At Chairman’s insistence, Commission will vote on new net neutrality rules in December despite shaky legal foundations and opposition in Congress.

On December 1, Chairman Genachowski announced that he has circulated a draft net neutrality order to be voted on at the Commission’s December 21 meeting. While the draft has not been made public, the Chairman’s announcement provides some insight into its contents. Here is an overview of the Chairman’s proposed approach, the Commission’s authority to implement that approach, and the likelihood of its success.

The Proposed Rules 

Genachowski’s remarks indicate that the current proposal is broadly similar to the one he introduced last Fall (you can read our report on that earlier effort here), with some refinements on specific issues like usage-based pricing and wireless. The draft is reportedly modeled on a net neutrality bill developed by departing House Commerce Chairman Henry Waxman (D-CA) earlier this Fall in an unsuccessful attempt to help the FCC out of its Comcast hole through legislative compromise. In particular, it appears that the proposed rules would include:

  • a transparency provision, with a requirement to provide consumers with information regarding network management;
  • a non-discrimination clause prohibiting the blocking of lawful content, apps, services, and devices as well as “unreasonable discrimination in transmitting lawful network traffic”.  The non-discrimination clause would allow for “reasonable network management”, taking into account the nature of the network in determining what is reasonable; and
  • some latitude for usage-based pricing to consumers and other measures to match price to cost. 

For wireless, the proposal would include transparency and a “basic” no blocking rule. The FCC would monitor the mobile market and take such further steps as may be necessary to counteract any “anti-competitive” or “anti-consumer” behavior.

Authority

According to Genachowski, the new rules would be grounded in a “variety of provisions” but will not rely on reclassification of Internet service from Title I to Title II (Title II being the portion of the Act governing basic telephone regulation) . Directly after the Comcast decision, FCC legal staff was leery of the shifting sands of Title I, leading the Chairman to propose a “Third Way” that would have reclassified ISPs as Title II carriers but spared them from most Title II rules. Now, however, Chairman Genachowski is backing off Title II, apparently satisfied that the FCC can find solid jurisdictional ground in Title I despite Comcast

Examining the Comcast wreckage, however, we don’t find many provisions left that could justify Title I ancillary jurisdiction over ISPs. The Comcast Court found that Sections 1 and 230(b) are merely policy statements, not direct delegations of authority. Section 256 failed because it explicitly states that nothing in it can be construed as expanding the Commission’s authority. Section 257 just requires a report; net neutrality regulations would not be “ancillary” to producing such a report. And the Court found no explicit provision that would allow the Commission to regulate the Internet in connection either with its Title III authority over broadcasting or with its Section 623 limited authority over cable. 

Left only half-dead were Sections 706 and 201.  But the Court found that the FCC was bound by its own 1998 conclusion that Section 706 grants no regulatory authority. And as to Section 201, the Court acknowledged that the FCC had, in its underlying Comcast order, laid out an explanation of possible Section 201 authority – but the Commission didn’t advance that explanation in defense of the order before the Court. As a result, the Court did not have occasion to assess the validity of that explanation. Although the Court did not expressly reject the ability of the FCC to rely on either of these sections for net neutrality authority, neither did it affirmatively approve either as a basis for ancillary jurisdiction.

To rely on Section 706, the Commission would first have to overrule its own earlier conclusion that that section grants no regulatory authority. Next the FCC would have to convince a court that net neutrality rules are “ancillary” to Section 706’s specific mandate directing the Commission to “encourage on a reasonable and timely basis the deployment of advanced telecommunications services to all Americans . . .”  Establishing such an “ancillary” nexus would be tricky, even with the copious deference the Courts routinely accord agency actions. Perhaps sensitive to the likely difficulties, the Commission started laying the groundwork for a possible future Section 706 argument last summer when, for the first time, it reported to Congress that broadband is not being deployed in a reasonable and timely way. Still, any effort to ground ancillary authority in Section 706 raises a lot of eyebrows here in the CommLawBlog bunker.

Finally, Section 201 grants the FCC broad authority to “prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this Act.” It’s not clear that this language could provide the “statutorily-mandated responsibilities” that the D.C. Circuit requires for ancillary jurisdiction, particularly when previously unregulated Internet services are involved. A court may well demand a more specific statutory directive to support ancillary jurisdiction.

Prospects

Congress. Genachowski says that the proposed order is a compromise, and that moving the item to a vote in December “is not designed or intended to preclude action by Congress.” Yet each of the four House Republicans currently vying to lead the House Energy and Commerce Committee has condemned the Chairman’s plans in the strongest terms, and Rep. Lee Terry (R-Neb) said that adopting a rule just before a new Congress was tantamount to an “act of war.”

But it’s not clear what the Republican opposition means in practical terms. It is conceivable that any net neutrality rules the FCC might adopt this month could be undone through legislative machinations. But at the end of the day, Republican rhetoric against the Commission’s current move to “regulate the Internet” may result in little more than aggressive oversight from the House Energy and Commerce Committee (think stern letters, lots of hearings, maybe even some finger-wagging).

Commission. It is not even certain that Genachowski’s proposal will meet the approval of a majority of the FCC’s Commissioners at the December meeting. As expected, Commissioners McDowell and Baker strongly oppose any action on net neutrality in advance of the next Congress – or at all. Baker said that the Chairman’s move to put it on the agenda in December “is a mistake. We do not have authority to act.” Commissioner McDowell called it an “ill-advised maneuver”; he also chided that “by choosing this highly interventionist course, the Commission is ignoring the will of the elected representatives of the American people.”

And even net neutrality proponents Commissioners Copps and Clyburn have stopped well short of fully embracing Genachowski’s proposal.  Both were hoping for Title II reclassification, and it is not certain that they will approve the Chairman’s somewhat watered-down approach.  Copps in particular believes that Title II would provide a stronger legal backing for net neutrality rules. He and Clyburn may, however, ultimately accept the Chairman’s approach as at least a step in the right direction.

Industry. Genachowski claims to have “broad support” for his proposal – he has certainly spent a lot of time meeting with various industry players over the past few months. But McDowell counters that “[p]ushing a small group of hand-picked industry players toward a ‘choice’ between a bad option (Title I Internet regulation) or a worse option (regulating the Internet like a monopoly phone company under Title II) smacks more of coercion than consensus or compromise.”  Industry support for the proposal seems to be lukewarm, at best.

And of course there is the possibility – or even likelihood – of challenge in the courts on the jurisdictional issues described above.

Summary

The Chairman’s actions at this point reflect more than mere concern over the future shape of the Internet. Both President Obama and Chairman Genachowski have taken strong positions on net neutrality and stand to lose credibility if the FCC doesn’t follow through. More broadly, the future of the agency’s regulatory clout looks very different depending on whether it can or can’t regulate IP-based communications. Clearly, the FCC’s practical ability to regulate services that perform telecommunications (Title II) and television (Title III) functions is likely to shrink as these types of services become increasingly delivered over IP connections.  The Chairman’s legal staff is working hard to frame a case for delegated authority over ISPs that doesn’t rely on reclassification or Congress; but it doesn’t have a lot to work with.