United States: New Proposal to Reclassify Broadband Services as Telecommunications Services Issued by US Federal Communications Commission

Originally published May 7, 2010

Keywords: Federal Communications Commission, Comcast, ISP, network management rules, broadband service, telecommunications

On May 6, 2010, Federal Communications Commission (FCC) Chairman Julius Genachowski issued a proposal in response to the US District Court for the District of Columbia's April 6, 2010, rejection of the FCC's assertions of authority to impose network management rules on broadband providers (Comcast Corp. v. FCC, No. 08-1291 (D.C. Cir. Apr. 6, 2010)).¹ The proposal offers new grounds for the FCC's authority to impose network management and other regulations on broadband services. FCC General Counsel Austin Schlick also issued a statement describing the legal theories behind the proposal described by the Chairman.

Recognizing that the DC Circuit's opinion in Comcast rejected the legal theory on which the FCC had sought to impose network management rules on broadband services—while allowing that such regulation might permissibly be grounded in a different theory—the Chairman proposed what he characterized as a "narrow and tailored approach." Under this approach, he plans to ask the FCC to reclassify the transmission component of broadband service as a telecommunications service under Title II of the Communications Act and to apply the core elements of Title II and several additional provisions to that service, while explicitly forbearing from other Title II regulations.

General Counsel Schlick asserted that continued efforts to regulate broadband under the current "information service" classification would, in light of Comcast, be subject to jurisdictional challenges and prolonged uncertainty. He also contended that reclassifying broadband service in its entirety as a telecommunications service and applying the full authority the FCC possesses under Title II would entail a higher degree of regulation than appropriate. Instead, he elaborated on the "third way" articulated by the Chairman. 

Recalling Justice Scalia's dissent in Nat'l Cable and Telecomm. Assoc. v. Brand X Internet Servs., Inc., which describes cable modem service as having a transmission component distinct from its information service, Schlick asserted that the FCC should reclassify just the former component as a telecommunications service. Under that approach, the FCC would have the power to regulate the transmission component pursuant to its Title II powers—but would forbear from doing so to the full permissible extent—while retaining at most ancillary jurisdiction over the information service.

Chairman Genachowski suggested that the FCC could accomplish its broadband-promotion goals by the application of only certain Title II provisions. He specified the following sections:

• Sections 201, 202, and 208, which would enable the FCC to enforce prohibitions on unreasonable denials of service and other unjust or unreasonable charges and practices;
• Section 254, which requires the FCC to promote universal service;
• Section 222, which would require providers to protect the confidential information of their customers; and
• Section 255, which requires reasonable accommodation to make telecommunications services and equipment accessible to individuals with disabilities.

Schlick argued that this approach would likely survive judicial scrutiny if challenged, even though the Supreme Court in Brand X affirmed the FCC's earlier classification of cable modem service as an information service. According to Schlick, in Brand X, a six-member majority of the Court agreed that courts must defer to the implementing agency's reasonable interpretation of an ambiguous statute, and that the agency must "consider varying interpretations and the wisdom of its policy on a continuing basis." The Court held that the question of the nature of cable modem service—whether it was an integrated information service, or an offering of distinct information and transmission services—was properly within the reasonable discretion of the FCC. Neither the Chairman nor Schlick, however, fully articulated how the FCC expects to satisfy the test established by the Supreme Court last year, in FCC v. Fox Television Stations, Inc., before the agency can so drastically break with its own precedent. 

In Fox, the Court held that, in order to permissibly change course from an established policy, an agency must show that "the new policy is permissible under the statute, that there are good reasons for it, and that the agency believes it to be better" than the prior policy. In addition, a "more detailed justification" is necessary when a new policy "rests upon factual findings that contradict those which underlay its prior policy; or when its prior policy has engendered serious reliance interests that must be taken into account." Given the FCC's repeated factual determinations, since 1998, that broadband service is an "inextricably intertwined" information service, and the long reliance the industry has placed on such determinations, the FCC may find it difficult to justify reversing course now.

The Chairman's plan has engendered concerns from broadband service providers, making a court challenge to the reclassification of broadband services as telecommunications services, if adopted by the FCC, a virtual certainty. 

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Footnote

1. See our discussion of the Comcast decision, "DC Circuit Determines That the FCC Exceeded Its Authority in Regulating Comcast's Network Management Policies—Congressional Action Likely Necessary to Implement Network Neutrality".

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