Net Neutrality in Jeopardy, DC Appellate Court Rules against FCC, Issue Far from Settled

In an order published this morning, available by clicking on the title of this post or the link posted at the end, the D.C. Federal Circuit Court of Appeals held that the Federal Communications Commission (FCC) lacked the power to mandate Comcast's network management practices, including the FCC's prohibition against Comcast's throttling of BitTorent traffic. The thirty-six page opinion was authored by Judge David S. Tatel who was joined by Judge A. Raymond Randolph and Chief Judge David B. Sentelle. The FCC agreed that it did not have express statutory authority to regulate this matter, but argued that it had "ancillary" authority by way of the Communications Act of 1934's equivalent to the Constitution's "necessary and proper" clause (found at 47 U.S.C. Section 154(i)) which states that:

"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."

According to the Court, the FCC failed to show that this action against Comcast was "reasonably ancillary to the . . . effective performance of its statutorily mandated responsibilities." The FCC attempted to make this showing through a Congressional statement of policy. The Court held that under U.S. case law, "statements of policy, by themselves, do not create 'statutorily mandated responsibilities.'" Though the Court noted that the FCC had the express authority from Congress to regulate "cable services," this authority does not extend to internet services. Citing the FCC's "binding" 2002 Cable Modem Order, the Court noted that the FCC had decided that internet services are neither telecommunications services nor cable services, thus outside the scope of the FCC's self imposed limitation on jurisdiction.

This decision is likely just the beginning of this legal mess. I see a number of possible actions that will follow this opinion. The first obvious action is an appeal to the Supreme Court. If the Supreme Court affirms, the FCC may choose to revisit its 2002 Cable Modem Order which this whole opinion seemingly rests upon. The FCC can initiate a notice and comment rulemaking to rescind that 2002 Order just as it created it. That would change this whole analytical framework. Furthermore, even if that failed the Court's analysis, Congress could make a law empowering the FCC to regulate the internet.

Finally, there is the possibility that the Obama Administration will attempt to circumvent this rule by pursuing a similar action with another executive agency. For example, a Department of Justice anti-trust investigation into Comcast would likely convince Comcast to amend their policies. The FCC has been delving more and more into matters that appear to have an anti-trust flavor, which I alluded to in my earlier Net Neutrality post and also the FCC's recent investigation into Apple and AT&T regarding the exclusion of the Google Voice App.

This decision certainly will be a blow to the Obama Administration's National Broadband policy goals, but the issue is far from settled, and I guarantee we will soon be reading more about it.

The opinion is available from this link.