Regulating the Most Powerful Network Ever
by
Justin (Gus) Hurwitz *
[Below is the Introduction and Conclusion to this latest FSF Perspectives. A PDF version of the complete Perspectives, with footnotes, is here.]
Introduction
At multiple recent events, FCC Chairman Tom Wheeler has emphatically described the Internet as "the most powerful network in the history of mankind." He did so in the context of defending the FCC's myriad regulatory efforts in the broadband space - from redefining "broadband" in the Section 706 Report, to the pending Open Internet order, and the planned pre-emption of state municipal broadband regulations. Speaking about the Open Internet rules, Chairman Wheeler has explained that he "will modernize Title II, tailoring it for the 21st century," by "taking the legal construct that was once used for phone companies and paring it back."
With the Commission apparently set upon its regulatory course, attention is turning to whether these regulations will stand up in court. In this Perspectives, I lay out some of the judicial challenges the Commission's efforts to regulate the Internet will face, focusing on challenges to regulations under Section 706 and under Title II. To my mind, the legal pitfalls I discuss are serious ones that may well lead to another judicial reversal of the FCC's efforts to adopt net neutrality regulations. And, separate and apart from the ultimate success or failure of these claims, they make clear the rocky road ahead for the Commission - and the uncertainty Chairman Wheeler's path imposes as the Commission "embarks on this multiyear voyage of discovery."
The central question in any challenge is going to be whether the FCC has legal authority to regulate broadband Internet access services - be it in whole or part, under Section 706 or Title II. The FCC is likely to point to Brand-X, arguing that the Supreme Court made clear there that the Commission has broad discretion under Chevron in how it classifies broadband; and to Fox I, in which the Court affirmed agencies' broad discretion to change prior interpretations of the statutes they administer. But while these cases do afford substantial discretion, it is not without limit. Indeed, the Commission's "triple bank shot" theory for justifying regulation under section 706 is just the sort of "M�bius-strip reasoning" that Justice Scalia's Brand-X dissent warns "mocks the principle that the statute constrains the agency in any meaningful way." And, more recently Justice Scalia, writing for the Court in Utility Air Regulatory Group, reminds us that "agencies are not free to adopt unreasonable interpretations of statutory provisions and then edit other statutory provisions to mitigate the unreasonableness." Yet this is just what Chairman Wheeler plans to do - not just reclassifying broadband, but "modernizing" and "tailoring" Title II in the process.
It is hard to square the application of Title II - even if edited and modernized by the Chairman's forbearing pen - to the Internet, or even to just broadband Internet access services. This is particularly hard to justify following the 1996 Act, which was enacted "to promote competition and reduce regulation," and which asserts that "It is the policy of the United States ... to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation." But rather than following the 1996 Act's deregulatory path, the Chairman has assured us that under his plan "there will be ongoing rules in perpetuity."
Litigation over the Chairman's proposal will focus on a number of specific arguments, such as those considered below. But the FCC should lose on this general argument alone: the Internet indeed is, as Chairman Wheeler says, the most powerful network in the history of humankind - and we expect Congress to speak clearly if it wishes to assign an agency to regulate things of such vast economic and political significance. The contortions of "triple bank shots" and "modernizing" Title II and "tailoring it to the 21st century" demonstrate the illegitimacy of the Chairman's chosen path. Even if forbearance allows the Commission to step back parts of Title II, the need to "rewrite clear provisions of the statute should have alerted [the FCC] that it had taken a wrong interpretive turn." This is just another example of Justice Scalia's recent lament: "Too many important decisions of the Federal Government [that] are made nowadays by unelected agency officials exercising broad lawmaking authority, rather than by the people's representatives in Congress."
The rest of this Perspectives considers in more specific detail the Commission's claims of authority under Section 706 and Title II.
A few notes at the outset. First, I will necessarily address these challenges holistically. Key portions of the FCC's regulations have yet to be released; more important, all these efforts are intertwined. Second, a number of likely challenges are not considered here, including procedural challenges (e.g., whether the proposed Open Internet rules are a logical outgrowth of, or otherwise were sufficiently noticed by, the May 2014 NPRM); preemption challenges (i.e., whether the FCC can preempt state broadband regulations under Nixon); the legal basis for the Commission's regulation of CDNs and interconnection agreements, and generally of those to whom the services are not being provided "for a fee"; the classification of mobile data services under Title II; as well as constitutional arguments (takings and First Amendment) - among other possible challenges. The Commission's many attempts to regulate broadband will face a truly staggering number of legal challenges. And third, speculating on legal outcomes is a risky business. I expect that the FCC faces likely, and substantial, losses as these regulations move to and through the courts - but it is entirely possible that the FCC could prevail on any or all of these claims. Of course, this litigation uncertainty nevertheless gives lie to Chairman's Wheeler's assertion that certainty is the great virtue of the proposed rules.
* * *
Conclusion
The FCC has embarked on one of the most aggressive expansions of authority of any agency in our nation's history. Clothing its efforts in the statutory ambiguity of the Communications Act's dated and circular definitions and taking comfort in dicta from Brand-X does not change this fact. As Chairman Wheeler has made very clear, the Internet is different in kind - in scale, scope, and nature - from what the Commission was granted authority to regulate. It really is "the most powerful network in the history of mankind," central to our modern economy. And, in giving the Commission authority in 1934 to regulate the telephone monopoly, and again in 1996 to unwind and eventually deregulate that monopoly, Congress did not give the Commission authority to regulate the Internet.
In this Perspectives, I have sought to map out parts of the road that lies ahead. It is, of course, entirely possible that the arguments I highlight will fail in practice - but, I believe, they also have a good chance of carrying the day. This means that we can say, with great certainty, that the road ahead is uncertain for the Commission and the industry. And, most tragically, it will be rocky for consumers - consumers who have already been subjected to years of discord as net neutrality proponents have sought sweeping new power for the FCC to regulate the Internet. It is all the more a pity given the many opportunities the Commission has had (and, indeed, still has) to avoid the whole mess. But instead: It almost certainly looks like "hi ho hi ho it's off to court we go!"
* Justin (Gus) Hurwitz, a member of the Free State Foundation's Board of Academic Advisors, is an Assistant Professor of Law at the University of Nebraska College of Law.
The Free State Foundation is an independent, nonpartisan free market-oriented think tank located in Rockville, Maryland.
A PDF of the complete
Perspectives, with footnotes, is
here.