United States: Federal Court Sharply Limits the FCC's Authority over Broadband Services

The court's ruling will likely delay the implementation of several FCC initiatives to promote the deployment and use of broadband services.

On April 6, 2010, the U.S. Court of Appeals for the District of Columbia Circuit issued a significant decision, ruling that the Federal Communications Commission (FCC) exceeded its authority when it sought to require broadband service providers to give equal treatment to all data and Internet traffic carried over their networks. This ruling represents a setback for the FCC in its efforts to exercise greater regulatory control over broadband services, such as its proposed "net neutrality" rules and other measures.

It is important to note, however, that a close reading of this decision shows that the court did not preclude the FCC from regulating broadband services entirely. Rather, while it rejected the FCC's claim of broad authority over broadband services in general, the court did hold that the FCC may regulate broadband services, but must independently justify its legal authority for each and every regulatory measure it adopts.

Nevertheless, the D.C. Circuit's ruling introduces substantial uncertainty regarding a number of national policy goals tied to broadband services, including greater deployment of broadband services and the use of broadband in support of initiatives ranging from energy management and "Smart Grid" systems to telemedicine and distance learning.

In particular, the court's decision could have implications for the National Broadband Plan that the FCC delivered to the U.S. Congress last month. The FCC stated at the time that it could implement about half of the recommendations in the plan under its current statutory authority, and this ruling calls into question the actual extent of the FCC's authority to push forward with many of these recommendations.

The Comcast Decision

The D.C. Circuit issued its ruling in response to an appeal by Comcast of an FCC order banning Comcast from interfering with its subscribers' use of peer-to-peer file sharing services and requiring Comcast to adopt new practices for managing the traffic on its network. In its order, the FCC held that Comcast had violated the FCC's "Internet Policy Statement," which established a set of principles intended to guide the FCC in its policymaking activities. The FCC asserted that it had the legal authority to take this action against Comcast pursuant to its so-called ancillary authority under Title I of the Communications Act.

On appeal, the D.C. Circuit rejected the FCC's assertion of Title I ancillary authority. According to the court, the FCC may only exercise this authority in conjunction with its "statutorily mandated responsibilities." For example, in the early days of cable TV, the FCC was able to use its Title I ancillary authority to impose new regulations on cable TV providers because these regulations were necessary at the time in order to allow the FCC to carry out its separate statutory responsibilities under Title III with respect to broadcast TV. In its April 6 Comcast decision, however, the court ruled that the FCC failed to show any independent source of statutory authority or statutory responsibility under the Communications Act that justified the use of its Title I ancillary authority to regulate Comcast's operation of its broadband network.

Next Steps

The most immediate impact of the court's ruling in the Comcast case will likely be to delay the implementation of several FCC initiatives to promote the deployment and use of broadband services. At a minimum, the FCC will now be compelled to reexamine every measure it takes to ensure that it can point to a specific provision of the Communications Act as the basis for its proposed regulation or action.

It is also expected that the D.C. Circuit's ruling may spark a move by the FCC to try to formally reclassify broadband services as "telecommunications services" subject to stricter regulation under Title II of the Communications Act. FCC Chairman Julius Genachowski has openly stated that he is willing to consider such a measure, and within hours after the ruling came out, FCC Commissioner Michael Copps issued a statement calling on the FCC to act now to "treat broadband as the telecommunications service that it is." However, any effort to subject broadband services to Title II regulation would likely face strong opposition not only from the major telecommunications and cable providers, but also from many members of Congress as well as the Republican commissioners at the FCC.

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