It’s difficult to predict how an appeals court will rule after it hears arguments Monday in Verizon Communication’s challenge of the U.S. Federal Communications Commission’s net-neutrality rules.
Groups on both sides of the debate over the FCC’s rules prohibiting broadband providers from selectively blocking or slowing traffic say they believe they have a good case at the U.S. Court of Appeals for the District of Columbia Circuit. Reading the court’s tea leaves has become as much of a case of wishful thinking as a predictive science.
On one hand, the same appeals court ruled against the FCC in April 2010, when the agency tried to force Comcast to comply with an Internet policy statement after the cable broadband provider was caught slowing BitTorrent and other bandwidth-hogging applications. The court said then that the FCC lacked “any statutorily mandated responsibility” to enforce network neutrality rules.
The legal situation has changed since then, however. Last December, the same appeals court ruled in favor of the FCC after Verizon Wireless had challenged the agency’s authority to impose data roaming rate rules on mobile carriers. The question over the FCC’s authority to impose data roaming rules is similar to the one raised by Verizon in the net neutrality case, some telecom experts said.
Then, in May, the U.S. Supreme Court ruled, in a case called City of Arlington v. FCC, that a regulatory agency generally be given broad deference when interpreting its own authority when statutory ambiguity exits. That decision could influence the upcoming appeals court decision, some experts said, although others cautioned that the cases have significant differences.
Adding to the difficulty in predicting an outcome: The court has a number of options it could take. It could strike down the FCC’s net neutrality order, it could uphold it, or it could take some type of middle ground. For example, the court could kick back the rules to the FCC by saying the agency may have the authority but hasn’t made its case.
[Related: A brief history of net neutrality at the FCC]
Verizon argues that the FCC doesn’t have authority to regulate an information service, a class of communications that the agency has previously exempted from most regulation. The net neutrality rules are a violation of Verizon’s First Amendment free speech rights and its Fifth Amendment property rights, the company has argued.
The agency has claimed broad authority over broadband using twisted regulatory logic, Verizon’s lawyers wrote in their brief to the appeals court. As with the earlier Comcast case, “the FCC has acted without statutory authority to insert itself into this crucial segment of the American economy, while failing to show any factual need to do so,” Verizon said in the court brief.
That earlier Comcast decision from the same court presents a major “hurdle” for the FCC, said Randolph May, president of the Free State Foundation, a free market think tank that has joined a brief calling for the court to overturn the rules. Although the FCC, in its 2011 net neutrality order, “made an effort to beef up its argument that it possesses authority under the Communications Act to regulate Internet access service, I think the overall impression is that the agency is reaching too far,” May said by email.
May would lean toward the FCC losing the case, he said. The court will look at whether the FCC’s net neutrality rules were reasonable, May said, and many critics have argued the regulations were unnecessary because there have been few examples of violations.
“Even if the court finds that the FCC possesses authority under the statute, there is a pretty good chance the court will find, in light of the lack of persuasive findings concerning market failure, consumer harm, or impact on investment and innovation, that the agency’s decision is arbitrary and capricious,” May said.
The Free State Foundation, free market think tank TechFreedom and other critics of the net neutrality rules argue in their brief that the U.S. government could police major violations of net neutrality principles under existing antitrust law.
If the appeals court strikes down the rules, “net neutrality will be dealt with the same way concerns about competition are dealt with throughout the rest of the economy,” Berin Szoka, president of TechFreedom, said by email.
The TechFreedom/Free State Foundation brief also repeats concerns that the rules violate broadband providers’ free speech rights. “By denying Internet service providers their editorial discretion and by compelling them to convey content providers’ messages with which they may disagree, the Order violates broadband providers’ First Amendment rights,” the brief says.
The First Amendment and Fifth Amendment concerns are “silly,” countered Matt Wood, policy director at Free Press, a digital rights group that has pushed for strong net neutrality rules. The FCC hasn’t taken away Verizon’s ability to communicate on its website or its blogs, and the agency hasn’t taken away the carrier’s network, he said.
Verizon’s argument that its free speech is impacted when it provides the pipes for other people’s messages is “contrary to the notion to what a carrier does and how the Internet works,” he said.
Verizon, during other debates, has argued it should not be held responsible for the communications of its broadband customers, says the Center for Democracy and Technology and a group of legal scholars in their brief to the appeals court.
The FCC’s order does not violate Verizon’s free speech rights, but “instead protects the First Amendment interests of Internet users,” CDT says in the brief. “Certainly, Verizon often does speak via the Internet, using websites, blogs, email, social media, and the like. But its separate conduct in transmitting the speech of others should not be confused with Verizon’s own speech.”
Still, the FCC’s argument that it has so-called ancillary authority to regulate broadband because it has authority over other communications services may be a tough sell, Wood said. The appeals court rejected the ancillary authority in the 2010 Comcast case, he noted.
The Supreme Court’s City of Arlington case and the data roaming case give the FCC a “mini-winning streak,” however, Wood said. He gives the FCC a “close to 50 percent chance” of winning the Verizon case.
The FCC has a good chance of winning, countered Michael Weinberg, a vice president at digital rights group Public Knowledge. The agency is “basically right” in arguing it has the authority to regulate broadband under the Communications Act, he said.
The agency had potential court challenges in mind when it drafted the net neutrality order, Weinberg said. “The FCC was thoughtful about this,” he said.