Deja vu all over again: questions and a few suggestions on how the FCC can lawfully regulate Internet access.

• Author: Frieden, Rob
• Position: I. Introduction through III. The Variable Burdens of Appellate Review for FCC Regulations B. New or Revised Regulation When the Statutory Mandate Contains Ambiguities, p. 325-354

TABLE OF CONTENTS I. INTRODUCTION II. THE CHALLENGE OF CALIBRATING GOVERNMENT OVERSIGHT IN FAST CHANGING MARKETS A. The FCC's 2015 Open Internet Order. III. THE VARIABLE BURDENS OF APPELLATE REVIEW FOR FCC REGULATIONS A. Streamlining and Deregulation B. New or Revised Regulation When the Statutory Mandate Contains Ambiguities C. Re-Regulation IV. WHETHER AND HOW THE FCC CAN DEFEND THE 2015 OPEN INTERNET ORDER A. Extensive Reliance on Chevron Deference to Interpret Statutory Ambiguity B. The FCC Applies the Statutory Classifications Without Modification C. The FCC Can Generate a Persuasive Empirical Record of New Facts and Changed Circumstances 1. Curious Reluctance to Emphasize Direct Statutory Authority Conferred by Section 706 2. VoIP Regulation Presents a Workable and Legally Defensible Model V. CONCLUSION. A. A Cascade of Strategic Miscalculations B. Handicapping the Odds for Affirmance. I. Introduction

In March, 2015 the Federal Communications Commission ("FCC") issued a comprehensive Report and Order on Remand and Declaratory Ruling, and Order, in the matter of Protecting and Promoting the Open Internet ("2015 Open Internet Order"). (1) The FCC attempts to lawfully convert broadband Internet access (2) from a largely unregulated "information service," (3) to a lightly regulated "telecommunications service." (4) In the Order, the Commission chose to classify Internet Service Providers ("ISPs") (5) as common carriers, subject to the telecommunications service regulations contained in Title II of the Communications Act, (6) as amended, based on changed circumstances necessitating more extensive government oversight. (7)

Having twice failed to convince a reviewing court that the Commission could impose conduit neutrality requirements without making the reclassification, the FCC took a different tack, subjecting ISPs to more muscular rules and regulations. (8) The 2015 Open Internet Order has generated substantial controversy, several requests for a stay of the Order, (9) and an expedited appeal, (10) the latter of which questions whether the Commission has adequately justified its reclassification of broadband Internet access. (11)

This Article will assess whether and how the FCC can successfully defend its 2015 Open Internet Order on appeal. In the Order, the FCC offered several justifications for its decision to apply its "light touch" approach to regulating broadband under Title II of the Communications Act, subject to extensive forbearing from Title II's common carrier regulatory safeguards.

While it is common in appellate advocacy to use multiple and alternative arguments, the FCC has presented contradictory legal rationales. On one hand, the FCC invokes the so-called Chevron Doctrine, (12) which requires courts to defer to the expertise of a regulatory agency when its authorizing statute lacks clarity and the agency reasonably interprets those statutory ambiguities. (13) However, elsewhere in its decision, the FCC confidently asserts that ISPs clearly provide essential telecommunications services, (14) evincing no difficulty with interpreting and applying existing service definitions created by Congress. Rather than having to remedy statutory ambiguity, the Commission appears to make the case that ISPs, once deemed to fit within the information service classification, now unambiguously fit within the telecommunications service category. (15)

This Article discusses how the FCC has come to understand the need to reclassify broadband Internet access as common carriage, leading the Commission to impose the regulatory safeguards it now considers essential. However, at the very time the Commission seeks to invoke lawful and sufficiently expansive statutory authority, ISPs need substantial flexibility to customize services meeting specific customer requirements, particularly demand for bandwidth intensive video services. Instead of according such flexibility, the Commission continues to apply an absolute, bright line regulatory dichotomy that does not work.

In this age of fast changing technologies and markets, the FCC ignores the fact that ventures readily offer both telecommunications and information services, as well as hybrids that combine elements that could trigger both regulatory classifications. Unlike reviewing courts, which have evidenced no difficulty in assessing how converging markets and technologies impact the FCC's jurisdiction, (16) the Commission continues to attempt the impossible: absolute and long term assessment of convergent services and assignment of them into single, mutually exclusive regulatory categories. Even as it already has attempted to reclassify broadband Internet access, the FCC wants reviewing courts, the public, and industry to think that it can shoehorn any existing or new service completely into one or the other service classification.

While stating its clear intent to forbear and streamline as never before, the FCC will have to convince a reviewing court that it considered all the facts and data in the record supporting the rational decision to reclassify ISP service. This Article concludes that the FCC's best appellate court strategy lies in emphasizing available direct statutory authority and changed circumstances in the Internet ecosystem, rather than ambiguity in the service definitions created by Congress, or alternatively that reviewing courts should defer to the Commission's expertise in assigning convergent services into unambiguous regulatory categories. This Article recommends that the FCC emphasizes its duty, established in Section 706 of the Communications Act, (17) to identify and remedy broadband market failures.

2. THE CHALLENGE OF CALIBRATING GOVERNMENT OVERSIGHT IN FAST CHANGING MARKETS

   Even if the FCC could assert near complete independence from political parties, presidents, and Congress, it cannot avoid its duty to respond to fast changing markets and technologies and calibrate the proper scope of its regulatory oversight. Congress may have handicapped the FCC by constructing service definitions that the Commission must use to determine the scope of its oversight, (18) but the FCC exacerbates the situation by electing to make such category assignments based on the assumption that any existing or prospective service can and must fit solely into one classification, explaining:

   We agree with commenters that [telecommunications service and information service] are best construed as mutually exclusive categories, and our classification ruling appropriately keeps them distinct. in classifying broadband internet access service as a telecommunications service, we conclude that this service is not a functionally integrated information service consisting of a telecommunications component "inextricably intertwined" with information service components. Rather, we conclude, for the reasons explained above, that broadband internet access service as it is offered and provided today is a distinct offering of telecommunications and that it is not an information service. (19) Over many generations of technologies, and despite vast changes in the telecommunications and information-processing marketplace, the FCC has opted to create and maintain an absolute dichotomy between regulated and largely unregulated services. (20) Notwithstanding its confidence in creating this dichotomy, the FCC has shown ambivalence about whether Congress created sufficiently clear statutory definitions, particularly when claimed ambiguity affords the Commission an opportunity to make its own clarifications, category assignments, and reclassifications. (21)

   When determining which statutory classification applies to broadband Internet access, the FCC first refrained from making any determination at all, (22) but subsequently chose to apply the information service classification in 2002. (23) Now, the Commission has opted to change which classification applies (24) so that it can work around the judicial prohibition on applying common carrier nondiscrimination safeguards to non-common carriers. (25)

   The FCC appears to have undertaken a strategy...