The court upholds the FCC’s authority to regulate internet access services as telecommunications carriers and impose restrictions on blocking and throttling internet content.

A panel of the US Court of Appeals for the District of Columbia  (DC Circuit) has rejected all challenges to the Federal Communications Commission’s (FCC’s) 2015 decision adopting new open internet rules.^[1] Judges David Tatel and Sri Srinivasan jointly authored the panel’s 115-page opinion, while Judge Stephen Williams wrote a 69-page dissent that agrees with many portions of the opinion but ultimately concludes that the FCC’s order should be vacated.

Background

The court’s ruling is the latest development in more than a decade of FCC efforts to establish a regulatory paradigm for internet access. In 2002, the FCC classified broadband internet access as a nonregulated “information service” under the Telecommunications Act of 1996 (Telecom Act); this classification decision was affirmed by the US Supreme Court in 2005. Also in 2005, the FCC declared that it expected internet service providers (ISPs) to abide by certain principles that allow consumers to access the internet services, content, and application of their choice. When it attempted to sanction a cable TV company for violating those principles in 2007, the DC Circuit found that the FCC had not identified a clear basis in the Telecom Act for exercising this authority and vacated the decision.

In response to that court ruling, the FCC adopted its first open internet rules in 2010, asserting that Section 706 of the Telecom Act provided it with authority to regulate certain aspects of information services in the public interest. That decision included three specific rules governing internet access: no blocking, no discrimination, and transparency. A subsequent decision by the DC Circuit agreed that Section 706 did give the FCC rulemaking authority over internet access, and specifically affirmed the transparency rule, but vacated the no-blocking and no-discrimination rules because they violated a different provision of the Telecom Act that specifically prohibits the FCC from treating information services as “common carriers.”

FCC Rules

The FCC then reconsidered its position and decided in 2015 to reclassify both fixed and mobile broadband internet access services as “telecommunications services” rather than information services; to expand the transparency rule and adopt rules against throttling, blocking, discrimination, and paid prioritization by ISPs; to adopt a general conduct standard prohibiting actions by ISPs that unreasonably interfere with a user’s ability to access the internet content of their choice; and to forbear from enforcing many provisions of the Telecom Act, including price regulations, that would otherwise apply to ISPs automatically by virtue of their classification as telecommunications carriers. Numerous parties appealed this ruling to the DC Circuit.

The Court’s Ruling

The court’s opinion considers and rejects a variety of procedural and substantive challenges to the FCC rules. Most significantly, the court upheld both the FCC’s reclassification of fixed broadband internet access as a telecommunications service and of mobile broadband as a “commercial mobile radio service” under the Telecom Act. In both cases, the court found that the FCC had reasonably exercised discretion vested in it by Congress to determine how best to interpret and apply ambiguous terms used in the statute. The court also upheld the FCC’s decision to forbear from certain common carrier regulations, rejected a challenge to the FCC’s authority to adopt the paid prioritization rule and a claim that the general ISP conduct rule was unreasonably vague, and rejected arguments that the rules infringe on the First Amendment free-speech rights of ISPs by requiring them to transmit content generated by third parties.

The dissenting opinion argues that the FCC’s decision to reclassify internet access as a telecommunications service lacked a reasonable explanation, that its interpretation of Telecom Act provisions to justify its no-paid-prioritization rule was unreasonable, and that its forbearance from common carrier regulations was inconsistent with its rationale for reclassifying broadband internet access.

Consequences

It is likely that some of the parties that appealed the FCC’s rules will seek further review of today’s decision. There are basically three options—requesting a rehearing by the same panel that issued today’s opinion, requesting a rehearing en banc by all 11 active DC Circuit judges (very rarely granted), or petitioning for review by the Supreme Court. Supreme Court review is discretionary, and we likely will not know until October or later whether it will accept the case; if it does, a final decision may not come until 2018.

In the meantime, the FCC’s rules will remain in effect. Until now, the FCC has been cautious about taking enforcement actions that might have been invalidated if the rules had been overturned in whole or in part. In light of today’s ruling, it is likely to be more vigorous in pursuing enforcement of the rules and may also move forward with a pending proposal to adopt more extensive rules to protect the privacy of ISP customer information.

For ISPs, today’s ruling heightens the importance of monitoring ongoing compliance with the FCC rules, including the disclosures required by the enhanced transparency rules. ISPs with interconnection or peering disputes will also need to consider the possibility of FCC involvement in these matters. For internet backbone networks and edge providers, the ruling provides an opportunity to seek FCC intervention in disputes with ISPs, but parties that seek FCC relief will need to understand both the agency’s procedural requirements and the substantive limits of its authority.

_{[1] US Telecom Ass’n v. FCC, No. 15-1063.}