Washington – For the third time in five years, the U.S. Court of Appeals for the D.C. Circuit heard oral arguments on the FCC’s attempt to maintain an open Internet Friday.  The panel was led by Judge David Tatel, who wrote the opinion for the Comcast v. FCC in 2010, where the D.C. Circuit invalidated the FCC’s first attempt at net neutrality rules.  Tatel also wrote the opinion in last year’s Verizon v. FCC, where the Court invalidated the FCC’s revised Open Internet rules.  Many people think that Tatel’s Verizon opinion provided a blueprint that the FCC followed this year in relying on Title II for its Open Internet rules.  Indeed, much of the discussion during the first section of the arguments revolved around the Verizon decision.

Judge Tatel set the stage for the discussion very early when he suggested that Peter Keisler, counsel for the Petitioners, begin with NCTA v. Brand X, where the Supreme Court in 2005 upheld the FCC’s decision to classify broadband as an informations service not subject to Title II.  Tatel explained that the Supreme Court found that Congress gave the FCC the choice to define broadband as an information or telecommunications service.  More specifically, he said Brand X was about looking at whether it was a reasonable interpretation of the statutory term “offer” and that the Supreme Court left the question of whether products are functionally integrated to the FCC.  Jonathan Sallet, the FCC’s General Counsel, contended that the FCC correctly changed its interpretation in accord with the deference afforded to it by the Supreme Court’s landmark decision in Chevron v. National Resource Defense Council, which says that when a term in a statute is ambiguous, an expert federal agency is entitled to deference regarding its reasonable interpretation of the term.  Although Keisler noted that the FCC did not discuss Title II reclassification in great detail, Sallet referenced the FCC’s reliance on comments in the record and how circumstances in the provision of broadband had changed over the years.

Tatel asked Keisler for his definition of last mile service and why it is different from Brand X.  Keisler replied that it covered dumb pipe transmission.  He argued that broadband is not a transmission service, and therefore not a telecommunications service, because of computer processing that is involved.  This began a discussion about the nature of additional network management practices like, packet switching, caching, and DNS.  Keisler said that caching and DNS are consumer-facing, but Tatel noted that caching does not change the content that an end user receives.  Tatel also noted that a key question from Brand X was how consumers perceive the broadband Internet service; more specifically, he questioned whether customers think they’re buying caching.

Judge Srinivasan highlighted how the FCC previously classified DSL as a Title II service in 1998, and how even if AOL presented it’s Internet service with information services, some browsers would connect consumers directly to websites without that additional layer.  Keisler tried to distinguish the DSL designation by saying that DSL service simply involved dumb pipes.

The issue of interconnection featured prominently in different sections of the arguments because the FCC, in the Open Internet Order, left consideration of interconnection agreements or complaints for case-by-case review.  Keisler pointed to the fact that interconnection is generally determined by individual negotiation and contracts between providers, so it is not common carriage.  Judge Williams challenged Sallet on the interconnection issue, but Sallet answered that interconnection is a contract between two Internet service providers, and that they are arrangements made in connection to with the provision of Title II common carrier services.  He said that service to edge providers is “derivative” of the carrier’s promise made to customers who want to go anywhere on the Internet.  He said that the FCC will review interconnection complaints on a case-by-case basis, focusing on whether a BIAP acted reasonably regarding its promises to the consumer.  Sallet contended that the FCC wants to wait and see if interconnection problems develop.  Judge Williams critiqued the FCC’s decision to ban paid prioritization even though there was limited evidence of the practice, but the FCC decided not to act on interconnection even though the FCC has significant experience with interconnection.

Keisler criticized in particular that portions of the FCC’s rules and argued further that it was invalid because the agency violated procedural law by not giving the industry enough notice about how it planned to regulate that part of the marketplace.  However, FCC Associate General Counsel Jacob Lewis explained that though notice was brief, it was complete because the Notice of Proposed Rulemaking (NPRM) discussed the general issues, provided citation to relevant laws, and posited questions for commenters to which many commenters responded, including some of the petitioners.

Interestingly, a case with a similar facts to this one was never mentioned.  A few months ago, Judge Srinivasan wrote the opinion in Home Care Association of America v. Weil, where the D.C. Circuit upheld the Department of Labor’s change in its interpretation of the Labor Act even though the Supreme Court upheld DOL’s previous interpretation in 2006.  Just as in Brand X, the Supreme Court found that the statute was ambiguous, so it deferred to the agency’s reasonable interpretation.  Although it is difficult to predict how judges will ultimately decide a case, referencing Home Care Association of America may have been unnecessary based on Judge Tatel’s early line of questioning regarding the FCC’s authority to interpret an ambiguous statutory term.

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