The Comedy of Comcast v. FCC Part I — What Did The Court Actually Do?

It’s been rather busy the last few weeks. Between my unfairly holding Sprint responsible for its own screw ups, shamelessly cheering on the documentation of our national broadband drought by Our Great Google Overlords, and generally crushing all who dare oppose me, it’s been hard to find time to blog about stuff. So naturally, while I was away for the last day of Passover, the DC Circuit issued its long awaited decision in the Comcast/BitTorrent case, Comcast v. FCC.

Needless to say, the opinion was greeted with the total hysteria that has become the hallmark of the network neutrality debate — with terms like “Nuclear Option,” “World War III,” and “spanking.” Opponents of FCC jurisdiction rejoiced, supporters of network neutrality lamented, and a few shrewd observers noted that the actual outcomes could prove far worse for Comcast and the incumbents than if Comcast had lost (as I noted after oral argument last January).

My co-counsel, Marvin Ammori, has written up his retrospective here. Understandably, he’s rather bummed. Despite this whole thing being my idea in the first place, however, I’m actually rather pleased and amused with how this whole thing is turning out. Sure, I would much rather have won. But as the history of the last 2+ years of this unfolds, the tale of how Comcast managed to bluff, badger, and bungle itself into a position where it has not only guaranteed harsher condition on its merger with NBC-Universal, but revived the possibility of classifying broadband access as a Title II telecom service for the first time in 10 years, is the stuff of high farce. And while I wish I could claim credit for this outcome, the real “heroes” here are Brian Roberts (head of Comcast) followed closely by AT&T, NCTA and the Republican party.

To try to keep this manageable, I’ll divide this into two posts. Below, I will try to set forth what the court actually said and the immediate legal implications, without worrying too much about the overall policy. While I can hardly claim to be an impartial observer, I’ll do my best to identify my editorial comments as such and note where reasonable minds can differ. In Part II, I shall shamelessly indulge myself with my own eyewitness to history and why I think the Comedy of Comcast v. FCC deserves its special place in the realm of farce — although we have by no means reached a certain conclusion.

More below . . .

Let me start by noting two things. First, FCC’s General Counsel Austin Schlick gives a fair summary of the implications of this decision in this FCC blog post. Second, I’d like to give a big shout out to FCC Commissioner Meredith Baker for most reasonable statement by a Net Neutrality opponent following the announcement of the case. Baker actually manages an accurate statement of what the court said, and manages to wag a finger at net neutrality supporters without being insulting. I may disagree with Baker’s statement about Title II, but she shows a level of understanding and overall classiness absent in much of the bullet point and mudslinging. Makes me nostalgic for Commissioner Tate, actually, with whom I could have substantive disagreement while respecting her position and overall graciousness.

Below, I will frequently cite to the opinion as published using the term “Slip Op.” (slip opinion, as opposed to published in an official reporter) to give page numbers. For example, “Slip Op at 20” would mean page 20 of the opinion as it appears here.

What the Court Did NOT Do.

Unsurprisingly, we’ve gotten a lot of confused and hyperbolic statements about what the court actually said. Some of that is natural where an important decision comes out and people flip through without getting the subtleties. Some of it results from folks confusing the specific result (e.g., the court held that the FCC failed to justify exercise of its authority over Comcast does not mean that the court found the FCC has no “ancillary authority.”) For example, Commissioner McDowell either had not actually read the case before issuing his statement or did not understand it, as he asserts the court “makes clear that Title I of the Communications Act provides the FCC with no authority to regulate the network management practices of an Internet service provider.”

OTOH, the Pollyannaish view advanced by Verizon that the court definitively found that the FCC does have Title I authority (so there’s no need to think about reclassification, move along!) to impose net neutrality rules is equally inaccurate. While it is no doubt comforting to see Verizon — along with AT&T, USTA, Comcast and NCTA — suddenly swear undying allegiance to the FCC’s Broadband Policy Statement and recognize some sort of undefined FCC authority to “protect an open internet,” the decision doesn’t do that either. As of today, the existing principles provide no basis for FCC action of any sort. Worse, as we at PK have been saying since it became clear the DC Circuit would go this way, this goes beyond the net neutrality “open internet” question. It impacts a pretty fair number of issues, such as public safety and Universal Service Reform.

I’m also not sure what exactly Comcast means when it says that the court decision “cleared” its “good name.” This was a civil case, not a criminal case. Nor did the court contradict any of the FCC’s findings of fact. The findings of the Order that Comcast blocked (rather than “delayed”) delivery of bittorrent packets still stands, as does the finding that Comcast changed its story along the way — initially denying that it was doing anything, then trying to hide the details for as long as possible. If this were a criminal case, we’d say Comcast was cleared on a technicality rather than vindicated in its conduct.

Finally, contrary to friend/sparring partner Barbara Esbin over at Progress and Freedom Foundation, I don’t see how you read this as a due process/rule of law case. The court utterly failed to address any of the procedural issues that so exercised folks like Barbara on the due process front. Nor did the court eliminate ancillary jurisdiction, so the notion the court instructed the FCC “nobles” to be bound by “law” as Barbara appears to want to define it (i.e., only an explicit delegation by Congress) does not bear up as far as I can tell. At it’s heart, the case is no more or less about a “lawless” agency than anytime a court finds that an agency failed to properly justify exercise of authority. OTOH, PFF was on the winning side (as an amicus) and I lost, so if Barbara wants to read this verdict as a vindication my opinion doesn’t count for much.

So What Did The Court Actually Do?

The decision represents the clearest statement of what the heck FCC “ancillary authority” means and how it works since Congress passed the Cable Act in 1984 and the FCC stopped relying on the doctrine in any substantial way. Those just tuning in can get deeper background from this old net neutrality primer I wrote back in 2006. For now, suffice it to say that “ancillary authority” has been a rather vague doctrine that allows the FCC to regulate “communications by wire and wireless” under its general power (Title I of the Communications Act) that are not explicitly covered by the other Titles of the Communications Act or other relevant statutes.

What this case actually does, if we strip away the verbiage and content-specific issues, is to reconcile two lines of cases with regard to how ancillary authority works. One line of cases supported an expansive view of this authority. Essentially, that if something is “a communication by wire and wireless” (Section 1 of the Act), the FCC has general “ancillary” authority to carry out the overall responsibilities of the Act. This includes the various stated policies in the statute, such as ensuring that communications systems are “rapid and efficient” (47 U.S.C. 151) and the rapid deployment of “advanced telecommunications systems” to all Americans. (Section 706 of the 1996 Act). This works on a theory that Title I of the Act is a broad general delegation of authority over all communications by wire and wireless by Congress, and the specific sections provide more explicit direction on specific matters such as telecommunications (Title II), wireless (Title III), or cable (Title VI).

The other line of cases supports a much more limited view. Under the narrow view, Title I merely creates the FCC and defines its “subject matter jurisdiction.” However, it does not confer any actual authority over “communication by wire and wireless.” Actually delegation of Congressional authority comes in the specific titles, where Congress explicitly tells the agency it has authority to regulate specific conduct with regard to a specific service or service provider. To regulate something not covered in the specific title, the FCC must show that the regulation of the not specifically mentioned thing is “reasonably ancillary” to carrying out a specific statute that conveys actual authority, not merely sets forth policy.

At the heart of the debate lies Section 4(i) of the Communications Act (47 USC 154(i)), which instructs the FCC to “perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions.” Cases supporting the expansive view have referred to this as the “necessary and proper clause of the FCC,” whereas the cases supporting a narrower view see this as read in conjunction with the more express delegations in other Titles.

The D.C. Circuit, to no one’s surprise, opted for the narrower interpretation. The critical language comes at Slip Op. 22.

When exercising its Title II authority to set “just and reasonable” rates for phone service, 47 U.S.C. § 201(b), or its Title III authority to grant broadcasting licenses in the “public convenience, interest, or necessity,” id. § 307(a), or its Title VI authority to prohibit “unfair methods of competition” by cable operators that limit consumer access to certain types of television programming, id. § 548(b), the Commission must bear in mind section 1’s objective of “Nation-wide . . . wire and radio communication service . . . at reasonable charges,” id. § 151. In all three examples, Section 1’s policy goal undoubtedly illuminates the scope of the “authority delegated to [the Commission] by Congress,” Am. Library, 406 F.3d at 691—though it is Titles II, III, and VI that do the delegating. So too with respect to the Commission’s section 4(i) ancillary authority. Although policy statements may illuminate that authority, it is Title II, III, or VI to which the authority must ultimately be ancillary.

On a personal note, I observe that in typical DC Circuit fashion, the court pretends there was really only one right way to interpret this — but the hand-waving over the more expansive precedent (Slip Op. 24-29) on which we relied means I can’t feel too bad. When you get statements like: “True, as the Commission observes, our discussion of ancillary authority never cites Title II. But any such citation would simply have restated the obvious given that the Commission established the Universal Service Fund for the very purpose of “‘ensur[ing] that telephone rates are within the means of the average subscriber in all areas of the country,’” (Slip Op 26) then you are basically saying ”sure, the actual language of the case you cite supports your position, but we are going to find a way to read it differently.“

OTOH, unlike Ginsberg, who simply makes stuff up, then bullies the helpless FCC into submission, Tatel at least has a line of cases to stand on (and keeps the FCC bashing to a minimum). Still it would have been nice to see a frank acknowledgment that the case law lends support to the FCC’s view but the panel elects to follow the line of cases narrowing ancillary authority to extensions of an express delegation outside Title I. But only Kavanaugh seems willing to extend any graciousness to the FCC these days, as evidenced in his dissent in the program access case.

Indeed, as Washington Post columnist Steve Pearlstien notes in this op ed, the DC Circuit’s non-stop judicial activism and browbeating of agencies has contributed to the utter gridlock in DC over all issues, not just telecom. Regulatory agencies are afraid to do anything, because they figure the D.C. Circuit will just overturn it.

But to continue, the court then went on to address specific statutes on which the FCC relied. It knocked out the biggest ones, Section 230(b) (the supposed ”Internet policy“) Section 1 as mere ”policy statements“ that do not confer any specific authority. Next, it knocked off Section 706 of the 1996 Act, which requires the FCC to ensure deployment of ”advanced telecommunications services“ to all Americans (and which it has insisted means ”broadband“ despite the fact that broadband is now an information service not a ”telecommunications service“) because the FCC had itself declared in its first ”Section 706 Report“ in 1998 that Section 706 did not itself create any new authority but merely directed the FCC to use its existing authority. Slip Op. at 30-32. Or, in other words, Section 706 is really a policy statement and not a ‘true’ delegation of authority.

The court knocks out reliance on Section 256 (coordinating interconnection) for pretty much the same reason. (Slip Op 32) The court sort of quotes the statute: ”’nothing in this section shall be construed as expanding . . . any authority that the Commission’ otherwise has under the law.“ Leaving aside that a statement that purports to be quoting a statute that contains a partial quote, an ellipse, and a paraphrase for the kicker at the end should raise red flags (the full quote is ”expanding or limiting any authority“), this analysis is inconsistent with the court’s own analysis of how ancillary authority is supposed to work. If the FCC articulated an appropriate connection between Section 256 and the Comcast Order, it would not be ”expanding“ its authority, but acting pursuant to the authority under Section 4(i) and 256. But a foolish consistency is obviously not the hobgoblin of a judicial activist opinion.

The court then knocks out Section 257 (slip op 32-33), which instructs the FCC to eliminate barriers to entry for small businesses and promote diversity and competition by finding that, really, all that Congress actually told the FCC to do was write a report. So again, through creative reading, we’ve reduced this to a mere ”policy statement“ and not an ”independent source of authority.“

But the real hand waiving kicks in for the discussion of Section 201 (slip op 33-34). This, of course, is the Mother of All Delegations of Authority. So how does the court evade this one? Through the following shell game: (a) the Commission’s discussion of Section 201 is different in its brief than in its Order; (b) we therefore treat the argument in the Order as ”abandoned“ and will not consider it; and, (c) because the Commission may not offer an explanation not in the Order, we won’t consider the argument in the brief either.

As an aside, the court indicated that — based on the Supreme Court’s statements in Brand X — it would be easier to order unbundling under ancillary authority than network neutrality. (Slip Op at 13-14)

What Impact Does This Have?

I’ll limit myself here to legal impact, rather than policy impact (which I will save for the follow up post). You can find a good video explanation from me colleagues at Public Knowledge here.

For starters, anything the FCC has already done with ancillary authority now comes into question. That includes E911 (which was never challenged in court), various emergency back up rules implemented after the Katrina Report (notably the ”back up power rule“ requiring providers to maintain 24-hours of back up power for cell towers). Closer to home, as we noted in our NBP/reclassification filing, when the FCC declared DSL an information service in the 2005 Wireline Framework Order, it waved it’s ”ancillary authority“ magic wand to bring along a bunch of public safety/national security statutes that explicitly apply to telecom (not CALEA, that was dealt with separately). All of those now need to be reexamined and proper justifications found — if possible.

Which brings us to the next point: the decision outlines the process by which the FCC must exercise ancillary jurisdiction for any Title I service. First, it needs to identify a specific statutory duty under Title II, III, or VI. As an aside, it is clear you can have something that looks like a statutory duty, but which the D.C. Circuit will decide doesn’t really count as a statutory duty. Then, the Commission must articulate a theory of how the action over the related ancillary service is needed for and consistent with its authority as specifically delegated in Section II, III, or VI. And for every single action or order relating to broadband, the Commission will need to undergo the same exercise.

Lets illustrate this with a non-network neutrality example. The FCC wants to repurpose universal service fund (USF) for broadband. The problem is that the USF statute s(Section 254 says that the purpose of the fund is to provide telecom service to high-cost areas (with the exception of E-Rate, which is limited to schools and libraries). What Title II, Title III, or Title VI statute gives the FCC authority to use that money for broadband? It can’t just be the general ”broadband is good, promote broadband“ sections. It has to be something specific that the FCC is required to do.

Even if the FCC does come up with a justification, it will then face the daunting prospect of appeal to an unknown circuit and a random panel that may very well, as the D.C. Circuit has done here, say ”we don’t like any of the reasons you gave. Go back and read out minds to see if there is some magic phrase that will work next time.” And even if the FCC is successful once, it provides no precedent for the future. Because, as elaborated by the D.C. Circuit, the FCC cannot simply rely on a previously asserted and approved theory of authority. It must come up with an independent rationale for each new exercise of authority.

To put it mildly, this creates something of a problem that goes well beyond network neutrality. On the flip side, however, it would not prevent anyone from actually bringing a Comcast-like complaint to try again. The courts said nothing about the procedural aspects. Zip. Nada. Although the oral argument certainly made it clear that this panel of judges did not think highly of the process, they also declined to address it.

In the short term, the immediate result of the court’s decision is to expand the overall uncertainty in this space. No action by the FCC is clearly authorized, but no action is expressly prohibited either. Every action by the FCC, or by any provider, is now subject to a roll of the dice in the hope is makes its savings throw against the DC Circuit (or other circuit, nothing compels the next appeal to land in the DC Circuit). Hence the outrage of observers like Steve Pearlstien not so much over the substance, but over how the D.C. Circuit’s continued exercises in judicial activism make any sort of regulatory certainty impossible and induce the gridlock that folks outside DC love to complain about.

Which brings us to the logical question. What happens next? Hopefully, I will get to some of that in my next post.

Stay tuned . . . .