clear intent and policy of the 1996 Telecom Act, and with the Section 230 definition of “interactive computer services,” that specifically included “access to the Internet,” that must remain “unfettered by Federal or State regulation.”

The SCOTUS found that FCC interpretation reasonable in 2005.

In stark contrast, the FCC concluded the opposite in its latest 2015 Open Internet Order that a combined service of transmission and computer processing can be ruled only a telecommunications service. That reinterpretation is problematic because it runs counter to the clear intent and policy of the 1996 Telecom Act, and with the clear Section 230 definition of “interactive computer services” that specifically includes “access to the Internet” that must remain “unfettered by Federal or State regulation.”

Will the SCOTUS find that an opposite conclusion that runs directly counter to the law, and with scant justification or account for reliance interests, is just as reasonable when it rules -- likely in 2016 or 2017?  

And while the SCOTUS will be reviewing whether it is reasonable for the FCC to reinterpret the intent of the 1996 Telecom Act for reclassification, the SCOTUS could also be confronted on appeal with the need to review whether or not the FCC’s reinterpretation of section 706 as direct regulatory authority to regulate the Internet in contravention of section 230, that was upheld in Verizon v. FCC in 2010, is reasonable as well.

The FCC’s section 706 net neutrality authority could also be at risk, in addition to its asserted Title II authority, because the FCC’s latest order added a new net neutrality ban to the 2010 FCC order, that Verizon v. FCC did not address -- i.e. banning paid prioritization.

As a central part of the FCC’s Open Internet Order, the legality of paid prioritization in particular could be at risk in the appellate process. That’s because the FCC’s paid prioritization ban is very similar to what the Verizon Court said the FCC did not have the authority to do under section 706. And remember, the FCC did not follow the Verizon Court’s legal roadmap to make section 706 legal in setting a permanent price of zero for all downstream traffic without reasonable compensation.

Simply, if the appellate process overturns the FCC’s asserted Title II authority, its section 706 authority could fall too.

In sum, the appellate process gets tougher for the FCC from here; and the stakes are higher than most appreciate. That’s because the FCC could emerge from this appellate process with a proverbial strike three and you’re out! -- i.e. no statutory authority for the FCC to enforce net neutrality or regulate the Internet going forward.

Bipartisan congressional legislation is the only path to a permanent net neutrality solution here for consumers, and the clock is ticking.   

 

Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, a research consultancy for Fortune 500 companies, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests.

 

 

 

 

 

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