Mozilla v. FCC Reaction, or Net Neutrality Telenovela Gets Renewed For At Least Two More Seasons.

I’ve been doing network neutrality an awfully long time. More than 20 years, actually. That was when we started arguing over how to classify cable modem service. As complained almost a decade ago, this is the issue that just will not die. I understand that, given the central importance of broadband to our society and economy. Nevertheless, my feeling on this can be summed up by the classic line from Godfather III: “Just when I thought I was out, they pull me back in.” [subtle product placement] I even went so far as to write a book on platform regulation to try to get away from this (available free here). [/subtle product placement] . But no. Here we are again, with a decision that creates further muddle and guarantees this will keep going until at least after the 2020 election.

Sigh.

 

Getting on to the basics, you can find the decision in its 186-page glory here. You can find a good analysis of what potentially happens next for net neutrality by my colleague John Bergmayer here. The short version is that we lost the big prize (getting the Order overturned, or “vacated” as we lawyers say), but won enough to force this back to the FCC for further proceedings (which may yet result in the “Restoring Internet Freedom Order” or RIFO being reversed and/or vacated) and open up new fronts in the states. The net result on balance is rather similar to what we had after the 2014 court decision that tossed out the 2010 net neutrality rules but laid the groundwork for reclassifying broadband as Title II; a curve ball that lets all sides claim some sort of win and creates enough uncertainty to likely keep the worst ISP abuses in check for the time being. (Mind you, ISPs will continue to test the boundaries, as they are already doing without actual enforceable rights in place.)

 

Most importantly, industry and the FCC can’t get what they want most (preemption of state authority) without going full Title II. This puts the FCC in a bind, since it can’t deliver the thing industry most wants. It also means that various state laws (especially the comprehensive California net neutrality law) and various executive orders imposing some sort net neutrality obligations now go into effect get to be litigated individually. As with the California privacy law passed last year, industry now has significant incentive to stop fooling around and offer real concessions to get some sort of federal law on the books. Also like the California Privacy Law, this is not going to be enough to overcome industry reluctance against a law with teeth and therefore is unlikely to go anywhere. So we are likely stuck until after the 2020 election.

 

I also want to emphasize that even the parts where we lost, as in 2014, contain the groundwork for ultimately winning. This gets lost in the headlines (particularly in the triumphant crowing of FCC majority). But like any good telenovela, this latest dramatic plot twist has lots of foreshadowing for the next few seasons and a set up for an even BIGGER plot twist in future seasons.

 

My incredibly long, highly personal and really snarky dissection of the D.C. Circuit’s opinion in Mozilla v. FCC and what it means going forward below.

 

If there is one thing that is more frustrating with making the right arguments and having the court disagree, it is making the right arguments and having the court agree with you — but still not do what you want.

 

So it is here. Despite 2 of the 3 judges agreeing that the FCC Order is “unhinged from the realities of broadband service today” (see Wilkins concurrence at page 147/1 (because they renumber for each separate opinion)) and despite finding multiple errors warranting reversal, the majority still declined to vacate RIFO (except for the preemption part). Even setting aside the places where I think the court got the analysis wrong, the fact that the majority agreed with us that the FCC’s technical and policy analysis is garbage and failed to satisfy the Administrative Procedure Act — despite the extremely deferential Chevron standard — makes this incredibly frustrating. Add to that the fact that net neutrality opponents will insist that the court totally approved of their awesome analysis when the court found it barely passed muster in several places and it makes reading this a lot like chewing broken glass. Granted, given the good parts, it’s like chewing broken bottles of Laphroig 25 yr cask strength, but still, not fun.

 

This also underscores the difference between activist Federalist Society judges v. everyone else. Can you imagine a majority of Federalist Society judges letting a little thing like precedent or consistency get in the way of the desired outcome? As the Williams dissent shows, not so much. While Millet and Wilkins are handwringing about how they think RIFO is crazy but they are bound by Brand X to “confuse the leash for the dog,” and declining to vacate despite finding multiple reversible errors (I’ll get to this below), Williams is just blithely inventing whole new doctrines of law and making arguments the FCC never made to justify the one thing he lost on — broad based state preemption.

 

Fine, You Got That Out of Your System. Can we move on to the actual case analysis, please?

 

First, we need a little law lesson for new readers. The central case that sets the standard for review of agency action is Chevron USA v. NRDC, usually shorthanded as Chevron or the Chevron Doctrine. This breaks down into a two step analysis. First, has Congress made the interpretation clear of the statute clear (or, at least, made it clear that the agency’s proposed definition is definitely impermissible). If yes, full stop and agency loses, since the agency cannot rewrite the statute. If no, we then move on to whether the agency violated the Administrative Procedure Act by “failing to address an important aspect of the problem” or failing to provide a “reasoned explanation based on the evidence in the record.” This standard of review is supposed to be “extremely deferential” and the court should not “substitute its judgment for that of the agency.”

 

As even we defenders of the Chevron Doctrine must admit, this makes things kind of mushy-squshy because it requires a judgment on the part of the reviewing court whether the agency met these factors and reasonable folks can differ on whether the agency met its burden or not. Mind you, that should not mean anything goes. But even excluding the cases where the agency clearly did consider everything it was supposed to and came to conclusions that are supported by evidence and those where the agency clearly failed to do so, there’s going to be a gray area where folks can disagree. So while I think the court was wrong in a number of places, I can’t say they were obviously crazy or stupid or clearly violating precedent (although I really think reversing without vacating was not simply wrong, but crazy and a dumb compromise by the majority to get a 3-0 per curiam).

 

With all this in mind, let us run through the highlights here by dividing between Chevron step 1 (the statute) and Chevron Step 2 (arbitrary and capricious).

 

Wait, Didn’t the Supreme Court and the D.C. Circuit Already Decide The Statute Was Ambiguous?

 

Yes, but there were two important things here that we argued — one of which we won and one we lost. First, the RIFO advanced a novel reading of “information service” that would have pretty much eliminated the entire concept of telecommunications and telecommunications service. RIFO proposed that if a telecommunications provides the “capacity” to perform non-telecommunications functions, then it becomes an information service. In other words, as RIFO maintained, broadband wasn’t an information service because of anything in particular about broadband, but because broadband gave users the ability to access things like Google and Facebook.

 

This ignores, of course, the the statute has an insanely broad definition of “telecommunications.” According to 47 U.S.C. 153(50) telecommunications is the transmission of any information at the direction of the user. That means anything one party sends through the “pipe” to the other party. This means that providing “access” to the service in question is ‘telecommunications’ and not an ‘information service.’ As Judge Millett pointed out at oral argument, even ye olde plain old telephone service (POTS) gives you access to all sorts of information service stuff, but that doesn’t make POTS an information service.

 

We won on this issue. The Court basically disposes of this effort to rewrite the statute in a few sentences. This gets us back to the bigger question of how to deal with the Supreme Court precedent from Brand X which found that the term “offer” in the definition of “telecommunications service” was ambiguous. The FCC’s fall back argument was that it was basically going back to the pre-2015 analysis which found that caching and DNS look-up — both information services — were bundled with residential broadband and that the combined “integrated service” that the FCC could class as an information service rather than a telecommunications service. We argued that while the Court’s analysis was binding, that analysis needed to reflect the modern reality where caching and DNS lookup aren’t what consumers care about but instead they want a direct connection to send and receive information (i.e., telecommunications).

 

And this is where we lost the majority. As their concurrences show, they agreed with us on the facts, but disagreed about the analysis of precedent. Instead, they found that because the Supreme Court had found caching and DNS lookup enough to justify information service classification in 2005 in Brand X, they were bound to accept the same analysis today even if it no longer reflects reality. No surprise, I think they misread how to apply the precedent. We argued that the Court is bound by the reasoning of Brand X and that, applying the reasoning of Brand X to the facts of today, broadband is clearly a telecommunications service. Instead, they applied the facts of Brand X and decided that as long as ISPs offer caching and DNS in some form, Brand X says broadband can be classed as an information service. *sigh*

 

The silver lining in this is that you have a majority that acknowledges that this is clearly contrary to the actual state of facts coupled with a plea for Congress or the Supreme Court to address this. If nothing else, it makes it a heck of a lot easier for a future FCC to reverse.

 

So You Lost on Chevron Step 1. What About Chevron Step 2?

 

Here, we kind of won, but not enough. I’ll run quickly through the decision rather than dig too deeply into the details, since in just about every case where we lost it boils down to “defer to the agency.” Again, it’s somewhat frustrating to have the court go in a direction that — to me at least — seems obviously absurd. It gets more frustrating to have seen numerous examples where Federalist Society activists mouth the language of deference and then completely ignore deference to get to their preferred result, while the majority here clearly though the agency did a lousy job and picked the wrong policy but deferred anyway. But here we go . . .

 

1. The RAY BAUM’S Act Didn’t Repeal The FCC’s Transparency Rules. Frankly, I was rooting for this argument for a number of reasons, and it is the place I feel the court most got it wrong. The FCC relied on Section 257(a) and 257(c), which required a report every three years on barriers to entry for small businesses that provide either “telecommunications services” or “information services” to impose the “transparency” rules (which actually reduced the transparency from the 2015 Rules) as a means of collecting information to assist in the formulation of the report. After the FCC passed RIFO, Congress passed the RAY BAUM’S Act, which, among other things, eliminated 257(c), combined it with new Section 13 (47 U.S.C. 163). In doing so, the act eliminated any reference to “information services” and replaced it with “communications services” (as well as altering other reporting elements). We argued that this eliminated the statutory authority for the “Transparency Rule,” and since the FCC explicitly made the Order dependent on the “Transparency Rule.” The Court found that the new provision of the RAY BAUM’S Act was close enough for government work. Literally.

 

2. The FCC was allowed to exclude the complaint information NHMC sought. This is another one that really bugs me, both because it allowed the FCC to shield probative information by playing games and because it directly undercut one of the FCC’s major arguments (which was why they worked so hard to keep the information out). National Hispanic Media Coalition (NHMC) requested under Freedom of Information Act (FIOA) any informal complaints on net neutrality made to the FCC’s net neutrality ombudsman. Turns out there were 47,000 complaints filed in the two years the regulations were in effect — which is rather a lot more than the zero the RIFO kept claiming. The FCC managed to exclude this information by releasing it at the last minute and then refusing to allow it on the record.

 

Mozilla Court says that’s totally OK.

 

Yeah, I think that’s crazy also. But the majority seems to have zoned out once they decided they were stuck on Chevron step 1. Still, the info is there, and can be used if the FCC ever decides to revisit this.

 

3. The FCC Was Allowed To Decide That Its Cost Benefit Analysis, Analysis of Reliance Interests, and Reliance on Antitrust and the FTC/State Generic Consumer Protection Law Was OK. This is classic Chevron deference. Although the majority decision does note that the FCC’s analysis wrt antitrust and consumer protection laws was “anemic” and other nasty words, they decided it “barely survives arbitrary and capricious review” primarily because it is only “one part of a larger economic and regulatory framework it believes will limit broadband providers engagement in undesirable practices.” Again, that isn’t much help now, but it does make it significantly easier to reverse should the FCC take this up again.

 

So What Did The FCC Actually Lose on?

 

The FCC lost on preemption (more on that below) and for three specific areas under Chevron step 2: (a) the impact of reclassification and deregulation on public safety; (b) for being completely incoherent about the impact of reclassification on poll attachments; and (c) failing to consider the impact of reclassification on the Lifeline broadband subsidy program.

 

Public Safety. Of these, the public safety issue is the most pervasive and really warranted vacatur as well as remand. Public safety entities offered two different concerns with regard to the impact of reclassification on public safety. First, there is the impact on public safety entities themselves. While the court declined to consider the impact of the Verizon/Santa Clara throttling because it occurred after the record closed, the possibility of incidents like this were raised by numerous public safety commenters. Additionally, the public safety folks (and others) pointed out how throttling of consumer traffic impacts the ability of public safety entities to communicate with consumers and for consumers to communicate with public safety entities during emergencies. If I am trying to send the local fire department video of the fire in my neighborhood, and I’m being throttled or otherwise degraded because my video isn’t going through an ISP’s preferred partner, that is a problem.

 

The problem for the FCC was they couldn’t think of a good way to address this issue that did not come right out and publicly say: “We don’t care. Screw public safety if it imposes burdens on ISPs.” Remember, the FCC is going to great lengths here to show that everything is better after their reclassification and complete elimination of FCC jurisdiction over ISPs. Sure, the FCC could have claimed to exercise authority via some sort of ancillary jurisdiction to its public safety authority, or by keeping Section 706 alive. But Pai didn’t want to do that. He wanted FCC authority over ISPs dead, dead DEAD! Which means no authority to prevent any of the harms identified in the comments to public safety.

 

So the FCC just ignored the issue altogether.

 

This finally woke up the majority from their Chevron snooze. As the court explained, when the agency fails to address “an important aspect of the problem,” that qualifies as arbitrary and capricious. Various excuses offered for how the FCC really did address this or didn’t have to address it failed to fly. So the FCC got reversed on this.

 

Pole Attachments: The Communications Act provides authority to the FCC and to the states to regulate the rates and terms and conditions for telecommunications providers or cable providers. In fact, states can certify that they are regulating pole attachments and thus preempt FCC authority over poll attachments, as 20 states actually do. By reclassifying broadband as Title I information service, the FCC eliminated not just its own authority to regulate rates and terms for poll attachments, but that of the states as well. The states were annoyed at this and argued that it would inhibit broadband deployment.

 

The FCC tried to have it both ways on this one. In some places in RIFO, the FCC admitted that by reclassifying they were screwing the states, but in other places seemed to say that somehow the 20 states that regulate poll attachments can still do so. As the Mozilla Court observed: “both cannot be true.” While the Commission can say “hey, this is going to screw over broadband deployment dependent on access to poles at regulated rates,” it didn’t want to do that. The Mozilla Court also notes that while providers that also offer a telecom or cable service can still benefit from pole attachment regulation, broadband providers who don’t offer “commingled” services can’t. So remanded to the FCC to “grapple with the lack of legal safeguards its reversal of policy triggered” and either explain why doing this is OK or decide how to make it better or not do it.

 

Impact on Lifeline Program. Lifeline is the subsidy program authorized by 47 U.S.C. 254 to help poor people pay for telecommunications services. The statute limits Lifeline to “telecommunications” services. Even Ajit Pai recognized that, from a political perspective, taking away existing subsidies for poor people while claiming to be promoting broadband deployment and “restoring internet freedom” was kind of a bad look. So how did RIFO resolve this problem of reclassifying broadband as Title I eliminates the broadband Lifeline rules adopted in 2016 under Title II. As the court observed, the RIFO once again chose to deal with this insolvable complication by not dealing with it. So the Court remands back to the FCC to deal with it.

 

OK, But What Happened With Preemption?

 

As folks may recall, the RIFO declared that it was prohibiting any state from adopting any net neutrality-like rules in service of what it perceived as the “broad federal policy of deregulation.” The Court rejected this, and went through a fairly detailed analysis on how preemption in this space works.

 

Setting aside the silliness of claiming such a policy (this claim has been rejected multiple times over the last 20 or so years), using federal policy as a source of authority was rejected by the D.C. Circuit back in 2010 in the first net neutrality case, Comcast v. FCC.  The Court also rejected any argument that the “dormant commerce clause” somehow gave the FCC the authority to preempt all state net neutrality rules, or somehow preempted state net neutrality rules all on their lonesome.

 

As I explained back in 2018 when this question first came up, the question isn’t simply whether there exists an interstate component. Heck, there is an “interstate component” to your going to the local McDonald’s, but the states can still inspect them for health code violations. As the court observed, the general rule is that the state can regulate any service just fine absent a “dormant commerce clause” issue, which don’t exist here. Then we look to see if there is a “comprehensive federal scheme” that would preempt states from regulating. Turns out, not so much. As the court repeats multiple times, Title I itself cannot be the source of the FCC’s authority, the duty or statutory authority the FCC that provides the basis for the preemption has to be in Title II, or Title III or Title VI. By taking broadband out of any of these categories, the FCC has no more authority over broadband than it does over Facebook or this blog. That’s what being an information service is all about.

 

By contrast, Title II actually does limit the ability of the FCC to regulate intrastate telecommunications traffic. The exception to this is the “impossibility exception,” as the D.C. Circuit obnoxiously reminded us in the prison phone case. You remember that case where Chairman Ajit Pai was all “gosh, I so care about prisoner families being charged obscene rates, but I am so worried about the limit of our jurisdiction being interstate rather than intrastate under 47 U.S.C. 152(b) (despite 47 U.S.C. 276 giving the FCC jurisdiction over intrastate prison phone rates) that I am going to take the almost unheard of step and actually withdraw the FCC’s defense of that section of the order.” Surprise! Pai and Williams both forget about this limitation in a heartbeat when it comes to preempting states from regulating monopolies rather than when the FCC tries to regulate monopolies. Oopsie. Happily, the majority actually woke up for this part and reminded them.

 

Now if the FCC had retained some theory of authority to impose net neutrality regs, such as ancillary authority through some other means — like keeping broadband in Title II and then preempting any regulation under 47 U.S.C. 160, or keeping Section 706 a viable source of authority — then they could preempt. But as it stands now, to quote the Court, “no dice.”

 

So Why Do Anti-Net Neutrality Folks and the FCC Republicans Keep Saying They Can Do This Through “Conflict Preemption.”

 

Conflict preemption refers to when a state law directly conflicts with an FCC regulation, federal law or general statutory scheme. As we all know from our high school civics, the “Supremacy Clause” says the federal rule wins. As the majority makes clear, this is a case by case analysis to see whether the state law and the federal law actually conflict, or whether they can coexist. In general, we want to see the laws coexist, because states are sovereign and we respect their laws, etc. Two caveats here. First, when we are talking about a federal agency, the federal agency must have the authority to make the rule that conflicts with the state rule. Second, it can’t offend state sovereignty under the Tenth Amendment. Because Supremacy Clause yields to Federalism, lizard poisons Spock, etc.

 

I am going to have to save the more full version of “why the anti-Net Neutrality folks are still wrong about preemption” for a separate post, since we are now up to about 4K words. The short version is that going case-by-case doesn’t really win you that much because simply reclassifying broadband as an information service so it wont be regulated is not a “conflict” that allows the FCC to preempt. That’s what Williams was dissenting about. I’ll give a long quote of the majority rejecting this reasoning:

 

The dissenting opinion fails to explain how the Commission’s interpretive authority under Chevron to classify broadband as a Title I information service could do away with the sine qua non for agency preemption: a congressional delegation of authority either to preempt or to regulate. Congress expressly “fenc[ed] off from [the Commission’s] reach or regulation intrastate matters, * * * including matters in connection with intrastate service.” Louisiana PSC, 476 U.S. 370 (internal quotation marks omitted). It is also Congress that chose to house affirmative regulatory authority in Titles II, III, and VI, and not in Title I. And 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 139 within their own borders. So to work here, the agency’s interpretive authority would have to trump Congress’s calibrated assignment of regulatory authority in the Communications Act.

 

But that cannot be right. No matter how desirous of protecting their policy judgments, agency officials cannot invest themselves with power that Congress has not conferred. (Slip op at 138-39, emphasis in original).

 

So the fact that the FCC moved this into Title I precisely to avoid any pesky regulations, particularly net neutrality regulations, doesn’t create a conflict with the state net neutralities. Nor, as the court explains at length, does the fact that the FCC really, really REALLY want’s to create a “no net neutrality” policy matter. That’s not a source of authority. You check the authority that’s left after you classify and — whoops! — under the FCC, there isn’t any. Except to promulgate transparency rules under Sections 257/163. So yes, if a state tried to undermine the notice rules by allowing an ISP to provide even less info than the FCC requires, that would be an “conflict” and the FCC’s transparency rules would prevail. (Whether a state can have stronger transparency rules is a more difficult question, since the purpose of the transparency rule is to help the FCC identify barriers to entry for small businesses, and it is hard to see how more detailed information conflicts with that purpose.) Not that I expect this to stop the FCC from trying.

 

So Given Everything The Opinion Found Wrong, Why Didn’t The Court Vacate.

 

This is extremely annoying. The D.C. Circuit basically said ‘well, the FCC might be able to fix this below, and this has been going back and forth for so long that we don’t want to flip it again even though the FCC was arbitrary and capricious — and about some fairly important things.’ Frankly, it is hard to square this cavalier decision to let RIFO stand with the analysis that failure to consider the impact on public safety potentially costs lives. But apparently the majority were willing to go along with Williams on this.

 

What Happens Now?

 

As I noted above, John Bergmayer at Public Knowledge already gave a good summary. In a desperate effort to start wrapping this up I’ll just hit the highlights. On the legal front, folks need to decide whether to seek rehearing by the panel, rehearing en banc, or try to go directly to the Supreme Court. Given the crowing by the Republican majority at the FCC, it is hard to imagine the FCC going for any of these. Meanwhile, both pro and anti net neutrality sides need to decide whether it is worth trying to get rehearing.

 

More important is what happens on the state side. We have some cases already in litigation (notably in California and Vermont) which were stayed pending the litigation around RIFO. Now those are over and the courts will need to decide whether to grant a preliminary injunction in light of the decision eliminating the Preemption Directive or if the states will agree to keep their net neutrality enforcement on hold until the litigation gets done.

 

MEANWHILE, however, a whole new front opens on the political side. As we saw in 2018, we were getting traction on passing net neutrality laws on the state level even before the D.C. Circuit eliminated the Preemption Directive. I expect the FCC will try to declare these laws in conflict, but I don’t anticipate that to work any better than the Preemption Directive unless they have some actual source of authority besides the classification.

 

Additionally, the FCC is supposed to address the three things on remand: public safety, pole attachments, and Lifeline. I am hardly privy to how Chairman Pai will try to handle this. The course of least resistance is to let a final decision slide until after the election, but Pai has shown himself to be quite the fanatic on this issue. I rather fancy that like Kahn following the Enterprise into the Mutari Nebula, Ajit Pai will push to get a new proceeding out that purports to address these three things and also purports to find ways to do issue preemption. [And yes, I’m laughing at the Federalist Society superior intellect . . .]

 

But even with Pai pushing as fast as possible, there is still the little problem of figuring out what to do. The reason the FCC ducked these issues last time is because they are impossible to solve under Pai’s framework that eliminates all sources of authority over broadband. Meanwhile, starting another proceeding is going to kick off another round of really loud political fighting on an issue that mobilizes younger voters bigly — just in time for the election. I don’t care how many fake comments you scare up, we all know where actual voters are on this. And now it’s not just a federal election issue, but a state election issue as well. If Pai puts a proceeding out there, it’s going to ring the dinner bell for major grass roots mobilization, which will spill over into the 2020 election.

 

In theory, Congress could solve this with common sense legislation of the type I’ve been urging since 2008, declare broadband Title II and simply carve away the pieces we think we don’t need anymore (this is called the Save The Internet Act, BTW, and it already passed the House). But we don’t expect to see that until 2021 at the earliest, and only then if the election puts the Dems in charge of both the Senate and the White House.

 

Conclusion

 

And so, the great and never ending Net Neutrality telanovela rolls on, renewed until at least 2021. Maybe someday we will run out of exciting plot twists to keep this thing alive. I can hope so, at any rate.

 

Stay tuned . . . .

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