I confess that I am more than a bit mystified at the way FCC
Chairman Tom Wheeler and his Democrat colleagues, seemingly, are moving ever
closer in the direction of embracing a Title II reclassification of Internet
access services. No matter how loud the banging of pots and pans outside the FCC’s
headquarters, it would be terribly unsound as a matter of policy to subject Internet
services to the same Title II public utility regulatory regime that applied to
last century’s POTS (“plain old telephone”) service.
The irony of the Free Press organization urging protesters
to bring pots to the FCC to make noise in the cause of imposing on today’s
Internet providers the same public utility regulation that applied to Ma Bell’s
POTS-era service seems to have escaped the protesters.
If you are old enough to recall the ubiquitous rotary dial telephone
of the Ma Bell era, then you know you don’t want to put the Internet into the
public utility straightjacket. Even Tim Wu, the claimed coiner of the term “net
neutrality,” freely admits that Title II regulation is the same regime applied
to railroads and electric utilities.
But put aside my mystification as to why Chairman Wheeler
and his Democrat colleagues would want to align themselves with such a
backwards-looking policy.
What also mystifies me is how little discussion there has
been concerning the likelihood of success, or not, that a Title II
reclassification would be sustained. As a said in my May 9 blog, “Pots and Pans and the Neutrality Mess,”
the “FCC’s legal case would be fairly problematic.”
Here is the way I explained why this is so:
“While it is true enough that, under established
administrative law principles, an agency may change its mind, it nevertheless
must provide a well-reasoned explanation for such a change. Pointing to the
number of protesters banging on pots and pans outside the FCC's doors is not
likely to suffice. Neither is pointing to the agency's disappointment at
already having been twice rebuffed by the DC Circuit under alternative
theories.
The main reason the FCC's case for sustaining a Title
II challenge would be problematic is this: In defending its decision to
classify Internet service providers as information service providers - thereby
removing them from the ambit of Title II regulation - the Commission argued
that, from a consumer's perspective, the transmission component of an
information service is integral to, and inseparable from, the overall service
offering. This functional analysis of ISPs' service offerings was the principal
basis upon which the Supreme Court upheld the FCC classification determination
in 2005 in its landmark Brand X decision.
I don't think the integrated, inseparable nature of
ISPs' service offerings, from a functional standpoint, and from a consumer's
perspective, has changed since the Brand X decision, so it won't be easy
for the Commission to argue that it is changing its mind about the proper
classification based on changed consumer perceptions of the service offerings'
functionality. And to the extent that the Brand X Court cited favorably
to the FCC's claims concerning the then-emerging marketplace competition and
the dynamism in the broadband marketplace, those factors, if anything, today
argue even more strongly for a non-Title II common carrier classification.
I understand the role that
so-called Chevron deference can play in upholding agency decisions.
Indeed, it played an important role in the Court's decision in Brand X.
But invoking Chevron deference won't relieve the FCC of the need to provide
persuasive reasoning in support of an abrupt about-face on a point the agency
litigated - successfully - all the way up to the Supreme Court.”
As I’ve been puzzling over the lack of comment concerning
the lawfulness of a potential FCC switcheroo regarding Title II, I reviewed
once again the FCC General Counsel’s Memorandum dated May 6, 2010,
in which Austin Schlick, the then-GC, set out to bolster the case for a Title
II reclassification of Internet services should the Commission choose to adopt
that course. Of course, the then-commissioners did not choose the Title II
route.
Nevertheless, given its clear intent to bolster the legal
justification for a Title II reclassification, the General Counsel’s memorandum
is instructive. As I acknowledged in my blog
last Friday, Mr. Schlick rightly observes that the FCC may well receive
substantial Chevron deference for a
reclassification determination and that an agency is entitled to change its
mind if it offers persuasive reasoning for doing so.
I agree with these points of administrative law. But I think
if Mr. Schlick’s memo is read closely, it indicates that it will not be so easy
for the Commission to supply such persuasive reasoning. This is because, as Mr.
Schlick readily acknowledges, in his opinion for the Supreme Court in Brand X, Justice Thomas declared: “The
entire question is whether the products here are functionally integrated (like
the components of a car) or functionally separate (like pets and
leashes). That question turns not on the language of the Act, but on the
factual particulars of how Internet technology works and how it is provided,
questions Chevron leaves to
the Commission to resolve in the first instance....”
Having already resolved in the first instance the question
of “the factual particulars of how Internet technology works and how it is
provided,” it won’t necessarily be so easy for the Commission now to do an
about-face. For as Mr. Schlick went on to say, an agency reassessment of the
classification issue would have to include:
“[A] fresh look at the technical
characteristics and market factors that led Justice Scalia to believe there is
a divisible telecommunications service within broadband Internet access.
The factual inquiry would include, for instance, examination of how broadband
access providers market their services, how consumers perceive those services,
and whether component features of broadband Internet access such as email and
security functions are today inextricably intertwined with the transmission
component. If, after studying such issues, the Commission reasonably
identified a separate transmission component within broadband Internet access
service, which is (or should be) offered to the public, then the consensus
policy framework for broadband access would rest on both the Commission’s
direct authority under Title II and its ancillary authority arising from the
newly recognized direct authority.”
In other words, as Mr. Schlick understood, it won’t suffice
for the Commission simply to bemoan the fact that the D.C. Circuit twice has
held that the agency lacked authority for its earlier forays into net
neutrality regulation. Instead, the Commission will need to show, as a factual
matter, from a functional standpoint and from the consumer’s perspective, why
its earlier technical analysis concerning the integrated nature of Internet
service – that is, the inseparability of
the transmission and information services components – is no longer
“operative.”
Mr. Schlick quotes heavily from Justice Scalia’s dissenting
analysis to bolster his case. But Justice Scalia’s analysis was accepted by
only two other Justices. He was on the losing side of a 6-3 decision.
I am not saying that the Commission could not prevail if it
ever decides to go the Title II route – as unwise as such a decision would be.
But I am not aware that the functional nature of Internet access services has
changed since the Commission initially classified Internet access as an
information services. Nor am I aware that consumers perceive the way these
services are offered, from a functional standpoint, any differently today than
they did at the time of the agency’s initial classification determination.
That being so, I remain mystified at how little discussion
there has been concerning the lawfulness, or not, of a potential Title II
reclassification.
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