ISPs and other opponents of the FCC's Title II-based Open Internet order were regrouping Tuesday after a court defeat that will be appealed to the Supreme Court, but in the meantime were making their unhappiness known.
A three-judge panel of the U.S. Court of Appeals for the District of Columbia rejected all the ISP challenges to the rules, including the reclassification of ISPs as common carriers and the application of the rules to interconnection and mobile wireless operators. It was essentially a sweep for the commission and the Obama Administration, which strongly backed the rules.
But the long legal road for net-neutrality rules is not over. AT&T has already pledged to take it to court -- it has 90 days to appeal -- and others will almost surely be joining them.
"I am deeply disappointed by the D.C. Circuit’s 2-1 decision upholding the FCC’s Internet regulations," said FCC Commissioner Ajit Pai, who voted against the rules. "For many of the reasons set forth in Judge [Stephen] Williams’ compelling dissent, I continue to believe that these regulations are unlawful, and I hope that the parties challenging them will continue the legal fight. The FCC’s regulations are unnecessary and counterproductive. Indeed, as Judge Williams put it: 'The ultimate irony of the Commission’s unreasoned patchwork is that, refusing to inquire into competitive conditions, it shunts broadband service onto the legal track suited to natural monopolies. Because that track provides little economic space for new firms seeking market entry or relatively small firms seeking expansion through innovations in business models or in technology, the Commission’s decision has a decent chance of bringing about the conditions under which some (but by no means all) of its actions could be grounded—the prevalence of incurable monopoly.'"
“The D.C. Circuit’s decision is more than disappointing, but I expect it to be appealed to the U.S. Supreme Court so this opinion is not necessarily the final say," said FCC Commissioner Michael O'Rielly, who also voted against the ruels. "If allowed to stand, however, today’s decision will be extremely detrimental to the future of the Internet and all consumers and businesses that use it. We all will rue the day the Commission was confirmed to have nearly unmitigated power over the Internet -- and all based on unsubstantiated, imaginary “harms.”
Cable operators, for one, were looking to Congress for help while contemplating any possible legal move, although the American Cable Association signaled it would likely appeal--AT&T has already said it will do so.
"ACA is disappointed that the D.C. Circuit supported the FCC's decision to regulate the complex, computer-like networks of ISPs as though they are 'dumb' pipes provided by monopoly telephone companies," said ACA president Matt Polka. "ACA continues to believe that the FCC acted contrary to law and decades of precedent in relying on Title II of the Communications Act as the legal basis for its new regulations, whose burdens fall disproportionately upon smaller ISPs. Although ACA needs time to review the Court's ruling to assess the need for further litigation, ACA expects to seek review of the decision."
The National Cable & Telecommunications Association said in a statement: “We are reviewing today’s split decision by the DC circuit panel, and will carefully review the majority and dissenting opinions before determining next steps. Though disappointed in today’s result, we are particularly gratified by Judge Williams’ recognition of the ‘watery thin and self-contradictory’ nature of the FCC arguments used to justify the imposition of common carriage laws on Internet networks. While this is unlikely the last step in this decade-long debate over Internet regulation, we urge bipartisan leaders in Congress to renew their efforts to craft meaningful legislation that can end ongoing uncertainty, promote network investment, and protect consumers.”
“Two judges on the court have unfortunately failed to recognize the significant legal failings of the Federal Communications Commission’s decision to regulate the internet as a public utility, leaving in place regulation we believe will replace a consumer-driver internet with a government-run internet, threatening investment and innovation in years to come. Our industry strongly supports open internet principles and the FCC’s order is wholly unnecessary to keeping the internet open," said USTelecom President Walter McCormick. "We will continue to work toward policies that facilitate America’s broadband leadership, are reviewing the court’s decision, and will be evaluating all of our legal options.”
“The wireless industry remains committed to preserving an open Internet and will pursue judicial and congressional options to ensure a regulatory framework that provides certainty for consumers, investors and innovators," said CTIA President Meredith Attwell Baker. "For the U.S. to remain the global mobile leader, we need rules that help promote consumer access to 5G and the Internet of Things without subjecting the wireless industry to investment-chilling public utility regulation. In the interim, we urge the FCC to support innovative new services, like free data, that benefit consumers and reflect the highly competitive mobile market.”
Adonis Hoffman, former chief of staff to FCC commissioner Mignon Clyburn, also looked to the Hill.
"The long arm of federal regulation now has the Internet firmly in its grasp -- only a matter of time before it is choked to death by rate regulation," Hoffman said, calling the decision. "One giant step for Silicon Valley. One giant leap backwards for society. This is a matter too important to be decided by three unelected regulators at the FCC and should rightfully rest with Congress."
The chair of the Senate Committee overseeing the FCC agreed.
“Today’s 2-1 court ruling upholding the FCC’s partisan decision to saddle the internet with restrictions designed for the monopoly telephone era says more about our outdated telecommunications laws than anything else,” said Sen John Thune (R-S.D.), chair of the Senate Commerce Committee. "Rather than providing internet users and companies alike with the regulatory certainty they need to thrive, we instead now have a highly political agency micromanaging the internet ecosystem. Today’s decision is a clear signal that my colleagues and I need to reestablish Congress’ appropriate role in setting communications policy on a bipartisan basis. As Judge Williams warns in his dissent, by ‘shunt[ing] broadband service onto the legal track suited to natural monopolies,’ the FCC’s order may actually foster ‘the prevalence of incurable monopoly.’ Congress must not allow that to happen.”
Sen. Roger Wicker (R-Miss.), chairman of the Communications Subcommittee, who was hoping the decision would not stand, added: “The Court’s ruling does not change the fact that the so-called ‘Open Internet’ rules are unnecessary and costly. Applying decades-old Title II regulations to modern technologies adds uncertainty to the marketplace and stifles innovation. I am hopeful that the decision will be appealed and overturned.”
Sen. Ron Johnson (R-Wis.), chairman of the Senate Homeland Security and Governmental Affairs Committee and no fan of the FCC rules, said that the court had upheld "President Obama’s net neutrality rule," which Republicans, including notably FCC Commissioner Ajit Pai, took to calling them after the President publicly urged the FCC to reclassify ISPs under Title II, which FCC Chairman Tom Wheeler proceeded to do.
“It is unfortunate that a split D.C. Circuit panel failed to recognize the severe Administrative Procedure Act shortcomings with the FCC’s open internet rule as outlined in my committee’s report, ‘Regulating the Internet: How the White House Bowled Over FCC Independence," said Johnson. "This will certainly be appealed to the Supreme Court. In the meantime, investment will continue to slow and innovation will lag, as businesses respond to this silent killer of economic opportunity.
“As Judge Williams concluded in his dissent: ‘The ultimate irony of the commission’s unreasoned patchwork is that, refusing to inquire into competitive conditions, it shunts broadband service onto the legal track suited to natural monopolies," he added. "Because that track provides little economic space for new firms seeking market entry or relatively small firms seeking expansion through innovations in business models or in technology, the Commission’s decision has a decent chance of bringing about the conditions under which some (but by no means all) of its actions could be grounded—the prevalence of incurable monopoly.’”
Energy and Commerce Committee Chairman Fred Upton (R-Mich.) and Communications Subcommittee Chairman Greg Walden (R-Ore.), said they were disappointed that the court "did not hold the commission accountable for the numerous process flaws and legal failings plaguing this Order."
The court found none of those, in fact saying the decision was confined only to whether the FCC could have reasonably taken the steps it did to effect its policy choice about Internet access regs, not whether its policy choice was the right one.
"Title II will continue to stifle Internet innovation and the impacts will surely trickle down to consumers,” they said. “Because of this added layer of regulation, sadly we’ll never realize the full potential of the Internet industry’s ability to innovate. While jobs, innovation, and consumers are the big losers today, there is little doubt that this ruling will be appealed. We hope that the courts [in this case either the full D.C. appeals court--it was a three-judge panel decision--or the Supreme Court--will reverse this decision and uphold the letter of the law to protect consumers and allow the Internet industry to innovate and invest.”
John Jones, SVP of CenturyLink, another ISP that challenged the rules, said: “We’re disappointed with the decision of the two-judge majority to deny the industry’s appeal. We appealed major portions of the net neutrality order because, in our opinion, it is unlawful, overly regulatory and out of step with rapidly evolving consumer needs and network investment strategies. CenturyLink supports the open internet that has flourished largely without government regulation for more than 30 years. The FCC’s decision to impose a heavy-handed regulatory regime on internet access does not further an open internet and instead hampers investment and consumer choice.”
University of Pennsylvania professor Christopher Yoo, who has argued against the rules, said he saw some big downsides to the decision.
"Today's court decision upholding the FCC's 2015 Open Internet Order will likely have a number of unfortunate consequences," Yoo said. "It calls into question popular video services such as Binge On, which allows T-Mobile customers to watch unlimited amounts of video without having to worry about their data cap. Over the long run, the decision will likely preempt new services that deliver video or other types of content in innovative ways.
Limiting Internet service providers' ability to manage their networks also threatens to exacerbate the digital divide. Making Internet access more costly makes it even more difficult to extend service in rural and low-income areas. Past experience also shows that access rules of this type tend to reduce investment in new, higher-capacity networks.
The FCC adopted a general conduct standard under the new rules that allows it to look at business practices like zero rating plans--it is in fact vetting them now--and take action if they are anticompetively harming the virtuous circle of content from edge to user.
Fred Campbell of Tech Knowledge, framed the decision as a threat to online speech, rather than a protection.
“For the first time in history, a federal court has granted the government the power to regulate the press as if it were a public utility," he said. "The First Amendment’s protection for the freedom of the press has never been in greater jeopardy.
"Make no mistake — this opinion marks a fundamental change in First Amendment law. Until today, the federal courts interpreted the First Amendment as prohibiting the FCC from regulating the transmission of video content and the distribution of newspapers as common carriage," he added. "Today’s decision abandons this protection for the freedom of the press and gives government the right to censor the news by imposing restrictions on its distribution."
The Telecommunications Industry Association (TIA), which builds and supplies equipment to communications networks and was also looking to Congress to step in, said: “The court’s decision means today’s dynamic, ever-changing Internet will face the strict, inflexible rules designed to regulate our grandparents’ phone service. We continue to believe the FCC has overstepped its authority and we are deeply disappointed by the decision."
TIA CEO Scott Belcheradded: "TIA is committed to working with members of Congress to advance legislation that protects consumers without harming investment and job creation. If the FCC’s current approach is allowed to remain in place, it will be much more difficult for Internet service providers to offer innovative new services enabled by the Internet of Things and 5G or to continue heavily investing in the network and enabling greater connectivity. And significant private sector investment is clearly needed in order to meet growing consumer demands for video and data."
NTCA: The Rural Broadband Association, had issues with the ruling, but took the opportunity to tell the FCC that, since the court had clarified interconnection issues were within its Title II authority, it should exercise that.
“Even as today’s court decision may uphold the commission’s authority to subject broadband to a Title II framework, we urge the commission to avoid regulatory over-reach in the decision’s wake and to focus instead on how best to adapt existing rules in a thoughtful, limited, clear-cut way as necessary specifically to promote certainty and serve core statutory principles such as universal service and consumer protection," the group said. "Along these lines, NTCA encourages the commission to use this decision as a springboard for a closer look at interconnection arrangements, which the court notes are a telecommunications service. As NTCA has long highlighted, these arrangements are two-way in nature, and reciprocal rules of the road are essential to ensure that all consumers—especially those in rural areas—can obtain and enjoy the full benefits of broadband.”
“Today’s decision is a huge step backward for the continued evolution of the internet that consumers enjoy today," said VoIP pioneer and rule challenger Daniel Berninger. "The extent of the legal gymnastics in the 184-page opinion imposing a 1934 law on the modern internet illustrates the out-of-touch structural nature of the problem. This convoluted legal opinion ignores the reality that the internet prospered for 20 years without FCC policy intrusions. The rules upheld today essentially render new innovations for consumers and businesses that otherwise could have come to market dead on arrival. Navigating the complex waters of Title II as applied to the internet ecosystem is all but impossible for start-up innovators and technologists."
Berin Szóka, president of TechFreedom, which intervened in the court challenge in support of ISPs, said the FCC victory "merely begins the next stage in this decade-long melodrama."
He signaled that he and other petitioners would first appeal to the full court--the decision was by a three-judge panel--though those are rarely overturned. "We and other Petitioners will ask the full D.C. Circuit to rehear the case en banc and press on to the Supreme Court if necessary."
“The Internet Innovation Alliance is deeply disappointed with today’s DC Circuit decision affirming the FCC’s Open Internet Order," said the group, whose honorary chairman is former Democratic chair of the House Communications Subcommittee Rick Boucher. "Unfortunately, the Court has missed a unique opportunity to continue the bipartisan policies that have spurred 21st century broadband wired and wireless infrastructure investment and brought high-speed Internet access services and applications to Americans throughout the nation. As the parties now consider their appellate strategies, we again reaffirm our call for Congress to step in and take a leadership role to adopt legislation that ensures both an open internet and the policies necessary to expand critical private investment in next-generation broadband networks.”