Comcast Corp. v. FCC

• Citation: 600 F.3d 642
• Decision Date: 06 April 2010
• Docket Number: No. 08-1291.,08-1291.
• Parties: COMCAST CORPORATION, Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents NBC Universal, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

600 F.3d 642

COMCAST CORPORATION, Petitioner v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents NBC Universal, et al., Intervenors.

No. 08-1291.

United States Court of Appeals, District of Columbia Circuit.

Argued January 8, 2010.

Decided April 6, 2010.

Helgi C. Walker argued the cause for petitioner. With her on the briefs were Eve Klindera Reed, Elbert Lin, David P. Murray, James L. Casserly, and David H. Solomon.

Howard J. Symons argued the cause for intervenors National Cable & Telecommunications Association and NBC Universal. With him on the briefs were Neal M. Goldberg, Michael S. Schooler, and Margaret L. Tobey. Richard Cotton entered an appearance.

Kyle D. Dixon was on the brief for amici curiae Professors James B. Speta and Glen O. Robinson and The Progress and Freedom Foundation in support of petitioner.

Austin C. Schlick, General Counsel, Federal Communications Commission, argued the cause for respondents. With him on the brief were Catherine G. O'Sullivan and Nancy C. Garrison, Attorneys, U.S. Department of Justice, Joseph R. Palmore, Deputy General Counsel, Federal Communications Commission, Richard K. Welch, Deputy Associate General Counsel, and Joel Marcus, Counsel. Daniel M. Armstrong III, Associate General Counsel, entered an appearance.

Marvin Ammori argued the cause for intervenors Free Press, et al. in support of respondents. With him on the brief were Henry Goldberg, Harold Feld, and Andrew Jay Schwartzman.

John F. Blevins was on the brief for amici curiae Professors Jack M. Balkin, et al. in support of respondents.

Before: SENTELLE, Chief Judge, TATEL, Circuit Judge, and RANDOLPH, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

In this case we must decide whether the Federal Communications Commission has authority to regulate an Internet service provider's network management practices. Acknowledging that it has no express statutory authority over such practices, the Commission relies on section 4(i) of the Communications Act of 1934, which authorizes the Commission to "perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions." 47 U.S.C. § 154(i). The Commission may exercise this "ancillary" authority only if it demonstrates that its action—here barring Comcast from interfering with its customers' use of peer-to-peer networking applications—is "reasonably ancillary to the ... effective performance of its statutorily mandated responsibilities." Am. Library Ass'n v. FCC, 406 F.3d 689, 692 (D.C.Cir. 2005). The Commission has failed to make that showing. It relies principally on several Congressional statements of policy, but under Supreme Court and D.C. Circuit case law statements of policy, by themselves, do not create "statutorily mandated responsibilities." The Commission also relies on various provisions of the Communications Act that do create such responsibilities, but for a variety of substantive and procedural reasons those provisions cannot support its exercise of ancillary authority over Comcast's network management practices. We therefore grant Comcast's petition for review and vacate the challenged order.

I.

In 2007 several subscribers to Comcast's high-speed Internet service discovered that the company was interfering with their use of peer-to-peer networking applications. See Peter Svensson, Comcast Blocks Some Internet Traffic, ASSOCIATED PRESS, Oct. 19, 2007. Peer-to-peer programs allow users to share large files directly with one another without going through a central server. Such programs also consume significant amounts of bandwidth.

Challenging Comcast's action, two non-profit advocacy organizations, Free Press and Public Knowledge, filed a complaint with the Federal Communications Commission and, together with a coalition of public interest groups and law professors, a petition for declaratory ruling. Compl. of Free Press & Public Knowledge Against Comcast Corp., File No. EB-08-IH-1518 (Nov. 1, 2007) ("Compl."); Pet. of Free Press et al. for Decl. Ruling, WC Docket No. 07-52 (Nov. 1, 2007) ("Pet."). Both filings argued that Comcast's actions "violated the FCC's Internet Policy Statement." Compl. at 1; Pet. at i. Issued two years earlier, that statement "adopted the ... principles" that "consumers are entitled to access the lawful Internet content of their choice ... and to run applications and use services of their choice." In re Appropriate Framework for Broadband Access to the Internet Over Wireline Facilities, 20 F.C.C.R. 14,986, 14,988, ¶ 4 (2005). Comcast defended its interference with peer-to-peer programs as necessary to manage scarce network capacity. Comments of Comcast Corp. at 14, WC Docket No. 07-52 (Feb. 12, 2008).

Following a period of public comment, the Commission issued the order challenged here. In re Formal Compl. of Free Press & Public Knowledge Against Comcast Corp. for Secretly Degrading Peer-to-Peer Applications, 23 F.C.C.R. 13,028 (2008) (Order). The Commission began by concluding not only that it had jurisdiction over Comcast's network management practices, but also that it could resolve the dispute through adjudication rather than through rulemaking. Id. at 13,033-50, ¶¶ 12-40. On the merits, the Commission ruled that Comcast had "significantly impeded consumers' ability to access the content and use the applications of their choice," id. at 13,054, ¶ 44, and that because Comcast "had several available options it could use to manage network traffic without discriminating" against peer-to-peer communications, id. at 13,057, ¶ 49, its method of bandwidth management "contravened ... federal policy," id. at 13,052, ¶ 43. Because by then Comcast had agreed to adopt a new system for managing bandwidth demand, the Commission simply ordered it to make a set of disclosures describing the details of its new approach and the company's progress toward implementing it. Id. at 13,059-60, ¶ 54. The Commission added that an injunction would automatically issue should Comcast either fail to make the required disclosures or renege on its commitment. Id. at 13,060, ¶ 55.

Although Comcast complied with the Order, it now petitions for review, presenting three objections. First, it contends that the Commission has failed to justify exercising jurisdiction over its network management practices. Second, it argues that the Commission's adjudicatory action was procedurally flawed because it circumvented the rulemaking requirements of the Administrative Procedure Act and violated the notice requirements of the Due Process Clause. Finally, it asserts that parts of the Order are so poorly reasoned as to be arbitrary and capricious. We begin— and end—with Comcast's jurisdictional challenge.

II.

Through the Communications Act of 1934, ch. 652, 48 Stat. 1064, as amended over the decades, 47 U.S.C. § 151 et seq., Congress has given the Commission express and expansive authority to regulate common carrier services, including landline telephony, id. § 201 et seq. (Title II of the Act); radio transmissions, including broadcast television, radio, and cellular telephony, id. § 301 et seq. (Title III); and "cable services," including cable television, id. § 521 et seq. (Title VI). In this case, the Commission does not claim that Congress has given it express authority to regulate Comcast's Internet service. Indeed, in its still-binding 2002 Cable Modem Order, the Commission ruled that cable Internet service is neither a "telecommunications service" covered by Title II of the Communications Act nor a "cable service" covered by Title VI. In re High-Speed Access to the Internet Over Cable and Other Facilities, 17 F.C.C.R. 4798, 4802, ¶ 7 (2002), aff'd Nat'l Cable & Telecomms. Ass'n v. Brand X Internet Servs., 545 U.S. 967, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005). The Commission therefore rests its assertion of authority over Comcast's network management practices on the broad language of section 4(i) of the Act: "The Commission may perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions," 47 U.S.C. § 154(i). Order, 23 F.C.C.R. at 13,036, ¶ 15.

Courts have come to call the Commission's section 4(i) power its "ancillary" authority, a label that derives from three foundational Supreme Court decisions: United States v. Southwestern Cable Co., 392 U.S. 157, 88 S.Ct. 1994, 20 L.Ed.2d 1001 (1968), United States v. Midwest Video Corp., 406 U.S. 649, 92 S.Ct. 1860, 32 L.Ed.2d 390 (1972) (Midwest Video I), and FCC v. Midwest Video Corp., 440 U.S. 689, 99 S.Ct. 1435, 59 L.Ed.2d 692 (1979) (Midwest Video II). All three cases dealt with Commission jurisdiction over early cable systems at a time when, as with the Internet today, the Communications Act gave the Commission no express authority to regulate such systems. (Title VI, which gives the Commission jurisdiction over "cable services," was not added to the statute until 1984. See Cable Communications Policy Act of 1984, Pub.L. No. 98-549, 98 Stat. 2779.)

In the first case, Southwestern Cable, the Supreme Court considered a challenge to a Commission order restricting the geographic area in which a cable company could operate. 392 U.S. at 160, 88 S.Ct. 1994. At that time, cable television, then known as "community antenna television" (CATV), functioned quite differently than it does today. Employing strategically located antennae, these early cable systems simply received over-the-air television broadcasts and retransmitted them by cable to their subscribers. Id. at 161-62, 88 S.Ct. 1994. Although they rarely produced their own programming, they improved reception and allowed subscribers to receive television programs from distant stations. Id. at 162-63, 88 S.Ct. 1994. Seeking to protect Commission-licensed local...