FCC Title II Net Neutrality Odds Seen Better on Wired than Mobile Broadband

“I think we’re looking at 2-1” in favor of the FCC, said Andrew Schwartzman, senior counselor at the Georgetown Institute for Public Representation, a backer of the agency’s order. He was among those we talked to or heard from Monday and Friday. If the D.C. Circuit has concerns on specific issues, he suggested it could remand them for a “do-over” that may not change much policy substance.

But critics believe the commission’s order is very vulnerable on its decisions to extend Title II to mobile broadband and IP interconnection, and to ban paid prioritization, threatening its overall regulatory framework. The FCC can’t take significant legal “hits” to its order and “get what they want,” said Daniel Berninger, a petitioner challenging the order on First Amendment speech grounds. “You could argue that they’ll win on two things and we’ll win on two, but they need to win on everything.”

Some critics, such as former FCC Commissioner Robert McDowell and NetCompetition Chairman Scott Cleland, believe the FCC is even still at significant risk of being overturned on its general Title II broadband reclassification, including for wired services. They noted Tatel pressed FCC General Counsel Jonathan Sallet hard to explain why the agency had shifted to Title II, and it’s unclear if the judge was satisfied by the answers. Even a remand could be problematic for the FCC because the timetable would be tight for adopting a new order before a new administration takes power in January 2017, said Christopher Yoo, a professor of law, engineering and communications at the University of Pennsylvania.

Wells Fargo analysts said their sense was “Title II is no sure thing (a positive for cable), given the judges’ apparent skepticism of the FCC’s decision to reclassify mobile broadband & ban paid prioritization, coupled with the apparent lack of appropriate notice.” Doug Brake, telecom analyst at the Information Technology and Innovation Foundation, called the argument a “wake-up call” on the need for a legislative solution. “The big takeaway is that while the judges seemed ready to give the commission discretion on the main aspects of wired reclassification, there are a couple of cards that, if knocked on could bring the house down,” he said.

Parties continued to caution that oral argument can be misleading and the judges' comments in this case were especially complicated. “Attempts to predict their ruling are likely to fail,” said network/Wi-Fi innovator Richard Bennett. "It is difficult, if not impossible, to handicap appellate decisions,” said NTCA Vice President-Policy Joshua Seidemann: “But, the depth of the panel’s inquiries and engagement regarding notice and evidence of circumstances indicates that the decision will be an intricate reminder to both rulemaking agencies and regulated entities of the need for comprehensive specificity in proceedings governed" by the Administrative Procedure Act.

Schwartzman agreed with the caveats about oral argument tea leaves, but he believed the “basic thrust” of the argument was determined at the outset when Tatel “made it clear that Brand X is going to control. That means the FCC is likely to get two votes for the principle that it can reclassify," he said, referring to Tatel and Judge Sri Srinivasan. The FCC and supporters argue that ruling gave the agency discretion to classify broadband Internet access service as a Title II telecom service subject to common carrier regulation. Schwartzman said he believes Judge Stephen Williams will likely go against the commission. “He doesn’t like regulation, and while he’s a judge and follows precedent, if there’s a way to find against the FCC, he’s going to do it,” Schwartzman said.

Schwartzman acknowledged judges could have concerns about some issues, but he believes they probably wouldn't be fatal for the commission’s approach. If the court has issues about interconnection or other questions, they’re likely to be in the form of a remand where the FCC gets a chance for a do-over, he said. “I think they were looking for avenues to uphold the commission on those sub-points. Once you get past the core question of Brand X, then you’re at the point where the two judges are looking for reason to uphold the FCC, and I think they got it.”

Kevin Russell, who argued for intervenors supporting the FCC, said his side “takes great hope" from Tatel’s early suggestions that “Brand X is the starting point.” New America’s Open Technology Institute is "confident in the strength of the rules and are encouraged by the court’s responsiveness to the legal arguments made by the FCC and its intervenors,” said Sarah Morris, OTI senior policy counsel.

But FCC critics said they believe the judges raised serious concerns about the commission’s decisions on mobile broadband, paid prioritization and interconnection, and even on its basic broadband framework. “Though it’s not possible to predict how the judges will ultimately rule on these issues, a majority of judges seemed as skeptical of some of the FCC's arguments as the judges who overturned the agency’s previous rules were during the Verizon oral arguments,” said Fred Campbell, executive director, Center for Boundless Innovation in Technology. “That doesn’t provide much confidence that the FCC built a more solid legal foundation for its rules this time around.”

Some critics said the FCC is particularly vulnerable on mobile broadband reclassification under Title II. “I think it’s all but a foregone conclusion that the FCC will lose on mobile broadband," McDowell said, citing Tatel’s questions and his reasoning from a 2012 Cellco data-roaming case. Yoo said he believes there are strong prospects the FCC will lose on the issue of whether the FCC could reclassify mobile broadband under Section 332, which prohibits “private mobile services” from being regulated under Title II. The Wells Fargo analysts said the judges showed “a lot of skepticism regarding the FCC’s reclassification of mobile broadband and IP interconnections but not edge traffic; and on the prohibition of paid prioritization.”

Russell acknowledged the FCC got “more skeptical questions about some aspects of the treatment of mobile broadband including about whether the notice was as comprehensive as it should have been. But at the same time, there’s a question whether a remand on notice grounds would make any difference.” Russell said the judges (and the agency) could face a dilemma if they believe the agency is prohibited under Section 332 from reclassifying mobile broadband as common carriage but under the statutory definition must treat a (broadband) telecom service under Title II. Although Schwartzman said the FCC’s notice on Section 332 mobile broadband issues was “weak,” he added that it was "brief but complete,” as FCC attorney Jacob Lewis said in court. He also said a remand on notice grounds could allow the court to avoid the substantive issue, giving the FCC another crack at formulating a better justification.

Yoo said even if the FCC wins on wired and mobile broadband reclassification and net neutrality rules, it could be seriously hurt if its Title II jurisdiction over interconnection is reversed or remanded. “You could see equal treatment within networks, but unequal treatment on how the traffic arrives at and leaves the networks,” he said. Yoo also said the FCC is vulnerable on its paid prioritization ban.

Cleland said the FCC could even lose on its general assertion that broadband Internet access service, including wireline, should be reclassified under Title II, despite Tatel’s Brand X comments. Cleland said Tatel’s “grilling” of Sallet -- on the question of why the FCC shifted to Title II from an apparent Section 706 approach allowed by Tatel’s earlier Verizon ruling -- was revealing. “If Judge Tatel and the court begin their thinking with questions about how much deference the FCC is due in the new legal environment of a Roberts’ [Supreme] Court, that is characterized by limiting the amount of Chevron deference expert agencies are judicially due, this is not a place the FCC would like this court to start, as it is a starting point of factual weakness rather than strength," he said in a precursorblog post. "Everything that the FCC and net neutrality proponents want out of this case -- i.e. substantial court deference to its asserted expert, independent, objective, decision-making; and the court fully upholding its Title II reclassification power to regulate Internet info services, interconnection, mobile, paid prioritization and Internet conduct going forward -- flows directly and completely from the FCC’s seminal decision to 'change its mind' and 'abandon' its 706 approach for Title II."

McDowell of Wiley Rein agreed: “Judge Tatel appeared very upset that the agency did not proceed with the Section 706 path and did not explain itself, and that could become the soft underbelly of the whole FCC framework.”