Court of Appeals Hears Oral Argument in Challenge to FCC's August 5 CALEA Order
May 5, 2006. A three judge panel of the U.S. Court of Appeals (DCCir) heard oral argument in ACE v. FCC. Judge Edwards repeatedly stated, with various blunt terms, that the argument of the Department of Justice (DOJ) and the Federal Communications Commission (FCC) that broadband service providers are subject to the requirements under the 1994 Communications Assistance for Law Enforcement Act (CALEA) is nonsense.
This is a consolidation of numerous petitions for review of the order [59 pages in PDF] that the FCC adopted on August 5, 2005, and released on September 23, 2005. This order and further notice of proposed rulemaking (FNPRM) provides that facilities based broadband service providers and interconnected voice over internet protocol (VOIP) providers are subject to requirements under the CALEA.
See, story titled "FCC Amends CALEA Statute" in TLJ Daily E-Mail Alert No. 1,191, August 9, 2005. This order is FCC 05-153 in ET Docket No. 04-295 and RM-10865. See also, story titled "FCC CALEA Order Challenged" in TLJ Daily E-Mail Alert No. 1,240, Wednesday, October 26, 2005.
See also, ACE brief [71 pages in PDF] and FCC brief [52 pages in PDF] filed with the Court of Appeals.
The FCC based its conclusion on two separate grounds. First, it concluded that the definition of "telecommunications carrier" in CALEA is different and much broader than the definition of that term in the Communications Act, and can encompass providers of services that are not classified as telecommunications services under the Communications Act. Second, it asserted that the services covered by the order replace a substantial portion of conventional telecommunications services.
There is a series of articles in TLJ Daily E-Mail Alert 960, August 17, 2004, which offer the legal analysis that neither of these two legal arguments is tenable.
The three judge panel was comprised of David Sentelle, Harry Edwards and Janice Brown. Judges Sentelle was appointed in 1987 by former President Reagan. Judge Edwards was appointed in 1980 for former President Carter. Both have sat on numerous panels that have reviewed final orders of the FCC. Both are very well versed in the Communications Act, the CALEA, and cases involving communications and information technologies.
In contrast, Judge Brown has been on the Court for less than one year. She sat in silence throughout the oral argument.
Both Judges Sentelle and Edwards were active in asking questions, and refuting arguments offered by counsel. Both drew a distinction between VOIP, which they referred to as "voice over", and broadband access service. The difference, they said is that the FCC has not determined that "voice over" is an "information service", while the FCC has determined that broadband access is an information service.
Jacob Lewis argued for the DOJ and FCC. Edwards said that the argument that broadband access service is covered by the CALEA is "just nonsense, and "utter nonsense". He said of the argument that broadband is a substantial replacement, "analytically that argument is wrong". He commented that the term "information service" has meaning, and that the FCC has ruled that broadband access is an information service. Moreover, if it is an information service it cannot be a telecommunications service. He also rejected the Lewis' argument that the transmission component can be disaggregated and regulated separately. Edwards said that, in light of the statutes, and the FCC's prior determinations, this argument is "goobledygook".
Edwards also suggested that the FCC must go "back to Congress" to get authority to impose CALEA obligations on broadband access services.
Edwards also said that the Court of Appeals is not bound by the opinion of the U.S. District Court (DMinn) in Vonage v. Minnesota Public Utilities Commission, which held that Vonage is an information service provider, and that the MPUC cannot apply state laws that regulate telecommunications carriers to Vonage. See, October 16, 2003, Memorandum and Order [PDF], and story titled "District Court Holds that Vonage's VOIP is an Information Service" in TLJ Daily E-Mail Alert No. 760, October 17, 2003.
Edwards and Sentelle suggested that the portion of the FCC's order that pertains to "voice over" might be sustained by the Court of Appeals. They did not elaborate on various types of VOIP. Nor did they discuss peer to peer service.
Hence, it is possible that the Court of Appeals will vacate the FCC's order in part, rejecting the conclusion that broadband access service is subject to CALEA like requirements, but allowing the FCC to impose CALEA like regulation upon VOIP applications that run over broadband.
From the perspective of effectively implementing an expanded CALEA like regime, there are some arguments for regulating the pipes, rather than the services that run over the pipes. However, because of the history of this matter at the FCC, the Court appears to be inclined to allow the FCC to regulate the latter, but not the former.
That is, the Supreme Court held in its June 27, 2005, opinion [59 pages in PDF] in NCTA v. Brand X that the FCC declaratory ruling that cable modem service is an information service is a permissible reading of the statute. Moreover, the FCC adopted its "Report and Order and Notice of Proposed Rulemaking" that classifies wireline broadband internet access services as information services on August 5, 2005. (Ironically, this was the same day that the FCC adopted the CALEA order under review.) See, story titled "FCC Classifies DSL as Information Service" in TLJ Daily E-Mail Alert No. 1,190, August 8, 2005.
Also, while Edwards belittled some of the arguments of the counsel for the FCC and DOJ at this oral argument, he remained, at bottom, quite deferential to the FCC in rulemaking.
That is, the CALEA provides that its requirements only apply to a "telecommunications carrier", and that its requirements do not apply to "information services". Then, the substantial replacement clause provides that certain services provided by certain entities are subject to CALEA requirements if their service is "a replacement for a substantial portion of the local telephone exchange service". The FCC has applied implausible meanings to numerous clauses in the statutes to reach its conclusions that broadband access services and interconnected VOIP services are subject to CALEA requirements.
But, Edwards questioned the FCC's conclusions only where, in addition to contorting the statutes, the FCC also reached conclusions that were directly inconsistent with its prior conclusions. Perhaps it is the case that Edwards is willing to let the FCC misconstrue the CALEA and Communications Act, so long as its misconstructions are not also inconsistent with its prior constructions. So long as the FCC has been silent on a particular issue, the FCC remains free to misconstrue and distort the statutes as it sees fit to bring new services and technologies within the reach of the CALEA regulatory regime.
As a consequence, the FCC may proceed with its CALEA based regulation of VOIP services. But also, if the Court of Appeals lets stand the FCC's reasoning as to the meaning of the substantial replacement clause, the FCC may, in the future, be able to sweep into the CALEA regime other services and technologies not at issue in the case, including those that have not yet been invented.
Comparison to the Broadcast Flag Case. Both Judges Sentelle and Edwards sat on the panel that vacated the broadcast flag order of the FCC in American Library Association v. FCC. (Judge Judith Rogers was the third member of that panel.)
The broadcast flag case is similar in many respects to the present CALEA case. Both are petitions for review of a final order of the FCC on a topic in which the FCC lacks statutory authority to issue the order.
The cases are different in the legal reasoning of the FCC. In the CALEA case the FCC asserts statutory authority based upon gross contortions of clauses in the CALEA and Communications Act that have plain meanings. In the broadcast flag case the FCC did not assert that it had specific statutory authority to regulate devices after a broadcast transmission is complete. Rather, it relied exclusively on its limited ancillary jurisdiction under Title I of the Communications Act.
In the broadcast flag case, the FCC's argument before the Court of Appeals was inconsistent with prior assertions of the FCC regarding authority to devices. In the present case, the FCC's arguments, as to broadband access services, are clearly inconsistent with other orders of the FCC. However, while the FCC's arguments, as to VOIP services, are inconsistent with the plain meaning of the statute, they are not also inconsistent with other orders of the FCC. The FCC has been careful not to determine that VOIP services are an information service.
A broadcast flag is digital code embedded in a digital broadcasting stream. It signals digital television (DTV) reception equipment to limit redistribution. For it to be effective, DTV equipment must give effect to a broadcast flag. Hence, the FCC wrote rules that contains technology mandates for equipment manufacturers. The FCC has statutory authority to license and regulate the use of electromagnetic spectrum, including devices that transmit and receive radio frequency signals. It does not have statutory authority to protect copyrights, or to regulate consumer electronic equipment for the purpose of protecting copyrights.
The FCC Commissioners recognized that the FCC faced a statutory authority problem from the outset. See, story titled "FCC Debates Its Authority to Promulgate Broadcast Flag Rule" in TLJ Daily E-Mail Alert No. 489, August 12, 2002. Nevertheless, the FCC proceeded to promulgate broadcast flag rules. The foreseen challenges came, and the Court of Appeals ruled with blunt and broad language that the FCC lacks statutory authority to write broadcast flag rules. The Court of Appeals issued its opinion [34 pages in PDF] in American Library Association v. FCC on May 6, 2005. See, story titled "DC Circuit Reverses FCC's Broadcast Flag Rules" in TLJ Daily E-Mail Alert No. 1,131, May 9, 2005.
The Court of Appeals began its opinion with the statement that "It is axiomatic that administrative agencies may issue regulations only pursuant to authority delegated to them by Congress."
The FCC Commissioners also recognized that their CALEA actions faced a statutory authority problem. When the FCC issued its NPRM on August 9, 2004, several Commissioners wrote separate statements regarding the lack of statutory authority.
Former Commissioner Kathleen Abernathy, who supported the NPRM, warned in a separate statement [PDF] that "at the end of the day, the federal courts -- rather than this Commission -- will be the arbiter of whether we are authorized to take the actions proposed in this rulemaking, and we must remain mindful of that fact as we consider final rules."
Matt Brill was a legal advisor to Abernathy at the time. He now works in the Washington DC office of the law firm of Latham & Watkins. He argued the case for the petitioners.
FCC Commissioner Michael Copps was bluntly critical of the substantial replacement analysis back in 2004. He wrote in a separate statement [PDF] that the NPRM "is flush with tentative conclusions that stretch the statutory fabric to the point of tear. If these proposals become the rules and reasons we have to defend in court, we may find ourselves making a stand on very shaky ground. It would be a shame if our reliance on thin legal arguments results in the CALEA rules being thrown out."
He also wrote that "it strains credibility to suggest that Congress intended ``a replacement for a substantial portion of the local telephone exchange´´ to mean the replacement of any portion of any individual subscriber's functionality. Capturing VoIP under the rubric of substantial replacement, ignoring the Ninth Circuit's decision in Brand X, and trying to slice and dice managed and non-managed services is not the way to proceed here."
FCC Commissioner Jonathan Adelstein wrote in a separate statement [PDF] that this NPRM "seizes upon notable but thin distinctions between definitions in CALEA and the Communications Act."
Judge Edwards wrote the opinion of the Court in the broadcast flag case. He also savaged the FCC's argument in the CALEA case regarding broadband access services.
The petitioners include the American Council on Education (ACE), and other library, university and education groups, including the American Library Association (ALA), Association of Research Libraries (ARL), American Association of State Colleges and Universities, Association of American Universities, National Association of College and University Business Officials, National Association of Independent Colleges and Universities, National Association of Statute Universities and Land Grant Colleges, Corporation for Education Network Initiatives in California, Internet2, and Educause.
The petitioners also include the Center for Democracy and Technology (CDT), Electronic Frontier Foundation (EFF), Electronic Privacy Information Center (EPIC), and the American Civil Liberties Union (ACLU)
The petitioners also include CompTel, Pulver.com, Sun Microsystems, Pacific Northwest GigaPOP, and National LambdaRail
This case is American Council on Education, et al. v. FCC and USA,
U.S. Court of Appeals for the District of Columbia, App. Ct. Nos. 05-1404, 1408, 1438,
1451 and 1453, Judges Sentelle, Brown and Edwards presiding.