The United States Court of Appeals-D.C. Circuit yesterday held that the Federal Communications Commission has no regulatory authority over the network management practices of Internet service providers. The FCC, according to the court, relied on congressional statements of policy as a basis for determining that the agency had ancillary authority over the network management practices of a broadband provider, in this case Comcast Corporation.
The court did not buy this argument. The court reasoned that regulation of Comcast’s network management practices was not ancillary to the FCC’s statutorily mandated responsibilities. In other words, ancillary authority has to be based on specifically delegated powers within the Communications Act. As an administrative agency, the FCC has authority to act only according to authority delegated to them by Congress. Congress has not delegated authority to the FCC to regulate a cable company’s network management practices.
For investors in broadband providers such as cable companies and telecommunications companies, this is a win. Net neutrality regulations would result in greater compliance costs and increased network management costs. If the costs are passed on to consumers through higher prices, the price increases may discourage adoption of broadband services offered by these companies. If cable companies are not able to pass on these costs through higher prices, the result may be an erosion in profits.
Net neutrality proponents are not expected to give up their fight. The FCC may appeal the decision to the Supreme Court. This may prove costly in terms of time, especially given the FCC’s intent to incorporate net neutrality into its national broadband plan.
The FCC may also attempt to reclassify Internet service as a Title II or common carrier service, treating Internet service providers like phone companies. The problem with this approach is that the FCC has already declared by its own rules that Internet service is not a telecommunications service but an information service. There will be high statutory and legal hurdles to climb should the FCC attempt to go 180 degrees against its own findings, which were upheld by the Supreme Court in 2002.
The other option is to get Congress to pass legislation specifically delegating to the FCC the authority to regulate an Internet service provider’s network management. I find this unlikely. Congress has always maintained a hands-off approach to the Internet and given the political climate of the country in terms of how it perceives takeovers of private industry by the federal government, Congress may not be supportive of such an action.
While it is too early to declare net neutrality as a dead policy, the court’s ruling has taken considerable sting out of its argument.
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