D.C. Circuit Upholds FCC Decision to Rescind "Net Neutrality" (But Rejects FCC Attempt to Preempt Conflicting State Law)

In a lengthy opinion, a divided three-judge panel turns away most of the legal challenges to the Federal Communications Commission's "Restoring Internet Freedom" Order

Today, a partially divided three-judge panel on the U.S. Court of Appeals for the D.C. Circuit largely rejected challenges to the Federal Communications Commission's 2018 decision to repeal its 2015 "net neutrality" decision (aka the "Open Internet Order"). In a per curiam opinion on behalf of Judges Millett and Wilkins, and Senior Judge Williams, the court concluded that given the broad degree of deference afforded to federal agencies, the FCC's interpretation of its own statutory authority could withstand legal challenge and that the agency was entitled change course.

The FCC did not win across the board, however. The court rejected a key part of the FCC's order that would have preempted conflicting state and local regulations. As a consequence, individual states may attempt to adopt "net neutrality" rules of their own. In addition, the court remanded a few issues to the FCC for greater examination and explanation, but otherwise left the new order intact.

The per curiam opinion in Mozilla v. FCC begins:

In 2018, the Federal Communications Commission adopted an order classifying broadband Internet access service as an information service under Title I of the Communications Act of 1934, as amended by the Telecommunications Act of 1996, Pub. L. 104–104, 110 Stat 56 ("the Act"). See In re Restoring Internet Freedom, 33 FCC Rcd. 311 (2018) ("2018 Order"). In so doing, the agency pursued a market-based, "light-touch" policy for governing the Internet and departed from its 2015 order that had imposed utility-style regulation under Title II of the Act.

Petitioners––an array of Internet companies, non-profits, state and local governments, and other entities––bring a host of challenges to the 2018 Order. We find their objections unconvincing for the most part, though we vacate one portion of the 2018 Order and remand for further proceedings on three discrete points. . . .

The 2018 Order accomplishes a number of objectives. First, and most importantly, it classifies broadband Internet as an "information service," see 2018 Order ¶¶ 26–64, and mobile broadband as a "private mobile service," see id. ¶¶ 65–85. Second, relying on Section 257 of the Act (located in Title II but written so as to apply to Titles I through VI), the Commission adopts transparency rules intended to ensure that consumers have adequate data about Internet Service Providers' network practices. See id. ¶¶ 209–38. Third, the Commission undertakes a cost-benefit analysis, concluding that the benefits of a market-based, "light-touch" regime for Internet governance outweigh those of common carrier regulation under Title II, see id. ¶¶ 304–323, resting heavily on the combination of the transparency requirements imposed by the Commission under Section 257 with enforcement of existing antitrust and consumer protection laws, see id. ¶¶ 140– 154. The Commission likewise finds that the burdens of the Title II Order's conduct rules exceed their benefits. See id. ¶¶ 246–266.

We uphold the 2018 Order, with two exceptions. First, the Court concludes that the Commission has not shown legal authority to issue its Preemption Directive, which would have barred states from imposing any rule or requirement that the Commission "repealed or decided to refrain from imposing" in the Order or that is "more stringent" than the Order. 2018 Order ¶ 195. The Court accordingly vacates that portion of the Order. Second, we remand the Order to the agency on three discrete issues: (1) The Order failed to examine the implications of its decisions for public safety; (2) the Order does not sufficiently explain what reclassification will mean for regulation of pole attachments; and (3) the agency did not adequately address Petitioners' concerns about the effects of broadband reclassification on the Lifeline Program.

Both Judges Millett and Wilkins wrote separate concurring opinions stressing that they were obligated to uphold the FCC's judgement under the Supreme Court's Brand X decision, but neither seemed particularly happy about it.

Senior Judge Williams dissented in part. His separate opinion begins:

And be these juggling fiends no more believed,
That palter with us in a double sense;
That keep the word of promise to our ear,
And break it to our hope.

So says Macbeth, finding that the witches' assurances were sheer artifice and that his life is collapsing around him. The enactors of the 2018 Order, though surely no Macbeths, might nonetheless feel a certain kinship, being told that they acted lawfully in rejecting the heavy hand of Title II for the Internet, but that each of the 50 states is free to impose just that. (Many have already enacted such legislation. See, e.g., Cal. S. Comm. on Judiciary, SB 822 Analysis 1 (2018) (explaining that California has expressly "codif[ied] portions of the recentlyrescinded . . . rules").) If Internet communications were tidily divided into federal markets and readily severable state markets, this might be no problem. But no modern user of the Internet can believe for a second in such tidy isolation; indeed, the Commission here made an uncontested finding that it would be "impossible" to maintain the regime it had adopted under Title I in the face of inconsistent state regulation. On my colleagues' view, state policy trumps federal; or, more precisely, the most draconian state policy trumps all else. "The Commission may lawfully decide to free the Internet from Title II," we say, "It just can't give its decision any effect in the real world."

His opinion concludes:

My colleagues and I agree that the 1996 Act affords the Commission authority to apply Title II to broadband, or not. Despite the ample and uncontested findings of the Commission that the absence of preemption will gut the Order by leaving all broadband subject to state regulation in which the most intrusive will prevail, . . . and despite Supreme Court authority inferring preemptive power to protect an agency's regulatory choices, they vacate the preemption directive. Thus, the Commission can choose to apply Title I and not Title II—but if it does, its choice will be meaningless. I respectfully dissent.

All together, the opinions are nearly 200 pages.

As preemption is an issue that divides the current Supreme Court in some unusual ways, it will be interesting to see whether a petition for ceriorari on the preemption question is forthcoming, and whether the Supreme Court believes this question is worthy of review.