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D.C. Circuit Strikes Down Network Neutrality Rules

Trey Hanbury

Trey Hanbury,

Washington, D.C.

Austin Bonner

16 January 2014
In a highly anticipated decision, the D.C. Circuit has struck down key provisions of the Federal Communication Commission’s (FCC) network neutrality regulation that banned blocking lawful content and prohibited fixed broadband providers from unreasonably discriminating among content providers.  While the majority of the three-judge panel concluded that section 706 of the Telecommunications Act gives the FCC authority to promulgate rules on broadband, the court concluded the FCC cannot use its section 706 authority to regulate broadband information service providers as if they were traditional common carriers.

The court considered three main provisions: (1) rules that prevent fixed broadband providers from unreasonably discriminating in transmitting data over their networks; (2) rules that prevent broadband providers from blocking consumers’ access to lawful content; and (3) rules that require disclosure of commercial terms, performance characteristics, and how broadband providers manage network congestion.

The court could not find any basis in section 706 of the Telecommunications Act that would allow the FCC to prohibit carriers from offering some content providers speedier delivery while limiting others to standard service: rules that require equal treatment of all internet traffic looked too much like traditional common carrier regulation in the court’s view to fall within the more general regulatory authority of section 706.

But the court viewed the FCC’s “no blocking” provisions of the FCC’s Open Internet Order a bit differently.  According to the court, the FCC’s attempt to prohibit a broadband provider from blocking a consumer’s access to the lawful content of their choice could be sufficiently distinguishable from traditional common carrier regulation to be theoretically permissible under section 706.  Since the FCC never addressed how these “no blocking” provisions would operate in the absence of common-carrier type regulation, however, the court declined to uphold the “no blocking” provisions on the current record.

Finally, the court upheld the FCC’s disclosure rules, finding them sufficiently narrow – and sufficiently distinct from traditional common carrier regulation – to survive scrutiny.   As a result, the FCC will continue to be able to require broadband providers to disclose information to consumers about the providers’ network management practices.

The three-judge panel was comprised Judge Rogers, Judge Tatel and Senior Judge Silberman.  Because the majority reasoning of Judge Rogers and Tatel rests heavily on the FCC’s decision to classify broadband as an information service rather than a traditional common carrier telecommunications service, this decision will likely reignite the debate around reclassifying broadband as a telecommunications service subject to common carrier regulation.  Reacting to the opinion, FCC Chairman Tom Wheeler said that the FCC would consider all its available options for continuing to promote open internet principles, including appealing the decision to the Supreme Court.

The third panelist, Senior Judge Laurence Silberman, concurred in part and dissented in part.  Judge Silberman took an even more limited view of section 706 authority.  He agreed with the majority that section 706’s directive the FCC shall “encourage the deployment on a reasonable and timely basis of advanced telecommunications capability” through, among other things, “measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment” grants the FCC positive regulatory authority.  But Judge Silberman also concluded that the FCC’s Open Internet Order exceeds that authority because the FCC never actually identified any broadband provider practices as “barriers to investment” that network neutrality would remove, nor did the FCC make a reasonable case that network neutrality regulation promotes local telecommunications competition.  Furthermore, Judge Silberman stated that the FCC’s regulation is arbitrary and capricious because its findings lack substantial evidence.

The court’s decision – and the accompanying opinion of Judge Silberman – is expected to fuel increased interest in paid prioritization programs among fixed broadband providers, a practice that the Order effectively curtailed.  Lifting the “no blocking” rule may also have consequences for bandwidth-intensive applications; operators could throttle or potentially ban bandwidth-intensive applications if network congestion becomes a serious issue.

Broadband providers appear to be poised to take advantage of the new regulatory landscape.  At oral argument last fall, Verizon told the court that it would be pursing different pricing models but for the FCC’s Network Neutrality rules.  AT&T has also begun exploring new pricing strategies with its recently announced Sponsored Data program, which sidestepped the then-in-force network neutrality rules but was criticized as violating the “spirit” of the Open Internet.

Unlike the United States, Europe does not distinguish between “common carrier” telecommunications services and broadband information services.  All Internet conveyance services are classified in Europe as "electronic communications services" and the same net neutrality rules apply both to fixed and mobile Internet access.  The FCC was handicapped by its own historical classification of Internet access services as “information services.”

For an update on European net neutrality rules, see Michele Farquhar's blog of November 21, 2013.  For a comparison of the FCC's rules to European net neutrality rules, see this article by Winston Maxwell and Dan Brenner.

Trey Hanbury

Trey Hanbury,

Washington, D.C.

Austin Bonner

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