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Net neutrality gets its day in court

Internet companies and state attorneys general take on the FCC and its chairman, Ajit Pai.

Sarah Tew/CNET

The fate of the Obama-era net neutrality rules could come down to whether the FCC followed proper procedure when it wrote and implemented its repeal of the controversial regulations.

That's the takeaway from nearly five hours of oral arguments Friday, during which the agency defended its "Restoring Internet Freedom" order in the US Court of Appeals for the District of Columbia Circuit. The case pits Mozilla and several other internet companies, such as Etsy and Reddit, as well as 22 state attorneys general against the Republican-led FCC.

It's hard to say exactly how the three judges on the panel, Robert Wilkins, Patricia Millett and Stephen Williams, will decide the case. Legal experts following along are quick to point out that anything can happen and that the oral arguments are just one piece of the process, which involves thousands of pages of briefs arguing for and against the FCC's repeal.

The judges spent a lot of time questioning the lawyers who were challenging the FCC's repeal of the rules. But the arguments that'll likely win the day involve whether the agency adequately considered concerns from the public safety community and whether the agency should've delayed implementation of its deregulation because Congress had changed a key part of the law between the time the FCC adopted its repeal and when it took effect.  

Now playing: Watch this: Net neutrality could be saved by a technicality

"It's hard to come away with much certainty about who will be the big winner," said Matt Schettenhelm, a legal analyst with Bloomberg Intelligence. "But the FCC should be encouraged on the question of whether it had authority to deregulate."

Where the FCC may be more vulnerable is in its process, Schettenhelm added.

"If the court rules against the FCC, it's likely to be because it doesn't think it did it in the proper way," he said. "Did they dot all their i's and cross all their t's."

The case

Net neutrality proponents are suing the government, charging that the FCC, led by Chairman Ajit Pai, overstepped its bounds when it voted in December 2017 to roll back the Obama-era net neutrality protections, which banned broadband providers from slowing or blocking access to the internet or charging companies higher fees for faster access.

Though little has happened yet, net neutrality supporters fear that the lack of protections ultimately could mean higher prices and fewer choices for consumers. Internet service providers, however, argue the rules make it harder to invest in their networks and improve their ability to serve you.

The vote to repeal the regulations happened more than a year ago, but they didn't officially come off the books until June. The backlash among supporters was immediate. Democrats in Congress unsuccessfully tried to undo the repeal through the Congressional Review Act. Though the measure passed the Senate, it failed in the House.

Several states, including California, Oregon and Washington, have also been passing legislation to protect these principles. Governors in other states, like New York and Montana, have already signed executive orders banning the states from doing business with companies that don't comply with net neutrality.

Then there are the lawsuits, which got their day in court Friday.

Behind the clash

The former, Democrat-led FCC reclassified broadband networks to make them subject to the same strict regulations that govern telephone networks. Supporters say the reclassification was needed to give the rules an underlying legal basis.

The stricter definition provoked a backlash from Republicans, who said the move was clumsy and blunt.

Pai, appointed by President Donald Trump, called the 2015 rules "heavy-handed" and "a mistake." He argued the rules deterred innovation because internet service providers had little incentive to improve the broadband network infrastructure. (You can read Pai's op-ed on CNET here.) Pai took the FCC back to a "light" regulatory approach, pleasing both Republicans and internet service providers.

But net neutrality supporters say there are several things wrong with Pai's analysis and the repeal order, which also abdicated the FCC's authority to oversee broadband networks altogether. The FCC's order also tries to prevent states from passing their own net neutrality regulations. Net neutrality proponents say the rollback and its preemption of state authority is unlawful. And they're asking the federal appeals court to throw out the FCC's repeal.

What's at stake, net neutrality proponents say, is the future of the internet. They fear that without rules of the road to protect the internet as we know it, it may not exist much longer.

"Today we fought for an open and free internet that puts consumers first," Dennelle Dixon, COO of Mozilla, said on Friday. "We believe the FCC needs to follow the rules like everyone else. We argued before the court that the FCC simply cannot renounce its responsibility to protect consumers on a whim. It's not permitted by law, and it's not permitted by sound reasoning."

FCC authority

The big argument in the case is whether the FCC had the right to change its mind and repeal the rules. This is a fight that could be difficult for net neutrality supporters to win, because the courts have generally given discretion to expert agencies, like the FCC, when it comes to technical aspects of regulation.  

At issue in this case is whether the FCC should have the latitude to decide whether broadband is a lightly regulated "information service" or whether it's a highly regulated "telecommunications service." The distinction is at the heart of the conflict in the net neutrality debate.

But on this particular issue, the US Supreme Court decided in 2005 in the Brand X case that it was too complicated for the court to decide how to classify broadband. Instead, it deferred to the expertise of the FCC. It's this deference to decide how broadband should be classified that helped the agency win its battle in the same DC Circuit appeals court, which upheld the 2015 rules three years ago.

Still, the attorney representing Mozilla, Pantelis Michalopoulos, tried to argue during oral arguments that the FCC's reasoning in how it classified broadband was flawed in 2005 and is flawed even more now, because many of the services that the FCC used to justify its classification of broadband as an information service, no longer exist.

He said it was as though the FCC was looking at a "surrealist painting that shows a pipe and captions it, 'This is not a pipe.'"  

He resurrected the late US Supreme Court Justice Antonin Scalia's "the internet is like a pizzeria delivery service" analogy from his dissent in the Brand X case. Scalia argued then that the FCC not classifying broadband as a telecom service was like a pizzeria saying it bakes a pizza and can drive it to your home but that it doesn't offer pizza delivery.

Michalopoulos updated the analogy, saying that the pizza shop no longer bakes pizzas, and instead offers only an Uber Eats delivery service. But because it doesn't offer "pizza delivery," the cars in which it transports that pizza to your home aren't subject to traffic laws.

Judge Williams, who was appointed to the DC Circuit in 1986 by President Ronald Reagan, pushed back with his own pizza analogy.

Though the arguments made for interesting thought exercises and brought some laughter to the proceeding, Schettenhelm said that from a legal perspective, they didn't seem to move the needle much.

"I'm not sure the challengers to the FCC made much progress in their argument about how to interpret the statute," he said. "It seems it could still go both ways, and the court has been clear that the FCC gets to decide."

Randolph May, president of conservative think tank The Free State Foundation, said the discussion parsing the technology and function of internet access "devolved into the metaphysical." 

"That being so, I see no reason why the court will not again defer to the FCC's classification decision ... because the judges, not having been confirmed as metaphysicians, are likely to follow the Brand X legal precedent," he said. "And if the DC Circuit doesn't adhere to the Brand X precedent granting the agency deference in interpreting the definitions, I think the Supreme Court will."  

Procedural issues

Instead, he said, the court may agree with the FCC that the agency was reasonable in how it classifies broadband, but it may have a problem with the way the agency got to this conclusion.

The first issue has to do with whether the FCC considered the effects of the repeal on public safety organizations, which the FCC by law must consider. This is an argument that was brought up by firefighters from Santa Clara, California. They joined the lawsuit against the FCC after Verizon throttled their service last summer, at the height of the wildfires in California,  jeopardizing the lives of first responders and the public.

The Santa Clara firefighters have conceded that Verizon likely didn't violate net neutrality principles, because the carrier mistakenly implemented a commercial service agreement between the company and the fire department. But the firefighters argue that since the FCC's repeal, there is no "cop on the beat" to hear their concerns. This is because as part of its order to repeal, the FCC abdicated its authority to police broadband providers to the Federal Trade Commission.

Danielle Goldstein, Deputy County Counsel for the County of Santa Clara in California, who represented the firefighters in the oral arguments, argued that the FCC should have made provisions for public safety in its order.

Millett dug in to this issue of paid priority when questioning FCC lawyer Tom Johnson. She pushed Johnson to explain how paid priority works.

"Is it a different line or do they just go first? I have no idea how it works,"  she said.

Johnson explained that paid prioritization would not hurt "best effort" internet traffic. And he explained it actually could be beneficial to niche providers like public safety, who could subscribe to a better quality service. But Millett questioned what would happen to a municipality that couldn't afford such a service.

"To make someone go fast, don't you have to slow down or delay someone else?" she asked.

At one point she said she didn't understand the FCC's explanation of how public safety would be unaffected.

Schettenhelm said this exchange might be significant if Millett decides the FCC didn't give enough consideration to the public safety concerns.

Change in the law

Another area where the FCC may be vulnerable has to do with its transparency rule. This is the one aspect of the 2015 net neutrality rules that the FCC kept as part of its repeal. This rule requires internet service providers to disclose how they manage traffic and if they're going to throttle or block access or offer paid priority. This is a key piece of the FCC's light touch approach, because these disclosures are what the FTC can use to hold internet service providers accountable to their customers.

But the section of the Communications Act that the FCC uses to justify this authority was changed in May 2018 when Congress passed the Ray Baum Act. Though petitioners challenging the FCC's repeal argue that the change stripped the FCC of its authority to have a transparency rule, the FCC maintains that its authority was left in tact.

But one thing is clear, the FCC never officially examined or opened public comment on what these changes to the law would mean to its repeal. And the timing of the changes could be problematic, since the law was actually changed between the time the FCC voted to repeal the net neutrality rules in 2017 and when they took effect in June 2018.

"The fact is that the statute doesn't exist anymore," Schettenhelm said. "The FCC could have shown that they were considering what the changes meant to the order before it took effect, and they didn't."

First published Jan. 31, 4:29 p.m. PT.
Update, Feb. 1 at 4:30 p.m.: Adds news and analysis from the oral arguments.

Correction Feb. 5 at 2 p.m.: A previous version of this story misidentified the attorney representing the Santa Clara firefighters. Danielle Goldstein, Deputy County Counsel for the County of Santa Clara, argued the case before the court for the public safety community. 

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