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Federal Appeals Court FCC Ruling 6-2-2011

Federal Appeals Court FCC Ruling 6-2-2011

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United States Court Appeals
FOR THE DISTRICT COLUMBIA CIRCUIT
Argued January 2010
Decided April 2010
No. 08-1291
COMCAST CORPORATION,
PETITIONER
FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES AMERICA,
RESPONDENTS
NBC UNIVERSAL, AL.,
INTERVENORS Petition for Review Order the Federal Communications Commission
Helgi Walker argued the cause for petitioner. With
her the briefs were Eve Klindera Reed, Elbert Lin, David Murray, James Casserly, and David Solomon.
Howard Symons argued the cause for intervenors
National Cable Telecommunications Association and NBC
Universal. With him the briefs were Neal Goldberg,
Michael Schooler, and Margaret Tobey. Richard Cotton
entered appearance.
Kyle Dixon was the brief for amici curiae
Professors James Speta and Glen Robinson and The
Progress and Freedom Foundation support petitioner.
Austin Schlick, General Counsel, Federal
Communications Commission, argued the cause for
respondents. With him the brief were Catherine
OSullivan and Nancy Garrison, Attorneys, U.S.
Department Justice, Joseph Palmore, Deputy General
Counsel, Federal Communications Commission, Richard
Welch, Deputy Associate General Counsel, and Joel Marcus,
Counsel. Daniel Armstrong III, Associate General
Counsel, entered appearance.
Marvin Ammori argued the cause for intervenors Free
Press, al. support respondents. With him the brief
were Henry Goldberg, Harold Feld, and Andrew Jay
Schwartzman.
John Blevins was the brief for amici curiae
Professors Jack Balkin, al. support respondents.
Before: SENTELLE, Chief Judge, TATEL, Circuit Judge,
and RANDOLPH, Senior Circuit Judge.
Opinion for the Court filed Circuit Judge TATEL.
TATEL, Circuit Judge: this case must decide
whether the Federal Communications Commission has
authority regulate Internet service provider network
management practices. Acknowledging that has express
statutory authority over such practices, the Commission relies section 4(i) the Communications Act 1934, which
authorizes the Commission perform any and all acts, make
such rules and regulations, and issue such orders, not
inconsistent with this chapter, may necessary the
execution its functions. U.S.C. 154(i). The
Commission may exercise this ancillary authority only
demonstrates that its action here barring Comcast from
interfering with its customers use peer-to-peer networking
applications reasonably ancillary the effective
performance its statutorily mandated responsibilities. Am.
Library Ass FCC, 406 F.3d 689, 692 (D.C. Cir. 2005).
The Commission has failed make that showing. relies
principally several Congressional statements policy, but
under Supreme Court and D.C. Circuit case law statements
policy, themselves, not create statutorily mandated
responsibilities. The Commission also relies various
provisions the Communications Act that create such
responsibilities, but for variety substantive and
procedural reasons those provisions cannot support its
exercise ancillary authority over Comcast network
management practices. therefore grant Comcast petition
for review and vacate the challenged order. 2007 several subscribers Comcast high-speed
Internet service discovered that the company was interfering
with their use peer-to-peer networking applications. See
Peter Svensson, Comcast Blocks Some Internet Traffic,
ASSOCIATED PRESS, Oct. 19, 2007. Peer-to-peer programs
allow users share large files directly with one another
without going through central server. Such programs also
consume significant amounts bandwidth.
Challenging Comcast action, two non-profit advocacy
organizations, Free Press and Public Knowledge, filed
complaint with the Federal Communications Commission
and, together with coalition public interest groups and
law professors, petition for declaratory ruling. Compl.
Free Press Public Knowledge Against Comcast Corp., File
No. EB-08-IH-1518 (Nov. 2007) Compl. Pet. Free
Press al. for Decl. Ruling, Docket No. 07-52 (Nov.
2007) Pet. Both filings argued that Comcast actions
violat[ed] the FCC Internet Policy Statement. Compl. Pet. Issued two years earlier, that statement
adopt[ed] the principles that consumers are entitled
access the lawful Internet content their choice [and]
run applications and use services their choice.
Appropriate Framework for Broadband Access the Internet
Over Wireline Facilities, F.C.C.R. 14,986, 14,988,
(2005). Comcast defended its interference with peer-to-peer
programs necessary manage scarce network capacity.
Comments Comcast Corp. 14, Docket No. 07-52
(Feb. 12, 2008).
Following period public comment, the Commission
issued the order challenged here. Formal Compl.
Free Press Public Knowledge Against Comcast Corp. for
Secretly Degrading Peer-to-Peer Applications, F.C.C.R.
13,028 (2008) (Order).
The Commission began
concluding not only that had jurisdiction over Comcast
network management practices, but also that could resolve
the dispute through adjudication rather than through
rulemaking. Id. 13,033 50, 40. the merits, the
Commission ruled that Comcast had significantly impeded
consumers ability access the content and use the
applications their choice, id. 13,054, 44, and that
because Comcast ha[d] several available options could use manage network traffic without discriminating against
peer-to-peer communications, id. 13,057, 49, its method bandwidth management contravene[d] federal policy,
id. 13,052, 43. Because then Comcast had agreed
adopt new system for managing bandwidth demand, the
Commission simply ordered make set disclosures
describing the details its new approach and the company
progress toward implementing it. Id. 13,059 60, 54. The
Commission added that injunction would automatically
issue should Comcast either fail make the required
disclosures renege its commitment. Id. 13,060, 55.
Although Comcast complied with the Order, now
petitions for review, presenting three objections. First,
contends that the Commission has failed justify exercising
jurisdiction over its network management practices. Second, argues that the Commission adjudicatory action was
procedurally flawed because circumvented the rulemaking
requirements the Administrative Procedure Act and
violated the notice requirements the Due Process Clause.
Finally, asserts that parts the Order are poorly
reasoned arbitrary and capricious. begin and
end with Comcast jurisdictional challenge.
II.
Through the Communications Act 1934, ch. 652,
Stat. 1064, amended over the decades, U.S.C. 151
seq., Congress has given the Commission express and
expansive authority regulate common carrier services,
including landline telephony, id. 201 seq. (Title the
Act); radio transmissions, including broadcast television,
radio, and cellular telephony, id. 301 seq. (Title III); and
cable services, including cable television, id. 521 seq.
(Title VI). this case, the Commission does not claim that
Congress has given express authority regulate Comcast
Internet service. Indeed, its still-binding 2002 Cable
Modem Order, the Commission ruled that cable Internet
service neither telecommunications service covered
Title the Communications Act nor cable service
covered Title VI. High-Speed Access the Internet
Over Cable and Other Facilities, F.C.C.R. 4798, 4802,
(2002), aff Nat Cable Telecomms. Ass Brand
Internet Servs., 545 U.S. 967 (2005). The Commission
therefore rests its assertion authority over Comcast
network management practices the broad language
section 4(i) the Act: The Commission may perform any
and all acts, make such rules and regulations, and issue such
orders, not inconsistent with this chapter, may necessary the execution its functions, U.S.C. 154(i). Order, F.C.C.R. 13,036, 15.
Courts have come call the Commission section 4(i)
power its ancillary authority, label that derives from three
foundational Supreme Court decisions: United States
Southwestern Cable Co., 392 U.S. 157 (1968), United States Midwest Video Corp., 406 U.S. 649 (1972) (Midwest
Video I), and FCC Midwest Video Corp., 440 U.S. 689
(1979) (Midwest Video II). All three cases dealt with
Commission jurisdiction over early cable systems time
when, with the Internet today, the Communications Act
gave the Commission express authority regulate such
systems. (Title VI, which gives the Commission jurisdiction
over cable services, was not added the statute until 1984.
See Cable Communications Policy Act 1984, Pub. No.
98-549, Stat. 2779.) the first case, Southwestern Cable, the Supreme Court
considered challenge Commission order restricting the
geographic area which cable company could operate. 392
U.S. 160. that time, cable television, then known
community antenna television (CATV), functioned quite
differently than does today. Employing strategically
located antennae, these early cable systems simply received
over-the-air television broadcasts and retransmitted them
cable their subscribers. Id. 161 62. Although they
rarely produced their own programming, they improved
reception and allowed subscribers receive television
programs from distant stations. Id. 162 63. Seeking
protect Commission-licensed local broadcasters, the
Commission adopted rules limiting the extent which cable
systems could retransmit distant signals and, the order
issue Southwestern Cable, applied this policy particular
company.
The Supreme Court sustained that order,
explaining
that
even
though
the
then-existing
Communications Act gave the Commission express
authority over cable television, the Commission could
nonetheless regulate cable television the extent reasonably
ancillary the effective performance the Commission
various responsibilities for the regulation television
broadcasting. Id. 178. Four years later, Midwest
Video the Court again sustained the Commission use its
ancillary authority, this time support issuance
regulation that required cable operators facilitate the
creation new programs and transmit them alongside
broadcast programs they captured from the air. 406 U.S.
670. Midwest Video II, the Court rejected the
Commission assertion ancillary authority, setting aside
regulations that required cable systems make certain
channels available for public use. 440 U.S. 708 09. recently distilled the holdings these three cases
into two-part test. American Library Ass FCC,
wrote: The Commission may exercise ancillary
jurisdiction only when two conditions are satisfied: (1) the
Commission general jurisdictional grant under Title [of the
Communications Act] covers the regulated subject and (2) the
regulations are reasonably ancillary the Commission
effective performance its statutorily mandated
responsibilities. 406 F.3d 691 92; see also Order,
F.C.C.R. 13,035, n.64 (citing the American Library
test). Comcast concedes that the Commission action here
satisfies the first requirement because the company Internet
service qualifies interstate and foreign communication
wire within the meaning Title the Communications
Act. U.S.C. 152(a). Whether the Commission action
satisfies American Library second requirement the central
issue this case.
III.
Before addressing that issue, however, must consider
two threshold arguments the Commission raises. First,
asserts that given contrary position Comcast took
California lawsuit, the company should judicially estopped
from challenging the Commission jurisdiction over the
company network management practices. Second, the
Commission argues that even Comcast challenge can
proceed, need not through our usual ancillary authority
analysis because recent Supreme Court decision, National
Cable Telecommunications Ass Brand Internet
Services, 545 U.S. 967, makes clear that the Commission had
authority issue the Order.
Courts may invoke judicial estoppel [w]here party
assumes certain position legal proceeding, succeeds maintaining that position, [and then,] simply because
his interests have changed, assume[s] contrary position.
New Hampshire Maine, 532 U.S. 742, 749 (2001) (internal
quotation marks omitted). For judicial estoppel apply,
however, party later position must clearly
inconsistent with its earlier position. Id. 750 (quoting
United States Hook, 195 F.3d 299, 306 (7th Cir. 1999)).
Doubts about inconsistency often should resolved
assuming there disabling inconsistency, that the
second matter may resolved the merits. 18B CHARLES
ALAN WRIGHT, ARTHUR MILLER EDWARD COOPER,
FEDERAL PRACTICE AND PROCEDURE 4477, 594 (2d ed.
2002).
The Commission estoppel argument rests the
position Comcast took while defending against civil action California federal court. that case, one Comcast
Internet customers challenged the company interference
with peer-to-peer programs the same time Free Press and
Public Knowledge were pressing their own challenges before
the Commission. Comcast responded moving stay the
litigation pending resolution the Commission proceedings. support, invoked the primary jurisdiction doctrine,
arguing that court obliged defer agency where
the issue brought before court the process litigation
through procedures originating the [agency]. Def.
Mem. Law Supp. Mot. for Pleadings 10, Hart Comcast Alameda, Inc., No. 07-6350 (N.D. Cal. 2008) Comcast Cal. Mem. (quoting Fed. Power Comm La.
Power Light Co., 406 U.S. 621, 647 (1972)). language
the Commission now emphasizes, Comcast continued: Any
inquiry into whether Comcast [peer-to-peer] management
unlawful falls squarely within the FCC subject matter
jurisdiction. Id. Persuaded, the district court granted the
requested stay.
According the Commission, when Comcast argued that
the Commission has subject matter jurisdiction over its
disputed network management practices, was saying that
any action the Commission prohibit those practices
would satisfy both elements the American Library test and
thus lie within the Commission ancillary authority.
Because Comcast prevailed [that] theory, the
Commission contends, should estopped from arguing
the opposite here. Resp Br. 30. For its part, Comcast
insists never argued that the Commission could justify
exercising ancillary authority over its network management
practices.
Instead, claims that saying that the
Commission possesses subject matter jurisdiction over
those practices, was arguing more than what concedes
here, namely that its Internet service constitutes
communication wire within the meaning American
Library first requirement. Interpreted that way, Comcast
California position does not conflict with the argument
makes here, which rests American Library second
requirement: that the Commission must show that its
regulation Comcast Internet service reasonably
ancillary the Commission effective performance its
statutorily mandated responsibilities. 406 F.3d 692.
Although the parties competing interpretations
Comcast California argument are both plausible, Comcast more so. For one thing, its interpretation comports with the
overall primary jurisdiction argument advanced that case. leading administrative law treatise explains, The
question whether issue within [an] agency primary
jurisdiction different from the question whether the
agency actually has exclusive statutory jurisdiction resolve issue. RICHARD PIERCE, JR., ADMINISTRATIVE LAW
TREATISE 14.1, 1162 (5th ed. 2010). Specifically, for
issue fall within agency primary jurisdiction, the
agency need not possess definite authority resolve it; rather,
there need only sufficient statutory support for
administrative authority that the agency should least
requested proceed[] the first instance. Ricci
Chicago Mercantile Exch., 409 U.S. 289, 304, 300 (1973)
(holding that dispute fell within the Commodity Exchange
Commission primary jurisdiction where the Commodity
Exchange Act least arguably protected prohibited the
conduct issue). Given this standard, and given that then,
now, the Commission claimed ancillary authority over
Comcast network management practices, the company
could plausibly argue the California case (as claims
did) that deference the Commission primary jurisdiction
was appropriate merely because the disputed practices
involved communication wire American Library first
requirement. And Comcast emphasized the California
case, the Commission was already actively investigating the
company network management practices, Comcast Cal.
Mem. 11, increasing the risk that the civil case could
disrupt the regulatory process. See PIERCE, ADMINISTRATIVE
LAW TREATISE 14.1, 1162 [D]etermination the
agency primary jurisdiction involves pragmatic
evaluation the advantages and disadvantages allowing
the agency resolve issue the first instance.
Therefore, the California court could have fairly concluded
under the primary jurisdiction doctrine that the Commission
should determine the first instance whether regulating
Comcast network management practices would
reasonably ancillary the Commission effective
performance its statutorily mandated responsibilities
American Library second requirement. 406 F.3d 692.
Reinforcing Comcast interpretation, the Commission
itself generally uses subject matter jurisdiction refer only the first part the American Library test rather than the
test whole. For example, earlier Internet-related
order (cited Comcast its California brief), the
Commission wrote that may exercise its ancillary
jurisdiction when Title the Act gives the Commission
subject matter jurisdiction over the service regulated
and the assertion jurisdiction reasonably ancillary the
effective performance its various responsibilities.
Appropriate Framework for Broadband Access the Internet
Over Wireline Facilities, F.C.C.R. 14,853, 14,913 14,
109 (2005) (emphasis added) (internal quotation marks and
alteration omitted); accord Consumer Information and
Disclosure, F.C.C.R. 11,380, 11,400, (2009); IPEnabled Services, F.C.C.R. 6039, 6044 45, (2009); High-Cost Universal Service Support, F.C.C.R. 6475,
6540, 101 (2008). thus not interpret Comcast California argument inconsistent with its argument here, let alone clearly
so. New Hampshire, 532 U.S. 750 (internal quotation
marks omitted). Because Comcast never clearly argued the
California litigation that the Commission assertion
authority over the company network management practices
would reasonably ancillary the Commission effective
performance its statutorily mandated responsibilities
(American Library second requirement), 406 F.3d 692,
that question remains for answer.
The Commission second threshold argument that the
Supreme Court decision Brand already decided the
jurisdictional question here. Resp Br. 20. that case,
the Court reviewed the Commission 2002 Cable Modem
Order, supra which removed cable Internet service
from Title and Title oversight classifying
information service. See Brand 545 U.S. 978.
Challenging that determination, Brand argued that cable
Internet actually comprises bundle two services:
information service not subject Commission regulation
and telecommunications service subject mandatory
Title regulation. Id. 990 91. Brand pressed this
argument because Title applied cable Internet, then,
under its view, cable companies would have unbundle the
components their Internet services, thus allowing Brand
and other independent Internet service providers (ISPs) use
the telecommunications component those bundles offer
competing Internet service over cable company wires. Brand Resp Br. 10, Brand 545 U.S. 967 (No. 04-277) [I]f the telecommunications component cable modem
service telecommunications service, and hence common
carriage, [c]ustomers then will able choose their
provider Internet services.
Although the Supreme Court acknowledged that cable
Internet service does contain telecommunications
component, deferred the Commission determination
that this component functionally integrated into single
offering properly classified information service.
545 U.S. 991. Using language the Commission now
emphasizes, the Court went say that the Commission
remains free impose special regulatory duties [cable
Internet providers] under its Title ancillary jurisdiction. Id. 996. particular, the Court suggested that the
Commission could likely require cable companies allow
independent ISPs access their facilities pursuant its
ancillary authority, rather than using Title Brand
urged. Id. 1002. According the Commission, this means
that the FCC has authority over [information service
providers] under its Title ancillary jurisdiction. Resp
Br. 20.
Comcast insists that the references ancillary
jurisdiction Brand are dicta: Brand presented the
question whether the FCC had permissibly classified cable
Internet services information services, not whether any
particular regulation such services was within the agency
statutory authority. Pet Br. 53. Although Comcast may
well correct, carefully considered language the
Supreme Court, even technically dictum, generally must
treated authoritative. United States Oakar, 111 F.3d
146, 153 (D.C. Cir. 1997) (internal quotation marks and
alteration omitted). the end, however, need not decide
whether the Court discussion ancillary authority Brand qualifies authoritative, for even does the
Commission stretches the Court words too far. leaping
from Brand observation that the Commission ancillary
authority may allow impose some kinds obligations
cable Internet providers claim plenary authority over
such providers, the Commission runs afoul Southwestern
Cable and Midwest Video Southwestern Cable, which the Court first
recognized the Commission ancillary authority, expressly
reserved for future cases the question whether particular
regulations fall within that power. Although the Court upheld
the cable television order issue, declined determine
detail the limits the Commission authority regulate
CATV. 392 U.S. 178. Then Midwest Video the
Court made clear that the permissibility each new exercise ancillary authority must evaluated its own terms.
That is, the Court asked whether the particular regulation
issue was reasonably ancillary the effective performance the Commission various responsibilities for the
regulation television broadcasting. 406 U.S. 670
(plurality opinion) (internal quotation marks omitted); see
also id. 675 (Burger, C.J., concurring). Contrary the
kind inference the Commission would have draw from
Brand nothing Midwest Video even hints that
Southwestern Cable recognition ancillary authority over
one aspect cable television meant that the Commission had
plenary authority over all aspects cable. made just this point National Ass Regulatory
Utility Commissioners FCC, 533 F.2d 601 (D.C. Cir. 1976)
(NARUC II). There reviewed series Commission
orders that preempted state regulation non-video uses
cable systems, including precursors modern cable modem
service. See id. 616 [T]he point-to-point communications involve one computer talking another Leaning its recent victories Southwestern Cable and Midwest
Video the Commission argued similar the way uses
Brand here that the combined force those two
affirmances FCC powers over cable must seen
establishing jurisdiction over all activities cable
operators. Id. 611. rejected that argument, explaining
that Southwestern Cable and Midwest Video foreclosed the
Commission broad view ancillary authority. pointed
out that Southwestern Cable the Court stated explicitly
that its holding was limited reasonably ancillary
activities, and expressly declined comment the
Commission authority, any, regulate CATV under any
other circumstances for any other purposes. Id. 612 (quoting Southwestern Cable, 392 U.S. 178).
similarly noted that Midwest Video the plurality relied
explicitly the Southwestern reasoning, and devoted
substantial attention establishing the requisite
ancillariness between the Commission authority over
broadcasting and the particular regulation before the Court.
Id. 613. Neither case, concluded, recogniz[ed] any
sweeping authority over [cable] whole. Id. 612.
Instead, they command[ed] that each and every assertion
jurisdiction over cable television must independently
justified reasonably ancillary the Commission power
over broadcasting. Id. (emphasis added).
Echoing this interpretation, the Supreme Court
Midwest Video described Southwestern Cable
conferring the Commission circumscribed range
power regulate cable television, determination
reaffirmed Midwest Video 440 U.S. 696. The
question now before us, the Court continued, whether the
[Communications] Act, construed these two cases,
authorizes the capacity and access regulations that are here
under challenge. Id. The Court ultimately concluded that
did not, thus reinforcing the principle that the Commission
must defend its exercise ancillary authority case-bycase basis. sure, Brand dealt with the Internet, not cable
television. Nothing Brand however, suggests that the
Court was abandoning the fundamental approach ancillary
authority set forth Southwestern Cable, Midwest Video
and Midwest Video II. Accordingly, the Commission cannot
justify regulating the network management practices cable
Internet providers simply citing Brand recognition that may have ancillary authority require such providers
unbundle the components their services. These are
altogether different regulatory requirements. Brand
more dictates the result this case than Southwestern Cable
dictated the results Midwest Video NARUC II, and
Midwest Video II. The Commission exercise ancillary
authority over Comcast network management practices
must, repeat, independently justified. NARUC II, 533
F.2d 612. that issue that now turn.
IV.
The Commission argues that the Order satisfies
American Library second requirement because
reasonably ancillary the Commission effective
performance its responsibilities under several provisions the Communications Act. These provisions fall into two
categories: those that the parties agree set forth only
congressional policy and those that least arguably delegate
regulatory authority the Commission. consider each
turn.
The Commission relies principally section 230(b), part provision entitled Protection for private blocking and
screening offensive material, U.S.C. 230, that grants
civil immunity for such blocking providers interactive
computer services, id. 230(c)(2). Setting forth the policies
underlying this protection, section 230(b) states, relevant
part, that [i]t the policy the United States promote
the continued development the Internet and other
interactive computer services and encourage the
development technologies which maximize user control
over what information received individuals, families,
and schools who use the Internet. Id. 230(b). this case
the Commission found that Comcast network management
practices frustrated both objectives. Order, F.C.C.R.
13,052 53, 43. addition section 230(b), the Commission relies
section which Congress set forth its reasons for creating
the Commission 1934: For the purpose regulating
interstate and foreign commerce communication wire
and radio make available, far possible, all the
people the United States rapid, efficient, Nation-wide,
and world-wide wire and radio communication service
reasonable charges, there created commission
known the Federal Communications Commission U.S.C. 151. The Commission found that prohibiting
unreasonable network discrimination directly furthers the goal making broadband Internet access service both rapid and
efficient. Order, F.C.C.R. 13,036 37, 16.
Comcast argues that neither section 230(b) nor section
can support the Commission exercise ancillary authority
because the two provisions amount nothing more than
congressional statements policy. Pet Br. 46. Such
statements, Comcast contends, are not operative part
the statute, and not enlarge confer powers
administrative agencies. such, they necessarily fail set
forth statutorily mandated responsibilities within the
meaning American Library. Id. (citations, internal
quotation marks, and alteration omitted).
The Commission acknowledges that section 230(b) and
section are statements policy that themselves delegate
regulatory authority. Still, the Commission maintains that the
two provisions, like all provisions the Communications
Act, set forth statutorily mandated responsibilities that can
anchor the exercise ancillary authority. The operative
provisions statutes are those which declare the legislative
will, the Commission asserts. Resp Br. (internal
quotation marks and alteration omitted).
Here, the
legislative will has been declared Congress the form
policy, along with express grant authority the FCC
perform all actions necessary execute and enforce all the
provisions the Communications Act. Id. support its reliance congressional statements
policy, the Commission points out that both Southwestern
Cable and Midwest Video the Supreme Court linked the
challenged Commission actions the furtherance various
congressional goals, objectives, and policies. See, e.g.,
Southwestern Cable, 392 U.S. 175; Midwest Video 406
U.S. 665, 669 (plurality opinion). particular, the
Commission notes that Midwest Video the plurality
accepted its argument that the Commission concern with
CATV carriage broadcast signals extends
requiring CATV affirmatively further statutory policies.
406 U.S. 664 (plurality opinion) (emphasis added) (internal
quotation marks omitted). According the Commission,
since congressional statements policy were sufficient
support ancillary authority over cable television, may
likewise rely such statements section 230(b) and
section exercise ancillary authority over the network
management practices Internet providers. read Southwestern Cable and Midwest Video quite
differently. those cases, the Supreme Court relied
policy statements not because, standing alone, they set out
statutorily mandated responsibilities, but rather because
they did conjunction with express delegation
authority the Commission, i.e., Title III authority
regulate broadcasting. Southwestern Cable, the
Commission argued that restricting the geographic reach
cable television was necessary fulfill its Title III
responsibility foster local broadcast service. The Court
agreed, explaining that Congress has imposed upon the
Commission the obligation providing widely dispersed
radio and television service, with fair, efficient, and
equitable distribution service among the several States
and communities. The Commission has, for this and other
purposes, been granted authority allocate broadcasting
zones areas, and provide regulations may deem
necessary prevent interference among the various
stations. 392 U.S. 173 (citation and footnote omitted)
(quoting REP. NO. 86-923, (1959), U.S.C. 307(b),
303(f)). The Court concluded that the Commission has
reasonably found that the successful performance these
duties demands prompt and efficacious regulation
community antenna television systems.
Id. 177.
Nonetheless, the Court emphasize[d] that the authority which recognize today restricted that reasonably
ancillary the effective performance the Commissions
various responsibilities for the regulation television
broadcasting. Id. 178 (emphasis added). Midwest Video the Court again made clear that
was sustaining the challenged regulation requiring cable
companies originate their own programming only
because its connection the Commission Title III
authority over broadcasting. four-Justice plurality agreed
with the Commission that the challenged rule would further
the achievement long-established regulatory goals the
field television broadcasting increasing the number
outlets for community self-expression and augmenting the
public choice programs and types services. 406 U.S. 667 (plurality opinion) (internal quotation marks
omitted). Because the regulation preserve[d] and enhance[d]
the integrity broadcast signals satisfied Southwestern
Cable, i.e., was reasonably ancillary the effective
performance the Commissions various responsibilities for
the regulation television broadcasting. Id. 670
(emphasis added) (internal quotation marks omitted). Chief
Justice Burger made the same point controlling
concurring opinion: CATV dependent totally broadcast
signals and significant link the system whole and
therefore must seen within the jurisdiction the Act.
Id. 675 (Burger, C.J., concurring). That said, warned,
candor requires acknowledgment that the Commission
position strains the outer limits its authority. Id. 676.
The Commission exceeded those outer limits both
NARUC and Midwest Video II. NARUC II, the
Commission defended its exercise ancillary authority over
non-video cable communications (as does here with respect Comcast network management practices) the basis
section overall statutory mandate make available,
far possible, all the people the United States rapid,
efficient, [N]ation-wide, and world-wide wire and radio
communications service. 533 F.2d 606 (internal quotation
marks and alteration omitted). The Commission reasoned
that this language called for the development nationwide
broadband communications grid which cable systems
should play important part. Id. (internal quotation marks
omitted). rejected that argument.
Relying
Southwestern Cable and Midwest Video began
explaining that the Commission ancillary authority really
incidental to, and contingent upon, specifically delegated
powers under the Act. Id. 612 (emphasis added).
Applying that standard, found difficult see how any
action which the Commission might take concerning two-way
cable communications could have its primary impact the
furtherance any broadcast purpose. Id. 615. Because
the regulations had not been justified reasonably ancillary the Commission power over broadcasting, id. 612,
vacated them. Midwest Video II, the Supreme Court rejected the
Commission assertion ancillary authority impose
public access requirement certain cable channels because
doing would relegate[] cable systems commoncarrier status. 440 U.S. 700 01. Pointing out that the
Communications Act expressly prohibits common carrier
regulation broadcasters, id. 702, the Court held that
given the derivative nature ancillary jurisdiction the same
prohibition applied the Commission regulation cable
providers. The Commission had opposed this logic, arguing
that could regulate long the rules promote statutory
objectives. Id. The Court rejected that broad claim and,
revealing the flaw the argument the Commission makes
here, emphasized that without reference the provisions
the Act directly governing broadcasting, the Commissions
[ancillary] jurisdiction would unbounded. Id. 706
(emphasis added). Though afforded wide latitude its
supervision over communication wire, the Court added,
the Commission was not delegated unrestrained authority.
Id.
The teaching Southwestern Cable, Midwest Video
Midwest Video II, and NARUC that policy statements
alone cannot provide the basis for the Commission exercise ancillary authority derives from the axiomatic principle
that administrative agencies may [act] only pursuant
authority delegated them Congress. Am. Library, 406
F.3d 691. Policy statements are just that statements
policy. They are not delegations regulatory authority. sure, statements congressional policy can help delineate
the contours statutory authority. Consider, for example, the
various services over which the Commission enjoys express
statutory authority. When exercising its Title authority
set just and reasonable rates for phone service, U.S.C.
201(b), its Title III authority grant broadcasting
licenses the public convenience, interest, necessity, id.
307(a), its Title authority prohibit unfair methods competition cable operators that limit consumer access certain types television programming, id. 548(b), the
Commission must bear mind section objective
Nation-wide wire and radio communication service
reasonable charges, id. 151. all three examples, section policy goal undoubtedly illuminates the scope the
authority delegated [the Commission] Congress, Am.
Library, 406 F.3d 691 though Titles II, III, and
that the delegating. too with respect the
Commission section 4(i) ancillary authority. Although
policy statements may illuminate that authority, Title II,
III, which the authority must ultimately ancillary. this case the Commission cites neither section 230(b)
nor section shed light any express statutory delegation authority found Title II, III, VI, or, for that matter,
anywhere else. That is, unlike the way successfully
employed policy statements Southwestern Cable and
Midwest Video the Commission does not rely section
230(b) section argue that its regulation activity
over which concededly has express statutory authority
(here Comcast Internet management practices) necessary further its regulation activities over which does have
express statutory authority (here, for example, Comcast
management its Title cable services). this respect,
this case just like NARUC II. the record before us,
see relationship whatever, NARUC II, 533 F.2d 616,
between the Order and services subject Commission
regulation. Perhaps the Commission could use section 230(b) section demonstrate such connection, but that not
how employs them here.
Instead, the Commission maintains that congressional
policy itself creates statutorily mandated responsibilities
sufficient support the exercise section 4(i) ancillary
authority. Not only this argument flatly inconsistent with
Southwestern Cable, Midwest Video Midwest Video II, and
NARUC II, but accepted would virtually free the
Commission from its congressional tether. the Court
explained Midwest Video II, without reference the
provisions the Act expressly granting regulatory authority,
the Commission [ancillary] jurisdiction would
unbounded. 440 U.S. 706. Indeed, Commission counsel
told oral argument that just the Order seeks make
Comcast Internet service more rapid and efficient,
Order, F.C.C.R. 13,036 37, 16, the Commission could
someday subject Comcast Internet service pervasive rate
regulation ensure that the company provides the service
reasonable charges, U.S.C. 151. Oral Arg. Tr. 59.
Were accept that theory ancillary authority, see reason why the Commission would have stop there, for can think few examples regulations that apply
Title common carrier services, Title III broadcast services, Title cable services that the Commission, relying the
broad policies articulated section 230(b) and section
would unable impose upon Internet service providers. Midwest Video the Commission strain[ed] the outer
limits even the open-ended and pervasive jurisdiction that
has evolved decisions the Commission and the courts,
406 U.S. 676 (Burger, C.J., concurring), and
NARUC and Midwest Video exceeded those limits, then
here seeks shatter them entirely.
Attempting avoid this conclusion, the Commission
argues that several more recent cases upheld its use
ancillary authority the basis policy statements alone.
each those cases, however, sustained the exercise
ancillary authority because, unlike here, the Commission had
linked the cited policies express delegations regulatory
authority.
The Commission places particular emphasis Computer
and Communications Industry Ass FCC, 693 F.2d 198
(D.C. Cir. 1982) (CCIA). There considered challenge
the Commission landmark 1980 Computer Order,
which the Commission set forth regulatory ground rules for
common carriers that provided so-called enhanced services,
i.e., precursors modern information services like cable
Internet. See Amend. 64.702 the Comm Rules
and Regulations (Second Computer Inquiry), F.C.C.2d
384, 385 89, (1980). The petitioners argued that two
aspects the Computer Order exceeded the Commission
ancillary authority. First, the Commission had ruled that
ATT, then the monopoly telephone provider throughout
most the nation, could offer enhanced services only
through separate subsidiary. CCIA, 693 F.2d 205.
Second, the Commission had mandated that all common
carriers unbundle charges for consumer premises equipment
(CPE) i.e., telephones, computer terminals, and other
similar devices from their regulated tariffs. Id.
sustained both requirements. Emphasizing, here,
that Southwestern Cable limited the Commission
jurisdiction that which reasonably ancillary the
effective performance the Commission various
responsibilities, explained that [o]ne those
responsibilities assure nationwide system wire
communications services reasonable prices. Id. 213
(internal quotation marks omitted).
According the
Commission, this latter language demonstrates that section
describes statutorily mandated responsibilities. But the
Commission reads our statement out context.
The crux our decision CCIA was that its
Computer Order the Commission had linked its exercise
ancillary authority its Title responsibility over common
carrier rates just the kind connection statutory
authority missing here. Thus, with respect the ATT
component the order, relied the Commission
finding that [r]egulation enhanced services was
necessary prevent ATT from burdening its basic
transmission service customers with part the cost
providing competitive enhanced services. Id. Given [the]
potentially symbiotic relationship between competitive and
monopoly services, concluded that the agency charged
with ensuring that monopoly rates are just and reasonable can
legitimately exercise jurisdiction over the provision
competitive services. Id. made the same point with
respect the order CPE component: [E]xercising
jurisdiction over CPE was necessary carry out [the
Commission duty assure the availability transmission
services reasonable rates. Id. So, when wrote that
[o]ne [the Commission responsibilities assure
nationwide system wire communications services
reasonable prices, id., were using section language
just the way required Southwestern Cable, Midwest
Video Midwest Video II, and NARUC II: for the light
sheds the Commission Title ratemaking power.
other words, viewed the Commission Computer
Order like the Supreme Court had viewed the regulations
issue Southwestern Cable regulation services
otherwise beyond the Commission authority order
prevent frustration regulatory scheme expressly
authorized statute.
The Commission reliance Rural Telephone
Coalition FCC, 838 F.2d 1307 (D.C. Cir. 1988), fares
better. There upheld the Commission creation
Universal Service Fund provide subsidies for telephone
service rural and other high-cost areas. Again borrowing
the language section held that [a]s the Universal
Service Fund was proposed order further the objective
making communication service available all Americans
reasonable charges, the proposal was within the
Commission statutory authority. Id. 1315. Contrary
the Commission argument, however, Rural Telephone, like
CCIA, rested not section alone, but the fact that
creation the Universal Service Fund was ancillary the
Commission Title responsibility set reasonable
interstate telephone rates. True, the Commission observes,
our discussion ancillary authority never cites Title II. But
any such citation would simply have restated the obvious
given that the Commission established the Universal Service
Fund for the very purpose ensur[ing] that telephone rates
are within the means the average subscriber all areas
the country. Id. 1311 (emphasis added) (quoting
Amend. Pt. the Comm Rules and Establishment Joint Bd., F.C.C.2d 781, 795, (1984)).
Next the Commission cites New York State Commission Cable Television FCC, 749 F.2d 804 (D.C. Cir. 1984), which considered challenge Commission order
preempting state regulation early satellite television.
Because petitioner there never argued that the Commission
exercise ancillary authority lacked sufficient grounding
express statutory authority, New York State Commission did
not address the issue now face. See id. 808 (describing
petitioner challenge). Still, sustaining the Commission
action, noted that [i]n its preemption order the
Commission based its authority over [satellite television]
upon the federal interest the unfettered development
interstate transmission satellite signals. Id. 808
(quoting Earth Satellite Commc ns, Inc., F.C.C.2d
1223, 1230, (1983)). According the Commission, this
language demonstrates that ancillary authority may
grounded policy alone. Not so. Our statement does
nothing more than clearly and accurately describe what the
Commission actually did, i.e., supply policy justification for
its decision. Significantly for the issue before here, the
Commission preemption order also expressly linked its
exercise ancillary authority over satellite television its
Title III authority over users radio spectrum. The
Commission noted that the reception facilities that states
sought regulate (satellite dishes hotel and apartment
building roofs) initially were subject Commission
licensing, calling these receivers absolutely essential
instrumentalities radio broadcasting. Earth Satellite
Commc ns, F.C.C.2d 1231, (internal quotation
marks omitted). The Commission also cited section 303,
which provides that the Commission public
convenience, interest, necessity requires, shall
[c]lassify radio stations; [p]rescribe the nature the
service rendered each class licensed stations and
each station within any class; [a]ssign bands
frequencies the various classes stations, and on.
U.S.C. 303. These express delegations authority contrast
sharply with the general policies set forth section 230(b)
and section
The Commission next relies National Ass
Regulatory Utility Commissioners FCC, 880 F.2d 422
(D.C. Cir. 1989) (NARUC III), which considered
challenge its decision preempt state regulation inside
wiring telephone wires within customer home place business. Id. 425. The Commission had found inside
wiring beyond the scope its Title regulation and
simultaneously preempted state regulation such wiring. held that the Commission had authority issue the
preemption orders insofar necessary encourage
competition the provision, installation, and maintenance
inside wiring. Id. 429 30. Although did agree with
the FCC that this policy [was] consistent with the goals the
Act, and that [had] the authority implement this policy
with respect interstate communications, id. (citation
omitted), petitioners that case had conceded that inside
wiring installation and maintenance are integral
telephone communication, id. 427 (emphasis added)
fact critical the Commission exercise preemption
authority. its orders, the Commission had emphasized that
[o]ur prior preemption decisions have generally been limited activities that are closely related the provision services
and which affect the provision interstate services.
Detariffing the Installation and Maintenance Inside Wiring, F.C.C.R. 1190, 1192, (1986). The term services
referred common carrier communication services within
the scope the Commission Title jurisdiction. Id.
short, the Commission explained, the interstate telephone
network will not function efficiently possible without the
preemptive detariffing inside wiring installation and
maintenance. Id. (emphasis added). The Commission
preemption state regulation inside wiring was thus
ancillary its regulation interstate phone service, precisely
the kind link express delegated authority that absent
this case.
The Commission cites several additional cases, but none
support its expansive view ancillary authority. Two
decisions, like the many have already discussed, upheld
the Commission exercise ancillary authority because,
unlike here, the Commission had linked its action
statutory delegation regulatory authority. See United
Video, Inc. FCC, 890 F.2d 1173, 1182 (D.C. Cir. 1989)
(upholding rules that, like those upheld Southwestern
Cable, limited the ability cable companies import
programming into broadcaster market); GTE Serv. Corp. FCC, 474 F.2d 724, 729 (2d Cir. 1973) (upholding
Commission regulation data processing activities
common carriers based the Commission concern that
the statutory obligation the communication common carrier provide adequate and reasonable services could
adversely affected another case, rejected the
Commission argument, similar the one makes here, that could exercise ancillary authority the basis policy
alone. Motion Picture Ass Am. FCC, 309 F.3d 796,
806 (D.C. Cir. 2002) (finding the Commission
argument that [its] video description rules are obviously
valid communications policy goal and the public interest
insufficient justify its exercise ancillary authority
(internal quotation marks omitted)). And two decisions,
ancillary authority was either never addressed, Nat Broad.
Co. United States, 319 U.S. 190 (1943) (reviewing the
Commission exercise its express licensing power over
broadcasting stations under section 303, U.S.C. 303),
addressed only passing, ATT Corp. Iowa Utils. Bd.,
525 U.S. 366, 379 (1999) (mentioning the existence the
Commission ancillary authority the course interpreting
another provision the Act).
This brings the second category statutory
provisions the Commission relies support its exercise
ancillary authority. Unlike section 230(b) and section each these provisions could least arguably read delegate
regulatory authority the Commission. begin with section 706 the Telecommunications
Act 1996, which provides that [t]he Commission shall
encourage the deployment reasonable and timely basis
advanced telecommunications capability all Americans utilizing price cap regulation, regulatory forbearance,
measures that promote competition the local
telecommunications market, other regulating methods that
remove barriers infrastructure investment. U.S.C.
1302(a). the Commission points out, section 706 does
contain direct mandate the Commission shall encourage earlier, still-binding order, however, the
Commission ruled that section 706 does not constitute
independent grant authority. Deployment
Wireline Servs. Offering Advanced Telecomms. Capability,
F.C.C.R. 24,012, 24,047, (1998) (Wireline Deployment
Order). Instead, the Commission explained, section 706
directs the Commission use the authority granted other
provisions encourage the deployment advanced
services. Id. 24,045, 69.
The Commission now insists that this language refers
only whether section 706(a) supported forbearance
authority, Resp Br. 41, i.e., the Commission authority
free regulated entities from their statutory obligations
certain circumstances, see U.S.C. 160. According the
Commission, was not opining more generally the effect section 706 ancillary authority. Resp Br. 41. But
the order itself says otherwise: [S]ection 706(a) does not
constitute independent grant forbearance authority
authority employ other regulating methods. Wireline
Deployment Order, F.C.C.R. 24,044, (emphasis
added). Because the Commission has never questioned, let
alone overruled, that understanding section 706, and
because agencies may not depart from prior policy sub
silentio, FCC Fox Television Stations, Inc., 129 Ct.
1800, 1811 (2009), the Commission remains bound its
earlier conclusion that section 706 grants regulatory
authority.
Implying that this court has done what the Commission
has not, the Commission points recent decision which wrote, The general and generous phrasing 706
means that the FCC possesses significant, albeit not
unfettered, authority and discretion settle the best
regulatory deregulatory approach broadband. Hoc
Telecomms. Users Comm. FCC, 572 F.3d 903, 906
(D.C. Cir. 2009). that case, however, cited section 706
merely support the Commission choice between
regulatory approaches clearly within its statutory authority
under other sections the Act, and upheld the Commission
refusal forbear from certain regulation business
broadband lines neither arbitrary nor capricious. Nowhere
did question the Commission determination that section
706 does not delegate any regulatory authority.
The
Commission reliance section 706 thus fails. the
case section 230(b) and section the Commission
seeking use its ancillary authority pursue stand-alone
policy objective, rather than support its exercise
specifically delegated power.
The Commission attempt tether its assertion
ancillary authority section 256 the Communications Act
suffers from the same flaw. Section 256 directs the
Commission establish procedures for oversight
coordinated network planning for the effective and
efficient interconnection public telecommunications
networks. U.S.C. 256(b)(1). language unmentioned the Commission, however, section 256 goes state that
[n]othing this section shall construed expanding
any authority that the Commission otherwise has under law,
id. 256(c) precisely what the Commission seeks
here.
The Commission next cites section 257. Enacted part the Telecommunications Act 1996, that provision gave
the Commission fifteen months complete proceeding for
the purpose identifying and eliminating, regulations
pursuant its authority under this chapter (other than this
section), market entry barriers for entrepreneurs and other
small businesses the provision and ownership
telecommunications services and information services.
U.S.C. 257(a). Although the section 257 proceeding now
complete, that provision also directs the Commission report Congress every three years any remaining barriers. See 257 Proceeding Identify and Eliminate Mkt. Entry
Barriers for Small Bus., F.C.C.R. 16,802 (1997)
(completing original proceeding); U.S.C. 257(c)
(requiring ongoing reports). readily accept that certain
assertions Commission authority could reasonably
ancillary the Commission statutory responsibility
issue report Congress. For example, the Commission
might impose disclosure requirements regulated entities
order gather data needed for such report. But the
Commission attempt dictate the operation otherwise
unregulated service based nothing more than its obligation issue report defies any plausible notion ancillariness.
See Motion Picture Ass Am., 309 F.3d 801 (holding
that order requiring that broadcasters incorporate video
descriptions into certain television programs fell outside the
Commission ancillary authority even though had been
directed produce report the subject).
Next the Commission argues that its exercise authority
over Comcast network management practices ancillary
its section 201 common carrier authority though the section
201 argument the Commission sets forth its brief very
different from the one appearing the Order. indicated
above, section 201 provides that [a]ll charges, practices,
classifications, and regulations for and connection with
[common carrier] service shall just and reasonable.
U.S.C. 201(b). the Order, the Commission found that
blocking certain traffic Comcast Internet service, the
company had effectively shifted the burden that traffic
other service providers, some which were operating their
Internet access services common carrier basis subject
Title II. Order, F.C.C.R. 13,037 38, 17.
marginally increasing the variable costs those providers,
the Commission maintained, Comcast blocking peer-topeer transmissions affected common carrier rates.
Id.
Whatever the merits this position, the Commission has
forfeited failing advance here. See United States
rel. Totten Bombardier Corp., 380 F.3d 488, 497 (D.C. Cir.
2004) Ordinarily, arguments that parties not make
appeal are deemed have been waived.
Instead, the Commission now argues that voice over
Internet Protocol (VoIP) services essence, telephone
services using Internet technology affect the prices and
practices traditional telephony common carriers subject
section 201 regulation. According the Commission, some
VoIP services were disrupted Comcast network
management practices. have need examine this
claim, however, for the Commission must defend its action
the same grounds advanced the Order. SEC Chenery
Corp., 318 U.S. 80, (1943).
The same problem undercuts the Commission effort
link its regulation Comcast network management
practices its Title III authority over broadcasting. The
Commission contends that Internet video has the potential
affect the broadcast industry influencing local
origination programming, diversity viewpoints, and the
desirability providing service certain markets. Resp
Br. 43. But the Commission cites source for this argument the Order, nor can find one.
Finally, the Commission argues that the Order
ancillary its section 623 authority over cable rates.
U.S.C. 543. Although the Order never mentions section
623, and although, far can tell, commenter
suggested section 623 basis for the Commission
exercise ancillary authority, the Commission argues that its
reliance this provision implicit its section finding.
That finding included the following explanation:
[E]xercising jurisdiction over the complaint would
promote [section goal achieving reasonable
charges. For example, cable companies such
Comcast are barred from inhibiting consumer access high-definition on-line video content, then,
discussed above, consumers with cable modem
service will have available source video
programming (much free) that could rapidly
become alternative cable television. The
competition provided this alternative should result downward pressure cable television prices,
which have increased rapidly recent years.
Order, F.C.C.R. 13,037, 16. Laying the foundation for
this theory earlier the Order, the Commission found that
video distribution poses particular competitive threat
Comcast video-on-demand VOD service. VOD operates
much like online video, where Internet users can select and
download stream any available program without schedule
and watch any time Id. 13,030, (internal
quotation marks and alteration omitted).
The Commission argument that should read its
invocation section reference its section 623
authority over cable rates fails because, unlike its Title
authority over common carrier rates, its section 623 authority sharply limited. Indeed, section 623 expressly prohibits the
Commission from regulating rates for video programming
offered per program basis, i.e., video-on-demand
service. U.S.C. 543(l)(2), (a)(1). Although the
Commission once enjoyed broader authority over cable rates,
see id. 543(c)(4), its current authority limited setting
standards for and overseeing local regulation rates for
basic tier service certain cable systems. See id. 543(b). the Order, the Commission does not assert ancillary
authority based this narrow grant regulatory power.
Instead, the Order rests the premise that section gives the
Commission ancillary authority ensure reasonable rates for
all communication services, including those, like video-ondemand, over which has express regulatory authority. explained above, Southwestern Cable, Midwest Video
Midwest Video II, and NARUC bar this expansive theory
ancillary authority. true that Congress gave the [Commission] broad
and adaptable jurisdiction that can keep pace with rapidly
evolving communications technologies. Resp Br. 19. also true that [t]he Internet such technology, id.,
indeed, arguably the most important innovation
communications generation, id. 30.
Yet
notwithstanding the difficult regulatory problem rapid
technological change posed the communications industry,
the allowance wide latitude the exercise delegated
powers not the equivalent untrammeled freedom
regulate activities over which the statute fails confer
Commission authority. NARUC II, 533 F.2d 618 (internal
quotation marks and footnote omitted).
Because the
Commission has failed tie its assertion ancillary
authority over Comcast Internet service any statutorily
mandated responsibility, Am. Library, 406 F.3d 692,
grant the petition for review and vacate the Order. ordered.