FCC Seen Having Upper Hand in Coming Net Neutrality Litigation; Not So Fast, Critics Say

The order also benefits from appellate court deference to the previous commission's 2015 net neutrality order subjecting broadband to common carrier regulation as a Title II telecom service, they said. But critics believe the new order is deficient. They said the FCC hasn't adequately justified its sweeping changes and cut corners under the Administrative Procedure Act. Similar conflicting views were expressed by others recently (see 1711270042, 1711290032, 1712050035 and 1712130053). Consumer groups and state attorneys general said they will file court challenges, with more parties likely to join.

"In terms of substantive law, there's no question what we did was lawful," Pai told reporters Dec. 14 after the order was adopted (see 1712140039). He said the 2005 Supreme Court Brand X ruling gave the FCC authority to classify broadband under Title I. Finding the statute ambiguous, the high court deferred, under its Chevron precedent, to the agency's Title I classification of cable modem (broadband) service as a reasonable interpretation. Pai also cited U.S. Court of Appeals for the D.C. Circuit judges in this year's USTelecom en banc ruling -- which upheld the 2015 order -- as recognizing the FCC had discretion under Brand X to decide broadband classification. He said the FCC fulfilled its APA duties, "fishing out" comments that "meaningfully grappled" with agency proposals and queries. "So both from the substantive and administrative law perspectives, I’m very confident that our decision will be upheld,” he said.

Challenges to the Title I broadband reclassification are likely to fail because the Brand X ruling is "directly on point upholding the FCC's authority," said Christopher Yoo, University of Pennsylvania professor of law. Given that precedent, it will be hard for a lower court to reject the Title I reclassification, said Yoo, who filed reply comments against Title II classification in docket 17-108. He said the key question was whether the FCC justified its change, and he believes the FCC can plausibly argue the 2015 Title II decision was wrong, things aren't working out as expected and circumstances have changed.

The challengers' prospects are "dim," said Gus Hurwitz, a University of Nebraska law professor who backed Title I reclassification. It's "most frustrating" that the litigation will include state AGs, "who will be wasting millions of taxpayer dollars and precious government law enforcement resources on what is almost certainly a lost cause," he said. "I don't see on what basis the FCC would lose," said TechFreedom President Berin Szoka, another Title I advocate. "This is about the FCC's legal authority, and the agency has the discretion to change its mind. ... This is just basic, current administrative law."

"Chevron deference is pretty clear cut on the issue," said Doug Brake, Information Technology and Innovation Foundation senior telecom policy analyst who backed Title I reclassification but believes the order went too far in deregulating. "Brand X gives clear precedent that the statute is ambiguous and broadband as an information service is a reasonable interpretation. USTelecom only strengthens the deference given to the FCC to make this call. The need to justify a change in policy is an incredibly low bar; [the Supreme Court's ruling in] Fox Television only requires the FCC acknowledge the change in policy, and give reasons for changing."

The FCC has "wide latitude" to interpret ambiguous law, agreed Stuart Brotman, University of Tennessee law professor. "It doesn't seem they violated a mandate from Congress," so it will "be hard to overturn," he said.

"It seems likely that Brand X and the D.C. Circuit's view of that precedent will sustain the FCC order," though "there will be APA challenges," said Paul Glenchur, Hedgeye Potomac Research analyst. "Even though this is a very sweeping reinterpretation of the Act, the burden is going to be on the parties challenging it to say that the FCC is being unreasonable," said telecom attorney Jeff Carlisle, who took no position on the merits. "And while I don’t think it’s an impossible burden to meet, I think it’s going to be a difficult argument to make. ... It’s not like this was some sort of hastily scribbled thing on the back of a napkin. They’ve made technical and economic arguments that support their read."

Critics Remain Optimistic

Net neutrality advocates believe the FCC order is on shaky ground despite the precedents cited by Pai and others. "We are of course very confident that the order is fatally flawed, both as a matter of law and procedure," emailed Michael Calabrese, director of the Wireless Future Project at New America's Open Technology Institute.

"We're optimistic. We think we have a good case, though you never give odds," said Gigi Sohn, Open Society Foundations fellow and an ex-aide to previous FCC Chairman Tom Wheeler. "The government agencies get a lot of deference, but I think they're going to have a tough road to show what’s changed so drastically in two and a half years to warrant not only eliminating Title II classification, but all the rules. ... The discretion is not unbounded. And if any agency has been struck down on arbitrary and capricious grounds, it’s the FCC.”

The order "is legally vulnerable as an arbitrary and capricious change in position," said Kevin Werbach, University of Pennsylvania Wharton School law professor and member of the Public Knowledge board. "The agency had one view about the classification of broadband for 13 years, and then shifted based on detailed evidence about changes in the broadband marketplace. Now it suddenly reverses itself two years later because a new party controls the White House? That seems inherently inconsistent with the function of an independent expert regulator. ... That won’t be the only challenge -- the notice and comment process for this decision was transparently a sham -- but it’s the one I think is most likely to succeed."

“They are on thin ice ... in returning to an information service" classification, said Rob Frieden, a Pennsylvania State University law professor, who questioned FCC justifications. "They’re trying to isolate the variable and say there’s been a reduction in investment, a reduction in innovation and it’s all due to net neutrality" and Title II, he said. The FCC relies heavily "on conjecture and sponsored research instead of solid, empirical evidence," he said.

New York Attorney General Eric Schneiderman is leading the state AG litigation effort, and a spokeswoman referred us to his Dec. 14 appearance on MSNBC's All In With Chris Hayes. The FCC "broke essentially all the rules of administrative procedure," Schneiderman said on the show. "Nothing has changed" since 2015 to justify the order, and the commission "relied on facts that are not in the record." He also said the agency process was "corrupted" because of the more than 23 million comments filed, about 10 million were "fake comments," including from people whose identities were "stolen."

Pai Allies Push Back

Litigation based on comment concerns would be "a frivolous, wasteful, political stunt," Hurwitz said. Brake said "all the theatrics around the comment process have no bearing on the legality of the order. Perhaps someone out there is guilty of fraud, but it’s not the FCC."

"This isn’t to say the whole thing is a slam dunk," Brake added. "There are notice issues with state pre-emption, and we’ve yet to see if the final order adequately addresses some of the novel, substantive arguments in the record. But on the basics, the agency is the clear favorite." Hurwitz said he's interested to see "how the pre-emption question is resolved," though "both general and FCC-specific precedent strongly supports the idea that the FCC can pre-empt state regulation of information services, even in deregulatory terms."

Yoo acknowledged conflicting evidence on the broadband investment fallout from Title II regulation. "Regardless, when there is decent evidence on both sides, the courts are likely to defer to the FCC," he said.

"It is unfortunate everyone is so dug in that we have to wait for litigation to wind its course," Brake said. "It would be better if net neutrality proponents came to the table with an affirmative legislative proposal, rather than wasting time with talk of a [Congressional Review Act resolution] or a long shot win in court."

"The real importance of the litigation is that it provides Democrats a pretense for refusing to negotiate or discuss net neutrality legislation at all until after the mid-term elections," Szoka said. "They desperately need a reason to delay. ... They have to know that their odds of winning on the merits are extremely low."