Court blocks net neutrality, says ISPs are likely to win case against FCC

The Federal Communications Commission’s hopes of enforcing net neutrality rules was dealt a major setback last week. A panel of appeals court judges blocked the regulations on Thursday in a ruling that said broadband providers are likely to win the case on the merits.

The US Court of Appeals for the 6th Circuit previously issued an administrative stay that delayed enforcement of the rules for a few weeks, which didn’t necessarily indicate much about the judges’ view of the lawsuit. But on Thursday, the judges issued an order that stays the net neutrality rules until the court makes a final ruling, and judges made it clear they believe the Internet service providers have a stronger case than the FCC.

“Because the broadband providers have shown that they are likely to succeed on the merits and that the equities support them, we grant the stay,” a panel of three judges wrote in the unanimous ruling.

The FCC in April voted to revive net neutrality rules that were previously discarded by the Trump-era commission. To get the rules upheld, the FCC must convince judges that it has authority to classify broadband as a telecommunications service, a necessary step for imposing Title II common-carrier regulations.

The FCC’s task got harder when the Supreme Court decision in Loper Bright Enterprises v. Raimondo overturned the 40-year-old Chevron precedent that gave agencies leeway to interpret ambiguous laws as long as the agency’s conclusion was reasonable. Even before that, ISPs were hoping that the Supreme Court’s evolving approach to what are deemed “major questions” would prevent the FCC from defining broadband as telecommunications without explicit instructions from Congress.

ISPs likely to succeed on the merits
The 6th Circuit panel found that broadband providers “are likely to succeed on the merits because the final rule implicates a major question, and the Commission has failed to satisfy the high bar for imposing such regulations.”

Net neutrality, the judges wrote, “is likely a major question requiring clear congressional authorization,” and the “Communications Act likely does not plainly authorize the Commission to resolve this signal question. Nowhere does Congress clearly grant the Commission the discretion to classify broadband providers as common carriers. To the contrary, Congress specifically empowered the Commission to define certain categories of communications services—and never did so with respect to broadband providers specifically or the Internet more generally.”

Although the ISPs now have a clear advantage in the case, net neutrality supporters say there is still hope.

“The grant of a stay definitely gives the edge to the ISPs. That said, the outcome is far from certain. The case goes to a different set of judges, which means that it may get a fresh look,” Andrew Jay Schwartzman, senior counselor for the Benton Institute for Broadband & Society, told Ars today.

The three 6th Circuit judges who ruled against the FCC last week are Chief Judge Jeffrey Sutton, Judge Eric Clay, and Judge Stephanie Dawkins Davis. Sutton was appointed by George W. Bush, while Clay is a Clinton appointee, and Davis was appointed by Biden.

New panel of judges on the way
The current case is Ohio Telecom Association v. FCC. Oral arguments may be held as early as October 28, but a different set of judges will hear the arguments and make a ruling on the merits. “The clerk is directed to schedule this case for oral argument at the court’s fall sitting, October 28-November 1, 2024, so that a randomly drawn merits panel may consider the case,” the Thursday ruling said.

Which three judges will decide the case on the merits hasn’t been announced. Even after that panel rules, the losing side could seek an en banc rehearing with all the court’s judges, and the case could eventually go to the Supreme Court.

Schwartzman, who is involved in the 6th Circuit case on the pro-net neutrality side, told Ars that there are “some factual mistakes in the stay order; once they are properly explained, the merits panel might see things differently.” The judges who granted the stay “seem to think [of] ISPs’ offering of DNS and caching as essential elements of their offerings; that was true in 2005, but not today,” Schwartzman said.

Schwartzman was referring to a passage in the ruling that said “broadband providers offer data processing and storage to users through DNS and caching services.” The judges’ panel said that because DNS and caching “provide users with a comprehensive capability for manipulating information,” broadband seems to be more accurately described as an information service than a telecommunications service.

Pro-net neutrality group “remains confident”
Consumer advocacy group Public Knowledge also expressed some optimism about the case’s final outcome. “Despite this court’s action, we remain confident that the FCC’s rules—and classification of broadband as a telecommunication service under Title II of the Communications Act—will ultimately be upheld, just as they were before—or that Congress will step in to reinstate these popular and necessary protections,” Public Knowledge said in a press release.

Public Knowledge Legal Director John Bergmayer acknowledged in an email to Ars that “the ruling on the stay is not good news for the FCC or Title II in the 6th Circuit.” But he argues that “there are some complicating factors and legal questions that have to be resolved, and there are still opportunities to draw the court’s attention to them, and the broader implications of its ruling.”

Bergmayer pointed to a statement in the Supreme Court’s Loper Bright ruling that said, “we do not call into question prior cases that relied on the Chevron framework.” That means the 2005 Brand X ruling that helped the FCC win previous court cases related to net neutrality is still valid.

“The Supreme Court in Loper Bright said that decisions relying on Chevron are not automatically overturned and that agencies still get deference for fact-finding, just not legal interpretation,” Bergmayer said. But “the 6th Circuit appears to simply disagree with some of the FCC’s findings of fact” related to whether broadband is a telecommunications service, he said.

Case could turn on telecommunications definition
The pro-net neutrality side will argue that broadband should be considered a telecommunications service based on the plain text of the law. Although US law doesn’t specifically say that broadband is telecommunications, it defines telecommunications as “the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.”

In previous cases, Chevron provided the FCC with deference for its determinations on whether broadband was an information service or telecommunications—even though the FCC came to opposite conclusions depending on whether Democrats or Republicans were in charge at any given time.

“As the case progresses, it will be harder to overlook how it’s the Chevron doctrine that allowed broadband to be regulated as an information service, saving the Bush-era FCC’s deregulatory push… We don’t need Chevron to get to the right result since the plain text supports Title II,” Bergmayer said.

Despite the Supreme Court’s conservative majority, Bergmayer is not convinced the high court will rule against the FCC:

Broadband lobby groups celebrate
Four major trade groups representing broadband providers issued a joint statement praising the 6th Circuit ruling.

“By all measures, broadband in the US has been thriving under a light-touch regulatory framework. We’re pleased that the Sixth Circuit has preserved that framework during the appeal process, thus shielding providers and their customers from the many harms that would stem from attempting to comply with the FCC’s ill-fitting and ambiguous common carrier mandates,” the groups said.

FCC Commissioner Brendan Carr, a Republican and staunch opponent of net neutrality rules, also celebrated what he called a ruling against “the Biden-Harris Administration’s plan for increasing government control of the Internet.” FCC Chairwoman Jessica Rosenworcel issued a statement saying the ruling “is a setback but we will not give up the fight for net neutrality.”

Even if the FCC loses, each US state would be allowed to regulate net neutrality because the Trump-era FCC lost its attempt to preempt state laws. “If we are stuck with the [former Chairman Ajit] Pai FCC’s framework, that means that states can freely enforce their own net neutrality laws, and there is no basis to challenge things like New York’s broadband affordability law. I don’t think that’s an outcome that ISPs particularly want, either,” Bergmayer said. Ars Technica