Case Summary and Outcome

The District of Columbia Circuit Court upheld new net neutrality rules issued by the Federal Communications Commission (FCC). The FCC had classified broadband services as telecommunications services and thus common carriers under Federal legislation. Internet service providers are classified as indiscriminate conduits for speech and not as speakers who are afforded First Amendment protection. The case came about as a challenge against an order issued by the FCC, the Open Internet Order, which attempted to force broadband service providers to abide by rules enforcing net neutrality, the principle that broadband providers must treat all internet traffic the same regardless of source.

Facts

This case concerns rules made by the FCC to maintain net neutrality. The Internet is a distributed global communication network that allows users and providers to transmit and receive information in many different forms. It has four major participants: “end users, broadband providers, backbone networks, and edge providers” (at 9.):

• End users are individual consumers and businesses using the internet;
• Broadband providers use technologies like cable modems, DSL, and fiber optics to deliver high-speed internet service to users;
• Backbone networks interconnect broadband providers; and
• Edge providers “provide content, services, and applications over the internet.” (slip op. at 9, quoting Verizon v. FCC) Examples of edge providers include ESPN, Netflix, Google, and Amazon.

End users, edge providers and internet freedom advocates worried that absent rules prohibiting such behavior, broadband providers would interfere with end users’ unfettered internet access to increase revenues, particularly when making use of specific edge providers like Netflix.

Title II of the Communications Act of 1934 (Title II) gives the FCC the power to regulate common carriers, public utilities like telephone service. Title II requires that common carriers furnish “communication service upon reasonable request,” and without “unjust or unreasonable discrimination in charges practices, classifications, regulations, facilities, or services,” while charging “just and reasonable rates.” (U.S., Communications Act of 1934, §§ 201(a), 202(a), 201(b)) In the nascent days of the internet, the Telecommunications Act of 1996 subjected “telecommunications service” to common carrier treatment under Title II, distinguishing such service from “information services.” (U.S., Telecomm. Act of 1996) A “telecommunications service” was defined as “the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.” (U.S., 47 U.S.C. Sec. 153(51)) An “information service” was defined as “offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications.” (U.S., 47 U.S.C. Sec. 153(24))

In 1998, as broadband internet service began to spread, the FCC classified some DSL services as a telecommunications service, thus subjecting it to common carrier treatment (in Advanced Serv. Order). In 2002, the FCC classified cable modem service (a type of broadband service) as solely an information service exempt from common carrier treatment, a decision upheld by the Supreme Court in 2005’s Brand X case. After Brand X, the FCC classified other broadband services such as DSL and mobile broadband as information services, freeing all broadband providers from the obligations imposed on common carrier utilities (in Wireline Broadband Order). At the same time, the FCC classified wireless broadband service as a “private mobile service” free from common carrier regulation, as opposed to a “commercial mobile service” subject to common carrier treatment.

However, the FCC made it clear that it would seek to maintain net neutrality and would redress its regulations if broadband providers violated open internet principles. Comcast apparently interfered with users’ internet access in 2007, giving the FCC reason to intervene to preserve net neutrality. The FCC ordered Comcast to make a set of disclosures about its practices, an order the Court vacated in 2010 for failure to identify any proper statutory authority (in Comcast Corp. v. FCC). Then, after a period for public comment, the FCC released its 2010 Open Internet Order promoting rules to enforce net neutrality, but did not reclassify broadband as a telecommunications service. In Verizon, the Court found statutory authority for the FCC to issue open internet rules under section 706 of the Telecommunications Act. The Court nonetheless struck down the open internet rules from the 2010 order because they treated broadband providers as if they were common carriers. The FCC could not lawfully institute open internet rules as long as broadband providers remained classified as information services, which are exempt from requirements imposed on common carriers that they transmit information without discrimination (e.g., rules enforcing net neutrality). However, Verizon did uphold a transparency rule from the 2010 Open Internet Order.

Months after the Court’s Verizon decision in 2014, the FCC issued a Notice of Proposed Rulemaking (“NPRM”) seeking to “find the best approach to protecting and promoting Internet openness.” The FCC received millions of comments in response to the NPRM and subsequently issued the 2015 Open Internet Order, which:

1. reclassified all broadband services (such as DSL, cable, and mobile) as telecommunications services;
2. forbore from applying certain common carrier provisions to broadband as “consistent with the public interest”; and
3. instituted five open internet rules.

The five “open internet rules” were an anti-blocking rule, an anti-throttling rule, a ban on paid prioritization, a “General Conduct Rule” to broadly promote net neutrality using a non-exhaustive list of factors, and an “enhanced” transparency rule improving upon the transparency rule from the 2010 Open Internet Order.

Several parties challenged the FCC’s order (collectively “challengers”) including the U.S. Telecom Association by petitioning the United States Court of Appeals for The District of Columbia Circuit to review the 2015 Open Internet Order. The challengers argued that reclassification of broadband service as a telecommunication service subject to common carrier treatment was improper and unreasonable; that the FCC lacked statutory authority to reclassify broadband and issue the rules; that the NPRM did not provide adequate notice of reclassification or the content of the rules, mobile broadband does not qualify as a commercial mobile service subject to common carrier treatment; that the FCC could not ignore some Title II provisions when regulating broadband providers; and that some of the rules violated broadband providers’ First Amendment rights to freedom of speech. Think tanks, investors, entrepreneurs, edge providers, users, activists, and advocate organizations intervened on both sides of the dispute.

Decision Overview

Justices Tatel and Srinivasan delivered the majority opinion of the Court. The main relevant issues were: 1. whether the FCC properly classified broadband service as a “telecommunications service,” which would subject it to the common carrier treatment necessary to institute net neutrality rules; and 2. whether the open internet rules were proper or whether they violated broadband providers’ free speech rights under the First Amendment.

The challengers relied on several administrative, procedural, and reasonableness arguments, all of which the Court denied. Many of these decisions were guided by the Court’s two fundamental principles as a reviewing court: 1. that its “role in reviewing agency regulations … is a limited one”; (at 22, quoting U.S., Ass’n of Am. Railroads v. Interstate Commerce Comm’n, 978 F.2d 737 (D.C. Cir. 1992)) and that the Court does answer whether a policy is wise, but it only resolves legal questions.

The first primary issue was whether the FCC properly classified broadband service as a telecommunication service. The FCC had properly focused on consumer perception of what broadband service providers “offer” — the product they sell to consumers. The Court concluded that broadband services provide the unadulterated transmission of messages via computer processing, in that they connect users to third party content. Content from edge providers like Netflix, YouTube, and MLB.tv have “transformed nearly every aspect of our lives, from profound actions like choosing a leader, building a career, and falling in love to more quotidian ones like hailing a cab and watching a movie.” (p. 26) As such, a broadband service provider makes a “stand-alone offering of telecommunications,” and are within the definition of a “telecommunications service” as determined by the FCC, and properly classified as such. Broadband providers’ reliance on information services such as the DNS and caching were not enough to disturb the FCC’s finding, as they were merely “telecommunications system management exceptions.”

The challengers’ procedural arguments regarding the sufficiency of notice in the NPRM reclassification also failed, as did their argument that the FCC lacked statutory authority to reclassify broadband. Additionally, the Court held that the FCC’s reclassification of mobile broadband service as a “commercial mobile service” was reasonable, given mobile broadband service’s increased ubiquity since its initial classification in 2007 and its versatility to communicate with all Internet and phone users. This move also avoided a contradictory result under which mobile broadband would have been a common carrier under one definition, and exempt from common carrier treatment under another. Furthermore, the FCC’s decision to forbear from applying certain Title II regulations upon broadband providers was reasonable given the FCC’s understanding of the market implications and the possibility of implicating the Fifth Amendment’s Takings Clause.

As for the open internet rules themselves, the Court held that the ban on paid-prioritization was within the FCC’s statutory authority under Title II and the Telecommunications Act of 1996. The FCC’s justification for the open internet rules was sufficient, as the Court had already decided in Verizon that open internet rules “will preserve and facilitate the ‘virtuous circle’ of innovation that has driven the explosive growth of the Internet.” (at 95) The General Conduct Rule was not unconstitutionally vague under the Due Process Clause, as it was “designed to be flexible so as to address unforeseen practices and prevent circumvention of the bright-line rules” such as the anti-blocking and anti-throttling rules. (at 98)

The second main issue was whether the open internet rules violated broadband providers’ free speech rights under the First Amendment. The parties first had to demonstrate standing to challenge the open internet rules, an issue of particular importance to the First Amendment. The only prong of standing in dispute was whether there was “injury in fact” that was “fairly traceable” to the FCC’s actions which could have been “redressed by a favorable decision.” Under First Amendment rules, pre-enforcement review is usually permitted as long as the challenging party has expressed intent to violate the law, as “the courts’ willingness to permit pre- enforcement review is at its peak when claims are rooted in the First Amendment” (quoting from N.Y. Republican State Comm. v. SEC). As the challengers expressed intent to violate the FCC’s regulations, the parties had standing to challenge the open internet rules under the First Amendment.

As to the substance of the First Amendment claims, the key was the hallmark attributes universal to common carriers under U.S. law. Common carriers have “long been subject to nondiscrimination and equal access obligations akin to those imposed by the rules without raising any First Amendment question. Those obligations affect a common carrier’s neutral transmission of others’ speech, not a carrier’s communication of its own message.” (at 108-09) This has been true with the postal service, railroad, and telephone companies without violating those carriers’ First Amendment rights. For internet access itself (as opposed to original content or a curated internet experience), the FCC properly found that broadband providers are “mere conduits for the messages of others, not as agents exercising editorial discretion,” and thus do not receive First Amendment protection. (at 111, quoting the 2015 Open Internet Order) Broadband providers historically exercise no editorial control like publishers, and a broadband provider does not — and is not understood by users to — “speak.” Broadband providers merely offer access to internet content as a utility, do not receive protection under the First Amendment, and are therefore properly subject to the open internet rules that maintain they remain indiscriminate, neutral providers.

For these reasons, the Court denied the challengers’ petitions for review, upholding the FCC’s 2015 Open Internet Order, its findings, and its rules for net neutrality imposed upon broadband service providers.

Senior Circuit Court Justice Williams concurred in part and dissented in part. The dissent agreed with some of the majority opinion, but argued that the FCC’s 2015 Open Internet Order should be vacated for three reasons: 1. the FCC acted unreasonably in its reclassification of broadband service from an information service to a telecommunications service by failure to account for broadband providers’ reliance, and weak reasoning regarding changed factual circumstances and policy perceptions; 2. Sections 201 of the Communications Act and Section 706 of the Telecommunications Act of 1996 do not justify the open internet rules in the order; and 3. the FCC’s decision to decline enforcement of some Title II provisions is contradictory with regard to market power — it should either be unable to reclassify broadband, or apply all of Title II’s provisions.