The scope of the FCC's ancillary jurisdiction after the D.C. Circuit's net neutrality decisions.

• Author: Wright, Christopher J.

TABLE OF CONTENTS I. INTRODUCTION II. THE STATUTORY FRAMEWORK AND THE SUPREME COURT'S ANCILLARY AUTHORITY DECISIONS III. JUDGE TATEL'S SYNTHESIS OF THE D.C. CIRCUIT PRECEDENT A. Comcast v. FCC B. Verizon v. FCC IV. THE ANCILLARY JURISDICTION TEST AFTER VERIZON A. Express Delegations Versus Mere Policy Statements B. Consistency with the Act V. CONCLUSION I. INTRODUCTION

Whether the Federal Communications Commission can and should reenact net neutrality rules similar to those invalidated by the U.S. Court of Appeals for the D.C. Circuit in Verizon v. FCC (1) has been the focus of most commentary on the case. But the decision in Verizon is also noteworthy for its effect on the scope of the FCC's "ancillary jurisdiction"--that is, the FCC's authority to adopt regulations based largely on the provisions in Title I of the Communications Act of 1934 (2) that grant the agency general, rather than specific, authority. This issue is important because the validity of many FCC regulations adopted since the enactment of the 1934 Act depends on the scope of the FCC's ancillary jurisdiction. Given the dynamic nature of the communications sector, questions concerning the scope of the FCC's ancillary authority are sure to arise again as new technologies emerge. This essay thus focuses on the scope of the FCC's ancillary authority after Verizon, rather than on how the FCC should respond to the opinion with respect to net neutrality. (3)

The provisions that provide the basis for the FCC's ancillary authority include section 2(a) of the Communications Act, (4) which gives the FCC jurisdiction over "all interstate and foreign communications by wire or radio;" section 1, (5) which provides that the FCC is required to endeavor to "make available ... to all the people of the United States ... a rapid, efficient, Nation-wide, and world-wide wire and radio communication service;" and section 4(i), which gives the FCC authority to "perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions." (6)

As the Supreme Court has explained, although the Act gives the FCC "expansive powers," (7) they are not "unbounded." (8) In 1968, in United States v. Southwestern Cable, the Court emphasized the expansive nature of the FCC's powers in approving the FCC's regulation of community antenna television ("CATV"), an early version of cable television, at a time when the Communications Act made no mention of CATV. (9) The Court found "no need ... to determine in detail the limits of the Commission's authority," adding that "[i]t is enough to emphasize that the authority which we recognize today under [section 2(a)] is restricted to that reasonably ancillary to the effective performance of the Commission's various responsibilities for the regulation of television broadcasting." (10) The Court thus introduced the concept of "ancillary" jurisdiction. (11)

In 1979, in FCC v. Midwest Video Corp. (Midwest Video II), the Court held that the FCC "was not delegated unrestrained authority" and rejected the FCC's attempt to exercise its ancillary authority to require CATV operators to set aside a portion of their channel capacity for access by third parties. (12) The Court noted that the Act specifically prohibits the FCC from regulating broadcasters as common carriers, concluding that the FCC "may not regulate cable systems as common carriers" either. (13)

Since 1979, federal courts of appeals--primarily the D.C. Circuit--have attempted to develop the ancillary jurisdiction doctrine to recognize the FCC's broad authority under the Act while ensuring that it is not unbounded. Two recent net neutrality cases represent the court's most recent attempt to navigate between these poles. (14) The Communications Act is hardly a model of clarity with respect to the limits on the FCC's power, yet neither the Supreme Court nor the federal courts of appeals have provided a clear framework for determining whether a particular exercise of ancillary authority is permissible. In the second edition of Digital Crossroads, published before the D.C. Circuit's Verizon decision, telecommunications scholars Jonathan Nuechterlein and Phil Weiser opined that the scope of "ancillary authority has always been murky." (15) They also expressed concern that the legal issues involved in debates about questions such as the FCC's authority with respect to Internet issues "can be mind-numbing in their scholastic complexity" and "are increasingly unhinged from the underlying economic and engineering realities that should be driving the policy debate." (16)

Professor John Blevins, who wrote the most recent, comprehensive review of the scope of the FCC's ancillary authority, has described the relevant Supreme Court cases as "to put it mildly, not a model of coherence." (17) While arguing for "a new theory of the FCC's ancillary jurisdiction, arguing that it is best understood as an authority to promote market competition," (18) Blevins acknowledged that a case can be made that "there is simply no logic to the ancillary jurisdiction cases." (19) In 2010, Judge Tatel of the D.C. Circuit confronted this disjointed doctrine in Comcast v. FCC, in which his opinion for the court sought to reconcile all of the Supreme Court and D.C. Circuit ancillary authority decisions. (20) More recently, Judge Tatel's majority opinion in Verizon v. FCC illustrates how that standard is to be applied. (21) Despite his herculean effort to harmonize the earlier cases, the scope of the FCC's ancillary authority remains murky and disconnected from economic and engineering realities.

Disputes over the scope of the FCC's ancillary authority are sure to arise again in varied and important contexts because, as the Supreme Court noted in 1943, the communications field is "dynamic." (22) Just as the Congress that enacted the Communications Act in 1934 did not foresee cable television or grasp the importance of broadcast networks, (23) and the Congress that substantially amended the Communications Act in 1996 did not fully appreciate how important broadband Internet service would become, (24) lawmakers have also surely overlooked emerging technologies and practices that will become important in the future. Under the law as it stands, whether the FCC may address such technologies will depend more on how complex and mind- numbingly scholastic legal issues are resolved than on whether particular regulations are warranted on the merits.

This essay first reviews the statutory framework and the Supreme Court decisions governing the scope of the FCC's ancillary authority. The essay then analyzes how Judge Tatel's decisions in Comcast and Verizon have reshaped the scope of the FCC's ancillary jurisdiction. Although Judge Tatel's synthesis of the relevant cases has produced a test that is largely true to D.C. Circuit precedent, this test is unlikely to shift judicial results away from complex issues having little to do with real-world matters and toward the merits of the FCC's actions as a matter of economic policy and engineering realities.

2. THE STATUTORY FRAMEWORK AND THE SUPREME COURT'S ANCILLARY AUTHORITY DECISIONS

   In its 1943 decision in NBC v. United States, the Supreme Court reviewed FCC regulations that comprehensively regulated the relationships between broadcast networks and broadcast stations. (25) The issue of the FCC's authority arose because the Communications Act of 1934 set forth no rules regarding broadcast networks, (26) even though these networks had played an important role in broadcasting even prior to the Act's enactment. As Tom Krattenmaker and Richard Metzger have explained, although section 303(i) of the Act empowers the FCC to regulate "stations engaged in chain broadcasting," it does not apply to chain broadcasting itself--such as the operation of a broadcast network. (27) Hence the Court soon faced a dispute concerning the source of the FCC's authority over broadcast networks.

   As Justice Frankfurter, writing for the Court, acknowledged, "[t]rue enough, the Act does not explicitly say that the Commission shall have power to deal with network practices found inimical to the public interest." (28) Although the Court did not regard section 303(i) as resolving the issue, (29) it emphasized that "the Act gave the Commission not niggardly but expansive powers." (30) Among the provisions of the Act the Court discussed was section 303(r), (31) which gives the FCC authority to "make such rules and regulations and prescribe such restrictions and conditions, not inconsistent with law, as may be necessary to carry out the provisions of this" Act; (32) and section 303(g), which directs the FCC to "generally encourage the larger and more effective use of radio in the public interest." (33) The Court described the public interest standard as "a criterion which 'is as concrete as the complicated factors for judgment in such a field of delegated authority permit.'" (34) The Court held that those powers were broad enough to comprehensively regulate networks' relationships with radio stations, notwithstanding the absence from the Act of a specific grant of authority to the FCC. (35)

   In United States v. Southwestern Cable Co., the first case to speak of the FCC's ancillary jurisdiction, the Court upheld the FCC's authority to broadly regulate CATV--now known as cable television--even though the Communications Act did not address CATV, as Congress had not anticipated the development of cable TV in 1934. (36) Justice John Marshall Harlan II emphasized the reach of section 2(a) of the Act, which gives the FCC authority over '"all interstate and foreign communication by wire or radio.'" (37) The Court rejected the argument that section 2(a) "does not independently confer regulatory authority upon the FCC, but instead merely prescribes the forms of communications to which the Act's other provisions may separately...