Comcast vs FCC: In Battle For Net Neutrality, Did the Courts Hand Comcast a Pyrrhic Victory?

The U.S. Court of Appeals for the District of Columbia handed Comcast a victory against the Federal Communication’ Commissions today, but in winning its appeal, Comcast (s cmcsa) may have just set off a war — one it could wind up losing. As we noted, a three-judge panel took issue with the FCC’s attempts to regulate cable’s ability to manage its networks, not simply because there wasn’t a formal rule-making process in place, but because the FCC appears to have overstepped its bounds when it tried to regulate how a cable company managed its network.

Stifel Nicolaus, an investment bank, lays it out well in a research note:

Today’s ruling is destabilizing as it could effectively free broadband providers from FCC regulation over broadband, including net neutrality, rules requiring transparency letting customers know what actual speeds they are receiving, the ability to prioritize emergency communications, consumer privacy protections (though these could presumably be imposed to a certain degree by the FTC). But it could lead the FCC to reclassify broadband services as the more heavily regulated “telecommunications service” under the traditional Title II – which the Bells, cable, and wireless companies (e.g., T, VZ, CMCSA) strongly oppose.

So while this decision does throw the FCC’s current network neutrality rule-making into disarray, it also could affect the agency’s attempts to regulate a wide variety of broadband issues, including how broadband providers tell consumers what their true Internet speeds are, as well as how the agency can enact universal service fund reform and set privacy rules on the Internet.

What the FCC needs to figure out is whether or not it should assert its authority narrowly for each issue it is trying to address, and risk its authority being challenged each time (possibly in court) or if Congress needs to step in to grant the FCC more power. Already several consumer organizations have issued statements about the ruling, such as Gigi Sohn of Public Knowledge:

“The FCC should immediately start a proceeding bringing Internet access service back under some common carrier regulation similar to that used for decades. Some parts of the Communications Act, which prohibit unjust and unreasonable discrimination, could be applied here. The Commission would not have to impose a heavy regulatory burden on the telephone and cable companies, yet consumers could once again have the benefit of legal protections and the Broadband Plan could go forward.”

The FCC itself is being coy on the reclassification issue, saying:

“The FCC is firmly committed to promoting an open Internet and to policies that will bring the enormous benefits of broadband to all Americans. It will rest these policies — all of which will be designed to foster innovation and investment while protecting and empowering consumers — on a solid legal foundation. Today’s court decision invalidated the prior Commission’s approach to preserving an open Internet. But the Court in no way disagreed with the importance of preserving a free and open Internet; nor did it close the door to other methods for achieving this important end.”

Apparently everyone — even Comcast, which originally sued the agency — is in favor of a “free and open Internet.” Comcast, which declared itself vindicated, was careful to point out that it was in favor of the open Internet principles, despite its original P2P blocking efforts:

Comcast remains committed to the FCC’s existing open Internet principles, and we will continue to work constructively with this FCC as it determines how best to increase broadband adoption and preserve an open and vibrant Internet.

Other major ISPs have also been quick to favor the existing broadband principles (notably those do not include network neutrality provisions on wireless networks and require ISPs to be transparent about any network management). AT&T, in what looks to be a bid for self-regulation by ISPs, suggested that the FCC’s censuring of Comcast wasn’t needed because Comcast had stopped the throttling on its own (although it did lie about what it was doing, pack hearings on the topic in its favor and behave poorly throughout the process). AT&T (s T) attributed its statement to Jim Cicconi, senior executive vice president of external and legislative affairs:

“If, after assessing its options under Title I, the FCC feels it needs to clarify its jurisdiction as a result of today’s decision, we hope the issue would be referred to the U.S. Congress which alone confers the Commission’s legal authority. In any circumstance, AT&T pledges to work constructively with the FCC as it considers these questions.”

Verizon’s (s vz) statement — attributed to Randal S. Milch, executive VP and general counsel — doesn’t emphasize the need for Congress to get involved, despite one of its top policy wonks calling for Congress to figure out new ways to regulate broadband last month:

“The court recognized that the FCC does have Title I ancillary authority over Internet access. In this case, the FCC simply failed to link its actions to its statutory responsibilities. The FCC’s authority supplements the various other consumer protection and competition laws that apply to all members of the Internet ecosystem.”

As this devolves into a fight between lawyers, it’s important to realize what’s at stake amid all of the fancy language, namely the ability for content to pass relatively unimpeded over the pipes that provide your broadband access. At stake as well is who gets to make the rules that govern those pipes, no matter if the ISP is a telco, a cable company or even Google (s goog).

Post and thumbnail photos courtesy of Flickr user Steakpinball