Appeals Court Strikes Down FCC's Net Neutrality Rules

On January 14, 2014, the U.S. Court of Appeals for the District of Columbia Circuit issued a long-awaited decision on the Federal Communications Commission's Open Internet Order.1 That Order required broadband Internet providers to disclose their pricing and network management practices and, subject to reasonable network management, prohibits carriers from blocking access to lawful content and applications, or engaging in unreasonable discrimination between and among competing applications and services such as Amazon and Netflix.2 The rules were adopted out of a concern that carriers might block, or otherwise grant preferential treatment to, their own Internet services, thereby disadvantaging competing content providers and consumers—and ultimately impairing the growth of the Internet.3

Verizon sought review of the FCC's Order. The opinion for the panel majority, by Circuit Judge Tatel, held that the FCC had ample authority under Section 706 of the Telecommunications Act of 1996 to adopt requirements designed to prevent practices that could impair broadband deployment. The court further decided that the rules in question were within the scope of Section 706 authority.

However, the court went on to hold that, while the rules pass muster under Section 706, they were contrary to other provisions of the Telecommunications Act and prior Commission decisions classifying the provision of broadband service by Verizon and others as an "information service," not common carriage. Since the nondiscrimination and anti-blocking rules are quintessential common carrier obligations, the court vacated those two key parts of the FCC's decision. The rule requiring disclosure of carrier network management practices was allowed to stand.

The case is noteworthy in several respects.

First, it appears to represent a ringing endorsement of potentially expansive FCC authority over the Internet. Furthermore, the majority endorsed the FCC's conclusion that even though the number of instances in the record of actual abuses was small (only four), this was enough to justify the rule—at least when coupled with judicial deference to the FCC's judgment that carriers have continued incentive to disadvantage competing Internet services.

While public interest groups and Democratic members of Congress are already calling for the FCC to exercise its authority under Section 706 to the fullest extent, the challenge for those so inclined is to fashion rules that avoid the common...