Will Net Neutrality Stall-out?: Making Sense of the FCC's Grab for Jurisdiction over the Internet
Digital Media Law Update: The Internet world has long been abuzz about the Federal Communication Commission's (FCC) proposed new rules for net neutrality. The proposed rules, which were issued on October 22, 2009, would prohibit ISPs from discriminating against "lawful" content, applications and service, subject to the needs of "reasonable network management." The promulgation of these new rules was speeded by the FCC's 2008 actions against Comcast, which it accused of interfering with the transmission of BitTorrent files - a peer-to-peer file sharing protocol.
As the basis for its actions against Comcast, as well as its proposed rulemaking, the FCC cited its longstanding agency policies to encourage the development of broadband and promote the open and interconnected nature of the Internet. See, e.g., FCC, Notice of Proposed Rulemaking, FCC 09-93 (Oct. 22, 2009). However, the FCC is not a part of the legislative, but the executive branch of government. It is a creature of statute and has no power to regulate anything except as provided by Congress via statute.
Accordingly, Comcast filed an appeal against the FCC's actions against it, claiming that the FCC lacked jurisdiction -- i.e. -- statutory authority -- to regulate the Internet. See Comcast v. FCC, D.C. Cir, No. 08-1291. The FCC's briefs indicate that the basis for its claimed jurisdiction against Comcast is the same as the basis for its claimed right to promulgate its net neutrality rules. So, a ruling against the FCC in the Comcast case could well doom its proposed net neutrality rules, as well.
Reports from the D.C. Circuit's hearing of the Comcast appeal indicate that the Court viewed the FCC's jurisdictional claims with considerable skepticism. So how solid are the FCC's claims that it has the right to promulgate net neutrality rules?
By way of background, the federal statute the provides the FCC with its authority is the Telecommunications Act. The Act is subdivided into multiple sub-chapters or "Titles" that provide rules for specific communications technologies: Title II regulates common carriers (e.g., telephone companies), Title III regulates radio and Title V regulates cable. The Act states in broad terms that the FCC "shall execute and enforce the provisions of" the Telecommunications Act." 47 U.S.C. § 151.
The Internet uses telephone, cable and radio services which are subject to FCC regulation. However, at its heart, the Internet is a system of interconnected computers that is far broader than any of these communication services. Accordingly, since the 1970s, the FCC has recognized a distinction between computer processing services (including the Internet), and communications services (like telephone services) over which these computer processing services are carried. These separate classifications were incorporated by Congress into the 1996 Telecommunications Act -- which distinguishes between "information services" and "telecommunications services." Information services include "the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications" -- the kinds of services provided via the Internet. 47 U.S.C. § 153(20). Telecommunications services include "transmission of information, without a change in its form or content" -- i.e., traditional telephone data services. 47 U.S.C. §§(43), (46).
This distinction makes a difference, because only providers of telecommunications services are considered "common carriers" and subject to Title II regulations. 47 U.S.C. § 153(44). See NCTA v. Brand X Internet Services, 545 U.S. 969 (2005). Among Title II regulations is a provision prohibiting common carriers from engaging in "any unjust or unreasonable discrimination" in services. 47 U.S.C. § 202(a).
In 2002, the FCC ruled that Internet services provided cable companies should also be classified as information services and hence not subject to Title II regulations. This is because Internet services provided via cable are indistinguishable from those provided via telephone lines. The U.S. Supreme Court upheld this FCC ruling in NCTA v. Brand X. Id. The FCC has also held that Internet services provided by wireless carriers should be treated as information services. 22 FCCR 5901, 5908-14 (2007). This means that regardless of the communications medium used, the FCC has never deemed Internet services as subject to Title II regulations, including the prohibitions against discrimination.
So what is the basis for the FCC's proposed Internet neutrality rule making?
The FCC bases its claim for jurisdiction in its "ancillary jurisdiction." According to the FCC, it has "ancillary jurisdiction over matters not directly addressed in the Act when the subject matter falls within the agency's general statutory grant of jurisdiction and the regulation is reasonably ancillary to the effective performance of the Commission's various responsibilities." FCC, Notice of Proposed Rulemaking, No. 09-93 (Oct. 22, 2009) at 36.
The U.S. Supreme Court has recognized that the FCC does have ancillary authority to regulate. However, as argued by Comcast, this ancillary authority is restricted to responsibilities that are specifically granted to the FCC in the Act. Comcast v. FCC, D.C. Cir., No. 08-1291, Petition at 64. As stated by Chief Judge David Santelle of the D.C. Circuit Court of Appeals at the hearing on Comcast's Petition, the FCC's ancillary jurisdiction is not a general mandate for the FCC to go out and do good. Fn1.
The problem for the FCC is that there is no "Title" in the Telecommunications Act that specifically targets the Internet and gives the FCC jurisdiction over it. Lacking this specific grant of authority, the FCC has pointed to statements of general policy, such as those contained in Sections 230(b) and 706(a) of the Act, as the basis for its claimed jurisdiction. See FCC, Notice of Proposed Rulemaking, No. 09-93 (Oct. 22, 2009) at 36, FCC v. Comcast, D.C. Cir., No. 08-1291, Respondent's Brief at 36-42.
In its Comcast brief, FCC cited a few statements in the preamble to Section 230(b) which state that "It is the policy of the United States . . . to promote the continued development of the Internet . . . to preserve the continued development of the Internet" and "to preserve the vibrant and free market that presently exists for the Internet." Comcast v. FCC, No. 08-1291, Respondent's Brief at 36. However, while the preamble to Section 230(b) contains these nice statements, the statute nowhere directs the FCC to do anything to enforce these sentiments. Rather, Section 230 provides several laws of general applicability to further these policy aims. Moreover, the full text of the sections cited by the FCC actually state that "It is the policy of the United States . . . (2) to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation . . ." 47 U.S.C. § 230(b)(2). Frankly, it seems disingenuous for the FCC to have cited this sections as a basis for its net neutrality regulations.
Section 706(a) does state that the FCC and state regulators shall "encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans broadband services." But again, nowhere does this section indicate that the FCC is to regulate the Internet itself. Again, The FCC's citation of this statute appears to be a clear overreach.
As back-up arguments for net neutrality jurisdiction, the FCC also argues that it has the right to regulate bits and pieces of the Internet that are related to other communications services that it does have the authority to regulate. For example, Section 257 tells the FCC to promote diversity and competition in the provision of telephone services. According to the FCC, this means that it has ancillary jurisdiction over VOIP services, because "VOIP can affect the "national policy" of "vigorous economic competition [and] technological advancement" and the removal of barriers to market entry that are the subject ot 47 U.S.C. § 257." See FCC, Notice of Proposed Rulemaking, No. 09-93 (Oct. 22, 2009) at 36, FCC v. Comcast, Respondent's Brief at 44-45.
Similarly, the FCC also argues that it has the right to regulate Internet services to the extent these are provided via "spectrum-based facilities" -- i.e. mobile phones. FCC, Notice of Proposed Rulemaking, No. 09-93 (Oct. 22, 2009) at 36.
Of course, this piecemeal basis for jurisdiction would not appear to give the FCC the right to regulate the portions of the Internet that do not involve VOIP or wireless transmission -- which is most of the Internet. In addition, the FCC's prior position has been that Internet services should not be regulated, regardless of the medium over which they are provided, whether it be telephone lines, cable or wireless -- a position that is consistent with the Act's exemption of information services from Title II common carrier regulations.
Given the aggressiveness of the FCC's recent attempts to regulate the Internet, the weakness of its jurisdictional basis for doing so is astounding. It is not surprising that the FCC has been making noises about pushing for Congressional action to give it the authority over the Internet it presently may well lack.
Notes:
Fn1 In its Respondent's Brief in Comcast, the FCC argued that its ancillary jurisdiction under Title I of the Act alone provided a sufficient jurisdictional basis for its net neutrality actions. However, the FCC seems to have little confidence in this argument. It placed it last in its Comcast brief and arguably does not advance this as a separate theory in its proposed rulemaking.
