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Toward a Viable Legal Theory For Net Neutrality

The news today is all about Tuesday’s “open meeting” at the FCC, where at long last a proposed regime for network neutrality will formally be considered.  “There are of course a lot of moving pieces surrounding this debate, and however the chips fall, it’s going to have a long-term affect over how the Internet operates over the next several years.”  The FCC Votes on Net Neutrality Tomorrow; The Internet Waits | AllThingsD.

Actually, the modest few rules FCC Chairman Genachowski has proposed are so trivial that, like all good policy, compromises or settlements, they have angered both the left and the right. The former deplores the scheme as worse than nothing, while the latter says it is a slippery slope to full regulation of the Internet.

The far more important issue tomorrow is the legal framework under which the FCC will propose net neutrality rules. After the Comcast decision in April of this year — in which a federal court of appeals threw out the Commission’s decision to sanction undisclosed throttling of P2P traffic by ISPs — net neutrality has been in a state of extreme jurisdictional chaos. For an overview, read the Fall 2010 edition of the ABA’s Icarus magazine, a symposium issue on so-called “Title II reclassification” featuring, among others, this author.

About a month ago, Genachowski also announced has was abandoning his Third Way reclassification approach. That’s a brilliant decision, as reclassification was doomed to judicial reversal and, almost certainly, an injunction or stay against implementation. The alternative is for the FCC to articulate the ancillary jurisdiction linkage or nexus between the agency’s specific areas of delegated responsibility — telephony (Title II) and broadcasting (Title III) — and its general authority over “communications by wire or radio.” Yet to do that the agency needs to distance itself from the protectionist roots and core of the ancillary jurisdiction doctrine, which for 40+ years has been used principally to squelch or constrain new technologies in order to prevent market competition with older, established industries (constituencies).

Here’s what I wrote earlier:

Ancillary jurisdiction under Southwestern Cable represents the low-water mark of communications jurisprudence. It was fashioned as a legal matter to permit FCC control of CATV, the infant predecessor to today’s robust cable programming industry, as a means of protecting the Commission’s power to regulate broadcast television. . . . It was protectionism to the core [and] epitomizes the conservative critique of administrative agencies as regulatory capture.

There is no longer an appetite in Congress to utilize governmental regulation to protect incumbents and vested commercial interests against competition and new entry. Hence, because it lacked and still lacks the political will to justify net neutrality on the ground of protecting its Title II and III jurisdiction over telephony and broadcasting — by sheltering the legacy providers of those services against disintermediation — the agency can never provide the requisite “nexus” demanded by the Comcast opinion.

Since no current policy or political figure today can admit to using regulation to handicap new entrants and favor established business interests, ancillary jurisdiction will remain the dark, dirty secret of administrative law until it is moved to a new footing. Imagine if the FCC reasoned that with IP convergence, services that formerly were within its Communications Act authority, like telephony and television, are increasingly moving to an Internet-based delivery system that, if it continues, will eventually leave all of communications beyond the FCC’s jurisdiction. Under this approach, the Commission could demonstrate a clear nexus between its statutorily delegated responsibilities and the ancillary role it proposes for net neutrality, without reverting to the sullied, protectionist past of ancillary jurisdiction.

Some observers may argue that such a “Title I” approach to net neutrality does not in principle prevent the FCC from exercising unlimited power over Internet communications. That’s overstated in my view. First, the Supreme Court’s 1970s decisions on ancillary jurisdiction (Midwest Video) hold that ancillary jurisdiction us not “unbounded.” Second, from a legislative perspective it is obvious that an administrative agency acting on the basis essentially of implied power cannot do anything broader under a general “public interest” standard than it could if acting under the express jurisdiction delegated by Congress. Specifically, while Title II authorizes full, rate-of-return common carrier regulation, the FCC would overstep its bounds imposing parallel rules under Title I ancillary jurisdiction. Third, the extreme critique from conservatives that agencies cannot be permitted to do anything without express congressional authorization really doesn’t apply; Congress has granted Title I authority over all interstate communications, it just has not fleshed that out with detailed standards.

More problematic are current reports that the FCC is considering relying on Section 706 of the Act, which urges the agency to promote “advanced telecommunications” services, as its ancillary jurisdiction hook for net neutrality. That’s inane, because the Commission in the 1990s ruled over and over again that 706 was not a basis for regulatory power. This means that using 706 as the nexus for ancillary jurisdiction will necessarily stoke a hotter fight over the FCC’s reversal of its statutory interpretation, a double whammy.

The better linkage is to the basic legislative commands (e.g., Section 201) that direct the FCC to ensure just and reasonable communications and broadcasting services for users. It cannot be disputed that if current trends continue, VoIP and Internet video could and well may eventually displace POTS and cable/broadcasting, in which case there would be nothing left with which the FCC could fulfill these elementary responsibilities if such IP-based services, which do not represent “telecommunications,” “cablecasting” or “broadcasting” in traditional statutory terms, must remain forever and completely unregulated.

A broader and more cogent question is, if the FCC takes this approach, would that not create a system in which an agency decides for itself how far to go when Congress fails to update its underlying statutory power to reflect technological change? Yes, it would. But it would not be Genachowski or the FCC creating this paradigm, it was the Supreme Court. A better legal system would have an administrative agency go back to Congress and ask for new powers if its old ones are being end-run by technology. As a practical matter, that could lead to gridlock, however, as in the communications arena general revisions of the Communications Act of 1934 happen very rarely — once in 65 years, far less than every generation.

So if politics is the art of the possible, it is possible for the FCC this Tuesday to make history, survive a judicial challenge and move archaic regulatory jurisprudence forward into a new era, stripped of its protectionist past. It’s also possible the Commission will be split politically, that left-wing proponents can convince some members that a principled loss is better than a compromise win, see Net Neutrality Supporters Question FCC’s Genachowski Plan | Techworld.com, or that as it has so many times in the past, the agency will fail to explain itself in simple terms the courts demand and can understand.

The Third Way of Title II reclassification was too cute for its own good. The Commission has a chance to correct that overreaching, but its internal bureaucratic tendencies to ambiguity and a “Chinese menu” theme for jurisdiction threaten to blow up net neutrality again. GOP Opposition to FCC Net Neutrality Plan Mounts | enterprisenetworkingplanet.com. Far more principled, regardless of one’s position on the substantive merits and policy need for network neutrality, would be for the FCC to pick a single, simple nexus. It’s not cute, it’s not expansive, but it would work. The question is whether in this highly polarized legal and political environment, the players really want anything to work at all.

Politics is always, in part, theater and sausage-making. That the law and public policy are the byproducts of such superficial pursuits remains a frustration, but in the United States it’s one we all have to live with, and one some pundits are convinced preserves the republican tradition of limited government. I for one hope the FCC keeps a more modest agenda tomorrow and moves the net neutrality debate closer to a conclusion, instead of adding fuel to the legal and policy fires that have raged on this issue for years.

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