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Net Neutrality Oral Argument Rundown: A Wake-up Call for Legislation

This morning saw the Federal Communications Commission’s (FCC) third attempt to defend net neutrality rules in court, with the U.S. Court of Appeals for the D.C. Circuit hearing oral argument in US Telecom v. FCC. A three judge panel, composed of Judges Tatel, Williams, and Srinivasan, heard from a series of lawyers, with the main arguments against reclassification made by Peter Keisler and defended by FCC General Counsel Jon Sallet. Sallet did an impressive job with the hand he was dealt, skillfully defending the FCC’s gerrymandering. That said, he did run into some tough questions from the judges—questions the FCC simply doesn’t have good answers for.

This case is a big one, with a lot more at stake than particular rules to protect the open Internet. When the FCC was pushed into reversing course for its open Internet order, classifying broadband providers as common carriers under Title II of the Communications Act instead of staying the course with rules grounded in section 706, it fundamentally changed the underlying framework of how this country regulates the communications industry. These changes are so sweeping, involving multiple changes in regulatory definitions and statutory interpretations, that the FCC really had a momentous task in court today. To see the rules stick, it will have to walk a tightrope through the opinion.

The big takeaway is that while the judges seemed ready to give the Commission discretion on the main aspects of wired reclassification, there are a couple of cards that, if knocked on, could bring the house down. Predictions are often proved wrong, but it seemed clear the court is ready to vacate the rules on mobile broadband. All three Judges had multiple sharp questions on the FCC’s rather contorted legal steps it took to rope mobile broadband in under Title II. In an earlier case, Judge Tatel wrote that “mobile-data providers are statutorily immune, perhaps twice over, from treatment as common carriers.” From the judge’s questions, it seems the FCC’s arguments are insufficient to get it past this statutory bar. The FCC’s rules on interconnection also faced difficult questions, and Judge Williams indicated this could be a thread that, if pulled on hard enough, could dismantle the whole order.

Op-eds, blog posts, and news stories have been flying all week, some with more specious analysis than others. A few Title II sympathizers picked up the false meme that because Title II is “stronger,” it is somehow a foregone conclusion that the preliminary step—the shift to Title II itself—is legally acceptable. Here an obvious problem is notice. The judges seemed especially skeptical that the FCC provided adequate notice in the mobile context, but also indicated improper process could threaten the entire rules. Williams especially seemed to believe the FCC would have been better off had it stuck to its original proposal under section 706.

Indeed, it has been puzzling to see the assertion in some publications that the Verizon decision “gave the FCC a roadmap” to net neutrality rules using Title II. As Judge Tatel noted at argument, even the FCC repeatedly recognized that the Verizon opinion, written by Tatel himself, gave a “blueprint” on how to devise net neutrality rules under section 706, not Title II. These are untested waters.

The FCC’s late-game change provided one of the more amusing moments of the oral argument: Judge Tatel needled Sallet on the FCC’s reversal from section 706 to Title II jurisdiction. Sallet did his best to describe the FCC as changing its mind based on a developing record (avoiding the obvious push from the president). His defense is all the more impressive when some past discussions could give one the suspicion that Sallet personally, at least at one point, believed a more nuanced, case-by-case approach based on antitrust principles was a better answer than bright-line rules grounded in common carriage.

We agree with this earlier incarnation of Sallet—section 706 would have been the right way to go. I just hope that these oral arguments haven’t shut the window of opportunity for a legislative solution. It would be unfortunate to see the potential for a stable, bipartisan grant of authority for rules protecting the open Internet to pass us by. Instead, it looks like we are heading for years more of debate. In the meantime, vague, fragmented regulations that treat similar services differently will no doubt put a drag on investment and stifle innovative new services. Hopefully this argument is a wake-up call for a legislative solution.

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