US net neutrality debate likely to be decided by Supreme Court

15 December 2017 2:03pm
Supreme Court Washington

13 December 2017. By Mike Swift and Amy Miller.

Forget the five members of the Federal Communications Commission, the 535 members of Congress, or the millions of people – granted, many of them appear to have been Russian bots — who filed comments on net neutrality.

Forget the protesters, the advocacy groups, and the fiery speeches.

The ultimate decider for how net neutrality will be determined is increasingly likely to be a group of six men and three women in black robes: the nine justices of the US Supreme Court.

The Republican-led FCC is widely expected to vote 3-2 along party lines Thursday to renounce the 2015 “Open Internet Order,” the Obama-era net neutrality decision that included before-the-fact rules against blocking of content, “throttling” or slowing of content, or paid prioritization of content by Internet service providers.

The FCC plans to replace the 2015 rule with another politically titled directive, the “Restore Internet Freedom Order.” It only has a “transparency” requirement that ISPs disclose whether they are blocking, throttling or creating paid “fast lanes”. The US Federal Trade Commission would assume the policing of privacy and data security for ISPs on a case-by-case basis, using its antitrust authority to stop any violations of net neutrality.

Then the real battle begins.

The inevitable court appeal is most likely to play out in 2018 before the US Court of Appeals for the DC Circuit, the appeals court that most frequently handles challenges to agency conduct — also the court that affirmed the Open Internet Order two years ago. But that initial judicial round could go to another appeals court as well.

Meanwhile, both sides are awaiting a decision of 11 circuit judges in San Francisco. That en banc panel of the US Court of Appeals for the Ninth Circuit is poised to decide a case involving a net neutrality issue brought by the FTC against AT&T Mobility, which could determine, at least for the Western portion of the US, whether the FTC can regulate ISPs.

But ultimately, net neutrality is most likely to land with the Supreme Court. Two cases, one involving an environmental group’s litigation against an oil company in the 1980s and another involving a long-defunct dial-up Internet company in the early 2000s, will likely define the contours of the high court’s review.

Initial battle

Once Thursday’s FCC decision is published in the Federal Register, probably by mid-February, the appeals process will begin.

Opponents are likely to initially seek an injunction from the DC Circuit or another appellate court blocking the FCC order from going into effect while an appeal is heard — a high bar that they are unlikely to clear.

There could be an immediate venue battle for the broader appeal. An ISP that supports the Restore Internet Freedom Order could elect to file an appeal in a more conservative venue, such as the US Court of Appeals for the Fifth Circuit, seeking to affirm Thursday’s expected FCC decision. An ISP called Alamo Broadband did just that in the wake of the FCC’s 2015 order, filing its appeal in the New Orleans-based court.

It’s also not unreasonable to think that an online content producer, perhaps one based in Silicon Valley, might file an appeal with the Ninth Circuit in San Francisco. Its reasoning would be that the Ninth Circuit would be more likely to adopt the viewpoint of companies on the Internet’s edge, which fear Thursday’s order will permit ISPs to restrict or exploit their access to consumers.

“If lawyers are doing their job, both sides, pro and con, are thinking right now, ‘Where do we want this heard?’ ” said Jim Tuthill, a former in-house lawyer for AT&T and other telecoms who now teaches telecom law at the University of Arizona.

However, it is the DC Circuit that has been the main judicial battleground for net neutrality litigation over the past decade, and it remains the most likely venue for this latest round. Any challenge to the new order would most likely be made under the Administrative Procedure Act, a 1946 law that prohibits federal regulatory agencies from making rulings that are “arbitrary” or “capricious.”

That is where the first Supreme Court case — the Chevron USA v. Natural Resources Defense Council decision from 1984 — will come into play.

One of the most frequently used legal terms in the net neutrality fight will be “Chevron deference,” the principle the Supreme Court established in the Chevron case that courts must defer to the findings of an expert agency — in this case, the FCC — so long as Congress has not spoken clearly on an issue.

Conservatives and the ISP industry are confident that FCC Chairman Ajit Pai has cited enough facts that the 2015 order, by heavier regulation of consumer broadband as a “common carrier” public utility, will stifle capital investment, and that the slowdown has already begun. So reversing it would not be arbitrary or capricious at all.

Democrats and those close to the 2015 order vigorously disagree, saying the FCC is shirking its responsibility mandated by Congress to act as the expert agency for net neutrality. That is grounds for reversal, they say.

“I believe the draft order is highly vulnerable to reversal, as a matter of law, as a matter of policy, as a matter of fact,” Jon Sallet, the FCC’s general counsel who helped craft the 2015 order, told reporters recently.

Regulatory ‘no man’s land’

Pai, FTC acting Chairman Maureen Ohlhausen and some conservative groups insist that the FTC will be an effective watchdog for the privacy and security practices of ISPs, and that the FTC’s antitrust authority could curb abusive practices of ISPs. But the forthcoming decision from the Ninth Circuit in in the AT&T Mobility case could sharply curtail the FTC’s authority to regulate ISPs.

The FTC had sued AT&T Mobility in October 2014, alleging that the wireless carrier misled customers who bought "unlimited" data plans by "throttling" the data flow of its heaviest users.

The FTC can sue companies for unfair or deceptive practices. But the agency doesn’t have the power to pursue enforcement actions against businesses known as “common carriers,” because a specific exemption in the FTC Act removes its jurisdiction. Fixed and wireless consumer broadband services were designated as "common carrier" telecom services under Title II Communications Act in the 2015 order.

In August 2016, a three-judge Ninth Circuit panel found that the common carrier exemption is based on the industry status of a company, not its specific activities, such as selling wireless Internet services.

In other words, any company that operates a telecom subsidiary can also be classified as a common carrier exempt from FTC oversight, the court said. Therefore, AT&T remains a common carrier because it provides voice telephone common carrier services. Even Google parent company Alphabet could theoretically claim to be a common carrier because it also operates Google Fiber, a voice and broadband service.

The FTC appealed, and the case was heard before a full panel of Ninth Circuit judges on Sept. 19. But judges didn’t give a clear indication of what they would rule at the hour-long hearing. Their decision is expected in coming weeks.

The FCC, along with Comcast, Verizon and other ISPs, backed the FTC, saying the current status quo would create "a regulatory no man's land that is exempt from both FTC and FCC jurisdiction."

If the en banc court does not reverse, there would still be an argument that “no man’s land” would persist even after Thursday’s FCC vote, at least for the nine Western states and two territories in the Ninth Circuit.

Supreme Court

If a circuit court appeal of the Restore Internet Freedom Order lands with the DC Circuit, it’s possible the court could hear oral argument before summer, and could reach a decision by the end of 2018. Ultimately, the loser would certainly ask the Supreme Court to consider the case.

If the high court takes up the case — given the perceived hostility of conservative Justices Clarence Thomas and Neil Gorsuch and Chief Justice John Roberts to the doctrine of Chevron deference, there is reason to think it would — the second case would come into play: National Cable & Telecommunications Association v. Brand X Internet Services.

By a 6-3 majority, the high court in 2005 found that broadband Internet service meets the definition of an “information service,” the same regulatory designation the FCC plans to return to on Thursday. As a result, ISPs such as Brand X were unable to gain access to the cable and phone wires to offer consumers competing Internet service.

But the ruling was also about Chevron deference, with the Supreme Court saying the doctrine trumps appellate court precedent, so long as the statute was unambiguous. Conservatives on the court, led by the late Justice Antonin Scalia, dissented.

“There are a growing number of justices who have made it clear they want to rein in Chevron deference, and they are looking for opportunities to do that,” said Berin Szoka, the president of TechFreedom, a group that opposed the 2015 order and supports Pai’s plan. “You could see this case as a way to do that.”

Sallet, the former FCC general counsel, said the Brand X decision would help opponents of Pai’s order. The decision, he said, “stated in a very effective way why a court looking at this and thinking about the intent of Congress would find the FCC’s legal rationale to be inadequate.”

One thing could short-circuit all the litigation that appears to be in future of net neutrality: Congress could step in to set rules. But don’t hold your breath.

“Right now,” said Senator Ed Markey, a Massachusetts Democrat, “we are at the point of litigation, not legislation.”

--With reporting assistance from Xiumei Dong in San Francisco.

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