Wickard for the Internet? Network neutrality after Verizon v. FCC.

AuthorYoo, Christopher S.
PositionI. Introduction through III. Limits on the FCC's Section 706 Authority, p. 415-440

Table of Contents I. Introduction II. Section 706 as a Grant of Authority A. The Text of Section 706 B. The Court's Expansive Reading of Section 706 C. The Impact of the Canons of Construction D. The Legislative History of Section 706 E. The Questionable Empirical Foundation for the Court's Reasoning III. Limits on the FCC ' s Section 706 Authority A. Statutory Limits on the FCC's Jurisdiction B. Common Carriage as a Limit to Section 706 Authority C. Commercial Reasonableness as an Alternative Standard 1. Impact on Competition 2. Impact on Consumers 3. Industry Practices IV. Title II Reclassification A. Legal Barriers to Reclassification B. Overlooked Implications of Reclassification 1. Common Carriage's Inapplicability to Complementary Services 2. The Permissibility of Prioritized Service 3. Difficulties Implementing Common Carriage 4. Difficulties Implementing Forbearance V. Other Implications of the Verizon Decision. A. State Regulation B. The Applicability of Network Neutrality to Interconnection Agreements 1. The Mischaracterization of Peering as Zero-Price Interconnection. 2. The Multiple Functions Performed by Prices. 3. The Danger of Regulating Interconnection Agreements C. Case-by-Case Adjudication. 1. MetroPCS/YouTube. 2. AT&T/Apple FaceTime 3. Verizon/Google Tethering Apps. 4. Verizon/Google Wallet. 5. Amazon Kindle/Zero Rating. VI. Conclusion I. Introduction

The U.S. Court of Appeals for the District of Columbia Circuit's long-awaited decision in Verizon v. FCC (1) represents a major milestone in the debate over network neutrality that has dominated communications policy for the past decade. In upholding some parts while striking down other parts of the FCC's Open Internet Order, (2) the court reached two major conclusions that together represent both a partial victory and partial defeat for proponents and opponents of network neutrality alike. First, the court ruled that section 706 of the Telecommunications Act of 1996 (3) affirmatively grants the FCC the authority to regulate broadband access providers' treatment of Internet traffic. (4) Second, the court ruled that the Order's nondiscrimination and anti-blocking rules represented an invalid exercise of that authority because they contravened other express statutory mandates. (5)

In striking down these rules, the court appeared to provide a roadmap showing a way to reconstitute nondiscrimination and anti-blocking rules that would withstand judicial scrutiny. (6) Wanting to avoid the risk of being rebuked on network neutrality a third time, FCC Chairman Tom Wheeler proposed rules that adhered closely to the path laid out by the court with respect to the nondiscrimination and anti-blocking rules, while beefing up the transparency rules that withstood judicial review. (7) Advocates of network neutrality criticized the proposal for its failure to reinstate a nondiscrimination mandate. (8) The resulting political pressure led Chairman Wheeler to include language in the proposed rule seeking comment on the more radical step of bringing broadband access within the regulatory regime that governs traditional telephone service. (9) Nondiscrimination has thus emerged as the focus of the network neutrality debate. Although the Open Internet Notice of Proposed Rulemaking that the FCC adopted on May 15, 2014, attempts to characterize nondiscrimination as part of a decade-long, bipartisan policy, (10) nondiscrimination did not appear in either Chairman Michael Powell's initial 2004 exposition of Internet freedoms (11) and from the FCC's 2005 Policy Statement. (12) Instead, nondiscrimination emerged as an issue somewhat later in the debate, when Commissioner Michael Copps began to call for it in a series of separate statements and speeches. (13) Moreover, the FCC attempts to characterize its actions in the SBC/AT&T, Verizon/MCI, and AT&T/BellSouth mergers and the Adelphia spinoff as supporting network neutrality. (14) As a formal matter, however, in each of those cases the FCC actually found competition to be sufficiently robust and the record sufficiently bare of evidence of discrimination to justify declining to mandate nondiscriminatory access to their last-mile broadband networks, although the FCC did accept voluntary commitments to abide by the 2005 Policy Statement as being in the public interest. (15)

This essay explores both of these conclusions. Part I critiques the Verizon court's potentially expansive reading of section 706, examining how it may expand FCC's authority beyond broadband access providers to encompass content and application providers (dubbed "edge providers" by the court) (16) and showing how this reading runs counter to standard principles of statutory interpretation. Part II discusses the limitations the court placed on how the FCC can exercise its section 706 authority, concluding that these limits prevent the FCC from imposing the type of nondiscrimination mandate that many regard as the central focus of network neutrality. Part III explores the implications of the court's decision, examining the potential for state broadband regulation, the possibility of Title II reclassification, the future of the wireless exception, and the prospects for a regime based on case-by-case adjudication.

  1. Section 706 as a Grant Of Authority

    The portion of the Verizon opinion with the most potentially sweeping implications for the future of the Internet is the court's expansive reading of section 706. (17) Understanding these implications requires some background on the federal communications statute, the Communications Act of 1934. When first enacted, the Act contained six titles, four of which were procedural, not substantive. (18) Title I laid out the general provisions regarding the number, qualifications, and terms of FCC Commissioners and defined a number of statutory terms. (19) Title IV contained provisions governing procedural and administrative matters. (20) Title V addressed penal enforcement and forfeitures. (21) Title VI dealt with miscellaneous housekeeping matters, such as abolishing the Federal Radio Commission-- the precursor to the FCC--and transferring its property and personnel to the FCC. (22)

    The Act's primary substantive provisions were contained in Title II, which governed common carriers, (23) and Title III, which governed radio communications. (24) In 1984, Congress replaced the old Title VI with a new substantive title to govern cable communications and renumbered the old procedural Title VI as Title VII. (25)

    Three provisions of Title I are particularly relevant to the network neutrality debate. Section 1 recognizes that Congress created the Commission "[f]or the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all people of the United States ... a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges." (26) Section 2(a) provides that "[t]he provisions of this chapter shall apply to all interstate and foreign communication by wire or radio and all interstate and foreign transmission of energy by radio, which originates and/or is received within the United States." (27) Section 4(i) states that "[t]he Commission may 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." (28)

    The FCC has sometimes cited these provisions of Title I as if they represented substantive grants of authority. (29) The problem with this approach should be apparent to every law student and lawyer. The FCC has conceded that statements of purpose, like those contained in section 1, delegate no regulatory authority. (30) Moreover, courts and the FCC have analogized section 4(i) to the Necessary and Proper Clause of the Constitution, (31) which authorizes Congress "[t]o make all Laws which shall be necessary and proper for carrying into Execution" the federal government's enumerated powers. (32) Although the Necessary and Proper Clause extends Congress' authority beyond the strict letter of the enumerated powers, it is not itself a separate grant of authority. It still must be exercised with respect to some enumerated power granted to Congress by Article I, Section 8, or some other explicit provision of the Constitution. (33)

    Nonetheless, the FCC has repeatedly invoked these provisions as if they were independent grants of authority to regulate Internet access. For example, in the Second Computer Inquiry, the FCC ruled that the enhanced services that were the direct antecedent to the Internet (34) were not subject to Title II. (35) Instead, the FCC relied on its Title I jurisdiction, explicitly rejecting the argument that the provisions of Titles II or III in any way limited its authority. (36) The D.C. Circuit affirmed both conclusions on judicial review. (37) Over two decades later, dicta in the Supreme Court's decision in National Cable & Telecommunications Association v. Brand X Internet Services similarly suggested that the FCC possessed ancillary authority under Title I to impose access requirements on broadband access providers. (38) However, the D.C. Circuit's 2005 decision in American Library Association v. FCC made clear that the FCC must do more than simply cite the general provisions from Title I to justify regulating under its ancillary jurisdiction. (39) Ancillary jurisdiction must be invoked with respect to one of the specific statutory responsibilities Congress delegated to the FCC in the substantive titles of the Communications Act. (40) In 2010, the D.C. Circuit reaffirmed this principle in Comcast v. FCC, which overturned the FCC's attempt to sanction Comcast for rate-limiting certain peer-to-peer applications. (41) Together, these decisions stand for the very reasonable proposition that Title I ancillary jurisdiction is not an independent...

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