FCC tells court it has no “legal authority” to impose net neutrality rules

The Federal Communications Commission opened its defense of its net neutrality repeal yesterday, telling a court that it has no authority to keep the net neutrality rules in place.

Chairman Ajit Pai's FCC argued that broadband is not a "telecommunications service" as defined in federal law, and therefore it must be classified as an information service instead. As an information service, broadband cannot be subject to common carrier regulations such as net neutrality rules, Pai's FCC said. The FCC is only allowed to impose common carrier regulations on telecommunications services.

"Given these classification decisions, the Commission determined that the Communications Act does not endow it with legal authority to retain the former conduct rules," the FCC said in a summary of its defense filed yesterday in the US Court of Appeals for the District of Columbia Circuit.

The FCC is defending the net neutrality repeal against a lawsuit filed by more than 20 state attorneys general, consumer advocacy groups, and tech companies. The FCC's opponents in the case will file reply briefs next month, and oral arguments are scheduled for February.

The FCC's argument that its net neutrality rules are illegal is notable for a couple reasons. Judges at the DC Circuit appeals court ruled in 2016 that the rules were legal, allowing them to remain in place despite the broadband industry's attempt to overturn them.

The FCC repealed the net neutrality rules anyway after the majority changed hands from Democrats to Republicans. In defending that repeal, Pai's FCC isn't merely claiming that the rules were a bad idea—the FCC is claiming it has no authority to impose such rules at all.

The FCC's claim that it has no authority to impose net neutrality rules could be important in determining whether state governments such as California's may impose net neutrality rules similar to those repealed by the FCC. Pai claims the FCC can both repeal its own rules and preempt states from enacting similar ones, because broadband is an interstate service and state rules conflict with the "federal policy of nonregulation."

But defenders of state rules say that the FCC cannot preempt state laws regulating conduct over which the FCC claims it has no regulatory authority.

The FCC's argument that broadband isn't "telecommunications" hinges on Pai's interpretation of the Communications Act.

The Communications Act specifically defines telecommunications as "the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received." A telecommunications service is "the offering of telecommunications for a fee directly to the public."

An information service, by contrast, is defined in the Act as "the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications." The information service definition "includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service."

Here's how the FCC's new brief argues that broadband is an information service:

The Commission reasonably classified broadband Internet access as an information service because, among other things, it offers users the "capability" for "'acquiring' and 'retrieving' information" from websites and applications "and 'utilizing' information by interacting with stored data." The Supreme Court held in Brand X that it was reasonable for the Commission to conclude that Internet access is an information service, given that "subscribers can reach third-party Web sites via 'the World Wide Web, and browse their contents, [only] because their [broadband] provider offers the capability for … acquiring, [storing] … retrieving [and] utilizing … information.'". The agency made the same reasonable finding here.

Broadband is an information service in part because it "inextricably intertwines high-speed transmission with the information processing capabilities provided by Domain Name Service (DNS) and caching," the FCC said.

"[B]roadband providers do not make a stand-alone offering of telecommunications," the FCC also said. "[B]roadband providers generally market and provide information processing capabilities and transmission together as a single service, and consumers perceive that service to include more than mere transmission."

Broadband customers "expect to receive (and pay for) a finished, functionally integrated service that provides access to the Internet," rather than a "separate" and "distinct transmission service," the FCC said.

In any event, regardless of consumer perception, the Commission found that broadband providers in fact offer a single, inextricably intertwined information service. Because information processing must be combined with transmission for users to reach the Internet, the Commission reasonably determined that the information processing capabilities are an integral part of the service and make broadband an information service under the Act. Finally, the Commission found that public policy considerations, including the costs of Title II regulation compared to its uncertain benefits, supported the Commission's classification decision.

If broadband is "in fact" an information service as the FCC claims, then the commission cannot impose net neutrality rules. The FCC in 2010 tried to impose net neutrality rules without classifying broadband as a telecommunications service, but Verizon sued and got the rules thrown out. The net neutrality rules were upheld in court only after the FCC decided in 2015 to classify broadband as telecommunications.

The Verizon court decision showed that the Communication Act "forbids common-carriage regulation of information services," Pai's FCC said in its brief. "Verizon further confirms that the Title II Order's conduct rules effectively require broadband providers to operate as common carriers. Maintaining the conduct rules would therefore contravene the Act."

Pai's FCC says the 2016 court decision upholding the net neutrality rules doesn't prevent the FCC from changing its classification of broadband. That ruling upheld the FCC's 2015 determination that broadband is telecommunications, but it recognized that the FCC has some leeway to define broadband as it wishes.

"A divided panel of this Court upheld that decision as a permissible exercise of the agency's discretion, but specifically recognized that, under Brand X, 'classification of broadband as an information service was permissible,'" the FCC said.

The state attorneys general and other entities suing the FCC have until November 16 to file reply briefs. Final briefs are due November 27, and oral arguments are scheduled for February 1.

In an earlier brief, Mozilla and other tech companies and consumer advocacy groups argued that broadband is by definition telecommunications.

Broadband providers "simply transmit information between users," they wrote. "None of Comcast, AT&T or Verizon adds scenes to the movies we watch online or embellishes our friends' notes on a social media 'wall.' [Broadband] is a transmission conduit; its nature is unchanged by the fact that it intentionally allows reaching others' information services."