Tech & Telecom Law News

FCC’s Rollback of Net Neutrality Rules May Be in Legal Jeopardy

Jan. 18, 2019, 9:46 AM

The Federal Communications Commission’s rollback of Obama-era net neutrality rules may be vulnerable to a narrow legal attack that jeopardizes the agency’s entire policy.

The commission in 2017 scrapped its rules that required Internet service providers like AT&T Inc. and Comcast Corp. to treat all traffic on their networks equally, and modified a transparency requirement that mandated public disclosure of network practices. It kept the requirement to deter ISPs from blocking and throttling content out of fear of angering subscribers.

The GOP-controlled agency’s repeal order cited a particular section of federal communications law as giving it the authority to mandate transparency from ISPs. But opponents say the section doesn’t give the agency rulemaking authority at all — and that if a federal appeals court agrees, it should void the entire order.

“If the transparency rule were to fall, because the FCC didn’t anchor it in authority from Congress, the rest of the FCC decision could fall with it,” Bloomberg Intelligence analyst Matt Schettenhelm said in a note.

The fight pits the agency and carriers including AT&T, Verizon Communications Inc. and T-Mobile US Inc. against tech companies including Alphabet Inc.'s Google, congressional Democrats and attorneys general from nearly half the states.

The legal question may take center stage at the upcoming oral argument on the case, Mozilla Corp. v. FCC, in the U.S. Court of Appeals for the District of Columbia Circuit. The FCC’s opponents argue that the entire repeal order can’t stand if the transparency rule is void because it’s the essential mechanism for influencing ISP behavior without other net neutrality rules.

“Without it, the FCC could not have relied on the possibility of consumer switching in response to public disclosure of unwanted ISP policies, or of FTC (Federal Trade Commission) enforcement against ISPs for misrepresenting network practices,” groups including the Internet Association, whose members include Amazon.com Inc., and Facebook Inc., and the Computer and Communications Industry Association, whose members include Google, said in a court filing.

Questionable Authority

The FCC adopted its current transparency rule under Section 257 of the Communications Act. Congress enacted the provision in its 1996 rewrite of the law to direct the FCC to open a proceeding to identify and eliminate “market entry barriers facing entrepreneurs and other small businesses in the provision and ownership of telecommunications services and information services.”

The FCC, in its court brief, argues that the D.C. Circuit “pointed to Section 257 as a possible source of authority for disclosure requirements” in a previous court ruling.

The agency also argues that Obama-era transparency rules adopted in 2010 cite Section 257 as a source of rulemaking authority. Unlike the GOP-led FCC, the commission in 2010 argued that several parts of communications law give it authority to mandate transparency, not just Section 257.

“Just as the Commission did in the Open Internet Order, we rely on section 257 of the Communications Act as authority for the transparency requirements we retain,” the FCC said in its 2017 order scrapping net neutrality.

But opponents, led by industry groups including the Internet Association, disagree.

“The text not only failed to provide any basis for a transparency rule, but also explicitly stated that it provided no rulemaking authority beyond that granted elsewhere in the statute,” the Internet Association and other groups said in a D.C. Circuit filing.

Opponents say Section 257 just imposes a reporting requirement on the FCC. Congress repealed part of the section that required the FCC to release follow-up reports every three years in a 2018 spending bill.

“Like lots of statutes it authorizes the FCC to compile a report to have a proceeding for the purpose of eliminating market entry barriers,” Matt Wood, policy director at pro-net neutrality tech policy group Free Press, told Bloomberg Law. “What it doesn’t do is authorize the imposition of any regulation.”

The agency also argues that its opponents don’t have standing to contest FCC authority because they haven’t proved that the transparency rule harms them.

“These parties lack standing to raise their challenge, and their arguments are in any event unavailing,” the FCC said in a court brief.

To contact the reporter on this story: Jon Reid in Washington at jreid@bloomberglaw.com
To contact the editor responsible for this story: Keith Perine at kperine@bloomberglaw.com

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