Court of Appeals Vacates FCC's Comcast Order
April 6, 2010. The U.S. Court of Appeals (DCCir) issued its opinion [36 pages in PDF] in Comcast v. FCC, vacating the August 2008 order of the Federal Communications Commission (FCC) that asserted authority to regulate the network management practices of broadband internet access providers. The Court held that the FCC lacks statutory authority to do this.
This opinion is significant, not just because it overturns the Comcast order, and because it holds that the FCC currently lacks statutory authority to regulate the network management practices of broadband internet access providers, but because the FCC's arguments that it has authority to writes rules in this area are the same arguments rejected in the just decided case.
On October 22, 2009, the FCC adopted and released its Notice of Proposed Rulemaking (NPRM) [107 pages in PDF] that proposes to regulate the network management practices of broadband internet access service providers. This proceeding is titled "In the Matter of Preserving the Open Internet Broadband Industry Practices". This NPRM is FCC 09-93 in GN Docket No. 09-191 and WC Docket No. 07-52.
TLJ asked Austin Schlick, the FCC's General Counsel, at the FCC's meeting on October 22, 2009, what is the statutory authority for the NPRM. He said, "read our brief" in the Comcast case. See, stories titled "FCC Adopts Internet Regulation NPRM" and "Statutory Authority and Ancillary Jurisdiction", and related stories, in TLJ Daily E-Mail Alert No. 2,008, October 23, 2009.
That is, the internet regulation rules proposed by the FCC on October 22, 2009, if promulgated, are at risk of being vacated on judicial review.
There remains a strategy for the FCC to assert statutory authority to regulate the network management practices of broadband internet access providers. That would be to reverse its 2002 cable modem order, in which it declared that cable modem service is an information service, not a cable service, and that there is no separate offering of telecommunications service. This strategy would further include reclassifying broadband internet access via cable as a Title II telecommunications service. This strategy would also entail revisiting the other FCC declaratory rulings classifying broadband internet access via wireline, wireless, and other platforms as Title II telecommunications service.
Summary of Opinion. It was not in dispute that the FCC lacked any express statutory authority to regulate the network management practices of broadband internet access providers. Rather, the FCC argued that it had ancillary authority.
The Court rejected this argument, holding, as it did in American Library Association v. FCC, the 2005 opinion overturning the FCC's broadcast flag rules, that to sustain its argument, the FCC must tie its claim of ancillary authority over Comcast's internet service to a statutorily mandated responsibility.
The Court of Appeals first summarized its holding. "In this case we must decide whether the Federal Communications Commission has authority to regulate an Internet service provider’s network management practices. Acknowledging that it has no express statutory authority over such practices, the Commission relies on section 4(i) of the Communications Act of 1934, which authorizes the Commission to ``perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions.´´ 47 U.S.C. § 154(i). The Commission may exercise this ``ancillary´´ authority only if it demonstrates that its action -- here barring Comcast from interfering with its customers’ use of peer-to-peer networking applications -- is ``reasonably ancillary to the ... effective performance of its statutorily mandated responsibilities.´´" (Hyperlink added.)
On May 6, 2005, the U.S.Court of Appeals (DCCir) issued its opinion [34 pages in PDF] in American Library Association v. FCC, overturning the FCC's broadcast flag rules. It held that the FCC did not have authority under Title I to promulgate those rules. See also, story titled "DC Circuit Reverses FCC's Broadcast Flag Rules" in TLJ Daily E-Mail Alert No. 1,131, May 9, 2005. That opinion is also reported at 406 F.3d 689.
The Court of Appeals continued in its summary of its holding that the FCC "has failed to make that showing. It relies principally on several Congressional statements of policy, but under Supreme Court and D.C. Circuit case law statements of policy, by themselves, do not create ``statutorily mandated responsibilities.´´ The Commission also relies on various provisions of the Communications Act that do create such responsibilities, but for a variety of substantive and procedural reasons those provisions cannot support its exercise of ancillary authority over Comcast’s network management practices. We therefore grant Comcast’s petition for review and vacate the challenged order."
The Court noted that the Communications Act gives the FCC "express and expansive authority to regulate common carrier services, including landline telephony, ... (Title II of the Act); radio transmissions, including broadcast television, radio, and cellular telephony, ... (Title III); and ``cable services,´´ including cable television, ... (Title VI)." (Parentheses in original.)
The Court also wrote that in the "still-binding 2002 Cable Modem Order, the Commission ruled that cable Internet service is neither a ``telecommunications service´´ covered by Title II of the Communications Act nor a ``cable service´´ covered by Title VI."
On March 14, 2002, the FCC adopted a Declaratory Ruling and Notice of Proposed Rulemaking [75 pages in PDF], which is also known as the "Cable Modem Order". The Declaratory Ruling (DR) component of this item states that "we conclude that cable modem service, as it is currently offered, is properly classified as an interstate information service, not as a cable service, and that there is no separate offering of telecommunications service." This is FCC 02-77 in Docket No. 00-185 and Docket No. 02-52. See, story title "FCC Declares Cable Internet Access an Interstate Information Service" in TLJ Daily E-Mail Alert No. 389, March 15, 2002.
On June 27, 2005, the Supreme Court issued its opinion [59 pages in PDF] in NCTA v. Brand X upholding this DR. See, story titled "Supreme Court Rules in Brand X Case" in TLJ Daily E-Mail Alert No. 1,163, June 28, 2005.
The Court of Appeals then noted that the FCC relies on the theory of "ancillary" authority. It "rests its assertion of authority over Comcast’s network management practices on the broad language of section 4(i) of the Act: ``The Commission may perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions´´".
The Court wrote in American Library Association v. FCC that the FCC "may exercise ancillary jurisdiction only when two conditions are satisfied: (1) the Commission’s general jurisdictional grant under Title I covers the regulated subject and (2) the regulations are reasonably ancillary to the Commission’s effective performance of its statutorily mandated responsibilities."
The Court wrote in the present opinion that the FCC meets first prong, and that this case turns on the second prong of the ALA test.
The FCC cited statutory sections that the Court concluded were statements of policy that delegated no legislative authority to the FCC, such as those in 47 U.S.C. § 230(b).
The Court held that "policy statements alone cannot provide the basis for the Commission’s exercise of ancillary authority".
It continued. "Policy statements are just that -- statements of policy. They are not delegations of regulatory authority. To be sure, statements of congressional policy can help delineate the contours of statutory authority. Consider, for example, the various services over which the Commission enjoys express statutory authority."
The Court cited three examples. "When exercising its Title II authority to set ``just and reasonable´´ rates for phone service, 47 U.S.C. § 201(b), or its Title III authority to grant broadcasting licenses in the ``public convenience, interest, or necessity,´´ id. § 307(a), or its Title VI authority to prohibit ``unfair methods of competition´´ by cable operators that limit consumer access to certain types of television programming, id. § 548(b), the Commission must bear in mind section 1's objective of ``Nation-wide ... wire and radio communication service ... at reasonable charges,´´ id. § 151." (Hyperlinks added.)
The Court added, "So too with respect to the Commission’s section 4(i) ancillary authority. Although policy statements may illuminate that authority, it is Title II, III, or VI to which the authority must ultimately be ancillary."
The Court reasoned that the FCC "cites neither section 230(b) nor section 1 to shed light on any express statutory delegation of authority found in Title II, III, VI, or, for that matter, anywhere else."
The Court also noted that if the FCC's argument that a Congressional statement of policy creates statutorily mandated responsibilities were accepted, "it would virtually free the Commission from its congressional tether".
The Court next rejected the FCC's argument that it has ancillary authority here under Section 706 of the Telecommunications Act of 1996, at 47 U.S.C. § 1302(a). It provides that the FCC "shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans ... by utilizing ... price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment."
The Court concluded that since the FCC concluded in 1998 that this section "does not constitute an independent grant of authority", it cannot now assert the opposite, relying upon the Supreme Court's April 28, 2009, opinion in FCC v. Fox Television Stations. This is also known as the fleeting expletives case. See, story titled "Supreme Court Reverses in FCC v. Fox" in TLJ Daily E-Mail Alert No. 1,932, April 28, 2009.
The Court of Appeals wrote, quoting the Fox opinion, that "Because the Commission has never questioned, let alone overruled, that understanding of section 706, and because agencies ``may not ... depart from a prior policy sub silentio,´´ ... the Commission remains bound by its earlier conclusion that section 706 grants no regulatory authority."
The Court also rejected the FCC's arguments that other statutory sections gave the FCC ancillary authority to issue its Comcast order.
The Court also rejected the FCC's argument that Comcast is estopped from arguing that the FCC lacks authority because the FCC asserts that Comcast took a contrary position in an earlier court proceeding.
Finally, the Court rejected the FCC's argument that the Supreme Court already decided the ancillary authority issue in the present case. The Court wrote that the FCC "cannot justify regulating the network management practices of cable Internet providers simply by citing Brand X's recognition that it may have ancillary authority to require such providers to unbundle the components of their services."
Case Background. The Congress has enacted no statute that prohibits any network management practices of broadband internet access providers. Nor has the Congress enacted any statute that delegates authority to the FCC to regulate the network management practices of broadband internet access providers.
The FCC adopted a policy statement [3 pages in PDF] on August 5, 2005, that states that "To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to access the lawful Internet content of their choice ... to run applications and use services of their choice, subject to the needs of law enforcement ... to connect their choice of legal devices that do not harm the network ... to competition among network providers, application and service providers, and content providers." (Footnotes omitted.)
Tom Navin, then Chief of the Wireline Competition Bureau (WCB), responded to questions at a news conference on August 5, 2005. He stated that the policy statement is "principles", and that "they are not enforceable".
See, stories titled "FCC Adopts a Policy Statement Regarding Network Neutrality" in TLJ Daily E-Mail Alert No. 1,190, August 8, 2005, and "FCC Releases Policy Statement Regarding Internet Regulation" in TLJ Daily E-Mail Alert No. 1,221, September 26, 2005.
On November 1, 2007, the Public Knowledge (PK) and Free Press (FP) filed with the FCC a document [48 pages in PDF] captioned "Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation For Secretly Degrading Peer-to-Peer Applications".
This complaint alleged that Comcast interfered with its subscribers' use of BitTorrent. See, story titled "Free Press Files Complaint with FCC Alleging that Comcast Is Violating 2005 Policy Statement" in TLJ Daily E-Mail Alert No. 1,669, November 5, 2007.
On March 27, 2008, Comcast reached an agreement with BitTorrent. Both companies also agreed that there is no need for government intervention. See, story titled "Comcast and BitTorrent Reach Accord on Network Management Practices" in TLJ Daily E-Mail Alert No. 1,738, March 27, 2008.
On April 15, 2008, Comcast and Pando Networks announced in a joint release an industry effort, including ISPs and P2P services, to discuss processes and practices ISPs should use to manage P2P applications.
FCC Comcast Order. On August 1, 2008, the FCC adopted its Comcast order [67 pages in PDF] asserting adjudicatory authority to enforce its 2005 policy statement, and asserting authority to regulate the network management practices of broadband service providers. This is the order which the Court of Appeals has vacated.
See, story titled "FCC Asserts Authority to Regulate Network Management Practices" in TLJ Daily E-Mail Alert No. 1,805, August 4, 2008.
The FCC released the text of this order on August 20, 2008. It is FCC 08-183 in Docket No. 07-52.
Former FCC Chairman Kevin Martin, a Republican, joined with Democrats Michael Copps and Jonathan Adelstein. Republican Commissioners Robert McDowell and Deborah Tate dissented.
Comcast filed a petition for review with the Court of Appeals. See, story titled "Comcast Files Petition for Review of FCC's Network Management Practices Order" in TLJ Daily E-Mail Alert No. 1,821, September 4, 2008.
The National Cable and Telecommunications Association (NCTA), Free Press, and others intervened. See, story titled "NCTA Intervenes in Comcast's Challenge to FCC Network Management Practices Order" in TLJ Daily E-Mail Alert No. 1,822, September 8, 2008. The Progress & Freedom Foundation (PFF) filed an amicus brief in support of Comcast.
This case is Comcast Corporation v. FCC and USA, U.S. Court of Appeals for the
District of Columbia, App. Ct. No. 08-1291. Judge Tatel wrote the opinion of the Court of
Appeals, in which Judges Sentelle and Randolph joined.