Little Impact on FCC Open Internet Order Appeal from SCOTUS Chevron Decision

Little Impact on FCC Open Internet Order Appeal from SCOTUS Chevron Decision
May 23, 2013

Scott Cleland

Scott Cleland is a precursor: a proven thought leader with a long track record of industry firsts.... (read full bio)

What’s the impact on the Verizon appeal of the Open Internet Order of the Supreme Court’s strong reaffirmation of its Chevron deference standard, in Arlington v. FCC?

I believe Verizon is still more likely than not to prevail on the merits of its appeal, because the FCC’s Open Internet Order is so unambiguously far outside the bounds of the FCC’s statutory authority, that Chevron deference is unlikely to apply.

If the SCOTUS had not strongly reaffirmed Chevron deference, the FCC would have faced an even steeper fight in the Open Internet Order. Despite the SCOTUS decision not being particularly helpful in the specific FCC Open Internet case, it undeniably was very FCC-friendly overall. That’s because it affords the FCC more latitude to exploit the many legally-ambiguous seams of communications law to advance its various regulatory agendas in highly-targeted ways.

This SCOTUS decision makes clear Chevron deference is not carte blanche. Chevron only applies when statutory authority is ambiguous; it is irrelevant if the agency has clearly strayed outside “the bounds of its statutory authority.”

Let’s consider some key guiding language from the SCOTUS Arlington v. FCC decision:

  • When a court reviews an agency’s interpretation of a statute it administers, the question is always, simply, whether the agency has stayed within the bounds of its statutory authority.” P. 2
  • “… for Chevron deference to apply, the agency must have received congressional authority to determine the particular matter at issue in the particular manner adopted. No one disputes that.P. 15

Let’s simplify. Verizon holds that the FCC Open Internet Order is way outside the bounds of the FCC’s statutory authority, whereas the FCC says the law in this instance is ambiguous enough that it should be due the broad Chevron deference that the SCOTUS just reaffirmed.

Now let’s review why both proponents and opponents have viewed the FCC Open Internet Order to be seriously vulnerable on appeal -- regardless of Chevron deference.

First, the FCC wants the Appeals Court to ignore Congress’ clear statement of Internet policy in the 1996 Telecom Act: “It is the policy of the United States -- … to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.”

Since the FCC Open Internet Order establishes preemptive Federal regulations of Internet Service Providers (ISPs), and since the law, the FCC and the Supreme Court have all defined ISPs’ networks as part of the Internet, the FCC is unambiguously going against Congressional policy enshrined in law.

Second, the FCC wants the Appeals Court to ignore that the FCC Open Internet order effectively changes the purpose of U.S. communications law:

  • From the 1996 Telecommunications Act purpose: “to promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies.”
  • To the 2010 Open Internet Order’s new purpose for the FCC: “The purpose [of the FCC’s rules] is to preserve the Internet as an open platform enabling consumer choice, freedom of expression, end-user control, competition, and the freedom to innovate without permission.”  Appendix A: Substantive Rules

Simply in this Open Internet order, the FCC is claiming that it has “received congressional authority to determine” these “particular matter(s)” in these “particular manner(s).”

In effect, the FCC is effectively asserting that Congress has unambiguously granted it statutory authority to change its overall purpose as an independent regulatory agency from “promoting competition and reducing regulation” to promoting openness and increasing Internet regulation. Congress has granted the FCC no such statutory authority.

If the FCC had the expansive unambiguous statutory authority in the 1934 Communications Act as it is now claiming, the FCC would not have needed Congress to pass the 1996 Telecom Act authorizing competition, because the FCC could have just changed its purpose on its own via Chevron deference.

Third, the FCC wants the Appeals Court to ignore that the Section 706 authority -- on which the FCC relies predominantly for justifying its Open Internet Order -- was an obviously deregulatory authority in a deregulatory act “to reduce regulation.” The relevant clear language of Section 706 calls for “removing barriers to infrastructure investment,” but the FCC’s Open Internet order is about creating potential new regulatory barriers to infrastructure investment. Exact opposites are not ambiguous.

The FCC’s claim that its section 706 authority is ambiguous-enough to trigger Chevron deference, is transparently self-serving and not supported by the plain language of the provision or the well-known intent of Congress at the time. Moreover, the FCC has the additional problem that a previous FCC ruled that Section 706 does not provide the FCC statutory authority to regulate broadband.

Lastly, Chevron deference will not protect the FCC from charges of being arbitrary and capricious.

The FCC predicates its entire Open Internet order on an obviously weak and think assertion of a substantive industry problem requiring preemptive price regulation of the broadband industry.

The Appeals Court will be able to see clearly and unambiguously that the FCC conducted no market power analysis, no assessment of the state of broadband competition, and no cost-benefit analysis. This obvious lack of real work and expert analysis spotlights for the court that the FCC order is replete with unproven assertions, and largely devoid of substantive objective analysis or presentation of facts.

In short, the SCOTUS’ reaffirmation of the FCC’s broad Chevron authority is undeniably good news for the FCC in the specific areas that it has some underlying regulatory statutory authority. However, whether or not Chevron deference kicks in on a specific case depends entirely on the facts of the regulatory action and the claimed congressional statutory authority -- in that specific case.

Importantly in this specific case, the facts, precedents and lack of actual statutory authority are seriously problematic for the FCC. This means it more likely than not that Verizon will prevail in its appeal of the FCC Open Internet Order.

[Originally Published on The Precursor Blog, as part of the FCC Open Internet Order Series]

Scott Cleland

Scott Cleland is a precursor: a proven thought leader with a long track record of industry firsts.... (read full bio)