The uncertain legal future of net neutrality

legal future of fcc

Net neutrality won at the FCC, but soon it’ll be headed to court.

Net neutrality advocates are celebrating the Federal Communications Commission’s approval of strong rules designed to protect the open Internet, but the FCC and its opponents in the cable and wireless industries are already preparing for the next step: a legal war.

Last Thursday, the FCC voted 3-2 to reclassify broadband Internet service as a “common carrier” service under Title II of the Communications Act of 1934. The vote enshrines net neutrality, the principle that all online data be treated equally and without throttling or censorship regardless of source, as the law of the land. With greater federal regulation, however, comes brewing anger among landline and wireless Internet service providers (ISPs) that aim to shake the burden of the FCC off their backs.

“It’s now really cold outside, and we’re going to be talking about this issue when it’s really warm outside.”

AT&T, the nation’s second-largest wireless carrier, launched the first salvo on Feb. 16, when the company’s chairman and CEO, Randall Stephenson, told CNBC that “there will be litigation” if the FCC voted to approve Chairman Tom Wheeler’s rules. Verizon, the largest American wireless provider, has called Wheeler’s proposal “unnecessary and counterproductive” but has declined to issue a legal threat. T-Mobile’s chief operating officer recently said that his company was not worried about the new rules. Sprint, alone among the major wireless carriers, has openly endorsed the proposal.

While wireless service providers stake out different positions on Wheeler’s plan, the cable industry has remained unified. The three largest American cable companies have taken Verizon’s approach, issuing disappointed statements but refraining from legal threats.

“We will need to await release of the Order so we—and everyone else—can review completely all of the actions taken,” Comcast Executive Vice President David Cohen wrote on the company’s blog. Cohen did, however, add that legal challenges to the law were “inevitable.”

Time Warner Cable and Cox Communications, the second- and third-largest cable companies, are playing the wait-and-see game along with Comcast.

Bobby Amirshahi, vice president of public relations at Time Warner Cable, declined to comment on his company’s legal plans. “For now, we’re referring news media to the NCTA on this topic,” he told the Daily Dot in an email, referring to the National Cable & Telecommunications Association (NCTA), the powerful industry group that represents the telecom companies.

“Cox will evaluate its options after it has reviewed the FCC’s final net neutrality ruling,” Stephen Boggs, Cox’s director of public affairs, wrote in an email to the Daily Dot.

As the FCC’s deliberations over net neutrality came to a close, Ajit Pai, one of the agency’s two conservative commissioners, observed that Wheeler’s proposal had made litigation a foregone conclusion.

“Litigants are already lawyering up to seek judicial review of these new rules,” Pai said just before the commissioners voted on net neutrality at their Feb. 26 meeting. “Given the Order’s many glaring legal flaws, they will have plenty of fodder.”

The earliest a lawsuit can be filed is 60 days after the new rules are published in the Federal Register, which is when they take effect. Only then will a court consider the issue ripe for intervention. In addition to ripeness, ISPs will also need to demonstrate that they have standing to sue by proving that the new rules are causing them actual, not merely theoretical, harm.

Cable and wireless companies are no doubt hoping that the first result of any lawsuit would be a judge temporarily putting the FCC’s rules on hold while he or she reviewed the case. But in order to request a stay, the industry plaintiffs would have to admit that they wanted to contravene net neutrality principles—something they have strenuously denied wanting to do as the FCC has considered new rules.

“They’ve all said, ‘We never intend to do that,’” FCC Chairman Wheeler said at a press conference immediately following the FCC’s vote. “So they’re going to go into court now and say, ‘No, court, you need to stay this because we intend to block, we intend to throttle, we intend to have fast lanes’? And so I think a stay is a high hurdle.”

For these procedural reasons, ISPs are keeping their powder dry for now, but net neutrality lawsuits are just over the horizon. Interviews with lawyers and professors who specialize in telecommunications law suggest that a legal fight over the FCC’s new rules is both inevitable and likely to last several years.

The crux of the argument

“These things don’t happen overnight,” said Gerard Waldron, a partner at Covington & Burling LLP who has represented tech companies in their push for net neutrality rules. “It’s now really cold outside, and we’re going to be talking about this issue when it’s really warm outside.”

The court that will most likely hear the first legal challenge to the new rules is the U.S. Court of Appeals for the District of Columbia Circuit, often considered the nation’s second most powerful court because of its exclusive jurisdiction over independent federal agencies. Of the court’s 11 active judges, four of them were appointed by President Obama, three by President Clinton, three by President George W. Bush, and one by President George H.W. Bush. The chief judge, Merrick B. Garland, was appointed by Clinton in 1997.

The ISPs could file a joint lawsuit against the FCC, perhaps under the umbrella of the NCTA, or they could file separate lawsuits, which the court could then consolidate. Either way, it is highly likely that the court of appeals in Washington will receive at least one request to hear a challenge to the new rules. Assuming that the company filing the suit can demonstrate ripeness and standing, the court will take up the case and the battle will be joined.

After the court agrees to hear a net neutrality lawsuit, it will first lay out a timeline for the case. It will ask all parties to submit legal briefs, documents that outline the submitter’s position and provide evidence to support that position. The process of drafting, submitting, and reviewing these briefs will take many months.

“The way that the process unfolds, it’s measured in, if not months, quarters of years, by the time it actually gets around to a briefing schedule being filed,” Waldron said.

As Chairman Wheeler developed his net neutrality proposal, he consulted with the FCC’s Office of General Counsel, led by Jonathan Sallet, the commission’s top lawyer. The counsel’s office helps FCC commissioners analyze the lay of the land and draft proposals to achieve certain goals.

“They want to protect all of their decisions from court review,” Waldron said. “I’m sure the general counsel is very much deeply involved in the drafting of this order to make sure it survives appeal and is consistent with the law.”

Howard Waltzman, a partner at Mayer Brown LLP who specializes in communications and Internet law, said, “They’re trying to hone their arguments in terms of how they can justify reclassification, and then subsequently how they can justify imposing these new requirements on broadband providers.”

The FCC’s main argument, legal experts said, will be that the Communications Act of 1934—which contains the all-important Title II provision—is ambiguous, and that the FCC, as an authority on its application, should be granted deference in interpreting and applying it.

The principle that courts should defer to agencies when they are regulating based on ambiguous statutes is known as Chevron deference. It originates from a 1984 Supreme Court case, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., in which the Court held that the Environmental Protection Agency was the most authoritative source when it came to interpreting the Clean Air Act.

Justice John Paul Stevens, writing the Court’s majority opinion, explained how this deference should work: “If the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.”

The FCC, experts said, will argue that reclassifying the Internet as a public utility, and thus making it eligible for Title II regulation, is a “permissible construction” of the Communications Act.

“The FCC is on much stronger ground if they can say, ‘This statute is ambiguous or this particular term is ambiguous, and so I, as the expert agency, am applying my expertise to the facts and the law, and I am making this conclusion,’” Waldron said.

The ISPs that sue the FCC will argue that the Communications Act is not ambiguous and that it explicitly prevents the agency from reclassifying the Internet as a public utility. In a quirk of legal and administrative history, the challengers’ argument will rest on a previous FCC classification decision and the Supreme Court case that shot down a central tenet of net neutrality at the FCC’s behest.

A complicated history

On March 14, 2002, the FCC, then led by Michael Powell, announced that it was classifying cable Internet as an “information service.” The commission’s press release spelled out in no uncertain terms the decision’s crucial implication: “Cable modem service does not contain a separate ‘telecommunications service’ offering and therefore is not subject to common carrier regulation.”

Michael Powell is now the president of the NCTA. His 2002 decision to classify the Internet as an information service led to the biggest defeat that open Internet advocates have ever suffered.

In December 2010, the FCC, led by Julius Genachowski, approved its first set of net neutrality regulations. The agency submitted the rule to the Federal Register in September 2011, under the name “Preserving the Open Internet.” According to its summary, FCC Open Internet Order 2010 “establishes protections for broadband service to preserve and reinforce Internet freedom and openness.”

Unfortunately for the FCC and its allies in the pro-net neutrality community, the Open Internet Order was built on legal quicksand. The agency was trying to apply rules to the Internet that did not fit the legal framework it had established in 2002. The cable industry saw an opening and took it. In January 2014, in Verizon v. Federal Communications Commission, the Court of Appeals for the D.C. Circuit struck down most of Genachowski’s open Internet regulations.

“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 concluded. “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.”

Susan Crawford, a Harvard law professor who served as President Obama’s first Special Assistant for Science, Technology, and Innovation Policy, described the 2014 decision as a wake-up call to the FCC. The court hadn’t declared common-carrier requirements unconstitutional per se, but it had rebuked the agency for attempting to impose them under Powell’s classification regime.

Unfortunately for the FCC and its allies in the pro-net neutrality community, the Open Internet Order was built on legal quicksand.

“The commission has no choice if it wants to be on a solid legal footing other than to administratively relabel high-speed Internet access as a telecommunications service,” Crawford said. “That’s what the D.C. Circuit has been telling the FCC to do since 2010, and now the FCC is finally listening.”

By the time the court ruled in Verizon, the agency had a new chairman: Tom Wheeler, a former lobbyist for the NCTA and the former CEO of the wireless industry group the Cellular Telecommunications & Internet Association (CTIA). It was the FCC’s legal defeat in the Verizon case that led Wheeler to begin working on a new approach to net neutrality. Although he initially considered a troubling proposals that would have left gaping holes in open Internet protections, he eventually settled on the so-called nuclear option of net neutrality rules: Overturning Powell’s 2002 decision and reclassifying the Internet as a telecommunications service, thus opening the door for Title II.

At the post-vote press conference on Feb. 26, Wheeler echoed Crawford’s point that the FCC was doing exactly what the court in Verizon had told them to do.

“The DC Circuit sent the previous Open Internet Order back to us and basically said, ‘Hey, you’re trying to impose common carrier-like regulation without stepping up and saying, “These are common carriers,”’” Wheeler told reporters. “We have addressed that issue. That is the underlying issue; that is the sine qua non of the all the debates we’ve had so far. That gives me great confidence going forward.”

Given its freshness and its importance to Wheeler’s thinking, Verizon v. FCC is widely seen as one of the most important cases in the judicial fight over net neutrality. But the legal history of this battle between agency and industry traces its origins to a 2005 Supreme Court case called National Cable & Telecommunications Ass’n v. Brand X Internet Services.

Brand X is a small ISP that promises bundle-free, contract-free DSL starting at $25 per month. In 2005, it wanted to gain access to the Internet cables of larger ISPs to expand its footprint. This right of access has long existed in traditional phone service, because landline telephone providers are considered common carriers. When all Internet was dial-up, the common-carriage principle for telephone lines meant that every ISP enjoyed essentially equal access to the market. But the emergence of cable and DSL Internet split off a new market, and as companies like Comcast and Verizon grew more and more powerful, smaller firms like Brand X found that they couldn’t compete.

For Brand X and other smaller players, the only solution was for the FCC to treat cable Internet like it treated phone service. But in 2005, Michael Powell ran the FCC, and just three years earlier, he had declared cable Internet to be an “information service.” The FCC refused Brand X’s request, so the company sued. The Court of Appeals for the Ninth Circuit sided with Brand X, saying that previous cases in its circuit had created a judicial precedent requiring common carriage in the cable market. That’s when the NCTA stepped into the fray, suing Brand X before the Supreme Court.

The NCTA disputed the idea that one appellate court’s precedents could tie the FCC’s hands. It argued for Chevron deference—the same concept that the FCC is now preparing to use to fight the NCTA and its members. In 2005, though, Chevron deference suited the NCTA, because it would let the FCC interpret the law in a way that denied Brand X its access to major ISPs’ cables. Brand X, meanwhile, continued to assert that cable companies ought to be considered telecommunications service providers. It also said that Chevron deference shouldn’t apply when an appellate court’s precedents conflicted with the FCC’s interpretation of a law.

The Supreme Court sided with the FCC in a 6-3 decision that became a landmark of telecommunications law. Justice Clarence Thomas, writing for the majority, concluded that the Communications Act of 1934 did not “unambiguously” classify cable Internet as a telecommunications service, and that the law’s “silence” on the subject gave the FCC “the discretion to fill the consequent statutory gap.”

The Brand X case has cast a long shadow over federal agencies’ interpretations of the laws that govern them. The Court’s decision means that an agency like the FCC has wide latitude to interpret a law for regulatory purposes unless the law’s language is so clear as to obviously contradict the agency’s argument. In the brewing court battle over net neutrality, the FCC will assert that the Communications Act of 1934 is ambiguous, just as it did in Brand X in 2005—only this time, the FCC will be siding on policy grounds with the dissent in Brand X, written by conservative justice Antonin Scalia.

In his dissent, Justice Scalia dismissed the FCC’s argument that the Communications Act—and, in particular, its use of the word “offer” to describe Internet service—was vague. “It remains perfectly clear,” he wrote, “that someone who sells cable-modem service is ‘offering’ telecommunications.” Scalia was saying that an honest reading of the law required the FCC to classify cable Internet as a telecommunications service.

Professor Crawford said the FCC would lean heavily on Scalia’s dissent in making its case.

“I think the Brand X decision, and particularly Justice Scalia’s stinging dissent in that decision, shows that even as of 2005, there were good reasons to treat high-speed Internet access as a telecommunications service,” Crawford said. “And those good reasons have only gotten better over time.”

Unknown odds

In 2005, Scalia’s interpretation of the statute called for reclassification over the FCC’s Chevron-deference objections. When the FCC goes to court this time, it will use Chevron deference to ward off industry objections to its reclassification plans. What a difference a new chairman and a decade of legal precedent make.

Waltzman, the Mayer Brown telecom lawyer, is skeptical that the FCC’s argument—that ISPs are offering a telecommunications service and not an information service—will prevail in court. “The FCC,” he said, “is essentially going to have to say, ‘We were wrong when we made that classification decision, and here’s why.’”

Professor Crawford disputed the idea that the FCC would face long odds in making this argument. She pointed out that, prior to Powell’s declaration that ISPs provided an information service, legal precedent supported the belief that cable Internet was a telecommunications service.

“That’s the classification that had been in place until then-Chairman Powell … deregulated high-speed Internet access,” she said. “We’re returning to the status quo, and it is very likely that the courts will follow the lead of the Supreme Court [in Brand X] and defer to [Wheeler’s] decision.”

When the industry’s lawsuit against the FCC reaches the Court of Appeals for the D.C. Circuit, its outcome will depend on which of the appellate court’s judges sit on the panel hearing the case. Unlike the Supreme Court, which hears very few cases, appellate courts have large caseloads and thus do not hear most cases as a full bench. Instead, they select three-judge panels to hear individual cases. The losing party in an appellate court case can request that the case be reheard by the entire bench in what is known as an en banc hearing, but appellate courts generally only grant such requests when the case is considered particularly important.

The judges who sided with Verizon over the FCC in January 2014 had decided several FCC cases prior to that ruling, but many of the new, Obama-appointed judges have not participated in FCC cases before.

“It’s conceivable,” Waltzman said, “that, given the number of new judges, [the upcoming net-neutrality lawsuit] would have a panel with judges that were not as steeped in these various battles over the years between the industry and the FCC.”

Waldron cautioned that political ideology was not a good predictor of a judge’s receptiveness to FCC arguments about Title II. He pointed out that Scalia had supported Title II regulation in the Brand X case and said that Judge Harry Edwards, a Jimmy Carter appointee on the Court of Appeals for the D.C. Circuit, has been a consistent FCC critic.

“I think that Republican and Democrat really does not help you think in a helpful way about how judges look at these issues,” Waldron said.

The next election matters

Politics may or may not play an important role in the outcome of the net neutrality case at the appellate level, but political calculations will almost certainly determine whether the case reaches the Supreme Court.

Every year, the Supreme Court receives about 10,000 requests to hear cases. It grants only about 80 of those requests. One factor that weighs heavily on the justices as they are debating whether or not take a case is the input of the U.S. Solicitor General, the lawyer who represents the federal government at the Supreme Court. The Solicitor General, who is nominated by the president and confirmed by the Senate, works so closely with the justices that he or she is often referred to in legal circles as “the tenth justice.”

“Where you have litigants with unlimited resources, nothing would surprise me.”

“The Supreme Court is always more likely to take a case when the Solicitor General weighs in and asks the Court to hear a case like this,” Waldron said, referring to cases involving agency authority.

Given how long the net neutrality court battle is expected to last, the Supreme Court is unlikely to receive a request to review an appellate court ruling in the case while President Obama is in office. This means that the case’s chances of reaching the Supreme Court hinge in part on whether the next president is a Democrat or a Republican.

If the FCC loses the initial case and a Democrat wins the 2016 presidential election, the new president’s Solicitor General is likely to recommend to the Supreme Court that it hear an appeal of the lower court ruling. (If the FCC wins the initial case, of course, the new Solicitor General would likely recommend that the Supreme Court ignore the cable industry’s request for an appeal.)

If the next president is a Republican, however, and the FCC loses at the appellate court level, the new Solicitor General will almost certainly recommend that the Supreme Court leave the matter be, allowing an appellate court loss to end the FCC’s attempt to implement Chairman Wheeler’s proposal.

Crawford was confident that, regardless of what the Solicitor General said, the ISPs would take their case to the Supreme Court if they lost in the first round.

“Where you have litigants with unlimited resources, nothing would surprise me,” she said. “They would do anything to defeat the idea that they should be subject to oversight.”

No matter which party wins the White House in 2016, or whether the Supreme Court hears an appeal of the initial ruling, the legal battle over net neutrality will not be settled anytime soon. Waltzman pointed out that it took until January 2014 for a court to rule on the FCC’s late 2010 regulations.

“The FCC was responsible for about six months of that time,” he said, “but you are still looking, conservatively, at a three year process.”

Activists and attorneys, start your engines. The next stage of the war for the open Internet is about to begin.

Illustration by Max Fleishman | Original image via Perhelion/Wikimedia Commons (PD) | Logos via Wikimedia Commons

Eric Geller

Eric Geller

Eric Geller is a politics reporter who focuses on cybersecurity, surveillance, encryption, and privacy. A former staff writer at the Daily Dot, Geller joined Politico in June 2016, where he's focused on policymaking at the White House, the Justice Department, the State Department, and the Commerce Department.