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Net Neutrality

D.C. Circuit’s Decision in Net Neutrality Case Likely to Open New Fronts of Attack Against FCC

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Photo-collage of Judges Robert Wilkins, Stephen Williams and Patricia Millett (left to right)

In-Depth Analysis of the D.C. Circuit Court’s Decision in Mozilla v. FCC Demonstrates It is Just the Beginning of a New Chapter

Debate Shifts to Congress and the States

The U.S. Court of Appeals for the District of Columbia, in Tuesday’s decision of Mozilla Corporation v. Federal Communications Corporation, handed the FCC a victory on the technically complicated and politically divisive issue of network neutrality.

Under Chairman Ajit Pai, in December 2017 the agency repealed regulations that had classified broadband internet access service as a form of “telecommunications” and hence subject to certain common carrier obligations. Instead, the Republican-led FCC changed broadband into an “information service,” with much less onerous regulations. This re-classification was largely upheld by the court.

However, that victory was tempered by the court’s requirement that the FCC make three specific changes to decision they took in 2017. The changes are on public safety, pole attachments and the Lifeline program. Moreover, by a two-to-one margin, the court decided to vacate FCC’s having purported to preempt “any state or local requirements that are inconsistent with [the FCC’s] de-regulatory approach.”

The decision by Judges Patricia Millett and Robert Wilkins and Senior Judge Stephen Williams (the dissenter on the preemption issue) will not put to rest the controversy associated with net neutrality.

Now, the matter is a four-ring circus:

  1. Future revisions to be made by the FCC;
  2. the appeals court’s implied invitation for Congress to clarify what the Telecommunications Act of 1996 had left ambiguous;
  3. states passing their own versions of net neutrality; and
  4. the possibility of an en banc rehearing by the whole circuit, or an appeal to the Supreme Court.

Basis for the Decision

The bulk of the court’s decision is per curiam, meaning that it is unsigned, and reflects the will of the court rather than that of any particular judge. Of the 186-page decision, 146 pages are in the “per curiam” portion, followed by a significant concurring opinion by Judge Millett, a nominal concurring opinion by Judge Wilkins, and a substantive dissent – from the portion of the decision dealing with preemption – by Judge Williams.

The voice in which the per curiam decision was written was one of duty: We as a court may not like what the FCC did in repealing net neutrality rules, but as an inferior court we are bound by the principles of Chevron, U.S.A., Inc. v. National Resources Defense Council, 467 U.S. 837 (1984) (“Chevron”) – which governs federal agency interpretation of ambiguous statutes – as well as National Cable & Telecommunications Association v. Brand X Internet Services, 545 U.S. 967 (2005) (“Brand X”) – the last substantive decision by the U.S. Supreme Court on the regulatory classification of “information services.”

In Brand X, the Supreme Court majority upheld the decision of a Republican-controlled FCC to re-classify cable broadband service as an “information service.” After that 2005 victory, the agency also reclassified wireline and wireless broadband in the same manner.

Ping-pong continued as a subsequent Democratic-controlled FCC attempted to implement net neutrality rules several times. The first attempt kept broadband internet access as a form of “information service,” but regulated blocking and throttling of internet traffic. It was rebuffed by the D.C. Circuit. A second attempt came in 2014 to fundamentally re-classify broadband as a “telecommunications service” with some attendant common carrier obligations under Title II of the Communications Act. However, the FCC did forbear at that time from applying many of those regulations.

The rules decided in 2014 were repealed by the Pai FCC in 2017, effectively returning the classification of broadband to “no regulation.” That “no regulation” status quo was the state of play when the net neutrality legal and political fight began in earnest more than a decade ago. The Pai FCC has settled upon including a small additional requirement that broadband providers disclose terms and conditions of service.

In 2016, both a three-judge panel and, later, the majority of the entire D.C. Circuit Court upheld the Democratic FCC’s classification of broadband as a Title II “telecommunication service.” Now, this new three-judge panel unanimously agreed that it was perfectly appropriate for the FCC to change its mind and reclassify broadband as an “information service” under the less-regulatory Title I.

This was so, the per curiam decision reasoned, because Chevron required judges to defer to an agency’s construction of an ambiguous provision in a statute that it administers, if that construction is reasonable.

In the concurring opinion authored by Judge Millett, she said she “join[s] the Court’s opinion in full, but not without substantial reservation.” The result was “compel[led]” by Brand X, but she pointedly added that “I am deeply concerned that the result is unhinged from the realities of modern broadband service.” Her concurring opinion emphasizes that – given the underlying ambiguity of the Telecom Act – it was equally permissible for the FCC to “regulate” broadband as an “information service” or as a “telecommunications service.”

Important Regulatory Issues Raised About Pole Attachment and Lifeline

Classification decisions have an enormous impact upon providers of communications services, so Tuesday’s decision represented a victory for internet service providers and their allies at the FCC.

But while the court accepted the FCC’s reclassification as reasonable on most counts, there were three specific instances where the court ruled that the agency had not complied with the Administrative Procedure Act. Specially, the APA requires that agency regulations not be “arbitrary and capricious.”

The first of these rebuffs came on the issue of public safety. Most of the court’s discussion on this centered on the widely-covered controversy over Verizon capping the data limits of Santa Clara County firefighters’ broadband plan when they were battling wildfires in the summer of 2018.

Although not vacating the order on these grounds, the court said that the FCC’s “disregard of its duty to analyze the impact of the Order on public safety renders its decision arbitrary and capricious in that part and warrants a remand with direction to address the issues raised.”

Although that strong language will require the FCC to go back and bolster its rationale for the rule-change vis-à-vis public safety, it doesn’t quite cut to the heart of the regulatory conflict in the same way as did the court’s objections over pole attachments and the Lifeline program.

Specifically, revising pole attachments rules will likely pose a challenge to the FCC’s re-classification because the federal regime, mirrored by the states, requires access “to a pole, duct, conduit, or right-of-way owned or controlled by a utility.” Federal law governs this area of law under Title II, unless states “reverse-preempt” the statute, as permitted by the Communications Act, and establish their own pole-attachment regime. As the court noted:

  • But this whole regulatory scheme applies only to cable television systems and “telecommunications service[s]”— categories to which, under the 2018 Order, broadband no longer belongs. See 47 U.S.C. § 224(a)(4) (defining “pole attachment” as “any attachment by a cable television system or provider of telecommunications service to a pole, duct, conduit, or right-of-way owned or controlled by a utility”) (emphasis added); id. § 224(f)(1) (“A utility shall provide a cable television system or any telecommunications carrier with nondiscriminatory access to any pole, duct, conduit, or right-of- way owned or controlled by it.”) (emphasis added). Section 224’s regulation of pole attachments simply does not speak to information services. Which means that Section 224 no longer speaks to broadband. Per curiam, at 106.

Similarly, with regard to Lifeline, the federal system of subsidizing low-income consumers’ access to broadband is governed by provisions in Title II. Lifeline originally only subsidized telephone service. This was changed in 2016, when the FCC extended the program to cover broadband internet access. The court noted:

  • In the [2016] Lifeline Order, the Commission repeatedly referenced Congress’s overriding command to provide “telecommunication services to consumers.” (emphasis added to Lifeline Order). That made sense, given that Congress had tethered Lifeline eligibility to common-carrier status. To receive Lifeline support under the Act, an entity must be designated as an eligible telecommunications carrier—a category that extends to common carriers regulated under Title II. See 47 U.S.C. §§ 254(e), 214(e). This congressional understanding pervades the statute…. As a result, broadband’s eligibility for Lifeline subsidies turns on its common-carrier status…. As a matter of plain statutory text, the Order’s reclassification of broadband—the decision to strip it of Title II common-carrier status—facially disqualifies broadband from inclusion in the Lifeline Program. Per curiam, at 111.

In other words, the FCC will need to fundamentally reconfigure its rules governing pole attachments and Lifeline. The benefits associated with these rights – access to others’ poles and conducts, or subsidies pursuant to eligible telecommunications carrier status – are deeply enmeshed with the provisions that govern “telecommunications” either under federal law or under a state’s telecommunications regulations. Now, the FCC would need much more creative thinking in order to retrofit these benefits to broadband providers who are now no longer bound by the burdens of offering “telecommunications services.”

The Uncertain Status of State Net Neutrality Laws under Mozilla v. FCC

This final issue – the subject of Judge Williams’ dissent – has captured the most reporting and disputes about the court’s Mozilla v. FCC decision since it was issued earlier this week. Are states forbidden, or will states be forbidden, from enacting their own variations of net neutrality?

The simplest answer is that the FCC’s attempt to flex its muscles and assert its preemptive predominance over “any state or local requirements that are inconsistent” with its order has now been officially struck down. Therefore, any state requirement that imposes net neutrality regulations is presumptively valid. But when further litigation undoubtedly arises, the issue of so-called “conflict preemption” will be foursquare in the analysis. The reviewing court would have to consider whether that state’s law “stands as an obstacle to the accomplishment and execution of the [federal law’s] full purpose and objectives.” Per curiam, at 143, note 4.

Under the U.S. Constitution’s supremacy clause in Article VI, “the laws of the United States… shall be the supreme law of the land” to which state judges are bound. The heart of the controversy between the majority and the dissent is whether this preemptive supremacy extends to the actions of an agency that are not explicitly authorized by Congress.

“It is Congress to which the Constitution assigns the power to set the metes and bounds of agency authority, especially when agency authority would otherwise tramp on the power of States to act within their own borders,” according to the per curiam opinion, at 139. Rebuts Judge Williams: “Supreme Court decisions make clear that a federal agency’s authority to preempt state law need not be expressly granted.” Williams, at 3-4 (emphasis in original).

The majority considers and rejects the two arguments that the FCC made in justifying preemption. First is the “impossibility exception,” which deals with the impossibility of determining whether particular broadband traffic was interstate or intrastate. Second is what the FCC characterized as the federal policy of non-regulation for information services.

Judge Williams calls this “impossibility exception” a “a well-established ground of FCC preemption,” and that it plainly applies

  • [W]hen (1) the matter to be regulated has both interstate and intrastate aspects . . . ; (2) FCC preemption is necessary to protect a valid federal regulatory objective . . . ; and (3) state regulation would ‘negate the exercise by the FCC of its own lawful authority’ because regulation of the interstate aspects of the matter cannot be ‘unbundled’ from regulation of the intrastate aspects.” Williams, at 1-2, citing Public Service Comm’n of Maryland v. FCC, 909 F.2d 1510 (D.C. Cir. 1990).

The majority diminishes the importance of this impossibility exception, saying that it was born out of a footnote in an earlier Supreme Court case, Louisiana Pub. Serv. Comm’n v. FCC, 476 U.S. 355 (1986), that denied the FCC the authority to preempt a state law without specific congressionally delegated authority. “The ‘impossibility exception’ does not create preemption authority out of thin air.” Per curiam, at 129.

The majority’s second concern, over the FCC’s policy of non-regulation, gets at the logical conundrum between the two sides. Because the FCC has decided to limit its regulatory authority over broadband by making it an “information service,” the majority says it cannot bootstrap “ancillary authority” on the back of a de-regulatory policy that it – rather than Congress – is promulgating. In addition to Louisiana PSC, the majority repeatedly cites American Library Association for the proposition that the agency “literally has no power to act unless and until Congress confers power upon it.” ALA v. FCC, 406 F.3d 689, 998 (D.C. Cir. 2005).

Thus the majority takes the view that unless and until the FCC can make a successful “conflict preemption” challenge that a state law is in fact an “obstacle” to the full purpose and objective of a federal law, “then presumably the two regulations can co-exist as the Federal Communications Act envisions.” Per curiam, at 143. That system is one of co-existing and dual state and federal responsibilities: Federal regulation being responsible for interstate communication, and state regulation being responsible for intrastate communication.

But, says Judge Williams, this simply means that the federal rules will inevitably subject interstate commerce to the will of the state with the most regulatory rules, at least in the short term:

  • Just as an ISP cannot “comply with state or local rules for intrastate communications without applying the same rules to interstate communications,” it seems safe to say that an ISP bound to apply the rules of California to any of its service will also need—because of the impossibility of “distinguish[ing] between intrastate and interstate communications over the Internet,”—to apply those heavy-handed rules to all its service. Williams, at 4 (internal quotations from the FCC order).

Judge Williams later writes that this process is likely to take years: “The majority hints that through case-by-case litigation of conflict preemption, the Commission might be able over the years to obtain relief against some state impositions of regulation inconsistent with the Commission’s de-regulatory scheme.” Id., at 21.

Because state rules on net neutrality are not clearly and immediately preempted, it seems likely that the controversy of the FCC’s reclassification of broadband will now simultaneously play out in administrative, state-level, congressional and federal judicial forums.

About the author:

Drew Clark, the Editor and Publisher of BroadbandBreakfast.com, is a nationally-respected telecommunications attorney at The CommLaw Group. He has closely tracked the trends in and mechanics of digital infrastructure for 20 years, and has helped fiber-based and fixed wireless providers navigate coverage, identify markets, broker infrastructure, and operate in the public right of way. If you are interested in tracking legislative, judicial or regulatory developments impacting the regulation and regulatory status of broadband services in Congress and the states, contact Drew Clark at apc@commlawgroup.com.

Breakfast Media LLC CEO Drew Clark has led the Broadband Breakfast community since 2008. An early proponent of better broadband, better lives, he initially founded the Broadband Census crowdsourcing campaign for broadband data. As Editor and Publisher, Clark presides over the leading media company advocating for higher-capacity internet everywhere through topical, timely and intelligent coverage. Clark also served as head of the Partnership for a Connected Illinois, a state broadband initiative.

Asia

Dae-Keun Cho: Demystifying Interconnection and Cost Recovery in South Korea

South Korean courts have rejected attempts to mix net neutrality arguments into payment disputes.

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The author of this Expert Opinion is Advisor in Dae-Keun Cho, a member of the telecom, media and technology practice team at Lee & Ko.

South Korea is recognized as a leading broadband nation for network access, use and skills by the International Telecommunications Union and the Organisation for Economic Co-operation and Development.

South Korea exports content and produces platforms which compete with leading tech platforms from the US and China. Yet few know and understand the important elements of South Korean broadband policy, particularly its unique interconnection and cost recovery regime.

For example, most Western observers mischaracterize the relationship between broadband providers and content providers as a termination regime. There is no such concept in the South Korean broadband market. Content providers which want to connect to a broadband network pay an “access fee” like any other user.

International policy observers are paying attention to the IP interconnection system of IP powerhouse Korea and the lawsuit between SK Broadband (SKB) and Netflix. There are two important subjects. The first is the history and major regulations relating to internet protocol interconnection in South Korea. Regulating IP interconnection between internet service providers is considered a rare case overseas, and I explain why the Korean government adopted such a policy and how the policy has been developed and what it has accomplished.

The second subject is the issues over network usage fees between ISPs and content providers and the pros and cons. The author discusses issues that came to the surface during the legal proceedings between SKB and Netflix in the form of questions and answers. The following issues were identified during the process.

First, what Korean ISPs demand from global big tech companies is an access fee, not a termination fee. The termination fee does not exist in the broadband market, only in the market between ISPs.

In South Korea, content providers only pay for access, not termination

For example, Netflix’s Open Connect Appliance is a content delivery network. To deliver its content to end users in Korea, Netflix must purchase connectivity from a Korean ISP. The dispute arises because Netflix refuses to pay this connectivity fee. Charging CPs in the sending party network pay method, as discussed in Europe, suggests that the CPs already paid access fees to the originating ISPs and should thus pay the termination fee for their traffic delivery to the terminating ISPs. However in Korea, it is only access fees that CPs (also CDNs) pay ISPs.

In South Korea, IP interconnection between content providers and internet service providers is subject to negotiation

Second, although the IP interconnection between Korean ISPs is included in regulations, transactions between CPs and ISPs are still subject to negotiation. In Korea, a CP (including CDN) is a purchaser which pays a fee to a telecommunications service provider called an ISP and purchases a public internet network connection service, because the CP’s legal status is a “user” under the Telecommunications Business Act. Currently, a CP negotiates with an ISP and signs a contract setting out connection conditions and rates.

Access fees do not violate net neutrality

South Korean courts have rejected attempts to mix net neutrality arguments into payment disputes. The principle of net neutrality applies between the ISP and the consumer, e.g. the practice of blocking, throttling and paid prioritization (fast lane).

In South Korea, ISPs do not prioritize a specific CP’s traffic over other CP’s because they receive fees from the specific CP. To comply with the net neutrality principle, all ISPs in South Korea act on a first-in, first-out basis. That is, the ISP does not perform traffic management for specific CP traffic for various reasons (such as competition, money etc.). The Korean court did not accept the Netflix’s argument about net neutrality because SKB did not engage in traffic management.

There is no violation of net neutrality in the transaction between Netflix and SKB. There is no action by SKB to block or throttle the CP’s traffic (in this case, Netflix). In addition, SKB does not undertake any traffic management action to deliver the traffic of Netflix to the end user faster than other CPs in exchange for an additional fee from Netflix.

Therefore, the access fee that Korean ISPs request from CPs does not create a net neutrality problem.

Why the Korean model is not double billing

Korean law allows for access to broadband networks for all parties provided an access fee is paid. Foreign content providers incorrectly describe this as a double payment. That would mean that an end user is paying for the access of another party. There is no such notion. Each party pays for the requisite connectivity of the individual connection, nothing more. Each user pays for its own purpose, whether it is a human subscriber, a CP, or a CDN. No one user pays for the connectivity of another.

Dae-Keun Cho, PhD is is a member of the Telecom, Media and Technology practice team at Lee & Ko. He is a regulatory policy expert with more than 20 years of experience in telecommunications and ICT regulatory policies who also advises clients on online platform regulation policies, telecommunications competition policies, ICT user protection policies, and personal information protection. He earned a Ph.D. in Public Administration from the Graduate School of Public Administration in Seoul National University. This piece is reprinted with permission.

Request the FREE 58 page English language summary of Dr. Dae-Keun Cho’s book Nothing Is Free: An In-depth report to understand network usage disputes with Google and Netflix. Additionally see Strand Consult’s library of reports and research notes on the South Korea.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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12 Days of Broadband

Gigi Sohn’s Political Purgatory and the Prospect of Reintroducing Net Neutrality Rules in 2023

If Sohn is sworn in, it would break the FCC’s party deadlock and allow the Democrats to potentially bring back net neutrality.

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From the 12 Days of Broadband:

November’s midterm elections saw the Democrats hold on to power in the Senate, where executive and judicial appointments are confirmed. But Democrats also held to power in the previous term, yet the upper chamber did not hold votes on the prospective fifth commissioner of the Federal Communications Commission, Democrat Gigi Sohn.

Sohn, who was nominated by President Joe Biden in October 2021, has been in a bit of a political purgatory since making it through the Senate commerce committee in March. Former FCC commissioners were concerned about her prospects of making it to Senate votes before the midterms, with the lingering possibility that the Republicans would win the chamber and nuke her nomination over concerns that she would not be able to remain non-partisan on the issues the FCC addresses.

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FCC

GOP Congresswoman Says FCC Puts Politics Over the Law

‘Our founders provided Congress with legislative authority to ensure lawmaking is done by elected officials, not unaccountable bureaucrats.’

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Photo of Rep. Cathy McMorris Rodgers, R–Wash., obtained from Flickr.

WASHINGTON, October 28, 2022 – Rep. Cathy McMorris Rodgers, R–Wash., accused the Federal Communications Commission of politicized actions in excess of its statutory authority, in a letter sent in September and apparently released by the agency last week.

To prevent possible FCC overreach, McMorris Rodgers, the ranking member of the House Energy and Commerce Committee, asked FCC Chairwoman Jessica Rosenworcel to provide a list of pending and expected rulemakings, and the congressional authorizations therefor. Rosenworcel responded earlier this month in a letter released with the congresswoman’s original correspondence.

The Washington Republican wrote that the Biden administration has been overly reliant on executive orders and cited recent Supreme Court precedent as evidence. McMorris Rodgers highlighted the Environmental Protection Agency’s loss in West Virginia v. EPA, in which the Court invoked the “major questions doctrine,” a legal doctrine limiting of the executive branch’s ability to permissively interpret Congress’s statutory language. She also referenced the Court’s rejection of the Center for Disease Control’s eviction moratorium and the Occupational Health and Safety Administration’s vaccine or testing mandate.

“Our founders provided Congress with legislative authority to ensure lawmaking is done by elected officials, not unaccountable bureaucrats,” McMorris Rodgers wrote.

“I assure you the Committee and its members will exercise our robust investigative and legislative powers to not only forcefully reassert our Article I responsibilities, but to ensure the FCC under Democrat leadership does not continue to exceed Congressional authorizations,” she added.

Is net neutrality coming back?

In April 2021, McMorris Rodgers co-signed a letter with numerous congresspeople urging Rosenworcel to reject net neutrality, a policy supported by the chairwoman.

Today’s FCC is evenly split between Republicans and Democrats, one commissioner short of the standard five. President Joe Biden nominated Gigi Sohn for the fifth spot, but her nomination is stalled due to Republican opposition in the Senate. Since Sohn supports net neutrality, some experts believe the FCC may once again pursue the policy should Sohn be confirmed.

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