Net Neutrality Rules Are Common Carriage Obligations, Verizon and MetroPCS Tell D.C. Circuit

The U.S. Court of Appeals for the D.C. Circuit had rejected a Verizon Wireless challenge to the data roaming order, finding the rules were within the commission’s authority -- and not, as the carrier argued, an imposition of common carrier obligations (CD Dec 5 p1). In the reply brief, Verizon and MetroPCS pointed to the D.C. Circuit’s reasoning that “if a carrier is forced to offer service indiscriminately and on general terms, then that carrier is being relegated to common carrier status.” The data roaming rule left “substantial room for individualized bargaining and discrimination in terms,” the carriers wrote, quoting the data roaming decision. In contrast, the net neutrality rules at issue here are “per se common carriage” because they don’t allow for ISP discretion over the traffic they carry, the brief said. “The no-blocking rule compels broadband providers to hold out their networks for use by all edge providers -- that is, ’to offer service indiscriminately.'"

The net neutrality rules also preclude individually negotiated arrangements and any differences in terms, the two carriers said. Like in Midwest Video II -- a 1979 Supreme Court opinion vacating the FCC’s public access rules as impermissible common-carrier obligations -- net neutrality rules require broadband ISPs to carry information “at no cost.” The FCC argues the net neutrality rules fall outside of the common-carrier framework because they don’t regulate the terms of service to “the end users who subscribe” to broadband ISPs, but common-carrier services can be provided to wholesale purchasers as well, the carriers said. “The FCC has no cogent response to the fact that its rules require broadband providers to carry edge providers’ traffic at a common, regulated rate of zero."

Verizon and MetroPCS excoriated the commission for claiming it has direct authority to regulate the Internet. That claim relies on “supposed ambiguities in disparate provisions scattered throughout the [Telecom] Act that simply do not say that Internet service should be regulated by the FCC, much less in this intrusive fashion,” the carriers wrote. “This is far too slender a reed to support the FCC’s extension into an area of such economic and political significance” as the Internet, they said. The FCC’s dependence on “reasonably construed” ambiguities throughout the Act “cannot overcome the express prohibitions on common-carrier regulation,” the carriers said, quoting the data roaming order: Wireless broadband providers “are statutorily immune, perhaps twice over, from treatment as common carriers.”

Verizon and MetroPCS also challenged the constitutionality of the net neutrality rules, arguing they violate the First Amendment and the Fifth Amendment’s takings clause. “Broadband providers exercise editorial discretion in selecting which speech to transmit and how to transmit it and thus are ’speakers’ entitled to First Amendment protection,” they told the court. “The Order’s broad ‘prophylactic rules’ infringe broadband providers’ speech by, among other things, stripping providers of control over which speech they transmit and how they transmit it.” The FCC has responded that providers remain “free to convey any content” they wish on their facilities, the brief argued. “That is irrelevant. The government cannot force a newspaper to publish editorials of its choosing, just because the newspaper can also publish its own editorials.”

The pleading took on the arguments of other briefs in support of the FCC. “Some amici suggest that affording broadband providers any role in determining what is transmitted over their private networks would imperil First Amendment interests,” the brief asserted. “That has matters backwards. The First Amendment prohibits the government from infringing speech, precisely so that private actors can decide for themselves how to use their property for expressive purposes."

Verizon and MetroPCS made a “takings” argument against the order. “Broadband providers are paid by end-users, not by the edge providers who are in effect being granted a permanent easement on private networks,” the brief said. “The Order does not provide compensation for that easement or the disruption of providers’ investment-backed expectations.” The facts of the case here are fundamentally different from the data roaming decision, where a takings argument was rejected, the brief asserted. “Unlike the Court’s conclusion with respect to the data roaming rule, broadband providers are not ‘compensated by a “commercially reasonable” payment,’ … for the squatting rights the Order grants edge providers. They are not compensated at all."

The order should be rejected on grounds that it’s “arbitrary and capricious,” the two carriers said. “To show a problem sufficient to justify industry-wide regulation, the FCC relies on the Comcast Order and the Madison River consent decree. But it does not dispute that the former was vacated and that the latter was really about intercarrier compensation.” The FCC also offered as justification that a “mobile broadband provider was charged with blocking credit card processing services,” the brief said. “But that did not involve the provision of Internet access service."

MetroPCS filed Friday a separate, 11-page brief focusing on its arguments the FCC cannot rely on its authority under Title III of the Act to justify imposing net neutrality rules on carriers. “Title III does not ‘confer unlimited power'” on the FCC, the brief said. “The Commission’s brief in opposition is telling for what it does not do,” MetroPCS said. The FCC “never confronts the limitations on its statutory power recognized by this Court,” the brief said. “It declines to defend the Order on its own terms, impermissibly attempting to smuggle in statutory grounds that the Commission never invoked and that cannot sustain the Mobile Internet Rules in any event. And it summarily invokes its license-modification power under [section] 316, but never addresses (and thus must be deemed to concede) MetroPCS’ arguments that section 316 is not an independent source of substantive statutory authority."

MetroPCS cited language in the court’s data roaming decision in support of the company’s case against the net neutrality rules. “As this Court recently affirmed, ’the Commission may not rely on Title III’s public-interest provisions without mooring its action to a distinct grant of authority in that Title,'” MetroPCS said. “The Commission’s Mobile Internet Rules are completely unmoored from the statute and thus cannot survive.” The FCC also goes wrong in relying in part on its license-modification power under Section 316 of the Act, the carrier said. “The Commission nowhere answers MetroPCS’ arguments that (1) section 316 is not an independent source of statutory authority; (2) general rulemakings can only modify a license if grounded in specific statutory authority; (3) under Commission precedent, a rule that affects all licenses within a class is not a section 316 modification; and (4) a rule that affects existing and future licensees alike cannot be defended.”