Why Verizon Wins Appeal of FCC’s Net Regs

January 20, 2011

Verizon is highly likely to win its appeal of the FCC’s December Open Internet order, because the FCC’s order is likely to deeply and broadly offend the legal sensibilities of the Appeals Court, just like the FCC offended the DC Appeals Court’s sensibilities when it punished Comcast for violating a regulation that did not exist.

  • The Court responded to that FCC injustice last April by ruling in its Comcast vs. the FCC decision that the FCC had no authority to regulate broadband or the Internet.

To understand the most likely outcome here, it is critical to cut through the FCC’s claims, assertions, and arguments, and focus on the big picture context of what the FCC is actually doing in this Open Internet Order, i.e. what is the effect of the FCC’s decision and process on the rule of law. That is what matters most to the Court.

  • The FCC wants people to believe that this is just about ensuring that there is “a cop on the beat.
    • The court looks at the whole context, whether this particular cop, beat, and rules are authorized by the Constitution, Congress, and the rule of law, and whether this self-appointed cop has acted justifiably, justly, fairly and reasonably.
  • The DC Court of Appeals is highly likely to overturn the FCC’s Open Internet order because it will offend the court’s legal sensibilities in multiple dimensions, as this piece will outline below.

To begin, it is critical to remember and understand the context of the Comcast vs. the FCC decision that the DC Appeals Court overturned last April.

  • In that case, the FCC had formally sanctioned and fined Comcast for essentially not reading the FCC’s mind months in advance.
  • It was plain for the court to see from the arguments that the FCC was telling Comcast: “you should have known what we wanted you to do, even though we never told you what that was, and even though we never even knew it ourselves until we decided it after the fact.
  • It was not hard for the court to figure out from the arguments that at the time of the alleged Comcast infraction, the FCC itself did not have a clue of what it specifically thought was unreasonable or reasonable network management.
  • The court also was offended that a company was being punished for violating a rule that did not exist and behavior that was never officially ruled to be wrong by a duly authorized entity.
    • This punish-first-figure-out-why-later FCC approach was obviously found to be the antithesis of American constitutional rule of law.
  • The unanimity and strength of the Comcast vs. the FCC decision in limiting the FCC’s authority made it clear that the court had no interest in rewarding the FCC for trampling on the rule of law, with a new grant of unbounded authority and unchecked power from the Court so the FCC to continue to trample on the rule of law in the future.

Next it is critical to understand the big picture context of this particular FCC Open Internet order.

When all the legal arguments are filed with the Court, it will become abundantly clear what the FCC did and what it intends to do in the future.

First, the FCC essentially is asserting it has the unilateral power, legal authority and public obligation to:

  • Decide if the Internet is regulated or not;
  • Decide which Internet-related industries are regulated and which are not;
  • Create a completely new regulatory classification, Broadband Internet Access Service (BIAS), when the law already has only two mutually-exclusive classification options for the FCC to choose from;
  • Change the effective purpose of communications law from promoting competition to promoting openness (without ever bothering to define what the FCC means by “openness;”)
  • Change U.S. communications policy from free-market competition to FCC regulated-outcomes; and
  • Grant itself new punishment powers for violating whatever the new rules that the FCC deems are necessary at any point in time.

Expect the Court to be deeply offended by the FCC’s presumption of near unbounded sweeping powers to do what it alone decides is necessary, because the FCC is flouting the Constitution’s fundamental principle of separation of powers and effectively asserting that the FCC can assume Congress’ power to effectively legislate new law.

Second, the FCC is blatantly and broadly ignoring constitutional due process.

The legal arguments will make clear to the Court that the FCC has decided broadband providers are guilty until proven innocent.

  • The FCC makes no substantive case of a real existing problem for the FCC to solve.
    • It only asserts the potential of a problem requiring preemptive regulatory detention to prevent companies from doing what the FCC worries they might do.
  • The FCC order preemptively regulates ~2,000 broadband providers for what one has done wrong in 2005, and for what the FCC alleges a few others have done wrong or might do wrong in the future.
    • How is that fair to the ~2,000 companies who have done nothing wrong and are cooperating fully with the FCC?
  • The FCC states that broadband providers only have incentives to violate un-defined “openness,” but have no disincentives, like competitive pressures and antitrust law, to prevent violations of undefined “openness.”
  • In its adjudicative procedure the FCC makes abundantly clear that it views broadband providers as guilty-until-proven-innocent of violating undefined “openness.”
    • See rule 8.14(b)(5) p. 92 where statements “in a complaint are deemed to be admitted when not denied in the answer.”
    • Amazingly the FCC has set up an obviously unjust process that has turned the legal burden of proof upside down; where anyone can complain that an undefined “openness” violation has occurred by a broadband provider and that charge is assumed to be true unless the accused quickly can prove themselves innocent of the charge to the FCC, which by the way presumes them to be guilty.

Expect the court to be deeply offended by the FCC trampling on the cherished constitutional principle of due process by:

  • Assuming guilt and that violations will occur, despite a near universally perfect record of behavior indicating otherwise, and
  • Constructing an undue process where the accused must prove their innocence or be punished by the FCC.

Third, the FCC is making it obvious to the courts that facts don’t matter to the FCC — the ultimate in arbitrariness and capriciousness.

The arguments before the court will make clear that the FCC’s unilateral decision to reverse its longstanding policy of promoting competition to impose new preemptive restrictions and potential punishments on “openness” violators, was not based on objective analysis or facts.

  • The FCC predicates its whole order on an obviously weak and thin assertion of a substantive problem requiring preemptive restrictions of broadband providers’ freedoms.
  • Amazingly and irresponsibly, the FCC conducted no market power analysis, no assessment of the state of competition assessment, and no cost benefit analysis.
    • This obvious lack of real work and expert analysis that the FCC has done in other orders, strongly suggests to the Court that the facts are not on the FCC’s side.
  • The Court can plainly see that the FCC order is replete with unproven assertions and largely devoid of substantive objective analysis or presentation of facts.

Expect the Court to be deeply offended by the FCC essentially telling the court, its order is valid and justified “because the FCC says so.”

  • By offering such scant justification and proof in the order, the FCC is telling the court that it assumes the FCC deserves very wide deference and latitude from the Court to do whatever it wants to do.

In sum, before the detailed arguments are filed, how can we know that it is highly likely to be overturned by the DC Court of Appeals?

  • Read the order; the court will.
  • A close reading of the FCC’s Open Internet order exposes broad FCC contempt for many fundamental principles of the rule of law.

This order also will more deeply and broadly offend the Court than the FCC’s unjust punishment of Comcast did, because this order signals the FCC’s strong intention that it wants the power to do be able to do what it did to Comcast to every broadband provider in the future.

Simply, the Court is not going to reward the FCC for trampling on the rule of law in the FCC Open Internet order, with a broad new grant of unbounded authority and unchecked power from the Court, so that the FCC could continue to trample on the rule of law in the future.

 

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