The following entry is the companion piece to my earlier blog post in which I provide an overview of the FCC's proposed broadband plan:
FCC’s Regulatory Authority Under the Telecommunications Act
Before delving into the Comcast opinion, it is important to discuss the historical development of the FCC’s regulatory authority (or lack thereof) over Internet communications in general. Let’s begin with the Communications Act of 1934. This charter legislation established the FCC and provided the regulatory framework under which the agency operated for much of the twentieth Century, and to a certain extent, continues to operate today. While the act was adopted “for the purpose of regulating interstate and foreign commerce in communication by wire,” there was no Internet in 1934 and Congress therefore did not specifically address the computer-based inter-web we use today. How, therefore, to classify Internet communications for purposes of exercising direct authority under the Act? Are ISPs subject to Title II common carrier regulation? The FCC has spent the last four decades identifying the boundaries of its direct authority and whether such authority extends to Internet communications.
According to justice Clarence Thomas, writing for the majority in Brand X (infra), “the [1934] Act, as amended by the Telecommunications Act of 1996, defines two categories of regulated entities, relevant [for purposes of this discussion]: telecommunications carriers and information-service providers. The Act regulates telecommunications carriers, but not [ISPs], as common carriers … ISPs, by contrast, are not subject to mandatory common carrier regulation under Title II, though the [FCC] has jurisdiction to impose additional regulatory obligations under its Title I ancillary jurisdiction.” (EN 1) This distinction reflects the historic battle between ISPs and the incumbent telephone companies over whether to subject ISPs to the same substantive regulatory obligations required of the Telcos because they both use the same infrastructure to reach consumers. The agency has consistently sided with the ISPs, concluding time and again that Internet communications fall outside the agency’s direct regulatory authority “set forth in Titles II (common carriers), III (radio licensees) and VI (cable and similar video programming distribution services).” (EN 2)
The FCC first broached the subject in 1966 while conducting the initial computer inquiries. The Computer Inquiries (Computer I-III (EN 3)) were a series of agency adjudications which spanned four decades and reflected an evolving effort to facilitate competition in the emerging data market. Computer I concerned the recent ability to transmit data over traditional phone networks. The agency ultimately rejected AT+T’s claim that these data transmissions were the equivalent to voice “communications” for purposes of the Communications Act, refusing to extend Title II jurisdiction. The rationale behind this decision was a desire to protect and develop the young data market: the agency recognized a potential goldmine in this new electronic communication. The agency has largely taken a hands-off approach moving forward, seeking to encourage competition in the data market by removing regulatory barriers and by refusing to recognize data transmission as a regulable form of communication under the framework of the Communications Act. This principal applies even when the data is used to augment regulated basic phone service.
The bottom line is that ISPs who employ DSL are not subject to common carrier regulation despite employing the same wires used to transmit regulable telephone signals. Similarly, cable providers who employ broadband are not subject to the same interconnectivity requirements (EN 4) that burden incumbent telcos, as Title II regulation applies exclusively to Telcos in their role as “basic” telephone service providers. The court in Brand X Internet Services upheld an FCC order “conclud[ing] that cable companies that sell broadband Internet service do not provide ‘telecommunications service[e]’ as the Communications Act defines that term, and hence are exempt from…regulation under Title II.” (EN 5) Nor does, the FCC’s common carrier authority extend to “information services” offered in conjunction with regulated common carriers services. Thus, AT&T does not qualify as a common carrier while offering information services. As Justice Thomas noted above, current agency and judicial statutory construction requires that the FCC rely on its ancillary jurisdiction to get at Broadband communications.
“Title I ‘ancillary jurisdiction’ is an FCC-created and judicially-sanctioned implied authority, to do that which is necessary to carry out the specific regulatory obligations; it is derivative, not generative, and it must be exercised in furtherance of the Commission's regulatory responsibilities contained in other titles of the Act.” (EN 6) The parameters of this authority are set forth in section 4(i) of the Communications Act of 1934. “Section 4(i) … authorizes the Commission to ‘perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions.’” (EN 7) However, “the Commission may exercise this “ancillary” authority only if it demonstrates that its action … is ‘reasonably ancillary to the … effective performance of its statutorily mandated responsibilities.’” (EN 8) Thus, “‘ancillary jurisdiction" [must] be necessary to further [the agency’s] regulation of activities over which it DOES have express statutory authority.” (EN 9) This brings us to the issue at the heart of Comcast: whether the FCC’s attempt to regulate Comcast’s network management is reasonably ancillary to some statutorily-based duty.
Comcast v. FCC: Does Title I Ancillary Jurisdiction Apply?
Background: On August 1st, 2008, the FCC issued a declaratory ruling (referred to herein as the “Order”) determining that Comcast’s management policy with respect to the use of peer-to-peer Internet protocol (eg, bit torrents) by end-users was unreasonable. Specifically, the agency took issue with how Comcast used “RST packets” (EN 10) to disrupt the transmission of bit torrent files. Bit torrent technology is an increasingly popular means for distributing information at high speeds and can be used for both legitimate and illicit purposes:
The problem for ISPs such as Comcast, however, is that Bit torrent technology has become a competitive alternative for traditional video providers, enabling consumers to access high-content video that they could otherwise view on cable or satellite. Therefore, ISPs who simultaneously distribute video programming have sought to protect their video interests by disrupting bit torrent transfers, in the hopes of preserving their exclusive stranglehold on the video market. Specifically, “‘when P2P unidirectional upload sessions . . . reach a predetermined congestion threshold in a particular neighborhood,’ Comcast's network ‘issues instructions called ‘reset packets’ (supra).’ Comcast further claim[s] that it sent RST packets to peer-to-peer TCP connections being used to upload content until the traffic ‘in the neighborhood drops below the predetermined level.’” (EN 12)
The FCC challenged this practice on the grounds that Comcast’s actions stymie innovation and are therefore contrary to the policy objectives set forth in the telecommunication act. However, whether the agency can exercise such regulatory oversight without direct authority is the subject of this litigation.
Analysis: To begin with, the FCC does not claim to have direct authority to regulate Broadband. “Indeed, in its still-binding 2002 Cable Modem Order, the Commission ruled that cable Internet service is neither a ‘telecommunications service’ covered by Title II of the Communications Act nor a ‘cable service’ covered by Title VI.” (EN 13) Rather, the FCC seeks to regulate Comcast pursuant to its Title I ancillary jurisdiction.
The agency first argues that the Brand X decision established plenary authority to regulate Cable Internet providers in any and all areas. The court rejects this argument on the basis that “the Commission cannot justify regulating the network management practices of cable Internet providers simply by citing Brand X's recognition that it may have ancillary authority to require such providers to unbundle the components of their services. These are altogether different regulatory requirements” (EN 14) (emphasis mine). In other words, simply because the court in Brand X recognized the possibility of regulating certain Cable Internet practices pursuant to its ancillary authority, this determination was limited to the specific area at issue in the Brand X and therefore does not necessarily speak to management practices involved in the instant case.
The agency next argues that Title I authority is supported by numerous provisions in the Telecommunications Act. These include: §§ 201, 230(b), 256, 257, 601(4) and 706(a). The court is quick to point out, however, that many of these provisions are in fact statements of policy rather than substantive powers. “[U]nder Supreme Court and D.C. Circuit case law statements of policy, by themselves, do not create ‘statutorily mandated responsibilities.’” (EN 15) I will address each provision in turn, in the order adopted by the court.
“Section 230(b) states, in relevant part, that ‘[i]t is the policy of the [U.S.] ... to promote the continued development of the Internet and other interactive computer services’ and ‘to encourage the development of technologies which maximize user control over what information is received by individuals, families, and schools who use the Internet.’” (EN 16) The agency admits that 230(b) is indeed a statement of policy and therefore does not provide regulatory authority in and of itself. However, the FCC claims that cases such as Southwestern Cable and Midwest Video I stand for the principal that “congressional statements of policy[, alone,] are sufficient to support ancillary jurisdiction.” (EN 17) The court rejects this interpretation, asserting that the policy statements upon which the earlier cases relied were used “in conjunction with an express delegation of authority to the Commission, i.e., Title III's authority to regulate broadcasting.” (EN 18) While policy objectives may serve to define the scope of the underlying statutory authority, they do not, themselves, delegate regulatory authority.
Section 706 instructs the agency to “encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans ... by utilizing ... price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.” (EN 19) While this provision is indeed a substantive directive, imposing affirmative duties to regulate, the agency, itself, has previously determined that “section 706 does not constitute an independent grant of authority … Rather, section 706(a) directs the Commission to use the authority granted in other provisions … to encourage the deployment of advanced services.” (EN 20) The same analysis applies with respect to section 256 (“Nothing in this section shall be construed as expanding ... any authority that the Commission may have under law in effect before February 8, 1996.” (EN 21))
Section 257 mandates that the FCC “complete a proceeding for the purpose of identifying and eliminating, by regulations pursuant to its authority under this chapter (other than this section), market entry barriers for entrepreneurs and other small businesses in the provision and ownership of telecommunications services and information services...” (EN 22) (emphasis mine). You will note that the italicized portion limits the FCC’s regulatory authority to carry out section 257 obligations to powers outside section 257 itself. While the court recognizes that the agency likely has ancillary authority to conduct a proceeding in the manner described in section 257, this authority is limited to the duties set forth in the provision: “…the Commission's attempt to dictate the operation of an otherwise unregulated service based on nothing more than its obligation to issue a report defies any plausible notion of ‘ancillariness.’” (EN 23)
Section 201 establishes the agency’s common carrier authority. The FCC argues that Comcast’s management practices impact various services regulated under Title II. However, this impact is somewhat attenuated. According to the agency, Comcast’s practices directly affect Internet communications tools, such as “voice over Internet Protocol” (voIP) (EN 24). Moreover, voIP, itself, “affect[s] the prices and practices of traditional telephony common carriers subject to section 201 regulation.” (EN 25) Therefore, the agency seeks to regulate Comcast’s business practices under Title II as such practices appear to proximately influence regulated phone services. The court, however, rejects this argument on the grounds that the agency failed to raise it within the Order.
Finally, section 623 deals with cable service regulation. Like section 201, the FCC failed to refer to section 623 in the Order and so the court is free to reject the claim outright. Regardless, the court believes the argument to be untenable, describing the agency’s diminished regulatory authority over cable and noting that its authority in this area has always been much more limited as compared to its Title II powers. “In the Order, the Commission does not assert ancillary authority based on this narrow grant of regulatory power. Instead, the Order rests on the premise that section 1 gives the Commission ancillary authority to ensure reasonable rates for all communication services, including those, like video-on-demand, over which it has no express regulatory authority.” (EN 26) The court once again refuses to extend plenary authority over broadband as it did previously in rejecting the agency’s interpretation of Brand X (supra).
Holding: The court concludes by vacating the order on the grounds that the FCC “failed to tie its assertion of ancillary authority over Comcast's Internet service to any ‘statutorily mandated responsibility…’” (EN 27) “[N]otwithstanding the ‘difficult regulatory problem of rapid technological change’ posed by the communications industry, ‘the allowance of wide latitude in the exercise of delegated powers is not the equivalent of untrammeled freedom to regulate activities over which the statute fails to confer ... Commission authority.’” (EN 28)
Moving Forward
Much has been made about the possible impact of the Comcast decision. Some believe that the court’s reasoning will greatly impede the Commission’s ability to carry out the broadband plan. According to the Austin Schlick, general council for the FCC, however, the Comcast decision will have “no effect at all on most of the plan … [as m]any of the recommendations for the FCC itself involve matters over which the Commission has an ‘express statutory delegation of authority.’” (EN 29) That being said, Mr. Schlick acknowledges that certain components are likely to be impacted by the Comcast opinion. (EN 30) To reach these areas, under Comcast, would require the Commission to provide a statutory basis for advancing its policy.
Chairman Genachowski, himself, recognizes that the decision has sent a serious blow to the legal theory advanced by the FCC in Comcast. However, the commissioner envisions a new way forward. This alternative approach would require a partial reclassification of broadband service by “recogniz[ing] the transmission component of broadband access service—and only this component— as a telecommunications service.” (EN 31) This narrow tailoring would enable the FCC to regulate broadband transmissions pursuant to its Title II authority. I am not entirely clear whether this approach is consistent with the agency’s historic reluctance to regulate information services, but it may indeed provide a sufficient statutory basis upon which to implement the plan and regulate broadband services more generally.
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End Notes:
1) National Cable & Telecommunications Ass'n v. Brand X Internet Services 545 U.S. 967, 976 (U.S., 2005).
2) 993 PLI/Pat 117, 121 (2010).
3) The impetus for the computer inquiries was the ability to transmit data over traditional phone networks and whether the agency could regulate the technology used to facilitate this new form of communication. Computer I considered whether Western Union’s practice of sending “data messages” constitutes “communication” sufficient to bring the company (and their device “data speed 40”) within the agency’s title II jurisdiction. Much to the disappointment of AT+T, and signaling regulatory changes to come, the FCC decided that these alternative uses were not equivalent to voice communications and were thus unregulable. Whether a particular service was regulable depended on who was providing the service and to what industry that service could be attributed (i.e. whether it was data or voice). The FCC adopted this policy of structural separation to encourage competition in the data market. This separation scheme prohibited any company from participating in both markets simultaneously. This distinction was unsustainable. Computer II resulted in a further modification and degradation of the earlier structural framework. Here, the FCC responded to fact that certain telephone services (so called “enhanced services” such as voice mail, caller I.D. and number blocking) involved the transmission of data, and, yet, were used to augment basic – regulable - phone calls. This time the agency chose to ignore who was providing the service, refusing to extend Title II regulation to any “enhanced service” regardless of why it was sent or from whom.
4) See 47 U.S.C.A. § 251. Interconnection
5) National Cable & Telecommunications Ass'n v. Brand X Internet Services. 545 U.S. 967, 974 (U.S., 2005)
6) 993 PLI/Pat 117 , 122 (2010).
7) Comcast Corp. v. F.C.C. 600 F.3d 642, 644, (C.A.D.C., 2010).
8) Id. at 655.
9) http://www.circleid.com/posts/20100406_fcc_comcast_ancillary_jurisdiction_ancillary_to_something/
10) According to the FCC, “for certain applications to work properly, [such as bit torrent files, the direct peer-to-peer] connection must be continuous and reliable. Computers linked via [such a] connection monitor that connection to ensure that packets of data sent from one user to the other over the connection ‘arrive in sequence and without error,’ at least from the perspective of the receiving computer. If either computer detects that ‘something seriously wrong has happened within the network,’ it sends a “reset packet” or “RST packet” to the other, signaling that the current connection should be terminated and a new connection established ‘if reliable communication is to continue.’” 23 F.C.C.R. 13028, 13029.
11) 23 F.C.C.R. 13028, 13029.
12) Id. at 13031.
13) Comcast Corp. v. F.C.C. 600 F.3d 642, 645 (C.A.D.C., 2010).
14) Id. at 651.
15) Id. at 644.
16) Id. at 651.
17) Id. at 652.
18) Id. at 651.
19) 47 U.S.C.A. § 1302 (a).
20) IN THE MATTERS OF DEPLOYMENT OF WIRELINE SERVICES OFFERING ADVANCED TELECOMMUNICATIONS CAPABILITY PETITION OF BELL ATLANTIC CORPORATION FOR RELIEF FROM BARRIERS TO DEPLOYMENT OF ADVANCED TELECOMMUNICATIONS SERVICES PETITION OF U S WEST COMMUNICATIONS 13 FCC Rcd. 24012, 24044-24047.
21) 47 U.S.C.A. § 256 (c)
22) 47 U.S.C.A. § 257(a)
23) Comcast Corp. v. F.C.C. 600 F.3d 642, 659-660 (C.A.D.C., 2010).
24) VoIP is essentially traditional phone service using an Internet connection (e.g. Vonage).
25) Comcast Corp. v. F.C.C. 600 F.3d 642, 660 (C.A.D.C., 2010)
26) Id. at 661.
27) Id.
28) Id.
29) http://blog.broadband.gov/?entryId=356610
30) These include: “recommendations aimed at accelerating broadband access and adoption in rural America; connecting low-income Americans, Native American communities, and Americans with disabilities; supporting robust use of broadband by small businesses to drive productivity, growth and ongoing innovation; lowering barriers that hinder broadband deployment; strengthening public safety communications; cybersecurity; consumer protection, including transparency and disclosure; and consumer privacy.” http://blog.broadband.gov/?entryId=356610
31) “The Third Way: A Narrowly Tailored Broadband Framework,” Julius Genachowski, p. 5. http://www.broadband.gov/the-third-way-narrowly-tailored-broadband-framework-chairman-julius-genachowski.html
FCC’s Regulatory Authority Under the Telecommunications Act
Before delving into the Comcast opinion, it is important to discuss the historical development of the FCC’s regulatory authority (or lack thereof) over Internet communications in general. Let’s begin with the Communications Act of 1934. This charter legislation established the FCC and provided the regulatory framework under which the agency operated for much of the twentieth Century, and to a certain extent, continues to operate today. While the act was adopted “for the purpose of regulating interstate and foreign commerce in communication by wire,” there was no Internet in 1934 and Congress therefore did not specifically address the computer-based inter-web we use today. How, therefore, to classify Internet communications for purposes of exercising direct authority under the Act? Are ISPs subject to Title II common carrier regulation? The FCC has spent the last four decades identifying the boundaries of its direct authority and whether such authority extends to Internet communications.
According to justice Clarence Thomas, writing for the majority in Brand X (infra), “the [1934] Act, as amended by the Telecommunications Act of 1996, defines two categories of regulated entities, relevant [for purposes of this discussion]: telecommunications carriers and information-service providers. The Act regulates telecommunications carriers, but not [ISPs], as common carriers … ISPs, by contrast, are not subject to mandatory common carrier regulation under Title II, though the [FCC] has jurisdiction to impose additional regulatory obligations under its Title I ancillary jurisdiction.” (EN 1) This distinction reflects the historic battle between ISPs and the incumbent telephone companies over whether to subject ISPs to the same substantive regulatory obligations required of the Telcos because they both use the same infrastructure to reach consumers. The agency has consistently sided with the ISPs, concluding time and again that Internet communications fall outside the agency’s direct regulatory authority “set forth in Titles II (common carriers), III (radio licensees) and VI (cable and similar video programming distribution services).” (EN 2)
The FCC first broached the subject in 1966 while conducting the initial computer inquiries. The Computer Inquiries (Computer I-III (EN 3)) were a series of agency adjudications which spanned four decades and reflected an evolving effort to facilitate competition in the emerging data market. Computer I concerned the recent ability to transmit data over traditional phone networks. The agency ultimately rejected AT+T’s claim that these data transmissions were the equivalent to voice “communications” for purposes of the Communications Act, refusing to extend Title II jurisdiction. The rationale behind this decision was a desire to protect and develop the young data market: the agency recognized a potential goldmine in this new electronic communication. The agency has largely taken a hands-off approach moving forward, seeking to encourage competition in the data market by removing regulatory barriers and by refusing to recognize data transmission as a regulable form of communication under the framework of the Communications Act. This principal applies even when the data is used to augment regulated basic phone service.
The bottom line is that ISPs who employ DSL are not subject to common carrier regulation despite employing the same wires used to transmit regulable telephone signals. Similarly, cable providers who employ broadband are not subject to the same interconnectivity requirements (EN 4) that burden incumbent telcos, as Title II regulation applies exclusively to Telcos in their role as “basic” telephone service providers. The court in Brand X Internet Services upheld an FCC order “conclud[ing] that cable companies that sell broadband Internet service do not provide ‘telecommunications service[e]’ as the Communications Act defines that term, and hence are exempt from…regulation under Title II.” (EN 5) Nor does, the FCC’s common carrier authority extend to “information services” offered in conjunction with regulated common carriers services. Thus, AT&T does not qualify as a common carrier while offering information services. As Justice Thomas noted above, current agency and judicial statutory construction requires that the FCC rely on its ancillary jurisdiction to get at Broadband communications.
“Title I ‘ancillary jurisdiction’ is an FCC-created and judicially-sanctioned implied authority, to do that which is necessary to carry out the specific regulatory obligations; it is derivative, not generative, and it must be exercised in furtherance of the Commission's regulatory responsibilities contained in other titles of the Act.” (EN 6) The parameters of this authority are set forth in section 4(i) of the Communications Act of 1934. “Section 4(i) … authorizes the Commission to ‘perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions.’” (EN 7) However, “the Commission may exercise this “ancillary” authority only if it demonstrates that its action … is ‘reasonably ancillary to the … effective performance of its statutorily mandated responsibilities.’” (EN 8) Thus, “‘ancillary jurisdiction" [must] be necessary to further [the agency’s] regulation of activities over which it DOES have express statutory authority.” (EN 9) This brings us to the issue at the heart of Comcast: whether the FCC’s attempt to regulate Comcast’s network management is reasonably ancillary to some statutorily-based duty.
Comcast v. FCC: Does Title I Ancillary Jurisdiction Apply?
Background: On August 1st, 2008, the FCC issued a declaratory ruling (referred to herein as the “Order”) determining that Comcast’s management policy with respect to the use of peer-to-peer Internet protocol (eg, bit torrents) by end-users was unreasonable. Specifically, the agency took issue with how Comcast used “RST packets” (EN 10) to disrupt the transmission of bit torrent files. Bit torrent technology is an increasingly popular means for distributing information at high speeds and can be used for both legitimate and illicit purposes:
“BitTorrent employs a decentralized distribution model: Each computer in a BitTorrent “swarm” is able to download content from the other computers in the swarm, and in turn each computer also makes available content for those same peers to download, all via [Transmission Protocol (TCP)] connections. Furthermore, a computer can download different portions of the same content from multiple computers simultaneously, with each computer providing a different portion of the same content. (For example, a computer could obtain different portions of a video file from several different other computers in the swarm.)” (EN 11)
The problem for ISPs such as Comcast, however, is that Bit torrent technology has become a competitive alternative for traditional video providers, enabling consumers to access high-content video that they could otherwise view on cable or satellite. Therefore, ISPs who simultaneously distribute video programming have sought to protect their video interests by disrupting bit torrent transfers, in the hopes of preserving their exclusive stranglehold on the video market. Specifically, “‘when P2P unidirectional upload sessions . . . reach a predetermined congestion threshold in a particular neighborhood,’ Comcast's network ‘issues instructions called ‘reset packets’ (supra).’ Comcast further claim[s] that it sent RST packets to peer-to-peer TCP connections being used to upload content until the traffic ‘in the neighborhood drops below the predetermined level.’” (EN 12)
The FCC challenged this practice on the grounds that Comcast’s actions stymie innovation and are therefore contrary to the policy objectives set forth in the telecommunication act. However, whether the agency can exercise such regulatory oversight without direct authority is the subject of this litigation.
Analysis: To begin with, the FCC does not claim to have direct authority to regulate Broadband. “Indeed, in its still-binding 2002 Cable Modem Order, the Commission ruled that cable Internet service is neither a ‘telecommunications service’ covered by Title II of the Communications Act nor a ‘cable service’ covered by Title VI.” (EN 13) Rather, the FCC seeks to regulate Comcast pursuant to its Title I ancillary jurisdiction.
The agency first argues that the Brand X decision established plenary authority to regulate Cable Internet providers in any and all areas. The court rejects this argument on the basis that “the Commission cannot justify regulating the network management practices of cable Internet providers simply by citing Brand X's recognition that it may have ancillary authority to require such providers to unbundle the components of their services. These are altogether different regulatory requirements” (EN 14) (emphasis mine). In other words, simply because the court in Brand X recognized the possibility of regulating certain Cable Internet practices pursuant to its ancillary authority, this determination was limited to the specific area at issue in the Brand X and therefore does not necessarily speak to management practices involved in the instant case.
The agency next argues that Title I authority is supported by numerous provisions in the Telecommunications Act. These include: §§ 201, 230(b), 256, 257, 601(4) and 706(a). The court is quick to point out, however, that many of these provisions are in fact statements of policy rather than substantive powers. “[U]nder Supreme Court and D.C. Circuit case law statements of policy, by themselves, do not create ‘statutorily mandated responsibilities.’” (EN 15) I will address each provision in turn, in the order adopted by the court.
“Section 230(b) states, in relevant part, that ‘[i]t is the policy of the [U.S.] ... to promote the continued development of the Internet and other interactive computer services’ and ‘to encourage the development of technologies which maximize user control over what information is received by individuals, families, and schools who use the Internet.’” (EN 16) The agency admits that 230(b) is indeed a statement of policy and therefore does not provide regulatory authority in and of itself. However, the FCC claims that cases such as Southwestern Cable and Midwest Video I stand for the principal that “congressional statements of policy[, alone,] are sufficient to support ancillary jurisdiction.” (EN 17) The court rejects this interpretation, asserting that the policy statements upon which the earlier cases relied were used “in conjunction with an express delegation of authority to the Commission, i.e., Title III's authority to regulate broadcasting.” (EN 18) While policy objectives may serve to define the scope of the underlying statutory authority, they do not, themselves, delegate regulatory authority.
Section 706 instructs the agency to “encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans ... by utilizing ... price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.” (EN 19) While this provision is indeed a substantive directive, imposing affirmative duties to regulate, the agency, itself, has previously determined that “section 706 does not constitute an independent grant of authority … Rather, section 706(a) directs the Commission to use the authority granted in other provisions … to encourage the deployment of advanced services.” (EN 20) The same analysis applies with respect to section 256 (“Nothing in this section shall be construed as expanding ... any authority that the Commission may have under law in effect before February 8, 1996.” (EN 21))
Section 257 mandates that the FCC “complete a proceeding for the purpose of identifying and eliminating, by regulations pursuant to its authority under this chapter (other than this section), market entry barriers for entrepreneurs and other small businesses in the provision and ownership of telecommunications services and information services...” (EN 22) (emphasis mine). You will note that the italicized portion limits the FCC’s regulatory authority to carry out section 257 obligations to powers outside section 257 itself. While the court recognizes that the agency likely has ancillary authority to conduct a proceeding in the manner described in section 257, this authority is limited to the duties set forth in the provision: “…the Commission's attempt to dictate the operation of an otherwise unregulated service based on nothing more than its obligation to issue a report defies any plausible notion of ‘ancillariness.’” (EN 23)
Section 201 establishes the agency’s common carrier authority. The FCC argues that Comcast’s management practices impact various services regulated under Title II. However, this impact is somewhat attenuated. According to the agency, Comcast’s practices directly affect Internet communications tools, such as “voice over Internet Protocol” (voIP) (EN 24). Moreover, voIP, itself, “affect[s] the prices and practices of traditional telephony common carriers subject to section 201 regulation.” (EN 25) Therefore, the agency seeks to regulate Comcast’s business practices under Title II as such practices appear to proximately influence regulated phone services. The court, however, rejects this argument on the grounds that the agency failed to raise it within the Order.
Finally, section 623 deals with cable service regulation. Like section 201, the FCC failed to refer to section 623 in the Order and so the court is free to reject the claim outright. Regardless, the court believes the argument to be untenable, describing the agency’s diminished regulatory authority over cable and noting that its authority in this area has always been much more limited as compared to its Title II powers. “In the Order, the Commission does not assert ancillary authority based on this narrow grant of regulatory power. Instead, the Order rests on the premise that section 1 gives the Commission ancillary authority to ensure reasonable rates for all communication services, including those, like video-on-demand, over which it has no express regulatory authority.” (EN 26) The court once again refuses to extend plenary authority over broadband as it did previously in rejecting the agency’s interpretation of Brand X (supra).
Holding: The court concludes by vacating the order on the grounds that the FCC “failed to tie its assertion of ancillary authority over Comcast's Internet service to any ‘statutorily mandated responsibility…’” (EN 27) “[N]otwithstanding the ‘difficult regulatory problem of rapid technological change’ posed by the communications industry, ‘the allowance of wide latitude in the exercise of delegated powers is not the equivalent of untrammeled freedom to regulate activities over which the statute fails to confer ... Commission authority.’” (EN 28)
Moving Forward
Much has been made about the possible impact of the Comcast decision. Some believe that the court’s reasoning will greatly impede the Commission’s ability to carry out the broadband plan. According to the Austin Schlick, general council for the FCC, however, the Comcast decision will have “no effect at all on most of the plan … [as m]any of the recommendations for the FCC itself involve matters over which the Commission has an ‘express statutory delegation of authority.’” (EN 29) That being said, Mr. Schlick acknowledges that certain components are likely to be impacted by the Comcast opinion. (EN 30) To reach these areas, under Comcast, would require the Commission to provide a statutory basis for advancing its policy.
Chairman Genachowski, himself, recognizes that the decision has sent a serious blow to the legal theory advanced by the FCC in Comcast. However, the commissioner envisions a new way forward. This alternative approach would require a partial reclassification of broadband service by “recogniz[ing] the transmission component of broadband access service—and only this component— as a telecommunications service.” (EN 31) This narrow tailoring would enable the FCC to regulate broadband transmissions pursuant to its Title II authority. I am not entirely clear whether this approach is consistent with the agency’s historic reluctance to regulate information services, but it may indeed provide a sufficient statutory basis upon which to implement the plan and regulate broadband services more generally.
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End Notes:
1) National Cable & Telecommunications Ass'n v. Brand X Internet Services 545 U.S. 967, 976 (U.S., 2005).
2) 993 PLI/Pat 117, 121 (2010).
3) The impetus for the computer inquiries was the ability to transmit data over traditional phone networks and whether the agency could regulate the technology used to facilitate this new form of communication. Computer I considered whether Western Union’s practice of sending “data messages” constitutes “communication” sufficient to bring the company (and their device “data speed 40”) within the agency’s title II jurisdiction. Much to the disappointment of AT+T, and signaling regulatory changes to come, the FCC decided that these alternative uses were not equivalent to voice communications and were thus unregulable. Whether a particular service was regulable depended on who was providing the service and to what industry that service could be attributed (i.e. whether it was data or voice). The FCC adopted this policy of structural separation to encourage competition in the data market. This separation scheme prohibited any company from participating in both markets simultaneously. This distinction was unsustainable. Computer II resulted in a further modification and degradation of the earlier structural framework. Here, the FCC responded to fact that certain telephone services (so called “enhanced services” such as voice mail, caller I.D. and number blocking) involved the transmission of data, and, yet, were used to augment basic – regulable - phone calls. This time the agency chose to ignore who was providing the service, refusing to extend Title II regulation to any “enhanced service” regardless of why it was sent or from whom.
4) See 47 U.S.C.A. § 251. Interconnection
5) National Cable & Telecommunications Ass'n v. Brand X Internet Services. 545 U.S. 967, 974 (U.S., 2005)
6) 993 PLI/Pat 117 , 122 (2010).
7) Comcast Corp. v. F.C.C. 600 F.3d 642, 644, (C.A.D.C., 2010).
8) Id. at 655.
9) http://www.circleid.com/posts/20100406_fcc_comcast_ancillary_jurisdiction_ancillary_to_something/
10) According to the FCC, “for certain applications to work properly, [such as bit torrent files, the direct peer-to-peer] connection must be continuous and reliable. Computers linked via [such a] connection monitor that connection to ensure that packets of data sent from one user to the other over the connection ‘arrive in sequence and without error,’ at least from the perspective of the receiving computer. If either computer detects that ‘something seriously wrong has happened within the network,’ it sends a “reset packet” or “RST packet” to the other, signaling that the current connection should be terminated and a new connection established ‘if reliable communication is to continue.’” 23 F.C.C.R. 13028, 13029.
11) 23 F.C.C.R. 13028, 13029.
12) Id. at 13031.
13) Comcast Corp. v. F.C.C. 600 F.3d 642, 645 (C.A.D.C., 2010).
14) Id. at 651.
15) Id. at 644.
16) Id. at 651.
17) Id. at 652.
18) Id. at 651.
19) 47 U.S.C.A. § 1302 (a).
20) IN THE MATTERS OF DEPLOYMENT OF WIRELINE SERVICES OFFERING ADVANCED TELECOMMUNICATIONS CAPABILITY PETITION OF BELL ATLANTIC CORPORATION FOR RELIEF FROM BARRIERS TO DEPLOYMENT OF ADVANCED TELECOMMUNICATIONS SERVICES PETITION OF U S WEST COMMUNICATIONS 13 FCC Rcd. 24012, 24044-24047.
21) 47 U.S.C.A. § 256 (c)
22) 47 U.S.C.A. § 257(a)
23) Comcast Corp. v. F.C.C. 600 F.3d 642, 659-660 (C.A.D.C., 2010).
24) VoIP is essentially traditional phone service using an Internet connection (e.g. Vonage).
25) Comcast Corp. v. F.C.C. 600 F.3d 642, 660 (C.A.D.C., 2010)
26) Id. at 661.
27) Id.
28) Id.
29) http://blog.broadband.gov/?entryId=356610
30) These include: “recommendations aimed at accelerating broadband access and adoption in rural America; connecting low-income Americans, Native American communities, and Americans with disabilities; supporting robust use of broadband by small businesses to drive productivity, growth and ongoing innovation; lowering barriers that hinder broadband deployment; strengthening public safety communications; cybersecurity; consumer protection, including transparency and disclosure; and consumer privacy.” http://blog.broadband.gov/?entryId=356610
31) “The Third Way: A Narrowly Tailored Broadband Framework,” Julius Genachowski, p. 5. http://www.broadband.gov/the-third-way-narrowly-tailored-broadband-framework-chairman-julius-genachowski.html
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