DC Court of Appeals struck down several FCC’s net neutrality provisions

imagesOn January 14, 2014, the U.S. Court of Appeals for the District of Columbia Circuit partially vacated Federal Communications Commission (FCC)’s rules imposing net neutrality obligations on broadband providers, while still affirming the Agency’s jurisdiction to promote broadband infrastructure investment and competition in an “open Internet”.

A little background.

There are four major participants in the Internet marketplace: backbone networks (long-haul fiber-optic links and high-speed routers capable of transmitting vast amounts of data); Internet users (who connect to these networks through local access providers like Verizon); edge providers (who, like Amazon or Google, provide content over the Internet); and end users (who consume edge providers’ content).

Net neutrality proponents worry about the relationship between broadband providers and edge providers. They want to make sure that broadband providers do not prevent end-user subscribers from accessing certain edge providers, for example by limiting subscribers’ access to a specific news website in order to spike traffic to their own news website.

To this regard, the Court was confronted – for the second time in two years – with FCC’s effort “to compel broadband providers to treat all Internet traffic the same regardless of source” and to require “net neutrality”.

The first time was in Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010). There, the Court held that the FCC “failed to demonstrate that it possessed authority to regulate broadband providers’ network management practices”. The Agency had no “statutory authority that would justify its order compelling a broadband provider to adhere to open network management practices”.

After Comcast, the FCC issued the order challenged here by Verizon — In re Preserving the Open Internet, 25 F.C.C.R. 17905 (2010) (“the Open Internet Order”) — which imposes on fixed and mobile broadband providers (i) a transparency requirement to disclosure information regarding commercial terms of their broadband Internet access; and (ii) an anti-blocking requirement, which prohibits them from blocking lawful content. Finally, the order imposed an anti-discrimination requirement on fixed broadband providers to guarantee an open Internet. Under this rule, such providers “shall not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service”.

As authority for the adoption of these rules, the FCC relied on section 706 of the Telecommunications Act of 1996, which gives it “affirmative authority to enact measures encouraging the deployment of broadband infrastructure”.

Verizon filed a petition for review of the Open Internet Order challenging it on several grounds, “including that the Commission lacked affirmative statutory authority to promulgate the rules, that its decision to impose the rules was arbitrary and capricious, and that the rules contravene statutory provisions prohibiting the Commission from treating broadband providers as common carriers”.

The Court of Appeals reminded that its task “is not to assess the wisdom of the Open Internet Order regulations, but rather to determine whether the Commission has demonstrated that the regulations fall within the scope of its statutory grant of Authority”. This being clarified, it held that the FCC “reasonably interpreted section 706 to empower it to promulgate rules governing broadband providers’ treatment of Internet traffic, and 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”.

However, despite the finding of adequate jurisdiction, the Court concluded that the FCC may not impose requirements that contravene any express statutory mandates contained in the Communications Act. The FCC violated such requirements by classifying fixed broadband providers as common carriers and regulating them as such. Because the Commission has failed to establish that two of the FCC’s net neutrality rules – specifically, the anti-blocking and the anti-discrimination provisions – do not impose per se common carrier obligations, the Court of Appeals vacated those portions of the Open Internet Order.

 

Verizon v. Federal Communications Commission, ____ F.3d ___ (D.C. Cir. 2014) (“Verizon Net Neutrality Order.”) is available at https://www.cadc.uscourts.gov…

For more information, Francesca Giannoni-Crystal

Follow us on& Like us on