The Decision in Verizon vs. FCC: A Legal Analysis

Today the federal D.C. Circuit Court of Appeals struck down the core of the Federal Communications Commission’s Open Internet Order, concluding that — in light of the agency’s previous missteps — the FCC could not apply anti-blocking and nondiscrimination provisions to broadband providers.

The only provision of the Open Internet Order to survive is the transparency requirement, meaning that although your broadband provider can now block and discriminate against Internet content and services, it has to tell you about what it’s doing.

Although it struck down the heart of the Open Internet rules, the court nonetheless acknowledged that the FCC has some limited authority to promote broadband deployment under Section 706 of the Telecommunications Act, so long as those regulations do not resemble common carrier-like obligations.

In reaching its conclusion, the court retraced the FCC’s past mistakes that built the shaky legal framework struck down today.

The court summarized the Computer Inquiries proceedings it undertook starting in the 1960s, highlighting how the FCC had once treated broadband Internet access provided by telephone companies as a telecommunications service. The court then noted that the Bush-era FCC reversed this line of decisions when it decided to treat broadband access provided by cable companies differently, classifying them as “information services” not subject to Title II of the Communications Act.

These missteps — which eventually led to the classification of all broadband Internet access services, including DSL and wireless, as information services — mean that such services are exempt from Title II’s common-carrier requirements.

And so the court concluded that the FCC has no authority to apply common-carrier obligations — like nondiscrimination and no-blocking rules — to broadband providers.

In recounting the history of the regulatory regime that has governed broadband services, the court observed that when the 1996 Telecommunications Act was passed, the FCC had already been subjecting broadband providers to common-carrier regulations, and that "one might have thought, as the Commission originally concluded, that Congress clearly contemplated that the Commission would continue regulating Internet providers in the manner it had previously."

Notably, the judges didn’t question the merits of the Open Internet Order — only the soundness of the FCC’s judgments about the way to accomplish those goals. The only issue here is whether the FCC had the authority to issue its rules under the legal framework it had adopted.

As a general matter, courts defer to administrative agencies like the FCC so long as the agency’s decisions are reasonable, and not arbitrary or capricious. Here, the court deferred to many of the substantive judgments made by the FCC, including the FCC's judgments that Internet openness encourages innovation and broadband deployment, that broadband providers have incentives to discriminate against edge providers, and that the open Internet rules would not harm investment in infrastructure.

The Commission’s power to protect the open Internet may be in jeopardy. Yet as this decision signals, the Commission can correct its missteps and treat broadband as a telecommunications service subject to Title II common carrier obligations.