Arlington v. FCC: What it Means for Net Neutrality

[Cross-posted on my blog, Managing Miracles]

On Monday, the Supreme Court handed down a decision in Arlington v. FCC. At issue was a very abstract legal question: whether the FCC has the right to interpret the scope of its own authority in cases in which congress has left the contours of their jurisdiction ambiguous. In short, can the FCC decide to regulate a specific activity if the statute could reasonably be read to give them that authority? The so-called Chevron doctrine gives deference to administrative agencies’ interpretation of of their statutory powers, and the court decided that this deference extends to interpretations of their own jurisdiction. It’s all very meta, but it turns out that it could be a very big deal indeed for one of those hot-button tech policy issues: net neutrality.

Scalia wrote the majority opinion, which is significant for reasons I will describe below. The opinion demonstrated a general skepticism of the telecom industry claims, and with classic Scalia snark, he couldn’t resist this footnote about the petitioners, “CTIA—The Wireless Association”:

This is not a typographical error. CTIA—The Wireless Association was the name of the petitioner. CTIA is presumably an (unpronounceable) acronym, but even the organization’s website does not say what it stands for. That secret, known only to wireless-service-provider insiders, we will not disclose here.

Ha. Ok, on to the merits of the case and why this matters for net neutrality.

Verizon v. FCC is a long-running case currently in DC Circuit court, arising out of Verizon’s challenge to the FCC’s “Open Internet Order.” It all started in 2010, but for a variety of reasons it has moved at a snail’s pace. They haven’t even scheduled oral arguments yet. On one side, Verizon claims that the FCC does not have the authority to implement the non-discrimination rules contained in the order, and that they as a company have a First Amendment right to discriminate. On the other side, the FCC has asserted a patchwork of statutory theories for why they can enforce the order. The Commission also claims that the free speech arguments by Verizon are bogus because the company is merely a carrier of speech and, if anything, the free speech obligations should counsel in favor of non-discrimination.

These arguments are largely untested ground for both sides. Although Verizon’s free speech argument may seem rather dubious, it might nevertheless turn out to be a legal winner in light of cases like Citizens United. The FCC’s “carrier of speech” argument fits a common-sense notion of what telecommunications companies do. Unfortunately for the Commission, it has already chosen to “deregulate” internet communications by stating that they are not “common carriers” — that is, entities that are traditionally obliged to deliver communications without discrimination. Instead, they articulated the patchwork of other statutory theories — the so-called “ancillary jurisdiction” approach.

As others have observed, the decision in Arlington gives the FCC a much better shot at winning the ancillary jurisdiction argument in the Verizon case. Tim Lee thinks that on balance this is a bad thing for public policy, because it contributes to regulatory jurisdiction creep. I can appreciate his position.

Let’s assume for a moment that the FCC loses the Verizon case in the DC Circuit. If the Supreme Court hears the case, it would be quite entertaining indeed. That’s because Scalia has some strong views on how broadband should be classified and what jurisdiction the FCC should have. This takes us back to a case in 2005, NCTA v. Brand X. In that case, a company named Brand X Internet Services claimed that cable-based broadband internet service was indeed a “common carrier” service. The FCC was at the time proceeding with its novel approach to “deregulating” broadband internet by stating that it was not a common carrier but instead subject to ancillary jurisdiction. The logical and legal acrobatics of this approach were quite impressive. The Supreme court, in an 8 to 1 vote applied Chevron deference to the FCC’s interpretation of the statute, and let it stand. Scalia dissented vociferously. He simply didn’t think that the statute was ambiguous. Broadband internet was a a common carrier service, rather than some new “information service” under the FCC’s “deregulated” scheme (see his extended pizzeria metaphor). He also noted that the Court’s decision (and the concurring opinions) would permit the FCC to change its mind and reclassify broadband as a common carrier under the Chevron doctrine. As he said:

“In other words, what the Commission hath given, the Commission may well take away–unless it doesn’t.”

In the lead-up to Verizon v. FCC, the Commission actually considered relying on this so-called “Title II” reclassification approach initially, but rejected it at the time because it was too politically sensitive (telcos/cablecos have friends in Congress). So, even if Verizon wins the case at the DC Circuit, and even if the Supreme Court does not reverse the DC Circuit, the FCC could take the significant (and, logical, to Scalia) approach of common-carrier classification.

Arlington supports this approach, and the FCC filed a letter with the court yesterday noting this fact. Verizon, for what it’s worth, filed a letter citing a recent DC Circuit opinion upholding the free speech rights of corporate conveyors of speech against control by others. [Update: The FCC replied, explaining why this opinion was not germane.]

For Verizon, there is no going back now. They have staked out their position and will defend it to the hilt. Many other broadband internet providers (including the cable companies) decided not to take part in this battle. MetroPCS, the other appellant, pulled out last week. Intervenor “CTIA—The Wireless Association”, represented by Jonathan Nuechterlein of WilmerHale, pulled out last summer. I, for one, am looking forward to oral arguments.