Court Hears Arguments on Challenges to FCC's Digital Discrimination Order

On September 25, the U.S. Court of Appeals for the Eighth Circuit heard oral arguments in the case of Minnesota Telecom Alliance v. FCC. The case involves several legal challenges against the FCC's November 2023 Digital Discrimination Order. One of those challenges is to the Order's imposition of unintentional disparate impact liability on broadband Internet service providers (ISPs). Section 60506 of the Infrastructure Investment and Jobs Act of 2021 authorizes the Commission to adopt rules prohibiting intentional digital discrimination of access to broadband Internet services based on one's membership in a protected class. However, the Order exceeds the agency's statutory authority by imposing unintentional disparate impact liability on ISPs.

The Free State Foundation's March 2023 public comments in the Commission's digital discrimination proceeding addressed the legal authority conferred on the Commission:

The text of the Infrastructure Act requires an intent-based definitional standard for digital discrimination. Section 60506(b) authorizes the Commission to adopt rules that prevent digital discrimination "based on" the specific categories of income level, race, ethnicity, religion, or natural origin. The Infrastructure Act's inclusion of the words "based on" in connection with suspect or prohibited classifications and – most significantly for purposes of statutory interpretation – the absence of any broader catchall terms such as "results in" or "otherwise adversely [a]ffects" indicates that proof of intent is a necessary element of any successful claim of "digital discrimination." 

When Congress enacted the Infrastructure Act, it was aware of Supreme Court precedents regarding the use of such catchall terms. Yet Congress declined to include such catchall terminology in Section 60506. 

 

Oral arguments before the Eighth Circuit also addressed the claim that the Order's overreach upon overreach contravened the Supreme Court's Major Questions Doctrine. The Free State Foundation's April 2023 reply comments concluded that the FCC's expansive interpretation of Section 6506 – including the imposition of disparate impact liability, in particular – makes it likely that the order would run afoul of the Major Questions Doctrine. According to the Supreme Court’s decisions in West Virginia v. EPA (2023) and Biden v. Nebraska (2023), there are certain "extraordinary cases" involving decisions of such "political and economic significance" that a "clear congressional authorization" by Congress is required for the agency to exercise the powers it claims. However, Section 60506 does not contain clear congressional authorization authorizing the FCC to subject seemingly every facet of broadband ISPs business and deployments to unintentional disparate impact liability. 

Press Release: The FCC Should Turn to Productive Endeavors

Regarding the Sixth Circuit’s issuance of an order staying implementing of the FCC decision to regulate Internet service providers as common carriers, Free State Foundation President Randolph May issued the following statement:

“Not since Daniel read the proverbial handwriting on the wall to King Belshazzar have predictions of doom been a safer bet. From the initiation of the FCC’s proceeding to regulate Internet service providers as common carriers, it’s been clear that the FCC’s action likely would be held unlawful as exceeding the agency’s authority. While the Sixth Circuit’s action is not a final determination, here’s today’s prediction. If the FCC pursues this case to the Supreme Court, it will lose because the Court has already telegraphed, in West Virginia v. EPA, that whether the FCC may regulate Internet providers as common carriers is a Major Question —and one that Congress has not clearly authorized the FCC to decide. In other words, the handwriting is on the wall, and you don’t have to be Daniel to read it.

“It would be so much better for America’s consumers if the Commission and the Biden Administration would turn away from the pursuit of fruitless aggressive regulatory endeavors, such as those pursued in the now-stayed Title II proceeding and the Digital Discrimination proceeding, and focus their energies on policies that would speed deployment to those still waiting for the remaining broadband deployment gaps to be filled." 

Joint Resolution in Senate Would Repeal FCC's Digital Discrimination Rule

On March 14, Sen. Ted Cruz introduced S.J.Res. 64, Congressional Review Act (CRA) joint resolution of disapproval to overturn the FCC's digital discrimination regulation. By a 3-2 vote, the Commission adopted a November 2023 Order to implement the Infrastructure Investment and Jobs Act's directive that the Commission facilitate equal broadband access insofar as it is technically and economically feasible.

The Infrastructure Act requires the Commission to adopt rules prohibiting intentional digital discrimination of access against individuals of protected classes such as race, religion, ethnicity, and income level. However, the Commission exceeded its statutory mandate by imposing unintentional disparate impact liability on broadband Internet service providers (ISPs) and subjecting nearly every facet of broadband network operations and business to agency scrutiny without clear safe harbors. 

 

A similar CRA joint resolution of disapproval – H.Res.107 – was introduced by Reps. Earl L. "Buddy" Carter and Andrew Clyde back on January 30 of this year. That resolution was the subject of a February 6 blog post. If passed by Congress and signed into law, the CRA would result in the repeal of the FCC's digital discrimination rule. As observed in a February 14 blog post, the FCC's November 2023 Order is also the subject of consolidated litigation that is pending in the U.S. Court of Appeals for the Eighth Circuit. 

 

The FCC's digital discrimination proceeding is ongoing. In its November 2023 further notice of proposed rulemaking, the Commission proposed additional "affirmative obligations" for reporting and internal compliance program requirements. The Commission also has proposed the creation of a Civil Rights Office with a roving mandate to police digital discrimination. But as Free State Foundation President Randolph May and I explained in our March 4, 2024, public comments, the record shows no evidence that digital discrimination is taking place. The agency's proposals, if adopted, would not confer any real benefit on Americans of any class but would instead amount to an unjustified further expansion of agency power over the private marketplace. 

 

Notably, the FCC's digital discrimination rule was a subject of discussion and debate at the Free State Foundation's Sixteenth Annual Policy Conference – #FSFConf16 – held on March 12, 2024. For more, check out the video of the hot topics communications law and policy panel, as well as the video of the inaugural TMR vidcast hosted by former FCC Commissioner Michael O'Rielly: 

Court Selected to Hear Legal Challenges to FCC's Digital Discrimination Order

According to a February 9 order by the U.S. Judicial Panel on Multidistrict Litigation, several legal challenges against the FCC's November 2023 Digital Discrimination Order will be consolidated and heard before the 8th Circuit Court of Appeals. Although all acknowledge that Section 60506 of the Infrastructure Investment and Jobs Act of 2021 authorizes the Commission to adopt rules prohibiting intentional digital discrimination of access to broadband Internet services based on one's membership in a protected class, the Commission's Order exceeds the agency's statutory authority by imposing unintentional disparate impact liability on broadband Internet service providers.

In March 2023, the Free State Foundation filed public comments in the Commission's digital discrimination proceeding addressing the legal authority conferred on the Commission:

The text of the Infrastructure Act requires an intent-based definitional standard for digital discrimination. Section 60506(b) authorizes the Commission to adopt rules that prevent digital discrimination "based on" the specific categories of income level, race, ethnicity, religion, or

natural origin. The Infrastructure Act's inclusion of the words "based on" in connection with suspect or prohibited classifications and – most significantly for purposes of statutory interpretation – the absence of any broader catchall terms such as "results in" or "otherwise

adversely [a]ffects" indicates that proof of intent is a necessary element of any successful claim of "digital discrimination." 

Congress undoubtedly also was aware of Supreme Court precedents regarding the use of catchall terms to express intent when it enacted the Infrastructure Act and declined to include in the statute any such catchall terminology. As a result, Section 60506 should be understood as conferring no authority on the Commission to adopt an unintentional disparate impact standard for digital discrimination in broadband deployment.

 

Given recent developments in Supreme Court jurisprudence, particularly the emergence of the major questions doctrine, the Commission may not be able to rely on Chevron deference to prop up the agency's imposition of unintentional disparate impact liability. The Free State Foundation's April 2023 reply comments addressed this point:

We agree with comments that the Commission's interpretation of Section 60506 is limited by the major questions doctrine. As explained by the Supreme Court in West Virginia v. EPA (2023), the doctrine holds that there are certain "extraordinary cases" involving decisions of such "political and economic significance" that a "clear congressional authorization" by Congress is required for the agency to exercise the powers it claims. Section 60506 does not contain clear congressional authorization for redrawing the regulatory landscape of broadband Internet services under the Communications Act… The broader the extent to which the Commission's rules impose liability on ISPs and the more onerous the restrictions and obligations they impose on the details of deployment undertakings, the more likely it is that such rules would be of vast political and economic significance. 

FSF's reply comments concluded if the Commission imposed disparate impact liability that the agency's new regulatory apparatus would more likely be considered an extraordinary case that would be unlawful under the major questions doctrine.

Joint Resolution in Congress Would Repeal FCC's Digital Discrimination Rule

On January 30, Representatives Earl L. "Buddy" Carter and Andrew Clyde introduced a Congressional Review Act (CRA) joint resolution of disapproval to overturn the FCC's "digital discrimination" regulation. The Commission's November 15, 2023 Order adopted the rule on a 3-2 vote. The joint resolution is worthy of support because the Commission's imposition of unintentional disparate impact liability on broadband Internet service providers (ISPs) is unlawful and bad policy.

The CRA provides a fast-track mechanism for Congress to repeal new agency regulations that it is opposed to. But a CRA joint resolution passed by Congress is still subject to the signature or veto of the President. For further background on the CRA, see FSF Board of Academic Advisors’ Member Daniel Lyons' June 2018 Perspectives from FSF Scholars, "The Congressional Review Act and the Toxic Politics of Net Neutrality."

 

As explained in further detail in the Free State Foundation’s February 2023 public comments and March 2023 and April 2023 reply comments filed in the FCC's proceeding on digital discrimination, Section 60506 of the Infrastructure Investment and Jobs Act authorizes the Commission to facilitate equal access to broadband insofar as it is technically and economically feasible. And the Act directs the Commission to adopt rules prohibiting intentional digital discrimination of access against individuals of protected classes such as race, religion, ethnicity, and income level. But the Act does not contain language authorizing liability based on unintentional disparate impact. 

 

Moreover, there is zero evidence of digital discrimination of access taking place and it's contrary to the financial interests of ISPs to deny would-be subscribers access to engage in for. The Commission's rule will not expand or speed up deployment to more Americans. And if allowed to stand, the agency's rule will subject nearly every broadband ISP business and network decision to scrutiny under the agency's rule. This will most likely deter investment in the infrastructure buildout to harder-to-reach areas. 

 

In short, the FCC's digital discrimination rule is well suited for the CRA joint resolution of disapproval. The House should pass it.