Opponents Fire Away at FCC Net Neutrality, Title II Broadband Order

“‘Net neutrality’ is a red herring; the issue before the Court is the FCC’s claim of unprecedented power to regulate the Internet without congressional authorization,” said the tech intervenors -- Scott Banister, Wendell Brown, CariNet, David Frankel, Charles Giancarlo, Jeff Pulver and Tech Freedom -- which sought an Internet “unfettered by excessive federal regulation.” In asserting Title II authority, the FCC violated basic statutory construction principles, including by unilaterally deciding “a question of utmost ‘economic and political significance’” without a clear mandate and despite legislative history contradicting its actions, they said. Even if the law “were merely ambiguous,” they said the court should review the statute de novo and not accord the FCC Chevron deference because the agency was usurping judicial interpretive power.

The International Center for Law & Economics and Administrative Law also said the FCC was exceeding its authority in asserting jurisdiction over the country’s "entire" broadband infrastructure. “It assumes the ability to regulate even beyond this already incredibly broad scope on an ‘ancillary’ or ‘secondary’ basis so long as such regulation has at least a Rube-Goldberg-like connection to broadband deployment,” the Center said. “The Commission claims authority that it has consistently disclaimed; it ignores this court’s holding in Verizon v. FCC, …; and it bends to the point of breaking the statutory structure and purpose.” The order claims authority over the Internet ecosystem, including “connections to the edge,” said the group. The “need to disclaim so many of the order’s effects” and to forbear from applying so much Title II regulation” should have alerted the commission “that it had taken a wrong turn.”

The Georgetown Center for Business and Public Policy said the Telecom Act recognized the Internet had flourished and benefited Americans “with a minimum of government regulation.” But the FCC relocated the Internet “to the heavily regulated public-utility sector” under Title II, in a “radical shift in policy, reversing nearly two decades of consistent, bipartisan ‘light touch’ oversight of the Internet,” the think tank said. The FCC also failed to do appropriate economic cost-benefit analysis compelled by the Supreme Court’s recent Michigan v. EPA case, and never established that broadband ISPs would use “gatekeeper’ power to harm consumers and content providers, the group said.

Big business/industry groups said broadband regulation was unwarranted because the market is highly competitive. Title II was particularly inappropriate for “the most technologically advanced and dynamic information system in history,” said the Business Roundtable, National Association of Manufacturers and U.S. Chamber of Commerce. “It is Depression-era legislation adopted to regulate the telephone monopoly, and was itself cribbed from a 19th Century railroad statute.” The regulation will stifle investment in next-generation broadband technology, increase costs, aggravate uncertainty, and reduce service choice and quality, they said.

The Telecommunications Industry Association said its network vendor and supplier members “are the first to bear the brunt” of telecom regulation but “will not be the last” to feel the order's negative fallout. TIA said the FCC ignored the “extensive record evidence demonstrating” that Title II “would significantly diminish investment in broadband networks and thereby disserve” regulatory objectives. The action was arbitrary and capricious, made worse because industry had relied on the FCC’s previous light-touch regulation in investing over $800 billion in broadband infrastructure since 2002, the group said.

Mobile Future said the FCC wasn't justified in imposing tougher rules on wireless in 2014 than it did in 2010. The 2010 rules didn't impose the nondiscrimination standard on mobile broadband, while the 2014 rules imposed the same strictures they placed on fixed broadband. In the Verizon decision the D.C. Circuit “acknowledged the ‘differential treatment’ between mobile and fixed broadband and neither criticized nor overruled the distinction,” Mobile Future observed. The record in the proceeding demonstrated instead that the “competitive and technical differences” between mobile and fixed broadband “are even more pronounced today than they were in 2010,” the group said. “A host of competing providers have aggressively deployed advanced fourth-generation mobile networks and new service plans and offerings,” Mobile Future said. “Mobile wireless consumers today enjoy more choices, lower prices, faster and more reliable service, greater differentiation, and reduced costs to change providers compared to five years ago. Moreover, there have not been any demonstrated openness-related harms in the mobile ecosystem, either before or after the FCC’s 2010 Order.”

The Multicultural Media, Telecom and Internet Council said the FCC failed to address the “deleterious effect” of Title II wireline and wireless broadband regulation on “people of color and other historically disadvantaged groups" on the "wrong side of the digital divide." The MMTC also said the reduction in investment and innovation would hit underserved communities the hardest.

Network Engineering, Section 706, 'Zero Price' Objections

University of Pennsylvania Law professor Christopher Yoo said broadband reclassification as a telecom service conflicted with the Communications Act’s requirement that transmission be “between or among points specified by the user.” But the Supreme Court in its Brand X ruling recognized “it is the Domain Name System that selects the destination of most Internet transmissions, not the user,” he said, noting caching was another example, where the ISP chooses a transmission endpoint, not the user.

Richard Bennett, a 35-year network veteran and innovator, said the FCC failed to recognize the Internet’s structure and functions, and their relationship to the Communications Act, which he said dictate continued classification of broadband Internet access service (BIAS) as a Title I “information service.” The Internet is a “network of networks” combining physical networks and virtual networks, but an ISP doesn’t provide a BIAS until it exchanges information between its customer’s network and another ISP’s network, Bennett said. The inter-network exchange of information is an “information service as defined in the Act because it provides the customer with ‘the capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications,’” he said.

The Competitive Enterprise Institute said the FCC had “long wanted to be the federal agency that regulates access to the Internet,” but lacking explicit authority it had attempted to give itself authority. CEI disputed FCC claims of independent Section 706 authority to adopt net neutrality rules. CEI said the D.C. Circuit in the Verizon case had erred by not deferring to the commission’s previous finding that it lacked such authority.

The Phoenix Center said the FCC was trying to “side-step” the legal consequences of applying Title II to the edge side of a two-sided market in which broadband service providers serve both retail customers and edge providers. The FCC chose to lump both the retail and edge sides together into a single BIAS service, the Center said. Although the FCC recognized Title II applies to the edge side, it “arbitrarily set a price of zero for the service offered by” broadband service providers to edge providers, which is “contrary to basic rate setting standards” and Title II’s “just and reasonable” standard, the group said. The FCC also failed to allow any form of “reasonable discrimination,” it said.

First Amendment Arguments

The Center for Boundless Innovation in Technology, led by former FCC Wireless Bureau Chief Fred Campbell, supported the First Amendment arguments made by Internet entrepreneur Daniel Berninger and Alamo Broadband (see 1508050065). The rules violate the law on several levels, but suffer from a “more fundamental defect” in that they tread on constitutional protection of free speech, CBIT said. “Not only do the Rules restrict speech, the total ban they impose on editorial discretion triggers strict scrutiny,” the center said. “The Rules restrict the ability of providers to exercise any degree of discretion over their transmission of political speech, they compel them to carry the speech of all others, and they favor the speech of other Internet companies over broadband providers’ own speech.” The FCC never addressed in a serious way the First Amendment implications of the net neutrality rules, CBIT said. “The FCC instead sought to short circuit any First Amendment inquiry by declaring that broadband providers are not speakers at all and, even if they are, the Rules are subject only to intermediate scrutiny,” the center argued. “The FCC’s gambit should be rejected.”

Former FCC Commissioner Harold Furchtgott-Roth and the Washington Legal Foundation also made a First Amendment argument. “More than a century ago, the Supreme Court recognized that the decision to act as a mere conduit for the dissemination of information triggers the protections of the First Amendment,” they said. The amici also argued that the rule of law and the economy “both suffer when federal agencies single out a segment of the economy for regulatory interference without any congressional mandate to do so.” They said the FCC isn't elected so there's no “political accountability to the American people” who “will be most directly affected by the slower Internet speeds and higher broadband prices that will undoubtedly result from implementation of the Commission’s new rules.”