Notice & Comment

Title II Reclassification: A Legal Primer

It’s an exciting time for communications law. Later this month, the FCC is expected to reclassify broadband ISPs like Comcast and Verizon as “telecommunications carriers” subject to the requirements contained in Title II of the federal Communications Act. This action follows on the heels of President Obama’s November plea for reclassification. Supporters of the FCC’s plan argue that it will enable the Commission to subject broadband providers to “network neutrality” obligations that it has tried unsuccessfully to apply under various other sources of authority. More broadly, reclassification would put all sorts of practices by broadband ISPs squarely within the Commission’s purview.

The legal details of reclassification proposals such as that now being considered by the FCC can be obscured in the broader debate over the policy merits of Title II reclassification and of net neutrality in particular. But in the near certain event that reclassification is challenged in court, those details could blossom into a very interesting and important case not only for the future of Internet regulation but also for administrative law more generally. Indeed, the last major case involving classification of broadband Internet access under the Communications Act resulted in the Supreme Court’s well-known decision – to admin nerds, at least – in National Cable & Telecommunications Association v. Brand X Internet Services.

Here is my sense of the major legal components of the FCC’s plan:

1. The classification issue itself is at bottom a question about statutory definitions. As those familiar with Brand X know, whether a communications provider counts as a “telecommunications carrier” subject to Title II turns on whether it provides a “telecommunications service,” which in turn depends on if it “offers” telecommunications.

A decision to reclassify broadband ISPs means simply that the FCC would decide that such ISPs do in fact offer telecommunications, which the Act defines as (to paraphrase) the ability to transmit information of the user’s choosing, without change in form or content. But things are not so simple. For one, any finding that consumer broadband Internet access is a Title II telecommunications service would involve reversing the 2002 FCC order affirmed in Brand X, which determined that broadband ISPs offer users an integrated “information service” without a separable “telecommunications component.”

It is expected that opponents of reclassification – most obviously, broadband ISPs themselves – will strenuously resist any such Commission decision. They will argue that whether ISPs offer telecommunications is a factual question on which the relevant facts have not changed, and that the FCC is engaged in politically driven fact-finding in order to impose its preferred policy. This argument may test the limits of the Commission’s ability to reverse itself and, in particular, the Supreme Court’s cryptic suggestion in FCC v. Fox Television that agencies face a potentially greater obligation to explain policy reversals that involve factual issues or significant reliance interests. For its part, the Commission is likely to counter that the Brand X majority endowed it with broad interpretive latitude to determine whether broadband providers are telecommunications carriers or not, and that it should receive substantial deference on the factual, legal, and policy issues involved.

2. Under the structure of the Communications Act, a Commission determination that broadband ISPs provide telecommunications service would automatically subject ISPs to the various “common-carrier” obligations contained in Title II. Proponents of net neutrality believe that the Commission could, through interpretation, adapt some of those obligations to (among other things) ban ISPs from accepting payment to favor certain traffic over their networks, the primary aim of network neutrality regulation. Most obviously, section 202 of the Act prohibits “unjust or unreasonable discrimination” by Title II common carriers, and the Commission has pointed to that provision as potential authority for net neutrality rules. On the other side, reclassification opponents have argued that section 202 at most requires ISPs to offer prioritized service on the same terms to any company that wants to buy it and does not support an outright ban on network prioritization.

3. A key part of nearly all reclassification proposals is what is called “forbearance.” As I mentioned at the outset, a Commission determination that a communications providers counts as a telecommunications carrier automatically results in a number of statutory requirements applying to that carrier. However, the FCC has the statutory power (see 47 U.S.C. § 160) to “forbear from” – i.e., choose not to apply – any or all of those requirements, provided that it makes certain determinations. And it is expected that the FCC will in fact forbear from many of the more onerous provisions of Title II, such as those that would require retail rate regulation of broadband services.

It is unclear what role forbearance will play in the court challenge. ISPs have argued that the FCC has not developed the factual record supporting forbearance. However, raising that issue to a court is a dicey proposition because, after all, the decision to forbear results in less, not more, regulation of ISPs. Whether the ISPs see it as in their interest to attack the Commission’s forbearance determination may therefore depend on whether the forbearance part of the order is likely severable from the reclassification part. If not, the ISPs might see an attack on forbearance as a way to get a court to vacate the order as a whole.

At the end of the day, I believe that the FCC has a winnable case, especially given the deference afforded to agencies in these sorts of cases. But the Commission’s gamble is not without risk. Only time will tell whether that gamble pays off.

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