by

 

Seth L. Cooper *

 

On January 15, the U.S. Court of Appeals for the D.C. Circuit ruled that the FCC exceeded its authority by imposing certain "encoding" regulations on direct broadcast satellite providers. The D.C. Circuit voided regulations banning "selectable output control," an encoding method allowing a video services or content provider to remotely disable viewing of particular programs over set-top boxes.

 

EchoStar v. FCC could have significant future implications for agency actions based on claims of ancillary power. If applied consistently, the non-deferential approach to ancillary authority claims embodied in the D.C. Circuit's opinion could curb agency power grabs. In particular, the principles enunciated to limit the exercise of ancillary power recognized by the D.C. Circuit possibly could seal the fate of the FCC's net neutrality regulations as well as the agency's "AllVid" proposal for regulating video devices.

 

In EchoStar v. FCC, the D.C. Circuit rejected the agency's claimed reliance on Sections 629 and 624A of the Communications Act as a basis for authority for its encoding regulations. Neither provision, the court ruled, provided direct authority for the FCC toimpose such regulations on direct broadcast satellite (DBS) providers. Just as important, the D.C. Circuit denied that the encoding regulations were "reasonably ancillary" to the FCC's effective execution of Sections 629 or 624A.

 

The D.C. Circuit was unwilling to read statutory terms in a loose way that would give cover to broad regulatory power. "[T]he FCC's interpretation of the reach of its ancillary jurisdiction is owed no deference," the D.C. Circuit said, "since Chevron only applies in instances in which Congress has delegated an agency authority to regulate the area at issue." With this non-deferential premise in place, the D.C. Circuit bristled at the FCC's overreaching ancillary power claims. If accepted, wrote the D.C. Circuit, such claims to authority "would leave the FCC's regulatory power unbridled - so long as the agency claimed to be working to make navigation devices commercially available." The D.C. Circuit instead "refuse[d] to interpret ancillary authority as a proxy for omnibus powers."

 

The D.C. Circuit's rejection of broad agency power claims based on the ancillary jurisdiction doctrine deserves special attention. In recent years, the FCC has staked expansive new regulatory controls over information technologies and services on its purported ancillary authority. So the D.C. Circuit elaboration on the limits to the FCC's ancillary power doctrine may be critical to the fate of the agency's other pro-regulatory undertakings.

 

The FCC's net neutrality order is staked, at least in part, on the agency's claimed ancillary power. Congress never expressly granted the FCC power to regulate broadband Internet services as such. The FCC invoked two-dozen statutory provisions primarily involving voice telephony, subscription video services, and broadcast TV - all the while claiming deference for itself in expansively implementing those provisions. Those net neutrality regulations are now the subject of another pending case at the D.C. Circuit. Consistent application of the non-deferential, limited formulation of the ancillary power doctrine contained in EchoStar v. FCC could doom the agency's net neutrality regulations on jurisdictional grounds.

 

Likewise, the FCC's "AllVid" proposal for subjecting video navigation devices to a comprehensive set of new regulations reaching down to the physical, protocol, and content layers appears premised in part of the agency's ancillary jurisdiction. However, a reading of EchoStar v. FCC suggests that the FCC's confidence in its jurisdictional power to impose sweeping new video devices regulations is misplaced.

 

Section 629 charges the FCC with ensuring there is a commercial market for retail devices that receive video subscription services. But it doesn't call for the FCC to set basic design parameters for how those devices operate and interact or to impose uniform standards regarding protocols or codecs such devices use. It's doubtful that the FCC's assertion of broad regulatory authority would receive deference if the standard set out by the D.C. Circuit in EchoStar v. FCC is applied consistently.

 

In sum, limitations on the ancillary power doctrine, as expounded and applied by the D.C. Circuit in EchoStar v. FCC could have an important disciplining effect on overreaching agency action. If adhered to, it would mean that future FCC actions would more closely follow the statutory directives set out by Congress and respect the inherent limits of the agency's authority.