On 1 October 2019, the US Court of Appeals for DC Circuit ruled, in the case of Mozilla Corporation v Federal Communications Commission, No. 18-1051 (2019), that the Trump Administration’s repeal of the so called Net Neutrality policy was lawful. However, the Court allowed States to set their own policies, therefore limiting the impact of the new regulations.
The case of Mozilla Corporation v Federal Communications Commission, No. 18-1051 (2019) comes down to the classification of Internet services. The Telecommunications Act 1996 created two potential classifications for Internet: ‘telecommunications services’ under Title II or ‘information services’ under Title I. This distinction entails two completely different regulatory frameworks. Title II (‘telecommunications services’) entails common carrier status and triggers statutory restrictions and requirements, including making unlawful “any […] charge, practice,classification or regulation that is unjust or unreasonable” (§201(b)). On the other hand, Title I (‘information services’) does not require a common carriage status leaving the sector mostly unregulated (pp10-11).
The Federal Communications Commission is empowered under the Telecommunications Act 1996 to classifying various services into the appropriate categories. Initially, in 1998, Internet delivered over phone lines was classified as a ‘telecommunications service’, but in 2002 it was reclassified under the Bush Administration as a ‘information service’ (along with a newly available wireless mode of delivery) which was upheld by the Supreme Court in National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U.S. 967 (2005). In 2015, under the Obama Administration, Internet services were once again classified as a ‘telecommunication service’ which was upheld under the Chevron deference doctrine (Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984)) by the US Court of Appeals for DC Circuit in United States Telecom Association v. Federal Communications Commission, DC Cir., No. 15-1063 (pp11-12).
In 2018, under the Trump Administration, the Federal Communications Commission issued an Order again reclassifying Internet access as an ‘information service’ under Title I of the Telecommunications Act of 1996. In the Order, the Commission undertook a cost-benefit analysis concluding that the benefits of a market-based approach under Title I outweighed benefits of heavy regulations under Title II (p12). The opponents of the Order sued in a federal District Court.
On appeal, in a highly technical judgment, the US Court of Appeals for DC Circuit upheld most of the Order as a reasonable interpretation of the Telecommunications Act 1996 under the Chevron deference doctrine (Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984)). The Court found that the Federal Communications Commission had conducted a proper analysis of the impact of the order on investments (pp74-85), potential harm to consumers (pp85-93) as well as an honest overall cost-benefit analysis of the proposed reclassification (pp113-119) and had taken into account the reliance interest created since 2015 (pp100-104).
However, the Court found that the Federal Communications Commission had not considered all relevant factors:
“…Aspects of the Commission’s decision are still arbitrary and capricious under the Administrative Procedure Act because of the Commission’s failure to address an important and statutorily mandated consideration—the impact of the 2018 Order on public safety—and the Commission’s inadequate consideration of the 2018 Order’s impact on pole-attachment regulation and the Lifeline Program” (pp73-74).
Furthermore, the US Court of Appeals for DC Circuit struck down the preemptive effect of the Order. The Order provided that “regulation of broadband Internet access service should be governed principally by a uniform set of federal regulations,” and not “by a patchwork that includes separate state and local requirements” (s194). To this effect, the Order “preempt[s] any state or local measures that would effectively impose rules or requirements that we have repealed or decided to refrain from imposing in this order or that would impose more stringent requirements for any aspect of broadband service that we address in this order” (s195). Consequently, the Order sought to invalidate State and local laws interfering with its objectives (pp121-122).
The US Court of Appeals for DC Circuit held that the Federal Communications Commission lacked any express or ancillary power to preempt State or local laws. The Court found that no Act of Congress conferred on the Commission such power. Furthermore, the Court rejected a list of alternatives sources of authority, including the doctrines of ‘impossibility exception’ (pp126-129), ‘federal policy of non-regulation’ (pp130-133) and ‘conflict preemption’ (pp135-144).
Overall, with the preemption part of the order struck down, the US Court of Appeals for DC Circuit upheld the core of the Order despite finding that the Federal Communications Commission had not properly considered the impact of the Order on public safety, pole-attachment regulation and the Lifeline Program. Consequently, the Order was partly remanded back to the Commission ‘without vacatur’ which means that the Commission will conduct a further analysis of the impugned parts of the Order while the Order itself remains in force.
The judgment of the US Court of Appeals for DC Circuit in Mozilla Corporation v Federal Communications Commission, No. 18-1051 (2019) was fully supported by Judges Millett and Wilkins (both Obama-appointees) and partly supported by Senior Judge Williams (a Reagan-appointee). However, all three judges submitted separate opinions. Judges Millett and Wilkins submitted concurring opinions while Senior Judge Williams submitted a partly concurring and partly dissenting opinion. In this opinion, Senior Judge Williams argued that the order should be allowed to preempt State and local laws under the doctrine of ‘impossibility exception’ claiming that “the consequences of the Commission’s choice of Title I depend on its having authority to preempt” (pp1-5).
The ruling in Mozilla Corporation v Federal Communications Commission, No. 18-1051 (2019) comes after a huge media storm preceding the repeal of the so called Net Neutrality policy by the Trump Administration. The pre-existing policy of Net Neutrality issued by the Obama Administration barred internet providers from slowing down, blocking or charging Internet companies to favor some websites over others. But the Trump Administration claimed that the policy created a disincentive for Internet services to invest in their networks (CBSNews). The repeal of Net Neutrality was part of the Trump Administration’s deregulation agenda. Ultimately, regardless of policy implications, the ruling of the US Court of Appeals for DC Circuit mostly vindicates the Trump Administration. However, at the same time, it leaves room for States to implement their own policies, somehow, inadvertently reinforcing the principle of federalism.