The Net Neutrality Case as a Battle Site over “Libertarian Administrative Law”

by Daniel Deacon — Saturday, June 18, 2016

I wanted to follow up on Aaron Nielson’s great post about the D.C. Circuit’s long-awaited net neutrality opinion with a couple of related thoughts. (I saw, as I was writing this post, that Professor Daniel Lyons also has a post up on the Volokh Conspiracy touching on similar points.)

For one, it’s interesting how Judge Williams’ (partial) dissent has changed the discourse over the case from one primarily focused on the meaning of various statutory terms (an issue I’d explored in a prior post) to one about the underlying economics of net neutrality regulation. That is because Judge Williams forthrightly concedes that nothing in the Communications Act bars the FCC’s reclassification of broadband providers before immediately turning to a blistering attack on the Commission’s treatment of the economic evidence before it.

This shift is potentially a bad one for the FCC (assuming this isn’t the end of the matter), because the Commission is probably shakier on the underlying economics than it is on the statutory matters. However, it’s also potentially good for the FCC, in that the common wisdom is that it’s just harder to win a largely substantive/policy-focused challenge against an agency than it is when you have a good statutory hook. This common wisdom is reflected, I think, in the quite cursory dismissal of the more substantive sounding challenges by the Tatel/Srinivasan majority.

This brings me to my second point, which is that, like Nielson and Lyons, I believe the case reflects a broader fault line on the D.C. Circuit and among scholars over just how exacting arbitrary and capricious review is (or should be), especially when it comes to issues of economic regulation. That debate has surfaced in, for example, cases concerning whether the SEC should be required to conduct a quantified cost-benefit analysis when it regulates the securities markets (such as Business Roundtable ). More exacting arbitrariness review is also one of the pillars of what Professors Cass Sunstein and Adrian Vermeule have called “libertarian administrative law,” which they are generally critical of. Judge Williams’ careful dissection of the economic evidence before the FCC—which, I should say, is not unusual for him—can be seen as a reflection of this more exacting form of review.

Now, one might respond—as Professors Joshua Wright and Gus Hurwitz did on Twitter—that the debate over just how exacting arbitrariness review should be is irrelevant to the net neutrality issue because the FCC’s analysis is so shoddy that it fails no matter how light the review. Maybe. As I said, I think the FCC is relatively weaker on the substance than it is on the legal particulars, and there are certainly parts of the Order that could have been improved. However, one byproduct of the majority opinion’s sidestepping of the economics issues is the impression that there is literally no economics case for net neutrality regulation, and no economist willing to step up for it. I don’t think that’s true. There are some economists, such as Professor Jonathan Baker (another former FCC chief economist) who have been publicly supportive of the rules, and others (like Professor Barbara van Schewick) who have made arguments for net neutrality rooted in the economics literature. Now, one might think that they and other net neutrality proponents are simply wrong and that the overall weight of the evidence is against net neutrality regulation, but that’s normally a call for the agency to make.

One more observation that is probably of interest only to telecom geeks but that ties in with the libertarian administrative law theme: One interesting aspect of Judge Williams’ dissent is his use of an apparent presumption against new forms of regulation under the Communications Act of 1934, as amended by the Telecommunications Act of 1996. That presumption appears, at points throughout the opinion, to defeat the kind of deference that would normally be owed an agency when it is engaged in implementing its statute. The presumption seems to be rooted in an argument about statutory purpose—namely, that the (original) Communications Act of 1934 was all about monopoly regulation, while the Telecommunications Act of 1996 was all about ushering in competition and, eventually, deregulation. Thus, according to Judge Williams, the FCC faces a “handicap” (reverseChevron deference?) when it uses its authority to regulate, as opposed to deregulate, under the Act as amended.

While the statutory purpose argument is true in broad strokes and is reflected in the 1996 Act’s preamble, I’m somewhat skeptical that it should work to totally defeat deference (or even reverse it). Although Title II of the 1934 Act was largely about regulation of the Bell network, non-monopolists have long been regulated under Title II as long as long as they were providing a telecommunications service. And the 1996 Act was a complex piece of legislation with different purposes and many moving parts. Notably, one thing the 1996 Act did was give the FCC authority to “forbear from” provisions of Title II as applied to certain kinds of carriers. That could be seen as a prescription for deregulation pure and simple, but forbearance was also provided to the FCC so that it could apply a more tailored version of the Communications Act to non-monopolist providers of new forms of communications—a power that had been denied the Commission in MCI v. AT&T —just as the FCC did in the Open Internet Order. In other words, there is a plausible case that the 1996 Act was not simply a charter for eventual wholesale deregulation but rather an acknowledgment that the Commission needed a more flexible set of regulatory tools to foster competition in a changing technological environment.

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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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