Antitrust Law Daily Court upholds most of FCC’s Internet freedom order, vacates state preemption
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Tuesday, October 1, 2019

Court upholds most of FCC’s Internet freedom order, vacates state preemption

By Lynn Stanton

The Federal Communications Commission repeal of Obama-era net neutrality rules upheld.

Over the partial dissent of Senior Circuit Judge Stephen F. Williams, the U.S. Court of Appeals for the District of Columbia Circuit today upheld the FCC’s 2017 reclassification of broadband Internet access service as an information service subject to Title I of the Communications Act and its reclassification of mobile broadband service as a private mobile service, as well as most of the rest of FCC’s 2017 restoring Internet freedom order (RIF), although it vacated the provision preempting states from adopting rules repealed in the RIF order, rules that the FCC "decided to refrain from imposing" in the RIF order, or that are "more stringent" than the rules in the RIF order (Mozilla v. Federal Communications Commission, October 1, 2019, per curiam).

A senior FCC official told reporters on a conference call that the FCC would have to further review the court’s decision to vacate the preemption directive, while emphasizing that the court left open the door to individual preemption decisions by the FCC in the cases of state actions that it could demonstrate conflict with its order.

The other judges who heard the case were Circuit Judge Patricia A. Millett, who presided over the oral arguments earlier this year, and Circuit Judge Robert L. Wilkins.

The 2017 RIF order overturned nearly all of the provisions of the 2015 open Internet order adopted by a Democratic-controlled Commission, including the classification of broadband Internet access service (BIAS) as a telecommunications service subject to common carrier regulation under Title II of the Communications Act, classifying it instead as a Title I information service; the classification of mobile broadband as a commercial mobile service subject to Title II regulation; bright-line conduct rules against blocking, throttling, and paid prioritization; and the Internet general conduct standard.

The RIF order left in place some of the transparency requirements of the 2015 order and imposed specific transparency requirements on ISPs, directing them to disclose if they engage in blocking, throttling, paid prioritization, or prioritization of affiliate content or services.

The RIF order also stated that BIAS is an interstate service and preempted state actions that conflict with the federal regime for ISPs.

In a per curiam decision, the court also remanded the order to the FCC to address issues in three areas in which it found the order inadequate: "(1) The Order failed to examine the implications of its decisions for public safety; (2) the Order does not sufficiently explain what reclassification will mean for regulation of pole attachments; and (3) the agency did not adequately address Petitioners’ concerns about the effects of broadband reclassification on the Lifeline Program," it said.

Despite the remand on these issues, the majority declined to vacate the order.

"When deciding whether to vacate an order, courts are to consider the ‘the seriousness of [its] deficiencies (and thus the extent of doubt whether the agency chose correctly) and the disruptive consequences of an interim change that may itself be changed’ Allied-Signal, Inc. v. United States Nuclear Regulatory Comm’n, 988 F.2d 146, 150–151 (D.C. Cir. 1993); see also Heartland Regional Med. Ctr. v. Sebellius, 566 F.3d 193 (D.C. Cir. 2009) (analyzing the Allied-Signal factors). Here, those factors weigh in favor of remand without vacatur. First, the Commission may well be able to address on remand the issues it failed to adequately consider in the 2018 Order. See Susquehanna Int’l Grp., LLC v. SEC, 866 F.3d 442, 451 (D.C. Cir. 2017) (‘[T]he SEC may be able to approve the Plan once again, after conducting a proper analysis on remand.’); see also Black Oak Energy, LCC v. FERC, 725 F.3d 230, 244 (D.C. Cir. 2013) (remanding without vacatur where it was ‘plausible that FERC can redress its failure of explanation on remand while reaching the same result’). Second, the burdens of vacatur on both the regulated parties (or non-regulated parties as it may be) and the Commission counsel in favor of providing the Commission with an opportunity to rectify its errors. Regulation of broadband Internet has been the subject of protracted litigation, with broadband providers subjected to and then released from common carrier regulation over the previous decade. We decline to yet again flick the on-off switch of common-carrier regulation under these circumstances. But because the Commission’s Preemption Directive, see 2018 Order ¶¶ 194–204, lies beyond its authority, we vacate the portion of the 2018 Order purporting to preempt ‘any state or local requirements that are inconsistent with [the Commission’s] deregulatory approach[,]’ see id. ¶ 194."

Regarding the preemption directive, the per curiam opinion says, "The Commission ignored binding precedent by failing to ground its sweeping Preemption Directive—which goes far beyond conflict preemption — in a lawful source of statutory authority. That failure is fatal."

In a signed concurrence, Judge Millett said, "I join the Court’s opinion in full, but not without substantial reservation. The Supreme Court’s decision in National Cable & Telecommunications Ass’n v. Brand X Internet Services, 545 U.S. 967 (2005), compels us to affirm as a reasonable option the agency’s reclassification of broadband as an information service based on its provision of Domain Name System (‘DNS’) and caching. But I am deeply concerned that the result is unhinged from the realities of modern broadband service."

She added, "As our opinion today recognizes, auxiliary services like DNS and caching remain in the broadband bundle. But their salience has waned significantly since Brand X was decided. DNS is readily available, free of charge, and at a remarkably high quality, from upwards of twenty different third-party providers. And caching has been fundamentally stymied by the explosion of Internet encryption. For these accessories to singlehandedly drive the Commission’s classification decision is to confuse the leash for the dog. In 2005, the Commission’s classification decision was ‘just barely’ permissible. ‘Brand X,’ 545 U.S. at 1003 (Breyer, J., concurring). Almost fifteen years later, hanging the legal status of Internet broadband services on DNS and caching blinks technological reality."

In his own separate concurring opinion, Judge Wilkins said, "I too join the Court’s opinion in full. As Judge Millett’s concurring opinion persuasively explains, we are bound by the Supreme Court’s decision in National Cable & Telecommunications Ass’n v. Brand X Internet Services, 545 U.S. 967 (2005), even though critical aspects of broadband Internet technology and marketing underpinning the Court’s decision have drastically changed since 2005. But revisiting ‘Brand X’ is a task for the Court — in its wisdom — not us."

In his partial concurrence and partial dissent, Judge Williams quoted from Shakespeare’s "Macbeth" when he realizes he was misled by the witches’ predictions and that "his life is collapsing around him. The enactors of the 2018 Order, though surely no Macbeths, might nonetheless feel a certain kinship, being told that they acted lawfully in rejecting the heavy hand of Title II for the Internet, but that each of the 50 states is free to impose just that. ... If Internet communications were tidily divided into federal markets and readily severable state markets, this might be no problem. But no modern user of the Internet can believe for a second in such tidy isolation; indeed, the Commission here made an uncontested finding that it would be ‘impossible’ to maintain the regime it had adopted under Title I in the face of inconsistent state regulation. On my colleagues’ view, state policy trumps federal; or, more precisely, the most draconian state policy trumps all else."

FCC Chairman Ajit Pai responded to the court’s ruling by saying, "Today’s decision is a victory for consumers, broadband deployment, and the free and open Internet. The court affirmed the FCC’s decision to repeal 1930s utility-style regulation of the Internet imposed by the prior Administration. The court also upheld our robust transparency rule so that consumers can be fully informed about their online options. Since we adopted the Restoring Internet Freedom Order, consumers have seen 40% faster speeds and millions more Americans have gained access to the Internet. A free and open Internet is what we have today and what we’ll continue to have moving forward. We look forward to addressing on remand the narrow issues that the court identified."

Democratic FCC Commissioner Jessica Rosenworcel said, "When the FCC rolled back net neutrality it was on the wrong side of the American people and the wrong side of history. Today’s court decision shows that the agency also got it wrong on the law. The agency made a mess when it gave broadband providers the power to block websites, throttle services, and censor online content.

"Today’s court decision vacates the FCC’s unlawful effort to block states and localities from protecting an open internet for their citizens. From small towns to big cities, from state houses to governors’ executive actions, states and localities have been stepping in because the FCC shirked its duties. In addition, the court took the agency to task for disregarding its duty to consider how its decision threatens public safety, Lifeline service, and broadband infrastructure," she continued.

"As the FCC revisits its policies in light of the court’s directives, I hope it has the courage to run an open and fair process. The momentum around the country is proof the American people are not done fighting for an open internet. I’m proud to stand with them in that fight," Commissioner Rosenworcel concluded.

The case is No. 18-1051.

Attorneys: Pantelis Michalopoulos (Steptoe & Johnson LLP) for Mozilla Corp. James M. Carr for the FCC. Nickolai Gilford Levin, U.S. Department of Justice, for the United States.

Companies: Mozilla Corp.

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