fcc net neutrality

ISPs asked the US Supreme Court to strike down a New York law that requires broadband providers to offer $15-per-month service to people with low incomes. On Monday, a Supreme Court petition challenging the state law was filed by six trade groups representing the cable, telecom, mobile, and satellite industries.

Although ISPs were recently able to block the FCC’s net neutrality rules, this week’s petition shows the firms are worried about states stepping into the regulatory vacuum with various kinds of laws targeting broadband prices and practices. A broadband-industry victory over federal regulation could bolster the authority of New York and other states to regulate broadband. To prevent that, ISPs said the Supreme Court should strike down both the New York law and the FCC’s broadband regulation, although the rulings would have to be made in two different cases.

A situation in which the New York law is upheld while federal rules are struck down “will likely lead to more rate regulation absent the Court’s intervention,” ISPs told the Supreme Court. “Other States are likely to copy New York once the Attorney General begins enforcing the ABA [Affordable Broadband Act] and New York consumers can buy broadband at below-market rates. As petitioners’ members have shown, New York’s price cap will require them to sell broadband at a loss and deter them from investing in expanding their broadband networks. As rate regulation proliferates, those harms will as well, stifling critical investment in bringing broadband to unserved and underserved areas.”

The New York law was upheld in April by the US Court of Appeals for the 2nd Circuit, which reversed a 2021 District Court ruling. New York Attorney General Letitia James agreed last week not to enforce the $15 broadband law while the Supreme Court considers whether to take up the case.

“Although New York has agreed not to enforce its rate-regulation law while the Court resolves this petition, New York continues to assert that it has the right to do what the FCC cannot,” ISPs wrote. “This case thus presents the question whether broadband services will remain protected from common-carrier treatment and rate regulation by individual States.”

NY law’s fate tied to FCC regulation

The fate of the New York law is tied in part to the Federal Communications Commission’s April 2024 decision to revive net neutrality rules and regulate ISPs as common carriers under Title II of the Communications Act. When New York enacted its affordability law, the FCC was not regulating ISPs under Title II. The lack of federal regulation gave states more leeway to implement their own laws.

When judges at the 2nd Circuit upheld the New York law, they wrote that “a federal agency cannot exclude states from regulating in an area where the agency itself lacks regulatory authority.” If the FCC’s revived common-carrier regulations are upheld, ISPs would have a better chance at overturning the New York law.

But ISPs are trying to get the net neutrality and common-carrier regulations overturned—and having success on that front. The US Court of Appeals for the 6th Circuit stayed enforcement of the FCC regulations while litigation is pending, and a panel of judges said that ISPs are likely to win the case. The “broadband providers have shown that they are likely to succeed on the merits,” 6th Circuit judges wrote.

ISPs are worried that if they succeed in killing the FCC regulation, they will be subject to many state laws like New York’s. “The upshot of the Sixth Circuit and Second Circuit decisions is that each State can now do what the FCC cannot—subject an interstate information service to common-carrier regulation, including rate regulation,” ISP lobby groups said in their Supreme Court petition. This will be “to the detriment of providers, consumers, and the nation,” they claimed.

ISPs asked the Supreme Court to “confirm that the federal Communications Act—not a patchwork of state laws—governs the regulation of interstate communications services such as broadband.”

The Federal Communications Commission’s hopes of enforcing net neutrality rules was dealt a major setback last week. A panel of appeals court judges blocked the regulations on Thursday in a ruling that said broadband providers are likely to win the case on the merits.

The US Court of Appeals for the 6th Circuit previously issued an administrative stay that delayed enforcement of the rules for a few weeks, which didn’t necessarily indicate much about the judges’ view of the lawsuit. But on Thursday, the judges issued an order that stays the net neutrality rules until the court makes a final ruling, and judges made it clear they believe the Internet service providers have a stronger case than the FCC.

“Because the broadband providers have shown that they are likely to succeed on the merits and that the equities support them, we grant the stay,” a panel of three judges wrote in the unanimous ruling.

The FCC in April voted to revive net neutrality rules that were previously discarded by the Trump-era commission. To get the rules upheld, the FCC must convince judges that it has authority to classify broadband as a telecommunications service, a necessary step for imposing Title II common-carrier regulations.

The FCC’s task got harder when the Supreme Court decision in Loper Bright Enterprises v. Raimondo overturned the 40-year-old Chevron precedent that gave agencies leeway to interpret ambiguous laws as long as the agency’s conclusion was reasonable. Even before that, ISPs were hoping that the Supreme Court’s evolving approach to what are deemed “major questions” would prevent the FCC from defining broadband as telecommunications without explicit instructions from Congress.

ISPs likely to succeed on the merits

The 6th Circuit panel found that broadband providers “are likely to succeed on the merits because the final rule implicates a major question, and the Commission has failed to satisfy the high bar for imposing such regulations.”

Net neutrality, the judges wrote, “is likely a major question requiring clear congressional authorization,” and the “Communications Act likely does not plainly authorize the Commission to resolve this signal question. Nowhere does Congress clearly grant the Commission the discretion to classify broadband providers as common carriers. To the contrary, Congress specifically empowered the Commission to define certain categories of communications services—and never did so with respect to broadband providers specifically or the Internet more generally.”

Although the ISPs now have a clear advantage in the case, net neutrality supporters say there is still hope.

“The grant of a stay definitely gives the edge to the ISPs. That said, the outcome is far from certain. The case goes to a different set of judges, which means that it may get a fresh look,” Andrew Jay Schwartzman, senior counselor for the Benton Institute for Broadband & Society, told Ars today.

The three 6th Circuit judges who ruled against the FCC last week are Chief Judge Jeffrey Sutton, Judge Eric Clay, and Judge Stephanie Dawkins Davis. Sutton was appointed by George W. Bush, while Clay is a Clinton appointee, and Davis was appointed by Biden.

New panel of judges on the way

The current case is Ohio Telecom Association v. FCC. Oral arguments may be held as early as October 28, but a different set of judges will hear the arguments and make a ruling on the merits. “The clerk is directed to schedule this case for oral argument at the court’s fall sitting, October 28-November 1, 2024, so that a randomly drawn merits panel may consider the case,” the Thursday ruling said.

Which three judges will decide the case on the merits hasn’t been announced. Even after that panel rules, the losing side could seek an en banc rehearing with all the court’s judges, and the case could eventually go to the Supreme Court.

Schwartzman, who is involved in the 6th Circuit case on the pro-net neutrality side, told Ars that there are “some factual mistakes in the stay order; once they are properly explained, the merits panel might see things differently.” The judges who granted the stay “seem to think [of] ISPs’ offering of DNS and caching as essential elements of their offerings; that was true in 2005, but not today,” Schwartzman said.

Schwartzman was referring to a passage in the ruling that said “broadband providers offer data processing and storage to users through DNS and caching services.” The judges’ panel said that because DNS and caching “provide users with a comprehensive capability for manipulating information,” broadband seems to be more accurately described as an information service than a telecommunications service.

Net neutrality back in court —

Fate of net neutrality may hinge on Supreme Court’s “major questions” doctrine.