Data Roaming Order Survives Verizon Challenge

The FCC approved the data roaming order over the strong objections of the commission’s two Republicans, Robert McDowell and former Commissioner Meredith Baker, who warned that the FCC exceeded its Communications Act authority by treating a private mobile service as a common carrier service (CD April 8/11 p1). Verizon was represented by Helgi Walker of Wiley Rein, the same attorney who successfully argued Comcast’s challenge of the FCC’s first net neutrality rules and is slated to represent Verizon in its pending challenge of the 2010 order.

Industry officials said the decision was a win for the FCC, but it doesn’t mean the net neutrality order will survive appeal as well. Stifel Nicolaus said while not a surprise, based on the tenor of questions during oral arguments (CD Sept 21 p1), the decision was a “setback” for Verizon Wireless and a “victory” for the FCC as well as competitive wireless carriers like Sprint and T-Mobile. “This decision certainly helps the commission in the open Internet case, but it is by no means outcome-determinative,” said Andrew Schwartzman, a longtime communications lawyer. “First, the court accepts an expansive view of the commission’s authority. Second, it rejects arguments similar to those made in the open Internet case, that the commission’s action unlawfully treated Verizon as a common carrier. So too, it rejected arguments that the commission’s decision was an unconstitutional taking of Verizon’s property.”

"I don’t think the court’s decision in any sense spells doom for the net neutrality appeal because in the data roaming case the court looked to several specific Title III spectrum licensing provisions that the commission could argue delegated it authority to adopt the roaming rules,” said Free State Foundation President Randolph May. “The courts have always viewed the commission’s Title III authority pretty broadly. In the net neutrality appeal, the commission’s assertion of authority is more tenuous and doesn’t rest primarily on Title III. That said, on balance, you certainly can’t conclude the roaming decision enhances Verizon’s chances in the net neutrality appeal.”

Judge David Tatel wrote the opinion upholding the order, joined by Judges Merrick Garland and Thomas Griffith. “Title III affords the Commission ‘broad authority to manage spectrum … in the public interest,'” Tatel wrote. “Although Title III does not ‘confer an unlimited power,’ … the Supreme Court has emphasized that it does endow the Commission with ‘expansive powers’ and a ‘comprehensive mandate to ‘encourage the larger and more effective use of radio in the public interest.'” The FCC can’t rely on Title III “without mooring its action to a distinct grant of authority in that Title,” he said. “But here the Commission did not rely solely on its power to act in the public interest. Instead, it expressly relied on particular delegations of authority in Title III, such as section 303(b)."

Tatel also rejected Verizon arguments that, based on Regents of University System of Georgia v. Carroll, the Communications Act does not give the FCC authority “to determine the validity of contracts between licensees and others.” “Although the data roaming rule dictates certain interactions between licensees and third parties, this kind of third-party impact differs in kind from the state-law contract issue at stake in Carroll,” Tatel wrote. “Because Verizon nowhere suggests that the data roaming rule will void third-party contracts, Carroll does not stand in the Commission’s way.” Verizon also argued that Title III gives the FCC no authority to make “fundamental changes” to the terms of existing licenses, he said. “Given that the data roaming rule requires nothing more than the offering of ‘commercially reasonable’ roaming agreements, it hardly effects such a radical change,” he said. “Indeed, imposing a limited obligation to offer data-roaming agreements to other mobile-data providers ‘can reasonably be considered [a] modification of existing licenses.'"

The “critical issue” is Verizon’s contention that the rule “contravenes the Communications Act’s prohibition against treating mobile-internet providers as common carriers,” Tatel said. “At oral argument, Verizon made its position crystal clear: Because the company does not qualify as a common carrier with respect to mobile-data services, the Commission has no authority to compel it to permit other providers’ subscribers to roam on its network.”

A reading of relevant case law makes clear that, when forced to offer service “indiscriminately and on general terms,” a carrier “is being relegated to common carrier status,” Tatel said. “But perhaps more importantly, the Commission has significant latitude to determine the bounds of common carriage in particular cases.” The court has to recognize that common carriage “is not all or nothing -- there is a gray area,” he said.

But Tatel also warned that much depends on how the rules are applied and so are open to further challenge. The rules leave “substantial room for individualized bargaining and discrimination in terms,” he said. They carry “no presumption of reasonableness” and rely in instead on a requirement that data rates are “commercially reasonable,” standard, he said. But if in applying the rules the FCC treats Verizon as a common carrier, “Verizon is free to return to court with an ‘as applied’ challenge,” Tatel wrote. “In implementing the rule and resolving disputes that arise in the negotiation of roaming agreements, the Commission would thus do well to ensure that the discretion carved out in the rule’s text remains carved out in fact."

"Today’s ruling upheld rules that require carriers to offer data roaming on commercially reasonable terms,” Verizon spokesman Ed McFadden said. “As we made clear throughout the case, Verizon Wireless regularly enters into such data roaming agreements on commercially reasonable terms to meet the needs of consumers, and will continue to do so.”

FCC Chairman Julius Genachowski was quick to issue a statement hailing the decision. “Our rules have empowered consumers and expanded their ability to enjoy the benefits of seamless and nationwide access to mobile data services, including wireless Internet and e-mail,” Genachowski said. “Enacting data roaming rules is one of many strong actions the FCC has taken in this area, and we will continue to promote broadband investment and innovation."

Several House Democrats said the court decision promotes competition and availability of wireless services for consumers. House Commerce Committee ranking member Henry Waxman, D-Calif., called it a “victory” for consumers that ensures competition among carriers. House Communications Subcommittee Ranking Member Anna Eshoo, D-Calif., said the court’s rejection of Verizon’s challenge is particularly important for smaller carriers “that often have little choice for roaming partners other than their largest rivals.” Rep. Mike Doyle, D-Pa. said he’s “glad to see the FCC’s authority to protect wireless subscribers reaffirmed today.” Rep. Ed Markey, D-Mass., said “exorbitant roaming charges should not be permitted to restrict consumers’ ability to fully utilize their wireless devices."

The Competitive Carriers Association, the Rural Telecommunications Group, the National Telecommunications Cooperative Association and the Interoperability Alliance said in separate statements the decision was critical for smaller carriers. “As Public Knowledge argued in its amicus brief supporting the Order, the updated roaming rules ‘allow smaller carriers to offer services that can compete with larger carriers,” Public Knowledge said. “Millions of American consumers who might have lacked access to data services will benefit from this rule, which ultimately creates more choices for consumers, brings down prices, and brings broadband access within reach of slow-adopting communities.”