The FCC Must Let Thee Be...

Yesterday, a three judge panel of the U.S. Court of Appeals for the D.C. Circuit (one of the twelve circuit courts beneath the Supreme Court), ruled that the Federal Communications Commission (FCC) does not have the legal authority to impose “net neutrality rules” on internet providers. This is a good thing. Here’s what this means.

What Is Net Neutrality

Net neutrality is the idea that internet providers should not be allowed to regulate how their customers use the internet. Specifically, proponents argue that net providers should not be allowed to deny access to specific internet sites or to slow down service when their customers attempt to visit those sites. This was the idea of internet companies like Google and Amazon, who advocated that the federal government should pass regulations preventing internet providers from restricting content or prioritizing one type of traffic over another.

Opponents of net neutrality, basically internet providers and cable companies, counter that these rules would choke off new innovation and prevent them from conducting necessary regulation to prevent harm to their systems and to stop nuisances like spam and piracy. It also prevents them from slowing service to websites that place excessively high demands on the system.

What Caused The Present Case?

In 2005, the FCC adopted a set of principles that said “consumers are entitled to run applications and use services of their choice.” However, these principles also allowed providers to conduct “reasonable network management.” Thus, they appear contradictory on their face. More importantly, the FCC acknowledged at the time that these principles were merely recommendations and were not legally enforceable. In other words, legally, they were meaningless.

Attempts by Google and Amazon and others to back five separate bills in 2006 that would have made net neutrality the law were all defeated. The Democrats, despite being proponents of net neutrality legislation, have been unwilling to advance any such bills since that time.

In August 2008, citing these principles, the FCC issued a cease and desist order to Comcast, after Comcast slowed transfers to and from BitTorrent, a site that allows users to upload and download all manner of songs, movies and software. The FCC decision, a 3-2 decision, was criticized at the time by Republican FCC Commissioner Robert McDowell, who noted that the agency lacked the legal authority to issue such a ruling and claimed that its efforts were “doomed. . . on appeal.”

Comcast appealed.

Tuesday, the DC Circuit struck down the FCC’s cease and desist order, noting that the FCC was unable to identify any law enacted by Congress which gives the agency the power to regulate the internet. In other words, Congress has never given the FCC the power to regulate the internet. Thus, it had no authority to issue the cease and desist letter.

While this decision technically only overturns the FCC’s cease and desist order, and thereby prevents the FCC from using the 2005 principles against providers, it has a larger effect as well. The decision at the least suggests that the FCC has no power at all to regulate the internet. It also suggests that the court will strike down any attempt by the FCC to issue such regulations (in October 2008, FCC Chairman Julius Genachowski announced that he would issue net neutrality rules). However, at this point, those are only suggestions.

What Happens Next?

If the FCC thinks that it has a good case, it may try to appeal the panel’s decision to the full DC Circuit. This is called a “rehearing” and would involve the entire Circuit Court presiding over the decision rather than a randomly selected three judge panel. This will most likely happen if the FCC feels that the three judge panel was somehow unique, and that it would have a better shot before the entire court. But I doubt this will happen.

Right now, the FCC retains a certain amount of wiggle room. Indeed, right now the decision only strikes down the cease and desist order, it doesn’t prohibit all regulation of the internet generally. If the FCC appeals, it runs the risk that it will lose that wiggle room if the Circuit Court makes the ruling more broad based. (The same sort of calculus would apply with any appeal to the Supreme Court.)

A more likely next step for the FCC would be to exploit that wiggle room. For example, net neutrality proponents now want the FCC to declare internet providers to be “common carriers,” like phone companies, and then impose regulations that include price controls, service quality requirements and technological mandates.

Could the FCC get away with this? It’s not decided, but probably not. The Circuit Court noted fairly clearly that the FCC has been unable to show where it gets the authority to regulate the internet. That means it can't issue such regulations. However, we must remember that this was only suggested by the decision, which was in fact much narrower -- holding only that the FCC had no power to issue the cease and desist order.

Would the FCC try this? It might. Indeed, the FCC indicated it is considering this. In a Tuesday statement, it noted that the DC Circuit’s ruling did not “close the door to other methods for achieving this important end.” However, the former chief counsel for the FCC has noted that this is unlikely to lead to the types of regulations the net neutrality proponents want. So it’s unclear if they will try this, or if they will focus instead on forcing a neutrality law through Congress.

The Democrats want the FCC to try again, probably because they are afraid to try again to pass a net neutrality law. The Republicans oppose any such attempts by the FCC. Said Rep. Joe Barton (R-TX): “It would be wrong to double down on excessive and burdensome regulations, and I hope the FCC chairman will now reconsider his decision to pursue expanded commission authority over broadband services.”

All in all, net neutrality was significantly wounded yesterday, but it’s not dead. I guess we’ll see.

By the way, bonus points if you can tell me what the title of this article is alluding to. It’s someone who has had his own problems with the FCC.