Court Fight Threatens Key Parts of Net-Neutrality Rules

Three federal judges grilled lawyers from the Federal Communications Commission and the broadband industry for three hours Friday on the legal intricacies of net-neutrality regulations.

In the end, the FCC appeared to hold the upper hand in the core legal dispute in the case: whether it has the power to regulate the Internet like a utility. But the FCC’s lawyers faced tough questions from the panel of the D.C. Circuit Court of Appeals on other issues, including the regulation of mobile devices, its oversight of traffic on the back end of the Internet, and whether the commission provided enough public notice for its rules.

If the judges side with the broadband companies on those issues, they could deal a severe blow to net-neutrality supporters. Striking down the mobile portion of the rules, for example, would leave cellular carriers free to manipulate Internet traffic for millions of smartphone users.

“You never know with these guys,” Andrew Schwartzman, a media attorney who supports the regulations, told reporters after the argument. “They probed very, very aggressively both sides. My sense of it, for what it’s worth—and we’ll know in four months—is that they were satisfied with the commission’s explanations.”

Supporters of net-neutrality rules, which require Internet providers like Comcast and AT&T to treat all traffic equally, argue they are essential for protecting online competition and ensuring users are free to access whatever content they want. But critics consider them an unnecessary burden on Internet providers that will ultimately mean slower and more expensive service for everyone.

The FCC enacted net-neutrality rules in 2010, but the D.C. Circuit struck them down in early 2014, saying the agency hadn't used the proper legal authority. The commission enacted new rules earlier this year that declared the Internet a “telecommunications service” under Title II of the Communications Act. That section, which the FCC has applied to telephone companies for more than 80 years, includes broad powers to regulate companies as public utilities.

Peter Keisler, a lawyer for the Internet providers, argued Friday that broadband Internet access should be classified as a lightly-regulated “information service” like Google or Netflix, and not a “telecommunications service” like old-style telephones because it necessarily involves the storing and retrieving of computer data. If the judges accept Keisler’s argument, it would gut the FCC’s rules.

But Judge David Tatel, a Clinton appointee who ruled against the FCC in two previous net-neutrality cases, repeatedly pointed to the Supreme Court’s decision in a case called Brand X. In that case, Tatel suggested, the court gave the FCC the latitude to choose on its own how to classify Internet service.

Judge Sri Srinivasan, an Obama appointee, pressed the industry’s lawyer on what the legal difference is between using the Internet to visit a sports website and dialing an automated telephone hotline to get sports scores. Both include data processing, but are fundamentally telecommunications, he suggested.

Judge Stephen Williams, a Reagan appointee, was the most skeptical of the FCC’s case. He had a puzzled look on his face as he questioned Jon Sallet, the commission’s general counsel, on the entire purpose of the regulations. Why, he asked, shouldn’t websites be able to pay for special “fast lanes?" A business, after all, can pay extra for a special refrigerated train car to transport its goods, he noted. “If you get something special, you pay something special,” Williams said.

Even if the FCC wins on its classification of the Internet, the court may still strike down important portions of the regulations.

The judges asked especially tough questions about the FCC’s decision to apply the regulations to cellular data connections. In order to equally regulate Internet access on home computers and mobile devices, the FCC had to redefine the “public switched network” to include not only phone numbers, but also Internet addresses.

But the law refers only to a single interconnected “network,” not multiple networks, Tatel noted. A regular cell phone without Internet access can’t connect to websites, so, he asked, how is it part of the same network as Internet devices?

The judges also scrutinized whether the FCC had given itself the proper authority to regulate congestion at the point where companies hand Internet traffic back and forth. If the court strikes down that portion of the FCC’s order, it would leave the agency unable to regulate interconnection disputes like the ones between Netflix and Comcast, in which both companies have blamed the other for slow speeds.

The judges seemed mostly unsympathetic to the argument from one Internet provider, Alamo Broadband, that the rules violate its First Amendment right to free speech. “Broadband providers are engaged in transportation, not expression,” said Jacob Lewis, an FCC lawyer.

Keisler, the broadband industry’s lawyer, argued that the agency had failed to provide adequate public notice about portions of its decision, including the regulation of mobile data and interconnection congestion. “We would have had to be psychics” to predict what the FCC was planning to do, he argued. But Lewis shot back that the FCC isn’t required to explain all its proposals like it’s talking to a “second grader.”

If the court strikes down portions of the rules for lack of proper notice, the FCC would presumably be able to just give better notice and then reenact them. Decisions siding with the broadband industry on other issues, however, may leave only Congress with the power to authorize new net-neutrality protections. Many observers are expecting that any decision will be appealed by the losing side to the Supreme Court.