Net Neutrality Litigation: Round 1 Goes To the FCC.

Good news! The D.C. Circuit denied the request by the carriers suing the Federal Communications Commission (FCC) to prevent the FCC’s net neutrality rules and reclassification of broadband as a Title II telecom service. As of today, the Net Neutrality rules are in effect, and broadband access is once again a Title II telecommunications service — pending the final outcome of the lawsuit challenging the the FCC’s actions.

 

Reactions from net neutrality opponents have ranged from defiance to “no biggie” with a side of trying to claim a partial win for getting expedited briefing (I’ll explain below why this is a tad disingenuous). On Twitter, I did see a few of my opposite numbers wailing and gnashing their teeth, at the prospect that their beloved Broadband Equestria ruled by the wise Queen Comcast Celestia and Princess Verizon Twilight Sparkle is now going to be converted into a Hellscape overrun with Tyrannosaurus Tariffs that will devour helpless ISPs like tourists dumb enough to go to Jurassic World. Needless to say, supporters of net neutrality and Title II, like my employer Public Knowledge, have been somewhat more upbeat.

 

So what does all this mean for the litigation and the ongoing machinations in Congress around net neutrality? Short version — the court was not impressed with the arguments of the carriers that the FCC was so whacky crazy power-usurping unlawful that this case is the slam-dunk reversal the carriers and their cheerleaders keep saying it is. Mind you, that doesn’t mean the FCC will win. But it does mean that opponents of net neutrality and Title II might want to ratchet back the TOTAL CONFIDENCE OF VICTORY they have exuded until now just a wee bit. It also provides a psychological lift to the pro-net neutrality side that the FCC can win this even in the D.C. Circuit.

 

On the political side, Republicans had hoped that a stay would push Democrats to the bargaining table to avoid the litigation risk. Because the FCC’s odds improve with the denial of the stay, this may have the opposite effect, with Democrats more likely to wait for a court decision rather than try to strike a deal. This could either prompt Republicans to sweeten their offer, or double down on efforts for total repeal.

 

I provide the longer version below . . .

 

Recap: Our Story So Far

 

Unsurprisingly, the major broadband ISP trade associations (USTA, NCTA, CTIA, ACA, WISPA), some of the larger carriers in their individual capacity (AT&T, Centurylink) and a bunch of others filed Petitions for Review of the FCC’s February Open Internet Order. After a false start back in March, we all ended up in the D.C. Circuit. A large bunch of folks (including Public Knowledge) intervened on the side of the Federal Communications Commission (FCC). You can see the list (and other court documents) here. For those not familiar with legal lingo, “intervenors” are people who have a legally recognizable interest in the outcome (not just the general interest shared by everyone) who pick a side and become parties to the case. (As you might expect, some other folks have intervened on the side of the broadband carriers.)

 

The carriers opened with a fairly aggressive move, asking the court to stay the FCC’s reclassification of broadband as Title II and some (but not all) of the net neutrality rules. The FCC and Intervenors in support of the FCC opposed (filings here and here) (Carrier reply to opposition here). On June 11, one day before the FCC rules went into effect, the D.C. Circuit denied the carrier motion for stay.

 

Why Did The Court Deny The Stay Motion?

 

The court doesn’t have to explain its reasoning when it grants or denies a stay, and did not do so here. The Order just contains the standard boilerplate language: “Petitioners have not satisfied the stringent requirements for a stay pending court review.” So we work back from what the standard requires and figure out what the broadband carriers failed to show.

 

To get a stay, a petitioner needs to prove 4 things:

(1) Likelihood of success on the merits. While not a determination on the actual merits, the party requesting a stay needs to show it has a fairly strong case that it will ultimately prevail. By contrast, failing to get the stay indicates that, although the party may ultimately win, it doesn’t seem obvious at this point that they have any clear advantage in their legal arguments.

(2) Threat of irreparable harm. If anyone could get a stay, then everyone would ask for one just to delay whatever they are suing to avoid. So it’s not enough for the party asking for the stay to say it’s important. The party asking for the stay has to show that they will suffer really awful harm if they don’t get a stay for the time it will take for the court to decide the merits (remember, we still don’t know who is actually going to win here, but if you reached this point you showed you have a much better than 50/50 chance of winning). The archetypal example is that if the stay doesn’t go into effect, I will lose my business and therefore my ultimate win will be meaningless.

 

These are balanced against:

(3) Harm to other parties if the court grants the stay. It ain’t all about you, Petitioner. Litigation has two sides, and the court has to consider that not letting whatever is otherwise supposed to happen while the court is considering the case actually happen may harm others.

(4) Grant of the stay is not contrary to the public interest. This is sort of a catch all for “sometimes a stay would have huge impact on people not before the court and would mess stuff up for the country. Don’t do that.”

 

In addition to these factors, you have a bunch of other things that aren’t actually part of the law, but which likely influence the way the judges consider this (after all, judges are human beings). Here, if you read the Petitioners Motion and reply, as well as the 200+ pages of affidavits from various ISPs (mostly small carriers from WISPA and ACA), you will note that — in addition to arguing that the case against the FCC is a TOTAL SLAM DUNK WIN for the carriers and that the tiny ISPs will get crushed by the massive Socialist Hellscape that is Title II  — the Petitioners made two arguments trying to appeal to the prejudices of the court.

(a) Appeal to the D.C. Circuit’s well known bias against the FCC. Petitioners went out of their way to characterize the FCC and the Order as violating the D.C. Circuit’s previous net neutrality decisions and generally acting as a power mad regulation-hungry Tariffing Tyrannosaur, with words like “usurping authority” “regulating the Internet” and other sorts of rhetoric designed to cater to the perceived anti-regulatory and anti-FCC bias of the D.C. Circuit.

(b) This is a real big deal and a stay just maintains the status quo. The Supreme Court has said consistently that judges should not grant a stay simply to “maintain the status quo,” but judges often do it anyway (since it is rather hard to prove). Petitioners were very careful to say they were not challenging the three “bright line” net neutrality rules of no blocking, no throttling, and no paid prioritization. They wanted a stay from the “general conduct rule” (a catch all to get at discriminatory conduct not explicitly mentioned), the willingness of the FCC to hear complaints based on interconnection, and the Title II reclassification.

 

The FCC and Intervenors for the FCC argued we would totally prevail on the merits (or, at any rate, that Petitioners did not have a better than 50/50 chance of winning based on the arguments so far); that Petitioners were talking big-time baloney burgers when they claimed they would suffer harm if the rules went into effect while the court considered the case; and that it would be intervenors and the public interest, not the Petitioners, who would suffer massive harm we if the rules did not go into effect on schedule. We also submitted our own 200+ pages of supporting affidavits on why we were right.

 

What Does It Mean That The Court Denied The Stay?

 

By denying the stay, the court said the Petitioners had not met their burden. Translating that into English.

(a) FCC Order Not Obviously Crazy Or Illegal. Opponents have pretty much carried on at great length ever since the D.C. Circuit vacated the no blocking or degrading rule last year that the FCC were totally cray-cray for thinking they could impose a net neutrality rule again, never mind Title II. They have consistently reassured anyone who would listen that the D.C. Circuit would totally slap down the FCC for its arrogant presumption and blatantly illegal conduct. Only last week, when a stay was not immediately forthcoming, did Petitioners start to try to manage expectations that maybe the court might not grant the stay.

Petitioners failed to show that they had a “substantial likelihood of success on the merits.” While they can still win, the failure to get the stay shows the FCC’s reclassification Order is not the obviously illegal slam-dunk reversal opponents kept repeating for everyone it was.

(b) Living under Title II won’t kill you — at least not immediately. The court clearly does not believe that Title II=Socialist Hellscape with Tyrannosaurus Tariffs devouring small WISPs and cable providers for snacks. Even if carriers don’t like it, the court has reasoned they can live with it — at least until the litigation is over.

(c) By contrast, it serves the public interest to allow the reclassification and all the net neutrality rules to go into effect. Similarly, the court clearly doesn’t buy the idea that the current status quo is a happy Broadband Equestria where My Little Broadband Providers make everything happy because ‘Broadband Is Magic’ ™. Grant of the stay would cause harm to some parties and/or the public interest.

 

To resort to the inevitable sports analogy, for the FCC, this is like running back the opening kick off for a touchdown. Obviously it’s a nice way to start the game, but we still have most of the rest of the game to go. And it ought to give those who have been giving the other side huge odds as favorites something to think about.

 

Impacts of the Court Decision.

From a legal standpoint, it means the FCC order goes into effect on schedule. You are now downloading this through your Title II broadband Internet access service (“BIAS” as they call it now at the FCC). Your BIAS provider is now a Title II telecom provider. The FCC will now take complaints on any allegations of rule violations, but I don’t think the FCC is eager to process these until we get to the ultimate decision on the merits. No use working to process a complaint only to find out later the FCC didn’t have authority. But if the BIAS providers start trying to squeeze in last minute outrageous conduct before the court makes its decision, the process is there and the FCC can act.

Additionally, BIAS providers have incentive to behave so the court doesn’t have more proof why the rules are necessary. Hence the sudden rush by major broadband providers to resolve their interconnection/peering disputes with backbone providers like Cogent and Level 3.

The biggest impact here is psychological and therefore political. The FCC and Title II supporters have now proven they can score a clean win on a net neutrality court fight — and in the DC Circuit no less! It has been an article of faith and a huge talking point among opponents of net neutrality and Title II that the FCC has consistently lost its every effort to impose net neutrality regulations because it is so obviously a regulatory over-reach, and that classification of BIAS as Title II was manifestly contrary to the Communications Act, the will of Congress, and the DC Circuit would never allow it.

 

Challengers losing on the stay shows that the FCC has a winnable case, something that opponents have never even vaguely conceded. Those who have not followed this debate for the last several years simply cannot appreciate the religious intensity with which opponents have insisted that the FCC not had merely poor chances, but NO CHANCE WHATSOEVER of winning in court. Hence the major freak out among some of the Title II opponents on social media and the cries of warlike defiance from others. Additionally, as someone on the pro-Net Neutrality pro-title II side who kept insisting that the FCC has the law on its side and that the court should not — if it followed the appropriate legal standard — grant the stay, I am relieved to find out my legal judgment is not totally out of whack with reality. It gives me confidence that I am also right when I say the FCC will prevail on the merits.

 

Political Implications

Finally, this impacts the possible Congressional negotiations. Republicans recognize the President will veto a purely partisan bill repealing Net Neutrality, so they have gone to the negotiating table on legislation. The Republicans put out a discussion draft, which the Democrats explained they could not accept because it stripped the FCC of its rulemaking power and — as written — would preclude the FCC from making broadband eligible for universal service funding and the important consumer protections provided to the public under Title II. Republicans, while expressing willingness to negotiate on these points, have not put forward any proposed changes in response (at least not publicly). As a result, things remain at an impasse.

 

Had the carriers won the stay, the Republicans would have pressured the Democrats to come back to the negotiating table or risk losing everything. Now the tables are at least somewhat reversed. Democrats have more reason to believe that the court will ultimately affirm the FCC, and get bragging rights over Republicans that a court has now found that Title II is neither obviously crazy or a Socialist Hellscape. Republicans now have to decide if they want to seriously sweeten their offer on a legislative compromise, or double down on explicitly partisan legislation to try to repeal net neutrality (such as the recent House Appropriations Bill that just passed out of the subcommittee).

 

Expedited Briefing — When Life Hands You Lemons, Make Artificially Sweetened Lemonade.

 

A number of the Petitioners have tried to spin this as a partial win because the court granted their alternative request for expedited briefing. I call this the “Crystal Lite” approach. Yes, when life hands you lemons, make lemonade. But this lemonade has a considerable amount of artificial sweetener.

 

Petitioners did, indeed, ask for expedited briefing as an alternative relief if the court did not grant the stay. But so did the FCC and Intervenors for the FCC. Hence the statement by the court that it granted the “unopposed motion for expedition.” This, in fact, understates things. The FCC affirmatively stated in its filing that it thought expedited briefing would serve the public interest, and Intervenors also asked the court to grant expedited briefing regardless of whether or not the court granted the stay.

 

So expedited briefing was pretty much always going to happen because everyone wanted it. The difference is that while the Challengers asked for expedited briefing as a consolation prize if they didn’t get what they want, we asked for expedited briefing as a thing we affirmatively wanted. to go back to the inevitable sports analogy, claiming a win on expedited briefing is like saying that it’s OK to lose the opening coin toss because that means you get to receive in the second half.

 

Care to Make A Parting Snarky Shot At Commissioner Pai Before We Close?

Sure! Not surprising, the FCC Dems all expressed their pleasure at the D.C. Cir.’s decision to deny the stay motion and the Republicans expressed their disappointment. But while I give props to Commissioner Mike O’Reilly for keeping it real, I must give Commissioner Pai my first ever Wetmachine Crystal Lite Award For Most Artificial Sweetener When Life hands You Lemons.

 

First, look at O’Reilly’s statement here. O’Reilly reads rather like an evil Michael Copps from the Star Trek Mirror Universe. I think he’s totally wrong, but I respect he’s keeping it real and rallying the troops much the same way Commissioner Copps used to do when we were fighting media consolidation ten years ago. He also doesn’t resort to any sleazy personal attacks or implications. I think he’s wrong about the claim that the FCC is making up the rules as they go along, but I get that’s their argument.

 

Now read Pai’s statement. This is a prime example of the kind of ridiculous political spin that makes so many people roll their eyes. First, we note the title of the statement on the “Decision to Review Internet Regulations Promptly.” Right, because that was totally what this was about. We then get the same tired “Obama’s plan t regulate the Internet” talking point and an unsubstantiated claim that the rules are “already harming broadband investment and deployment” (why use evidence when assertion will do, especially when all the available evidence says the exact opposite).

But the kicker, the real thing that puts this over the eye rolling top, is the extraordinary claim that Pai is “pleased the court did not suggest the rules are legally valid.” This is a lot like saying “I am pleased the opponents touchdown only counted for 6 points, and that game officials required the other team to actually kick the ball through the goal post to get the traditional ‘extra point.'” Saying it that way makes it look to anyone who doesn’t know how the game is played like this was some kind of win. Anyone who actually knows how the game is played knows that while this statement is technically true, it doesn’t mean anything, because that is how the game works. Yes, it was vaguely possible that the DC Circuit might be so disgusted with the Carriers that it would actually write an opinion explaining why the carriers are unlikely to prevail on the merits. But no one really expected that to happen because the DC Cir. generally doesn’t work that way.

 

Accordingly, I therefore award Commissioner Pai the first ever Crystal Lite Award. That’s a heck of a lot of artificial sweetener dumped into the tiny little package of Pai’s statement. No doubt some folks will find it refreshing, but Pai’s statement bears as much resemblance to reality as Crystal Lite does to real lemonade.

 

CONCLUSION

Opponents of Title II are right when they say that the FCC’s win on the stay motion is a relatively small win in the overall litigation game. But it’s also the case that the carriers took a risk by opening the game with such an aggressive gambit, and now find themselves at an opening disadvantage. The FCC proved they could win an argument for net neutrality rules and Title II in the carriers’ chosen court, something that opponents of Title II insisted could never happen and which many observers doubted.

We will get expedited briefing, which means we will probably have the briefing done by late fall and may get oral argument in January or February. With luck, we will see this case resolved by this time next year.

 

Stay tuned . . .

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