Judges Send Mixed Signals in Arguments Over FCC Net Neutrality, Title II Order

Afterward, both the FCC’s critics and supporters saw reasons to be hopeful. Petitioner AT&T is “very pleased with today’s oral arguments,” said Senior Vice President Bob Quinn, who said the judges “focused on all the right issues.” Some FCC critics said they believed petitioners would likely prevail in arguments against the commission’s Title II reclassification of mobile broadband and IP interconnection, and against its ban on paid prioritization -- an outcome they said could jeopardize its overall regulatory framework.

At the same time, Senior Vice President Harold Feld of Public Knowledge, which backed the commission, told reporters, “I’m pretty happy, actually.” He said he believed the FCC’s Title II reclassification was on “pretty solid” ground on wireline broadband, though it faced “mixed” prospects on the mobile wireless side and the FCC “may lose” on IP interconnection, possibly on procedural notice grounds. He said only Judge Stephen Williams seemed “interested” in arguments against the paid prioritization ban. An FCC spokesman had no comment.

Potomac Research Group senior analyst Paul Glenchur said he believed the FCC’s Title II "common carrier treatment of wireless broadband will be the most obvious agency vulnerability." He added, "Oral arguments are not the best indication of likely outcomes, but I got the sense the panel is inclined to sustain the wired broadband rules in light of the Brand X Supreme Court precedent. It could be a close call.”

Tatel repeatedly cited Brand X in pushing back against petitioner arguments that broadband Title II reclassification violated the law. Tatel said the panel wasn't writing on a blank slate because the Supreme Court had ruled the FCC had reasonable discretion to classify broadband service as either a Title I information service or a Title II telecom service, which is generally more heavily regulated under common-carrier rules. Peter Keisler, representing USTelecom and other telco and cable petitioners, said the FCC had gone further this time because it had reclassified broadband Internet access service, which included computer processing functions that he said were clearly Title I information services.

Williams and Judge Sri Srinivasan asked about a telecom management exception to information services. Srinivasan suggested that, even back in the day of the traditional Title II phone system, there were information processing elements to the network. Keisler said Web access had always been considered a Title I information service. He said the domain name system and caching had also always been considered information services (or “enhanced” services before the 1996 Telecom Act). Tatel said caching seems like a telecom service that transmits information without changing it. FCC General Counsel Jonathan Sallet said both DNS and caching were covered by the telecom management exception.

Tatel kept bringing the early discussion back to Brand X and pressed Keisler about petitioner arguments that that earlier case was only about “last-mile” broadband service. Keisler said the “last-mile” was the broadband pipe from the customer up to the point of the ISP’s computer facilities but BIAS extends further. Tatel suggested that even if Keisler were right about that, the question came down to what service consumers were being “offered,” and “that’s ambiguous,” which the FCC can interpret as long as it’s “reasonable.”

Tatel pressed Sallet hard on why the FCC shifted to Title II after initially seeming to pursue broadband regulation under its Section 706 authority, which Tatel’s 2014 Verizon ruling upheld if, absent Title II, it didn’t include common-carrier regulation. Sallet struggled several times to answer in the face of Tatel’s questioning about what had changed. Tatel finally fell quiet after Sallet said the FCC concluded it couldn’t do all of its bright-line net neutrality rules -- against Internet blocking, throttling and paid prioritization -- without Title II, and it viewed those rules as essential.

There was much discussion about the FCC’s decisions to assert Title II jurisdiction over IP interconnection but not ISP service to Internet edge providers. Keisler said petitioner arguments that they were not given due notice of FCC intentions under the Administrative Procedure Act were particularly strong on interconnection after the FCC chairman had originally said interconnection should be dealt with separately from net neutrality. Keisler also said the FCC had backed off applying Title II to ISP service to edge providers after a Google filing late in the rulemaking, which he said was a particularly egregious APA violation. All three judges questioned Sallet extensively over the FCC’s decision not to reclassify the ISP edge service. Williams also pressed Sallet hard to justify its paid prioritization ban, which Sallet said the FCC had reasonably concluded was needed to encourage a “virtuous circle” of broadband provider and edge innovation and investment.

Keisler said the FCC’s Title II reclassification of mobile broadband Internet access service was even more fatally flawed. Under questioning from Tatel, Keisler allowed that the commission had “some latitude,” prompting Tatel to interject, “the FCC has more than some.” But after that, Keisler seemed to get less pushback from judges to some of his arguments that the FCC had violated the law on mobile broadband, including by not providing petitioners with enough APA notice. Tatel even suggested to both Keisler and FCC attorney Jacob Lewis that the court may agree with petitioners on the lack of notice, though he questioned whether they had suffered any actual harm. Keisler said they had, arguing petitioners had no opportunity to comment meaningfully or at all on at least three FCC policy shifts: from a “functional equivalence test” to a “ubiquity test”; from regulating traditional cellular phone networks and mobile broadband networks separately to “combining” them into one network for Title II purposes; and by redefining interconnection. There was also much debate over whether statutory text on the “public switched network” could be equated with the “public switched telephone network.” The FCC said it could not. Tatel also noted the distinction.

The court heard Alamo Broadband arguments that the FCC’s order violated the First Amendment on free-speech grounds, and Full Service Network arguments against the FCC’s forbearance decision giving broadband ISPs relief from much Title II regulation. Alamo attorney Brett Shumate said ISPs are speakers whose speech rights cannot be taken away by FCC regulation, but Lewis said ISPs engage in "transportation not editorial discretion" when they provide broadband access to the Internet. FSN attorney Earl Comstock said the FCC could not simply forbear from applying major competitive sections of the Telecom Act, or at least not without greater justification. Judges asked many questions on both issues, which were discussed late in the oral arguments, but they did not seem as animated.

Petitioner Daniel Berninger and attorney David Balto, who backed petitioners, said they believe the panel could side with arguments against the FCC’s paid prioritization ban and mobile broadband reclassification. “It was a good day for petitioners,” said Balto, who filed an amicus brief for the Georgetown Center for Business and Public Policy. “It was a tough day for the FCC,” said Scott Cleland, chairman of broadband ISP-backed NetCompetition. “The FCC’s case is a mess," he said, suggesting the court may only shoot out part of its order, but a key part -- like “the bottom of a boat.”

Andrew Schwartzman, senior counselor at the Georgetown Institute for Public Representation, which backed the FCC, said he believes at least two judges didn’t seem interested in Alamo and Berninger First Amendment arguments that the order violated ISP speech rights. But Schwartzman said it is unclear how the court will come out in general. Free State Foundation President Randolph May struck a similar note, saying he doesn’t know which way the case will go. “I'd say the outcome on the fundamental issue of Title II classification is difficult to predict, except that I'd say the court is leaning in favor of the mobile broadband providers with respect to their Title II argument. Also, I'd say the odds are against the FCC with respect to regulating interconnection. And I'd guess the FCC will prevail on the First Amendment issue."

Free Press Policy Director Matt Wood said: “We’re confident that the panel of judges will uphold the FCC’s ruling, because the agency chose the correct legal path to protect the rights Congress preserved for all Internet users. The judges recognized right out of the gate that earlier court cases on this topic made that path clear. The Supreme Court 10 years ago gave the FCC broad leeway to interpret the statutes in play. In the current case the agency got it right. They returned to the solid foundation of the law in Title II, crafted strong safeguards built on that foundation, and restored protections for the open communications network that powers our democracy and our economy. With Title II authority, the FCC can stop access providers’ plans to block and throttle online content, no matter where in their networks they try to play these tricks. That’s the legal protection everyone needs to make sure they can speak up and participate in 21st-century life.”

Brookings Nonresident Senior Fellow Stuart Brotman told us: “The D.C. Circuit was at the top of its game during oral argument, with an unusually expert three-judge panel. The FCC continued to treat this area as one based on expert policymaking. In contrast, the petitioners were far more assertive and conversant with detailed legal analysis, which is more likely to resonate with the judges when they craft the opinion.”