Why Court Very Likely Will Stay FCC’s Title II Reclassification

By Scott Cleland

Published May 17, 2015

Based on the latest best arguments this week from both the FCC and broadband petitioners, the D.C. Circuit Court of Appeals is very likely to partially stay the FCC Open Internet Order‘s reclassification of broadband as a Title II service and imposition of a new Internet conduct standard — in the coming weeks.

That’s because a close comparison of the broadband industry’s latest best arguments in itspetition for a court stay with the FCC’s latest best counter-arguments in denying the broadband industry’s petitions for an FCC stay — exposes how extraordinarily weak the FCC’s legal justification is.

Normally, winning a court stay of a Federal Government decision has a low probability of success because petitioners must overcome the high legal bar of convincing the court that they are likely to win on the merits and that they would suffer irreparable harm.

This is no normal case.

First, on the merits, the FCC’s legal case proves extraordinarily flawed on: court deference, findings of fact, FCC/Court/Supreme Court precedents, the law, and APA due process. Second on irreparable harm, petitioners present real, substantial, documentable and unrecoverable costs, which easily overwhelm the FCC’s few largely hypothetical, anecdotal, unsupported, and unquantifiable harms, because the petitioners are not asking for a stay of the FCC’s net neutrality rules, of no blocking, throttling, and paid prioritization, or a stay of the FCC’s Section 706 authority to protect consumers.

For those who doubt that the FCC’s legal case could be this weak please read and compare the FCC’s best summary arguments versus the industry’s best summary counter-arguments – like the judges essentially will.

(Background Note: After analyzing the FCC’s legal justification for Title II before andafter the publication of the FCC’s Open Order in March, I predicted the order would be highly vulnerable in court. After analyzing the telecom & cable petitions for a partial stay last week, I then predicted a better than even chance the court could grant a partial stay of Title II reclassification. This analysis — of the FCC’s latest best arguments versus the industry’s latest best arguments — results in increased confidence the court will very likely grant a partial stay of the Title II part of the FCC Order.)

Why the FCC’s Title II legal justification is extraordinarily fragile and weak.

First, the industry’s petition eviscerates the FCC’s main line of defense, which presumes “carte blanche” Chevron Deference to empower the FCC to repudiate and reverse multiple past FCC findings of fact, five FCC precedents and one Supreme Court precedent without “substantial justification,” in order to redefine broadband information services to be only telecommunications end-to-end.

Specifically, the circus tent-pole assumption supporting the FCC’s whole case here is whether the FCC now has the authority and administrative latitude to redefine broadband service from an un-regulated Title I information service to a Title II common carrier telecommunications service.

Contrary to the FCC’s presumption that the FCC as the expert agency is due broad Chevron Deference for interpreting “ambiguous” law, the specific interpretation at issue here is now essentially settled legal precedent.

All 9 Supreme Court Justices in the seminal Brand X decision on this matter in 2004 agreed that offering Internet access is, according to Section 230 of the 1996 Telecom Act,bydefinition an information service.

Compounding the FCC’s legal jeopardy on this point is that the evidence proves the FCC’s interpretation to be an unreasonable interpretation of the well-developed facts in five prior consistent FCC precedents that found broadband service met all eight independent parts of the statutory information service definition. This is not an “ambiguous” grey area any more, but consistently settled precedent.

The FCC’s legal position here confronts even more legal peril because the FCC’s legal view “lacks any limiting principle” which is necessary for an interpretation of statutory authority to be legal.

This is especially problematic in this case, because this D.C. Court of Appeals has already overturned the FCC twice before for effectively asserting unlimited Internet regulatory authority in 2010 in Comcast v. FCC and again 2014 in Verizon v. FCC. The FCC comes before this court as an unrepentant overreach recidivist imagining the court has no memory.

The FCC’s presumption of sweeping court deference here is even further undercut by the transparently political nature of the FCC’s decision-making process in this matter.

Chevron deference is due for administrative convenience on administrative matters of ambiguous law. The petition for a stay presents substantial evidence that a “sharply divided” FCC reversed decades of consistent bipartisan precedent in support of a light touch information services classification of Internet service.

The obvious sequence of facts are: that the original FCC NPRM did not originally plan to reclassify broadband to be Title II; that there were White House meetings on how to exert influence on the FCC on the Title II matter; that the President publicly called for Title II regulation of the Internet as a utility; and that a few months later a “sharply divided” FCC voted to implement the President’s view.

The obvious appearance that the FCC’s Open Internet Order is a big political reversal of longstanding bipartisan Internet policy on a partisan basis without Congress, undercuts the FCC’s legal contention that it is engaged in a mere administrative interpretive action worthy of maximal Chevron deference from the courts.

In short, the FCC’s circus tent-pole assumption supporting its entire Title II case is in serious legal jeopardy.

Second, in the important context of a request for a stay that must balance net harms, please consider how vastly different the petitioners and the FCC frame what “the status quo” actually is here.

Which reality do you think the court will most likely believe?

Will the court believe as the petitioners represent, that the Title II reclassification change is a big policy change with large net commercial harms? Or will they see it as the FCC represents, as an administrative “backstop” to maintain the legality of the FCC’s Open Internet policy with minimal harms and a net public interest benefit?

Petitioners’ Status Quo Reality

Will the Court believe the petitioners’ frame of a big factual change in the status quo?

Is the FCC changing from a longstanding bipartisan Internet policy driven by Congress to a partisan Internet policy driven by the White House and FCC?
Is the FCC changing from Title I light touch Internet regulation, to Title II common carrier regulation?
Is the FCC changing from a policy that resulted in normal and predictable business liability, to a policy that results in increased and unpredictable business liability by encouraging class action lawsuits in most all aspects of the broadband business?
Is the FCC changing from a policy that encouraged ~$800b in broadband investment in a decade, to an economic regulation policy that inherently discourages investment by increasing economic uncertainty over expected return on investment?
Is the FCC changing from a policy that has long respected commercial reliance interests in infrastructure investment, to a policy that effectively does not recognize that any substantial commercial reliance interests even exist in infrastructure investment?
Is the FCC changing from a policy that never had regulated the Internet backbone market, to a one-sided common carrier policy where longstanding commercially-negotiated interconnection agreements can all be challenged as unjust or unreasonable?

In addition, will the court believe the other big changes in the status quo that the petitioners spotlight?

Has the FCC created “out of whole cloth a ‘Title II tailored for the 21^st Century'” without Congress?
Has the FCC rewritten its mobile service rules to overrule Congress’ clear intent in the law twice?
Has the FCC redefined broadband to selectively change the legal status of only ISPs?
Has the FCC adopted a new one-sided vague Internet conduct standard that ISPs must follow, and everyone else can sue ISPs for violating?

In short, will the court believe the petitioners’ core position that the FCC Title II reclassification is a big change in the status quo that implicates vast, real, substantial, documentable and unrecoverable net costs?

Or will the court believe the FCC’s opposite factual view of the status quo?

FCC’s Status Quo Reality

Will the court believe the FCC that its Title II decision is little change in the status quo, because as it states in its denial of the petitioners’ request for an FCC stay, that “the Commission’s Order maintains the status quo of an Open Internet, which the Commission has committed to protect and promote since 2005?”
Will the court believe the FCC’s position that its Title II reclassification of broadband service is not a big change in Internet policy but an administrative reinterpretation of ambiguous law worthy of court deference, in order to bolster its regulatory authority to protect the public interest?
Will the court believe the FCC that the President’s public call for the “strongest possible” Title II utility regulations of broadband did not influence only the FCC democrat majority to impose Title II regulation on broadband ISPs?
Will the D.C. Court of Appeals believe the FCC that it needed Title II to enforce net neutrality, when the broadband industry is not challenging the net neutrality rules and when this court drew a roadmap for the FCC to enforce net neutrality under its section 706 authorities in Verizon v. FCC?
Will the court believe the FCC and its evidence in its Order (paras. 409-425), that a change in broadband providers’ legal status to Title II economic regulation will not discourage their future rate of investment in Internet infrastructure?
Will the court believe the FCC’s harms analysis, that there are no real reliance interests at risk here at all, because the FCC’s imposition of Title II economic regulation will not affect ISPs infrastructure investment incentives?
Will the court believe that the FCC’s ‘Title II tailored for the 21^st Century’ that forbore from many of the onerous Title II provisions, succeeded in replicating the previous status quo, so the newly-created FCC status quo did not really change the previous FCC status quo? (If the FCC’s logic is hard to follow, you get the point.)
Will the court believe the FCC’s assertion that they have no interest in ex ante price regulation of broadband when there is no statutory limitation on the FCC’s asserted Title II authority?
Will the court believe the that the FCC’s asserted need to prevent future undefined potential harms to the Open Internet by ISPs, is on balance greater than the petitioners’ documented harms from Title II?

In short, will the court believe the FCC’s core position that the FCC Title II reclassification is not a big change in the status quo and that the FCC’s assessment that a stay of the FCC’s Title II reclassification and Internet conduct standard would harm the public interest?

Comparing the two, I believe when the court looks at this case through a court stay lens of what view really maintains the actual status quo with the least harm, they will accept the petitioners’ more accurate and realistic frame of the status quo.

Third, there are many more strong arguments that independently and additionally imperil the FCC’s Title II reclassification and augur for a grant of a partial stay.

Probably the most egregious and vulnerable part of the FCC’s order is applying Title II common carrier regulation to wireless. The FCC directly contravenes two different clear congressional prohibitions of treating private mobile providers as common carriers. And the FCC makes obvious its “results oriented reasoning” by going to the preposterous length of redefining the Internet to be the Public Switched Telephone Network (PSTN) when Congress has repeatedly made it clear they are not one in the same.

Further imperiling the FCC’s Title II reclassification is that it is built upon several serious arbitrary and capricious actions, and that it required the FCC to violate the APA in several ways.

In conclusion, the D.C. Circuit Court of Appeals is very likely to grant a stay of the FCC’s Title II reclassification and its new Internet conduct standard in the FCC’s Open Internet Order.

By not requesting a stay of the FCC’s existing bright line net neutrality rules banning blocking, throttling, and paid prioritization, and by not asking for a stay of the FCC’s Section 706 Internet regulatory authority, the petitioners effectively eliminate consumer harms from the balance of harms equation.

In a nutshell, the petitioners successfully eviscerate the FCC’s weak legal justification for Title II reclassification and a new Internet conduct standard.

Most all of the FCC’s case is based on the constant presumption that the courts must show the FCC sweeping deference as the “expert agency.” The FCC’s case can be aptly encapsulated as ‘this particular FCC always knows best.’ Moreover, the FCC’s repeated legal justifications can be aptly encapsulated as ‘because this FCC says so.’ Furthermore, the FCC also claims king-like powers that allow it to act arbitrarily and capriciously and to wholesale ignore the APA.

Simply, the FCC is its own worst enemy.

Its legal justification is so weak because the FCC majority obviously decided to do what it wanted politically and quickly with little regard to common sense, prior FCC’s repeated findings of facts and definitional precedents, appeals court and Supreme Court precedents, the Communications Act, The Administrative Procedures Act, and the Constitution.

The FCC is in for a very rough day in court.

[Originally published at Precursor Blog]