The White House’s New Internet Policy, and thoughts on Comcast v. FCC

I published the first of two pieces on CNET today about interesting and even encouraging developments in Washington over Internet policy. (See “New Year, New Policy Push for Universal Broadband”)

In short, I believe that over the past year the Obama administration has come to see Internet products and services as one of the best hopes for economic recovery and continued competitiveness for U.S. businesses.  At least as a matter of policy, this is the first administration to see digital life as a source of competitive advantage.

Tomorrow’s piece concerns the “spectrum crisis” and what the federal government hopes to do to solve it. (The federal government “owns” the radio waves, after all.)

Cut due to the length of the piece was a longer analysis of the arguments a few weeks ago in the U.S. Court of Appeals for the D.C. Circuit in Comcast v. FCC, in which cable provider Comcast challenged a sanction the FCC issued in 2008 for the company’s attempts to limit use by some customers of peer-to-peer applications including BitTorrent.

Depending on how the court rules, the commission’s proposed Net neutrality rules could be dead in the water for lack of authority to regulate in this space.

Here’s the longer version of that section:

The fate of net neutrality may depend on the outcome of important development that took place during CES, but at the other end of the country. This involved litigation over the one notorious instance of non-neutral behavior that largely reawakened the net neutrality debate in 2008.

Comcast admitted that it has used some fairly clumsy techniques to limit the speed or sometimes the availability of peer-to-peer Internet services that allowed users to share very large files, notably using the BitTorrent protocol. In the wake of that revelation, Comcast agreed to change its practices and to make them more transparent, and made peace with BitTorrent developers. (They are also in the process of settling a class-action lawsuit brought by Comcast customers affected by the limits.)

The FCC issued a non-monetary sanction against the company, claiming that the techniques violated net neutrality principles which, while not formally enacted by the FCC, nonetheless applied to Comcast. Comcast challenged the sanctions in the U.S. Court of Appeals for the D.C. Circuit, which hears all challenges to FCC rulings.

On Jan. 8th, hours before Chairman Genachowski took the stage at CES, the D.C. Circuit heard oral arguments in Comcast’s appeal. As was widely reported, the three-judge panel considering the appeal questioned government lawyers severely.

Some statements from the judges suggested they were skeptical at best about the Commission’s authority to sanction Comcast. Chief Judge Sentelle, who sat on the panel, complained about the Commission’s view of its own authority. “You can’t get an unbridled, roving commission to go about doing good,” he was reported to have said. Judge Randolph, another panelist, complained that the lawyers for the FCC could not “identify a specific statute” that authorized the sanction.

The case is certainly important, though too much was read into the tone of the arguments by a number of mainstream media sources. As a former circuit court law clerk, I can attest to FCC Commissioner McDowell’s warning at CES not to draw conclusions about the outcome of the case from comments or even the appearance of hostility by appellate judges at an oral argument. (McDowell, notably, was one of the Commissioners who dissented from the Comcast sanction, on the grounds that the FCC did not have the authority to issue it.)

Wired, for example, ran the extreme headline: “Court to FCC: You Don’t Have Power to Enforce Net Neutrality.”

The accompanying article was a little less hyperbolic, but still misleading: “A federal appeals court gave notice Friday it likely would reject the Federal Communications Commission’s authority to sanction Comcast for throttling peer-to-peer applications.” That was an interpretation of the arguments echoed in many publications.

There is, however, no way to predict from the oral arguments how appellate judges are “likely” to rule. They may have just been in a bad mood, or annoyed with the government’s lawyers for reasons unrelated to the merits of the appeal. Unlike political office holders, federal judges are appointed for life, and do not measure their questions or comments at oral arguments to signal how they are likely to rule in a case.

Indeed, the judges may have objected not so much to the conclusion urged by the FCC as much as the line of reasoning the Commission followed in its briefs. The Commission may have relied too much on its general authority to regulate communications companies, for example, rather than citing more specific regulatory powers that Congress and the courts have already recognized.

Still, the outcome in this case could have serious repercussions for the proposed net neutrality rules. Why? Most of the FCC’s rulemaking authority comes from longstanding regulatory power over telephone companies, classified as “common carriers” who must follow nondiscriminatory practices overseen closely by the Commission.

But cable Internet providers are not common carriers, and indeed the FCC itself argued that point successfully in a 2005 Supreme Court case. The FCC later determined that traditional phone companies, when offering broadband Internet service, were also not subject to common carrier regulations.

So if broadband Internet services are not subject to common carrier rules, where does the FCC get the authority to propose net neutrality rules in the first place?

The Commission argued both in the Comcast case and in its proposed net neutrality rules that its jurisdiction comes from “traditional ancillary authority,” that is, from authority that is implicit in the governing statute that defines the FCC’s power. The skepticism expressed at oral argument seemed to be focused on the argument that ancillary jurisdiction was all the FCC needed to sanction Comcast’s behavior.

The D.C. Circuit could rule that such authority does not extend so far as to allow the FCC to create or enforce net neutrality. It could also rule more narrowly, and reject the sanctions only on the grounds that they were not issued pursuant to a formal rulemaking–that is, the kind of rules now being considered. Or, of course, the court could agree with the Commission that ancillary authority is sufficient both to issue the sanctions and to enact formal rules.

The proposed rules are not directly at issue in the Comcast case. Even if the court rules that ancillary jurisdiction is insufficient to make net neutrality rules (as, among others, the Electronic Frontier Foundation has argued, see “FCC Perils and Promise”), the FCC could technically still go ahead with its rulemaking. But the court would surely hold the new rules exceed the agency’s power, and pretty quickly.

Rather than pass rules that would be dead on arrival, the Commission would likely head back to Congress for explicit authority to define and enforce net neutrality regulations. Since 2007, there have been several bills floating around committees that would grant precisely that power (and, indeed, mandate that the FCC use it) but none of them has yet to be reported out. There are also bills explicitly forbidding the FCC from enacting net neutrality rules, also sitting in committee.