In-Depth Analysis of the D.C. Circuit Court’s Decision in Mozilla v. FCC Demonstrates It is Just the Beginning of a New Chapter

Debate Shifts to Congress and the States

The U.S. Court of Appeals for the District of Columbia, in Tuesday’s decision of Mozilla Corporation v. Federal Communications Corporation, handed the FCC a victory on the technically complicated and politically divisive issue of network neutrality.

Under Chairman Ajit Pai, in December 2017 the agency repealed regulations that had classified broadband internet access service as a form of “telecommunications” and hence subject to certain common carrier obligations. Instead, the Republican-led FCC changed broadband into an “information service,” with much less onerous regulations. This re-classification was largely upheld by the court.

However, that victory was tempered by the court’s requirement that the FCC make three specific changes to decision they took in 2017. The changes are on public safety, pole attachments and the Lifeline program. Moreover, by a two-to-one margin, the court decided to vacate FCC’s having purported to preempt “any state or local requirements that are inconsistent with [the FCC’s] de-regulatory approach.”

The decision by Judges Patricia Millett and Robert Wilkins and Senior Judge Stephen Williams (the dissenter on the preemption issue) will not put to rest the controversy associated with net neutrality.

Now, the matter is a four-ring circus:

1. Future revisions to be made by the FCC;
2. the appeals court’s implied invitation for Congress to clarify what the Telecommunications Act of 1996 had left ambiguous;
3. states passing their own versions of net neutrality; and
4. the possibility of an en banc rehearing by the whole circuit, or an appeal to the Supreme Court.

Basis for the Decision

The bulk of the court’s decision is per curiam, meaning that it is unsigned, and reflects the will of the court rather than that of any particular judge. Of the 186-page decision, 146 pages are in the “per curiam” portion, followed by a significant concurring opinion by Judge Millett, a nominal concurring opinion by Judge Wilkins, and a substantive dissent – from the portion of the decision dealing with preemption – by Judge Williams.

The voice in which the per curiam decision was written was one of duty: We as a court may not like what the FCC did in repealing net neutrality rules, but as an inferior court we are bound by the principles of Chevron, U.S.A., Inc. v. National Resources Defense Council, 467 U.S. 837 (1984) (“Chevron”) – which governs federal agency interpretation of ambiguous statutes – as well as National Cable & Telecommunications Association v. Brand X Internet Services, 545 U.S. 967 (2005) (“Brand X”) – the last substantive decision by the U.S. Supreme Court on the regulatory classification of “information services.”

In Brand X, the Supreme Court majority upheld the decision of a Republican-controlled FCC to re-classify cable broadband service as an “information service.” After that 2005 victory, the agency also reclassified wireline and wireless broadband in the same manner.

Ping-pong continued as a subsequent Democratic-controlled FCC attempted to implement net neutrality rules several times. The first attempt kept broadband internet access as a form of “information service,” but regulated blocking and throttling of internet traffic. It was rebuffed by the D.C. Circuit. A second attempt came in 2014 to fundamentally re-classify broadband as a “telecommunications service” with some attendant common carrier obligations under Title II of the Communications Act. However, the FCC did forbear at that time from applying many of those regulations.

The rules decided in 2014 were repealed by the Pai FCC in 2017, effectively returning the classification of broadband to “no regulation.” That “no regulation” status quo was the state of play when the net neutrality legal and political fight began in earnest more than a decade ago. The Pai FCC has settled upon including a small additional requirement that broadband providers disclose terms and conditions of service.

In 2016, both a three-judge panel and, later, the majority of the entire D.C. Circuit Court upheld the Democratic FCC’s classification of broadband as a Title II “telecommunication service.” Now, this new three-judge panel unanimously agreed that it was perfectly appropriate for the FCC to change its mind and reclassify broadband as an “information service” under the less-regulatory Title I.

This was so, the per curiam decision reasoned, because Chevron required judges to defer to an agency’s construction of an ambiguous provision in a statute that it administers, if that construction is reasonable.

In the concurring opinion authored by Judge Millett, she said she “join[s] the Court’s opinion in full, but not without substantial reservation.” The result was “compel[led]” by Brand X, but she pointedly added that “I am deeply concerned that the result is unhinged from the realities of modern broadband service.” Her concurring opinion emphasizes that – given the underlying ambiguity of the Telecom Act – it was equally permissible for the FCC to “regulate” broadband as an “information service” or as a “telecommunications service.”

Important Regulatory Issues Raised About Pole Attachment and Lifeline

Classification decisions have an enormous impact upon providers of communications services, so Tuesday’s decision represented a victory for internet service providers and their allies at the FCC.

But while the court accepted the FCC’s reclassification as reasonable on most counts, there were three specific instances where the court ruled that the agency had not complied with the Administrative Procedure Act. Specially, the APA requires that agency regulations not be “arbitrary and capricious.”

The first of these rebuffs came on the issue of public safety. Most of the court’s discussion on this centered on the widely-covered controversy over Verizon capping the data limits of Santa Clara County firefighters’ broadband plan when they were battling wildfires in the summer of 2018.

Although not vacating the order on these grounds, the court said that the FCC’s “disregard of its duty to analyze the impact of the Order on public safety renders its decision arbitrary and capricious in that part and warrants a remand with direction to address the issues raised.”

Although that strong language will require the FCC to go back and bolster its rationale for the rule-change vis-à-vis public safety, it doesn’t quite cut to the heart of the regulatory conflict in the same way as did the court’s objections over pole attachments and the Lifeline program.

Specifically, revising pole attachments rules will likely pose a challenge to the FCC’s re-classification because the federal regime, mirrored by the states, requires access “to a pole, duct, conduit, or right-of-way owned or controlled by a utility.” Federal law governs this area of law under Title II, unless states “reverse-preempt” the statute, as permitted by the Communications Act, and establish their own pole-attachment regime. As the court noted:

• But this whole regulatory scheme applies only to cable television systems and “telecommunications service[s]”— categories to which, under the 2018 Order, broadband no longer belongs. See 47 U.S.C. § 224(a)(4) (defining “pole attachment” as “any attachment by a cable television system or provider of telecommunications service to a pole, duct, conduit, or right-of-way owned or controlled by a utility”) (emphasis added); id. § 224(f)(1) (“A utility shall provide a cable television system or any telecommunications carrier with nondiscriminatory access to any pole, duct, conduit, or right-of- way owned or controlled by it.”) (emphasis added). Section 224’s regulation of pole attachments simply does not speak to information services. Which means that Section 224 no longer speaks to broadband. Per curiam, at 106.

Similarly, with regard to Lifeline, the federal system of subsidizing low-income consumers’ access to broadband is governed by provisions in Title II. Lifeline originally only subsidized telephone service. This was changed in 2016, when the FCC extended the program to cover broadband internet access. The court noted:

• In the [2016] Lifeline Order, the Commission repeatedly referenced Congress’s overriding command to provide “telecommunication services to consumers.” (emphasis added to Lifeline Order). That made sense, given that Congress had tethered Lifeline eligibility to common-carrier status. To receive Lifeline support under the Act, an entity must be designated as an eligible telecommunications carrier—a category that extends to common carriers regulated under Title II. See 47 U.S.C. §§ 254(e), 214(e). This congressional understanding pervades the statute…. As a result, broadband’s eligibility for Lifeline subsidies turns on its common-carrier status…. As a matter of plain statutory text, the Order’s reclassification of broadband—the decision to strip it of Title II common-carrier status—facially disqualifies broadband from inclusion in the Lifeline Program. Per curiam, at 111.

In other words, the FCC will need to fundamentally reconfigure its rules governing pole attachments and Lifeline. The benefits associated with these rights – access to others’ poles and conducts, or subsidies pursuant to eligible telecommunications carrier status – are deeply enmeshed with the provisions that govern “telecommunications” either under federal law or under a state’s telecommunications regulations. Now, the FCC would need much more creative thinking in order to retrofit these benefits to broadband providers who are now no longer bound by the burdens of offering “telecommunications services.”

The Uncertain Status of State Net Neutrality Laws under Mozilla v. FCC

This final issue – the subject of Judge Williams’ dissent – has captured the most reporting and disputes about the court’s Mozilla v. FCC decision since it was issued earlier this week. Are states forbidden, or will states be forbidden, from enacting their own variations of net neutrality?

The simplest answer is that the FCC’s attempt to flex its muscles and assert its preemptive predominance over “any state or local requirements that are inconsistent” with its order has now been officially struck down. Therefore, any state requirement that imposes net neutrality regulations is presumptively valid. But when further litigation undoubtedly arises, the issue of so-called “conflict preemption” will be foursquare in the analysis. The reviewing court would have to consider whether that state’s law “stands as an obstacle to the accomplishment and execution of the [federal law’s] full purpose and objectives.” Per curiam, at 143, note 4.

Under the U.S. Constitution’s supremacy clause in Article VI, “the laws of the United States… shall be the supreme law of the land” to which state judges are bound. The heart of the controversy between the majority and the dissent is whether this preemptive supremacy extends to the actions of an agency that are not explicitly authorized by Congress.

“It is Congress to which the Constitution assigns the power to set the metes and bounds of agency authority, especially when agency authority would otherwise tramp on the power of States to act within their own borders,” according to the per curiam opinion, at 139. Rebuts Judge Williams: “Supreme Court decisions make clear that a federal agency’s authority to preempt state law need not be expressly granted.” Williams, at 3-4 (emphasis in original).

The majority considers and rejects the two arguments that the FCC made in justifying preemption. First is the “impossibility exception,” which deals with the impossibility of determining whether particular broadband traffic was interstate or intrastate. Second is what the FCC characterized as the federal policy of non-regulation for information services.

Judge Williams calls this “impossibility exception” a “a well-established ground of FCC preemption,” and that it plainly applies

• [W]hen (1) the matter to be regulated has both interstate and intrastate aspects . . . ; (2) FCC preemption is necessary to protect a valid federal regulatory objective . . . ; and (3) state regulation would ‘negate the exercise by the FCC of its own lawful authority’ because regulation of the interstate aspects of the matter cannot be ‘unbundled’ from regulation of the intrastate aspects.” Williams, at 1-2, citing Public Service Comm’n of Maryland v. FCC, 909 F.2d 1510 (D.C. Cir. 1990).

The majority diminishes the importance of this impossibility exception, saying that it was born out of a footnote in an earlier Supreme Court case, Louisiana Pub. Serv. Comm’n v. FCC, 476 U.S. 355 (1986), that denied the FCC the authority to preempt a state law without specific congressionally delegated authority. “The ‘impossibility exception’ does not create preemption authority out of thin air.” Per curiam, at 129.

The majority’s second concern, over the FCC’s policy of non-regulation, gets at the logical conundrum between the two sides. Because the FCC has decided to limit its regulatory authority over broadband by making it an “information service,” the majority says it cannot bootstrap “ancillary authority” on the back of a de-regulatory policy that it – rather than Congress – is promulgating. In addition to Louisiana PSC, the majority repeatedly cites American Library Association for the proposition that the agency “literally has no power to act unless and until Congress confers power upon it.” ALA v. FCC, 406 F.3d 689, 998 (D.C. Cir. 2005).

Thus the majority takes the view that unless and until the FCC can make a successful “conflict preemption” challenge that a state law is in fact an “obstacle” to the full purpose and objective of a federal law, “then presumably the two regulations can co-exist as the Federal Communications Act envisions.” Per curiam, at 143. That system is one of co-existing and dual state and federal responsibilities: Federal regulation being responsible for interstate communication, and state regulation being responsible for intrastate communication.

But, says Judge Williams, this simply means that the federal rules will inevitably subject interstate commerce to the will of the state with the most regulatory rules, at least in the short term:

• Just as an ISP cannot “comply with state or local rules for intrastate communications without applying the same rules to interstate communications,” it seems safe to say that an ISP bound to apply the rules of California to any of its service will also need—because of the impossibility of “distinguish[ing] between intrastate and interstate communications over the Internet,”—to apply those heavy-handed rules to all its service. Williams, at 4 (internal quotations from the FCC order).

Judge Williams later writes that this process is likely to take years: “The majority hints that through case-by-case litigation of conflict preemption, the Commission might be able over the years to obtain relief against some state impositions of regulation inconsistent with the Commission’s de-regulatory scheme.” Id., at 21.

Because state rules on net neutrality are not clearly and immediately preempted, it seems likely that the controversy of the FCC’s reclassification of broadband will now simultaneously play out in administrative, state-level, congressional and federal judicial forums.

About the author:

Drew Clark, the Editor and Publisher of BroadbandBreakfast.com, is a nationally-respected telecommunications attorney at The CommLaw Group. He has closely tracked the trends in and mechanics of digital infrastructure for 20 years, and has helped fiber-based and fixed wireless providers navigate coverage, identify markets, broker infrastructure, and operate in the public right of way. If you are interested in tracking legislative, judicial or regulatory developments impacting the regulation and regulatory status of broadband services in Congress and the states, contact Drew Clark at apc@commlawgroup.com.