How FCC Hurt Its Title II Anti-Stay Case

Published May 28, 2015

The FCC’s latest legal brief opposing a stay of its Open Internet Order, hurt its legal case more than it helped.

The FCC brief unwittingly: exposed a glaring internal inconsistency with the FCC’s Open Internet Order; spotlighted its arbitrary and capricious decision-making; and exposed a big mistake in its legal strategy.

If the D.C. Circuit Court of Appeals panel rules on the legal merits of the industry’s petition, it remains very likely they will grant a partial stay of the Title II reclassification part of the FCC’s Open Internet Order.

However, the FCC remains very confident that a majority of the court will overlook the multiple serious legal infirmities in the FCC’s Title II case and deny a stay based on sweeping legal deference to the FCC and political deference to President Obama’s public position for the FCC to reclassify the Internet as Title II telecommunications.

Thus this stay decision, and the ultimate judicial resolution of this case, potentially by the Supreme Court, could prove to be a test of American rule of law.

  • [Note: This analysis provides only the new and latest legal problems with the FCC’s order based on the FCC’s latest brief countering the industry’s petition for a partial stay of the Open Internet Order. For more on the multiple serious legal infirmities of the FCC’s legal case see PrecursorBlog posts:  5-14-155-4-153-16-15, and 3-2-15.]

Ironically, the FCC’s brief claims up front that the “petitioners’ stay motion is not what it seems.”

Given the FCC’s invitation to explore that line of inquiry, let’s consider three big ways the FCC’s own argument “is not what it seems.”

1.  The FCC brief exposes a glaring internal inconsistency with the FCC’s Order.

On pages 11-12 of the brief, the FCC says it forbore from “the large majority of Title II’s provisions…” and “this established “a light-touch regulatory framework,” thereby “minimizing the burdens on broadband providers while still adequately protecting the public…”

Thus the FCC admits in its brief, and in its Order, that the FCC Order does impose “burdens” on broadband providers, and it also admitted it chose to keep some of the “burdens,” like sections 201 and 202, to protect the public.

The simplest of cursory review of Title II by the court will show that the FCC retained the provisions with the most burdens, i.e. sections 201 and 202 powers, upon which the remainder of Title II rests.

Now on pages 2 and 24 of the FCC’s brief, the FCC summarily dismisses any legal harm (burden) on broadband providers in summarily asserting: “each alleged harm is speculative or insubstantial.”

How can the FCC’s sweeping denial of any harm in their brief square with the FCC’s detailed discussion in their Order of the need for the FCC to be “minimizing the burdens on broadband providers while still adequately protecting the public?”

Simply, why did the FCC need to forbear from Title II at all, if even the most burdensome Title II provisions, from which the FCC chose to not forbear, implicitly represent at best “speculative or insubstantial” harms to broadband providers?

The FCC can’t have it both ways.

Either Title II has actual harms/burdens on broadband providers as it made clear in the Order: “minimizing the burdens on broadband providers,” or it has no harms to broadband providers as it said it its stay brief: “each alleged harm is speculative and insubstantial.”

2.  The FCC brief spotlights the FCC’s arbitrary and capricious decision making.

Just like the FCC arbitrarily and capriciously denies any harm from Title II at all, the FCC brief also arbitrarily and capriciously dismisses the existence of any reliance interests for broadband providers, suppliers, or investors by summarily dismissing them as “alleged reliance interests.” [page 18]

Let the magnitude of the FCC’s caprice here set in: “alleged reliance interests.

The FCC brief denies that broadband providers, other Internet businesses, and private investors — who have invested upwards of a trillion dollars over the last decade relying on the law, Supreme Court precedent and multiple FCC precedents classifying all broadband infrastructures: cable, DSL, wireless and power-lines, as Title I services, not Title II utility rate regulated services — have no reliance interests requiring “substantial justification” to overcome.

Just like the FCC summarily dismissed that the un-forborne parts of Title II — like sections 201 and 202 that subject common carriers to sweeping rate regulation obligations — pose no “burdens” on broadband providers, the FCC is summarily asserting that imposing sections 201 and 202 implicates no reliance interests.

It is the quintessence of arbitrary and capricious behavior, when the FCC essentially can’t/won’t acknowledge before the court that the interests which maximally relied upon FCC’s settled precedent have no reliance interests at all, let alone reliance interests warranting “substantial justification” to overturn.

To paraphrase a famous line in an old infamous movie, the FCC is effectively saying to broadband providers: “You screwed up; you trusted us.”

3.  The FCC brief exposed a big mistake in its legal strategy.

Apparently the FCC remains confounded that broadband providers have only challenged the FCC’s Title II reclassification (and the conduct standard) and have not challenged the FCC’s section 706 authority or the FCC’s bright-line net neutrality rules banning blocking, throttling and paid prioritization.

It’s pretty obvious from reading the FCC Open Internet Order that it never occurred to the FCC that a legal challenge would concede section 706 and the bright line net neutrality rules, and then isolate Title II for legal challenge.

That’s because the clear backbone of the FCC’s integrated legal defense in the Order and in its stay brief is the Verizon v. FCC decision. Tellingly, the FCC brief cites Verizon v. FCC as much as it cites the Supreme Court’s Brand X decision.

Obviously the FCC likes the Verizon Court’s affirmation of the FCC’s section 706 authority and many of the FCC’s market findings/assumptions in its 2010 Open Internet Order that the court otherwise overturned.

The FCC’s apparent failure to anticipate a Title II-only challenge now has the FCC having to de facto assume and imply to the court that its section 706 and Title II authorities are somehow inseverable, when they are completely separate legally.

This big awkward FCC mistake in legal strategy has resulted in an FCC defense that may be inappropriately, too-heavily-reliant on Verizon v. FCC, which is a much more of section 706 relevant precedent that a straight Title II classification relevant precedent, like the Supreme Court’s Brand X decision which was solely focused on FCC classification.

Importantly, both the FCC and industry did not brief the Verizon v. FCC court about the legality of reclassifying broadband as a Title II service, after the FCC repeatedly found the facts and law warranted an information services classification. That’s because the FCC asserted 706 authority, and did not assert Title II common carrier authority to promulgate its 2010 net neutrality rules.

Simply, to this court, reclassifying broadband as a telecommunications service, after a decade of being legally classified as an information service, is a new legal question that Verizon v. FCC did not rule on.

This is a big problem for the FCC’s case for a variety of strong reasons.

The 1996 Telecommunications Act made Title I information services and Title II common carrier telecommunications services mutually exclusive legal classifications.

Not only are Section 706 & and Title II part of different legal titles, they are from different laws; the 1996 Telecommunications Act versus the 1934 Communications Act.

They are even opposite legal models in that section 706 is situational, conditional, targeted and reactive while Title II is ex ante and comprehensive.

Ironically, the main similarity of section 706 and Title II is that the FCC has now asserted unlimited authority to regulate the Internet under both Section 706 and Title II.

The FCC’s big legal mistake here is that the FCC effectively argues Verizon v. FCC is a major Title II, classification-relevant precedent, when it is a really a very different section 706, net neutrality precedent.

In sum, for the FCC to ultimately prevail on reclassifying broadband as a telecommunications service the D.C. Court of Appeals and the Supreme Court ultimately must confer near carte blanche deference on the FCC.

[Originally published at Precursor Blog]