Data Roaming Decision Affirms FCC’s Title III Authority over Neutrality Rules, Agency Says

Cellco confirms that the FCC has authority under Title III of the Communications Act to establish open Internet rules applicable to wireless mobile broadband providers, the commission said. The court held the rule was within the agency’s authority under Section 303(b) to “prescribe the nature of the service to be rendered” by holders of spectrum licenses. “So too here,” said the FCC of its net neutrality rules. “By setting basic ‘rules of the road’ establishing that wireless broadband Internet access providers may not block lawful data traffic in using their FCC-licensed spectrum,” the net neutrality rules “likewise ‘prescribe the nature of the service to be rendered’ by the holders of those licenses."

The net neutrality rules are not tantamount to common carriage, because common carriage only exists when a carrier is “forced to offer service indiscriminately and on general terms,” the FCC said, quoting the D.C. Circuit. The net neutrality order “leaves a broadband provider free to offer (or decline) to serve any end user,” the FCC said. The end user, not any edge provider, is the only “customer” in the equation, the FCC said. “Because there is no obligation to ‘offer service indiscriminately and on general terms,’ there is no common carriage.” The agency pointed out that Cellco gives it Chevron deference to interpret and apply the term “common carrier."

"I believe the FCC can make a credible argument that its open access requirements do not constitute the functional equivalent of imposing common carrier regulation on ISPs,” said Penn State University Professor Rob Frieden. “However, it will be interesting to see if the lack of a direct Title III hook matters insofar as applying the rules to wireline broadband providers that do not use spectrum."

"It’s interesting we're dealing with wireless when wireless is the one thing that isn’t being dealt with by the rules,” said Phoenix Center President Lawrence Spiwak. “The one thing everybody agrees we shouldn’t apply these rules to seems to have -- at least, under current precedent -- the strongest legal case.” That said, looking at Cellco or the decision out of the 10th U.S. Circuit Court of Appeals granting the agency discretion to determine its own jurisdiction, “courts seem to be finding a way to give the FCC authority to do what they're going to do,” he said.

Free State Foundation President Randolph May doesn’t think the data roaming decision will be controlling. The net neutrality nondiscrimination prohibition, with its requirement that edge providers’ traffic be carried at a uniform zero price, “is closer to pure common carriage than the data roaming regulatory regime, which retained elements of voluntary negotiation,” May said. Title III authority -- key to upholding the agency’s data roaming decision -- is “pretty much irrelevant for the wireline ISPs.” As broad as the commission’s Title III authority may be, “it’s a stretch to apply the specific Title III sections relied on by the FCC to regulations as far-reaching as net neutrality."

Verizon had argued the rules are “per se common carriage” because they don’t give an ISP any discretion over the traffic they carry from edge providers; the FCC responded that in the case of the Internet, edge providers do not request service from the end user’s access provider. “That access provider is not required to deliver content based on the demand of edge providers,” the FCC said. “Instead, it is only the request of an end user -- the access provider’s customer -- that triggers service. In this context, the FCC had discretion to conclude that a no-blocking rule does not create a common carriage relationship between edge providers and an end user’s access provider. Indeed, any other result would have sharply expanded traditional notions of common carriage."

"The reviewing court should appreciate that retail subscribers of ISP service have a reasonable expectation that their ISP will secure all necessary arrangements -- peering, paid peering, transit, etc. -- to provide subscribers with complete access to the Internet cloud and the content available from it,” Frieden said. “Retail ISPs voluntarily enter into peering and other arrangements with other upstream ISPs so that the retail ISP can provide a complete service. Retail ISPs typically do not enter into direct arrangements with specific content sources. The content source does have privity of contract with one or more ISPs who also have interconnection arrangements with downstream ISPs."

The data roaming decision seems to suggest improved prospects for the FCC defense of net neutrality rules, on the surface, said Medley Global analyst Jeff Silva. In reality, the decision may provide less cover for upholding open Internet guidelines than the FCC would like, Silva said. “Data roaming and net neutrality appeals involve two distinct legal analyses,” he said. “The fact that Title III and FCC deference helped carry the day in sustaining the data roaming rule does not by any means portend an FCC victory in the net neutrality appeal, especially considering that Title III is limited to radio services and the agency’s open internet rules governs both wireless and wired broadband carriers."

From a public policy perspective, the FCC’s approach is “somewhat disconcerting,” said Michael Santorelli, director of the Advanced Communications Law and Policy Institute at New York Law School. “It reflects a New Deal-era esprit de corps among some in this arena who see markets -- and firms competing in markets -- as problems waiting to be solved by omniscient regulators. The key animating force here is a very outdated statute.” Santorelli hopes the decision in this case, along with those in dockets addressing the appropriate scope of Chevron deference and the legality of the FCC’s USF order, “build momentum toward more fundamental legal and policy reforms in this space.”