That Other Basis for FCC Jurisdiction over the Internet

by Daniel Deacon — Wednesday, July 8, 2015

As Chris Walker noted recently on Twitter, the latest issue of the Administrative Law Review was kind to Notice and Comment bloggers. My own contribution has to do with a new basis for the FCC’s jurisdiction over Internet Protocol-based networks and services. And that basis is not Title II of the Communications Act, which has been getting most of the press recently. Rather, the essay explores the contours of section 706 of the Telecommunications Act of 1996 as interpreted by the courts—most importantly, in Verizon v. FCC (better known as the case that struck down the FCC’s 2010 net neutrality rules).

Section 706(a) of the Telecommunications Act of 1996 directs the FCC to “encourage the deployment on a reasonable and timely basis” of broadband Internet to “all Americans.” (Section 706(b) provides a related authority, which I won’t get into here.) The Verizon court, deferring to the FCC, made two critical moves in interpreting this provision. First, it accepted the Commission’s view that section 706(a) provides it with independent regulating authority, which is not obvious from the text of section 706 as a whole. Second, it found that the Commission could use that authority to “encourage” broadband deployment somewhat indirectly—by adopting rules that benefit the Internet ecosystem broadly (including “edge” applications like Facebook, etc.), thus stimulating long-term demand for broadband access service and investment by broadband providers.

My essay is primarily an attempt to understand what this new basis of FCC authority means for the future of Internet regulation, particularly in the competition area. I’ll focus on just two points here:

1. The scope of the FCC’s authority under section 706 is potentially shockingly broad. In particular, Verizon authorized the FCC to use section 706 to adopt rules regulating entities that are not Title II common carriers or otherwise regulable under the Communications Act. And although the Commission has shown most interest in regulating broadband ISPs—which, in any event, are now Title II common carriers (more on this later)—it could in the future attempt to use section 706 as a basis for regulating other players, including providers of edge services. And I don’t think that it is as unlikely as some believe that the Commission will in fact do so. Google’s search policies, for example, have occasionally been subject to antitrust scrutiny in the US and abroad, and it’s conceivable that the FCC could one day decide to enter the fray.

2. Although Verizon held that the FCC could regulate non-common carriers under section 706, it also reaffirmed that the Commission could not adopt regulations under 706 that in effect “treated” those providers as common carriers. It was on this basis that the court struck down the Commission’s 2010 net neutrality rules. Much of the essay is concerned with developing an understanding of what it means to treat someone as a common carrier. And although there is no easy answer to this question, one thing is clear: The FCC is less likely to be found to treat someone as a common carrier to the extent it regulates using a standards-based system involving the ex post enforcement of vaguely worded prohibitions. Thus, the emergence of section 706 as a standalone basis for jurisdiction may push the FCC toward a more common-law, antitrust-like system of regulation than the command-and-control-style system with which it is historically most familiar. Drawing on the rules versus standards literature, the essay outlines the pluses and minuses of such a system as applied to Internet-based networks and services. In particular, I argue that a standards-based system under section 706 may provide the Commission with much-needed flexibility to deal with emerging communications technologies, but that it will require the FCC to develop more robust mechanisms for enforcement and adjudication than it has traditionally had.

One final note: Because of the normal law review publication cycle, as well as some unexpected delays, the essay went final prior to the FCC reclassifying broadband ISPs as Title II telecommunications carriers in February. The FCC’s reclassification means that the Commission now has stronger authority over such ISPs, and in particular greater authority to apply a more rule-like set of prohibitions to ISPs than would be possible under section 706 alone. Indeed, this is the primary reason the FCC undertook reclassification, as the more flexible net neutrality rules the Chairman originally proposed under section 706 were viewed in some quarters as too weak. But section 706 is far from irrelevant. For one, reclassification is being challenged in the courts, though I continue to believe there is a likelihood the FCC will prevail. More importantly, for the reasons discussed above, the potential scope of section 706 is much wider than the scope of the reclassification, which only captured ISPs to the extent they are providing broadband access service. Many other Internet-based services, including some (like VoIP) also offered by ISPs, remain unregulated under Title II but still potentially subject to the Commission’s jurisdiction under section 706. Thus, section 706 is still likely to provide an important arrow in the FCC’s quiver going forward.

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About Daniel Deacon

Dan Deacon’s primary interests are in administrative law and telecommunications and Internet regulation. His work has appeared in the Yale Law Journal, the Administrative Law Review, the Virginia Law Review, and the NYU Law Review. Topics he has written about include executive enforcement discretion, processes for deregulation, and the changing face of communications regulation in the United States.

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