Why Waxman’s FCC Internet Utility Regulation Plan Would Be Unlawful

 

Rep. Henry Waxman, Ranking Member of the House Energy and Commerce Committee, wrote the FCC to propose that the FCC, in its pending Open Internet order remand, “reclassif[y] broadband providers as telecommunications services and then using the modern [Title I] authority of section 706 to set bright-line rules to prevent blocking, throttling, and paid prioritization.”

In response to an FCC request for comment on whether the FCC should continue to regulate broadband under its Title I Section 706 broadband authority (as the D.C. Appeals Court Verizon v. FCC decision suggested), or should reclassify the Internet under Title II common carrier utility regulation, Rep. Waxman recommends the FCC try and use both Title I and Title II, and in such a way as to achieve more restrictive regulatory outcomes than either Title I or Title II would allow separately.  

This is no “hybrid approach.” It’s a call for FCC double-regulation of the Internet using both Title I and Title II.

This is also no compromise. Effectively it would be the most extreme, maximal regulation yet proposed to the FCC because it would outlaw previously-legal, commercially-reasonable behavior under either Title I or Title II of the Communication Act, while creating maximal regulatory uncertainty and risk. 

Why would Rep. Waxman’s FCC Internet utility regulation be found unlawful ultimately?

First, the fatally-flawed tent-pole assumption here, on which this entire contrivance depends, is that the FCC can somehow deem previously mutually-exclusive services under precedent and the law to now be inclusive, i.e. a service that can be both a largely unregulated Title I information service and also a heavily-regulated Title II telecommunications service -- at exactly the same time.

Congress created mutually-exclusive definitions for information services and telecommunications services in the 1996 Telecom Act.

The Supreme Court’s Brand X opinion effectively affirmed those mutually-exclusive definitions in 2004.

And the FCC has nine precedents over the last 44 years that decided that basic and enhanced services, or telecommunications and information services, were mutually-exclusive service classifications: 1970, 1980, 1986, 1998, 1998, 2002, 2004,  2005,  2007. 

Chevron Deference is no rescue here, because while the overall Telecom Act may be ambiguous granting the FCC wide interpretive latitude, there is no ambiguity that telecommunications and information services have always been ruled different mutually-exclusive services.  

Second, Congress did not grant the FCC statutory authority to unilaterally combine heretofore mutually-exclusive, congressionally-defined, regulatory classifications, let alone for the purpose of imposing more restrictive regulation than Congress imposed in either Title I or Title II authority, or for the purposes of regulating competitive providers in the 21^st century more restrictively than Congress and the FCC regulated the telephone monopoly in the 20^th century.

This proposal contrives to impose and then forbear from Title II Section 202, which prohibits “unjust and unreasonable discrimination,” so that it can replace it with even more restrictive Title I regulation that would outlaw any discrimination at all, even if it was just and reasonable discrimination, or “commercially reasonable” discrimination, which have long been legal under Title II. Many court precedents have affirmed providers’ freedom to engage in just and reasonable discrimination.  

Third, there is nothing in Section 706 that authorizes the FCC to essentially broadly-legislate regulatory restrictions in excess of common carriage obligations under Title II, that are designed in effect, to be economic regulations that create permanent implicit multi-billion dollar subsidies via a permanent zero-price for Silicon Valley sender or downstream traffic.

This is no trivial or technical matter, because the effect of this proposal would be to create a massive national economic subsidy scheme. The FCC would have to force consumers to subsidize Silicon Valley commercial interests and profitability by forcing consumers to pay the full cost of upgrading the Internet’s infrastructure with no fair share contribution from Silicon Valley.   

Simply, the D.C. Circuit Court of Appeals ruled that the FCC does not have the authority to ban a two-sided market under its Title I Section 706 authority because that would be tantamount to illegal common carrier regulation of an information services provider, and under Title II the FCC does not have the authority to ban “just and reasonable discrimination” which is what the Waxman proposal is asking for. 

More simply, how can combining mutually-exclusive regulations that both individually do not legally allow what the Waxman proposal seeks to achieve, somehow allow it when combined in an obviously contrived, and extremely restrictive, way never envisioned by Congress? 

Conclusion

The D.C. Court of Appeals has twice overturned FCC overreach in broadband regulation in Comcast v. FCC in 2010 and in Verizon v. FCC in 2014.

In Verizon v. FCC, Judge Tatel outlined a roadmap for the FCC to successfully assert general regulatory authority to cover most, but not all of the FCC’s regulatory needs and concerns. The FCC’s NPRM wisely proposes to follow the Court’s advice. It should follow through with that common sense approach.

However, if the FCC somehow were to adopt the Waxman double-regulation of the Internet approach, there is a high likelihood the courts would eventually overturn the FCC -- yet again.

It isn’t a close call.

Implementing the Waxman proposal would be a unilateral de facto FCC Communications Act Update by the FCC – sans Congress.

Lastly, the Waxman proposal is also completely unnecessary, unwarranted, and unjustified double-regulation of competitive broadband providers of critical Internet infrastructure that well serve consumers, businesses, and the economy, and that need commercially-reasonable, regulatory certainty and flexibility to keep up with exploding demand for Internet capacity.

 

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FCC Open Internet Order Series

 

Part 1: The Many Vulnerabilities of an Open Internet [9-24-09]

Part 2: Why FCC proposed net neutrality regs unconstitutional, NPR Online Op-ed [9-24-09]

Part 3: Takeaways from FCC's Proposed Open Internet Regs [10-22-09]

Part 4: How FCC Regulation Would Change the Internet [10-30-09]

Part 5: Is FCC Declaring 'Open Season' on Internet Freedom? [11-17-09]

Part 6: Critical Gaps in FCC's Proposed Open Internet Regulations [11-30-09]

Part 7: Takeaways from the FCC's Open Internet Further Inquiry [9-2-10]

Part 8: An FCC "Data-Driven" Double Standard? [10-27-10]

Part 9: Election Takeaways for the FCC [11-3-10]

Part 10: Irony of Little Openness in FCC Open Internet Reg-making [11-19-10]

Part 11: FCC Regulating Internet to Prevent Companies from Regulating Internet [11-22-10]

Part 12: Where is the FCC's Legitimacy? [11-22-10]

Part 13: Will FCC Preserve or Change the Internet? [12-17-10]

Part 14: FCC Internet Price Regulation & Micro-management? [12-20-10]

Part 15: FCC Open Internet Decision Take-aways [12-21-10]

Part 16: FCC Defines Broadband Service as "BIAS"-ed [12-22-10]

Part 17: Why FCC's Net Regs Need Administration/Congressional Regulatory Review [1-3-11]

Part 18: Welcome to the FCC-Centric Internet [1-25-11]

Part 19: FCC's Net Regs in Conflict with President's Pledges [1-26-11]

Part 20: Will FCC Respect President's Call for "Least Burdensome" Regulation? [2-3-11]

Part 21: FCC's In Search of Relevance in 706 Report [5-23-11]

Part 22: The FCC's public wireless network blocks lawful Internet traffic [6-13-11]

Part 23: Why FCC Net Neutrality Regs Are So Vulnerable [9-8-11]

Part 24: Why Verizon Wins Appeal of FCC's Net Regs [9-30-11]

Part 25: Supreme Court likely to leash FCC to the law [10-10-12]

Part 26: What Court Data Roaming Decision Means for FCC Open Internet Order [12-4-12]

Part 27: Oops! Crawford's Model Broadband Nation, Korea, Opposes Net Neutrality [2-26-13]

Part 28: Little Impact on FCC Open Internet Order from SCOTUS Chevron Decision [5-21-13]

Part 29: More Legal Trouble for FCC's Open Internet Order & Net Neutrality [6-2-13]

Part 30: U.S. Competition Beats EU Regulation in Broadband Race [6-21-13]

Part 31: Defending Google Fiber's Reasonable Network Management [7-30-13]

Part 32: Capricious Net Neutrality Charges [8-7-13]

Part 33: Why FCC won't pass Appeals Court's oral exam [9-2-13]

Part 34: 5 BIG Implications from Court Signals on Net Neutrality - A Special Report [9-13-13]

Part 35: Dial-up Rules for the Broadband Age? My Daily Caller Op-ed Rebutting Marvin Ammori's [11-6-13]

Part 36: Nattering Net Neutrality Nonsense Over AT&T's Sponsored Data Offering [1-6-14]

Part 37: Is Net Neutrality Trying to Mutate into an Economic Entitlement? [1-12-14]

Part 38: Why Professor Crawford Has Title II Reclassification All Wrong [1-16-14]

Part 39: Title II Reclassification Would Violate President's Executive Order [1-22-14]

Part 40: The Narrowing Net Neutrality Dispute [2-24-14]

Part 41: FCC’s Open Internet Order Do-over – Key Going Forward Takeaways [3-5-14]

Part 42: Net Neutrality is about Consumer Benefit not Corporate Welfare for Netflix [3-21-14]

Part 43: The Multi-speed Internet is Getting More Faster Speeds [4-28-14]

Part 44: Reality Check on the Electoral Politics of Net Neutrality [5-2-14]

Part 45: The “Aristechracy” Demands Consumers Subsidize Their Net Neutrality Free Lunch [5-8-14]

Part 46: Read AT&T’s Filing that Totally Debunks Title II Reclassification [5-9-14]

Part 47: Statement on FCC Open Internet NPRM [5-15-14]

Part 48: Net Neutrality Rhetoric: “Believe it or not!” [5-16-14]

Part 49: Top Ten Reasons Broadband Internet is not a Public Utility [5-20-14]

Part 50: Top Ten Reasons to Oppose Broadband Utility Regulation [5-28-14]

Part 51: Google’s Title II Broadband Utility Regulation Risks [6-3-14]

Part 52:  Exposing Netflix’ Biggest Net Neutrality Deceptions [6-5-14]

Part 53: Silicon Valley Naïve on Broadband Regulation (3 min video) [6-15-14]

Part 54: FCC’s Netflix Internet Peering Inquiry – Top Ten Questions [6-17-14]

Part 55: Interconnection is Different for Internet than Railroads or Electricity [6-26-14]

Part 56: Top Ten Failures of FCC Title II Utility Regulation [7-7-14]

Part 57: NetCompetition Statement & Comments on FCC Open Internet Order Remand [7-11-14]

Part 58: MD Rules Uber is a Common Carrier – Will FCC Agree? [8-6-14]

Part 59: Internet Peering Doesn’t Need Fixing – NetComp CommActUpdate Submission [8-11-14]

Part 60: Why is Silicon Valley Rebranding/Redefining Net Neutrality?  [9-2-14]

Part 61: the FCC’s Redefinition of Broadband Competition [9-4-14]

Part 62: NetCompetition Comments to FCC Opposing Title II Utility Regulation of Broadband [9-9-14]

Part 63: De-competition De-competition De-competition [9-14-14]

Part 64: The Forgotten Consumer in the Fast Lane Net Neutrality Debate [9-18-14]

Part 65: FTC Implicitly Urges FCC to Not Reclassify Broadband as a Utility [9-23-14] 

Part 66: Evaluating the Title II Rainbow of Proposals for the FCC to Go Nuclear [9-29-14]