On February 19, FCC Chair Tom Wheeler made a low-key announcement that the agency would not appeal the D.C. Circuit’s January 14 invalidation of the Commission’s “open Internet” (“network neutrality”) rules. The Commission apparently did not want to highlight its decision not to appeal, and listed it among half a dozen otherpolicy points. It noted only that “the Commission will not initiate any further judicial action in connection with the …decision.”

The FCC has gone through numerous iterations of the net neutrality rules since 2005. But the central thrust has been to prevent long-haul, national broadband distributors (“broadband providers”), such as Verizon, from charging “discriminatory” high rates to profitable broadband users—generally program producers or “edge providers”—such as Netflix. The Commission’s theory was that the broadband providers would earn their profits from the “end user” residential or business customers, who in turn would vote with their credit cards for their preferred programming. In effect this was a form of traditional rate regulation, except that only one rate was available for every edge provider using the same amount of broadband capacity, and bargaining between broadband users and program producers was prohibited.

The FCC’s decision not to pursue the matter is less than surprising. In arguing to invalidate the Internet rules, Petitioner Verizon had relied upon two parts of the Communications Act: Section 706 of the 1996 Telecommunications Act  (47 U.S.C. Sec.1302) and Title II. Both are relatively simple and general. Section 706 gives the Commission jurisdiction to “encourage the deployment…of advanced telecommunications capability to all Americans (in particular, elementary and secondary schools and classrooms….”  Although the provision may have been concerned primarily with providing classroom programming, the agency interpreted it to be a plenary grant of power over all “advanced telecommunications capability.” Perhaps to its and certainly to others’ surprise, the D.C. Circuit accepted this broad interpretation. Viewed one way, it gave the FCC something which it had been trying unsuccessfully to secure from Congress for more than 50 years—plenary jurisdiction over high-capacity transmission systems like cable and broadband.

The court was more sympathetic to Verizon’s second argument, however, and held that the open Internet rules violated Section II of the Communications Act—originally passed in 1934 to empower the agency to regulate interstate telephone rates. If possible, though, Title II is even vaguer than Section 1306, since it essentially just defines a common carrier as “any person engaged as a common carrier for hire.” In turn, the Supreme Court had interpreted this provision as prohibiting the agency from regulating any other mass electronic medium as a carrier—e.g., a radio or television broadcaster, cable operator, or satellite service such as Dish. This discussion leads to an analysis of a somewhat bizarre old case, FCC v. Midwest Video Corp. (1979) (in which the writer participated).

When the smoke cleared, the largely unexpected result appeared to be that the D. C. Circuit had recognized a new plenary jurisdiction for the Commission for advanced technologies, but had invalidated the open Internet rules on the basis of a two-generation old case.

Seeking Supreme Court review thus might have some downsides for the agency. Chairman Wheeler is dealing with a majority which may be only three out of five commissioners, since two members seem less than supportive of the network neutrality rules on substantive grounds. And because of delays in clearing new Commission members through the Senate, the current decisionmakers may have less than a three-year run in front of them. The current situation thus may not be the best on which to litigate an issue of quasi-constitutional dimensions. Having reached a draw in the D.C. Circuit, Chairman Wheeler may have been very prudent in avoiding another round before the Supreme Court.