Verizon fires legal shot against Net neutrality rules

Verizon Communications has fired the first shot in the legal war to dismantle the Federal Communications Commission's new Net neutrality rules.

The phone company today filed an appeal in the U.S. Court of Appeals for the District of Columbia Circuit challenging the FCC's Report and Order on rules dealing with the issue of Net neutrality.

Michael E. Glover, Verizon's senior vice president and deputy counsel, said in a press release that the company has been committed to the process of preserving the open Internet but that after careful review of the FCC's order, it believes that the FCC has overstepped its bounds.

"We are deeply concerned by the FCC's assertion of broad authority for sweeping new regulation of broadband networks and the Internet itself," he said in a statement. "We believe this assertion of authority goes well beyond any authority provided by Congress, and creates uncertainty for the communications industry, innovators, investors and consumers."

After years of debate on the topic, the FCC adopted rules codifying specific Net neutrality principles in late December. The new regulation creates two classes of service subject to different rules: one that applies to fixed broadband networks and one for wireless networks.

The first rule requires both wireless and wireline providers to be transparent in how they manage and operate their networks. The second Net neutrality rule prohibits the blocking of traffic on the Internet. The rule applies to both fixed wireline broadband network operators as well as to wireless providers. But the stipulations for each type of network are slightly different. And finally, the last rule applies only to fixed broadband providers. It prohibits fixed wireline broadband providers from unreasonably discriminating against traffic on their network.

Net neutrality opponents have been voicing their opposition to the rules since they were adopted a few weeks ago. And some Republican Congressional leaders have already pledged to dismantle the new Open Internet rules. Lawyers in D.C. have also been preparing complaints for weeks.

Larry Downes, a consultant, author, and contributor to CNET, said that he finds it odd that Verizon would file its complaint before the official regulations have been published in the Federal Register. But he said he isn't surprised that Verizon has fired the first legal shot.

"There was little doubt from the Consumer Electronics Show (earlier this month) that this was going to happen," he said in an e-mail. "By being first, Verizon gets the best possible court. The D.C. Circuit, in addition to being the court that decided the Comcast case, is historically skeptical of FCC efforts to stretch its authority."

In April, the D.C. Circuit court tossed out the FCC's August 2008 cease-and-desist order against Comcast, which had taken measures to slow BitTorrent transfers before voluntarily ending them earlier that year.

Since then, the FCC's authority has been called into question. Some people believe that the agency has no authority to enact these rules. But the FCC asserted in its Open Internet ruling that it does have the authority to impose rules and regulations governing Net neutrality. This lawsuit is clearly the next challenge to that authority.

Verizon's legal strategy
Downes said that Verizon is taking an interesting legal strategy by filing its complaint in the D.C. Circuit Federal Appeals court, which has special jurisdiction to hear certain FCC cases. Filing in that court is likely a safer bet for Verizon rather than a regular federal district court, which may not have much experience hearing telecommunications cases. What's more, the D.C. Circuit Appeals court has historically been more favorable toward complaints against the FCC.

But to get it into the D.C. Circuit Federal Appeals court, Verizon has had to do some legal maneuvering. Instead of taking direct aim at the FCC's new Net neutrality rules, Verizon asserts in its "appeal" that the FCC order changes the terms of existing licenses that Verizon holds to wireless spectrum. So in that regard the company is "appealing" the change to the order rather than initiating a new case that challenges the rules directly, Downes points out. If Verizon initiated a new case, it would have to be filed in a regular federal district court. But because it's an appeal to existing FCC licenses, the D.C. Circuit Court of Appeals has jurisdiction.

The Court of Appeals may take some time to decide on the motion, which will require detailed briefing and possibly oral arguments, Downes said. In the meantime, Verizon could ask the court to stay implementation of the new rules, which will go into effect 60 days after the FCC posts the new rules in the Federal Register. That is expected to happen any day. Verizon could also ask the court to stay any other proceedings brought by others in different courts against the FCC.

Even if the D.C. appeals court eventually decides the case isn't in its jurisdiction, it could grant these stays while it is deciding, which could delay action.

The FCC declined to comment on the court filing, but Downes said he suspects that the FCC will move to vacate the appeal on the grounds that the FCC order was a new rulemaking and not a modification to Verizon's existing licenses. And they will likely argue that challenges to the FCC order should start in federal district court rather than in an appeals court.

Verizon also filed a separate motion today asking the D.C. appeals court to assign the same panel of judges who heard the Comcast vs. FCC case to the Verizon appeals case.

The Media Access project, a nonprofit public interest law firm, says that Verizon is blatantly shopping for a favorable court to hear its "appeal" on the Net neutrality issue.

"Under this bizarre legal theory, virtually every FCC decision would wind up in one court," said Andrew Jay Schwartzman, senior vice president and policy director of the Media Access Project. "Verizon has made a blatant attempt to locate its challenge in a favorable appeals court forum. The company's theory assumes that all agency actions changing rules are 'modifications' to hundreds of thousands of licenses. This would insure the case remains in the District of Columbia Circuit, and keeps others from seeking review in different courts."

So far, Verizon's efforts appear to be about starting a long and time-consuming legal process, which will keep Net neutrality uncertain for some time. So far actual details of the company's arguments against Net neutrality are thin.

"There's not much substance yet to their appeal," Downes said in an e-mail. "Nor does there need to be. They claim that the Net neutrality order exceeded the FCC's authority, was arbitrary and capricious, violates Verizon's constitutional rights, and is otherwise illegal. For now, that's all they have to say. The real legal arguments will come when they brief the case."

Updated 3:30 p.m. PT: This story was updated with additional analysis.