Will the FCC's new net neutrality rules hold up in court?

"The FCC's new classification is wrong"

Since the agency was brought into existence around 80 years ago, the FCC has been able to govern what are known as "telecommunications services," such as phone networks. In 1996, Congress introduced a new category of services that the FCC also had authority over: "information services." These services are ambiguously defined as "offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications."

For the most part, every internet provider's argument boils down to this: the FCC has called internet service an information service for a long time now, and changing it to a telecommunications service is wrong.

The internet providers would say that this is a battle of definitions, that the FCC has to choose which category internet service best fits into — telecommunications or information — and that information is obviously the correct one.

But this issue was actually brought to court already. Back in 2002, when the FCC initially classified internet service as an information service, the Supreme Court ruled that it’s pretty much at the FCC’s discretion how these definitions are interpreted. The decision is known as Brand X. Outside of internet providers' legal counsel, this seems to be pretty much agreed upon.

FCC special counsel Gigi Sohn explained it neatly on C-SPAN last week:

"The Brand X decision was a decision in 2005 where the Supreme Court looked at the FCC's cable modem decision to classify it as an information service and said, 'This isn't a great decision, it's probably not the best interpretation of the communications law, but it's not arbitrary and capricious.' It's not, in plain English, totally wacky. And I think people misconstrue the Brand X case. All the Supreme Court did in Brand X was say the FCC has the discretion to interpret the Communications Act, and — even though it's not the best interpretation — as long as it's not wacky, we have to uphold it."

Of course, the FCC would argue that the ruling grants it the authority to do what it’s trying to do, but it really is that simple. The FCC flicked the classification switch toward information services back in 2002 — now, with some WD-40, it can flick it back over to telecommunications.

At least, it seems that simple until you get into the finer issues. To push a metaphor too far: to move that switch again, the commission may need a lot of WD-40.

"The FCC has to explain itself, and it better be good"

The FCC may be allowed to change its decision, but it can't just do that on a whim. Legal precedent requires the commission to acknowledge the change and provide some amount of explanation for it. The bigger the change, the better the explanation has to be. This is where internet providers really believe the commission will trip up.

"This FCC is not entitled to its own view of the facts," says Bennett Ross, a partner and chair of the telephony group at law firm Wiley Rein, which represented Verizon against the FCC. "This is not going to be a case where I think the FCC can say it is simply changing policy. It has to make a different factual finding."

It's generally agreed upon that the commission will have to provide an explanation for why internet service can now reasonably be called a telecommunications service when it believed otherwise in 2002. What's in contention is whether a reasonable explanation is actually out there, as well as how compelling that explanation has to be.

"It's unclear what factual basis the FCC has for that change in view," Ross tells The Verge. "I don't think — at least in my experience and in looking at the record in this case — that there has been any change in the way broadband providers make available broadband service today."

The FCC initially decided that internet service was an information service, in significant part, because consumers don't just sign up for internet access: they get email, they get web hosting, and they get message boards and other added services as well. So the commission decided that, though telecommunications are involved, the offering as a whole is an information service.

The FCC will have to explain why internet service no longer fits this definition. "In fact, the FCC is going to have to deal with significant evidence that, if anything, broadband is now even more functionally integrated than it was in 2002," Ross says. Nowadays, he says, internet providers routinely bundle security tools, cloud storage, and other new offerings that "I think most everybody would agree are information services," which seems to entrench them in the commission's existing definition.

Net neutrality advocates see it very differently. Even though internet services may include more bundled tools these days, those tools aren't really relevant anymore — and often, they’re actually pretty annoying. "If you look today at what [service providers] advertise and what people buy, yeah sure, you can still get your Comcast email account, but that's not the thing people are buying this for," Harold Feld, a senior vice president with interest group Public Knowledge, tells The Verge. "That's not a major part of the offer, that's become like voicemail with your phone. ...We believe that if you look at how things are today, it's very different than the way they were 15 years ago." (Opponents would counter that it doesn't matter what consumers are buying it for, it just matters what the ISPs are selling.)

Feld also believes that the FCC won't have much trouble defending its new opinion. "This is a common misstatement of the law," he says. "The Supreme Court has been very clear about this, particularly with regard to the FCC in the last five years or so where it's said, 'No, the FCC does not need to explain why it's changing its mind, other than to say look we had this policy before, we think that this other policy is a better way to go, and here's our new policy.'"

The commission won't release its full net neutrality proposal until February 26th, so we don't yet know what its exact reasoning is in support of the change. It will have to provide one, though, and it will be closely watched. While the FCC receives a lot of leeway in court, it has more to account for in a situation like reclassification, which represents a broad paradigm shift in the regulation of the internet.

"Do you know how much money we've spent!?"

Broadband providers have spent billions building out their networks, and they love to remind the FCC of this. It's an important fact, because they've largely done so while their networks were regulated as information services. Suddenly changing them to telecommunications services could have dramatic and harmful effects, they claim.

"Even assuming that the FCC can establish that the facts have changed, they're going to have to justify their decision to change, as a matter of policy, the treatment of broadband as an information service because they effectively induced the industry to spend billions of dollars in investments by virtue of their decision to not regulate broadband as [a telecommunications] service," Ross says. "The FCC has been clear about this for years. They were making the classification decision, at least in part, in an attempt to induce or persuade investment in broadband."

Net neutrality advocates argue that this doesn't paint a fair picture of the FCC's actions. "For five years the FCC has been saying, 'We might do Title II,'" Feld says, referencing actions taken by former commission chairman Julius Genachowski. "…They've given you plenty of warning. The fact that you didn't believe it doesn't mean you didn't get notice about it, so you can't claim that you relied on the idea that this would stay the same way forever when the FCC as an agency put this out in 2010."

Five years sounds like a fair amount of warning. At the same time, an understanding that the FCC might do something may not be enough. "You're mixing apples and oranges," Barbara Esbin, a partner with the law firm Cinnamon Mueller and a former FCC senior staffer, tells The Verge. "…I don't think anybody's arguing that they didn't give enough notice. The question is of reliance."

And the ISPs, she says, should reasonably have been able to make their investments while believing that they would remain providers of an information service. "Yeah, they can fairly rely on a series of four government decisions not to classify the service under Title II, as well as the FCC's successful arguments before the Supreme Court on their first classification decision," she says. "…I think that builds a fair case for reliance."

The FCC does have some amount of support from internet providers, however. Sprint, for instance, has acknowledged that "light-touch" regulation under Title II — as the commission is proposing — would not hamper investments. Verizon has also admitted that this reclassification decision "does not influence" its investment strategy. And net neutrality advocates would also argue that, once again, the commission really doesn't have to explain itself here. The court standard only calls for a "reasoned" explanation, and the FCC can certainly provide that. The question becomes how much more accountable the FCC will need to be because of this history.

"Technically, the FCC doesn't have the legal authority"

All of the issues up until now are really just pieces of a bigger argument about how well the FCC has to explain itself. Assuming that the FCC succeeds there, it moves on to the internet providers' other main argument. It’s also their craziest: it's basically like arguing the FCC into a legal Ouroboros.

This argument rests on the rules surrounding "common carriers." Common carrier is a legal status given to certain companies that basically says that they must accept business from anyone and not discriminate on prices. Critically, all telecommunications providers are required to act as common carriers. The logic is that a common carrier’s infrastructure is so fundamental to our daily lives that the government needs to take extra precautions to make sure anyone can connect to it at a fair price.

But, the argument goes, the FCC doesn’t have the power to simply mandate common carrier status. So if the FCC suddenly defines a company as offering a telecommunications service, is that company inherently a common carrier, or is the FCC mandating that it's a common carrier and therefore exceeding its authority?

Esbin calls this, "some kind of an existential or philosophical problem inherent in the nature of common carrier status."

If you ignore the greatest absurdities in this reading of the law, which would effectively bar the FCC from any possible action, you still come out with some important limitations on when the commission can and cannot impose common carrier status — and these are a bit more agreed upon. "There are a lot of court cases that say to the commission, when it has tried to require an entity to offer service on a common carrier basis, that you can't just do that on a whim or to satisfy some policy goal," she says.

While it's not hard to accept the argument that internet service should be defined as a telecommunications service, there's no hiding the fact that the FCC is now doing so to advance a policy goal — protecting net neutrality.

"I would still maintain that it's kind of a quirk of common carrier law that [the FCC doesn't] just get to make you be a common carrier because they think it's good policy," Esbin says. "So this may be an area where they made the right call in the first place. And Congress can change it. You know, we do have a legislative body in this country."

Ultimately, this appears to be another argument over how much freedom the FCC has. The courts enforce limits on the commission's power, but that's still far from stripping it of legal authority to classify telecommunications services. Feld says that he strongly suspects this argument boils down to the FCC having a good amount of freedom, but not so much that it can totally disregard legal procedure.

"The FCC has a lot of discretion to judge whether something looks like it's acting as a common carrier or not, and [it] has a lot of discretion when setting new service rules to decide if an entity must offer service on a common carrier basis," Feld writes in an email. "But that doesn't mean you get to ignore the Administrative Procedure Act and just say, 'Well, we think it would just be better if you were declared a common carrier.'"

Those are the core arguments, but others have been put forward as well. Even after all of that, the FCC will still have to defend its assertion that Title II covers interconnection agreements and that Title III lets it enforce these rules on mobile. Plus, it'll probably have to defend the notion that Title II actually allows the commission to ban paid fast lanes, which is basically how the net neutrality battle started in the first place.

Should things go awry for the commission, there's still some silver lining: the public knows what net neutrality is — and they’re demanding it.

"Whether the FCC is successful here or not, broadband is an essential service. Whether the FCC succeeds in classifying it under Title II, it is an established service to people," Feld says. "Whatever happens in this litigation, ultimately these policy questions about providing it in an open and fair way will need to be addressed."

Congress is already looking at enacting net neutrality regulations on its own — it's even the pro-business Republicans who are making the proposal. The legislation would offer key net neutrality protections, like banning internet fast lanes and site blocking, but it would also severely limit what the agency can do in the future and avoid Title II reclassification. That's a sub-optimal resolution for net neutrality advocates, but it'd likely be better than no rules at all.

The FCC is optimistic that it won't come down to that.

"The court will say, whether or not they agree with our reclassification, 'This is not wacky. This is not arbitrary and capricious.' An independent agency has the ability and the legal right to determine what its authority is and determine what the classification of its services are," Sohn, the FCC's special council, said last week. "So I feel good about the legal authority that we've chosen."