Court Gives FCC Sweeping Net Neutrality, Title II Victory; Williams Partially Dissents

A split panel of federal judges has upheld the FCC net neutrality order that reclassified broadband service under Title II of the Communications Act. In a 184-page document of the U.S. Court of Appeals for the D.C. Circuit, Judges David Tatel and Sri Srinivasan wrote the majority opinion finding FCC arguments reasonable and denying all petitions for review of its order, while judge Stephen Williams dissented in part and concurred in part (USTelecom v. FCC, No. 15-1063). FCC Chairman Tom Wheeler cheered the ruling, which Commissioner Ajit Pai said it disappointed him, and USTelecom had no immediate comment.

Tatel and Srinivasan cited the Supreme Court's 2005 ruling on Brand X, which found that it was consistent with the statute for the FCC to take into account the end user's perspective in classifying a service as an "information" or "telecommunications" service. In its 2015 order reclassifying broadband Internet access service as a Title II telecom service, "the Commission concluded that consumers perceive broadband service both as a standalone offering and as providing telecommunications," the two judges wrote in their 109-page opinion. "These conclusions about consumer perception find extensive support in the record and together justify the Commission’s decision to reclassify broadband as a telecommunications service."

"Petitioners assert numerous challenges to the Commission’s decision to reclassify broadband," Tatel and Srinivasan wrote. "Finding that none has merit, we uphold the classification. Significantly, although our colleague believes that the Commission acted arbitrarily and capriciously when it reclassified broadband, he agrees that the Commission has statutory authority to classify broadband as a telecommunications service."

Tatel and Srinivasan upheld FCC reclassification of mobile broadband as a commercial mobile service against separate arguments by CTIA and AT&T. "In their view, mobile broadband is, and must be treated as, a private mobile service, and therefore cannot be subject to common carrier regulation," the judges wrote. "We reject mobile petitioners’ arguments and find that the Commission’s reclassification of mobile broadband as a commercial mobile service is reasonable and supported by the record."

The two judges upheld the FCC assertion of Title II authority over interconnection. The commission overcame problems from a 2014 Verizon v. FCC ruling "by reclassifying broadband service -- and the interconnection arrangements necessary to provide it -- as a telecommunications service," they wrote. They also denied: petitioner challenges to particular net neutrality rules, including barring paid prioritization, and its general conduct rule; Alamo Broadband and Daniel Berninger's challenge to the rules on First Amendment free-speech grounds; and Full Service Network's challenge to the FCC's decision to forbear from applying many Title II provisions to broadband service.

Williams said he agreed with much of the majority opinion but felt obligated to dissent and argue the FCC order should be vacated. "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 wrote in his 69-page opinion. "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 ruling is "a victory for consumers and innovators who deserve unfettered access to the entire web," Wheeler said in a written statement. "It ensures the internet remains a platform for unparalleled innovation, free expression and economic growth." Pai was "deeply disappointed" by the ruling, he said. "For many of the reasons set forth in Judge 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."

AT&T suggested an appeal is coming. “We have always expected this issue to be decided by the Supreme Court, and we look forward to participating in that appeal,” said David McAtee, AT&T senior executive vice president and general counsel in a one-sentence blog post.