Court’s rejection of FCC’s net neutrality rules sends the issue back to Congress

[vertical][/vertical]Considering the Court of Appeals for the Federal Circuit was striking down the FCC’s net neutrality order in its ruling today in Verizon v. Federal Communications Commission, the 82-page opinion (PDF) it issued is remarkably sympathetic to what the agency was trying to accomplish:

Before beginning our analysis, we think it important to emphasize that although the question of net neutrality implicates serious policy questions, which have engaged lawmakers, regulators, businesses, and other members of the public for years, our inquiry here is relatively limited. “Regardless of how serious the problem an administrative agency seeks to address, . . . it may not exercise its authority in a manner that is inconsistent with the administrative structure that Congress enacted into law.” Ragsdale v. Wolverine World Wide, Inc., 535 U.S. 81, 91 (2002) (internal quotation marks 17 omitted).

Accordingly, our task as a reviewing court is not to assess the wisdom of the Open Internet Order regulations, but rather to determine whether the Commission has demonstrated that the regulations fall within the scope of its statutory grant of authority.

And on the question of the agency’s statutory grant of authority, the court found the FCC’s authority fell well short of what would be required to impose the regulations it sought to impose in its Open Internet Order.

The FCC said it may appeal the decision. But if that fails, the agency will have to go to Congress to ask for the necessary authority if it means to preserve the rules. The question is: should it?

The FCC’s Open Internet Order was always a kluge — a mishmash of ideas and justifications, inconsistently applied, that never hung together as a coherent regulatory regime, as the FCC struggled to stay within its statutory authority. From the start, moreover, it was clear the order did not address critical areas of network management like network peering arrangement, where all sorts of mischief can occur.

The main problem, which the court seemed to intuit, is that however laudable the FCC’s goals in issuing its net neutrality rules, many of the issues regarding network management practices that really ought to concern policymakers are not so easily framed as questions of telecommunications policy or law. Crucial questions concerning the management of last-mile peering points, discriminatory treatment of services based on their content, bandwidth throttling and over-the-top access to premium content, may be better viewed through the lens of competition policy and antitrust law.

If net neutrality proponents were to go to Congress to try to preserve the FCC’s rules, in fact, a good place to start would be with the bill introduced in November by Senate Commerce Committee chairman Jay Rockefeller (D-WV). Rockefeller’s bill wouldn’t do much to help the FCC with its authority — his committee does not have oversight of the agency — but it could go a long toward reframing the net neutrality debate in antitrust terms.

The bill would bar ISPs, particularly those that also offer traditional pay-TV service, from engaging in “unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which are to hinder significantly or to prevent an online video distributor from providing video programming to a consumer.”

The bill goes on to ban certain specific practices, such as the discriminatory use of usage-based billing by ISPs to raise the cost of using Netflix and other OTT services. While it doesn’t specifically mandate no-settlement peering agreements it directs the FCC to conduct a study of the impact that peering disputes are having on consumers’ unfettered access to online video services. It also would bar the use of restrictive covenants in carriage agreements between programmers and ISP-affiliated pay-TV service providers that limit programmers’ ability to license content to OTT services.

In the long run, today’s ruling could turn out to be a blessing in disguise for advocates of an open internet. Trying to wedge the net neutrality rules in under the FCC’s authority may have seemed to proponents like the fastest way to get some regulations on the books to preserve openness on the internet but that’s now turned out to have been a bad bet. Yet if losing that bet opens up new legislative channels that might result in grounding anti-discrimination rules on sounder legal footing, or encourages the Obama Administration to look to existing competition law to police network management practices, as Federal Trade Commissioner Joshua Wright suggested last year after Verizon filed its lawsuit, it ultimately could end up accomplishing more than if the FCC’s rules had stood.

In any case, don’t expect the debate over net neutrality to end here.