DC Circuit Decision on Net Neutrality Opens Way For States

In a highly anticipated decision, the United States Court of Appeals for the District Of Columbia Circuit (D.C. Circuit) upheld most of the Federal Communications Commission’s (FCC) repeal of the its earlier net neutrality rule (i.e. In re Restoring Internet Freedom, 33 FCC Rcd. 311 (2018)). However, the D.C. Circuit declined to accept the FCC’s attempt to preempt all contrary state laws and struck down this part of the FCC’s rulemaking. Consequently, states and local jurisdictions may now be free to enact regulations of internet services along the lines of the FCC’s now repealed Open Internet Order. The D.C. Circuit also sent the case back to the FCC for further consideration on three points.

The D.C. Circuit provided this background on the 2015 and 2018 orders, the former of which classified internet service providers (ISP) as common carriers under Title II of the Communications Act, and the latter of which reclassified ISPs as information services:

The 2018 Order and today’s litigation represent yet another iteration of a long-running debate regarding the regulation of the Internet. We rehearsed much of this complex history in United States Telecom Association v. FCC, 825 F.3d 674, 689–697 (D.C. Cir. 2016) (“USTA”), and see no need to recapitulate here what was so well and thoroughly said there. In the interest of reader-friendliness, though, we briefly review certain highlights necessary to understand this opinion.

….

The 2018 Order accomplishes a number of objectives. First, and most importantly, it classifies broadband Internet as an “information service,” see 2018 Order ¶¶26–64, and mobile broadband as a “private mobile service,” see id. ¶¶ 65– 85. Second, relying on Section 257 of the Act (located in Title II but written so as to apply to Titles I through VI), the Commission adopts transparency rules intended to ensure that consumers have adequate data about Internet Service Providers’ network practices. See id. ¶¶ 209–38. Third, the Commission undertakes a cost-benefit analysis, concluding that the benefits of a market-based, “light-touch” regime for Internet governance outweigh those of common carrier regulation under Title II, see id. ¶¶ 304–323, resting heavily on the combination of the transparency requirements imposed by the Commission under Section 257 with enforcement of existing antitrust and consumer protection laws, see id. ¶¶ 140– 154. The Commission likewise finds that the burdens of the Title II Order’s conduct rules exceed their benefits. See id. ¶¶ 246–266.

The D.C. Circuit stated that “[w]e uphold the 2018 Order, with two exceptions:

First, the Court concludes that the Commission has not shown legal authority to issue its Preemption Directive, which would have barred states from imposing any rule or requirement that the Commission “repealed or decided to refrain from imposing” in the Order or that is “more stringent” than the Order. 2018 Order ¶ 195. The Court accordingly vacates that portion of the Order.

Second, we remand the Order to the agency on three discrete issues:

(1) The Order failed to examine the implications of its decisions for public safety;

(2) the Order does not sufficiently explain what reclassification will mean for regulation of pole attachments; and

(3) the agency did not adequately address Petitioners’ concerns about the effects of broadband reclassification on the Lifeline Program.

Regarding its overturning of the FCC’s attempt to bar state action on net neutrality, in relevant part, the D.C. Circuit vacated “the portion of the 2018 Order that expressly preempts “any state or local requirements that are inconsistent with [its] deregulatory approach.” The D.C. Circuit claimed that FCC “ignored binding precedent by failing to ground its sweeping Preemption Directive—which goes far beyond conflict preemption—in a lawful source of statutory authority.” The D.C. Circuit noted that “[t]hat failure is fatal.”

The D.C. Circuit further explains that

The relevant portion of the Order provides that “regulation of broadband Internet access service should be governed principally by a uniform set of federal regulations,” and not “by a patchwork that includes separate state and local requirements.” In service of that goal, the 2018 Order expressly “preempt[s] any state or local measures that would effectively impose rules or requirements that we have repealed or decided to refrain from imposing in this order or that would impose more stringent requirements for any aspect of broadband service that we address in this order.” In other words, the Preemption Directive invalidates all state and local laws that the Commission deems to “interfere with federal regulatory objectives” or that involve “any aspect of broadband service * * * address[ed]” in the Order. The Preemption Directive conveys more than a mere intent for the agency to preempt state laws in the future if they conflict with the 2018 Order.

California, Vermont, and Colorado have enacted net neutrality laws that have not been enforced pending the outcome of this case. Currently six states require entities wishing to contract with the state to meet net neutrality rules: Hawaii, Montana, New Jersey, New York, Rhode Island, and Vermont. A number of states have proposed or are implementing the regulation of net neutrality and ISPs by its public utility commissions.

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