‘Arlington’ Helps FCC’s Net Neutrality Case, Agency Tells D.C. Circuit

Where Congress has established a clear line, “the agency cannot go beyond it; and where Congress has established an ambiguous line, the agency can go no further than the ambiguity will fairly allow,” wrote FCC counsel Joel Marcus, quoting the Arlington decision. “If the agency’s reading of the statute ‘is based on a permissible construction,’ however, ’that is the end of the matter.'”

"Chevron deference thus clearly applies to the Commission’s interpretation of the statutes on which its authority rests in this case,” Marcus wrote. “Congress has given the FCC authority to implement all statutes within its purview. ... As our brief shows, the agency’s reasonable interpretations of provisions in the Communications Act and the Telecommunications Act of 1996 warrant deference."

Attorneys on both sides of the issue told us Arlington could help the commission, but it doesn’t make the case a slam dunk. “Could the FCC still lose the net neutrality case after Arlington?” asked Wiltshire Grannis partner John Nakahata. “Yes. Does Arlington make it more likely that the FCC will win? Yes. The FCC now reinterpreted Section 706 as a grant of regulatory authority. It must justify its interpretation. But unless the petitioners can show that the statute clearly and unambiguously establishes that Section 706 is not a grant of regulatory authority, Arlington means the FCC should win so long as its interpretation was reasonable.” This holds true even if the judges would have reached a different interpretation of ambiguous statutory language, Nakahata said.

Arlington “undoubtedly gives the FCC a leg up with respect to questions about its statutory authority to adopt the open Internet rules, but it does not definitively resolve the case,” said communications lawyer Andrew Schwartzman, who filed a brief on behalf of Columbia University law professor Tim Wu supporting the Open Internet rules. “The Court of Appeals could find that the statute is not ambiguous, in which case no deference applies. Alternatively, it could rule against the FCC even after applying deference."

In the short term, the Arlington decision might “boost the confidence of some net regulation backers,” but ultimately the FCC’s case remains built on a shaky legal foundation, said Prof. Michael Santorelli, director of the Advanced Communications Law and Policy Institute at New York Law School. In addition to granting agency deference to determine jurisdiction, the Supreme Court also made clear that agencies do not have unfettered authority, Santorelli said: “There are limits to what is considered a permissible construction of agency jurisdiction. Otherwise, an agency like the FCC would have unlimited authority to wander into policy matters that a bipartisan Congress never contemplated -- like regulating the Internet. As we saw in Comcast, this is certainly not the case, especially when it comes to regulating Internet service providers under the current Title I regime.” In Comcast, the D.C. Circuit held the commission couldn’t exercise ancillary authority over ISPs.

Law Prof. Rob Frieden of Penn State University told us he’s “not as sanguine as commission staff” that the case expands the scope of deference accorded federal regulatory agencies. It’s worth remembering Justice Antonin Scalia’s “sharply worded dissent in the Brand X case warning of regulatory overreach by the FCC as aided and abetted by overly credulous courts,” he said. “I don’t think Justice Scalia has turned over a new leaf: He simply states that when ambiguous but direct statutory authority exists the expert regulatory agency can act. When acting, the agency’s statutory interpretation must be reasonable."

"The flaw in the FCC’s logic is that it effectively implies that it is the FCC and not the Court that is the final arbiter of the law and the bounds of statutory authority,” said Scott Cleland, chairman of NetCompetition. “Just like the FCC overreached in its Open Internet order, its latest response is an overreach that Chevron deference means FCC carte blanche,” Cleland told us. In a blog post, Cleland said Verizon is likely to prevail, because the Open Internet order is “so unambiguously far outside the bounds of the FCC’s statutory authority, that Chevron deference is unlikely to apply” (http://bit.ly/Z3rIw7).

"The Arlington decision will augment agencies’ power generally, and it is quite possible that the Supreme Court’s decision will prove helpful to the Commission in the net neutrality appeal. But it still may not be decisive,” said Randolph May, president of the Free State Foundation. The Arlington decision might not control if the court accepts Verizon’s argument that this is not a case of statutory ambiguity, but rather a case in which Congress has actually precluded the FCC from, in effect, converting ISPs into common carriers, May said. “The court could determine there is sufficient indication of congressional intent in the Communications Act, including Section 230’s declaration that Internet providers should remain free from federal regulation, that this specific intent leaves no ambiguity as to the agency’s regulatory authority over ISPs.” Section 230, known as the Communications Decency Act, states that it’s U.S. policy to “preserve the vibrant and competitive free market” of an Internet “unfettered by Federal or State regulation.”

Regardless of Arlington, “it’s worth remembering that Verizon argues that the net neutrality regulations violate its First Amendment rights,” May said. “The Arlington decision may have made it more likely the court will be required to confront the constitutional question."

In its filing, the FCC also discussed a hypothetical in Arlington that discussed the agency’s authority to enforce common carrier-like rules on ISPs. “The Court in Arlington used as its principal example of statutory ambiguity the question whether an Internet service provider is a ‘common carrier,'” the FCC wrote. “Under Arlington, the FCC’s interpretation of that term is entitled to deference."

"The Supreme Court’s reference to ISPs could not have been an accident,” Schwartzman said. “There are countless examples it could have used, so one must assume that the Court is aware that the FCC’s authority over ISPs is a pending matter.” But Cleland found it “ironic” that the FCC would tout the court’s common carrier hypothetical, “because the FCC already declared ISP broadband to be an unregulated information service, not a common carrier service."

"I don’t find the hypothetical dispositive,” said Mayer Brown Internet and privacy compliance lawyer Howard Waltzman. The court’s two examples of possible common-carrier statutes “are extremely broad statutory provisions that grant broad authority to the Commission with presumably no statutory definition of the term ‘common carrier,'” he said by email. “In contrast, the Communications Act includes a definition of ‘common carrier’ which the Commission, to date, has determined does not include ISPs."

"While very tempting, it could be dangerous -- if not foolhardy -- to read too much one way or the other” into Arlington’s effect on the net neutrality case, said Medley Global analyst Jeffrey Silva. “Each case has a distinct set of facts, giving rise to unique legal analyses based on legal precedent, relevant congressional statutes and other factors,” he said. Arlington may give the FCC “reason for some optimism” about its ability to defend net neutrality this go-round, Silva said, but “a better defense might not necessarily translate into an agency victory in court.”