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Net Neutrality: What’s Next for FCC’s Open Internet Rules

The FCC won a major victory over net neutrality this week, and the surprise wasn’t so much that it prevailed but that its legal win was so sweeping.

There had been some expectation, on Wall Street, on Capitol Hill and in the legal community, that the D.C. Circuit would chip away at some of the FCC’s rules of the road for the internet. The FCC actions that looked to be under threat included extending the regulations to mobile carriers, and a “general conduct” rule which, in the words of FCC chairman Tom Wheeler, was meant to stop “new and novel threats to the internet.”

But the judges upheld those actions, as well as the FCC’s jurisdiction over interconnection, which has become a flashpoint in the broadband ecosystem after Netflix balked at being charged fees from some internet providers to carry its traffic.

AT&T, one of the ISPs seeking to overturn the rules, has vowed to appeal. Some lawmakers on Capitol Hill, like Sen. John Thune (R-S.D.), chairman of the Senate Commerce Committee, are once again talking about legislation. And there’s some sense that if Donald Trump were to become president, he would favor overturning to rules.

So which is likely?

An appeal. The many internet providers and telecom companies challenging the rules can either ask for a rehearing before the larger “en banc” panel of the D.C. Circuit, or they can appeal directly to the Supreme Court. The latter is where net neutrality may ultimately end up anyway, but the Supreme Court vacancy makes it less-than-certain that justices would jump at taking the case. Four justices must agree before a case is accepted for review.

“This case presents some issues on both sides, in terms of whether the court will take it,” said Paul Werner, partner at Sheppard Mullin in Washington D.C., who puts that odds at 50-50 that the high court would grant review.

Courts have shown more deference to agency actions, particularly when they are tasked with filling in gaps of ambiguous statutes. That actually was at issue in 2005, when the Supreme Court, in NCTA v. Brand X, ruled that the FCC was within its authority to classify cable broadband service as an “information service,” rather than a “telecommunications service,” which subjects Internet providers to more regulation. Justice Antonin Scalia wrote the dissent in the Brand X case, and found fault with the way the FCC classified cable modem as an “information” service. He even ridiculed it.

That was a different time and a different FCC.

The agency last year essentially did a switcheroo and reclassified broadband as a telecommunications service. That established a solid legal footing to impose robust rules requiring that internet providers treat all traffic equally, as courts have twice before gutted previous versions of the FCC’s net neutrality rules .

The net neutrality case also does not present a conflict between circuits — another factor that can interest the justices.

Working in favor of the court taking the case is that the stakes are so far reaching.

“This case does raise considerable issues of importance for the public and for the national economy, given that the policies at issue really do implicate the internet, which affects the everyday lives of Americans,” Werner said.

AT&T has indicated that it would appeal, and after the ruling the cable industry pointed to the partial dissent of  Judge Stephen Williams. He agreed that the FCC could reclassify broadband as a common carrier, but wrote that the rules were in fact an “unreasoned patchwork.” Although he agreed with “much of the majority opinion,” he still found fault with the way that the agency justified their rules.

Congressional action. Thune tried to forestall the FCC’s action in 2015 with his own net neutrality legislation, which included a ban on blocking and throttling of internet content, as well as paid prioritization. That in and of itself was significant, but Democrats and the White House balked at provisions that stripped the FCC of some of its authority over broadband.

Earlier this week, the Senate Commerce Committee passed legislation that exempts small internet providers from the net neutrality transparency requirements.

But that legislation is a far cry from a more far ranging bill. It’s hard to see that going very far in an election year, and even if it did, there is always the prospect of a veto from President Obama. He publicly endorsed reclassifying the internet in 2014 — and the White House was lukewarm to the idea of legislation back then.

The election. Hillary Clinton tweeted out support of the D.C. Circuit’s decision, writing that the ruling was a big win “for consumers, innovation and freedom of expression on the internet.” There has been a lot of speculation that, should she be elected, she would continue the policies of the current Democratic majority.

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Trump hasn’t said much about net neutrality — it is not a top-tier issue, at least not yet. It got some mention in the Republican debates, but largely from references by Jeb Bush. Ted Cruz rather famously called it “Obamacare for the internet.”

After Obama threw his support behind reclassification, Trump tweeted in 2014 that “Obama’s attack on the internet is another top down power grab. Net neutrality is the Fairness Doctrine. Will target conservative media.”

The appellate judges rejected arguments that the FCC rules violate the First Amendment, and the regulations themselves do not dictate content.

Wall Street. “The end of this story hasn’t been written yet,” research firm MoffettNathanson said in a blog post.

They believe that the ruling could “embolden” the FCC to act on other issues, like a proposed new set of privacy rules for internet providers. They believe that the rules could even lead to oversight over pricing, even though agency officials say that such rate regulation is exempt.

The end of the story hasn’t been written, but is an end even in sight? After all, the net neutrality debate has been going on for more than a decade. The previous iteration of the FCC rules was challenged by Verizon, and the result was a court victory but a more stringent set of rules.

John Mayo, professor of economics, business and public policy at Georgetown University, said that while industry enjoys operating in an environment of policy certainty, he says that questions still remain about the impact of having the net neutrality rules in place. “I would argue that this creates regulatory uncertainty,” he said.

He believes that the high court may have an “appetite for reviewing the actions of the commission in a slightly broader context,” given that its legal authority is heavily reliant on the 1996 Telecommunications Act. Congress back then, he said, intended the internet to be subject to light regulation.

“Commissions will come and go depending on the administration, but if you give a regulatory authority more latitude from which to regulate, the economic truism is that it will regulate more,” he said.

Michael Copps, a former FCC commissioner and champion of reclassification, thinks that it’s time to move on.

He tweeted on Friday, “Hey Big Cable/Telecom: You lost on EVERY count. Now spend your $ on better broadband not lobbyists.”

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