Comcast Corp. v. FCC (D.C. Cir.)

See our prior coverage of this case: Comcast: Not-So-Brief Brief Roundup and Is the FCC Authorized to Promote Net Neutrality?

The DC Circuit issued its opinion in Comcast Corp. v. FCC today, holding that the Commission’s ancillary authority does not extend to its efforts to ensure network neutrality.

Having only skimmed the decision, it seems the court focused on the FCC’s effort to tie its Comcast adjudication to Congressional policy statements in the Telecommunications Act. Such policy statements, as opposed to affirmative delegations of regulatory authority, are simply incapable of empowering the Commission through ancillary authority according to the court.

The court appears to largely ignore what always struck me as the FCC’s strongest arguments – that it is entitled to regulate Comcast’s network management practices because of their impact on telephone carriers and broadcasters. By discriminating against competing voice and video service providers, Comcast’s actions affect industries clearly within the FCC’s regulatory ambit. The court suggests that the Commission waived those arguments by not relying on them in the underlying order.

The decision may leave the FCC some room to flex its net neutrality muscles again on a stronger record that more fully articulates the arguments not rejected here. The other options for effective neutrality regulation would now seem to require either wholesale reclassification of ISPs as common carriers or explicit Congressional delegation of authority to the FCC. No doubt all three of these options will be much discussed in the coming weeks.

See also:

• Mark Giangrande, FCC Loses Comcast Appeal on Net Regulation, Law Librarian Blog (Apr. 6, 2010).
• Nate Anderson, Court: FCC had no right to sanction Comcast for P2P blocking, Ars Technica (Apr. 6, 2010).

The exercise of ancillary authority, according to the Commission, requires two elements. First, the subject matter must fall within the agency’s general grant of jurisdiction. Second, the regulation must be “reasonably ancillary to the effective performance of the Commission’s various responsibilities.” The first of these requirements, general subject matter jurisdiction, is not disputed.

The Commission offers several bases upon which it argues its 2008 Order is a proper use of its ancillary authority. First, the Commission notes that the Supreme Court in Brand X concluded that the FCC can exercise authority over information service providers like Comcast under its Title I ancillary jurisdiction. The Commission also points to a number of statutory provisions it claims define federal internet policy and justify the use of ancillary authority. According to the FCC, section 230(b) of the Communications Decency Act defines a policy of “maximizing user control over the receipt of Internet content,” a policy inconsistent with Comcast’s surreptitious disruption of subscriber communications. Similarly, section 706(a) of the Telecommunications Act of 1996, 47 U.S.C. § 1302(a), requires the FCC to “encourage the deployment on a reasonable and timely basis of advanced communications capability,” a provision that confers the FCC “significant … authority and discretion to settle on the best regulatory or deregulatory approach to broadband.” Ad Hoc Telecom. Users Comm. v. FCC, 572 F.3d 903, 906-907 (D.C. Cir. 2009). Likewise, Congress’s goal of “mak[ing] available, so far as possible, to all the people of the United States … a rapid, efficient, Nation-wide and world-wide wire … communication service … with adequate facilities at reasonable charges,” 47 U.S.C. § 151, imposes “responsibilities” that the Commission is “required” to pursue.

Aside from their impact on internet communication, Comcast’s practices are likely to alter the markets for both traditional telephone and broadcast services. Internet based video distribution and voice service both serve as competitors to existing services heavily regulated by the FCC. Given the interrelated nature of these services, the FCC maintains that “clandestine network-blocking practices such as Comcast’s could undermine the Commission’s regulatory goals for virtually every sector of communications media, from the Internet, to cable and broadcast television, to voice communications.”

These justifications aside, the FCC argues Comcast is estopped from challenging its regulatory authority over Comcast’s practices because Comcast itself successfully argued in Hart v. Comcast, No. 07-06350 (N.D. Cal.), a class action challenging Comcast’s practices under California law, that “the very allegations that fuel this lawsuit” were before the FCC and “within [its] subject matter jurisdiction.”

In response to Comcast’s procedural challenge the the FCC’s decision to rely on adjudication rather than rulemaking, the Commission argues it properly exercised its discretion. Rather than developing broad, industry wide rules, the Commission chose to take more cautious first steps by targeting only Comcast’s practices. Responding to Comcast’s argument that it received inadequate notice, the Commission argues that it imposed no penalty on Comcast, which ceased its activities voluntarily and faced no monetary penalty. Moreover, Comcast received notice, both in the form of the FCC’s prior Policy Statement and specific warnings to Comcast when the Commission approved its acquisition of another cable provider that discriminatory network management would arouse scrutiny.

BRIEF AMICUS CURIAE OF PROFESSORS JAMES B. SPETA AND GLEN O. ROBINSON AND THE PROGRESS AND FREEDOM FOUNDATION IN SUPPORT OF PETITIONER COMCAST CORPORATION

The Speta/Robinson/PFF brief argues that the FCC’s 2008 Order “greatly expands the Commission’s authority by regulating a communications service that is not an adjunct to and therefore closely connected to services that the Communications Act explicitly places within the agency’s regulatory powers.”

Amici recommend a narrow understanding of the Commission’s ancillary jurisdiction. They argue that ancillary jurisdiction, an invention of the FCC, is appropriate only where exercised “over an adjunct to a service over which the agency had clear and explicit authority.” Cable television, for example, was the proper subject of ancillary authority only because at the time “cable was completely dependent on the retransmission of broadcast television signals.”

Here, they argue the regulation of Comcast’s practices is not “directly tied to regulated services.” Without an independent grant of statutory authority for such action, they argue the Commission lacks the power to interfere with Comcast’s efforts to manage its network. With respect to Section 230(b), the FCC’s primary statutory hook for ancillary authority, amici are dismissive. “The five policy statements in Section 230(b) are just that – mere statements of policy and not law. Even then, they are so vague as to be purely atmospheric if not altogether meaningless as guides for affirmative regulatory action.” Moreover, they maintain that the Communications Act instead reflects Congress’s desire for an unregulated internet.

The Commission’s understanding of its authority, according to amici, is one defined by “completely discretionary and yet completely unlimited regulatory powers over information services.” In the name of efficiency, decreased consumer costs, or enhanced consumer service quality, the FCC could impose any regulation it chooses on the providers of information services, including the intervention on par with common carrier classification.

BRIEF FOR INTERVENORS FREE PRESS, PUBLIC KNOWLEDGE, OPEN INTERNET COALITION, CONSUMERS UNION, CONSUMER FEDERATION OF AMERICA, AND VUZE, INC.

The intervenors’ brief argues that in light of the ambiguity of the statutory provisions that provide the basis for ancillary jurisdiction, Chevron deference is appropriate. The FCC, therefore, only needs to show that its interpretation of those provisions is reasonable. Chevron USA, Inc. v. NRDC, Inc., 467 U.S. 837 (1984).

Intervenors focus on the Commission’s statutory power to “perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with the Act, as may be necessary in the execution of its functions.” They argue that “necessary” and “execution of its functions,” are ambiguous, and the Commission’s reading of the statute need only be reasonable.

In contrast with the PFF brief above, the intervenors maintain that the 2008 Order is consistent with the FCC’s prior assertions of ancillary jurisdiction and “a long line of cases” upholding such assertions. The intervenors chastise both Comcast and PFF for omitting any reference to eight cases upholding ancillary authority, six of which were decided by the D.C. Circuit.

Finally, the intervenors note the potential consequences of Comcast’s challenge to the Commission’s ancillary authority. If successful, this strategy could compel the FCC to reclassify broadband internet access as a telecommunications services, rather than an information service. Such a reclassification would place Comcast squarely within the more burdensome regulatory structure of Title II of the Communications Act, an outcome Comcast is doubtless eager to avoid.

BRIEF AMICUS CURIAE OF PROFESSORS JACK M. BALKIN, JIM CHEN, LAWRENCE LESSIG, BARBARA VAN SCHEWICK, AND TIMOTHY WU URGING THAT THE FCC’S ORDER BE AFFIRMED

Unlike those above, this brief focuses on the policy implications of Comcast’s conduct and the need for regulatory intervention.

Amici offer two primary rationales for regulation. First, they argue that discriminatory network practices like those adopted by Comcast reduce the innovative and economic potential of the internet. Such practices will introduce uncertainty that could scare away potential funders of new ventures and distort markets by disadvantaging offerings that compete with those of established providers like Comcast.

Second, amici suggest Comcast’s actions undermine the potential of speech enabling technologies like peer to peer distribution networks. Because such technologies enable cheap, efficient, worldwide distribution of speech, they enable broadly democratic cultural participation. Because Comcast targeted these particular technologies, they lead to particularly troubling harms.

See also:

• Matthew Lasar, FCC: Congress said we could spank Comcast for P2P blocking, Ars Technica (Sept. 23, 2009).

The initial policy statement outlined four principles to guide the Commission’s enforcement efforts:

• To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to access the lawful Internet content of their choice.
• To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement.
• To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to connect their choice of legal devices that do not harm the network.
• To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled to competition among network providers, application and service providers, and content providers.

According to Genachowski, these guidelines will be supplemented by two additional principles – nondiscrimination and transparency.

First, the Commission hopes to prevent discrimination on the basis of content or application, while permitting reasonable network management policies. Second, the Commission seeks to ensure that information regarding network management practices is available to consumers. And in a break from the FCC’s historic fixation on technology- and medium-specific rules, Genachowski suggested these principles apply to all platforms for accessing the Internet, including mobile devices. An October Notice of Proposed Rulemaking will seek input on these network neutrality principles.

The Commission’s statement today is a logical progression of its previous Policy Statement and President Obama’s network neutrality policy commitments from the 2008 campaign.  But the effort to enshrine these principles in FCC regulations rather than leaving them embodied in a policy statement has some implications for the Comcast litigation. In fact, the FCC’s move is likely, in part, a response to Comcast’s challenge.

The FCC’s ability to point to regulations rather than a policy statement won’t undermine Comcast’s argument that the Commission lacks any statutory basis to exercise its ancillary authority. But regulations could put the FCC on surer administrative footing in future efforts to enforce its network neutrality principles – assuming the court finds the Commission has the necessary authority.

Comcast Corp. v. FCC (D.C. Cir.).

Background:

In 2007, subscribers to Comcast’s broadband internet service began reporting difficulty using BitTorrent clients and other peer to peer applications. When these reports surfaced, Comcast disclaimed any responsibility. But two independent studies by the Associated Press and the Electronic Frontier Foundation proved that Comcast was proactively interfering with its customers’ network traffic. Through deep packet inspection, Comcast determined when its customers were uploading peer to peer data and spoofed reset packets, which terminated their subscribers’ connections to other network users.

In response, Comcast admitted its interference, but maintained that its practices were targeted to ease congestion that exceeded thresholds at specific places and times. After further studies disproved this claim, Comcast reluctantly revealed that its “P2P management is triggered… regardless of the level of overall network congestion at th[e] time, and regardless of the time of day.”

In August of 2008, the FCC issued an order declaring Comcast’s practices unreasonable and discriminatory. The Commission noted the competitive threat posed by practices that discriminate against applications like BitTorrent that compete with Comcast’s own video on demand offerings. The order required Comcast to reveal its network management practices, detail its plans to stop those practices, and disclose to the FCC and the public its new network management practices.

Comcast has sought review of the FCC’s order by the Court of Appeals for the District of Columbia Circuit.

What’s at Stake:

At its core, Comcast’s challenge to the order calls into question the Commission’s authority to implement any regulatory strategy to promote or maintain network neutrality absent an explicit congressional directive.

The technical question is whether the FCC’s rather amorphous ancillary authority empowered it to issue the Comcast order.  As the FCC first articulated in its Internet Policy Statement, it understands the “national Internet policy” outlined in § 230(b) of the Communications Decency Act to establish the basis for its exercise of ancillary authority over network neutrality issues. Section 230(b) states that it is the policy of the United States to “to preserve the vibrant and competitive free market that presently exists for the Internet” and “to promote the continued development of the Internet.” According to the Commission, those goals require it to ensure that “consumers are entitled to run applications and use services of their choice” and “to access the lawful Internet content of their choice,” subject to “reasonable network management” practices.¹

Comcast argues that neither the Internet Policy Statement nor the statutory policy objectives create any enforceable law that Comcast could have violated through its network management practices. Further, it maintains that statements of policy are insufficient to justify the exercise of ancillary authority.

The resolution of these questions will have a profound effect on the FCC’s ability to target discriminatory and anticompetitive network management practices like those implemented by Comcast. As ISPs increasingly find themselves competing with sites and services that rely on their pipes, the need for some oversight seems apparent. The question is whether regulation will require Congress to act.

See also:

• Kevin Werbach, Net Neutrality: I told you so, Werblog (Feb. 26, 2009).
• Susan Crawford, Comcast, Susan Crawford blog (Aug. 21, 2008).
• David Sohn, FCC “Enforcement” Against Comcast?, PolicyBeta (Jul. 16, 2008).

Footnotes

1. In its order, the Commission also cites additional statutory objectives reflected in the Communications Act that it suggests trigger its ancillary authority, among them: “[to] encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans”; “to promote nondiscriminatory accessibility by the broadest number of users and vendors of communications products and services to public telecommunications  networks used to provide telecommunications services”; and “to ensure the ability of users and information providers to seamlessly and transparently transmit and receive information between and across telecommunications networks.” [↩]