Telecommunications Law - Internet Regulation - D.C. Circuit Holds That Federal Communications Commission Violated Communications Act in Adopting Open Internet Rules

Harvard Law Review, June 2014 | Go to article overview

Telecommunications Law - Internet Regulation - D.C. Circuit Holds That Federal Communications Commission Violated Communications Act in Adopting Open Internet Rules


TELECOMMUNICATIONS LAW--INTERNET REGULATION--D.C. CIRCUIT HOLDS THAT FEDERAL COMMUNICATIONS COMMISSION VIOLATED COMMUNICATIONS ACT IN ADOPTING OPEN INTERNET RULES.--Verizon v. FCC, 740 F.3d 623 (D.C. Cir 2014).

In December 2010, after several years of watching from the sidelines, the Federal Communications Commission (FCC) entered the "Open Internet" or "net neutrality" debate over whether high-speed Internet providers (broadband providers) should be required to transmit all lawful Internet traffic to consumers indiscriminately, without regard for the source or type of traffic or for the device or person receiving it. The FCC sided with Open Internet proponents, adopting the order Preserving the Open Internet (1) ("Open Internet Order" or "the Order"), which prohibited broadband providers from engaging in Internet traffic blocking and discrimination. In January 2014, the D.C. Circuit struck down the antiblocking and antidiscrimination rules in Verizon v. FCC. (2) The court held that the FCC had the statutory authority to enact the rules, but that the agency had unreasonably interpreted sections of the Communications Act (3) and had regulated broadband providers as "common carriers" despite declining to classify them as such, in violation of that statute. (4) While the immediate result was a loss for the FCC, the court's holding on the agency's statutory authority charts a path for the FCC to follow in drafting new Open Internet rules that could withstand judicial review. The history of common-carrier regulation, the deference owed to agencies' interpretations of their authorizing statutes, and Supreme Court precedent all suggest that the FCC could adopt a reasonable interpretation of the Communications Act that would permit new Open Internet rules.

On December 21, 2010, the FCC adopted the order titled Preserving the Open Internet, codifying three rules (Open Internet Rules). (5) The first rule mandated transparency, requiring that all broadband providers "disclose ... commercial terms of [their] broadband Internet access services." (6) The second rule prevented fixed broadband providers (7) from blocking any "lawful content, applications, services, or non-harmful devices, subject to reasonable network management." (8) The third rule addressed discrimination and prohibited fixed broadband providers from "unreasonably discriminating] in transmitting lawful network traffic," with the caveat that reasonable network management would not "constitute unreasonable discrimination." (9)

The "antiblocking" and "antidiscrimination" rules were intended to prevent broadband providers from limiting or degrading consumer access to certain "edge provider" traffic--that is, providers of "content, services, and applications," such as Amazon, Apple, Google, Hulu, and Netflix. (10) The Open Internet Order expressed concern that broadband providers had previously restricted consumer access to certain edge-provider traffic, such as Voice over Internet Protocol services like Skype or Google Talk, which permit telephone calls over the Internet and compete with telephony services offered by broadband providers. (11) The FCC also intended to prevent broadband providers from collecting certain fees from edge providers, which the FCC believed broadband providers might demand in exchange for assurances that they would permit consumers to continue accessing the edge-provider content. (12) The FCC's stated overall goal for the Order was to preserve the Internet as "an open platform for innovation ... and free expression," (13) and to encourage the "reasonable and timely" deployment of Internet access to all Americans, a statutory duty of the FcC. (14)

On September 30, 2011, Verizon filed a petition for review pursuant to 47 U.S.C. [section] 402 directly with the United States Court of Appeals for the D.C. Circuit, challenging all three rules adopted in the Open Internet Order. (15) Verizon challenged the Order on five independent grounds: it argued that the FCC lacked the statutory authority to promulgate the rules under the FCC's authorizing statutes, the Communications Act of 1934, (16) and the Telecommunications Act of 1996; (17) that the rules were unlawfully arbitrary and capricious; that the rules violated Communications Act sections 153(51) and 332(c) (2), which prohibit the FCC from regulating broadband providers as "common carriers" in contrast to how various other telecommunications providers are regulated by the Act; (18) that the rules violated Verizon's First Amendment rights; and that the rules constituted an uncompensated taking that violated Verizon's Fifth Amendment rights. …

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