On May 6, the U.S. Court of Appeals for the Eighth Circuit vacated the FCC’s digital discrimination rules. The discrimination rules were required by the Infrastructure Investment and Jobs Act (IIJA). The FCC took an interesting approach to the issue and defined discrimination in two ways. The FCC prohibited intentional discrimination – meaning that ISPs can’t have policies and practices that are clearly intended to discriminate against any portion of the public. The FCC also prohibited disparate discrimination, which measures discrimination by looking at the results of ISP practices in the market rather than trying to judge the intentions of ISPs.

As was expected for almost all FCC orders these days, ISPs quickly banded together and sued to stop the FCC order. The U.S. Chamber of Commerce brought the first suit in the Fifth Circuit Court of Appeals in January on behalf of big ISPs like AT&T, Charter, Comcast, T-Mobile, and Verizon. Twenty industry groups like NCTA, WISPA, ACA Connects, and US Telecom entered the fray, and the suits were eventually joined into one case in the Eighth Circuit.

The ISP industry threw a number of arguments against the wall, hoping one would stick. The primary complaint was that Congress didn’t intend to impose a disparate discrimination test, and that disparate discrimination is rarely applied anywhere in the regulatory world. The ISPs also argued that the FCC violated the major questions doctrine with its ruling. This concept was based on recent Supreme Court rulings that prohibit federal agencies from adopting regulations that have “vast economic and political significance” without clear authorization from Congress. ISPs argued that the FCC went further in its discrimination rules than was specifically authorized by Congress. Finally, ISPs said the ruling was too widely applied, and should only have been applied to last-mile ISPs, while the FCC rules applied to a wider market, such as MDU owners who provide broadband in their buildings.

The Court made a number of rulings. It said the FCC had overreached its authority since Congress had not explicitly allowed a disparate discrimination test. The Court also ruled that the FCC had exceeded its authority by applying the discrimination rules to entities other than last-mile ISPs.

The Court completely vacated the FCC’s 2023 discrimination order, which means it is the same as if it didn’t exist. The FCC is still obligated by the IIJA to implement discrimination rules, so we can expect the FCC to restart the process. Any new FCC proposed rules will undoubtedly acknowledge the Court rulings.

The natural question to ask is what the court order means in the market. There should be little immediate impact since the FCC’s 2023 discrimination rules never went into effect when they were immediately challenged in court.

There will be repercussions since the Court considerably weakened the 2023 FCC order by only allowing the intentional discrimination test. It seems likely that it will be nearly impossible to prove that an ISP intentionally discriminated against some subset of customers. The proof would have to be some sort of written documentation or public statement that proves the ISP’s intention to discriminate. The Court eliminated the disparate discrimination test, which is basically an “if it quacks like a duck, it is a duck” test. That’s the kind of test that has routinely been applied to housing discrimination complaints, as was ordered by the Fair Housing Act. The revised rules will also let landlords off the hook since they will not be subject to broadband discrimination complaints.