Telecom Law Monitor : Washington D.C. Telecom Lawyer & Attorney : Kelley Drye & Warren Law Firm : New York, Chicago, Connecticut, New Jersey, Brussels

In a much anticipated decision with potentially widespread ramifications across all federal agencies charged with implementing federal statutes, the United States Supreme Court has permitted the so-called “shot clock” rules of the Federal Communications Commission (“FCC” or “Commission”) applicable to wireless siting applications to remain in effect. By a 5-4 margin on May 20, 2013, in City of Arlington, Texas v. Federal Communications Commission, the High Court affirmed that when the FCC interprets an ambiguous provision of a statute that concerns the scope of the FCC’s regulatory authority, that interpretation is entitled to the same Chevron deference as its interpretation of any other ambiguous statutory provision unambiguously within the agency’s regulatory bailiwick. Under Chevron, if a federal “statute is silent or ambiguous with respect to the specific issue [before an agency], the question for the [reviewing] court is whether the agency’s answer is based on a permissible construction of the statute.” Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). If the agency’s construction of the ambiguous provision is permissible, then the agency’s interpretation is entitled to judicial deference.

Justice Antonin Scalia delivered the opinion of the Court joined by four other justices. Justice Breyer concurred with the Court’s opinion in part and concurred in the judgment. Chief Justice Roberts delivered a dissenting opinion joined by two other justices. The differences among the three opinions are rather fine. Distinguishing among the opinions arguably requires almost as much “mental acrobatics,” to use the majority’s term, as the majority sought to avoid stating that no dichotomy exists, in terms of the deference to which an agency is entitled, between interpretations regarding the scope of an agency’s authority under a statute it administers and interpretations applying the jurisdiction the agency clearly has. Read our full summary of the opinion here.

The impact of the Court’s decision in City of Arlington will go far beyond the bounds of the FCC’s declaratory ruling adopting the antenna siting “shot clock.” The decision is not easily limited to the facts in the case before the Court and will likely affect court review of federal agency actions generally, not just those of the FCC. For example, the pending appeals of the FCC’s 2010 Net Neutrality Order which we have previously covered in this blog involve questions of the Commission’s interpretation of its own authority. City of Arlington may also have the effect of emboldening agencies to make decisions that “push the jurisdictional envelope” under the statutes they administer. In almost any situation involving the scope of the Commission’s authority, where the Act is at least potentially ambiguous as to the FCC’s authority to adopt the regulations in question, parties will need to take heed of City of Arlington.
 

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On December 23, 2010, the FCC adopted new Open Internet ("network neutrality") rules that place a variety of disclosure and other obligations on certain providers of broadband Internet access. On June 30, 2011, while required OMB review of the new rules continued, the FCC's Enforcement Bureau and the Office of General Counsel issued a Public Notice to assist with compliance with the new transparency rule. OMB review was completed early in August, the rules were published in the Federal Register on September 23, 2011, and they are effective as of November 20, 2011.

The rules, the justification for the rules, and the Commission's authority to adopt the rules will be the subject of ongoing policy, legal, and legislative battles in the months and years ahead. Petitions for review were filed in numerous federal circuits, and, after a lottery, the D.C. Circuit Court of Appeals was selected to hear the appeals brought by Verizon and Verizon Wireless and numerous consumer and public interest groups. We expect the court to hear the case in 2012.

The Kelley Drye Telecom practice has created a memo titled "A Practical Look at the Federal Communications Commission’s Open Internet (Network Neutrality) Regulations" that provides a practical overview in question and answer format of the substance of the new rules and the obligations they impose on affected providers of broadband Internet access services, as well as general guide for compliance, taking into account the Enforcement Advisory.

If you would like a complete copy of the memo, please e-mail Steve Augustino at saugustino@kelleydrye.com, or John Heitmann at jheitmann@kelleydrye.com.
 

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The same circuit that decided the Comcast case will decide the net neutrality appeals after all. Yesterday, the Judicial Panel on Multidistrict Litigation announced that the D.C. Circuit had been selected by random selection (i.e., lottery) for the net neutrality appeals.  The other cases will be consolidated with the D.C. Circuit case.

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With the September 23rd publication of the Net Neutrality Order in the Federal Register, appeals of the order could finally be filed.  As expected, multiple parties filed appeals in multiple districts, and the choice of circuit will now be decided by lottery under the Judicial Panel on Multijurisdiction Litigation rules.  Verizon has again asserted that the case must be heard in the DC Circuit, but the FCC moved to dismiss that appeal, on substantially similar grounds as in January.

The next step is for the panel to announce which circuit is selected in the lottery.  That decision is expected by the end of the week.  If the pick is not the DC Circuit, Verizon is expected to move to transfer venue to the DC Circuit. 

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One long march is finally over, another one begins.  After OMB approval of the rules was announced earlier this week, today, the FCC published the Net Neutrality Order in the Federal Register.  The 44 page summary is available here.  With this notice today, the next stage in the net neutrality saga finally begins. 

First, and most likely, with the publication today, appeals of the rules may finally begin.  Multiple appeals will be filed, most likely in multiple circuit courts of appeals.  The question will be where the appeals will be heard.  On one side, Verizon Wireless has argued that the appeal must be heard in the DC Circuit because it is a "licensing" decision.  Others have argued that the general appeal provision applies, so venue is proper in any of the circuits.  If this latter view is correct, a lottery will be held among the circuits with appeals filed in the first 10 days to determine which circuit will hear the case. 

Second, the publication triggers the effective date of the new rules.  With publication today, the new rules will take effect on November 20th unless stayed by the court.  It is important to recall that Commissioner McDowell wrote a dissent that essentially argued that the rules will create irreparable harm, which is the primary factor examined in determining whether a stay is proper.

Watch this blog for more updates.  We expect today to mark the beginning of a busy litigation period over the new rules. 

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The Office of Management and Budget does not post the comments it receives on Paperwork Reduction Act notices, like the FCC's recent notices regarding the net neutrality rules.  But we have them here.

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Continuing the slow march to Federal Register publication -- and certain court challenge -- of the Net Neutrality rules, the FCC today published notices of the two information collection provisions subject to review by the Office of Management and Budget (OMB).  The notices address the formal complaint rules for violations of the new requirements and the public disclosure rules for network management practices.  Regarding the latter, see also the clarification released by the FCC last week.

Comments on the two information collection notices are due by August 8.  Publication of the rules in the Federal Register is not likely before the comment date.

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After months of waiting for the FCC to publish its Net Neutrality Order in the Federal Register, the FCC has finally . . .  released a clarification of the disclosure rules that will eventually apply.   The action does not indicate when Federal Register publication will occur, but, buried in the clarification is an announcement that the FCC will release results of its own broadband performance measurements before the new rules become effective.  So, we may have at least one more Public Notice before Federal Register publication (or perhaps simply a notice between publication and effectiveness). 

For more on the clarification, see below

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In a move that has more symbolic than practical effect, on Friday, the U.S. House of Representatives approved a resolution of disapproval of the FCC's December 21, 2010 Net Neutrality Order.  The Resolution was approved largely along party lines, with only two Republicans voting against the measure and only six Democrats voting for the measure.

To become effective, the resolution of disapproval would have to be approved by the Senate and signed by the President.  The Senate is not expected to approve the resolution, and the President stated that he would veto any disapproval measure.

The next major step for the Net Neutrality Order will be Court of Appeals review.  That will commence once the FCC publishes notice of the order in the Federal Register.

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Back in January, we posted on Verizon's attempt to appeal the FCC's Net Neutrality order.  Verizon presented a controversial claim that the order was a "licensing" decision which limited review to the U.S. Court of Appeals for the D.C. Circuit.  The FCC opposed that interpretation.

If successful, Verizon's preemptive move would have prevented a lottery from deciding which court of appeals considered the Net Neutrality order.  Yesterday, however, the D.C. Circuit dismissed Verizon's appeal as premature.

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On January 20th, Verizon took the controversial move of appealing the FCC's Net Neutrality Order before notice was published in the Federal Register.  Shortly after Verizon appealed, MetroPCS Communications filed a similar appeal, also in the D.C. Circuit and also relying on section 402(b) to assert that venue lies exclusively within the D.C. Circuit.

The FCC has moved to dismiss both petitions as premature.  Verizon opposed the motion and the FCC filed its reply yesterday.  At this time, the court has not ruled on the motion.  However, the D.C. Circuit issued a brief order denying Verizon's motion to refer the case to the Comcast panel of judges. 

Meanwhile, the FCC's order still has not been published in the Federal Register.  Once it is published, we expect multiple appeals to be filed, most likely in several circuit courts of appeal.  Such appeals would trigger the lottery process to determine where to consolidate the cases.

Links to the pleadings relating to the FCC's motion to dismiss are available below.

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In a controversial move, yesterday Verizon filed an appeal of the FCC's Net Neutrality Order adopted December 21.  Verizon sought review in the U.S. Court of Appeals for the D.C. Circuit -- and asked the same panel that decided the Comcast case to hear the appeal.

Verizon's appeal is controversial because it was filed before the FCC has published notice of the Net Neutrality Order in the Federal Register.  Appeals taken under the more common review provision -- section 402(a) of the Communications Act -- may not be filed prior to Federal Register publication, and the courts will conduct a lottery among all courts where appeals were filed within the first 10 days to determine which circuit will hear the case.  Verizon's move is an attempt to force review in the D.C. Circuit, where the Comcast decision also was considered.

Verizon's petition for review is available here.  Verizon's appeal relies upon section 402(b) of the Communications Act, asserting that the Net Neutrality Order modified Verizon's wireless licenses and thus that 402(b) applies.  Verizon's motion for consideration of the appeal by the Comcast panel is available here.

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Late yesterday, the FCC released the text of its Open Internet Report and Order (aka the Net Neutrality decision).  We're on vacation already, so we don't have time for any analysis right now.  Nevertheless, for those interested, the Report and Order is available here. 

Readers should review paragraphs 151-160 for the discussion of enforcement of the new rules.  Also, paragraph 161 states that all of the rules will be effective 60 days after the Federal Register notice of OMB's approval of the new information collection requirements associated with the rules.

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Today, a divided FCC adopted enforceable "net neutrality" rules for the first time.  By a 3-2 vote, with all three Democrats voting in favor and both Republicans voting against, the Commission adopted a Report and Order in its Open Internet inquiry.  As Chairman Genachowski announced last month, the new rules rely upon the FCC's "Title I" authority to adopt "basic rules of the road" to preserve the open Internet "as a platform for innovation, investment, competition and free expression."

To win the support of the other Democratic Commissioners, the Chairman agreed to several changes from his proposal last month.  Most notably, the Order applies the transparency rule and a limited blocking prohibition to wireless carriers, and -- although the exact extent is unclear -- appears to bar wireline broadband service providers from engaging in paid prioritization of Internet content.  The Order also adopts a definition of the "broadband Internet access services" to which the rules apply.

Commissioners Copps and Clyburn pronounced this action imperfect but sufficient to enable them to permit adoption of the Chairman's proposal.  On the other hand, both Commissioners McDowell and Baker dissented from the Order.  Both strongly objected to the Commission's claim of exisiting authority over Internet network management.  Commissioner McDowell also asserted that the Order would create "irreparable harm" -- a factor considered by courts in granting a stay of agency orders.

The FCC action is described in more detail below.  UPDATED:  A PUBLIC NOTICE WITH THE RULES WAS RELEASED.  SEE BELOW

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Since April, the FCC has been struggling with how to react to the Court's reversal of the Comcast P2P blocking order.  Today, Chairman Genachowski announced that he plans to move forward to adopt net neutrality rules at the FCC's December 21 open meeting.  That announcement was met with prompt condemnation from the Republican commissioners and measured support from his fellow Democratic commissioners.

Genachowski's speech abandons his prior proposal for a "third way" to resolve this issue.  His current approach relies upon the same Title I authority that the court of appeals found lacking, although presumably the Chairman intends to provide a better rationale connecting the rules to the Commission's authority.  One issue that should not get lost in the shuffle, however, is that Chairman Genachowski is proposing to adopt enforceable rules that bind broadband providers for the first time.  This would replace the 2005 Policy Statement, which, as we've pointed out, creates enforcement problems of its own.

Follow the jump below to read the statements released today.

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Earlier this month, Verizon and Google announced an agreement on the vexing issue of net neutrality.  The agreement has been criticized by net neutrality advocates for allegedly permitting a "private Internet," and for excluding wireless services, among other things.  Until recently, the provisions in the Verizon-Google "Legislative Framework" that radically alter FCC enforcement have been overlooked.

Four elements of the Legislative Framework are described in detail in this post.  These elements would restrict the tools available to the FCC and would raise the standard for FCC fines.  In addition, one provision strips the Federal Trade Commission of any potential jurisdiction over broadband Internet access service. 

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The FCC today adopted and released its highly anticipated Notice of Inquiry (“NOI”) regarding the potential regulatory reclassification of facilities-based broadband Internet access services.  This proceeding will explore the "third way" toward regulation that Chairman Genachowski suggested in response to the recent decision issued by the U.S. Court of Appeals for the D.C. Circuit in the Comcast case.  In Comcast, the D.C. Circuit rejected the FCC's attempt to rely upon its "ancillary authority" to enjoin a cable operator from degrading its customers' lawful Internet services.  This sparked a concern that similar decisions could cause the Commission to lose regulatory authority over time in connection with most, if not all, Internet access services.  The heart of the problem is that the FCC made a series of decisions over the past decade that have classified wireline broadband Internet access services as "information services" that are exempt from Title II common carrier regulation, and this classification was upheld by the U.S. Supreme Court in its Brand X decision.   If the Commission cannot exert "ancillary authority" to regulate them, then the FCC could be left with virtually no control over services provided over a broadband platform. 

The NOI seeks comment in three areas.  First, the FCC seeks input on whether the current "information service" classification remains adequate for the Commission to perform its mission.  Second, it seeks comment on the legal and practical consequences of "reclassifying Internet services used to communicate with others that have Internet connections" as "telecommunications service" and then applying all of the regulatory requirements of Title II.   Finally, and most importantly, the Commission seeks comment on the "third way" position by which so-called "Internet connectivity service" that is offered as part of a wired broadband Internet service would be reclassified as a "telecommunications service", but that the Commission would forbear from applying all Title II regulatory authority over it except such as necessary to implement a set of discrete rules applicable to universal service, consumer protection, competition and small business opportunity. 

The Commission has fast-tracked the comment cycle in this case.  Comments will be due by July 15, with replies due August 12. 

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A month after the Court of Appeals reversed the FCC's Comcast decision, FCC Chairman Genachowski announced a "third way" to regulate broadband transmission lawfully.  The Chairman released a statement describing his "third way" along with a memo from the General Counsel asserting its legality.  Commissioner Copps, who publicly advocated reclassification of braodband internet access services to Title II, praised Genachowski's solution (though he still prefers reclassification).  Meanwhile, Commissioners McDowell and Baker, the two Republicans on the Commission, declared the proposal "disappointing" and "deeply concern[ing]." 

The battle has only begun.

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The US Court of Appeals for the DC Circuit vacated the FCC's decision declaring illegal Comcast's 2007 blocking of P2P internet traffic.  This decision is not surprising, given how poorly the oral argument went for the FCC.  (see our post here). 

Click here to download the Court's decision.  We will post a discussion of the jurisdictional issue later.

UPDATE 4/6/10:  The Court of Appeals vacated the FCC Order because the Commission had not adequately justified its exercise of Title I "ancillary" authority over Comcast's network management practices.  Discussing at length appellate Title I jurisdiction cases over the last 40 years, the Court in essence held that the FCC failed to relate Internet network management to common carrier telephone service (Title II), broadcast service (Title II) or cable TV service (Title VI).  One quote from the decision sums up the conclusion:  "On the record before us, we see 'no relationship whatever' between the Order and services subject to Commission regulation."  In other words, the FCC must connect its assertion of authority to something that it indisputably can regulate.

Since the decision was released, there has been much discussion about whether the FCC will reclassify Internet access services as Title II common carrier services.  While it is premature to predict these issues with any confidence, one alternative not being discussed is to accept the Court's invitation to connect regulation of Internet access service with regulation of pure transmission services.  In the Wireline Broadband Order, the Martin Commission concluded that Internet access did not have a separate transmission component.  The decision today may lead the Commission to reverse that determination -- and find that a separate transmission component is inherent in the offering -- so that it may then regulate bundled Internet access due to its impact on stand alone transmission services. 

Finally, I note that the Court did not address the enforceability of the Policy Statement itself.  As a result, the potential impact on the Universal Service Fund's Form 499-A instructions did not come to pass.  Maybe next time.

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Yesterday, the DC Circuit held oral argument on Comcast's appeal of the FCC's ruling that Comcast ilegally blocked P2P traffic in its broadband Internet service.  By all accounts, the argument went poorly for the FCC.  If the FCC indeed loses the case, it could have implications for enforcement of federal Universal Service Fund (USF) contribution obligations too. 

Some of the best summaries appear in MultiChannel News, The Blog of the Legal Times and Enterprise Networking Planet.  The argument went so poorly that FCC Chairman Julius Genachowski issued what amounts to a "vote of confidence" for the enforcement order.  And we know how well those things work out for NFL coaches.

It appears that the FCC might lose because the court feels the FCC lacks authority over broadband Internet service providers. That would have a significant impact on the FCC's activities, particularly with the Commission on the verge of adopting (and then implementing) a National Broadband Plan.

A more narrow ground also could have significant impact on Universal Service.  One argument made by Comcast was that the FCC Order is unlawful because the Commission was enforcing a 2005 Policy Statement, not an actual law.  The FCC can enforce obligations that are legally binding -- statutes, properly adopted rules and lawful FCC orders.  But a policy statement is not itself enforceable.  Its enforceability depends on the underlying legal obligations that the Commission is interpreting.  If the only "authority" relied upon is the Policy Statement, the FCC would lose.

The Policy Statement is a shortcut to the harder task of adopting specific and enforceable obligations, typically through rulemaking.  The FCC is taking a similar shortcut with its Universal Service rules.  In a series of FCC Orders, the Commission has created a federal USF and established rules for who must contribute to the Fund and on what revenues.  Each year, the FCC releases an FCC Form 499A for contributors to report their revenues for assessment purposes.  The 499A comes with 30+ pages of instructions.  The instructions purport to mandate a variety of actions by contributors, and they are frequently modified without any change in the underlying FCC rules or orders. 

The problem is that USAC acts as if the instructions are binding rules.  It is increasingly becoming more aggressive in audits and enforcement actions, relying on specific instructions that never were subject to notice and comment rulemaking, were not adopted by the FCC and could not be appealed.  If the FCC loses the Comcast case because the Policy Statement is not enforceable, it will have to return to enforcing actual law.  Hopefully, such an outcome will reign in USAC's reliance on non-binding instructions, too.  If so, it will not be a moment too soon.

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The “Obama FCC” took one giant step toward reality today when President Obama formally announced his “intention to nominate” Julius Genachowski as Chairman of the FCC. Genachowski’s nomination has been expected for some time, but apparently was delayed when President Obama revamped his process for vetting candidates after several high-profile withdrawals by key nominees.

Genachowski comes with stellar credentials including two Supreme Court clerkships, a prior stint as advisor to FCC Chairman Reed Hundt and several years at Barry Diller’s Internet company, IAC. Virtually every telecom organization took turns today praising the incoming chairman.

Genachowski is expected to further President Obama’s policies to promote broadband deployment and net neutrality. Genachowski’s nomination must be approved by the Senate, so he may not formally take office for a few months.
 

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