Verizon Communications Inc. v. FCC (2014)

Verizon Communications Inc. v. Federal Communications Commission was a 2014 U.S. Court of Appeals for the D.C. Circuit case vacating portions of the FCC Open Internet Order 2010 that the court determined could only be applied to common carriers. The court ruled that the FCC did not have the authority to impose the order in its entirety. Because the FCC had previously classified broadband providers under Title I of the Communications Act of 1934, the court ruled that the FCC had relinquished its right to regulate them like common carriers. The case was largely viewed as a loss for network neutrality supporters and a victory for the cable broadband industry. Of the three orders that make up the FCC Open Internet Order 2010, two were vacated (no blocking and no unreasonable discrimination) and one was upheld (transparency). Judge David S. Tatel wrote the opinion with Judge Judith Ann Wilson Rogers joining. Judge Laurence H. Silberman wrote a separate decision concurring in part and dissenting in part.

Verizon v. FCC
CourtUnited States Court of Appeals for the District of Columbia Circuit
Full case nameVerizon Communications Inc. v. Federal Communications Commission
ArguedSeptember 9, 2013
DecidedJanuary 14, 2014
Citation(s)740 F.3d 623 (D.C. Cir. 2014); 11-1355 (2014)
Holding
The FCC does not have the authority to regulate broadband providers as per the FCC's own Open Internet Order. The court vacated in part and upheld in part the FCC Open Internet Order 2010.
Court membership
Judge(s) sittingSenior Circuit Judge Laurence H. Silberman; Circuit Judges Judith Ann Wilson Rogers, David S. Tatel
Case opinions
MajorityDavid S. Tatel, joined by Judith Ann Wilson Rogers
Concur/dissentLaurence H. Silberman

Background

At issue was whether the FCC could regulate Internet service providers with regards to network neutrality.

On June 27, 2005, in National Cable & Telecommunications Association v. Brand X Internet Services, The United States Supreme Court applying the Chevron doctrine upheld a determination by the FCC that cable Internet providers were an "information service," and not a "telecommunications service" as classified under the Telecommunications Act of 1996. BrandX had argued that the FCC must regulate cable Internet providers as common carriers under the Communications Act of 1934. BrandX lost, and this case set an important precedent with the FCC classifying cable Internet providers as "information services."

On April 6, 2010, the United States Court of Appeals for the District of Columbia held, in Comcast Corp. v. FCC, that the FCC did not have ancillary jurisdiction over Comcast's Internet service under the language of the Communications Act of 1934. Since the FCC had already classified cable Internet providers as information services, the court ruled that the FCC could not censure Comcast's interference with their customers' peer-to-peer traffic.

The Comcast ruling lead the FCC to issue its FCC Open Internet Order 2010 in December 2010. On January 20, 2011, Verizon sued the FCC, arguing that the order was exceeding the FCC's authority as authorized by Congress, violated the company's constitutional rights, and created uncertainty for the communications industry.[1][2] MetroPCS also brought suit against the FCC shortly after Verizon, but dropped its suit on May 17, 2013.[3][4]

Holding

The court first defines their task as, "not to assess the wisdom of the Open Internet Order regulations, but rather to determine whether the Commission has demonstrated that the regulations fall within the scope of its statutory grant of authority." The court then sets about breaking up the FCC Open Internet Order 2010 into its constituent parts and either vacating or upholding each part.[5]

The court vacated two parts of the FCC Open Internet Order 2010, determining that the FCC did not have the authority to impose these orders without classifying network providers as common carriers. Since the FCC had previously classified broadband providers as "information services" and not "telecommunications services," they could not be regulated as common carriers under Title II of the Communications Act of 1934. Therefore, the FCC Open Internet Order 2010 regulations, which could only be applied to common carriers, could not be applied to broadband providers. The court upheld the transparency order of the FCC Open Internet Order 2010, which it found was not contingent upon network operators being classified as common carriers.

Additionally, the court found that section 706 of the Telecommunications Act of 1996 "vests the FCC with affirmative authority to enact measures encouraging the deployment of broadband infrastructure."[5] The court mostly agreed with the FCC's interpretation of section 706 of the Telecommunications Act of 1996. The court also agreed with the FCC that broadband providers represent a threat to Internet openness and could hinder future Internet development without at least rules similar to those in the FCC Open Internet Order 2010.[6]

The court suggested possible changes to the FCC's regulations that may be more amenable to their opinion.[5]

Effect on 2010 Open Internet Order

The FCC Open Internet Order 2010 established three orders on fixed and mobile operators of Internet access.

Transparency

This order was applied to both fixed and mobile operators. It requires them to publicly disclose accurate information regarding their network management practices, performance, and commercial terms of service.[7] This order was not vacated by the court.[5]

No blocking

This order was applied to both fixed and mobile operators. This order prevents blocking, or otherwise degrading so as to make unusable, access to lawful content, applications, services or non-harmful devices.[7] This order was canceled by the court.[5]

No unreasonable discrimination

This order was applied only to fixed operators. This order forbids fixed network operators from unreasonably discriminating against lawful network traffic. The FCC did not order for mobile operators because, according to the FCC, competition in the mobile networking space rendered it unnecessary.[7] This order was vacated by the court.[5]

Concurring/dissenting opinion

Judge Laurence H. Silberman wrote his own opinion, concurring in part and dissenting in part. His opinion is in general agreement with the majority that the FCC Open Internet Order 2010 "impermissibly subjects broadband providers to treatment as common carriers."[5] Of significance in this minority opinion is Silberman's ruling that the FCC has the authority to take "measures that promote competition in the local telecommunications market or other regulating methods that remove barriers to infrastructure investment." This has been interpreted to mean that the FCC has the authority to challenge state laws restricting municipal broadband.[8]

Reactions

Industry reaction

Immediately following the decision, both Comcast and Verizon issued a statement that the Internet will continue to work for consumers. Verizon stated the ruling will result in more innovation and more choice for consumers. AT&T stated that their commitment to network neutrality will not diminish. Time Warner Cable stated that their commitment to deliver the best service will not be compromised. As part of the Comcast NBC merger, Comcast was required to follow the FCC Open Internet Order 2010 for 7 years. They reiterated this commitment after the trial.[9][10]

On February 10, 2014, Netflix updated its ISP speed rankings with January 2014 data that show the average access speed via Verizon FiOS traffic was dropped down between December 2013 and January 2014.[11] Ars Technica, a technology news and information website, suggested the possibility that the ruling might affect this sudden traffic speed drop.[12] Pointing to Netflix's performance change, several news media pointed out that the battle began shifting from network neutrality frameworks to private peering deals, which had not been covered by the FCC Open Internet Order 2010.[12][13][14]

Government reaction

In January 2014, in response to the ruling, a petition campaign was launched on the White House's petition site, urging President Obama to direct the FCC to reclassify ISPs as "common carriers". It received more than 105,000 signatures. On 18 February 2014, the Obama administration replied to the petition. It stated that although the President "vigorously supports" a robust, free and open Internet, he was not able to direct the FCC to do that because the FCC is an independent agency.[15]

On February 19, 2014, Tom Wheeler, the chairman of the FCC, issued a statement responding to the court's decision and laying out their intentions for the future of network neutrality. The FCC stated that they will not appeal the decision, but will establish new rules for the transparency, the no blocking, and the non-discrimination, based on the decision. The FCC stated that it will keep "Title II authority on the table" and work "on a case by case basis" to evaluate whether standards of network neutrality are met by carriers.[16][17] The FCC also opened a new proceeding asking for general public comment,[18] and on April 24, the Chairman announced he would be circulating a draft Open Internet Notice of Proposed Rulemaking for the next open FCC meeting on May 15.[19][20][21]

Additionally, the FCC laid out plans to start challenging state laws prohibiting municipal broadband, based in part on the dissenting opinion of Judge Laurence H. Silberman, who wrote that the FCC has the authority to take "measures that promote competition in the local telecommunications market or other regulating methods that remove barriers to infrastructure investment."[8]

Commentary

Multiple news outlets claimed the Court ruling was the death of network neutrality in the United States.[22][23][24][25][26]

The court upheld the FCC's authority to regulate broadband providers to encourage nationwide broadband deployment, agreeing with the FCC's interpretation of section 706 of the 1996 Telecommunications Act. Some legal observers believe this should allow the FCC to reclassify broadband providers as "telecommunications services" and therefore subject them to common carrier regulation.[22] Legal scholar Annemarie Bridy predicted that the case will force the FCC's hand in reclassifying broadband providers as "telecommunications services,"[27] something which the FCC has so far resisted doing. Legal scholar Susan P. Crawford also wrote that the FCC should move now to regulate broadband providers as common carriers in order to preserve network neutrality and civic life in the United States.[28]

In response to the FCC's decision of not appealing but establishing new rules, James P. Tuthill, an attorney and lecturer of UC Berkeley School of Law, criticized the decision as the agency could appeal the Supreme Court to seek review, and the Court would likely accept the case because of the significance of the issues and a request by a federal agency. He also predicted that even if the FCC would propose new rules, they would be challenged and overturned based on this case results as "simply calling a rose by another name will not change what it is, and the courts won't buy it."[29]

In response to the FCC's plans to start challenging state laws prohibiting municipal broadband, reformer and law professor Susan P. Crawford believes promoting local municipal broadband may be the most effective way to provide broadband access.[30]

Some people, who have paid attention to the governmental regulation on the Internet, mentioned another aspect of the ruling. April Glaser, a staff activist at the EFF, noted that the ruling had an aspect of a bar against the FCC's approach to network neutrality.[31] Various commentators pointed to the possibility that by invoking the court's interpretation of Section 706, the FCC could expand its regulative power to the Internet thereby threatening its freedom.[32]

See also

References
  1. Wyatt, Edward (21 January 2011). "Verizon Sues F.C.C. to Overturn Order on Blocking Web Sites". New York Times. Retrieved 14 February 2014.
  2. McFadden, Ed. "Verizon Files Appeal in Federal Court Regarding FCC Net Neutrality Order". Retrieved 14 February 2014.
  3. Singel, Ryan (25 January 2011). "Accused of Violating Net Neutrality, MetroPCS Sues FCC". Wired. Retrieved 14 February 2014.
  4. Sundar, Sindhu. "MetroPCS Ditches Challenge To FCC Net Neutrality Regs". Law 360. Retrieved 14 February 2014.
  5. Verizon v. FCC (United States District Court for the District of Columbia Jan. 14, 2014).TextFull court opinion
  6. Kevin, McCarthy. "OLR BACKGROUNDER: APPELLATE COURT DECISION ON NET NEUTRALITY" (PDF). Connecticut Office of Legislative Research. Retrieved 28 February 2014.
  7. FCC. "In The Manner Of Preserving the Open Internet Broadband Industry Practices" (PDF). FCC. Retrieved 28 February 2014.
  8. Brodkin, Jon (19 February 2014). "FCC thinks it can overturn state laws that restrict public broadband". Ars Technica. Retrieved 20 February 2014.
  9. Lowensohn, Josh (14 January 2014). "Comcast, Verizon, and others promise net neutrality ruling won't hurt customers". The Verge. Retrieved 28 February 2014.
  10. Brodkin, Jon (14 January 2014). "How the FCC screwed up its chance to make ISP blocking illegal". Ars Technica. Retrieved 14 February 2014.
  11. Joris Evers (2014-02-10). "Brazil, Chile Lead In Broadband in Latin America" (Press release). Netflix. Netflix. Retrieved 18 March 2014.
  12. Brodkin, Jon (2014-02-10). "Netflix performance on Verizon and Comcast has been dropping for months". Ars Technica. Retrieved 18 March 2014.
  13. FitzGerald, Drew; Ramachandran, Shalini (2014-02-18). "Netflix-Traffic Feud Leads to Video Slowdown". Wall Street Journal. Retrieved 18 March 2014.
  14. Gustin, Sam (2014-02-19). "Here's Why Your Netflix Is Slowing Down". TIME. Retrieved 18 March 2014.
  15. Musil, Steven (2014-02-18). "White House says it won't direct FCC to reclassify broadband". CNET. Retrieved 18 March 2014.
  16. Wheeler, Tom. "STATEMENT BY FCC CHAIRMAN TOM WHEELER ON THE FCC'S OPEN INTERNET RULES FEBRUARY 19, 2014". FCC. Retrieved 20 February 2014.
  17. Brodkin, Jon (19 February 2014). "FCC won't appeal Verizon ruling, will regulate 'Net on "case-by-case basis"". Ars Technica. Retrieved 20 February 2014.
  18. "New Docket Established to Address Open Internet Remand". Federal Communications Commission. February 19, 2014.
  19. "Setting the Record Straight on the FCC's Open Internet Rules". Federal Communications Commission. April 24, 2014.
  20. "May 2014 Open Commission Meeting". Federal Communications Commission. 25 November 2013.
  21. "FCC ANNOUNCES TENTATIVE AGENDA FOR MAY OPEN MEETING" (PDF). Federal Communications Commission. April 24, 2014.
  22. Brodkin, Jon (14 January 2014). "Net neutrality is half-dead: Court strikes down FCC's anti-blocking rules". Ars Technica. Retrieved 14 February 2014.
  23. Wyatt, Edward (14 January 2014). "Rebuffing F.C.C. in 'Net Neutrality' Case, Court Allows Streaming Deals". New York Times. Retrieved 14 February 2014.
  24. Fung, Brian. "Federal appeals court strikes down net neutrality rules". Washington Post. Retrieved 14 February 2014.
  25. Moritz, Scott. "Verizon Victory on FCC Rules Seen as Loss for Netflix". SFGate. Retrieved 14 February 2014.
  26. Dattaro, Laura (15 January 2014). "Why the Courts Ruled Against Net Neutrality". Popular Mechanics. Retrieved 14 February 2014.
  27. Bridy, Annemarie. "Is There a Future for Net Neutrality after Verizon V FCC". Freedom to Tinker. Retrieved 14 February 2014.
  28. Crawford, Susan (15 January 2014). "Did the Government Just Break the Internet?". Bloomberg.com. Bloomberg News. Retrieved 28 February 2014.
  29. Tuthill, James (25 February 2014). "FCC throws in towel, but public has right to know why". San Francisco Chronicle. Retrieved 2014-03-20.
  30. Judis, John (30 April 2013). "The Next Elizabeth Warren Susan Crawford's crusade against lousy, overpriced Internet providers". New Republic. Retrieved 28 February 2014.
  31. Glaser, April (25 February 2014). "Why the FCC Can't Actually Save Net Neutrality". Electronic Frontier Foundation. Retrieved 2014-03-20.
  32. Tummarello, Kate (25 February 2014). "FCC grasps for expanded powers with net neutrality push". The Hill. Retrieved 2014-03-20.
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