Another Challenge to FCC Authority

There is a new legal challenge that could alter the way that the FCC and other federal agencies regulate industries. The issue was highlighted in an article by John Eggerton in Multichannel News.

The Supreme Court has agreed to hear the case of Relentless Inc. et al v. Department of Commerce, et al. The specifics of the case are about the ability of the National Oceanic and Atmospheric Administration (NOAA) to regulate fishing. Specifically, fishermen have to pay for the cost of having NOA monitor their herring catches. There is a lot of speculation that the Court is open to weakening the ability of regulatory agencies to make new regulations.

This may sound like is not relevant to the FCC, but the case could impact all federal agencies that enact regulations that have not been specified by Congress. Agencies feel empowered to make regulatory rulings based on the Chevron doctrine. This doctrine comes from a strong ruling by the Supreme Court in 1984 in the case of Chevron U.S.A., Inc. v. Natural Resources Council, Inc. The lawsuit involved a challenge from Chevron that challenged the ability of the government to create and enact environmental rules that were not specifically ordered by Congress. Chevron also comes into play whenever there are conflicting laws from Congress – agencies get to interpret any conflicts.

Chevron is considered a landmark case where the Supreme Court gave substantial deference to the ability of government agencies to enact regulations. The Supreme Court ruling looked specifically at cases where agencies enact regulations that were not specified by Congress. The Court, in Chevron, looked instead at the intent of Congress when it gave agencies the power to enact regulations. A simplified explanation of Chevron is that the Court ruled that regulators are allowed to regulate as long as agencies stay within the overall framework of responsibilities given to them by Congress when the agency was created.

The Chevron doctrine has already been used by the Supreme Court related to the FCC in the 2005 case of NCTA v. Brand X Internet Services. The Court relied on the Chevron doctrine in ruling that the FCC had the authority to classify broadband as an information service that is not subject to common carrier regulation. This same ruling was used as subsequent FCCs reimposed Title II regulation and then reverse that decision a second time.

The issue is certainly going to arise again if FCC Chairwoman Jessica Rosenworcel goes through with her recently announced intention to reclassify broadband as a telecommunications service. The reason that Chevron was needed in the 2004 Brand X case is that Congress has been moot on the topic of regulating broadband. The last major related ruling from Congress was the Telecommunications Act of 1996, which preceded the explosion of the Internet. While there have been attempted bills introduced in Congress over the years to formally regulate broadband, Congress has apparently never had the necessary votes to enact broadband regulation.

Overturning Chevron would result in regulatory chaos since every regulatory agency makes rules that are not specifically spelled out by Congress. This would mean lawsuits challenging both new rulings by regulatory agencies but also older decisions. This also will likely results in the confusion that will come when courts issue conflicting opinions on the same topic.

Ending Chevron would mean that regulatory agencies will lose more court fights concerning new regulations, making it harder to create or modify regulations. Chaos will also abound since challenges to new regulations will result in a long delay as regulations are argued in court. This could mean a lot more delays, and for a longer time, for any new regulations not specifically required by Congress. Of course, Congress could avoid all of this by enacting explicit laws for regulations it cares about – but I don’t think anybody expects that.

Reconsidering Brand X

Jon Brodkin recently wrote in Ars Technical that Supreme Court Justice Clarence Thomas has reconsidered and regrets his original position on the Brand X decision in 2005. The Brand X decision supported the FCC’s decision in the early 2000s to classify broadband as an information service.

There was a government push during the Bush administration to protect the newly burgeoning broadband industry. The FCC, and federal politicians all thought correctly that broadband was going to become a huge economic driver of the economy. This story was pushed by the lobbyists of both the cable companies and the big telcos, because at that time the broadband from both telcos and cable companies was functionally equivalent with similar speeds. At that time, the US was in front of the rest of the world in broadband adoption and the unified story out of Washington DC was that overregulation might squelch the new broadband industry.

The primary fear in Washington DC (and among lobbyists) was that states were going to regulate broadband. At the time there were already investigations by many state regulatory commissions about regulating broadband in the same manner that telephone service was already regulated. Since broadband was regulated under FCC Title II, state regulators felt they had the full authority to also regulate broadband prices and the actions of ISPs.

The Brand X decision was the culmination of early FCC rulings and ensuing court cases. In 2000 the US Court of Appeals for the Ninth Circuit had ruled in AT&T Corp versus the City of Portland that broadband services are subject to Title II common carrier regulation, including tariff, interconnection and wholesale access obligations. The FCC reacted to the City of Portland ruling by declaring that cable modem service is an ‘information service’ exempt from Title II regulation. The Ninth Circuit reversed the FCC’s ruling based upon the City of Portland Ruling, thus leading to the appeal to the Supreme Court that resulted in Brand X.

Brand X was an interesting decision. The Supreme Court said that the FCC was free to classify broadband as either an information service or as a telecommunications service that would be regulated under Title II. The FCC only had to provide a rationale for any decision they reached.

Brand X has been the source of the mess that we’ve had at the FCC since then. Each subsequent FCC can invent a new rationale and reclassify broadband. The Wheeler FCC used Brand X to reclassify broadband under Title II and the Pai FCC used Brand X to go in the opposite direction.

What Justice Thomas realized is that the ruling gives federal agencies regulatory powers separate from Congress. An agency like the FCC needs to only concoct a good story and can then ignore laws passed by Congress. In the case of broadband, Congress has clearly conveyed that they want the FCC to monitor and regulate broadband, and yet Brand X gave the agency cover to do otherwise. Brand X is now being cited by other federal agencies defending decisions they make and is now the law of the land.

As Brodkin points out in his article, Brand X also ties the hands of courts, giving even more power to federal agencies to do whatever they want. The courts upheld the appeal of the FCC’s decision to kill net neutrality. In that decision Circuit Judge Patricia Millett said that the FCC’s rationale for killing Title II regulation was “unhinged from the realities of modern broadband service”, and yet she felt unable to rule against the FCC due to Brand X.

Justice Thomas’s change of heart doesn’t change anything for now. At best it means that if another case hits the Supreme Court testing the ability of a federal agency to hide behind Brand X that he might be ready to vote against it.

The other message that comes from the misuse of Brand X is that Congress has a responsibility to provide its intentions to agencies like the FCC. It’s somewhat unbelievable that Congress hasn’t taken any action concerning broadband since the days when we all were using dial-up. We’re long overdue for an update the Telecommunications Act of 1996, and Congress could reset the meter on many of the decisions the FCC is making. Unfortunately, that doesn’t look to be coming any time soon.