Verizon v. Fed. Commc'ns Comm'n

• Decision Date: 14 January 2014
• Docket Number: 11–1356.,Nos. 11–1355,s. 11–1355
• Court: U.S. Court of Appeals — District of Columbia Circuit
• Parties: VERIZON, Appellant v. FEDERAL COMMUNICATIONS COMMISSION, Appellee. Independent Telephone & Telecommunications Alliance, et al., Intervenors.

740 F.3d 623

VERIZON, Appellant

v.FEDERAL COMMUNICATIONS COMMISSION, Appellee.

Independent Telephone & Telecommunications Alliance, et al., Intervenors.

Nos. 11–1355, 11–1356.

United States Court of Appeals,District of Columbia Circuit.

Argued Sept. 9, 2013.

Decided Jan. 14, 2014.

On Petition For Review and Notice of Appeal of an Order of the Federal Communications Commission.

Helgi C. Walker argued the cause for appellant/petitioner Verizon. With her on the briefs were Eve Klindera Reed, William S. Consovoy, Brett A. Shumate, Walter E. Dellinger, Anton Metlitsky, Samir C. Jain, Carl W. Northrup, Michael Lazarus, Andrew Morentz, Michael E. Glover, William H. Johnson, Stephen B. Kinnaird, and Mark A. Stachiw. John T. Scott III and Edward Shakin entered appearances.

Stephen B. Kinnaird, Carl W. Northrup, Michael Lazarus, Andrew Morentz, and Mark A. Stachiw were on the briefs for appellants/petitioners MetroPCS Communications, Inc., et al.

John P. Elwood, Sam Kazman, Randolph May, and Ilya Shapiro were on the brief for amici curiae The Competitive Enterprise Institute, et al. in support of appellant/petitioner.

Russell P. Hanser, Bryan N. Tramont, and Quentin Riegel were on the brief for amicus curiae National Association of Manufacturers in support of appellant/petitioner.

Kenneth T. Cuccinelli, II, Attorney General, Office of the Attorney General for the Commonwealth of Virginia, E. Duncan Getchell, Jr., Solicitor General, and Wesley G. Russell, Jr., Deputy Attorney General, were on the brief for amici curiae The Commonwealth of Virginia, et al. in support of appellant/petitioner.

Sean A. Lev, General Counsel, Federal Communications Commission, argued the cause for appellee/respondent. With him on the briefs were Catherine G. O'Sullivan and Nickolai G. Levin, Attorneys, U.S. Department of Justice, Peter Karanjia, Deputy General Counsel, Federal Communications Commission, Jacob M. Lewis, Associate General Counsel, and Joel Marcus and Matthew J. Dunne, Counsel. Robert J. Wiggers, Attorney, U.S. Department of Justice, R. Craig Lawrence, Assistant U.S. Attorney, and Richard K. Welch, Deputy Associate General Counsel, Federal Communications Commission, entered appearances.

Pantelis Michalopoulos argued the cause for intervenors. With him on the brief were Stephanie A. Roy, Andrew W. Guhr, Henry Goldberg, David C. Bergmann, Kurt Matthew Rogers, and Brendan Daniel Kasper. Markham C. Erickson, Jeffrey J. Binder, Harold J. Feld and James B. Ramsay entered appearances.

Sean H. Donahue and David T. Goldberg were on the brief for amici curiae Reed Hundt, et al. in support of appellee/respondent.

E. Joshua Rosenkranz, Gabriel M. Ramsey, Thomas J. Gray, and Christina Vonder Ahe were on the brief for amici curiae Venture Capital Investors in support of appellee/respondent.

Andrew Jay Schwartzman was on the brief for amicus curiae Tim Wu in support of appellee/respondent.

John Blevins was on the brief for amici curiae Internet Engineers and Technologists in support of appellee/respondent.

Kevin S. Bankston and Emma J. Llansó were on the brief for amici curiae The Center for Democracy and Technology, et al. in support of appellee/respondent.

Before: ROGERS and TATEL, Circuit Judges, and SILBERMAN, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge TATEL.

Opinion concurring in part and dissenting in part filed by Senior Circuit Judge SILBERMAN.

TATEL, Circuit Judge.

For the second time in four years, we are confronted with a Federal Communications Commission effort to compel broadband providers to treat all Internet traffic the same regardless of source—or to require, as it is popularly known, “net neutrality.” In Comcast Corp. v. FCC, 600 F.3d 642 (D.C.Cir.2010), we held that the Commission had failed to cite any statutory authority that would justify its order compelling a broadband provider to adhere to open network management practices. After Comcast, the Commission issued the order challenged here—In re Preserving the Open Internet, 25 F.C.C.R. 17905 (2010) (“the Open Internet Order ”)—which imposes disclosure, anti-blocking, and anti-discrimination requirements on broadband providers. As we explain in this opinion, the Commission has established that section 706 of the Telecommunications Act of 1996 vests it with affirmative authority to enact measures encouraging the deployment of broadband infrastructure. The Commission, we further hold, has reasonably interpreted section 706 to empower it to promulgate rules governing broadband providers' treatment of Internet traffic, and its justification for the specific rules at issue here—that they will preserve and facilitate the “virtuous circle” of innovation that has driven the explosive growth of the Internet—is reasonable and supported by substantial evidence. That said, even though the Commission has general authority to regulate in this arena, it may not impose requirements that contravene express statutory mandates. Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the Commission from nonetheless regulating them as such. Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order.

I.

Understanding this case requires an understanding of the Internet, the Internet marketplace, and the history of the Commission's regulation of that marketplace.

Four major participants in the Internet marketplace are relevant to the issues before us: backbone networks, broadband providers, edge providers, and end users. Backbone networks are interconnected, long-haul fiber-optic links and high-speed routers capable of transmitting vast amounts of data. See In re Verizon Communications Inc. and MCI, Inc. Applications for Approval of Transfer of Control, 20 F.C.C.R. 18433, 18493 ¶ 110 (2005). Internet users generally connect to these networks—and, ultimately, to one another—through local access providers like petitioner Verizon, who operate the “last-mile” transmission lines. See Open Internet Order, 25 F.C.C.R. at 17908, 17915 ¶¶ 7, 20. In the Internet's early days, most users connected to the Internet through dial-up connections over local telephone lines. See in rE inquiRY concerninG high–speeD access to thE interneT oveR cable anD other Facilities, 17 F.C.C.R. 4798, 4802–03 ¶ 9 (2002) (“Cable Broadband Order ”). Today, access is generally furnished through “broadband,” i.e., high-speed communications technologies, such as cable modem service. See In re Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, 25 F.C.C.R. 9556, 9557, 9558–59 ¶¶ 1, 4 (2010) (“Sixth Broadband Deployment Report ”); 47 U.S.C. § 1302(d)(1). Edge providers are those who, like Amazon or Google, provide content, services, and applications over the Internet, while end users are those who consume edge providers' content, services, and applications. See Open Internet Order, 25 F.C.C.R. at 17910 ¶ 13. To pull the whole picture together with a slightly oversimplified example: when an edge provider such as YouTube transmits some sort of content—say, a video of a cat—to an end user, that content is broken down into packets of information, which are carried by the edge provider's local access provider to the backbone network, which transmits these packets to the end user's local access provider, which, in turn, transmits the information to the end user, who then views and hopefully enjoys the cat.

These categories of entities are not necessarily mutually exclusive. For example, end users may often act as edge providers by creating and sharing content that is consumed by other end users, for instance by posting photos on Facebook. Similarly, broadband providers may offer content, applications, and services that compete with those furnished by edge providers. See Open Internet Order, 25 F.C.C.R. at 17915 ¶ 20.

Proponents of net neutrality—or, to use the Commission's preferred term, “Internet openness”—worry about the relationship between broadband providers and edge providers. They fear that broadband providers might prevent their end-user subscribers from accessing certain edge providers altogether, or might degrade the quality of their end-user subscribers' access to certain edge providers, either as a means of favoring their own competing content or services or to enable them to collect fees from certain edge providers. Thus, for example, a broadband provider like Comcast might limit its end-user subscribers' ability to access the New York Times website if it wanted to spike traffic to its own news website, or it might degrade the quality of the connection to a search website like Bing if a competitor like Google paid for prioritized access.

Since the advent of the Internet, the Commission has confronted the questions of whether and how it should regulate this communications network, which, generally speaking, falls comfortably within the Commission's jurisdiction over “all interstate and foreign communications by wire or radio.” 47 U.S.C. § 152(a). One of the Commission's early efforts occurred in 1980, when it adopted what is known as the Computer II regime. The Computer II rules drew a line between “basic” services, which were subject to regulation under Title II of the Communications Act of 1934 as common carrier services, see47 U.S.C. §§ 201 et seq., and “enhanced” services, which were not. See In re Amendment of Section 64.702 of the Commission's Rules and Regulations, 77 F.C.C.2d 384, 387 ¶¶ 5–7 (1980) (“Second Computer Inquiry ”). What distinguished “enhanced” services from “basic” services was the extent to which they involved the processing of information rather than simply its transmission. Id. at 420–21 ¶¶ 96–97. For example, the Commission characterized...