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Court Vacates Most of FCC Open Internet Order

Leaves Disclosure Requirements Intact and upholds FCC authority to regulate broadband 1/14/2014 10:26 AM Eastern

The U.S. Court of Appeals for the District of Columbia has vacated much of the FCC's Open Internet order and remanded it back to the FCC.

"[A]lthough we reject Verizon’schallenge to the Open Internet Order’s disclosure rules, we vacate both the anti-discrimination and the anti-blocking rules. The agency’s decision is so deficient as to raise serious doubts whether the agency can adequately justify its decision at all," said the court. "We remand the case to the Commission for further proceedings consistent with this opinion."

The court said the FCC has the authority to "promulgate rules governing broadband providers’ treatment of Internet traffic," and says that its "justification for the specific rules at issue here—that they will preserve and facilitate the “virtuous circle” of innovation that has driven the explosive growth of the Internet—is reasonable and supported by substantial evidence."

But it concluded that because the FCC has not classified ISPs as common carriers, it cannot regulate them as though they were.

'[E]ven though the Commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates. Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such," the court said. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order."

The unanimous decision, by the same panel that threw out the FCC's Bittorrent finding against Comcast for violations of its then net neutrality guidelines, included one partial dissent, but that was by a judge--Laurence Silberman--who thought the FCC had even less ground to stand on.

"I disagree with the majority’s conclusion that [the law] provides the FCC with affirmative statutory authority to
promulgate these rules. I also think the Commission’s reasoning violates the Administrative Procedure Act," he wrote. "These differences are important since the majority opinion suggests possible regulatory modifications that might circumvent the prohibition against common carrier treatment."

Cable operators and Verizon both recognzied that the decision was something of a double-edged sword, knocking out the FCC's rules but confirming its ability to craft others.

“Today’s historic Court decision means that the FCC has been granted jurisdiction over the Internet," said National Cable & Telecommunications Association President Michael Powell. "While we fully expect some to rush to judgment about the fate of the open Internet, we should remember neither the adoption of the Open Internet Order, nor its partial repeal, has led or will lead to significant changes in how ISPs manage their networks.”

Verizon echoed that read on the authority portion of the decision. "The court rejected Verizon’s position that Congress did not give the Federal Communications Commission jurisdiction over broadband access," the company said. But both Verizon and NCTA were assuring the FCC and Congress that the decision would not change consumers ability to access an open Internet.

The FCC can appeal the decision to the full court or make changes on remand. FCC Chairman Tom Wheeler was keeping his options open.

“The D.C. Circuit has correctly held that ‘Section 706 . . . vests [the Commission] with affirmative authority to enact measures encouraging the deployment of broadband infrastructure’ and therefore may ‘promulgate rules governing broadband providers’ treatment of Internet traffic," the chairman said in a statement. "I am committed to maintaining our networks as engines for economic growth, test beds for innovative services and products, and channels for all forms of speech protected by the First Amendment.  We will consider all available options, including those for appeal, to ensure that these networks on which the Internet depends continue to provide a free and open platform for innovation and expression, and operate in the interest of all Americans.”

Cable operators had not challenged the order, and were even part of a negotiation with then FCC Chairman Julius Genachowski on the compromise regulations, though that was primarily as a way to avoid the so-called "nuclear option" of classifying Internet access under common carrier regs that would mandate nondiscriminatory access.

Following Verizon's oral argument in the court last September (MetroPCS also sued, but dropped its suit last May after it was bought by T-Mobile), the National Cable & Telecommunications Association said that whatever happens to the FCC's regs, cable operators will keep providing fast Internet and will not block access to lawful content, applications and services.

Court watchers had been giving fairly long odds that the FCC's rules would remain entirely intact, but NCTA said that even without those rules, "broadband providers would retain a strong incentive to ensure that consumers have the high-speed connections they need to access these offerings." And if there are bad actors, the Justice Department and Federal Trade Commission have the authority to police them. "Thus, even if the FCC loses today’s case and its rules are overturned, one thing that will not change is consumers’ access to an open, growing and vibrant Internet," said NCTA at the time. (http://www.broadcastingcable.com/news/washington/ncta-we-wont-block-court-decision-fccs-open-internet-order/123677).

Rep. Marsha Blackburn (R- Tenn.) advised the Federal Trade Commission last month that the decision out of the D.C. Circuit could boost its profile on the Hill. At an FTC oversight hearing in the House Commerce, Manufacturing & Trade Subcommittee, Blackburn told the commissioners in attendance that if the court threw out or remanded the FCC's Open Internet order, the FTC could become the de facto arbiter of network neutrality, saying that would "dramatically increase" attention on the agency.

Look for Free Press to push the FCC to classify Inernet access as a Title II service, and look for House Republicans to argue the opposite. 

“New FCC Chairman Tom Wheeler recently stated that the FCC must have the ability to protect broadband users and preserve the Internet’s fundamental open architecture," said Free Press President Craig Aaron in a statement, "In order to do that, he must act quickly to restore reassert the FCC’s clear authority over our nation’s communications infrastructure. The agency must follow its statutory mandate to make broadband communications networks open, accessible, reliable and affordable for everyone."

If the FCC were to try to classify Internet access service under title II common carrier regs, it would be a "major disruption in the relationship between Congress and the FCC," House Communications Subcommittee Greg Walden (R-Ore.) warned last year. "I hope they would not proceed down that path."

Rep. Anna Eshoo (D-Calif.), ranking member of the subcommittee (she represents Silicon Valley), said that if the court were to overturn the rules, she would be ready with a bill "clarifying" that the FCC had authority to enforce an open Internet.

Current FCC Chairman Tom Wheeler has made it clear he believes it is imperative that the FCC have the authority to maintain and open and accessible Internet. In a speech last week in Silicon Valley, Wheeler said it was the government's role to intervene when necessary to insure openness and access to networks, wired and wireless.

"No one in the Valley needs to be convinced of the importance for innovation and overall societal welfare of our broadband networks," he said. "Keeping them open for any and all lawful uses is a major policy imperative."

In the challenge, launched in January 2011, wireless companies Verizon and MetroPCS argude that the FCC's Dec. 21, 2010, order exceeded its authority, was arbitrary and capricious and an abuse of its discretion, and was unconstitutional as well.

The FCC's rules prevent Internet service providers from discriminating against content and applications, subject to reasonable network management. The FCC said it would enforce them on a case-by-case basis via a fast-track complaint process.

They were billed by the FCC majority -- the rules were approved on a straight party-line vote -- as a way to provide increased certainty to broadband users that networks will not be able to interfere with their traffic. The FCC was basing its legal authority on various congressional directives to deploy broadband and ensure competition, including competition with the broadcasters and other competitors whose online content delivery could potentially be discriminated against.

September