The FCC Lacks Jurisdiction over “Neutrality” Rules

by on April 6, 2010 · 4 comments

(Adam beat me to the punch (he’s on East Coast time, after all), but I wanted to make a few preliminary remarks about the FCC loss today anyway.)

The D.C. Circuit Court of Appeals issued its opinion today in Comcast’s appeal of sanctions issued in 2008, rejecting the FCC’s authority to issue the sanctions in the first place.  (Brent Kendall of The Wall Street Journal has already reported the story, see “Court Strikes at Net Neutrality.”)

The ruling punished the cable company’s efforts to throttle peer-to-peer traffic over its network of some customers using the BitTorrent application, a network management principle the FCC said violated its “policy” on open and transparent Internet or “net neutrality.”   Since Comcast agreed to more subtle forms of traffic management and to make such decisions more transparent, the FCC left them with a slap on the wrist.  Comcast appealed nonetheless.  (Appeals of FCC adjudications go directly to the D.C. Circuit.)

I’ve read through the court’s 36-page opinion, which will serve as an important marker in the “net neutrality” debate.  It largely follows the harsh line of questioning taken during the oral arguments for the case back in January, where the panel challenged the FCC to identify a specific statutory provision that gave them authority to impose the neutrality principles—in this case, in an adjudication that Comcast had failed to follow the rules.

In 36 pages, there is not a single reference to any arguments made by Comcast.  Instead, the court “begins and ends” by dismantling the brief of the FCC, rejecting every effort to tie the Commission’s “ancillary jurisdiction” to something—anything!–in the Communications Act that could justify the sanctions.

When the FCC issued its Notice of Proposed Rulemaking on net neutrality in October of last year (rules that would in essence codify the basis for sanctions in the Comcast case), it cited as its authority to issue the rules none other than “ancillary jurisdiction”–making the same argument there that the D.C. Circuit has now rejected.  (See Paragraph 83 of the NPRM.)

FCC Commissioner Robert McDowell dissented from that aspect of the NPRM, noting “My view is that regulation of network management is simply not reasonably ancillary to responsibilities set forth under other sections of the Act.”

The D.C. Circuit agrees.  In conclusion, the court notes:

It is true that “Congress gave the [Commission] broad and adaptable jurisdiction so that it can keep pace with rapidly evolving communications technologies.”  It is also true that “[t]he Internet is such a technology,” indeed, “arguably the most important innovation in communications in a generation.” Yet notwithstanding the “difficult regulatory problem of rapid technological change” posed by the communications industry, “the allowance of wide latitude in the exercise of delegated powers is not the equivalent of untrammeled freedom to regulate activities over which the statute fails to confer . . . Commission authority.” [citations omitted]

The spin doctoring of this opinion will now commence.  But it is very hard to see how the NPRM can go forward—or survive even the briefest of legal challenges should the FCC simply do so—given this ruling.  The FCC could try to appeal to the U.S. Supreme Court or go back to Congress for explicit authority to issue net neutrality rules.  As I’ve written earlier, the FCC could also try to reclassify Internet services under the common carrier rules of Title II, where it has extensive regulatory powers.

Each of these paths is fraught with dangers and unintended consequences.

Perhaps it’s time for the Commission instead to take a step back and ask a question that was missing from the many posed in the NPRM:  Why regulate at all?

  • flawedskull

    Hah good one Larry.
    “Why regulate at all” is never a question asked in Washington.

  • Brett Glass

    Regulation has a role to play when markets fail. There is no evidence of market failure with regard to network management and therefore no reason to regulate. It's disturbing that the FCC seems so intent upon regulating that the three Democratic Commissioners are talking about reversing years of precedent and trying to apply a classification that simply doesn't fit to broadband, simply so that they can solve a “problem” that does not exist.

    On the other hand, the FCC itself has actually created market failures in two areas: in spectrum, by failing to allocate spectrum reasonably; and in “special access,” by subsidizing monopoly carriers but not competitive ones and failing to oversee the monopolies, thus making it impossible for competitors to enter and restore a functional market. It should be focusing on these and similar problems, not on “solving” nonexistent ones.

  • flawedskull

    Hah good one Larry.
    “Why regulate at all” is never a question asked in Washington.

  • Brett Glass

    Regulation has a role to play when markets fail. There is no evidence of market failure with regard to network management and therefore no reason to regulate. It's disturbing that the FCC seems so intent upon regulating that the three Democratic Commissioners are talking about reversing years of precedent and trying to apply a classification that simply doesn't fit to broadband, simply so that they can solve a “problem” that does not exist.

    On the other hand, the FCC itself has actually created market failures in two areas: in spectrum, by failing to allocate spectrum reasonably; and in “special access,” by subsidizing monopoly carriers but not competitive ones and failing to oversee the monopolies, thus making it impossible for competitors to enter and restore a functional market. It should be focusing on these and similar problems, not on “solving” nonexistent ones.

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