How FCC Hurt Its Title II Anti-Stay Case

The FCC’s latest legal brief opposing a stay of its Open Internet Order, hurt its legal case more than it helped.

The FCC brief unwittingly: exposed a glaring internal inconsistency with the FCC’s Open Internet Order; spotlighted its arbitrary and capricious decision-making; and exposed a big mistake in its legal strategy.    

If the D.C. Circuit Court of Appeals panel rules on the legal merits of the industry’s petition, it remains very likely they will grant a partial stay of the Title II reclassification part of the FCC’s Open Internet Order.

However, the FCC remains very confident that a majority of the court will overlook the multiple serious legal infirmities in the FCC’s Title II case and deny a stay based on sweeping legal deference to the FCC and political deference to President Obama’s public position for the FCC to reclassify the Internet as Title II telecommunications.  

Thus this stay decision, and the ultimate judicial resolution of this case, potentially by the Supreme Court, could prove to be a test of American rule of law.

• [Note: This analysis provides only the new and latest legal problems with the FCC’s order based on the FCC’s latest brief countering the industry’s petition for a partial stay of the Open Internet Order. For more on the multiple serious legal infirmities of the FCC’s legal case see PrecursorBlog posts:  5-14-15, 5-4-15, 3-16-15, and 3-2-15.]

Ironically, the FCC’s brief claims up front that the “petitioners’ stay motion is not what it seems.”

Given the FCC’s invitation to explore that line of inquiry, let’s consider three big ways the FCC’s own argument “is not what it seems.”  

1.  The FCC brief exposes a glaring internal inconsistency with the FCC’s Order.

On pages 11-12 of the brief, the FCC says it forbore from “the large majority of Title II’s provisions…” and “this established “a light-touch regulatory framework,” thereby “minimizing the burdens on broadband providers while still adequately protecting the public…”

Thus the FCC admits in its brief, and in its Order, that the FCC Order does impose “burdens” on broadband providers, and it also admitted it chose to keep some of the “burdens,” like sections 201 and 202, to protect the public.

The simplest of cursory review of Title II by the court will show that the FCC retained the provisions with the most burdens, i.e. sections 201 and 202 powers, upon which the remainder of Title II rests. 

Now on pages 2 and 24 of the FCC’s brief, the FCC summarily dismisses any legal harm (burden) on broadband providers in summarily asserting: “each alleged harm is speculative or insubstantial.”

How can the FCC’s sweeping denial of any harm in their brief square with the FCC’s detailed discussion in their Order of the need for the FCC to be “minimizing the burdens on broadband providers while still adequately protecting the public?”

Simply, why did the FCC need to forbear from Title II at all, if even the most burdensome Title II provisions, from which the FCC chose to not forbear, implicitly represent at best “speculative or insubstantial” harms to broadband providers? 

The FCC can’t have it both ways.

Either Title II has actual harms/burdens on broadband providers as it made clear in the Order: “minimizing the burdens on broadband providers,” or it has no harms to broadband providers as it said it its stay brief: “each alleged harm is speculative and insubstantial.”

2.  The FCC brief spotlights the FCC’s arbitrary and capricious decision making.

Just like the FCC arbitrarily and capriciously denies any harm from Title II at all, the FCC brief also arbitrarily and capriciously dismisses the existence of any reliance interests for broadband providers, suppliers, or investors by summarily dismissing them as “alleged reliance interests.” [page 18]

Let the magnitude of the FCC’s caprice here set in: “alleged reliance interests.

The FCC brief denies that broadband providers, other Internet businesses, and private investors -- who have invested upwards of a trillion dollars over the last decade relying on the law, Supreme Court precedent and multiple FCC precedents classifying all broadband infrastructures: cable, DSL, wireless and power-lines, as Title I services, not Title II utility rate regulated services -- have no reliance interests requiring “substantial justification” to overcome.

Just like the FCC summarily dismissed that the un-forborne parts of Title II -- like sections 201 and 202 that subject common carriers to sweeping rate regulation obligations -- pose no “burdens” on broadband providers, the FCC is summarily asserting that imposing sections 201 and 202 implicates no reliance interests.    

It is the quintessence of arbitrary and capricious behavior, when the FCC essentially can’t/won’t acknowledge before the court that the interests which maximally relied upon FCC’s settled precedent have no reliance interests at all, let alone reliance interests warranting “substantial justification” to overturn. 

To paraphrase a famous line in an old infamous movie, the FCC is effectively saying to broadband providers: “You screwed up; you trusted us.”

3.  The FCC brief exposed a big mistake in its legal strategy.

Apparently the FCC remains confounded that broadband providers have only challenged the FCC’s Title II reclassification (and the conduct standard) and have not challenged the FCC’s section 706 authority or the FCC’s bright-line net neutrality rules banning blocking, throttling and paid prioritization.

It’s pretty obvious from reading the FCC Open Internet Order that it never occurred to the FCC that a legal challenge would concede section 706 and the bright line net neutrality rules, and then isolate Title II for legal challenge.

That’s because the clear backbone of the FCC’s integrated legal defense in the Order and in its stay brief is the Verizon v. FCC decision. Tellingly, the FCC brief cites Verizon v. FCC as much as it cites the Supreme Court’s Brand X decision.

Obviously the FCC likes the Verizon Court’s affirmation of the FCC’s section 706 authority and many of the FCC’s market findings/assumptions in its 2010 Open Internet Order that the court otherwise overturned.

The FCC’s apparent failure to anticipate a Title II-only challenge now has the FCC having to de facto assume and imply to the court that its section 706 and Title II authorities are somehow inseverable, when they are completely separate legally.

This big awkward FCC mistake in legal strategy has resulted in an FCC defense that may be inappropriately, too-heavily-reliant on Verizon v. FCC, which is a much more of section 706 relevant precedent that a straight Title II classification relevant precedent, like the Supreme Court’s Brand X decision which was solely focused on FCC classification.   

Importantly, both the FCC and industry did not brief the Verizon v. FCC court about the legality of reclassifying broadband as a Title II service, after the FCC repeatedly found the facts and law warranted an information services classification. That’s because the FCC asserted 706 authority, and did not assert Title II common carrier authority to promulgate its 2010 net neutrality rules.

Simply, to this court, reclassifying broadband as a telecommunications service, after a decade of being legally classified as an information service, is a new legal question that Verizon v. FCC did not rule on.

This is a big problem for the FCC’s case for a variety of strong reasons.

The 1996 Telecommunications Act made Title I information services and Title II common carrier telecommunications services mutually exclusive legal classifications.  

Not only are Section 706 & and Title II part of different legal titles, they are from different laws; the 1996 Telecommunications Act versus the 1934 Communications Act.

They are even opposite legal models in that section 706 is situational, conditional, targeted and reactive while Title II is ex ante and comprehensive.   

Ironically, the main similarity of section 706 and Title II is that the FCC has now asserted unlimited authority to regulate the Internet under both Section 706 and Title II. 

The FCC’s big legal mistake here is that the FCC effectively argues Verizon v. FCC is a major Title II, classification-relevant precedent, when it is a really a very different section 706, net neutrality precedent.  

In sum, for the FCC to ultimately prevail on reclassifying broadband as a telecommunications service the D.C. Court of Appeals and the Supreme Court ultimately must confer near carte blanche deference on the FCC.

***

FCC Open Internet Order Series

Part 1: The Many Vulnerabilities of an Open Internet [9-24-09]

Part 2: Why FCC proposed net neutrality regs unconstitutional, NPR Online Op-ed [9-24-09]

Part 3: Takeaways from FCC's Proposed Open Internet Regs [10-22-09]

Part 4: How FCC Regulation Would Change the Internet [10-30-09]

Part 5: Is FCC Declaring 'Open Season' on Internet Freedom? [11-17-09]

Part 6: Critical Gaps in FCC's Proposed Open Internet Regulations [11-30-09]

Part 7: Takeaways from the FCC's Open Internet Further Inquiry [9-2-10]

Part 8: An FCC "Data-Driven" Double Standard? [10-27-10]

Part 9: Election Takeaways for the FCC [11-3-10]

Part 10: Irony of Little Openness in FCC Open Internetg-making [11-19-10]

Part 11: FCC Regulating Internet to Prevent Companies from Regulating Internet [11-22-10]

Part 12: Where is the FCC's Legitimacy? [11-22-10]

Part 13: Will FCC Preserve or Change the Internet? [12-17-10]

Part 14: FCC Internet Price Regulation & Micro-management? [12-20-10]

Part 15: FCC Open Internet Decision Take-aways [12-21-10]

Part 16: FCC Defines Broadband Service as "BIAS"-ed [12-22-10]

Part 17: Why FCC's Net Regs Need Administration/Congressional Regulatory Review [1-3-11]

Part 18: Welcome to the FCC-Centric Internet [1-25-11]

Part 19: FCC's Net Regs in Conflict with President's Pledges [1-26-11]

Part 20: Will FCC Respect President's Call for "Least Burdensome" Regulation? [2-3-11]

Part 21: FCC's In Search of Relevance in 706 Report [5-23-11]

Part 22: The FCC's public wireless network blocks lawful Internet traffic [6-13-11]

Part 23: Why FCC Net Neutrality Regs Are So Vulnerable [9-8-11]

Part 24: Why Verizon Wins Appeal of FCC's Net Regs [9-30-11]

Part 25: Supreme Court likely to leash FCC to the law [10-10-12]

Part 26: What Court Data Roaming Decision Means for FCC Open Internet Order [12-4-12]

Part 27: Oops! Crawford's Model Broadband Nation, Korea, Opposes Net Neutrality [2-26-13]

Part 28: Little Impact on FCC Open Internet Order from SCOTUS Chevron Decision [5-21-13]

Part 29: More Legal Trouble for FCC's Open Internet Order & Net Neutrality [6-2-13]

Part 30: U.S. Competition Beats EU Regulation in Broadband Race [6-21-13]

Part 31: Defending Google Fiber's Reasonable Network Management [7-30-13]

Part 32: Capricious Net Neutrality Charges [8-7-13]

Part 33: Why FCC won't pass Appeals Court's oral exam [9-2-13]

Part 34: 5 BIG Implications from Court Signals on Net Neutrality - A Special Report [9-13-13]

Part 35: Dial-up Rules for the Broadband Age? Op-ed Rebutting Marvin Ammori's [11-6-13]

Part 36: Nattering Net Neutrality Nonsense Over AT&T's Sponsored Data Offering [1-6-14]

Part 37: Is Net Neutrality Trying to Mutate into an Economic Entitlement? [1-12-14]

Part 38: Why Professor Crawford Has Title II Reclassification All Wrong [1-16-14]

Part 39: Title II Reclassification Would Violate President's Executive Order [1-22-14]

Part 40: The Narrowing Net Neutrality Dispute [2-24-14] 

Part 41: FCC’s Open Internet Order Do-over – Key Going Forward Takeaways [3-5-14]

Part 42: Net Neutrality is about Consumer Benefit not Corporate Welfare for Netflix [3-21-14]

Part 43: The Multi-speed Internet is Getting More Faster Speeds [4-28-14]

Part 44: Reality Check on the Electoral Politics of Net Neutrality [5-2-14]

Part 45: The “Aristechracy” Demands Consumers Subsidize Their Net Neutrality Free Lunch [5-8-14]

Part 46: Read AT&T’s Filing that Totally Debunks Title II Reclassification [5-9-14]

Part 47: Statement on FCC Open Internet NPRM [5-15-14]

Part 48: Net Neutrality Rhetoric: “Believe it or not!” [5-16-14]

Part 49: Top Ten Reasons Broadband Internet is not a Public Utility [5-20-14]

Part 50: Top Ten Reasons to Oppose Broadband Utility Regulation [5-28-14]

Part 51: Google’s Title II Broadband Utility Regulation Risks [6-3-14]

Part 52:  Exposing Netflix’ Biggest Net Neutrality Deceptions [6-5-14 

Part 53: Silicon Valley Naïve on Broadband Regulation (3 min video) [6-15-14]

Part 54: FCC’s Netflix Internet Peering Inquiry – Top Ten Questions [6-17-14]

Part 55: Interconnection is Different for Internet than Railroads or Electricity [6-26-14]

Part 56: Top Ten Failures of FCC Title II Utility Regulation [7-7-14]

Part 57: NetCompetition Statement & Comments on FCC Open Internet Order Remand [7-11-14]

Part 58: MD Rules Uber is a Common Carrier – Will FCC Agree? [8-6-14]

 

Part 59: Internet Peering Doesn’t Need Fixing – NetComp CommActUpdate Submission [8-11-14]

Part 60: Why is Silicon Valley Rebranding/Redefining Net Neutrality?  [9-2-14]

Part 61: the FCC’s Redefinition of Broadband Competition [9-4-14]

Part 62: NetCompetition Comments to FCC Opposing Title II Utility Regulation of Broadband [9-9-14]

Part 63: De-competition De-competition De-competition [9-14-14]

Part 64: The Forgotten Consumer in the Fast Lane Net Neutrality Debate [9-18-14]

Part 65: FTC Implicitly Urges FCC to Not Reclassify Broadband as a Utility [9-23-14] 

Part 66: Evaluating the Title II Rainbow of Proposals for the FCC to Go Nuclear [9-29-14]

Part 67: Why Waxman’s FCC Internet Utility Regulation Plan Would Be Unlawful [10-5-14]

Part 68: Silicon Valley’s Biggest Internet Mistake [10-15-14]

Part 69: Will the FCC Break the Internet? [10-22-14]

Part 70: Net Neutrality Has Become an Industrial Policy [10-31-14]

Part 71: The Federal Communications Congress? [11-7-14]

Part 72: The Top Ten Adjectives to Describe Net Neutrality [11-11-14]

Part 73: Top Ten Questions to Ask About Title II Regulation of the Internet [11-20-14]

Part 74: The Only Legitimate FCC Hybrid Net Neutrality Approach [12-1-1

Part 75: Who Pays for Net Neutrality? [12-3-14]

Part 76: Top Ten Deficiencies in FCC’s Title II Record [12-8-15]

Part 77: FCC Title II Internet Regulation: “Believe it or not!” [12-17-14]

Part 78: The FCC Is Unnecessarily Undermining its Legitimacy [12-18-14]

Part 79: NetCompetition Statement on New FCC Net Neutrality Legislation [1-16-15]

Part 80: Need for Modernizing Communications Law – Seeing the Forest for the Trees [1-18-15]

Part 81: Why the FCC Needs Congress [1-25-15]

Part 82: NetCompetition on FCC Publicll sharing its Proposed Open Internet Order [1-23-15]

Part 83: The FCC’s De-Americanization of the Internet [1-25-15]

Part 84: Testing the FCC’s Net Neutrality Calculus [1-28-15]

Part 85: Net Neutrality Bait & Switch to Title II [2-3-15]

Part 86: FCC Internet Utility Regulation Is a Really Stupid Idea [2-9-15]

Part 87: The FCC Is Not Neutral [2-17-15]            

Part 88: Title II Protectionism Will Hurt Google & Silicon Valley in EU [2-19-15]

Part 89: The FCC’s Predictable Fiasco of Internet Utility Regulation [2-24-15]

Part 90: Why FCC Will Lose in Court on Title II Internet (80%) – A Legal House of Cards [3-2-15]

Part 91: FCC Title II Protectionism Creates a U.S. Digital Single Market like EU’s [3-11-15]

Part 92: NetCompetition on FCC Title II Internet Order [3-12-15]

Part 93: FCC’s Title II Legal Case is Modern Version of “The Emperor Has No Clothes”

Part 94: Unnecessary Collateral Damage from FCC Title II Internet Regulation [3-26-15]

Part 95: Nationalistic Net Neutrality Naiveté [4-10-15]

Part 96: ObamaNet vs EuroNet -- “Competing” Protectionist Industrial Policies [4-24-15]

Part 97: FCC’s New Do Not Track Authority [4-27-15]

Part 98: Expect Court to Partially Stay FCC’s Title II Internet Reclassification [5-4-15]

Part 99: Why Court Very Likely Will Stay FCC’s Title II Reclassification [5-14-15]