Mozilla Corporation v. FCC ( 2019 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 1, 2019 Decided October 1, 2019
No. 18-1051
MOZILLA CORPORATION,
PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND UNITED
STATES OF AMERICA,
RESPONDENTS
CITY AND COUNTY OF SAN FRANCISCO, ET AL.,
INTERVENORS
Consolidated with 18-1052, 18-1053, 18-1054, 18-1055,
18-1056, 18-1061, 18-1062, 18-1064, 18-1065, 18-1066,
18-1067, 18-1068, 18-1088, 18-1089, 18-1105
On Petitions for Review of an Order of
the Federal Communications Commission
Pantelis Michalopoulos and Kevin Kendrick Russell
argued the causes for non-government petitioners. With them
on the joint briefs were Cynthia L. Taub, Markham C.
Erickson, Michael A. Cheah, Brian M. Willen, Donald J.
Evans, Sarah J. Morris, Matthew F. Wood, Colleen Boothby,
James N. Horwood, Tillman L. Lay, Jeffrey M. Bayne,
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Katherine J. O= Konski, Andrew Jay Schwartzman, Harold
J. Feld, and Lisa A. Hayes. Keenan P. Adamchak and Kevin
S. Bankston, entered appearances.
Stephanie Weiner argued the cause for intervenors Internet
Association et al. et al. in support of petitioners. With her on
the briefs were Christopher J. Wright, Scott Blake Harris, E.
Austin Bonner, Matt Schruers, John A. Howes, Jr., and
Anthony R. Segall. Maria K. Myers entered an appearance.
Danielle L. Goldstein and Steven C. Wu, Deputy Solicitor
General, Office of the Attorney General for the State of New
York, argued the causes for government petitioners. With them
on the briefs were Barbara D. Underwood, Attorney General
at the time the brief was filed, Office of the Attorney General
for the State of New York, Arocles Aguilar, Helen M.
Mickiewicz, Lisa-Marie G. Clark, Kimberly Lippi, Ester
Murdukhayeva, Assistant Solicitor General, Office of the
Attorney General for the State of New York, James R.
Williams, Greta Hansen, Xavier Becerra, Attorney General,
Office of the Attorney General for the State of California,
Sarah E. Kurtz, Deputy Attorney General, Nicklas A. Akers,
Senior Assistant Attorney General, George Jepsen, Attorney
General, Office of the Attorney General for the State of
Connecticut, Jonathan J. Blake, Assistant Attorney General,
Jeffrey T. Pearlman, Phillip R. Malone, Matthew P. Denn,
Attorney General, Office of the Attorney General for the
State of Delaware, Christian D. Wright, Director,
Consumer Protection, Thomas J. Miller, Attorney General,
Office of the Attorney General for the State of Iowa, Benjamin
E. Bellus, Assistant Attorney General, Russell A. Suzuki,
Attorney General at the time the brief was filed, Office of
the Attorney General for the State of Hawai=i, Clyde J.
Wadsworth, Solicitor General, Lisa Madigan, Attorney
General, Office of the Attorney General for the State of
Illinois, David Franklin, Solicitor General, Andrew G.
3
Beshear, Attorney General, Office of the Attorney General for
the Commonwealth of Kentucky, Maura Healey, Attorney
General, Office of the Attorney General for the
Commonwealth of Massachusetts, Jared Rinehimer, Assistant
Attorney General, Janet T. Mills, Attorney General at the time
the brief was filed, Office of the Attorney General for the State
of Maine, Brendan O=Neil, Assistant Attorney General, Brian
E. Frosh, Attorney General, Office of the Attorney General for
the State of Maryland, Richard L. Trumka, Jr., Assistant
Attorney General, Lori Swanson, Attorney General, Office of
the Attorney General for the State of Minnesota, Joseph C.
Meyer, Assistant Attorney General, Hector Balderas, Attorney
General, Office of the Attorney General for the State of New
Mexico, Tania Maestas, Deputy Attorney General, James M.
Hood, Attorney General, Office of the Attorney General for the
State of Mississippi, Crystal Utley Secoy, Special Assistant
Attorney, Gurbir S. Grewal, Attorney General, Office of the
Attorney General for the State of New Jersey, Jeremy M.
Feigenbaum, Assistant Attorney General, Joshua H. Stein,
Attorney General, Office of the Attorney General for the State
of North Carolina, Kevin Anderson, Senior Deputy Attorney
General, Peter Kilmartin, Attorney General, Office of the
Attorney General for the State of Rhode Island, Michael W.
Field, Assistant Attorney General, Ellen F. Rosenblum,
Attorney General, Office of the Attorney General for the State
of Oregon, Andrew Shull, Senior Assistant Attorney General,
Josh Shapiro, Attorney General, Office of the Attorney
General for the Commonwealth of Pennsylvania, Michael J.
Fischer, Chief Deputy Attorney General, Thomas J. Donovan,
Jr., Attorney General, Office of the Attorney General for the
State of Vermont, Christopher J. Curtis, Chief, Public
Protection Division, Karl A. Racine, Attorney General, Office
of the Attorney General for the District of Columbia, Loren L.
AliKhan, Solicitor General, Mark R. Herring, Attorney
General, Office of the Attorney General for the
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Commonwealth of Virginia, Samuel T. Towell, Deputy
Attorney General, Robert W. Ferguson, Attorney General,
Office of the Attorney General for the State of Washington,
Tiffany Lee, Assistant Attorney General, Dennis J. Herrera,
and William K. Sanders. Bryan C. Yee, Deputy Attorney
General, Office of the Attorney General for the State of
Hawai=i, Sarah E. Kurtz, Deputy Attorney General, Office of
the Attorney General for the State of California, Michael C.
Wertheimer, Assistant Attorney General, and John S. Story,
Attorney, Office of the Attorney General for the State of
Connecticut, Theresa C. Mueller, Jennifer M. Murphy, and
James B. Ramsey, entered appearances.
Christopher Jon Sprigman was on the brief for amici
curiae Members of Congress in support of petitioners.
Mitchell Stoltz and Corynne McSherry were on the brief
for amicus curiae Electronic Frontier Foundation in support of
petitioners.
Christopher T. Bavitz was on the brief for amicus curiae
Engine Advocacy in support of petitioners.
MacKenzie Fillow, Edward N. Siskel, Michael P. May, and
Karen L. Moynahan were on the brief for amici curiae The City
of New York and 27 other local governments, mayors and
municipal organizations in support of petitioners.
Allen S. Hammond, IV was on the brief for amici curiae
Professors of Administrative, Communications, Energy,
Antitrust, and Contract Law and Policy in support of
petitioners.
Jessica L. Ellsworth and Matthew Higgins were on the
brief for amici curaie The American Council on Education and
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19 other education and library associations in support of
petitioners.
Henry Goldberg and Devendra T. Kumar were on the brief
for amicus curiae eBay Inc. in support of petitioners.
Adrienne E. Fowler was on the brief for amicus curiae
Twilio Inc. in support of petitioner.
Andrew Jay Schwartzman and James T. Graves were on
the brief for amicus curiae Consumer Reports in support of
petitioners.
Thomas H. Vidal was on the brief for amici curiae
Professors Scott Jordan and Jon Peha in support of petitioners.
Michael J. Burstein was on the brief for amici curiae
Professors of Communications Law in support of petitioners.
Paul Goodman and Yosef Getachew were on the brief for
amici curiae Common Cause, et al. in support of petitioners
and vacation of the order.
William Michael Cunningham, pro se, was on the brief for
amicus curiae William Michael Cunningham in support of the
public interest.
Thomas M. Johnson Jr, General Counsel, Federal
Communications Commission, argued the cause for
respondents. With him on the brief were Kristen C. Limarzi
and Nickolai G. Levin, Attorneys, U.S. Department of Justice,
David M. Gossett, Deputy General Counsel, Federal
Communications Commission, Jacob M. Lewis, Associate
General Counsel, and James M. Carr and Scott M. Noveck,
Counsel. Robert J. Wiggers, Attorney, U.S. Department of
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Justice, and Richard K. Welch, Deputy Associate Counsel,
Federal Communications Commission, entered appearances.
Jonathan E. Nuechterlein argued the cause for ISP
intervenors. On the brief were Michael K. Kellogg, Scott H.
Angstreich, Helgi C. Walker, Andrew G.I. Kilberg, Miguel A.
Estrada, Matthew A. Brill, Matthew T. Murchison, Jeffrey A.
Lamken, and Stephen E. Coran. C. Frederick Beckner, III,
Rick Chessen, Kellam M. Conover, Neal M. Goldberg,
Theodore B. Olson, and Michael S. Schooler entered
appearances.
Ken Paxton, Attorney General, Office of the Attorney
General for the State of Texas, Kyle D. Hawkins, Solicitor
General, and John C. Sullivan, Assistant Solicitor General,
were on the brief for amici curiae The States of Texas, et al. in
support of respondents.
Lawrence J. Spiwak was on the brief for amicus curiae
Phoenix Center for Advanced Legal and Economic Public
Policy Studies in support of respondents.
Tara M. Corvo and Jonathan Markman were on the brief
for amici curiae Richard Bennett, et al. in support of
respondents.
Thomas R. McCarthy was on the brief for amici curiae
Washington Legal Foundation, et al. in support of respondents.
John D. Seiver, Daniel P. Reing, and Sarah Oh were on
the brief for amicus curiae The Technology Policy Institute in
support of respondents.
Charles Kennedy and James Dunstan were on the brief for
amicus curiae TechFreedom in support of respondents.
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Arthur J. Burke was on the brief for amicus curiae
Information Technology and Innovation Foundation in support
of respondents.
Robert N. Weiner was on the brief for amici curiae The
Georgetown Center for Business and Public Policy and Nine
Prominent Economists and Scholars in support of respondents.
Leonid Goldstein, pro se, was on the brief as an intervenor
in support of respondents.
John P. Elwood, Matthew X. Etchemendy, Peter C.
Tolsdorf, Kevin W. Brooks, Dileep S. Srihari, and Daryl
Joseffer were on the brief for amici curiae The National
Association of Manufacturers, et al. in support of respondents.
David P. Murray was on the brief for amici curiae The
International Center for Law and Economics and Participating
Scholars in support of respondents.
Robert G. Kirk was on the brief for amicus curiae Roslyn
Layton in support of respondents.
J. Wade Lindsay was on the brief for amicus curiae Tech
Knowledge in support of respondents.
Christopher S. Yoo was on the brief for amicus curiae
Christopher S. Yoo in support of respondents.
Andrew Grimm was on the briefs for intervenor Digital
Justice Foundation, Inc. in support of neither party.
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Before: MILLETT and WILKINS, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed PER CURIAM.
Concurring opinion filed by Circuit Judge MILLETT.
Concurring opinion filed by Circuit Judge WILKINS.
Opinion concurring in part and dissenting in part filed by
Senior Circuit Judge WILLIAMS.
TABLE OF CONTENTS
I. Broadband Internet Classification .................................. 13
A. The Supreme Court’s Decision in Brand X ................. 16
B. DNS and Caching in the 2018 Order ........................... 19
C. Objections to the Classification.................................... 21
1. “Walled Garden” Reading of Brand X ................. 21
2. “Telecommunications Management” Exception ... 22
3. Adjunct-to-Basic Precedent .................................. 32
4. Functional Integration ........................................... 40
II. Mobile Broadband Classification................................... 46
A. The 2018 Order’s Provisions ....................................... 46
B. Objections to the Classification.................................... 49
1. Meaning of “Public Switched Network” .............. 50
2. Whether Mobile Broadband Is an
“Interconnected Service” ...................................... 54
3. Whether Mobile Broadband Is the “Functional
Equivalent” of a Commercial Mobile Service...... 62
III. Section 706 Authority .................................................... 66
9
IV. Section 257 and the 2018 Order’s
Transparency Requirements ........................................... 68
V. Arbitrary and Capricious Challenges ............................. 73
A. Effects on Investment and Innovation ......................... 74
B. Harms to Edge Providers and Consumers ................... 85
1. Reliance on the Transparency Rule ...................... 87
2. Reliance on Competition ....................................... 88
3. Reliance on Antitrust and Consumer
Protection Laws ..................................................... 91
C. Public Safety ................................................................. 93
D. Reliance Interests ........................................................ 100
E. Pole Attachments ........................................................ 104
F. Lifeline Program ......................................................... 109
G. Cost-Benefit Analysis................................................. 113
H. Data Roaming Rates ................................................... 119
I. Procedural Challenges ................................................ 120
VI. Preemption ................................................................... 121
A. Express and Ancillary Authority................................ 122
B. The Commission’s Asserted Sources of Authority ... 126
1. Impossibility Exception....................................... 126
2. Federal Policy of Nonregulation ......................... 130
3. Case Precedent..................................................... 133
C. Conflict Preemption.................................................... 135
VII. Conclusion ................................................................... 145
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PER CURIAM: In 2018, the Federal Communications
Commission adopted an order classifying broadband Internet
access service as an information service under Title I of the
Communications Act of 1934, as amended by the
Telecommunications Act of 1996, Pub. L. 104–104, 110 Stat
56 (“the Act”). See In re Restoring Internet Freedom, 33 FCC
Rcd. 311 (2018) (“2018 Order”). In so doing, the agency
pursued a market-based, “light-touch” policy for governing the
Internet and departed from its 2015 order that had imposed
utility-style regulation under Title II of the Act.
Petitioners––an array of Internet companies, non-profits,
state and local governments, and other entities––bring a host of
challenges to the 2018 Order. We find their objections
unconvincing for the most part, though we vacate one portion
of the 2018 Order and remand for further proceedings on three
discrete points.
The 2018 Order and today’s litigation represent yet
another iteration of a long-running debate regarding the
regulation of the Internet. We rehearsed much of this complex
history in United States Telecom Association v. FCC, 825 F.3d
674, 689–697 (D.C. Cir. 2016) (“USTA”), and see no need to
recapitulate here what was so well and thoroughly said there.
In the interest of reader-friendliness, though, we briefly review
certain highlights necessary to understand this opinion.
As relevant here, the 1996 Telecommunications Act
creates two potential classifications for broadband Internet:
“telecommunications services” under Title II of the Act and
“information services” under Title I. These similar-sounding
terms carry considerable significance: Title II entails common
carrier status, see 47 U.S.C. § 153(51) (defining
“telecommunications carrier”), and triggers an array of
statutory restrictions and requirements (subject to forbearance
11
at the Commission’s election). For example, Title II
“declar[es] * * * unlawful” “any * * * charge, practice,
classification or regulation that is unjust or unreasonable.” Id.
§ 201(b). By contrast, “information services” are exempted
from common carriage status and, hence, Title II regulation.
An analogous set of classifications applies to mobile
broadband: A “commercial mobile service” is subject to
common carrier status, see 47 U.S.C. § 332(c)(1), whereas a
“private mobile service” is not, see id. § 332(c)(2).
The Commission’s authority under the Act includes
classifying various services into the appropriate statutory
categories. See National Cable & Telecomms. Ass’n v. Brand
X Internet Servs., 545 U.S. 967, 980–981 (2005). In the years
since the Act’s passage, the Commission has exercised its
classification authority with some frequency.
Initially, in 1998, the Commission classified broadband
over phone lines as a “telecommunications service.” See In re
Deployment of Wireline Services Offering Advanced
Telecommunications Capability, 13 FCC Rcd. 24012 (1998).
Just four years later, though, the Commission determined
that cable broadband was an “information service,” see In re
Inquiry Concerning High-Speed Access to the Internet over
Cable and Other Facilities (“Cable Modem Order”), 17 FCC
Rcd. 4798 (2002), a choice that the Supreme Court upheld in
Brand X, 545 U.S. 967. The agency then applied a similar
classification to wireline and wireless broadband. See In re
Appropriate Framework for Broadband Access to the Internet
over Wireline Facilities, 20 FCC Rcd. 14853 (2005) (“2005
Wireline Broadband Order”); In re Appropriate Regulatory
Treatment for Broadband Access to the Internet over Wireless
Networks, 22 FCC Rcd. 5901 (2007) (“Wireless Broadband
Order”).
12
But in 2015 the Commission took the view that broadband
Internet access is, in fact, a “telecommunications service” and
that mobile broadband is a “commercial mobile service.” See
In re Protecting and Promoting the Open Internet, 30 FCC
Rcd. 5601 (2015) (“Title II Order”). In USTA, this court
upheld that classification as reflecting a reasonable
interpretation of the statute under Chevron’s second step. See
825 F.3d at 701–706, 713–724; see also Chevron, U.S.A., Inc.
v. Natural Res. Def. Council, 467 U.S. 837 (1984).
Once again, the Commission has switched its tack. In
2017, the Commission issued a notice of proposed rulemaking
seeking to revert to its pre-2015 position, In re Restoring
Internet Freedom, 32 FCC Rcd. 4434 (2017), and released the
final order at issue in this case in January 2018.
The 2018 Order accomplishes a number of objectives.
First, and most importantly, it classifies broadband Internet as
an “information service,” see 2018 Order ¶¶ 26–64, and
mobile broadband as a “private mobile service,” see id. ¶¶ 65–
85. Second, relying on Section 257 of the Act (located in Title
II but written so as to apply to Titles I through VI), the
Commission adopts transparency rules intended to ensure that
consumers have adequate data about Internet Service
Providers’ network practices. See id. ¶¶ 209–38. Third, the
Commission undertakes a cost-benefit analysis, concluding
that the benefits of a market-based, “light-touch” regime for
Internet governance outweigh those of common carrier
regulation under Title II, see id. ¶¶ 304–323, resting heavily on
the combination of the transparency requirements imposed by
the Commission under Section 257 with enforcement of
existing antitrust and consumer protection laws, see id. ¶¶ 140–
154. The Commission likewise finds that the burdens of the
Title II Order’s conduct rules exceed their benefits. See id.
¶¶ 246–266.
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We uphold the 2018 Order, with two exceptions. First, the
Court concludes that the Commission has not shown legal
authority to issue its Preemption Directive, which would have
barred states from imposing any rule or requirement that the
Commission “repealed or decided to refrain from imposing” in
the Order or that is “more stringent” than the Order. 2018
Order ¶ 195. The Court accordingly vacates that portion of the
Order. Second, we remand the Order to the agency on three
discrete issues: (1) The Order failed to examine the
implications of its decisions for public safety; (2) the Order
does not sufficiently explain what reclassification will mean
for regulation of pole attachments; and (3) the agency did not
adequately address Petitioners’ concerns about the effects of
broadband reclassification on the Lifeline Program.
I. Broadband Internet Classification
The central issue before us is whether the Commission
lawfully applied the statute in classifying broadband Internet
access service as an “information service.” We approach the
issue through the lens of the Supreme Court’s decision in
Brand X, which upheld the Commission’s 2002 refusal to
classify cable broadband as a “telecommunications service.”
545 U.S. at 974. The Commission’s classification of cable
modem as an “information service” was not challenged in
Brand X, see id. at 987, but, given that “telecommunications
service” and “information service” have been treated as
mutually exclusive by the Commission since the late 1990s,
see, e.g., 2018 Order ¶¶ 53, 62 & n.239; Title II Order ¶ 385,
a premise Petitioners do not challenge, see Mozilla Br. 24, we
view Brand X as binding precedent in this case.
We start, of course, with the statutory definition. Section
47 U.S.C. § 153(24) reads:
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The term “information service” means the offering of
a capability for generating, acquiring, storing,
transforming, processing, retrieving, utilizing, or
making available information via telecommunications
* * * but does not include any use of any such
capability for the management, control, or operation
of a telecommunications system or the management
of a telecommunications service.
The final clause is known as the “telecommunications
management” exception. The Act defines
“telecommunications service” (as distinct from
“telecommunications,” see id. § 153(50)), as follows:
The term “telecommunications service” means the
offering of telecommunications for a fee directly to
the public, or to such classes of users as to be
effectively available directly to the public, regardless
of the facilities used.
Id. § 153(53).
The Commission appears to make two arguments for its
classification. It states first that “broadband Internet access
service necessarily has the capacity or potential ability to be
used to engage in the activities within the information service
definition—‘generating, acquiring, storing, transforming,
processing, retrieving, utilizing, or making available
information via telecommunications,’” 2018 Order ¶ 30
(quoting 47 U.S.C. § 153(24)), and on that basis alone merits
an “information service” classification.
The Commission then goes on to say: “But even if
‘capability’ were understood as requiring more of the
information processing to be performed by the classified
service itself, we find that broadband Internet access service
15
meets that standard.” 2018 Order ¶ 33. As we will see, the
Commission regards this requirement as being met by specific
information-processing features that are, in its view,
functionally integrated with broadband service, particularly
Domain Name Service (“DNS”) and caching, about which
more later. (Petitioners themselves treat the Commission’s
DNS/caching argument as “an alternative ground” for the
Commission’s classification. Mozilla Reply Br. 21.)
Our review is governed by the familiar Chevron
framework in which we defer to an agency’s construction of an
ambiguous provision in a statute that it administers if that
construction is reasonable. See, e.g., American Elec. Power
Serv. Corp. v. FCC, 708 F.3d 183, 186 (D.C. Cir. 2013) (The
Chevron framework “means (within its domain) that a
‘reasonable agency interpretation prevails.’”) (quoting
Northern Nat. Gas Co. v. FERC, 700 F.3d 11, 14 (D.C. Cir.
2012)). By the same token, if “Congress has directly spoken
to an issue then any agency interpretation contradicting what
Congress has said would be unreasonable.” Entergy Corp. v.
Riverkeeper, Inc., 556 U.S. 208, 218 n.4 (2009).
At Chevron Step One, we ask “whether Congress has
directly spoken to the precise question at issue.” 467 U.S. at
842. Where “the intent of Congress is clear, that is the end of
the matter; for [we], as well as the agency, must give effect to
the unambiguously expressed intent of Congress.” Id. at 842–
843. But if “the statute is silent or ambiguous with respect to
the specific issue,” we proceed to Chevron Step Two, where
“the question for the court is whether the agency’s answer is
based on a permissible construction of the statute.” Id. at 843.
However, we do not apply Chevron reflexively, and we find
ambiguity only after exhausting ordinary tools of the judicial
craft. Cf. Kisor v. Wilkie, 139 S. Ct. 2400, 2414–2415 (2019).
16
All this of course proceeds in the shadow of Brand X, which
itself applied Chevron to a similar issue.
Applying these principles here, we hold that classifying
broadband Internet access as an “information service” based on
the functionalities of DNS and caching is “‘a reasonable policy
choice for the [Commission] to make’ at Chevron’s second
step.” Brand X, 545 U.S. at 997 (alteration in original) (quoting
Chevron, 467 U.S. at 845). As we said in USTA, “Our job is to
ensure that an agency has acted ‘within the limits of
[Congress’s] delegation’ of authority,” 825 F.3d at 697
(quoting Chevron, 467 U.S. at 865), and “we do not ‘inquire as
to whether the agency’s decision is wise as a policy matter;
indeed, we are forbidden from substituting our judgment for
that of the agency,’” id. (quoting Association of Am. Railroads
v. ICC, 978 F.2d 737, 740 (D.C. Cir. 1992)); see also United
States Telecom Ass’n v. FCC, 855 F.3d 381, 384 (D.C. Cir.
2017) (“[T]he [Brand X] Court made clear in its decision—
over and over—that the Act left the [classification] to the
agency’s discretion.” (Srinivasan, J., joined by Tatel, J.,
concurring in denial of rehearing en banc)).
A. The Supreme Court’s Decision in Brand X
Brand X held that, by virtue of the ambiguity of the word
“offering,” the FCC could permissibly choose not to classify
cable modem service as a “telecommunications service.”
Brand X, 545 U.S. at 973–974, 989–992. As to DNS and
caching, the Brand X Court endorsed the Commission’s
argument that those functionalities can be relied on to classify
cable modem service as an “information service.” Challengers
opposing the FCC had argued that when consumers “go[]
beyond” certain Internet services offered by cable modem
companies themselves—for example, beyond access to
proprietary e-mail and Web pages (commonly referred to as the
17
cable modem companies’ “walled gardens”)—the companies
were “offering” a “telecommunications service” rather than an
“information service.” Id. at 998. The Court rejected this
claim. It found that such a view “conflicts with the
Commission’s understanding of the nature of cable modem
service,” which the Court deemed “reasonable.” Id.; cf. 2018
Order ¶ 51. The Court explained that—when a user accesses
purely third-party content online—“he is equally using the
information service provided by the cable company that offers
him Internet access as when he accesses the company’s own
Web site, its e-mail service, or his personal Web page,” Brand
X, 545 U.S. at 999 (emphasis added), i.e., “walled garden”
services. Why so?
Brand X’s answer, as relevant here, lay in DNS and
caching. The argument proceeded in two steps—first, showing
that DNS and caching themselves can properly fall under the
“information service” rubric; second, showing that these
“information services” are sufficiently integrated with the
transmission element of broadband that it is reasonable to
classify cable modem service as an “information service.” See
Brand X, 545 U.S. at 999–1000.
As to the first step, the Court observed that “[a] user cannot
reach a third party’s Web site without DNS,” Brand X, 545
U.S. at 999, which “among other things, matches the Web page
addresses that end users type into their browsers (or ‘click’ on)
with the Internet Protocol (IP) addresses of the servers
containing the Web pages the users wish to access,” id. at 987.
It therefore saw it as “at least reasonable” to treat DNS itself
“as a ‘capability for acquiring * * * retrieving, utilizing, or
making available’ Web site addresses and therefore part of the
information service cable companies provide.” Id. at 999
(quoting 47 U.S.C. § 153(24)); see also id. at n.3 (rebutting
dissent’s claim that “DNS does not count as use of the
18
information-processing capabilities of Internet service”). The
Court applied a cognate analysis to caching, which “facilitates
access to third-party Web pages by offering consumers the
ability to store, or ‘cache’ popular content on local computer
servers,” id. at 999, “obviat[ing] the need for the end user to
download anew information from third-party Web sites each
time the consumer attempts to access them,” id. at 999–1000.
Thus the Court found “reasonable” the FCC’s position that
“subscribers can reach third-party Web sites via ‘the World
Wide Web, and browse their contents, [only] because their
service provider offers the capability for * * * acquiring,
[storing] * * * retrieving [and] utilizing * * * information.’”
Id. at 1000 (alterations in original) (some internal quotation
marks omitted) (quoting In re Federal-State Joint Bd. on
Universal Serv., 13 FCC Rcd. 11501, 11537–11538 ¶ 76
(1998) (“Stevens Report”)).
As to the second step, the Brand X Court endorsed the
FCC’s position that—because DNS and caching are
“inextricably intertwined” with high-speed transmission—it
was reasonable for the Commission not to treat the resulting
package as an “offering” of a standalone “telecommunications
service.” 545 U.S. at 978–979, 989–991; see Cable Modem
Order at 4823 ¶ 38 (“As currently provisioned, cable modem
service is a single, integrated service that enables the subscriber
to utilize Internet access service * * * .”). “[H]igh-speed
transmission used to provide cable modem service is a
functionally integrated component of [cable modem] service
because it transmits data only in connection with the further
processing of information and is necessary to provide Internet
service.” Brand X, 545 U.S. at 998 (emphasis added). DNS
and caching, in turn, are two examples of such “further
processing” integrated with the data transmission aspect of
cable modem service. “[A] consumer cannot purchase Internet
service without also purchasing a connection to the Internet and
19
the transmission always occurs in connection with information
processing,” id. at 992, in the form of (for example) DNS or
caching. Thus, according to the Supreme Court, the
Commission reasonably concluded that cable modem service
is not an offering of a standalone “telecommunications
service,” but, rather, an “information service”—which by
definition is offered “via telecommunications.” See id. at 989–
992; see also 2018 Order ¶ 52.
B. DNS and Caching in the 2018 Order
The reasoning in the 2018 Order tallies with the line of
argument in Brand X described above. See, e.g., 2018 Order
¶¶ 26, 34, 41, 51, 53, 54, 55 n.207, 57. The Commission’s
principal claim is that “ISPs offer end users the capability to
interact with information online * * * through a variety of
functionally integrated information processing components
that are part and parcel of the broadband Internet access service
offering itself”—including DNS and caching. Id. ¶ 33. The
Commission describes DNS and caching as “integrated
information processing capabilities offered as part of
broadband Internet access service to consumers today.”
Id. We hold that under Brand X this conclusion is reasonable.
We note that the 2018 Order alluded to several
“information processing functionalities inextricably
intertwined with the underlying service” besides DNS and
caching, such as “email, speed test servers, backup and support
services, geolocation-based advertising, data storage, parental
controls, unique programming content, spam protection, pop-
up blockers, instant messaging services, on-the-go access to
Wi-Fi hotspots, and various widgets, toolbars, and
applications.” 2018 Order ¶ 33 n.99. Although the 2018 Order
states that these “further support the ‘information service’
classification,” it did not find them “determinative,” id., and
20
mentioned them only briefly in a footnote. Thus we address
DNS and caching only.
In passages echoing Brand X, the Commission
characterized the essential roles of DNS and caching. As to
DNS, it observed that DNS is “indispensable to ordinary users
as they navigate the Internet.” 2018 Order ¶ 34 (quoting
AT&T Comments at 73, J.A. 189). “[T]he absence of ISP-
provided DNS would fundamentally change the online
experience for the consumer.” Id. This formulation is actually
a good deal more cautious than that of the Court in Brand X,
which declared that without DNS a “user cannot reach a third
party’s Web site.” 545 U.S. at 999. In fact users who know
the necessary IP addresses could enter them for each relevant
server. But the Commission and the Court (the latter more
emphatically) are making an undeniable pragmatic point—that
use of the Web would be nightmarishly cumbersome without
DNS.
As to caching, the Commission explained that it “provides
the capability to perform functions that fall within the
information service definition,” 2018 Order ¶ 41, including,
but not limited to, “enabl[ing] the user to obtain more rapid
retrieval of information through the network,” id. (quoting
Information Technology and Innovation Foundation (“ITIF”)
Comments at 13, WC Dkt. No. 17-108 (July 17, 2017)
(quoting, in turn, Title II Order ¶ 372)). Operating a caching
service entails running “complex algorithms to determine what
information to store where and in what format,” id. (quoting
ITIF Comments at 13), so that “caching involves storing and
retrieving capabilities required by the ‘information service’
definition,” id. Thus the Commission added technical detail
reinforcing the Brand X Court’s statements as to caching. See
545 U.S. at 999–1000.
21
The Commission then summarized these points, again in
terms resonating with those in which Brand X had endorsed the
2002 Cable Modem Order. It argued that “ISPs offer a single,
inextricably intertwined information service,” 2018 Order
¶ 49, based in part on the functionalities of DNS and caching.
It said that “all broadband Internet access services rely on DNS
and commonly also rely on caching by ISPs,” id. ¶ 48, and
contended that DNS and caching should be “understood as part
of a single, integrated information service offered by ISPs,” id.
¶ 50; see also id. ¶ 42. It then maintained, drawing on Brand
X, that “[w]here * * * a service involving transmission
inextricably intertwines that transmission with information
service capabilities—in the form of an integrated information
service—there cannot be ‘a “stand-alone” offering of
telecommunications * * * ,’” id. ¶ 53 (quoting Brand X, 545
U.S. at 989), in line with the Commission’s stance in Brand X.
“[A]n offering like broadband Internet access service that
‘always and necessarily’ includes integrated transmission and
information service capabilities * * * [is] an information
service.” Id. ¶ 55 (quoting Brand X, 545 U.S. at 992).
C. Objections to the Classification
Petitioners raise numerous objections aimed to show that
the Commission’s reliance on DNS and caching for classifying
broadband as an “information service” is unreasonable at
Chevron’s second step. We find them unconvincing.
1. “Walled Garden” Reading of Brand X
First, to short-circuit the Commission’s reliance on Brand
X, Petitioners try to characterize the Court’s reasoning in that
case as dependent on a vision of Internet providers as offering
mainly access to their “walled gardens.” They assert that in
Brand X “the Court was focused on the [Broadband Internet
22
Access Service (“BIAS”)] providers’ add-on information
services, such as ISP-provided e-mail,” and that “the Court had
no occasion to consider the proper classification of a service
combining telecommunications with nothing more than DNS
and caching.” Mozilla Br. 42. This reading is unpersuasive
because it airbrushes out the lengthy discussion summarized
above in which the Court finds “reasonable” the Commission’s
“information-service” classification even where “a consumer
goes beyond [walled garden] offerings and accesses content
provided by parties other than the cable company,” Brand X,
545 U.S. at 998—by virtue of the functionalities of DNS and
caching, see id. at 998–1000. We thus reject Petitioners’
attempt to discredit the Commission’s sensible reliance on
Brand X’s treatment of DNS and caching. See, e.g., 2018
Order ¶¶ 10, 34, 41, 51; see also Part I.C.4 infra (addressing
Petitioners’ related claims in functional integration context).
2. “Telecommunications Management” Exception
Petitioners assert that DNS and caching fall under the
“telecommunications management” exception (“TME”) and so
cannot be relied on to justify an “information service”
classification. See Mozilla Br. 43–46. We find that
Petitioners’ arguments do not hold up, either because they rest
on a misreading of Brand X and USTA or do not adequately
grapple with the Commission’s reasonable explanation as to
why DNS and caching fall outside that exception. See 2018
Order ¶¶ 36–38, 42–44. Our discussion here will be quite
involved in part because Brand X did not directly confront
whether DNS and caching may fall within the TME. See Brand
X, 545 U.S. at 999 n.3.
In deciding whether to slot DNS and caching under the
TME the Commission confronted “archetypal Chevron
questions[] about how best to construe an ambiguous term in
23
light of competing policy interests.” City of Arlington v. FCC,
569 U.S. 290, 304 (2013). “[I]f the implementing agency’s
construction is reasonable, Chevron requires a federal court to
accept the agency’s construction of the statute, even if the
agency’s reading differs from what the court believes is the
best statutory interpretation.” Brand X, 545 U.S. at 980. And
when an agency changes course, as it did here, it “must show
that there are good reasons for the new policy,” but “it need not
demonstrate to a court’s satisfaction that the reasons for the
new policy are better than the reasons for the old one.” USTA,
825 F.3d at 707 (quoting FCC v. Fox Television Stations, Inc.,
556 U.S. 502, 515 (2009)). The Commission clears this bar.
a. The Commission’s Interpretation
To begin with, Petitioners misconstrue USTA. As they do
persistently, they gloss passages that find parts of the Title II
Order to be permissible readings of the statute as mandating
those readings—when the passages plainly do not do so. A
case in point is the treatment of the TME. Petitioners say that
“[t]his Court has already agreed that DNS and caching fall
within the terms of the telecommunications management
exception.” Mozilla Br. 43 (emphasis added) (citing USTA,
825 F.3d at 705). Yet all we said in USTA was that we were
“unpersuaded” that the FCC’s “use of the telecommunications
management exception was * * * unreasonable.” USTA, 825
F.3d at 705. The Title II Order, in other words, adopted a
permissible reading, though not a required one. This holding
in no way bars the Commission from adopting a contrary view
now—so long as it adequately justifies that view, as we find it
has.
Despite Petitioners’ objections, we find that the 2018
Order engages in reasonable line-drawing for purposes of
administering this amorphous exception. Relying on judicial
24
precedent, Department of Justice policy (developed pursuant to
its duty to see that the settlement of its antitrust suit against
AT&T was lawfully implemented), and prior Commission
statements, the 2018 Order seems to envision a continuum with
two poles: a user-centered pole and network management-
centered pole. It locates a given service on the continuum and
classifies it as falling within or outside the TME according to
which pole it appears closest to. If a service is “directed at
* * * customers or end users,” 2018 Order ¶ 36 (quoting
United States v. Western Elec. Co., No. 82-0192, 1989 WL
119060, at *1 (D.D.C. Sept. 11, 1989)), or benefits users “in
significant part,” id. ¶ 38, or “predominantly,” id. ¶ 42, it does
not call for TME classification. We view this construction as
an adequately justified departure from the Title II Order’s
understanding of the TME in the face of a dauntingly
ambiguous provision with inevitably fuzzy borderline cases
and complex and possibly inconsistent (or at least orthogonal)
policy implications.
Given the Commission’s approach, it need not—and does
not—deny that even those services properly classed under the
TME benefit end users in some respect. It would be folly to
deny as much given that the raison d’être of ISPs is to serve
their customers. As one commenter notes, “To maintain * * *
that something that is ‘useful’ to an end user cannot fall under
the management exception is absurd, as the entire purpose of
broadband is to be useful to end users * * * .” Public
Knowledge Reply at 37, J.A. 2857; see 2018 Order ¶ 38 n.135;
see also Mozilla Reply Br. 19–20.
But a rule involving a spectrum or continuum commonly
requires a decider to select a point where both ends are in play.
Night and day are distinguishable, however difficult
classification may be at dawn and dusk. The Commission’s
way of construing the TME and applying its continuum-based
25
approach is not inconsistent with Public Knowledge’s point
that “the entire purpose of broadband is to be useful to end
users.” The Commission notes that its “focus remains on the
purpose or use of the specific function in question and not
merely whether the resulting service, as a whole, is useful to
end-users.” 2018 Order ¶ 38 n.135. While DNS might play a
role in managing a network, the Commission reasonably
concluded that DNS “is a function that is useful and essential
to providing Internet access for the ordinary consumer,” id.
¶ 36, and that these benefits to the end user predominate over
any management function DNS might serve. The Commission
says that caching “benefits” users through “rapid retrieval of
information from a local cache,” id. ¶ 42, and can also be used
“as part of a service, such as DNS, which is predominantly to
the benefit of the user (DNS caching),” id. (emphasis added).
And it gives examples of services that in its view are genuine
TME services: Simple Network Management Protocol
(“SNMP”), Network Control Protocol (“NETCONF”), or Data
Over Cable Service Interface Specification (“DOCSIS”)
bootfiles for controlling the configuration of cable modems.
Id. ¶ 36 (quoting Sandvine Comments at 5, WC Dkt. No. 17-
108 (July 14, 2017)). It observes that the Title II Order had
essentially proceeded in a contrary manner, finding that the
management-centered functionality of DNS predominated, so
as to render it TME-worthy. “Although confronted with claims
that DNS is, in significant part, designed to be useful to end-
users rather than providers, the Title II Order nonetheless
decided that it fell within the [TME].” Id. ¶ 38 (emphasis
added). The Commission reasonably declined to follow this
route (partly, as we shall see below, because it believed that it
would cause the exception to swallow the rule in ways
antithetical to its reading of Commission precedent and the
Act’s goals). It chose a different, and reasonable, alternative.
26
b. Modification of Final Judgment Precedent
In adopting its approach to the TME, the Commission
rested on precedent from a line of judicial decisions
interpreting the Modification of Final Judgment (“MFJ”), a
consent decree entered into between the Department of Justice
and AT&T in 1982 as part of the breakup of the AT&T
monopoly to create a set of independent regional Bell
Operating Companies (“BOCs”). See United States v.
American Tel. & Tel. Co., 552 F. Supp. 131, 225–232 (D.D.C.
1982) (subsequent history omitted). This decree, which
modified a 1956 consent decree and final judgment, spawned
a long line of cases in which District Court Judge Harold
Greene resolved conflicts over the decree’s limits on the
BOCs’ permissible business ventures. The cases interpreted a
broad array of terms of the consent decree, entered many
modifications, and granted waivers, balancing a need to “avoid
anticompetitive effects” (which might flow from BOC
exploitation of their monopolies in telecommunications to
dominate related services) with a hope of “bring[ing] th[e]
nation closer to enjoyment of the full benefits of the
information age” by facilitating “the efficient, rapid, and
inexpensive dissemination of * * * information.” United
States v. Western Elec. Co., 714 F. Supp. 1, 3, 5 (D.D.C. 1988),
aff’d in part, rev’d in part, 900 F.2d 283 (D.C. Cir. 1990).
The Commission makes a good case for the
persuasiveness of this precedent. First, the definition of
“information service” in the 1996 Act––including the TME––
is lifted nearly verbatim from the 1982 consent decree.
Compare American Tel. & Tel. Co., 552 F. Supp. at 229, with
47 U.S.C. § 153(24). Second, in the case on which the
Commission principally relies, the court was interpreting the
MFJ’s TME equivalent and adopted a reading in keeping with
its understanding of Department of Justice policy at the time.
27
In Western Electric, Judge Greene addressed the question
whether the consent decree permitted the BOCs to offer relay
services for customers who use “telecommunications devices
for the deaf” (“TDDs”). 1989 WL 119060, at *1. The court
held that, because TDD services involve “transformation of
information”––“the very crux and purpose of the TDD relay
services”––they “f[e]ll squarely” within the definition of
“information services,” which covers the capability to
“transform[] * * * information.” Id. Accordingly offering the
service ran afoul of Section II(D)(1) of the decree, see
American Tel. & Tel. Co., 552 F. Supp. 131 at 227, banning the
BOCs from providing information services, see Western
Electric, 1989 WL 119060, at *1. The BOCs argued as a
fallback position that TDD services fell within the TME. Id.
Judge Greene made quick work of this, finding it “patently
obvious that what is being sought * * * does not involve the
internal management of Bell Atlantic” and hence was not
TME-eligible. Id. In support of this conclusion the court
explained, relying on the Department of Justice Competitive
Impact Statement, that the TME “was directed at internal
operations, not at services for customers or end users.”
Western Elec. Co., 1989 WL 119060, at *1 (emphasis added)
(citing Department of Justice, Competitive Impact Statement in
Connection with Proposed Modification of Final Judgment,
Notice, 47 Fed. Reg. 7170, 7176 (Feb. 17, 1982)).
It is this language that the Commission expressly invokes
to ground its interpretation of the TME, stating that it (the
Commission) “interpret[s] the concepts of ‘management,
control, or operation’ in the [TME] consistent with” Judge
Greene’s analysis. See 2018 Order ¶ 36. And as we have noted
above, the Commission rightly acknowledges that being
“directed at” one end of a spectrum does not rule out
embodying certain aspects from the other end. The agency was
within its rights to treat Judge Greene’s analysis––which in
28
essence interpreted the statutory provision at issue and squared
with the government’s position supporting enforcement of the
antitrust decree—as support for its construction of the TME.
(As no party objected to the BOCs’ offering of TDD services,
and BOC entry into this activity posed no anticompetitive risk,
the court granted a waiver for their provision. See Western
Elec. Co., 1989 WL 119060, at *2.)
The Commission offers an added reason to put stock in the
MFJ precedent: It believed that Petitioners’ approach risked
causing the TME exception to swallow the “information
services” category. It said, plausibly, that such an “expansive
view” of the TME assigns it an outsized role, thereby
“narrowing * * * the scope of information services” in a way
that clashes with the Commission’s pre-1996 Act approach to
cabining the “basic services” category, see 2018 Order ¶ 38 &
n.135, and the 1996 Act’s imperative to “preserve the vibrant
and competitive free market * * * for the Internet * * *
unfettered by Federal or State regulation,” id. ¶ 39 (quoting 47
U.S.C. § 230(b)(2)), which the Commission permissibly uses
as a rationale to interpret a vague provision in a way that limits
regulatory burdens. In sum, the Commission lawfully
construed an ambiguous statutory phrase in a way that tallies
with its policy judgment, as is its prerogative.
Petitioners’ objections to the Commission’s classification
of DNS and reliance on the MFJ do not convince us.
Many of Petitioners’ objections pillory a straw man. They
state that “[t]he statute asks whether a function is used ‘for the
management, control, or operation of a telecommunications
system,’ not whether the function also benefits consumers.”
Mozilla Br. 45 (quoting 47 U.S.C. § 153(24)). But, as noted
before, the Commission need not deny, for example, that
“configuration management”––a function it slots under the
29
TME, see 2018 Order ¶ 36 & n.126—benefits end users in
some respect. See Mozilla Reply Br. 19–20. It can simply say
that DNS/caching and (for example) configuration
management, respectively, adjoin opposite ends of the
spectrum, one meriting inclusion in the TME and the other not.
Petitioners observe that DNS renders broadband Internet
access “more efficient in ways that are generally invisible to
users,” a point that misses its mark entirely, or at best
equivocates on the key point at issue. Mozilla Br. 45. While
DNS is “invisible” in the sense that it is “under the hood,” so
to speak, it remains “essential to providing Internet access for
the ordinary consumer.” 2018 Order ¶ 36. Using a certain
“configuration” tool or protocol might, say, make Internet
traffic a bit faster or slower in the way that a metro’s use of
varying rail technologies might influence train speeds. But an
absence of DNS would be something different altogether,
hobbling ordinary users in navigating the Web, akin to a total
absence of signage in a metro. Signage, unlike DNS, is of
course quite apparent, but their user-centered purposes are
alike for all practical purposes. (We address in Part I.C.4
Petitioners’ separate argument that users’ ability to obtain DNS
from providers other than their ISPs precludes a finding of
functional integration.) So the sense in which DNS is
“invisible” to many end users is fully consistent with the
agency’s rationale for locating it nearer to the user-centric
pole—and hence beyond the TME.
Finally, an argument made by amici on behalf of
Petitioners as to DNS arguably aligns with claims made by the
Commission’s amici and so may work in the agency’s favor.
Petitioners’ amici assert in the context of functional integration
(an issue to which we turn in Part I.C.4) that broadband Internet
access is not functionally integrated with DNS because
broadband access works perfectly well without DNS. “Internet
30
architects deliberately created DNS to be entirely independent
from the IP packet transfer function,” Jordan/Peha Amicus Br.
17, and “a BIAS provider’s DNS is an extraneous capability
* * * not required for the core service,” id. at 17–18 (emphasis
added). But if DNS is “extraneous” to operating the network,
it is at least debatable whether DNS is used in “the
management, control, or operation of a telecommunications
system or the management of a telecommunications service.”
Amici for the Commission make related points, observing that
“[a]n app’s DNS translation transaction ends before the BIAS
transmission begins,” “DNS transactions do not provide the
BIAS provider with information about the best path to the
destination,” and they “do not have the power to either
optimize or impair the BIAS provider network.” Bennett et al.,
Amicus Br. 13. Thus it is at least reasonable not to view DNS
as a network management tool. Id. at 13–14. Granted, Jordan
and Peha remark that running DNS helps an ISP “reduce[] the
volume of DNS queries passing through its network.”
Jordan/Peha Amicus Br. 18. But in the deferential posture of
Chevron the points quoted above by Jordan/Peha seem in part
to support the Commission’s reading of the record (consistent
with Bennett et al.) as showing that, whereas “little or nothing
in the DNS look-up process is designed to help an ISP
‘manage’ its network,” 2018 Order ¶ 36, DNS is “essential to
providing Internet access for the ordinary consumer,” id., for
whom “DNS is a must,” id. ¶ 34 (quoting Brand X, 545 U.S. at
999).
The Commission extends the same logic to caching,
though matters here are less obvious. It explains that caching
“does not merely ‘manage’ an ISP’s broadband Internet access
service and underlying network,” but “enables and enhances
consumers’ access to and use of information online.” 2018
Order ¶ 42. It makes clear that ISP caching service is not just
“instrumental to pure transmission” but, rather, “enhances
31
access to information” by consumers by facilitating “rapid
retrieval of information from a local cache or repository.” Id.
As the Title II Order had put it (albeit drawing a different
lesson), “caching * * * provide[s] a benefit to subscribers in
the form of faster, more efficient service,” id. ¶ 368 n.1037, by
“enabling the user to obtain ‘more rapid retrieval of
information’ through the network,” id. ¶ 372 (quoting Cable
Modem Order, 17 FCC Rcd. at 4810 ¶ 17 & n.76); cf. Brand X,
545 U.S. at 999–1000 (stating that “[c]acheing [sic] obviates
the need for the end user to download anew information from
third-party Web sites * * * , thereby increasing the speed of
information retrieval”).
Granted, some ISPs describe caching in terms indicating
that it is a network management practice, and caching can help
reduce ISPs’ costs. See Jordan/Peha Amicus Br. 20–21. But
these facts are not determinative. The Commission is entitled
to draw its own conclusions based on its (permissible)
interpretation of the TME, so long as consistent with the
record. Here it has done that. The Commission found (without
contradiction in the record) that caching “enables and enhances
consumers’ access to and use of information online.” 2018
Order ¶ 42. In particular, “[t]he record reflects that without
caching, broadband Internet access service would be a
significantly inferior experience for the consumer, particularly
for customers in remote areas, requiring additional time and
network capacity for retrieval of information from the
Internet.” Id. That is so, the Commission maintains, even
though encrypted traffic does not use caching, because “truly
pervasive encryption on the Internet is still a long way off[] and
* * * many sites still do not encrypt.” Id. at n.147 (citation
omitted).
32
3. Adjunct-to-Basic Precedent
Finally, Petitioners raise a host of objections arising from
the Commission’s “adjunct-to-basic” precedent, developed in
the Computer Inquiries orders issued by the Commission. See
In re Amendment of Section 64.702 of the Commission’s Rules
and Regulations (Second Computer Inquiry), 77 F.C.C.2d 384
(1980) (“Second Computer Inquiry”).
Because in our view the precedents in this area are murky,
raising convoluted questions of grafting older Commission
interpretations onto the “information services” definition as
applied to broadband Internet service, we find neither side’s
recounting of adjunct-to-basic precedent fully compelling.
Even though Congress’s creation of the TME may fairly be
said to have “[t]rack[ed]” adjunct-to-basic in certain respects,
USTA, 825 F.3d at 691, the Commission reasonably refused to
be bound by facets of the analogy filtered through the lens of
the Title II Order. The Commission’s chief task was to
interpret the TME’s statutory text in a coherent, workable
fashion and offer a reasonable rationale for altering its course,
not to demonstrate that its reading is a tight fit with every
aspect of adjunct-to-basic precedent. In fact, as we will see,
that precedent is not the seamless web of Petitioners’ vision.
Petitioners try to catch the Commission in a contradiction
in a two-step approach. The agency, as we have seen, locates
DNS and caching outside the TME. First, Petitioners invoke
Commission precedent seeming to suggest that all or most
adjunct-to-basic services would fall under the TME. Second,
they observe that––whereas paradigmatic examples of adjunct-
to-basic services such as speed dialing and call forwarding are
undeniably useful to consumers and, per step one, belong under
the TME––the Commission can give no satisfactory
explanation for excluding DNS and caching from the TME. In
33
particular, Petitioners and commenters analogize DNS to
ordinary directory assistance, which the Commission has
dubbed adjunct-to-basic, since both services help direct users
to their chosen endpoints. See, e.g., Mozilla Br. 46; Open
Technology Institute (“OTI”) New America Comments at 33–
34, J.A. 1631–1632. Whence the difference?
To make sense of these claims and the Commission’s
response, we need to review the basic terms. To preview, even
if there are incongruities in the Commission’s treatment of the
TME vis-à-vis the adjunct-to-basic idea, we see them as
byproducts of drawing imperfect analogies.
The FCC created a distinction between “basic services”
and “enhanced services” in its Second Computer Inquiry, with
the latter concept defined as follows:
[T]he term “enhanced service” shall refer to services[]
offered over common carrier transmission facilities
used in interstate communications, which employ
computer processing applications that act on the
format, content, code, protocol or similar aspects of
the subscriber’s transmitted information; provide the
subscriber additional, different, or restructured
information; or involve subscriber interaction with
stored information. Enhanced services are not
regulated under Title II of the Act.
Second Computer Inquiry, 77 F.C.C.2d at 498; see also 47
C.F.R. § 64.702(a).1 In contrast,
1
Note that the definition of “enhanced services” is restricted to
services “offered over common carrier transmission.” Second
Computer Inquiry, 77 F.C.C.2d at 498. For this reason, among
others, at least one scholar has argued that caution is warranted in
34
In offering a basic transmission service * * * a carrier
essentially offers a pure transmission capability over
a communications path that is virtually transparent in
terms of its interaction with customer supplied
information.
Second Computer Inquiry, 77 F.C.C.2d at 420 ¶ 96; see also id.
at 419–420 ¶ 95 (“[A] basic transmission service should be
limited to the offering of transmission capacity between two or
more points suitable for a user’s transmission needs and subject
only to the technical parameters of fidelity or distortion criteria,
or other conditioning.”).
The most contested category is a third: adjunct-to-basic. It
arose to accommodate the reality that providers of ordinary
telephone services wished to offer new technologies
facilitating that service—technologies that would quite plainly
fall under the “enhanced services” definition, though ordinary
phone service was indisputably a “basic service.” To square
the circle and avoid complexities of hybrid treatment, the
Commission created an adjunct-to-basic bucket:
In the [1985] NATA Centrex proceeding, the
Commission defined adjunct services as services that
‘facilitate the provision of basic services without
altering their fundamental character,’ and determined
that such services should be treated as basic services
drawing overly-neat analogies between “enhanced services” and
“information services” on the one hand, and “basic services” and
“telecommunications services,” on the other. See Robert Cannon,
The Legacy of the Federal Communications Commission’s
Computer Inquiries, 55 Fed. Comm. L.J. 167, 191–192 (2003)
(explaining why all “enhanced services” are “information services”
whereas not all “information services” are necessarily “enhanced
services”).
35
for purposes of the Computer II rules, even though
they might fall within possible literal readings of the
definition of enhanced services.
In re Bell Operating Companies, Petitions for Forbearance
from the Application of Section 272 of the Commc’ns Act of
1934, as Amended, to Certain Activities, 13 FCC Rcd. 2627,
2639 ¶ 18 (CCB 1998) (“272 Forbearance Order”) (citation
omitted).
The Commission has set out two necessary criteria for a
service to qualify as adjunct-to-basic:
[C]arriers may use some of the processing and storage
capabilities within their networks to offer optional
tariffed features as ‘adjunct to basic’ services, if the
features: (1) are intended to facilitate the use of
traditional telephone service; and (2) do not alter the
fundamental character of telephone service.
In re Establishment of a Funding Mechanism for Interstate
Operator Servs. for the Deaf, 11 FCC Rcd. 6808, 6816–6817
¶ 16 (1996) (“Operator Services Order”).
Which services qualify as adjunct-to-basic? The answer
covers a remarkably wide gamut, including “inter alia, speed
dialing, call forwarding, computer-provided directory
assistance, call monitoring, caller i.d., call tracing, call
blocking, call return, repeat dialing, and call tracking, as well
as certain Centrex features.” In re Implementation of the Non-
Accounting Safeguards of Sections 271 and 272 of the
Commc’ns Act of 1934, as Amended, 11 FCC Rcd. 21905,
21958 ¶ 107 n.245 (1996) (“Non-Accounting Safeguards
Order”). The same goes for “communications between a
subscriber and the network itself for call setup, call routing, call
cessation, calling or called party identification, billing, and
36
accounting,” In re N. Am. Telecommunications Ass’n Petition
for Declaratory Ruling Under Section 64.702 of the
Commission’s Rules Regarding the Integration of Centrex,
Enhanced Servs., and Customer Premises Equip., 3 FCC Rcd.
4385, 4386 ¶ 11 (1988) (“Centrex Order”) (citation omitted),
and prepaid calling cards with built-in advertisements, see
American Tel. & Tel. Co. v. FCC, 454 F.3d 329, 331 (D.C. Cir.
2006)—though not “talking yellow pages” with
advertisements, see id. at 333; see also Northwest Bell Tel. Co.
Petition for Declaratory Ruling, 2 FCC Rcd. 5986, 5988 ¶ 20
(1987).
Having laid out the key terms, we return to the parties’
claims. We are satisfied with the Commission’s prioritization
of the MFJ precedent and its way of squaring the adjunct-to-
basic precedent with its treatment of DNS and caching.
First, as explained above, the Commission had adequate
grounds to focus on the 1982 MFJ’s definition of “information
service,” which the 1996 Act took over virtually word for
word.
Second, devising a coherent and workable test for
applying the statutory TME permissibly takes precedence in
the Commission’s analysis over attempts to reach synthetic
conformity between adjunct-to-basic precedent and the 1996
Act’s terms. As the Court said in Brand X, we should “leav[e]
federal telecommunications policy in this technical and
complex area to be set by the Commission, not by warring
analogies,” 545 U.S. at 992, whether crafted by courts,
litigants, or Commissions past.
Third, the Commission’s historical approach to adjunct-to-
basic has hardly been clear-cut in its own right. As we have
previously said, “it is difficult to discern any clear policy” in
the Commission’s application of its “various formulations” of
37
what counts as adjunct-to-basic, so that “[t]he Commission’s
rulings reflect a highly fact-specific, case-by-case style of
adjudication.” American Tel. & Tel. Co., 454 F.3d at 333.
Given this lack of cohesion, we can hardly fault the current
Commission for discounting the persuasive force of adjunct-
to-basic analogies in interpreting and applying the 1996 Act’s
TME in light of its policy views.
Furthermore, the Commission’s definition of adjunct-to-
basic services does not, as a linguistic matter, force the
Commission’s hand in interpreting the TME. Just because an
adjunct-to-basic service like speed dialing or directory
assistance “facilitate[s]” telephone service, USTA, 825 F.3d at
691, it hardly follows automatically that it also qualifies under
the text of the TME, since it requires no contortion of English
to say that (for example) directory assistance is, by and large,
not used to “manage[]” or “control” or “operat[e]” a
telecommunications system or service, 47 U.S.C. § 153(24).
So the Commission had ample basis to dub the adjunct-to-
basic line of analysis “potentially ambiguous precedent,” 2018
Order ¶ 39, and depart from what it regarded as “loose
analogies” devised in the Title II Order. “Because broadband
Internet access service was not directly addressed in pre-1996
Act Computer Inquiries and MFJ precedent, analogies to
functions that were classified under that precedent must
account for potentially distinguishing characteristics” as they
relate to “technical details” and “regulatory backdrop.” Id.
These claims are not unreasonable. Whatever the
Commission’s prior views on the relationship between basic
services and their adjuncts, it is reasonable for the Commission
to say that that rubric need not transfer over neatly to what it
claims is not a basic service—broadband Internet access. See
id. ¶ 40 n.139. Hence there is little basis for the claim that
adjunct-to-basic lore requires the Commission to jettison the
38
lesson of Judge Greene’s TDD ruling. See Western Elec. Co.,
1989 WL 119060, at *1; see also Mozilla Br. 44.
Fourth, the Commission identifies precedent from the
Computer Inquiries themselves to support a reading of the
TME as requiring location of particular services on a spectrum
running between utility to carriers and utility to end users. A
ruling invoked by the 2018 Order allowed BOCs to enable the
tracing of Emergency 911 (“E911”) calls to the right location.
The FCC’s Common Carrier Bureau said:
Although the “telecommunications management
exception” encompasses adjunct services, the storage
and retrieval functions associated with the BOCs’
automatic location identification databases provide
information that is useful to end users, rather than
carriers. As a consequence, those functions are not
adjunct services and cannot be classified as
telecommunications services on that basis.
272 Forbearance Order, 13 FCC Rcd. at 2639 ¶ 18; see 2018
Order ¶ 38 n.131. While the Title II Order had sought to
distinguish this precedent on the ground that the benefit of
E911 service was “unrelated to telecommunications,” Title II
Order ¶ 368, it does not seem unreasonable for the current
2018 Order to assume a broader view of telecommunications
in its invocation of this precedent.
Fifth, in any case, we are satisfied with the agency’s
refusal to treat DNS like speed dialing, call forwarding, and
directory assistance.
As already noted, the Commission has adequate grounds
not to hold its interpretation of the TME hostage to a chimerical
hope for a perfect match-up with adjunct-to-basic precedent, in
part because the regulatory history is so convoluted as to render
39
the likelihood of a “perfect” matchup remote. So even if the
Commission’s interpretation of the TME comes at the cost of
certain incongruities with the concept of adjunct-to-basic
services, it reasonably regards alignment with the text and
purposes of the 1996 Act, and the unifying policy vision
animating the 2018 Order, as more weighty factors. See 2018
Order ¶ 39.
Moreover, implicit in the Commission’s analysis is a
recognition of a key difference between the above services and,
at the least, DNS. Those other services are plausibly described
as adjunct-to-basic, i.e., “ancillary” and “optional” in relation
to telephone service. Centrex Order, 3 FCC Rcd. at 4389 ¶ 30
(quoting Second Computer Inquiry, 77 F.C.C.2d at 421 ¶ 98);
cf. 2018 Order ¶ 40 n.138. Not so, the Commission says, for
DNS, which “[f]or an Internet user * * * is a must.” 2018
Order ¶ 34 (quoting Brand X, 545 U.S. at 999) (emphasis
added) (internal quotation mark omitted). So DNS might well
be seen to “alter the fundamental character of [the] service,”
and would thus fail to satisfy one of the two criteria specified
by the Commission (and quoted above) for a service to qualify
as adjunct-to-basic. Operator Services Order, 11 FCC Rcd. at
6816–6817 ¶ 16. This seems to distinguish DNS from such
functions as speed dialing, call forwarding, and directory
assistance, and thus square the Commission’s current treatment
of DNS with the Commission’s prior treatment of those
services as adjunct-to-basic, consistent with Judge Greene’s
treatment of a certain type of directory assistance as falling
within the TME. See Western Elec. Co., 1989 WL 119060, *1
n.7; Mozilla Br. 44–45. (While some adjunct-to-basic services
seem non-optional in certain respects, like “communications
between a subscriber and the network itself for call setup * * *
[and] call cessation,” Centrex Order, 3 FCC Rcd. at 4386 ¶ 11,
this point simply reinforces the miscellaneous nature of the
40
adjunct-to-basic category, where “it is difficult to discern any
clear policy,” American Tel. & Tel. Co., 454 F.3d at 333.)
We find the above considerations sufficient to uphold the
agency’s position and hence do not address analogies to other
MFJ precedents on technologies and services. See 2018 Order
¶¶ 35, 43–44. Even if Petitioners offer plausible interpretations
of rulings on address translation and third-party storage
services provided by the BOCs, we believe the Commission
has given a sufficiently sturdy justification for treating DNS
and caching as non-TME services apart from other MFJ-linked
analogies. It has set forth a plausible reading of the highly
ambiguous TME, adequately explained its basis for giving
more credence to judicial MFJ precedent than to the Computer
Inquiries in this context, and made a reasonable case as to why
DNS and caching need not be classed under the TME.
4. Functional Integration
Petitioners then open a new—and final—line of attack:
Even if DNS and caching are “information services,” the
Commission’s reliance on them to classify broadband as an
“information service” was still unreasonable. Mozilla Br. 46.
They make three arguments in support of this thesis, but none
holds water. As a threshold matter, we note that Brand X
already held it reasonable for the Commission to conclude that
DNS and caching are information services functionally
integrated with the offering of “Internet access [service]” “to
members of the public.” Brand X, 545 U.S. at 1000 (quoting
Stevens Report ¶ 79).
Petitioners first play up the facts that users may obtain
DNS from providers other than their ISPs and that caching is
not utterly indispensable. According to them, because “a user
can easily configure her computer to use a third-party DNS
server and content can be delivered even without caching,”
41
Mozilla Br. 46, especially in the context of encrypted
communications that occur without caching, id. at 46–47, it
follows that DNS and caching are not “inextricably intertwined
with the transmission component” of broadband, id. at 46.
These facts ostensibly yield a “contradict[ion]” in the agency’s
position, since one’s ISP-provided DNS and caching are not
“indispensable” after all. Id.
We find the objection misguided. As the Commission
explained, “[T]he fact that some consumers obtain [DNS and
caching] from third-party alternatives is not a basis for ignoring
the capabilities that a broadband provider actually ‘offers.’”
2018 Order ¶ 50. Given the ambiguity in the term “offe[r],”
see Brand X, 545 U.S. at 989–990, the Commission’s preferred
reading of that term rather than the Title II Order’s “narrower
interpretation,” 2018 Order ¶ 50—which would foreclose the
Commission’s view quoted above—is permissible. In
elucidating the ambiguity, Brand X said that “[t]he entire
question is whether the products here are functionally
integrated (like the components of a car) or functionally
separate (like pets and leashes). That question turns not on the
language of the Act, but on the factual particulars of how
Internet technology works and how it is provided, questions
Chevron leaves to the Commission to resolve in the first
instance.” 545 U.S. at 991. The agency reasonably concluded
that, notwithstanding the availability of alternative sources of
DNS, a market where “the vast majority of ordinary
consumers”—“[a]pproximately 97 percent”—“rely upon the
DNS functionality provided by their ISP,” 2018 Order ¶ 34 &
n.109 (citation omitted in second quotation), as “part and parcel
of the broadband Internet access service,” id. ¶ 42, meets
Brand X’s requirements for functional integration. Chevron
licenses these interpretive steps.
42
Second, Petitioners focus on what they dub the “relative
importance” of the “inextricably intertwined” components at
play—DNS/caching and high-speed transmission. Mozilla Br.
47. The transmission aspect, they say, overshadows DNS and
caching in “importance,” where that concept is understood in
terms of what “consumers focus on,” id. (quoting USTA, 825
F.3d at 698), and what aspect has “dominance in the broadband
experience,” id.; see also Mozilla Reply Br. 24. The
supposedly miniscule “importance” of DNS and caching in
consumers’ minds when using the Web means that those
functionalities cannot be “inextricably intertwined” with high-
speed transmission—and hence broadband cannot be an
“information service” based on DNS and caching services.
These claims are unavailing. To begin with, Petitioners’
invocation of USTA is yet again misplaced. There we said
simply that the Commission reasonably determined what
“consumers focus on,” USTA, 825 F.3d at 698, without holding
that that is the only permissible view. Moreover, nowhere does
Brand X say that a finding of “functional integration” requires
a finding as to “dominance” or “relative importance” in the
sense Petitioners imply. Average consumers, presumably, are
no less in the dark now about the inner workings of DNS and
caching than they were in 2005 when the Court decided Brand
X. Yet that did not keep the Court from finding reasonable the
FCC’s position that DNS and caching were functionally
integrated with high-speed transmission. However “consumer
perception” might be understood, it is not unreasonable to
interpret it as reflected in a consumer’s use of the offered
service as a whole and the functionalities that make that
possible, even if the consumer has no inkling of what is “under
the hood.” As Brand X said, “Seen from the consumer’s point
of view, the Commission concluded, cable modem service is
not a telecommunications offering because the consumer uses
the high-speed wire always in connection with the information-
43
processing capabilities provided by Internet access * * * .” 545
U.S. at 988 (emphasis added). So it is perfectly sensible for the
agency to retort that “[w]hile the typical broadband subscriber
may know little or nothing about DNS or caching, that
subscriber would keenly feel the absence of those functions” in
everyday Web use. Commission Br. 43.
Petitioners reply that the argument proves too much, as
Web browsers and search engines are also essential to the
consumer’s Internet experience. See Mozilla Reply Br. 24.
But quite apart from the fact that the role of ISP-provided
browsers and search engines appears very modest compared to
that of DNS and caching in ISPs’ overall provision of Internet
access, Petitioners are in a weak posture to deny that inclusion
of “search engines and web browsers” could support an
“information service” designation, id., since those appear to be
examples of the “walled garden” services that Petitioners hold
up as models of “information service”-eligible offerings in
their gloss of Brand X.
Finally, Petitioners contend that even if DNS and caching
were functionally integrated with transmission, that “does not
automatically lead to an information service classification.”
Mozilla Br. 47. “The FCC could not have reasonably
concluded that a drop of DNS and caching in a sea of
transmission transformed the service into something that could
properly be called an information service.” Id. The idea seems
to be that ISPs now offer fewer “walled garden” services of the
kind consumers mostly care about than they did in the era of
the 2002 Cable Modem Order and Brand X, so that basing an
“information service” designation on DNS and caching alone
is currently as dubious as saying that a few golden threads
interwoven in an ordinary sweater turn the sweater into a
golden garment. “Congress could not have intended inclusion
of two minor auxiliary information services to transform the
44
classification of what is otherwise overwhelmingly
telecommunications.” Mozilla Reply Br. 25.
But the Supreme Court has never imposed or even hinted
at such a quantitative standard to determine whether
inextricably intertwined functionalities can justify an
“information service” classification. We see no basis for
launching such a notion on our own. Had the Court thought
along Petitioners’ lines, it could have sided with challengers in
Brand X by saying that—when users wander beyond ISPs’
proprietary services—the quantum of ISP-offered
“information services” shrinks so greatly in proportion to the
transmission aspect that in that realm they are accepting an
“offering” of standalone telecommunications service. The
Court took the opposite tack, marshaling DNS and caching as
examples of “information services” operative when users
“access[] content provided by parties other than the cable
company,” Brand X, 545 U.S. at 998, thereby rendering the
Commission’s classification “reasonable,” id. at 1000.
Petitioners try to get mileage from a hypothetical in Brand
X involving the bundling of telephone service with voicemail,
see Mozilla Br. 47, but the attempt falls far short. Challengers
in Brand X had argued that, on the FCC’s theory in that case, a
telephone-plus-voicemail bundle would have to be classified as
an “information service,” making it far too easy to evade the
reach of Title II. The Court declined to “decide whether a
construction that resulted in these consequences would be
unreasonable”—because the hypothetical misfired. Brand X,
545 U.S. at 997. Its result “d[id] not follow from the
construction the Commission adopted,” id., which was “more
limited than respondents [had] assume[d],” id. at 998. That is,
the FCC’s position “d[id] not leave all information-service
offerings exempt from mandatory Title II regulation.” Id. at
997 (emphasis added). A landline telephone service provider
45
could not—on the FCC’s theory as interpreted by the Court—
get away with “packag[ing] voice mail [or a time-of-day
announcement] with telephone service” and on that basis take
landline service out of Title II. Id. at 998. That gimmick must
fail because add-ons like voicemail and time-of-day
announcements are separable from “pure transmission” in a
way that is not true for DNS and caching in relation to
broadband. Whereas landline service “transmits information
independent of the information-storage capabilities provided
by voice mail,” and is “only trivially dependent on the
information service the [time-of-day] announcement
provides,” id., broadband involves “functional[] integrat[ion]”
between “high-speed transmission,” which is “necessary to
provide Internet service,” with “further processing of
information,” id., e.g., in the form of DNS and caching, see id.
at 998–1000. The Brand X Court, in short, made plain that the
challengers’ hypothetical was simply irrelevant. Since
Petitioners develop no credible explanation as to why the
current Commission’s theory is any more vulnerable to the
hypothetical discredited by Brand X, we can see no merit in
their criticism.
To summarize, just as the USTA petitioners “fail[ed] to
provide an unambiguous answer to” whether “broadband
providers make a standalone offering of telecommunications,”
USTA, 825 F.3d at 702, Petitioners have not done so here. Nor
have they shown the Commission’s stance to be unreasonable.
We conclude, under the guidance of Brand X, that the
Commission permissibly classified broadband Internet access
as an “information service” by virtue of the functionalities
afforded by DNS and caching.
46
II. Mobile Broadband Classification
In keeping with its classification of broadband Internet as
an “information service” not subject to Title II, the
Commission classified mobile broadband as a “private mobile
service”—a classification that under the statute automatically
exempted it from common carriage treatment—just as the sole
alternative classification available under the statute would have
automatically required common carriage treatment. See 47
U.S.C. § 332(c)(1) & (2). We uphold this classification as
reasonable under Chevron. As we said in USTA (and as the
Title II Order and Petitioners recognize), the Commission has
compelling policy grounds to ensure consistent treatment of the
two varieties of broadband Internet access, fixed and mobile,
subjecting both, or neither, to Title II.
A. The 2018 Order’s Provisions
Title III of the Act, as amended by Congress in 1993, Pub.
L. No. 103-66, 107 Stat. 312, establishes two mutually
exclusive categories of mobile services—“commercial” and
“private.” Because the latter is defined negatively, as “any
mobile service * * * that is not a commercial service or [its]
functional equivalent,” 47 U.S.C. § 332(d)(3) (emphases
added), the key definition is that of “commercial mobile
service.” And the statute defines it as “any mobile service * * *
that is provided for profit and makes interconnected service
available” to the public. Id. § 332(d)(1). “[I]nterconnected
service,” in turn, is a “service that is interconnected with the
public switched network (as such terms are defined by
regulation by the Commission) * * * .” Id. § 332(d)(2).
The 2018 Order readopted definitions of “public switched
network” and “interconnected service” that the Commission
had set out in the Second CMRS Report and Order of 1994,
47
2018 Order ¶ 74; see In re Implementation of Sections 3(n) and
332 of the Commc’ns Act; Regulatory Treatment of Mobile
Servs., 9 FCC Rcd. 1411, 1516–1517 § 20.3 (1994) (“Second
CMRS Report and Order”), and maintained until the Title II
Order of 2015.
First, the Commission now defines “the public switched
network” as:
[A]ny common carrier switched network, whether by
wire or radio, including local exchange carriers,
interexchange carriers, and mobile service providers,
that use[s] the [ten-digit] North American Numbering
Plan [NANP] in connection with the provision of
switched services.
2018 Order ¶ 66 (second alteration in original); see 47 C.F.R.
§ 20.3; see also CMRS Report and Order, 9 FCC Rcd. at 1517
§ 20.3. The Title II Order, by contrast, modified that definition
by inserting the phrase “or public IP addresses”:
[T]he network that includes any common carrier
switched network, whether by wire or radio, including
local exchange carriers, interexchange carriers, and
mobile service providers, that use[s] the North
American Numbering Plan, or public IP addresses, in
connection with the provision of switched services.
Title II Order ¶ 391 (second alteration in original) (emphasis
added). This insertion assisted the Title II Order in making a
case that mobile broadband was “interconnected” with the
newly redefined public switched network.
As for “interconnected service,” the Commission now
defines it as “a service ‘that gives subscribers the capability to
communicate to or receive communication from all other users
48
on the public switched network.’” 2018 Order ¶ 77 (quoting
47 C.F.R. § 20.3); see Second CMRS Report and Order, 9 FCC
Rcd. at 1516 § 20.3. Restoring “all” was again a reversion to
the agency view since the 1994 Second CMRS Report and
Order. See 2018 Order ¶ 77. The Title II Order had deleted
that word, explaining the change at least in part as a recognition
of the already accepted view that services reaching North
American Numbering Plan (“NANP”) numbers generally
could meet Section 332(d)(1)’s requirement of
interconnectedness despite the existence of some blocked
NANP numbers (such as 900 numbers). See Title II Order
¶ 402 & n.1172.
Finally, the Commission readopted the Second CMRS
Report and Order’s “functional equivalence” test, which
considers “a variety of factors” in making that determination.
2018 Order ¶ 83. The “principal inquiry will involve
evaluating consumer demand for the service in order to
determine whether the service is a close substitute for [a
commercial mobile radio service],” which entails “evaluat[ing]
whether changes in price for the service under examination, or
for the comparable commercial service, would prompt
customers to change from one service to the other.” Second
CMRS Report and Order, 9 FCC Rcd. at 1447–1448 ¶ 80.
Viewing these definitions in the policy-driven mode
endorsed by Brand X (see, e.g., 545 U.S. at 992), the
Commission observed: “No one disputes that, consistent with
the Commission’s previous findings, if mobile broadband
Internet access service were a commercial mobile service for
purposes of § 332 and were also classified as an information
service, such a regulatory framework could lead to
contradictory and absurd results.” 2018 Order ¶ 82. As we
said in USTA, clashing classifications between mobile and
fixed broadband services would yield a “counterintuitive
49
outcome” in which a “mobile device could be subject to
entirely different regulatory rules depending on how it happens
to be connected to the internet at any particular moment.” 825
F.3d at 724. Just as the Title II Order strove to avoid a
“statutory contradiction” that would arise if mobile broadband
were classified differently from broadband Internet, see Title II
Order ¶ 403, the Commission now opted to treat mobile
broadband as a “private mobile service.” Parallel
classifications, it explained, would “further[] the Act’s overall
intent to allow information services to develop free from
common carrier regulations” and tally with the Commission’s
policy rationales for classifying broadband as an “information
service.” 2018 Order ¶ 82; see also id. ¶ 83 n.308; cf. Wireless
Broadband Order 5919–5921 ¶¶ 48–56 (2007) (explaining
importance of avoiding a contradictory outcome in classifying
broadband Internet access and mobile broadband). Petitioners
accept the general proposition, though with an inverse spin:
They say that if we were to reject the Commission’s
“information service” classification, that refusal in itself
“would be a powerful factor in favor of concluding that mobile
BIAS is a commercial mobile service,” because it “would be
unreasonable to construe the statute to create * * * a
contradiction.” Mozilla Br. 79.
Of course the Commission’s legitimate policy purposes
could not justify its indulging in unreasonable interpretations
of the controlling provisions. But it is obliged to interpret the
statute as a whole, and interpretations needed to avert
“statutory contradiction” (really, self-contradiction) ipso facto
have a leg up on reasonableness.
B. Objections to the Classification
We now analyze Petitioners’ three specific objections.
50
1. Meaning of “Public Switched Network”
First, Petitioners protest the Commission’s reversion to the
pre-Title II Order definition of “the public switched network.”
Their initial argument in support of that claim is an entirely
misplaced reliance on passages in USTA where we rejected
challengers’ argument “that the statutory phrase ‘public
switched network’ must be understood as if Congress had used
the phrase ‘public switched telephone network.’” 825 F.3d at
718 (first emphasis added). Rejection of that claim meant,
under Chevron, that we were required to affirm the Title II
Order so long as it had “permissibly considered a network
using [both] telephone numbers and IP addresses to be a
‘public switched network.’” Id. (emphasis added). Thus we
said that the phrase “public switched network” “by its plain
language can reach beyond telephone networks alone.” Id. at
717–718 (emphasis added). In light of Chevron and Brand X,
there is no basis for doubting that we meant just what we said,
leaving the door open to a different, adequately supported,
reading, which the Commission has provided here.
We likewise see no basis for a view that the statutory
language compels the Commission to retain the phrase “or
public IP address,” which the Title II Order had inserted into
the definition of “public switched network.” We note, as we
did in USTA, that the agency acts under express statutory
authority to modify its definition: The term “the public
switched network” is to be “defined by regulation by the
Commission.” 47 U.S.C. § 332(d)(2); see USTA, 825 F.3d at
717–718; Title II Order ¶ 396. Further, the Commission offers
multiple textual grounds in favor of its reading, emphasizing
Congress’s use of the definite article (“the public switched
network”) and “network” in the singular, suggesting that
“Congress intended ‘public switched network’ to mean a
51
single, integrated network.” 2018 Order ¶ 76; cf. United States
v. Manafort, 897 F.3d 340, 347 (D.C. Cir. 2018) (“The use of
the definite article ‘the’ * * * suggests a narrow reading.”).
The Commission also points to contemporaneous
understandings of “public switched network” by the
Commission and courts suggesting that it was commonly
understood to refer to the “public switched telephone
network.” See 2018 Order ¶ 75. It singles out Commission
precedent going back to 1981, see id. at n.276, as well as cases
from this circuit, referring to “public switched network” and
“public switched telephone network” seemingly
interchangeably, see id. at n.279. It was against this
background that Congress added the phrase “the public
switched network” to Title III in 1993. Although mobile
broadband was not yet in widespread use, these textual points
and identification of contemporaneous usage and meaning lend
support to the Commission’s gloss of that term to mean a
“singular network that ‘must still be interconnected with the
local exchange or interexchange switched network as it
evolves.’” Id. ¶ 76 (quoting Wireless Broadband Order, 22
FCC Rcd. at 5918 ¶ 45).
In parrying the USTA petitioners’ claims, we addressed
two other uses of “public switched network” in the United
States Code. Pointing to 18 U.S.C. § 1039(h)(4)’s express use
of “public switched telephone network,” USTA, 825 F.3d at
717, we found that use of this phrase contradicted petitioners’
idea that Congress had intended to assign a more “restrictive
meaning” to “public switched network” in Section 332. But
the language occurs in Title 18 of the United States Code
(devoted to the rather different subject of criminal law), and
was enacted in 2007, two features rendering it insufficient as a
basis to compel either the narrow reading of Congress’s 1993
addition to Title 47 advanced by the USTA petitioners, or the
broad one advanced by the current Petitioners. Further, despite
52
some language in the 2018 Order to the effect that “Congress
intended ‘public switched network’ to mean a single,
integrated network” that was not “meant to encompass multiple
networks whose users cannot necessarily communicate or
receive communications across networks,” 2018 Order ¶ 76,
the Commission here did not suppose that its reading was
required. Rather it said simply that that reading was “the best
reading of the Act,” id. ¶ 74, “more consistent with the text of
section 332(d)(2),” id. ¶ 76, and “better reflects Congressional
intent,” id. Section 1039(h)(4) at most helped the USTA court
find that the petitioners in that case failed to carry their burden
of showing that the Title II Order violated the unambiguous
meaning of “public switched network.” The Commission’s
burden here was only to show the reasonableness of its
interpretation. It did so, and without running afoul of the
doctrine that we must remand a decision when the agency rests
its result on a mistaken notion that it is compelled by statute.
See, e.g., Prill v. NLRB, 755 F.2d 941, 947–948 (D.C. Cir.
1985).
Similarly in USTA we rejected a claim that 47 U.S.C.
§ 1422(b)(1)(ii)’s use of the term “public switched network”—
in a context pretty clearly meaning only the telephone
network—meant that the Commission was required to so limit
its definition for purposes of Section 332. We responded by
pointing out that Congress was merely using the term in the
sense established by the Commission’s then longstanding
definition (including “telephone”); accordingly the section
could not have reasonably been thought “to divest the
Commission of the definitional authority” expressly granted in
Section 332. USTA, 825 F.3d at 718. In short, we simply
refused to regard the provision as inflicting an implied
constraint on the Commission’s definitional authority. Id. Just
so here, as well.
53
Next, Petitioners stress the need for Commission policy to
keep pace with technological innovation. They in essence
reiterate USTA’s “agree[ment] with the Commission that, in
granting the Commission general definitional authority,
Congress ‘expected the notion [of the public switched network]
to evolve and therefore charged the Commission with the
continuing obligation to define it.’” USTA, 825 F.3d at 718
(second alteration in original) (quoting Title II Order ¶ 396).
But, given the ambiguity in the statutory text, the manner in
which the Commission chooses to carry out that “continuing
obligation” is naturally and permissibly driven by its
underlying policy judgments (subject of course to the
possibility of technological changes so substantial and material
that they render the policy judgment irrational, which the
Commission reasonably concluded were not shown here).
Noting that the Title II Order expressly invoked its policy
reasons for broadening the concept of public switched network,
2018 Order ¶ 78 (citing Title II Order ¶ 399), the Commission
similarly invoked its policy choices to restore the agency’s
previous view, id.; see also id. ¶ 82.
The Commission also reasoned that it wished to
harmonize its definition of “public switched network” with that
of an “interconnected service.” See 2018 Order ¶ 77. Because
it restored the word “all” to the definition of “interconnected
service” (as discussed shortly), it had good grounds to omit
“public IP address” from “public switched network.” The
proliferation of “smart” devices with IP addresses, such as
“servers, thermostats, washing machines, and scores of other
devices in the Internet of Things,” Verizon Comments at 48,
J.A. 1968; see also ISPs’ Br. 18, 21–22, threatened such a
definition with a new complication. If those devices were part
of the public switched network, it might yield the dubious
upshot that mobile voice would no longer be a commercial
mobile service because its subscribers could not interconnect
54
with “all” endpoints on the network, “such as IP-enabled
televisions, washing machines, and thermostats, and other
smart devices” incapable of voice communications. 2018
Order ¶ 76 n.284. Hence a restoration of “all” in the definition
of “interconnected service,” coupled with an important
technological development, gave added reason to restore the
agency’s prior view of the “public switched network.”
In sum the Commission amply justified its return to the
CMRS definition of “public switched network.”
2. Whether Mobile Broadband Is an
“Interconnected Service”
Second, Petitioners argue that—even on the
Commission’s definition of “public switched network”—it is
unreasonable to conclude that mobile broadband is not an
“interconnected service.” See Mozilla Br. 75–79. We
disagree.
As noted previously, an “interconnected service,” in the
Commission’s view, “gives subscribers the capability to
communicate to or receive communication from all other users
on the public switched network.” 47 C.F.R. § 20.3 (emphasis
added). The Commission’s core contention is that Voice-over-
IP (“VoIP”)—the generic name for voice calls transmitted over
the Internet—is “a separate application or service” from mobile
broadband. 2018 Order ¶ 80. Hence the capabilities it affords
cannot turn mobile broadband, a separate service, into an
“interconnected service” as defined above. “[M]obile
broadband Internet access as a core service is distinct from the
service capabilities offered by applications (whether installed
by a user or hardware manufacturer) that may ride on top of it.”
Id. ¶ 81. The Commission instead centers its inquiry on the
capabilities mobile broadband service itself affords, rather than
55
“whether [it] allows consumers to acquire other services that
bridge the gap to the telephone network.” Id. ¶ 80 (quoting
Verizon Comments at 47, J.A. 1967). As the Commission
explained in its 2007 Wireless Broadband Order, its finding
that mobile broadband was not an “interconnected service” did
not prejudge how other services—such as “interconnected
VoIP”—should be classified. Wireless Broadband Order, 22
FCC Rcd. at 5918 ¶ 46; cf. American Council on Educ. v. FCC,
451 F.3d 226, 227–229, 228 n.1 (D.C. Cir. 2006) (taking for
granted that broadband and VoIP are distinct services in
upholding a Commission decision).
Petitioners by contrast contend, reprising the Title II
Order, that mobile broadband service meets the above
definition of “interconnected service” by virtue of
functionalities afforded by VoIP. VoIP applications––like
Apple FaceTime, Google Voice, and Skype––are now
ubiquitous and easy to use. “For most users, the only
operational difference between communicating with all other
users, including all NANP endpoints, through a mobile voice
call versus VoIP is which icon they press.” Mozilla Br. 77.
This holds true, Petitioners say, whether applications are
preinstalled on mobile devices or downloaded by users. Some
carriers themselves offer preinstalled Wi-Fi calling and Voice-
over-LTE capabilities that permit users to make voice calls to
NANP numbers via broadband without needing any additional
applications. See OTI New America Reply at 56–59, J.A.
2791–2794; see also Mozilla Br. 76–77. As Petitioners see it,
VoIP functionalities have become part and parcel of mobile
broadband service itself and give subscribers “capabilit[ies]”
that make mobile broadband an “interconnected service.”
Some commenters frame the issue as a claim that
technological change demands persistence in the choice of the
Title II Order. Whereas “[t]he Commission’s findings in the
56
2007 Wireless Broadband Ruling were reasonable,” they are so
no longer, given “the increasing convergence of mobile service
offerings (mobile carriers market ‘data’ packages, not separate
voice calling and broadband products) and of mobile networks
* * * .” OTI New America Reply at 55, J.A. 2790; see Title II
Order ¶ 401. In part for that reason Petitioners say, quoting
USTA, that the distinction between “(i) mobile broadband
alone enabling a connection, and (ii) mobile broadband
enabling a connection through use of an adjunct application
such as VoIP” is “elusive,” USTA, 825 F.3d at 721, and,
therefore, they claim, no longer permissible, Mozilla Br. 77.
We do not see it Petitioners’ way. In our view the
Commission adequately defended its approach and responded
to relevant objections, in keeping with its inclusion of the word
“all” in the definition of “interconnected service.”
First, Petitioners yet again overread USTA. There we
spoke of an “elusive” line in making the simple point that
“[n]othing in the statute * * * compels the Commission to
draw” that line. USTA, 825 F.3d at 721. That proposition is
quite consistent with the proposition that nothing in the statutes
bars the Commission from adopting the distinction—many
legal distinctions are, after all, rather elusive. We fail to see
our language in USTA as foreclosing the Commission’s current
view of what is part of mobile broadband service.
Second, as alluded to earlier, the agency previously drew
this “elusive” distinction at least since 2007, interrupted of
course by the Title II Order, even while it fully and expressly
recognized the availability and significance of VoIP, as it said
in the Wireless Broadband Order:
Mobile wireless broadband Internet access service in
and of itself does not provide this capability to
communicate with all users of the public switched
57
network. For example, mobile wireless broadband
Internet access services do not use the North
American Numbering Plan to access the Internet,
which limits subscribers’ ability to communicate to or
receive communications from all users in the public
switched network. Instead, users of a mobile wireless
broadband Internet access service need to rely on
another service or application, such as certain voice
over Internet Protocol (VoIP) services that rely in part
on the underlying Internet access service, to make
calls to, and receive calls from, “all other users on the
public switched network.” Therefore, mobile
wireless broadband Internet access service itself is not
an “interconnected service” as the Commission has
defined the term in the context of section 332.
Wireless Broadband Order, 22 FCC Rcd. at 5917–5918 ¶ 45;
see also 2018 Order ¶ 81 n.300; Title II Order ¶ 400 & n.1167
(quoting language from the above and acknowledging the
Commission’s previous conclusion).
Third, technological advances since the 2007 Wireless
Broadband Order do not invalidate the Commission’s way of
drawing the line between services. Of course technological
change may sometimes require regulatory reclassification. But
it is not clear why the changes identified by commenters are an
example of such a requirement, as we have noted above. The
proliferation of VoIP and prevalence of its use are orthogonal
to the Commission’s point about the relationship between
mobile broadband and VoIP. Whether VoIP applications are
used by many users or few, and whether they are preinstalled
or acquired on an ad hoc basis, the question is whether VoIP
functionalities are part of the service at issue here—mobile
broadband service—or constitute other services that mobile
broadband allows users to access. Similarly, ease of
58
interoperability is irrelevant to the Commission’s way of
framing whether there are one or two services involved in
facilitating a call, no matter how seamless the toggling may be
from a user’s standpoint. Although a user’s ability to move
easily between making mobile voice calls and VoIP calls (or to
toggle automatically between mobile voice and VoIP on a
single call) may, as the Title II Order had put it, have “blurred
the distinction between services using NANP numbers and
services using public IP addresses,” Title II Order ¶ 401
(emphasis added), blurring is not erasing. The Commission
observes that “even if providers are increasingly offering voice
service and mobile broadband Internet access service together,
this does not support classifying and regulating the latter in the
same way as the former.” 2018 Order ¶ 81 n.302. Similarly,
the Commission comments that there is nothing odd about
subjecting carriers offering “multiple services of mixed
classification” to regulation on a service-by-service basis, and
thus, for example, being “regulated as common carriers to the
extent they offer services that are subject to Title II regulation.”
Id. (citing 47 U.S.C. § 153(51)). (The Commission declined to
determine whether Wi-Fi calling and Voice-over-LTE could
qualify as “interconnected services” because, on the same logic
as above, it treats them as distinct services “subject to separate
classification determinations.” Id.)
Indeed, the 2018 Order recognized “the evolution of
mobile network technologies that have blurred the [physical]
lines between circuit switched and packet switched networks,”
and agreed with commenters arguing that the “public switched
network should not be defined in a static way” (emphasis
added) and should account for “continuous[] grow[th] and
chang[e].” 2018 Order ¶ 78 n.290. But it believed that this
flexibility must be constrained by fidelity to what it viewed as
the best reading of the statute, so that “the public switched
network remains a single integrated network incorporating the
59
traditional local and interexchange telephone networks and
enabling users to send or receive messages to or from all other
users.” Id.
Fourth, no precise conceptual framework dictated to either
the current Commission or the one that issued the Title II Order
how it should parse the relationship between mobile broadband
and VoIP. None of the parties identifies (and we have not
found) either a set of regulatory definitions purporting to draw
lines between “applications” and “services,” or a set of
generally accepted linguistic practices drawing such a line or
generally governing when the capability of apps that are usable
with a service should be taken to belong to the “capabilities”
of the service. As a matter of ordinary language there surely is
no problem with the Commission’s take. If someone tells a
friend, “I just got a great new tablet with mobile broadband,” it
would hardly be a solecism for the friend to reply, “Great—
does your service let me reach you from my landline?” Of
course the new tablet owner might reply, “Not now—but it
could if I set up a Google Voice number,” but that only shows
the linguistic ambiguity. Given the absence of any norms
pressing in Petitioners’ favor, we cannot condemn as
impermissible the Commission’s choice to draw the line in a
way that averted what it reasonably viewed as statutory self-
contradiction, echoing the Title II Order’s reasoning in
Paragraph 403, which was accepted by USTA, see 825 F.3d at
724.
Fifth, attempts to catch the Commission in self-
contradiction are unavailing. Commenters and Petitioners say
that if the Commission’s theory were properly applied, mobile
voice would turn out not to be an “interconnected service,” an
untenable outcome. Commenters invoke the truth that the
Commission recognizes a service as having a “capability” even
though exercise of that capability requires customer premises
60
equipment (“CPE”) even for ordinary landline use. See OTI
New America Comments at 56–57, J.A. 2791–2792; Mozilla
Reply Br. 36–37. And just as customers need mobile devices
packaged with software to make use of a mobile voice service,
they need VoIP to place voice calls over broadband. Since the
former does not disqualify mobile voice from being a
commercial mobile service (as everyone agrees), the latter,
commenters and Petitioners say, should not disqualify mobile
broadband from the same classification. See Mozilla Br. 75–
76; see also OTI New America Comments at 56, J.A. 2791
(“[A] mobile voice subscriber cannot ‘speak’ to a fax machine,
or to a pager, because each of these common carrier services,
despite being ‘interconnected’ through the ‘public switched
network,’ obviously requires certain CPE (or applications) to
meaningfully interconnect and communicate. VoIP and Wi-Fi
calling to NANP endpoints over the internet is no different,
whether the application is pre-loaded by the mobile BIAS
provider (e.g., T-Mobile Wi-Fi Calling, Google Voice) or
downloaded via a pre-loaded app store gateway.”).
But the Commission found the analogy “inapt.” 2018
Order ¶ 80 n.298. (Hence Mozilla is mistaken in saying that
the Commission did not address the matter. See Mozilla Br.
76). The difference, the Commission says, is that—even
though users need to acquire equipment and software
separately for mobile voice—“the function of interconnection
is provided by the purchased mobile service itself.” 2018
Order ¶ 80 n.298. With VoIP, by contrast, the add-on
application—and not the broadband service—supplies the
interconnection functionality. Id. And precisely because (as
noted above) no regulatory, conceptual, or linguistic strictures
force the Commission’s hand, its analysis here is reasonable.
Finally, even if we were to accept Petitioners’ argument
that the capability of mobile broadband service should be
61
conceived as embracing the capabilities both of that service and
of VoIP, the choice of mobile broadband subscribers not to
obtain VoIP capability would stand in the way of mobile
broadband’s satisfying the Commission’s restored definition of
“interconnected service”: To repeat, such service must give
subscribers “the capability to communicate to or receive
communication from all other users on the public switched
network.” 47 C.F.R. § 20.3 (emphasis added). Petitioners and
commenters in support of their position never dispute the
existence of many such non-VoIP-using mobile broadband
subscribers, though their number is unknown.
The gap in Petitioners’ theory is shown most clearly in the
obvious inability of a would-be caller from a NANP number
who seeks to reach a person with mobile broadband but no
form of VoIP (or mobile voice service). Suppose we agreed
with Petitioners that mobile broadband gives the call’s
intended recipient the “capability” of receiving NANP-
originated calls by, for example, obtaining a NANP number
through Google Voice or Skype or like services. By this they
really mean that it gives him the capability of acquiring that
capability (“capability2”?). But the availability of that option
for the intended recipient does not give the would-be caller
even the capability of obtaining the capability of reaching his
intended call recipient.
And a party with mobile broadband but without some form
of VoIP capability cannot either “communicate to or receive
communication from all other users on the public switched
network,” 47 C.F.R. § 20.3 (emphasis added), even though she
has the capability of acquiring that capability. But “[u]sers
who cannot communicate with each other are simply not
‘interconnected’ in any plausible sense.” ISPs’ Br. 19.
62
In sum, we find that the Commission’s way of
distinguishing among services and analyzing their regulatory
implications meets Fox Television’s reasonableness
requirement, 556 U.S. at 514–516, and falls within the bounds
of agency discretion under Chevron.
3. Whether Mobile Broadband Is the “Functional
Equivalent” of a Commercial Mobile Service
Third, Petitioners dispute the Commission’s conclusion
that mobile broadband is not a “functional equivalent” of
mobile voice, which all agree is a commercial mobile service.
47 U.S.C. § 332(d)(3). We are unconvinced. We find that the
Commission reasonably readopted its test for functionally
equivalent services that it had used from 1994 until 2015 and
permissibly found that mobile broadband does not qualify as a
service functionally equivalent to mobile voice.
To begin with, Petitioners do not directly challenge the
Commission’s return to its pre-Title II Order test for functional
equivalence laid out in the Second CMRS Report and Order.
See 2018 Order ¶¶ 83–84; see also Second CMRS Report and
Order, 9 FCC Rcd. at 1447–1448 ¶ 80; cf. ISPs’ Br. 22 n.9.
That approach entails looking to “a variety of factors” to
determine whether “demand for” the allegedly functionally
equivalent service is “a close substitute” for a given
commercial mobile service, including:
[C]onsumer demand for the service to determine
whether the service is closely substitutable * * *;
whether changes in price for the service under
examination, or for the comparable * * * service[,]
would prompt customers to change from one service
to the other; and market research information
63
identifying the targeted market for the service under
review.
Second CMRS Report and Order, 9 FCC Rcd. at 1519
§ 20.9(a)(13)(ii)(B); see also id. at 1447–1448 ¶ 80. This focus
on cross-elasticity of demand differs significantly from the new
test adopted in the Title II Order, which focused entirely on
whether a service is “widely available” and “offers mobile
subscribers the capability to send and receive communications
on their mobile device to and from the public.” Title II Order
¶ 404.
In justifying its return to the CMRS test, the Commission
properly underscores its statutory “discretion” to define
functional equivalence, 2018 Order ¶ 84, whose meaning is to
be “specified by regulation by the Commission,” 47 U.S.C.
§ 332(d)(3); cf. Title II Order ¶ 404. The Commission argues
that the CMRS test “reflects the best interpretation of section
332,” 2018 Order ¶ 83, and “hews much more faithfully to the
intent of Congress” than the Title II Order “or the analyses in
the record focusing on the extent of service availability,” id.
¶ 84.
It was reasonable for the Commission to home in on
substitutability: If the same regulatory regime is to govern two
services, the Commission could sensibly conclude that
economic rationality suggests that the risk of regulation-
engendered economic distortions will be less if the two are
close substitutes. As the Commission rightly observed in the
Second CMRS Report and Order, the “statute’s overriding
purpose [is] to ensure that similar services are subject to the
same regulatory classification and requirements.” 9 FCC Rcd.
at 1447 ¶ 78 (emphasis added). The 2018 Order quite properly
rested on this section of the Second CMRS Report and Order.
2018 Order ¶ 84 & n.312.
64
Applying the restored CMRS test, the Commission
appropriately looked to substitutability of the services on offer.
It reasoned that mobile voice and mobile broadband “have
different service characteristics and intended uses and are not
closely substitutable for each other * * *.” 2018 Order ¶ 85.
Consumers purchase mobile broadband to “access the Internet,
on-line video, games, search engines, websites, and various
other applications.” Id. By contrast, consumers “purchase
mobile voice service solely to make calls to other users using
NANP numbers [presumably referring primarily to users
reachable via the public switched telephone network].” Id.
Thus the Commission plausibly places its emphasis on the
distinct purposes and capabilities of the services taken as a
whole. In virtue of these differences, the two are not “closely
substitutable in the eyes of consumers.” Id. ¶ 84; cf. Second
CMRS Report and Order, 9 FCC Rcd. at 1447–1448 ¶ 80
(asking whether a service is a “close substitute”).
In support of its finding of non-substitutability, the
Commission points to divergent price points between the two
services. It offers examples showing a substantial price gap—
with up to a six-fold jump from $15 to $90 per line—between
unlimited voice/text plans and unlimited mobile broadband
plans. 2018 Order ¶ 85; see id. at nn.317 & 318. It ties this
down to the CMRS test by making the seemingly indisputable
point that “[n]othing in the record suggests that changing the
price for one service by a small but significant percentage
would prompt a significant percentage of customers to move to
the other service.” Id. ¶ 85. Petitioners do not contest that
finding, which is hardly surprising, given the distinct purposes
and range of options in mobile voice and mobile broadband,
notwithstanding their interoperability.
Instead Petitioners respond with an interesting but
seemingly unhelpful point: “Today each of the four national
65
[mobile] carriers exclusively sell smartphone plans that bundle
voice, texting and internet access as applications * * * .” OTI
New America Comments at 97–98, J.A. 1695–1696 (quoted at
Mozilla Br. 81). The Commission concedes that the voice-and-
text-only plans it describes are offered by “small mobile
carriers.” Commission Br. 56 n.12. But Petitioners’ approach
suffers a worse defect: To contest the Commission’s finding
that the two services are not close substitutes (and therefore not
very direct competitors) it offers evidence that they are very
good complements. That seems a rather deft way of changing
the subject. Though national plans may bundle voice and data,
the Commission aptly says that this “does not undermine [its]
conclusion that consumers do not regard [the services] as
fungible.” Id.; cf. ISPs’ Br. 22 (“[C]onsumers generally
subscribe to both services * * * because they employ them for
different purposes.”).
Petitioners appear to rely on a competing test for
functional equivalence resembling the Title II Order’s
approach. As Petitioners see it, the fact that mobile voice and
mobile broadband both allow users to carry out some of the
same tasks—most importantly, placing voice calls to NANP
numbers (to the extent allowed by mobile broadband users’
adoption of VoIP)—suffices to compel their treatment as
functionally equivalent services. Mozilla contends that mobile
broadband “provides all the functionality of mobile voice,
allowing subscribers to call anyone a mobile voice subscriber
could,” and is therefore a functionally equivalent service.
Mozilla Br. 80.
This argument fails on two counts. It completely
disregards the Commission’s solid grounds for returning to the
pre-Title II Order focus on substitutability and cross-
elasticity—a return that, as we noted above, Petitioners do not
explicitly challenge. That focus made the statute’s “functional
66
equivalent” provision serve the sound policy objective of
bringing services in close competition with each other under
the same regulatory umbrella. Second, Petitioners’ alternative
test suffers the same flaw (from the Commission’s perspective)
as their effort to treat mobile broadband and VoIP as a single
service, an effort the Commission was under no obligation to
countenance.
In sum, even though Petitioners’ reading of a “functional
equivalen[ce]” in Section 332(d)(3) is not foreclosed by the
statute, the agency’s interpretation of that term, and its
application to mobile broadband, are reasonable and merit
Chevron deference.
III. Section 706 Authority
Petitioners additionally argue that the Commission could
have addressed the harms of blocking and throttling and issued
open Internet rules under Section 706 of the
Telecommunications Act. Pursuant to Section 706(a), the FCC
“shall encourage the deployment on a reasonable and timely
basis of advanced telecommunications capability to all
Americans * * * by utilizing * * * price cap regulation,
regulatory forbearance, measures that promote competition in
the local telecommunications market, or other regulating
methods that remove barriers to infrastructure investment.” 47
U.S.C. § 1302(a). Furthermore, Section 706(b) states that the
agency “shall take immediate action” if this goal is not being
met “in a timely fashion.” Id. § 1302(b). The Commission
interpreted these provisions as “exhorting the Commission to
exercise market-based or deregulatory authority granted under
other statutory provisions, particularly the Communications
Act” not as “an independent grant of regulatory authority to
give those provisions meaning.” 2018 Order ¶ 270. Despite
67
Petitioners’ contentions, we find that this interpretation of
Sections 706(a) and (b) is lawful.
As with our prior analysis of the Commission’s
classification determinations, we evaluate its statutory
interpretation decisions concerning Section 706 authority by
applying the two-step analysis of Chevron. See 467 U.S. at
842–843.
In Verizon v. FCC, we noted that the language of Section
706 is ambiguous. See 740 F.3d 623, 635-636 (D.C. Cir. 2014)
(citing Chevron, 467 U.S. at 842–843); see also id. at 641
(“[A]s with section 706(a), it is unclear whether section 706(b)
* * * vested the Commission with authority to remove []
barriers to infrastructure investment and promote
competition.”). Thus, we proceed to Step Two of the analysis
and ask whether the Commission’s understanding of Section
706 as hortatory represents a reasonable interpretation of the
statute. We find that it does. Indeed, we have previously held
that the language of Section 706(a) could “certainly be read as
simply setting forth a statement of congressional policy” and
“just as easily be read to vest the Commission with actual
authority. Id. at 637. We have also understood Section 706(b)
to be similarly permissive. Id. at 641. Furthermore, in support
of its interpretation, the Commission notes that Section 706
lacks details “identify[ing] the providers or entities whose
conduct could be regulated,” whereas other provisions of the
Act that unambiguously grant regulatory authority do specify
such details. 2018 Order ¶ 271. We find the Commission’s
rationales in favor of its reading of Section 706 to be
reasonable.
68
IV. Section 257 and the 2018 Order’s Transparency
Requirements
In its 2018 Order, the Commission retained a
“transparency rule,” which provided that “[a]ny person
providing broadband Internet access service shall publicly
disclose accurate information regarding the network
management practices, performance, and commercial terms of
its broadband Internet access services sufficient to enable
consumers to make informed choices * * * .” 2018 Order
¶ 215. Petitioners challenge the Commission’s legal authority
to issue a transparency rule under 47 U.S.C. § 257. Instead,
Petitioners argue that the Commission should have adopted the
rule under Section 706 of the Telecommunications Act. We
disagree.
We first dispense with the Commission’s contention that
Petitioners Mozilla and Internet Association (“IA”) do not have
standing to assert this challenge because they do not suffer
injury. The Commission notes that Petitioners fail to identify
any injuries that flow from the transparency rule itself but
rather observe that the rule derivatively supports other rules
that they find injurious. Without alleging harm specific to the
transparency rule, the Commission contends, Petitioners lack
standing. This understanding of injury is flawed. Petitioners
allege concrete injury from the Commission’s Order repealing
Internet conduct rules. When a party alleges concrete injury
from promulgation of an agency rule, it has standing to
challenge essential components of that rule, invoked by the
agency to justify the ultimate action, even if they are not
directly linked to Petitioners’ injuries; if Petitioners’ objections
carry the day, the rule will be struck down and their injury
redressed. See Sierra Club v. FERC, 867 F.3d 1357, 1366–
1367 (D.C. Cir. 2017); see also WildEarth Guardians v. Jewell,
738 F.3d 298, 304–308 (D.C. Cir. 2013). Because it is
69
undisputed that the transparency rule is an essential component
of the 2018 Order, Petitioners have standing to object to any
deficiency with the transparency rule. See Sierra Club, 867
F.3d at 1366–1367. The deficiency need not be tied to the
Petitioners’ specific injuries. Accordingly, we find that
Petitioners suffer injury for the purpose of establishing
standing.
Nonetheless, the Commission’s reliance on 47 U.S.C.
§ 257 to issue the transparency rule was proper. Section 257(a)
of the Communications Act required the FCC, within 15
months after enactment of the 1996 Act, to “complete a
proceeding for the purpose of identifying and eliminating, by
regulations pursuant to its authority under this chapter (other
than this section), market entry barriers for entrepreneurs and
other small businesses in the provision and ownership of
telecommunications services and information services.” 47
U.S.C. § 257(a). Section 257(c) directed the Commission,
“triennially thereafter, to report to Congress on such
marketplace barriers and how they have been addressed by
regulation or could be addressed by recommended statutory
changes.” 2018 Order ¶ 232 (citing 47 U.S.C. § 257(c)). The
Commission observed that “section 257 does not specify
precisely how [they] should obtain and analyze information for
purposes of its reports to Congress,” and thus “construe[d] the
statutory mandate to ‘identify’ the presence of market barriers
as including within it direct authority to collect evidence to
prove that such barriers exist.” 2018 Order ¶ 232 n.847. We
find that this interpretation of Section 257(a) is permissible.
“The Commission, however, interpreted the statute to require
a rulemaking based on authority other than section 257 itself
only for rules intended to eliminate market barriers rather than
rules meant to identify such barriers.” Commission Br. 100.
The relevant language in Section 257 is sufficiently
ambiguous—Congress does not proscribe the means of
70
“identifying” market barriers. The Commission permissibly
read the clause to apply only to the elimination of market
barriers. In turn, we find that the Commission’s reading easily
satisfies review at Chevron Step Two, under which we defer to
the agency’s interpretation unless it is “arbitrary or capricious
in substance, or manifestly contrary to the statute.” United
States v. Mead Corp., 533 U.S. 218, 227 (2001).
While Petitioners correctly note that Section 257(c) was
removed from the Communications Act before the 2018 Order
became effective, see RAY BAUM’S Act of 2018, Pub. L. 115-
141, § 402(f), 132 Stat. 1089 (2018), it was not altered in any
material respect for purposes of the Commission’s authority in
this regard. The 2018 legislation that amended the Act
introduced a biennial reporting requirement quite similar to the
triennial reporting requirement contained in the former Section
257(c). See Pub. L. No. 115-141, Div. P, §§ 401, 402(f), 132
Stat. at 1087-1089 (codifying a reporting requirement at
47 U.S.C. § 163). Indeed, Congress emphasized that
“[n]othing in this title or the amendments made by this title
shall be construed to expand or contract the authority of the
Commission.” Pub. L. No. 115-141, Div. P, § 403, 132 Stat. at
1090.
We also reject Petitioners’ contention that they did not
have adequate notice of the statutory authority upon which the
Commission relied in imposing the transparency rule. This
Court has previously recognized Section 257 as a possible
source of authority for such rules. See, e.g., Comcast Corp. v.
FCC, 600 F.3d 642, 659 (D.C. Cir. 2010) (“We readily accept
that certain assertions of Commission authority could be
reasonably ancillary to the Commission’s statutory
responsibility to issue a report to Congress. For example, the
Commission might impose disclosure requirements on
regulated entities in order to gather data needed for such a
71
report.” (quotations omitted)); see also Verizon, 740 F.3d at
668 n.9 (Silberman, J., concurring in part and dissenting in
part). In fact, in response to the Notice of Proposed
Rulemaking’s (“NPRM’s”) explicit solicitation of comment on
its legal authority to adopt rules if the Commission reclassified
broadband as an information service, several commenters
identified Section 257 as a possible source of authority for a
transparency rule. See 2018 Order ¶ 232 n.843; see also
NPRM ¶ 103 (“[W]e seek comment on any other sources of
independent legal authority.” (emphasis added)). Thus, we
find Petitioners’ notice argument to be without merit.
Intervenor Digital Justice Foundation argues that while the
Commission has authority to maintain a transparency rule, it
should have retained aspects of the rule contained in a 2010
Order issued by the Commission. See Preserving the Open
Internet, 25 FCC Rcd. 17905 (2010) (“2010 Order”). At the
outset, we reject the Commission’s assertion that this argument
is not properly before us. Digital Justice has simply raised a
new argument in support of claims the Petitioners have
presented. The argument is thus a far cry from the sort of
intervenor’s claim with “absolutely no substantive connection
with the issues raised by the petition for review,” which we
have rejected in the past. See Synovus Fin. Corp. v. Board of
Governors of Fed. Reserve Sys., 952 F.2d 426, 434 (D.C. Cir.
1991). We also find no merit in the Commission’s argument
that Digital Justice was required to seek reconsideration before
raising this garden-variety arbitrary-and-capricious challenge.
A petition for reconsideration is required for “only those issues
upon which the Commission has been afforded no opportunity
to pass.” AT&T Corp. v. FCC, 394 F.3d 933, 938 n.1 (D.C.
Cir. 2005) (internal quotation marks omitted). That rule
always allows courts to consider whether the Commission
“relied on faulty logic,” id., because “[t]he Commission
necessarily had an opportunity to pass upon the validity of the
72
rationale that it actually put forth,” MCI Telecomm. Corp. v.
FCC, 10 F.3d 842, 845 (D.C. Cir. 1993).
Turning to the merits, Digital Justice charges that it was
arbitrary and capricious for the Commission to eliminate
aspects of the former transparency rule without considering the
impact on entrepreneurs and small businesses — as identified
in Section 257(a)—or providing a reasoned explanation for
modifying the rule. We disagree. The Commission explained
that the “additional obligations [of the former transparency
rule] [did] not benefit consumers, entrepreneurs, or the
Commission sufficiently to outweigh the burdens imposed on
[broadband providers].” See 2018 Order ¶ 210. We are also
unpersuaded by Digital Justice’s claim that the Commission
needed to analyze the interest of entrepreneurs and other small
businesses in the specific context of repealing portions of the
transparency rule. Section 257(a) simply requires the FCC to
consider “market entry barriers for entrepreneurs and other
small businesses.” 47 U.S.C. § 257(a). The disclosure
requirements in the transparency rule are in service of this
obligation. The Commission found that the elements of the
transparency rule in the 2018 Order will “keep entrepreneurs
and other small businesses effectively informed of [broadband
provider] practices so that they can develop, market, and
maintain Internet offerings.” See 2018 Order ¶ 218. In fact,
the Order takes care to describe the specific requirements of
the rule to “ensure that consumers, entrepreneurs, and other
small businesses receive sufficient information to make [the]
rule effective.” Id.; see also id. ¶¶ 218–223. Digital Justice’s
challenges cannot prevail under our particularly deferential
arbitrary-and-capricious review.
In sum, we uphold the transparency rule as authorized by
47 U.S.C. § 257.
73
V. Arbitrary and Capricious Challenges
The Commission claims that we can uphold its entire
rulemaking on the weight of its statutory interpretation alone.
See Commission Br. 58 (expressing its view that its legal
interpretation “alone suffices to justify the repeal”). In the
Commission’s view, the reasonableness of its interpretation
necessarily insulates the 2018 Order from arbitrary and
capricious challenge. See id.
That argument misunderstands the law. To be sure, the
analysis of an agency’s statutory interpretation at Chevron Step
Two has some overlap with arbitrary and capricious review.
The former asks whether the agency’s interpretation “is based
on a permissible construction of the statute.” Chevron, 467
U.S. at 843. And the latter asks whether the agency
“examine[d] the relevant data and articulate[d] a satisfactory
explanation for its action including a rational connection
between the facts found and the choice made,” and “whether
the decision was based on a consideration of the relevant
factors and whether there has been a clear error of judgment.”
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 43 (1983) (internal quotations marks omitted).
Nevertheless, “the Venn diagram of the two inquiries is not a
circle.” Humane Soc’y of United States v. Zinke, 865 F.3d 585,
605 (D.C. Cir. 2017). Each test must be independently
satisfied.
This is a case in point. The Commission has advanced
what is, under controlling precedent, a reasonable
interpretation of the statute for purposes of Chevron. But
aspects of the Commission’s decision are still arbitrary and
capricious under the Administrative Procedure Act because of
the Commission’s failure to address an important and
statutorily mandated consideration—the impact of the 2018
74
Order on public safety—and the Commission’s inadequate
consideration of the 2018 Order’s impact on pole-attachment
regulation and the Lifeline Program. We consider each of
Petitioners’ challenges in turn.
A. Effects on Investment and Innovation
Petitioners challenge the Commission’s conclusion that
reclassification of broadband as an information service is
“likely to increase ISP investment and output,” 2018 Order
¶ 98, focusing almost entirely on the Commission’s suggestion
that the Title II Order may well have led to reduced investment
in broadband. They object to particular studies on which the
agency relies, the explanations it offers for its conclusions, and
its failure to credit certain data. We find that the agency’s
position as to the economic benefits of reclassification away
from “public-utility style regulation,” id. ¶ 90, which the
Commission sees as “particularly inapt for a dynamic industry
built on technological development and disruption,” id. ¶ 100,
is supported by substantial evidence, see National Lifeline
Ass’n v. FCC, 921 F.3d 1102, 1111 (D.C. Cir. 2019), and so
reject Petitioners’ objections.
As part of its justification for “light-touch” regulation of
the Internet ecosystem, the Commission made a variety of
arguments about optimal, and suboptimal, conditions for
broadband investment and innovation. It relied on, among
other things, (1) prior agency positions, which have “long
recognized that regulatory burdens and uncertainty * * * can
deter investment by regulated entities,” 2018 Order ¶ 88,
backed up by economic theory in general, id. ¶¶ 89, 93; (2) a
finding that “the balance of the evidence indicates that Title II
discourages investment by ISPs,” id. ¶ 93, supported by studies
evaluating ISP investment before and after the Title II Order,
id. ¶¶ 89–98; (3) the disincentive to investment arising from
75
regulatory uncertainty about the substance and potential reach
of Title II regulation, id. ¶¶ 99–102; (4) effects on small ISPs
and rural communities where firms are more likely to take the
risks of offering much-needed services in a more predictable
and less onerous regulatory climate, id. ¶¶ 103–106; and (5) the
absence of evidence of negative effects on edge investment, id.
¶¶ 107–108. This diverse array of theses led the Commission
to conclude that “Title II classification likely has resulted, and
will result, in considerable social cost, in terms of forgone
investment and innovation,” without “discernable incremental
benefit relative to Title I classification.” Id. ¶ 87.
We reiterate that our posture in arbitrary and capricious
review is deferential. To withstand scrutiny, “the agency must
examine the relevant data and articulate a satisfactory
explanation for its action including a rational connection
between the facts found and the choice made.” State Farm,
463 U.S. at 43 (internal quotation marks omitted). Where, as
here, the agency shifts course, “it suffices 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, which the
conscious change of course adequately indicates.” Fox
Television, 556 U.S. at 515. Especially apt here is an
admonition we have long made: “Predictions regarding the
actions of regulated entities are precisely the type of policy
judgments that courts routinely and quite correctly leave to
administrative agencies.” Public Citizen, Inc. v. National
Highway Traffic Safety Admin., 374 F.3d 1251, 1260–1261
(D.C. Cir. 2004) (quoting Public Utils. Comm’n v. FERC, 24
F.3d 275, 281 (D.C. Cir. 1994)).
Mozilla and Intervenors IA especially attack a study by
Hal J. Singer, which had “concluded that ISP investment by
major ISPs fell by 5.6 percent between 2014 and 2016.” 2018
Order ¶ 91. They allege “serious methodological defects” with
76
the study, Mozilla Br. 69, and say that the Commission should
have placed greater stock in “aggregate investment totals as
actually reported by companies to investors,” id.—specifically,
capital expenditure figures of publicly traded broadband
providers in 2013–2016 as summarized by Free Press in its
comments to the Commission, see J.A. 860. And they
unfavorably contrast the reliability of Singer’s numbers with
those cited by Free Press. They note the Commission’s
acknowledgement that “Singer’s calculations do not control for
some factors that influence investment, such as the ‘lumpiness’
of capital investment and technological change,” 2018 Order
¶ 91 n.339; see Mozilla Br. 69; IA Intervenors’ Br. (“IA Br.”)
22–23, an acknowledgement that might well be taken to reflect
quite proper Commission caution about the empirical issues.
In our view the Commission’s reliance on, and analysis of,
the Singer study are reasonable. First, it is but one of numerous
studies and trends invoked by the Commission that reached
similar conclusions—about which Petitioners say relatively
little or nothing specific. These include (1) a study finding that
“ISP capital investment increased each year from the end of the
recession in 2009 until 2014, when it peaked,” 2018 Order ¶ 90
& n.335; see IA Br. 20–21 (questioning trends in these data);
(2) another reporting that wireless capital investment had
slowed, with a “precipitous decline in 2016,” id. ¶ 90 n.337;
and (3) an article, Thomas W. Hazlett & Joshua D. Wright, The
Effect of Regulation on Broadband Markets: Evaluating the
Empirical Evidence in the FCC’s 2015 ‘Open Internet’ Order,
50 Rev. Indus. Org. 487 (2017), uncontroverted by Petitioners,
on which the Commission drew extensively, see 2018 Order
¶¶ 94 & n.349, 96 & n.358, 98 & n.362, 107, 148 & nn.535–
536. This study relied in part on a “natural experiment”
derived from Commission policy changes, showing a
“statistically significant upward shift in DSL [Digital
77
Subscriber Line]” investment after the FCC reclassified DSL
service as an “information service” in 2005. Id. ¶ 94.
Mozilla’s effort to paint a contrasting picture of the Singer
and Free Press studies (“Singer—bad; Free Press—good”)
encounters multiple obstacles (undiscussed by Petitioners).
Mozilla does not address shortcomings of the Free Press
figures, pinpointed by the agency, including for example its
failure to exclude investment abroad, which the Singer study
had accounted for. 2018 Order ¶ 91; cf. IA Br. 22
(acknowledging this point). Most important, Mozilla and IA
entirely ignore an analysis that puts the two studies on an
apples-to-apples basis and finds agreement between them.
That analysis “adjusted the Free Press and Singer numbers so
that they [1] covered the same ISPs, [2] spanned the same time
period, and [3] subtracted investments unaffected by the
regulatory change.” 2018 Order ¶ 92 (numbering added).
After controlling for these three factors, the assessment “found
that both sets of numbers demonstrate that ISP investment fell
by about 3 percent in 2015 and by 2 percent in 2016.” Id.
(emphasis added). The comparison thus indicates a
convergence between the two sets of figures—a convergence
close to the original Singer findings. While that assessment
may itself be flawed, Petitioners and Intervenors ignore it
altogether. We thus conclude that the Commission’s reliance
on the Singer study—given its apparent match-up with the Free
Press data, and as but a part of the agency’s analysis—is not
unreasonable.
Mozilla also reframes its championing of the Free Press
data by asserting the superiority of investment “results”
attained by “[i]ndividual BIAS providers[]” (citing only the
Free Press data), over “aggregate numbers,” which may be
“easily[] skewed.” Mozilla Br. 70; see IA Br. 21. Whatever
the force of the general theory, it seems immaterial as a basis
78
to prefer Free Press’s calculations in light of the apparent (and
uncontested by Petitioners) harmony of the Free Press and
Singer data.
The broader point here is that the Commission was clear-
eyed in assigning quite modest probative value to studies
attempting to draw links between the Title II Order and
broadband investment, so that there is less daylight between
the Commission and Petitioners than the latter seem to think.
It states that “reclassification * * * is likely to increase ISP
investment and output.” 2018 Order ¶ 98 (emphasis added). It
also notes a separate calculation by the Free State Foundation
that yielded findings similar to Singer’s based on “capital
expenditure data for 16 of the largest ISPs.” Id. ¶ 92. But the
Commission observes that, while “suggestive,” they are at
most confirmatory of “other evidence in the record that
indicates that Title II affected broadband investment.” Id. So
here too we find IA’s criticism of Free State’s calculation, see
IA Br. 23–24, to a large extent blunted by the Commission’s
having already discounted it. To be sure, the IA asserts a more
intense level of skepticism, indeed an Olympian level, calling
“attempts to identify and quantify direct causal impacts of the
[Title II Order]” an “essentially * * * pointless exercise.” IA
Br. 18 (citation omitted). The takeaway here is both that
Petitioners’ skepticism is echoed in the 2018 Order and that
some commenters seem to set the bar so high that no empirical
grounds relating to the Title II Order’s effects on ISP
investment could support (or refute) the Commission’s policy.
The parties spar at length over a paper by George Ford at
the Phoenix Center, which had shown that then-FCC Chairman
Julius Genachowski’s “surprise[]” announcement in 2010 of a
“framework for reclassifying broadband under Title II * * *
was associated with a $30 billion-$40 billion annual decline in
investment in” the United States Bureau of Economic
79
Analysis[’s] ‘broadcasting and telecommunications’ category
between 2011 and 2015.” 2018 Order ¶ 95 & n.353. Again
we note that the Commission was fairly modest in its reliance
on the study, observing that because it had used data
“cover[ing] the entire broadcasting and telecommunications
industries,” it could only be reliably adduced as evidence of the
directionality of broadband investment, not “the absolute size
of the change” attributable to the Title II Order. 2018 Order
¶ 95.
IA (perhaps applying the lofty standard by which it
discounted any effort to estimate the effect of the Title II Order
on investment as “essentially a pointless exercise”) still regards
the Commission as having placed undue weight on this result
while underweighting a competing study by Christopher
Hooton that it had proffered. See J.A. 1178–1222. The Hooton
study had criticized Dr. Ford’s work, see J.A. 1184, and elicited
a reply, see 2018 Order ¶ 97 n.360; see also IA Br. 24–25;
Phoenix Ctr. Amicus Br. 18–25.
The Ford-Hooton dispute seems far too sophisticated for
us to credibly take sides. When intricacies of econometric
modeling are in dispute, “we do not sit as a panel of referees
on a professional economics journal, but as a panel of
generalist judges obliged to defer to a reasonable judgment by
an agency acting pursuant to congressionally delegated
authority.” USTA, 825 F.3d at 697 (quoting City of Los
Angeles v. United States Dep’t of Transp., 165 F.3d 972, 978
(D.C. Cir. 1999)). One issue suggests the impenetrability of
the matter from our perspective. The IA brief is very insistent
that the Commission unfairly criticizes the Hooton study for
relying “partially on forecast [data] rather than actual data,”
Commission Br. 83 (quoting 2018 Order ¶ 97), while failing to
complain of comparable methodologies in its own favored
studies, see IA Br. 19; IA Reply Br. 9–11.
80
Maybe so, maybe not. Perhaps the methodological dispute
will ultimately attract scholarly attention and be sorted out
persuasively on one side or the other. It seems likely that many
variables would be relevant in assessing when reliance on
forecasts would be justifiable, and—in cases where it was
not—assessing whether the reliance was of any real
consequence. But we are not the needed scholars, and will not
pretend we understand more than we do. Perhaps Hooton wins
on points. That is an insufficient ground for us to call the
Commission’s finding unreasonable.
Next Mozilla quotes remarks by two chief executive
officers of ISPs that it believes “offer[] much more probative
evidence on the effect of the [Title II] Order on investment
decisions.” Mozilla Br. 70; see IA Br. 21–22. But those
statements seem to match exactly one of the grounds on which
the Commission found such statements generally irrelevant to
the investment-effect issue, namely that the executives were
saying only that their firms’ practices would not be affected
because they were not engaged in the conduct prohibited by the
new rules. See 2018 Order ¶ 102 & nn.384–385; R Street
Institute Reply at 8, WC Dkt. No. 17-108 (Aug. 30, 2017); see
also Commission Br. 83. Petitioners do not address these
points. See Mozilla Br. 69–70; IA Br. 22; see also Mozilla
Reply Br. (failing to address reduced investment).
Indeed, one of the CEOs whose December 2015 remarks
Mozilla highlights, Randall Stephenson of AT&T, Mozilla Br.
70 (quoting J.A. 881), said in January 2017 that, while his
company is an “advocate[] of net neutrality,” “[t]here is no way
anybody can argue” that “placing utility[-]style regulation on
our mobility and internet businesses * * * is not suppressive to
investment,” Georgetown Ctr. for Bus. and Pub. Policy Amicus
Br. 6; see also AT&T Comments at 54 n.91, J.A. 170, a
distinction that echoes the FCC’s contrast between a
81
commitment to “net neutrality per se” and “the threat of Title
II regulation,” 2018 Order ¶ 95.
We now turn to IA’s claims that the Commission gave
short shrift to benefits for edge investment arising from the
Title II Order. IA Br. 25–27. We are unconvinced. While
agreeing that it is critical not to overlook effects on edge
providers, the Commission found no evidence of either (1) “a
correlation between edge provider investment and Title II
regulation” or (2) a “causal relationship” between the Title II
Order and upswings in edge investment, which would need to
be demonstrated using a counterfactual analysis of the sort
employed on other matters in Hazlett and Wright’s paper. 2018
Order ¶ 107. Without claiming that edge investment would
have been higher absent the Title II Order, the Commission
pointed to data suggesting that “the strongest growth” for
certain edge providers and segments of the industry “predate[d]
the Title II Order.” Id. ¶ 108.
First, IA alleges a double standard as to the above: The
Commission sets a high bar to show causal links between edge
investment and the Title II Order while settling for less
exacting standards in finding that the Title II Order likely hurt
ISP investment. IA Br. 26. But we have already said that the
agency drew reasonable, and appropriately qualified,
conclusions on the latter issue. Second, IA says it is ironic that
the Commission asks for counterfactual analysis while putting
stock in the (allegedly) flawed Ford study. Id. Without
touching on the Ford-Hooton debate, we simply note that IA is
silent as to Hazlett and Wright’s methodology for running
counterfactual analyses, which the Commission treated as
reliable—and without any equivalent as to edge providers in
these proceedings. 2018 Order ¶ 107. Third, IA says the
Commission flouts Fox Television by ignoring the Title II
Order’s claim that edge innovation “depends upon low barriers
82
to innovation and entry,” IA Br. 26–27 (quoting Verizon, 740
F.3d at 645 (quoting, in turn, Title II Order ¶ 14)). Here IA
begs the question. The thrust of the 2018 Order is that edge
investment will benefit on net from unburdening ISPs of
“onerous utility regulation.” 2018 Order ¶ 110. The
Commission argues, inter alia, that (1) the Title II Order failed
to take a properly “holistic view of the market(s) supplied by
ISPs,” and that “net gains to subscribers and edge providers,”
id. ¶ 119 (emphasis added), are best achieved without “heavy-
handed” Title II rules, id. ¶ 117; see also id. ¶¶ 120–121; (2)
“smaller edge providers may benefit from tiered pricing, such
as paid prioritization, as a means [both] of gaining [market]
entry,” id. ¶ 133, and “compet[ing] on a more even playing
field against large edge providers,” id. ¶ 255; (3) “ending the
flat ban on paid prioritization will encourage the entry of new
edge providers into the market, particularly those offering
innovative forms of service differentiation and
experimentation,” id.; see also id. at n.921 (reasoning that
“encourag[ing] differentiated services is important because
some online activities require only a minimal amount of
bandwidth but extremely low latency; other uses may require
greater bandwidth” (quoting Ericsson Comments at 5, WC Dkt.
No. 17-108 (July 17, 2017)); and (4) transparency rules,
coupled with ISPs’ economic incentives, can protect “Internet
openness,” ¶ 117; see also id. ¶ 142. Putting aside the merits
of these claims, which we address elsewhere, we do not find
that the Commission’s take on edge investment at Paragraphs
107–108 of the 2018 Order is either arbitrary or in conflict with
Fox Television.
IA also alleges that the Commission failed to grapple
properly with the Title II Order’s prediction of a possible short-
term downturn in investment, only touching cursorily on it at
Paragraph 247. See Title II Order ¶ 410; see also IA Br. 28 &
n.11. But the Commission, noting “that the vague Internet
83
Conduct Standard [of the Title II Order] subjects providers to
substantial regulatory uncertainty,” 2018 Order ¶ 247,
expressed doubt that this uncertainty was “likely to be short
term and [would] dissipate over time as the marketplace
internalizes [the] Title II approach,” id. (second alteration in
original) (quoting Title II Order ¶ 410).
Finally, Petitioners appear to believe that the Commission
arbitrarily downweighted a study, Robert W. Crandall, The
FCC’s Net Neutrality Decision and Stock Prices, 50 Rev.
Indus. Org. 555 (2017), finding that, despite release of the Title
II Order in March 2015, there had been no decline in the stock
prices of BIAS providers in the first half of 2015 relative to the
stock market generally. Mozilla Br. 70–71; see 2018 Order
¶ 93 n.346. (We note that the study relates only indirectly to
the issue of investment, although both derive from market
anticipations of future profit.) The agency had commented that
the study “may reflect the forward-looking, predictive
capabilities of market players.” 2018 Order ¶ 93 n.346. In its
brief before us the Commission confirms what an ordinary
reader would likely have made of that remark, namely, that the
market would have factored into the stock price investors’
expectations of the ultimate Commission action before it
occurred. Commission Br. 84 n.23. Anticipating this reading,
Petitioners see it as unreasonable, because it is tantamount to
using a “crystal ball, since reclassification was not the
preferred course announced by the Commission in the 2014
NPRM [¶ 148].” Mozilla Br. 71; see In re Protecting and
Promoting the Open Internet, 29 FCC Rcd. 5561, 5612–5613
¶ 148 (“2014 NPRM”).
Curiously, we have already opined on Paragraph 148 of
the 2014 NPRM for the Title II Order. In USTA we addressed
United States Telecom’s claim that because the NPRM
proposed to rely on Section 706 there was inadequate notice of
84
its ultimate use of Title II. We batted that out of the park in
one sentence, citing Paragraph 148’s call for comment on
possible use of Title II, USTA, 825 F.3d at 700, a call that the
Commission in fact proliferated in seven additional paragraphs
bursting with minutiae about the use of Title II, see 2014
NPRM ¶¶ 149–155. Moreover the May 2014 NPRM made
clear the Commission’s plan to impose new rules on industry.
See, e.g., id. ¶ 24. (“Today, we respond directly to that remand
[Verizon, 740 F.3d at 659] and propose to adopt enforceable
rules of the road * * * to protect and promote the open
Internet.”). Strikingly, United States Telecom’s claim of
inadequate notice did not suggest that the NPRM left it in the
dark on a single rule adopted in the Title II Order. USTA, 825
F.3d at 700.
We should add that the disputed Crandall article takes no
explicit note of the 2014 NPRM (though its charts suggest an
absence of any stock movement associated with it). See
Crandall, The FCC’s Net Neutrality Decision and Stock Prices,
50 Rev. Indus. Org. at 661 Figs. 1 & 2. Reading the article as
finding no stock price impact from the whole course of events,
however, does not ipso facto undermine the Commission’s
inference of a probable reduction in investment, as that
reduction might reflect firms’ strategies for minimizing the
Title II Order’s anticipated economic impact by reallocating
capital to other, similarly productive, uses, thereby keeping
stock prices mostly unaffected.
In sum, we stress again the Commission’s recognition that
the Title II Order’s effect on investment was subject to honest
dispute, focusing in Paragraphs 87–98 on what is “likely” to
happen, repeatedly flagging shortcomings in studies it cites,
and qualifying their probative force. It found modestly that
“[t]he balance of the evidence in the record suggests that Title
II classification has reduced ISP investment in broadband
85
networks.” 2018 Order ¶ 88. Further, claims about the Title
II Order’s effects on investment are only one element of the
Commission’s basis for believing that reclassification will
yield positive economic effects. We are, in short, unpersuaded
by Petitioners’ and Intervenors’ objections to the
Commission’s finding and their implicit claim that
uncertainties associated with that finding render arbitrary the
Commission’s overall judgment—that there are net public
policy benefits from reclassification, based not only on a
likelihood of increased investment and innovation but also on
the absence of any “discernable incremental benefit relative to
Title I classification.” Id. ¶ 87. This court “properly defers to
policy determinations invoking the [agency’s] expertise in
evaluating complex market conditions.” Gas Transmission
Nw. Corp. v. FERC, 504 F.3d 1318, 1322 (D.C. Cir. 2007).
B. Harms to Edge Providers and Consumers
Petitioners emphasize that, historically, the “FCC has
repeatedly found that [broadband providers] have the ability
and incentive to harm edge providers and consumers.” See
Mozilla Br. at 62 (citing 2010 Order ¶ 21 and Title II Order
¶ 20). According to Petitioners, the Commission ignored these
prior findings when it issued the 2018 Order. Under Fox
Television, when an agency changes its policy “a reasoned
explanation is needed for disregarding facts and circumstances
that underlay or were engendered by the prior policy.” 556
U.S. at 515–516. While “[a]n agency cannot simply disregard
contrary or inconvenient factual determinations that it made in
the past, any more than it can ignore inconvenient facts when it
writes on a blank slate,” Id. at 537 (Kennedy, J., concurring),
such is not the case here.
The Commission reasonably concluded that the harms the
Title II Order was designed to prevent did not require the prior
86
Order’s regulatory measures but could instead be mitigated—
at a lower cost—with transparency requirements, consumer
protection, and antitrust enforcement measures. Even if the
conduct rules lead to marginal deterrence, the Commission
determined that the “substantial costs” are “not worth the
possible benefits.” 2018 Order ¶ 245; see also id. ¶¶ 240–266.
In arriving at this conclusion, the Commission “scrutinize[ed]
closely each prior conduct rule.” 2018 Order ¶ 239. Rather
than ignoring its prior findings, the Commission changed its
balancing of the relevant incentives. The Commission
employed a different method to address its previous concerns
regarding broadband providers’ behavior and incentives. In so
doing, the Commission provided a “reasoned explanation” for
its changed view as required by Fox.
We are, however, troubled by the Commission’s failure to
grapple with the fact that, for much of the past two decades,
broadband providers were subject to some degree of open
Internet restrictions. For example, from the late 1990s to 2005,
Title II applied to the transmission component of DSL service.
Title II Order ¶ 313. Even after the Commission issued the
2005 Wireline Broadband Order, which classified DSL as an
integrated information service and thus further removing it
from Title II’s ambit, the Commission announced that should
it “see evidence that providers of telecommunications for
Internet access or IP-enabled services are violating” the Internet
Policy Statement, which reflected Chairman Michael Powell’s
four principles of Internet openness, it would “not hesitate to
take action to address that conduct,” id. at 14904 ¶ 96. In 2015,
the Commission also claimed that “Title II has been maintained
by more than 1000 rural local exchange carriers that have
chosen to offer their DSL and fiber broadband services as
common carrier offerings.” Title II Order ¶ 39. The
Commission’s failure to acknowledge this regulatory history,
however, does not provide grounds for reversal on this record
87
given its view that market forces combined with other
enforcement mechanisms, rather than regulation, are enough to
limit harmful behavior by broadband providers.
Petitioners dispute that the transparency rule, market
forces, or existing antitrust and consumer protection laws can
adequately protect Internet openness. The Commission’s
conclusion to the contrary, they argue, was arbitrary and
capricious. We consider Petitioners’ attack on components of
the light-touch regime but are ultimately unpersuaded.
1. Reliance on the Transparency Rule
The Commission, in large part, undergirds its light-touch
regime with its finding that the transparency rule’s disclosure
requirements will discourage broadband providers from
engaging in harmful practices. 2018 Order ¶ 209.
Specifically, the Commission reasoned that public disclosure
requirements would encourage broadband providers to abide
by open Internet principles and “incentivize[] quick corrective
measures by providers if problematic conduct is identified.”
Id.; see also id. ¶ 217. Disclosure could help ensure that “those
affected by such conduct will be in a position to make informed
competitive choices or seek available remedies for
anticompetitive, unfair, or deceptive practices.” Id. ¶ 217. But
Petitioners contend that the Commission’s reliance on the
transparency rule was unreasonable because “[d]isclosure does
little for consumers with no practical alternatives.” Mozilla Br.
55. We disagree and find that the Commission offered a
reasonable justification for the transparency rules. Since the
Commission first adopted a transparency rule in 2010, “almost
no incidents of harm to Internet openness have arisen.” 2018
Order ¶ 242; see also id. ¶ 241. Based on this record, the
Commission concluded that “public scrutiny and market
pressure” is an effective “disinfectant” and leads to
88
“increasingly fast [broadband provider]-driven resolution[s]”
when issues do arise. Id. ¶ 243. Beyond its claim that the
transparency rule does not go far enough to protect some
consumers, Petitioners offer no more elaborate reason for
explaining how the Commission’s reliance on disclosure was
impermissible. Seeing none, we reject Petitioners’ arbitrary-
and-capricious challenge.
2. Reliance on Competition
Petitioners contend that the Commission acted arbitrarily
and capriciously in changing its view about the magnitude of
competitive pressures in the fixed broadband market. Recall,
the “premise of Title II and other public utility regulation is that
[broadband providers] can exercise market power sufficient to
substantially distort economic efficiency and harm end users.”
2018 Order ¶ 123. But in the most recent order, the
Commission concluded that “fixed broadband Internet access
providers frequently face competitive pressures that mitigate
their ability to exert market power.” 2018 Order ¶ 217.
Petitioners responded with three arguments, none of which we
find surmount the highly deferential standard of review.
First, Petitioners claim that the Commission arbitrarily
accepted a lack of competition in the fixed broadband market.
For example, Petitioners lament that almost half of Americans
have either one or no choice for residential high-speed wireline
broadband providers (download speeds of 25 Mbps and higher
and upload speeds of 3 Mbps and higher). Another 45 percent
have only two high-speed wireline options. Despite this
information, the Commission concludes that competition is
“widespread.” 2018 Order ¶ 125.
As part of its overall argument, the Commission suggests
that “fixed satellite and fixed terrestrial wireless Internet access
providers” exert “some pressure on [broadband] providers.”
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2018 Order at ¶ 125. When considering this wider range of
providers, the Commission estimates that 43.9 percent of all
Americans have a choice of three or more providers offering
high-speed broadband (download speeds of 25 Mbps and
upload speeds of 3Mbps and higher), and about 95 percent
have a choice of three or more providers offering slower
speeds. Id. ¶ 124. But the Commission’s own discussion makes
clear the limited conclusions these figures can support as to
competition in wireline services. First, the Commission
acknowledges that fixed satellite and fixed terrestrial wireless
Internet access service may not be “broadly effective
competitors.” Id. ¶ 125. So, at best, we can only anticipate that
“these services, where available, place some competitive
constraints on wireline providers.” Id. (emphasis added).
Second, the Commission “make[s] no finding as to whether
lower speed fixed Internet access services are in the same
market as higher speed fixed Internet access services.” Id.
¶ 124 n.454. Taken together, the Commission fails to provide
a fully satisfying analysis of the competitive constraints faced
by broadband providers.
We are, however, satisfied by the Commission’s other
reasons for believing that competition exists in the broadband
market. The Commission turns to empirical research that
supports the claim that the presence of two wireline providers
is enough to ensure that meaningful competition exists. Id.
¶ 126. Consumers in areas with fewer than two providers may
also reap the benefits of competition; a provider in this area
“will tend to treat customers that do not have a competitive
choice as if they do” because competitive pressures elsewhere
“often have spillover effects across a given corporation.” Id.
¶ 127. Additionally, these providers could face hefty
operational and reputational cost from acting badly in
uncompetitive areas. Id. Based on these reasonable findings
and our highly deferential standard of review, it was not
90
arbitrary for the Commission to conclude that fixed broadband
providers face competitive pressures.
Second, Petitioners worry that even if there is competition
in the local market for broadband, once a consumer chooses a
broadband provider, that provider has a monopoly on access to
her. In turn, the provider can use that access to control the
interaction between edge providers, end users, and others. The
Title II Order took this “terminating access monopoly” concern
seriously and found that it enabled broadband providers of all
types and sizes to raise prices. Petitioners claim that the
Commission’s 2018 Order shifts from this previous position
without explanation. This is not so.
The Commission offered several reasons for rejecting its
prior finding of a terminating monopoly. For example, it notes
that many customers can access edge provider’s content from
multiple sources (i.e., fixed and mobile). See 2018 Order
¶ 136. In this way, there is no terminating monopoly. Id.
Additionally, the Commission argued that even if a terminating
monopoly exists for some edge providers the commenters did
not offer sufficient evidence in the record to demonstrate that
the resulting prices will be inefficient. Id. ¶ 137. Given these
reasons, we reject Petitioners’ claim that the Commission’s
conclusion on terminating monopolies is without explanation.
Third, Petitioners argue that the Commission disregards its
previous determination that broadband provider market power
is strengthened by the high costs of switching broadband
providers. The Title II Order found that, when switching
providers, “consumers may experience []: high upfront device
installation fees; long-term contracts and early termination
fees; the activation fee when changing service providers; and
compatibility costs of owned equipment not working with the
new service.” Title II Order ¶ 81. However, the Commission’s
91
most recent order was skeptical of whether the rate of
consumers changing providers — the “churn” rate — is as low
as it previously found. See 2018 Order ¶ 128. More
importantly, the Commission contends that low churn rates do
not per se indicate market power. See id. Instead, they could
be a function of competitive actions taken by broadband
providers to attract and retain customers. See id. And such
action to convince customers to switch providers, the
Commission argues, is indicia of material competition for new
customers. See id. This rationale provides a reasoned
explanation for departing from prior findings on churn rates
and broadband provider market power.
3. Reliance on Antitrust and Consumer Protection
Laws
The Commission found that “[i]n the unlikely event that
ISPs engage in conduct that harms Internet openness,” legal
regimes like “antitrust law and the FTC’s authority under
Section 5 of the FTC Act to prohibit unfair and deceptive
practice” will provide protection for consumers. See 2018
Order ¶ 140. The Commission reasoned that antitrust and
consumer protection laws are particularly well-suited to
addressing openness concerns because “they apply to the whole
of the Internet ecosystem, including edge providers, thereby
avoiding tilting the playing field against ISPs and causing
economic distortions by regulating only one side of business
transactions on the Internet.” Id. Petitioners argue that reliance
on antitrust and consumer protection law was an improper
delegation of authority. We disagree.
Petitioners’ argument relies on Section 706, which directs
“[t]he Commission” to “encourage the deployment” of
broadband, 47 U.S.C. § 1302(a) (emphasis added), and Section
1 of the Communications Act, which likewise directs the FCC
92
to make rapid and efficient communications services available
to all, id. § 151. According to Petitioners, these mandates mean
that the Commission may not “delegate” fundamental
questions of national telecommunications policy to the
Department of Justice and the Federal Trade Commission.
Petitioners liken this case to Local 1976, United
Brotherhood of Carpenters & Joiners v. NLRB, 357 U.S. 93(1958), where the Supreme Court held that an agency may not
“abandon an independent inquiry into the requirements of its
own statute and mechanically accept standards elaborated by
another agency under a different statute for wholly different
purposes.” Id. at 111. But the Commission has not
“mechanically accept[ed] the standards” of other laws as
satisfying its own. Instead, it has conducted an independent
assessment of the degree of problematic conduct that has been
and will be committed by broadband providers and whether, as
a policy matter, the benefits of restricting that conduct
outweigh the costs. A reasonable piece of that policy-making
puzzle, then, is an assessment of other regulatory regimes that
might already limit the conduct in question. Therefore, it was
not impermissible for the Commission to recognize that the
Department of Justice and Federal Trade Commission have the
ability to police blocking and throttling practices ex post.
To be sure, the Commission’s discussion of antitrust and
consumer protection law is no model of agency
decisionmaking. The Commission theorized why antitrust and
consumer protection law is preferred to ex ante regulations but
failed to provide any meaningful analysis of whether these laws
would, in practice, prevent blocking and throttling. For
example, the Commission opines that “[m]ost of the examples
of net neutrality violations discussed in the Title II Order could
have been investigated as antitrust violations,” see 2018 Order
¶ 145, but fails to explain what, if any, concrete remedies might
93
address these antitrust violations. It is concerning that the
Commission provides such an anemic analysis of the safety
valve that it insists will limit anticompetitive behavior among
broadband providers. Nonetheless, we cannot go so far as to
say that this failure is so profound that the agency “entirely
failed to consider an important aspect of the problem,” State
Farm, 463 U.S. at 43, or otherwise engaged in unreasoned
decisionmaking. That is especially true because the
Commission viewed those laws as only one part of a larger
regulatory and economic framework that it believes will limit
broadband providers’ engagement in undesirable practices.
The Commission barely survives arbitrary and capricious
review on this issue.
C. Public Safety
The Governmental Petitioners challenge as arbitrary and
capricious the Commission’s failure to consider the
implications for public safety of its changed regulatory posture
in the 2018 Order. And they are right.
Congress created the Commission for the purpose of,
among other things, “promoting safety of life and property
through the use of wire and radio communications.” 47 U.S.C.
§ 151. So the Commission is “required to consider public
safety by * * * its enabling act.” Nuvio Corp. v. FCC, 473 F.3d
302, 307 (D.C. Cir. 2006); see also 47 U.S.C. § 615 (The
Wireless Communication and Public Safety Act of 1999, Pub.
L. No. 106–81, § 3, 113 Stat. 1286, 1287, directs the
Commission to “encourage and support efforts by States to
deploy comprehensive end-to-end emergency communications
infrastructure and programs” and to “consult and cooperate
94
with State and local officials responsible for emergency
services and public safety.”).
An agency’s failure to consider and address during
rulemaking “an important aspect of the problem” renders its
decision arbitrary and capricious. State Farm, 463 U.S. at 43.
A “statutorily mandated factor, by definition, is an important
aspect of any issue before an administrative agency, as it is for
Congress in the first instance to define the appropriate scope of
an agency’s mission.” Public Citizen v. Federal Motor Carrier
Safety Admin., 374 F.3d 1209, 1216 (D.C. Cir. 2004); accord
Lindeen v. SEC, 825 F.3d 646, 657 (D.C. Cir. 2016) (“A rule
is arbitrary and capricious if an agency fail[s] to consider * * *
a factor the agency must consider under its organic statute.”)
(internal quotation marks omitted). When, as here, “Congress
has given an agency the responsibility to regulate a market such
as the telecommunications industry that it has repeatedly
deemed important to protecting public safety,” then the
agency’s decisions “must take into account its duty to protect
the public.” Nuvio, 473 F.3d at 307.
A number of commenters voiced concerns about the threat
to public safety that would arise under the proposed (and
ultimately adopted) 2018 Order. Specifically, public safety
officials explained at some length how allowing broadband
providers to prioritize Internet traffic as they see fit, or to
demand payment for top-rate speed, could imperil the ability
of first responders, providers of critical infrastructure, and
members of the public to communicate during a crisis.
Santa Clara County, for example, explained that the 2018
Order would have a “profound negative impact on public
welfare, health, and safety” communications. J.A. 3332. The
County and its fire department have implemented new,
Internet-based services that depend on community members’
95
speedy and unimpeded access to broadband Internet. “For
example, the County’s virtual Emergency Operations Center,
used by the County and County Fire to coordinate crisis
response, relies on contributors’ access to the internet on
nondiscriminatory terms.” J.A. 3333; see also J.A. 3338
(describing an Internet-based system that allows emergency
personnel to log in through “a web interface and populate,
monitor, and act on situational data”); id. (describing a critical
“web-based public alert system” that “provides immediate
contact with members of the public via email, text, or phone on
matters such as evacuation or shelter-in-place orders, fires,
unhealthy air quality, and excessive heat warnings”).
Similarly, the California Public Utility Commission
warned that the 2018 Order could “profoundly impair[]” the
ability of state and local governments “to provide
comprehensive, timely information to the public in a crisis.”
J.A. 259. Catherine Sandoval, former Commissioner of the
California Public Utilities Commission, J.A. 2481, noted that
the Utility Commission authorized energy utility companies to
expend taxpayer funds on Internet-based “demand response
programs” that are “activated during times of high demand, or
when fire or other emergencies make conservation urgent,” and
“call on people and connected devices to save power.” J.A.
2514–2515. Pacific Gas and Electric, for example,
implemented a “gas detection box that uses readily available
[geographic information systems] platforms and tablets” in the
wake of an earthquake to “quickly survey * * * damaged areas
and identify and prioritize work to address gas leaks.” J.A.
2511. And the California Department of Forestry and Fire
Protection “depends on broadband access, speed, and
reliability” in order to “track fire threats, fires, and manage
forests and vegetation” to prevent fires. J.A. 2530–2531.
96
Any blocking or throttling of these Internet
communications during a public safety crisis could have dire,
irreversible results. “[E]ven if discriminatory practices might
later be addressed on a post-hoc basis by entities like the
Federal Trade Commission,” the harm to the public “cannot be
undone.” J.A. 3333.
On appeal, the Governmental Petitioners attempt to
supplement their record comments with documentation of an
incident involving the (apparently accidental) decision by
Verizon to throttle the broadband Internet of Santa Clara
firefighters while they were battling a devastating California
wildfire. “To ensure that we review only those documents that
were before the agency, we do not allow parties to supplement
the record unless they can demonstrate unusual circumstances
justifying a departure from this general rule.” District Hosp.
Partners v. Burwell, 786 F.3d 46, 55 (D.C. Cir. 2015) (internal
quotation marks omitted). Unusual circumstances will be
found where (i) “[t]he agency deliberately or negligently
excluded documents,” (ii) “the district court needed to
supplement the record with ‘background information’ in order
to determine whether the agency considered all of the relevant
factors,” or (iii) “the agency failed to explain administrative
action so as to frustrate judicial review.” American Wildlands
v. Kempthorne, 530 F.3d 991, 1002 (D.C. Cir. 2008).
The throttling incident involving the Santa Clara
firefighters occurred in June 2018, six months after the 2018
Order was issued. Yet, the Governmental Petitioners have
made no attempt to demonstrate the type of unusual
circumstances that would allow this court to consider that post-
Order evidence. Therefore, we decline to consider it.
Even without that evidence, though, the direct and specific
comments by Santa Clara County, former California Public
97
Utility Commissioner Sandoval, and others repeatedly raised
substantial concerns about the Commission’s failure to
undertake the statutorily mandated analysis of the 2018 Order’s
effect on public safety.2
In fact, the Commission does not dispute that it was
obligated to consider public safety. Nor does it claim that it
specifically addressed public safety in its 2018 Order. Instead,
the Commission offers two defenses. The Commission argues
that the June 2018 incident with Verizon demonstrates that
light-touch rules promote public safety because, in response to
the negative public reaction to its throttling practice, Verizon
introduced a new plan for public safety customers. The
Commission also reasons that the Governmental Petitioners’
concerns “about government services are issues that apply to
all edge providers, public and private.” Commission Br. 95.
Those arguments are too little, too late.
First, the argument about Verizon’s response was not
made in the 2018 Order to explain the Commission’s bypassing
of the required public-safety analysis. In fact, it was not made
at all because, as noted, this incident postdated the final 2018
Order by half a year. Just as we will not expand the record to
consider documentation about Verizon’s decision to throttle
the Santa Clara County Fire Department after the 2018 Order
2
Most of Santa Clara County’s comments appear to have been
made outside the comment window. However, the Commission has
not suggested that those comments are untimely. Therefore, it has
itself forfeited any forfeiture challenge to Santa Clara County’s
arguments. See National Corn Growers Ass’n v. EPA, 613 F.3d 266,
275 (D.C. Cir. 2010) (considering letter where EPA did not suggest
until oral argument that it was untimely); BNSF Ry. Co. v. Surface
Transp. Bd., 604 F.3d 602, 611 (D.C. Cir. 2010) (“[A] forfeiture can
be forfeited by failing on appeal to argue an argument was
forfeited.”).
98
was issued, we will not consider the public statements made by
Verizon in response to that controversy. Under the
Administrative Procedure Act as elsewhere, what is good for
the goose is good for the gander.
Nor, for that matter, will we consider arguments about
those statements’ relevance to the 2018 Order surfaced for the
first time on appeal. “[C]ourts may not accept appellate
counsel’s post hoc rationalization for agency action,” because
longstanding Supreme Court precedent “requires that an
agency’s discretionary order be upheld, if at all, on the same
basis articulated in the order by the agency itself.” Temple
Univ. Hosp. v. NLRB, 929 F.3d 729, 734 (D.C. Cir. 2019)
(quoting Erie Brush & Mfg. Corp. v. NLRB, 700 F.3d 17, 23
(D.C. Cir. 2012)); see SEC v. Chenery Corp., 332 U.S. 194,
196 (1947).
Second, the Commission did not claim in the 2018 Order
that the public safety issues raised by the Governmental
Petitioners could be ignored because they were redundant of
the arguments made by edge providers. Therefore, the
Commission’s argument is an off-limits post hoc
rationalization. See Temple Univ. Hosp., 929 F.3d at 734.
And the argument is facially inadequate to boot. The
Commission’s after-the-fact reasoning entirely misses the fact
that, whenever public safety is involved, lives are at stake. As
noted by Santa Clara County, unlike most harms to edge
providers incurred because of discriminatory practices by
broadband providers, the harms from blocking and throttling
during a public safety emergency are irreparable. People could
be injured or die. See J.A. 3333; see also Hawkins v. Defense
Logistics Agency of the Dep’t of Defense, 99 F.3d 1149 (Table),
*1 (10th Cir. 1996) (using imminent threat of death as an
example of irreparable harm); New York v. Sullivan, 906 F.2d
99910, 918 (2d Cir. 1990) (finding irreparable harm when the
“[d]enial of benefits potentially subjected claimants to
deteriorating health, and possibly even death”).
Apparently recognizing the problem, the Broadband
Intervenors United States Telecom, et al. try a different tack.
They argue that—unbeknownst even to the Commission
itself—the 2018 Order did consider public safety. The four
references that the Broadband Intervenors cite do not hold up.
First, the Broadband Intervenors claim that the
Commission found “‘scant evidence’ of threats to public
safety.” Broadband Br. 37 (citing 2018 Order ¶ 265 & n.978).
What the Commission actually found is that there was “scant
evidence that end users, under different legal frameworks, have
been prevented by blocking or throttling from accessing the
content of their choosing.” 2018 Order ¶ 265. No mention of
public safety.
Second, the Broadband Intervenors say the 2018 Order
allowed that States “could continue to play their vital role” in
advancing public safety. Broadband Br. 37 (citing 2018 Order
¶ 196 & n.737). Not quite. The full quote was that States “will
continue to play their vital role in protecting consumers from
fraud, enforcing fair business practices, for example, in
advertising and billing, and generally responding to consumer
inquiries and complaints.” 2018 Order ¶ 196. While
important, those topics are not about public safety.
Third, the Broadband Intervenors point to the
Commission’s conclusion that national security objections to
the 2018 Order were vague and unsubstantiated. Broadband
Br. 37 (citing 2018 Order ¶ 258 n.943). But that Commission
statement was made in reference to a comment in the record
about “a September 11-type of failure of imagination about
risks to America’s national security and democracy.” 2018
100
Order ¶ 258 n.943. That narrow and isolated response says
nothing about the multi-faceted public safety concerns
associated with subjecting emergency services providers, other
public health providers, and the members of the public who
depend on those services to paid prioritization and blocking
and throttling.
Finally, the Broadband Intervenors note the Commission’s
conclusion that “any remaining unaddressed harms” were
“small relative to the costs of implementing more heavy-
handed regulation.” Broadband Br. 37 (citing 2018 Order
¶ 116). That Rorschachian speculation is hardly the focused
and specific study of public safety implications that the law
requires.
The Commission’s disregard of its duty to analyze the
impact of the 2018 Order on public safety renders its decision
arbitrary and capricious in that part and warrants a remand with
direction to address the issues raised.
D. Reliance Interests
Both sets of Petitioners argue that the Commission paid
too little heed to the reliance that various parties—particularly
edge providers and state and local governments—allegedly
placed on the Title II Order in making investments that
Petitioners see as jeopardized by the Commission’s action
here. See Mozilla Br. 71–72; Governmental Pet’rs’ Br. 29–32.
The Commission acknowledged, as it must, the significance of
reliance interests as a potential weight against its decision, see
2018 Order ¶ 159; cf. Fox Television, 556 U.S. at 515–516;
Mingo Logan Coal Co. v. EPA, 829 F.3d 710, 718–719 (D.C.
Cir. 2016), but found the submissions wanting. It argues first
that parties have not established any reliance to begin with, for
lack of any “attempt to attribute particular portions of th[eir]
investment to any reliance on the Title II Order.” 2018 Order
101
¶ 159; see also id. at n.588 (quoting comment observing that
the complainants had not “provide[d] any empirical basis for
speculating that edge investment since 2015 would have been
substantially lower in the absence of Title II regulation”).
Second, even if reliance had been shown, the Commission
maintains that it would not have been reasonable under the
circumstances. Id. ¶ 159.
As to the Commission’s first argument, the issue is
whether the Commission was arbitrary or capricious in finding
that there were no serious reliance interests attributable to the
Title II Order because it was not convinced that edge providers’
investments in the time since the Title II Order had been made
in reliance on that order. We lack adequate briefing on the
issues we would need to settle here, including what findings an
agency must make to support a conclusion that serious reliance
interests do not exist in the first place—issues that neither the
Supreme Court, see Encino Motorcars, LLC v. Navarro, 136 S.
Ct. 2117 (2016); Fox Television, 556 U.S. at 515–516, nor our
circuit has resolved. Given as much, and in light of the
availability of other grounds for decision, we will not pass on
the Commission’s first argument. Rather, we will uphold the
agency’s treatment of reliance interests based on its alternative
argument. That is, assuming the change in agency position
implicated serious reliance interests, we agree with the
Commission that such reliance would have been unreasonable
on the facts before us.
Besides noting the record’s loose link between investment
and particular rules, the Commission says that it was not
persuaded that any “such reliance would have been reasonable
in any event, given the lengthy prior history of information
service classification of broadband Internet access service,
which we are simply restoring here after the brief period of
departure initiated by the Title II Order.” 2018 Order ¶ 159.
102
Insofar as the regulation on which reliance is asserted is
simply the Title II Order’s package of rules and policies, we
think this is a fair response. First, the 2015 rules had been in
effect “barely two years before the Commission proposed to
repeal them,” a limited period to engender reliance.
Commission Br. 92–93; see 2018 Order ¶ 159 (referring to a
“brief period of departure” from the prior classification policy
“initiated by the Title II Order”); see also Encino Motorcars,
136 S. Ct. at 2126 (describing “decades of industry reliance on
the Department’s prior policy”); USTA, 825 F.3d at 709–710
(crediting 2015 Commission’s rebuttal to Petitioners’ asserted
reliance interests on the basis that “just five years after Brand
X” the Commission sought comments on reclassifying
broadband). Second, in light of the Commission’s approach to
classifying cable modem service and Internet access since the
late 1990s, the Title II Order could reasonably have been
viewed as a regulatory step that might soon be reversed. See
2018 Order ¶ 159 (referring to “lengthy prior history of
information service classification of broadband Internet access
service”).
In its brief before us, the Commission adds a third point.
In the two-year period between the Title II Order and the
Commission’s announcement of its intention to return to prior
policies, the Title II Order faced persistent legal challenges.
Commission Br. 93. (Indeed, certiorari on the legal assaults
was denied only on November 5, 2018, see, e.g., United States
Telecom Ass’n v. FCC, 139 S. Ct. 475 (2018), after issuance of
the 2018 Order itself, with three Justices dissenting from denial
of certiorari, id.) Any reliance on the rules of the Title II Order
would not have been reasonable unless tempered by substantial
concerns for legal or political jeopardy.
But as we already mentioned, Petitioners do not confine
themselves to the Title II Order as the basis for their claim
103
(though they seem to view our overturning the Commission’s
overturning of that order as the proper remedy). According to
Mozilla, edge investment has “relied not simply on a particular
classification decision, but on the Commission’s unwavering
commitment * * * to use what powers it has to ensure that
consumers would have free access to all lawful internet
content” “beginning at least with” a 2005 Commission policy
statement. Mozilla Br. 71–72; see In re Appropriate
Framework for Broadband Access to the Internet over Wireline
Facilities, 20 FCC Rcd. 14986 (2005) (“2005 Policy
Statement”). One of the comments Mozilla points to takes the
matter back to the statement of Commission Chairman Powell
in February 2004 outlining four principles of “internet
freedom,” J.A. 3348 & n.5, reflected in the 2005 Policy
Statement. Each of those principles was meant “to encourage
broadband deployment and preserve and promote the open and
interconnected nature of the public Internet.” 2005 Policy
Statement, 20 FCC Rcd. at 14988. And Governmental
Petitioners claim the 2018 Order “overturned a much longer
history of open Internet protections.” Governmental Pet’rs’ Br.
31.
The Commission did not expressly respond to this variant
of the “reliance” argument. But Petitioners’ effort to define the
status quo as a whole era of Commission policy, from
Chairman Powell’s 2004 statement to the 2018 Order (or at
least the underlying NPRM), renders the claim more or less
non-falsifiable. While outside observers may associate “light
touch” with a distinct era in regulation and “open Internet” with
another era, the successive Commission majorities have
consistently vowed fealty to both. The Title II Order at
multiple locations insisted that the new policy was “light-
touch,” see, e.g., Title II Order ¶¶ 5, 37, 39, 382, and the 2018
Order similarly sees its policy as a new and better way to
advance precisely what Petitioners see as the Commission’s
104
age-old policy, an “open Internet,” see 2018 Order ¶¶ 1, 4, 18.
Here the Commission, though recognizing that the phrase “net
neutrality” is in some circles equated with application of Title
II, draws a clear contrast between “net neutrality per se” and
“Title II regulation,” suggesting that the Powell principles
evinced a commitment to the former but not the latter. 2018
Order ¶ 95. And, far from eschewing any effort to prevent
unreasonable discrimination, it sees its insistence on
transparency as well-designed to advance that goal. See, e.g.,
id. ¶¶ 116, 142, 153, 209. Petitioners may distrust the
Commission’s stated dedication to an open Internet, but the
ubiquity of Commissioners’ attachment to an open Internet (as
well as to “light touch”) makes it impossible to rest a reliance
claim on some notion that either phrase represented a discrete
policy that has appeared and disappeared with each zig or zag
of Commission analysis.
We conclude that the agency’s treatment of reliance
interests is not arbitrary or capricious.
E. Pole Attachments
The Governmental Petitioners express substantial concern
that, in reclassifying broadband Internet as an information
service, the Commission, without reasoned consideration, took
broadband outside the current statutory scheme governing pole
attachments. That is because the Communications Act defines
the “pole attachment[s]” it subjects to regulation by reference
to “telecommunications service[s]” under Title II, not
information services under Title I. 47 U.S.C. § 224(a)(4).
We agree. The Commission offered, at best, scattered and
unreasoned observations in response to comments on this
issue. Because the Commission did not adequately address
how the reclassification of broadband would affect the
105
regulation of pole attachments, we remand for the Commission
to do so.
For purposes of the Communications Act, a “pole
attachment” is defined as an “attachment * * * to a pole, duct,
conduit, or right-of-way owned or controlled by a utility.” 47
U.S.C. § 224(a)(4). As the Commission has recognized, pole
attachments are “crucial to the efficient deployment of
communications networks including, and perhaps especially,
new entrants.” See Title II Order ¶ 56; id. ¶ 413 (recognizing
that Title II classification “offers other benefits at the state
level, including access to public rights of way, which some
broadband providers reportedly utilize to deploy networks”)
(internal quotation marks omitted). The Commission has also
“recognized repeatedly” that “[l]eveling the pole attachment
playing field for new entrants that offer solely broadband
services * * * removes barriers to deployment and fosters
additional broadband competition.” Id. ¶ 478.
The Communications Act establishes as a default rule that
“the Commission shall regulate the rates, terms, and conditions
for pole attachments.” 47 U.S.C. § 224(b)(1). Yet the Act also
allows any State to displace Commission regulation if the State
certifies to the Commission that it is regulating pole
attachments. See id. § 224(c) (“Nothing in this section shall be
construed to apply to, or to give the Commission jurisdiction
with respect to rates, terms, and conditions or access to poles,
ducts, conduits, and rights-of-way * * * for pole attachments in
any case where such matters are regulated by a State.”).
Approximately twenty States regulate pole attachments under
this regime. See States That Have Certified That They Regulate
Pole Attachments, 25 FCC Rcd. 5541, 5541–5542 (May 19,
2010); 2018 Order ¶ 185.
106
But this whole regulatory scheme applies only to cable
television systems and “telecommunications service[s]”—
categories to which, under the 2018 Order, broadband no
longer belongs. See 47 U.S.C. § 224(a)(4) (defining “pole
attachment” as “any attachment by a cable television system or
provider of telecommunications service to a pole, duct,
conduit, or right-of-way owned or controlled by a utility”)
(emphasis added); id. § 224(f)(1) (“A utility shall provide a
cable television system or any telecommunications carrier with
nondiscriminatory access to any pole, duct, conduit, or right-
of-way owned or controlled by it.”) (emphasis added). Section
224’s regulation of pole attachments simply does not speak to
information services. Which means that Section 224 no longer
speaks to broadband.
The Commission must have seen this problem coming
because it sought comment on the specific issue of “the impact
of reclassification * * * with respect to pole attachments.” See
NPRM at ¶ 69. The Governmental Petitioners foresaw it too.
During the comment period, they alerted the Commission that
reclassification would disrupt this settled legal and regulatory
foundation. See J.A. 234–240. Given that “[u]nauthorized,
and sometimes hazardous, attachments to poles are a regular
occurrence,” the Governmental Petitioners expressed concern
that broadband providers might invoke reclassification “to
ignore, avoid, deny or undercut” the States’ power to impose
pole-attachment safety regulations. J.A. 236. They also
warned that reclassification would take away broadband
providers’ “statutory right, under federal law, to
nondiscriminatory, just and reasonable access to the poles and
conduit that cable providers and telecommunications carriers
enjoy.” J.A. 236. On top of that, reclassification “without a
successful alternative for pole attachment rights under federal
law could delay or harm [broadband] deployment and that, in
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turn, could negatively affect competition * * * throughout the
nation.” J.A. 239.
The Commission’s response makes no sense. In some
portions of the 2018 Order, the Commission candidly
acknowledged that reclassification means that Section 224 no
longer governs broadband. See 2018 Order ¶ 163 n.600 (“We
make clear that as a result of our decision to restore the
longstanding classification of broadband Internet access
service as an information service, Internet traffic exchange
arrangements are no longer subject to Title II and its attendant
obligations,” including obligations under Section “224 (pole
attachments).”).
But in other portions of the Order, the Commission seemed
to whistle past the graveyard, implying without reasoned basis
that Section 224 would continue to govern reclassified
broadband. See 2018 Order ¶ 185 (“[I]n the twenty states and
the District of Columbia that have reverse-preempted
Commission jurisdiction over pole attachments, those states
rather than the Commission are empowered to regulate the pole
attachment process.”); id. ¶ 186 (“[W]e caution pole owners
not to use this Order as a pretext to increase pole attachment
rates or inhibit broadband providers from attaching
equipment—and we remind pole owners of their continuing
obligation to ‘offer rates, terms, and conditions [that] are just
and reasonable.’”) (quoting 47 U.S.C. § 224(b)(1)); id. ¶ 196
(“Nor do we deprive the states of any functions expressly
reserved to them under the Act, such as * * * exclusive
jurisdiction over poles, ducts, conduits, and rights-of-way
when a state certifies that it has adopted effective rules and
regulations over those matters under section 224(c).”).
Both cannot be true.
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The best explanation the Commission provided was its
reference to the 2007 Wireless Broadband Order. “As to
section 224,” the Commission said, the Wireless Broadband
Order directs that “where the same infrastructure would
provide ‘both telecommunications and wireless broadband
Internet access service,’ the provisions of section 224
governing pole attachments would continue to apply to such
infrastructure used to provide both types of service.” 2018
Order ¶ 188 (quoting 22 FCC Rcd. at 5922–5923). According
to the Commission, its “rationale from 2007, that commingling
services does not change the fact that the facilities are being
used for the provisioning of services within the scope of the
statutory provision, remains equally valid today.” Id. ¶ 189.
That “clarification,” the Commission concluded, “will alleviate
concerns that wireless broadband Internet access providers not
face increased barriers to infrastructure deployment as a result
of today’s reclassification.” Id.
That is all well and good for providers who “commingl[e]”
telecommunication and broadband services. Wireless
Broadband Order at 5922. But it does nothing to “alleviate
concerns” regarding standalone broadband, which Americans
have come to “increasingly * * * favor.” J.A. 2268 (citing
letter from members of Congress); see also J.A. 2270
(discussing “new entrants such as Google Fiber who offer
standalone broadband services”). That is because the plain text
of Section 224 speaks only of telecommunications services and
cable television services. So under the 2018 Order, the statute
textually forecloses any pole-attachment protection for
standalone broadband providers.
The Commission was required to grapple with the lapse in
legal safeguards that its reversal of policy triggered. See
Colorado Fire Sprinkler, Inc. v. NLRB, 891 F.3d 1031, 1038
(D.C. Cir. 2018); see also Lone Mountain Processing, Inc. v.
109
Secretary of Labor, 709 F.3d 1161, 1164 (D.C. Cir. 2013). But
it failed to do so. Because the 2018 Order was arbitrary and
capricious in this respect, we remand for the Commission to
confront the problem in a reasoned manner. See Fogo De Chao
(Holdings) Inc. v. United States Dep’t of Homeland Sec., 769
F.3d 1127, 1141 (D.C. Cir. 2014) (agency’s judgment “fails the
requirement of reasoned decisionmaking under arbitrary and
capricious review” where it “was neither adequately explained
* * * nor supported by agency precedent”); see also Hawaiian
Dredging Constr. Co. v. NLRB, 857 F.3d 877, 881 (D.C. Cir.
2017) (citing State Farm, 463 U.S. at 52).
F. Lifeline Program
The Lifeline Program subsidizes low-income consumers’
access to certain communications technologies, including
broadband Internet access. See 47 U.S.C. §§ 214, 254; 47
C.F.R. § 54.403. The Governmental Petitioners challenged the
2018 Order on the ground that reclassification would eliminate
the statutory basis for broadband’s inclusion in the Program.
See 47 U.S.C. §§ 214(e), 254(e). The Commission brushed off
their concern. That was straightforward legal error which
requires remand.
Since its inception, the Commission has been responsible
for “mak[ing] available, so far as possible * * * a rapid,
efficient, Nation-wide, and world-wide wire and radio
communication service with adequate facilities at reasonable
charges.” Communications Act of 1934, Pub. L. No. 416, 48
Stat. 1064, 1064 (codified at 47 U.S.C. § 151); see also
National Lifeline, 921 F.3d at 1106. In 1985, the Commission
implemented this national policy of universal service by
creating the Lifeline Program. MTS and WATS Market
Structure; and Establishment of a Joint Board; Amendment, 50
Fed. Reg. 939 (Jan. 8, 1985); see also National Lifeline, 921
110
F.3d at 1106 (describing the Lifeline Program as meant to
“ensure * * * low-income consumers [have] access to
affordable, landline telephone service”).
In 1996, Congress codified the Lifeline Program as part of
the Communications Act. See 47 U.S.C. §§ 214, 254. The
statutory provisions set forth, among other things, a program-
funding mechanism, guidelines for state participation, and a
designation scheme for determining Program eligibility. Id.
§§ 214, 254(d) & (f). The Act also declared that “[u]niversal
service is an evolving level of telecommunications services
that the Commission shall establish periodically * * *, taking
into account advances in telecommunications and information
technologies and services.” Id. § 254(c)(1).
With Congress’s directive in mind, the Commission added
broadband to the Lifeline Program in 2016. See In re Lifeline
& Link UP Reform and Modernization, 31 FCC Rcd. 3962,
3964 (2016) (“Lifeline Order”); 47 C.F.R. § 54.403. In doing
so, it sought to “enable all Americans to share in the
opportunities broadband connectivity provides” by allowing
“low income consumers to apply Lifeline’s $9.25 per month
discount to stand-alone broadband service.” FCC, Lifeline
Support for Affordable Communications,
https://www.fcc.gov/sites/default/files/lifeline_support_for_af
fordable_communications.pdf. In the Lifeline Order, the
Commission repeatedly referenced Congress’s overriding
command to provide “telecommunication services to
consumers.” Lifeline Order at 3964 (emphasis added); see also
id. at 3970, 3972, 3975, 3994, 4084.
That made sense, given that Congress had tethered
Lifeline eligibility to common-carrier status. To receive
Lifeline support under the Act, an entity must be designated as
an eligible telecommunications carrier—a category that
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extends to common carriers regulated under Title II. See 47
U.S.C. §§ 254(e), 214(e). This congressional understanding
pervades the statute. See, e.g., id. § 214(e)(2) (“A State
commission shall upon its own motion or upon request
designate a common carrier that meets the requirements of
paragraph (1) as an eligible telecommunications carrier for a
service area designated by the State commission.”) (emphasis
added); id. § 214(e)(3) (“If no common carrier will provide the
services that are supported by Federal universal service support
mechanisms * * *, the Commission [or a State commission]
shall determine which common carrier or carriers are best able
to provide such service to the requesting unserved community
or portion thereof and shall order such carrier or carriers to
provide such service.”) (emphasis added); id. § 214(e)(6) (“In
the case of a common carrier providing telephone exchange
service and exchange access that is not subject to the
jurisdiction of a State commission, the Commission shall upon
request designate such a common carrier that meets the
requirements of paragraph (1) as an eligible
telecommunications carrier for a service area designated by the
Commission.”) (emphasis added).
As a result, broadband’s eligibility for Lifeline subsidies
turns on its common-carrier status. See In re FCC 11-161, 753
F.3d 1015, 1048–1049 (10th Cir. 2014) (observing, before
broadband was classified as a telecommunications service, that
“broadband-only providers * * * cannot be designated as
‘eligible telecommunications carriers’” because “under the
existing statutory framework, only ‘common carriers’ * * * are
eligible to be designated as ‘eligible telecommunications
carriers’”). As a matter of plain statutory text, the 2018 Order’s
reclassification of broadband—the decision to strip it of Title
II common-carrier status—facially disqualifies broadband
from inclusion in the Lifeline Program.
112
Several commenters raised this concern in response to the
NPRM. The Commission backhanded the issue, stating that it
“need not address concerns in the record about the effect of
* * * reclassification” given its “authority under Section 254(e)
of the Act to provide Lifeline support to [Eligible
Telecommunications Carriers] that provide broadband service
over facilities-based broadband-capable networks that support
voice service.” 2018 Order ¶ 193.
That response does not work. The Commission
completely fails to explain how its “authority under Section
254(e)” could extend to broadband, even “over facilities-based
broadband-capable networks that support voice service,” 2018
Order ¶ 193, now that broadband is no longer considered to be
a common carrier. After all, Section 254(e) provides that “only
an eligible telecommunications carrier designated under
section 214(e) of this title shall be eligible to receive specific
Federal universal service support.” 47 U.S.C. § 254(e)
(emphasis added). And the statute expressly defines an
“eligible telecommunications carrier” as a “common carrier”
under Title II. Id. § 214(e)(1).
For whatever it is worth, the Commission has proven
unable to explain itself in this litigation either. Rather than
engage with the Governmental Petitioners’ statutory argument,
the Commission takes the position that it has “broad
discretion” to “defer consideration of particular issues to future
proceedings,” and it “need not address all problems in one fell
swoop.” Commission Br. 110 (quoting United States Telecom
Ass’n v. FCC, 359 F.3d 554, 588 (D.C. Cir. 2004)).
That is a non-sequitur. If, as the statute seems to clearly
say, the Commission’s reclassification of broadband as an
information service precludes the agency from solving this
problem in future proceedings, the possibility of future
113
proceedings is irrelevant. At the very least, the Governmental
Petitioners identified a “relevant and significant” problem that
the Commission was obligated to address in a reasoned way.
See Liliputian Sys., Inc. v. Pipeline & Hazardous Materials
Safety Admin., 741 F.3d 1309, 1312 (D.C. Cir. 2014) (“An
agency’s failure to respond to relevant and significant public
comments generally demonstrates that the agency’s decision
was not based on a consideration of the relevant factors.”)
(formatting modified). So we must remand this portion of the
2018 Order for the Commission to address the issue now.
G. Cost-Benefit Analysis
Petitioners next take exception to the Commission’s cost-
benefit analysis. See 2018 Order ¶¶ 304–323; Mozilla Br. 72–
74. They express two sets of concerns. The first set goes to
the general nature of the analysis (qualitative rather than
quantitative) and to the NPRM’s allegedly having failed to
alert the public to the possibility that the Commission would
pursue a purely qualitative analysis. The second set goes to
some specific treatments of benefits and costs. We review
cost-benefit analyses with deference, National Ass’n of Home
Builders v. EPA, 682 F.3d 1032, 1040 (D.C. Cir. 2012), and
here find nothing arbitrary in the Commission’s choice of
methodology or explanation of its conclusions. Petitioners’
objections to the Commission’s treatment of several issues
arguably classifiable as part of cost-benefit analysis are treated
under separate headings of this opinion. See Parts V.A–B.
The notice argument rests on a claim that the NPRM’s
discussion committed the Commission to a quantitative
analysis under OMB Circular A-4. It fails on two grounds: the
NPRM made clear that the Commission was not wedded to the
idea of following the Circular, and the Circular itself calls for
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a qualitative analysis under circumstances that the Commission
reasonably invoked.
The Commission said in the NPRM that it “propose[s] to
follow the guidelines in Section E * * * of * * * Circular A-4.”
NPRM ¶ 107 (emphasis added). It then added that it was
“seek[ing] comment on following Circular A-4 generally” and
“on any specific portions of Circular A-4 where the
Commission should diverge from the guidance provided.” Id.
(emphasis added). “Commenters should explain why
particular guidance in Circular A-4 should not be followed in
this circumstance and should propose alternatives.” Id.
(emphasis added). The passage leaves little doubt that the
Commission envisioned possibly deviating from Circular A-4
in ways large and small, necessarily including a possibility of
electing qualitative analysis even where the Circular
contemplates quantitative. Even assuming that the
Commission applied a laxer standard than prescribed by the
Circular for choosing qualitative over quantitative (see below),
notice of such a possible detour was adequate and the
Commission’s way of proceeding was a “logical outgrowth” of
the notice, as suffices under our cases. See Covad Commc’ns
Co. v. FCC, 450 F.3d 528, 548 (D.C. Cir. 2006); see also
USTA, 825 F.3d at 700.
Further, although not essential to rejection of this claim,
the Commission’s ultimate decision to conduct a qualitative
analysis appears consistent with the Circular. The latter
provides that “where no quantified information on benefits,
costs, and effectiveness can be produced, the regulatory
analysis should present a qualitative discussion of the issues
and evidence.” OMB Circular A-4 at 10 (2003). The
Commission, after finding that “the record provides little data
that would allow [the agency] to quantify the magnitudes of
many of” the costs and benefits, adopted the qualitative
115
approach, seeking to assess “the direction of the effect on
economic efficiency.” 2018 Order ¶ 304; cf. National Ass’n of
Regulatory Util. Comm’rs v. FCC, 737 F.2d 1095, 1140–1141
(D.C. Cir. 1984) (holding that the Commission had acted
within the scope of its “broad discretion” in a context where
“no reliable data was available”).
Mozilla makes no effort to undermine the Commission’s
finding that a quantitative analysis was infeasible. In fact, as
we will see shortly, its fault-finding (apart from matters
addressed elsewhere in this opinion) focuses on exactly the sort
of issues on which hard and convincing quantitative data would
be difficult to find—the sort of issues that are the basis of the
Circular’s warning that “[w]hen important benefits and costs
cannot be expressed in monetary units,” attempting a
quantitative cost-benefit analysis “can even be misleading,
because the calculation of new benefits in such cases does not
provide a full evaluation of all relevant benefits and costs.”
OMB Circular A-4 at 10.
We should add that we are hard-pressed to imagine how
the notice defect claimed by Petitioners might have hurt them
in a legally significant way. Notice typically serves to help
parties marshal their arguments and analyses to persuade an
agency to see matters their way. If Petitioners had offered an
array of useful quantitative analyses and the Commission had
turned it aside because of its decision in favor of a qualitative
approach, we could understand. But Petitioners claim no such
thing, and it is hard to imagine that an agency pursuing
qualitative analysis would on that account turn away a
quantitative one (which, one supposes, would typically
encompass qualitative elements). Cf. IA Br. 19 (criticizing the
Commission for failing to “acknowledg[e] that economists
might not yet be able to” quantify certain economic effects of
the Title II Order).
116
As to the substance of the cost-benefit analysis, Petitioners
set out four challenges. Two of these are addressed separately
in this opinion—the claims that the Commission overlooked
particular reliance interests, see Part V.D., and overstated the
costs of Title II classification by relying selectively on studies
whose defects it ignored, see Part V.A.
We thus turn directly to the other two, which overlap so
heavily as to amount to one. We identify them separately, but
will treat them together. First, Petitioners claim that the agency
did not account for harms to “innovation and democratic
discourse” that the 2018 Order would supposedly bring about.
Mozilla Br. 73. Second, they assert that the Commission failed
to factor in the “cost to consumers of decreased innovation and
other consumer harms,” citing a comment about Comcast’s
interference with file sharing, see J.A. 1098, and news stories
from 2007–2008 describing how “Comcast had blocked users’
ability to share copies of the King James Bible,” Mozilla Br.
73–74; see also J.A. 2429 & n.198.
As an initial matter, Petitioners do not explain how the
2018 Order would harm “innovation and democratic
discourse” beyond quoting an assertion by a commentator that
“ex post enforcement would hamstring nascent industries.”
Mozilla Br. 73; see J.A. 1097. This bare-bones objection is not
enough to pose an issue for the court, which after all is not
generally expected to do counsel’s work. See Masias v. EPA,
906 F.3d 1069, 1077 (D.C. Cir. 2018). In any event, the
Commission’s cost-benefit analysis makes a reasonable case
that its “light-touch” approach is more conducive to innovation
and openness than the Title II Order. We do note that antitrust
enforcement by the Commission’s sister agencies (the
Department of Justice and the FTC, the latter being released by
the 2018 Order from the statutory exclusion effected by
application of Title II) aims at generating and protecting
117
competition, see Part V.B.3; at least as a general matter, it
seems reasonable to expect that competition would tend to
multiply the voices in the public square. The agency says as
much, noting that “the transparency rule and the ISP
commitments backed up by FTC enforcement are targeted to
preserving free expression, particularly the no-blocking
commitment,” and that “[t]he market competition that antitrust
law preserves will protect values such as free expression.”
2018 Order ¶ 153. At the same time, the Commission frankly
acknowledges that “[t]he competitive process and antitrust
would not protect free expression in cases where consumers
have decided that they are willing to tolerate some blocking or
throttling in order to obtain other things of value.” Id. at n.558.
As to harms akin to those such as interference with file-
sharing, the Commission observes that commenters could point
“only to a handful of incidents that purportedly affected
Internet openness, while ignoring the two decades of
flourishing innovation that preceded the Title II Order.” 2018
Order ¶ 110; see also id. ¶ 116. The colorful example of
difficulties with downloading the King James Bible arose from
Comcast’s “throttling of BitTorrent, a peer-to-peer networking
protocol,” id. ¶ 112, which had nothing in particular to do with
the Bible, see J.A. 2429 n.198, and which Petitioners do not
suggest is of a type likely to recur. Further, Petitioners do
nothing to refute the agency’s claim that “since 2008, few
tangible threats to the openness of the Internet have arisen.”
2018 Order ¶ 113; see id. ¶¶ 111–114 (describing examples of
similar conduct).
Against this backdrop of what the Commission views as
slim empirical support for relevant harms, see, e.g., 2018 Order
¶ 153, the agency argues that the benefits of “maintaining a free
and open Internet” are “positive and considerable,” id. ¶ 313.
It contends that its “light-touch” strategy—rooted in
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transparency rules and “enforcement under antitrust and
consumer protection law,” id.—will protect Internet openness
and help “prevent and remedy harmful behaviors by ISPs,” id.,
without the costs imposed by Title II regulations (measured by
“the economic welfare of consumers, ISPs, and edge
providers,” id. ¶ 306). For example, a “light-touch” route
incentivizes greater “deployment of [broadband] service to
unserved areas,” id. ¶ 308, so that more people can get online
sooner and enjoy content at higher speeds—especially those
“in rural and/or lower-income communities” with
“underserved and hard-to-reach populations,” id. ¶ 106. Such
an outcome, presumably, would bolster democratic discourse
and participation.
In weighing the costs and benefits of Title II regulation
against those of a deregulatory strategy, the agency finds that,
on almost every point, the latter approach is preferable. Title
II regulation would “discourage[] investment in the network,”
which, in turn, may cause “society * * * to lose some spillover
benefits,” 2018 Order ¶ 310, including forgone “improvements
in productivity and innovation that occur because broadband is
a general-purpose technology,” id. Conduct rules mandated by
the Title II Order, the Commission said, have “large [negative]
effects on consumers obtaining innovative services,” such as
zero-rating. Id. ¶ 318. Following up its prior observation that
“smaller edge providers may benefit from tiered pricing, such
as paid prioritization, as a means of gaining entry,” id. ¶ 133, it
reasoned that removal of the Title II Order’s ban could yield
“innovative services and business models,” id. ¶ 321.
Whatever harms might occur absent a ban on paid
prioritization, the agency estimated them to be “small” and
“infrequent,” id. ¶ 320, and thus outweighed by the costs of the
Title II Order. As for rules against blocking and throttling, the
agency states that their costs are “likely small,” though they
could grow if compliance becomes more onerous. Id. ¶ 322.
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The benefits of such rules, however, are “approximately zero,”
id. ¶ 323—a point Petitioners do not grapple with, see Mozilla
Reply Br. 36; cf. IA Br. 25–26 (claiming Title II Order
promoted edge investment); Part V.A (discussing IA’s claim).
That is so, in the agency’s view, because the 2018 Order’s
transparency rules—combined with the deterrent effects of
“market forces, public opprobrium, and enforcement of the
consumer protection laws”—can “mitigate potential harms.”
2018 Order ¶ 323; cf. ¶ 315 (explaining that the Title II Order’s
transparency rules would “impose significant additional costs”
without “additional benefits”). In sum, a “light-touch”
approach can in the Commission’s judgment secure Internet
openness and encourage innovation at lower cost than the Title
II Order, while yielding unique benefits.
The Commission’s reasoning rehearsed above is not
plagued by “serious flaw[s]” that so “undermin[e]” its cost-
benefit analysis as to render the rule “unreasonable.” Home
Builders, 682 F.3d at 1040. We therefore reject Petitioners’
objections on this front.
H. Data Roaming Rates
Petitioner NTCH, Inc. (NTCH) argues that the 2018 Order
failed to address data roaming rates charged by broadband
providers. According to NTCH, the Commission unlawfully
disregarded its comments that stressed the need for Title II
regulation given the allegedly high data roaming rates. But the
Commission’s 2018 Order classified mobile broadband—of
which data roaming is a service—as an information service,
thus making Title II regulation inapplicable. Thus, the
Commission’s failure to respond to NTCH’s comments
regarding data roaming is “significant only insofar as it
demonstrates that the agency’s decision was not based on a
consideration of the relevant factors.” Texas Mun. Power
120
Agency v. EPA, 89 F.3d 858, 876 (D.C. Cir. 1996) (quoting
Thompson v. Clark, 741 F.2d 401, 409 (D.C. Cir. 1984)).
NTCH offers no reason why the value of regulating data
roaming rates under Title II would be important enough to
affect the agency’s decision to reclassify mobile broadband.
Given that we conclude, infra Part II, that the classification of
mobile broadband as an information service was reasonable, the
Commission had no obligation to consider NTCH’s comments
urging for Title II regulations for mobile broadband providers’
data roaming agreements.
I. Procedural Challenges
Before the Commissioner, Petitioner National Hispanic
Media Coalition (“NHMC”) moved to include in the record
and for the Commission to consider informal consumer
complaints filed under the previous rules. NHMC had itself
obtained these documents from the Commission under the
Freedom of Information Act. NHMC argues that these
materials are relevant because the May 2017 Notice of
Proposed Rulemaking specifically requested information about
the impact of Title II classification on consumers and ISPs’
conduct. The Commission denied the motion, finding that it
was “exceedingly unlikely” that those complaints raised any
issue that was not already identified in “the voluminous record
in this proceeding.” 2018 Order ¶ 342. Given the broad
discretion afforded to the Commission to “make ad hoc
procedural rulings in specific instances,” FCC. v. Schreiber,
381 U.S. 279, 289 (1965); see also 47 U.S.C. § 154(j) (“The
Commission may conduct its proceedings in such manner as
will best conduce to the proper dispatch of business and to the
ends of justice.”), we reject NHMC’s challenge.
On this basis, we also conclude that the Commission did
not abuse its discretion in denying INCOMPAS’s motion to
121
“modify the protective orders” in four recent proceedings
reviewing corporate transactions involving Internet service
providers “to allow confidential materials submitted in those
dockets to be used in this proceeding.” 2018 Order ¶ 324. The
Commission declined to do so, noting that the protective orders
assured the parties involved that the confidential materials
would not be used in future proceedings. Id. ¶ 331. Moreover,
the Commission explained that gathering this requested
information would be “costly” and “administratively difficult”
yet would only provide an “incomplete picture of industry
practices” and would not “meaningfully improve the
Commission’s analysis.” Id. ¶ 330, 329. Indeed, the
Commission is “fully capable of determining which documents
are relevant to its decision-making.” SBC Commc’ns Inc. v.
FCC., 56 F.3d 1484, 1496 (D.C. Cir. 1995). Thus, in the
absence of a more specific showing of relevance or prejudice
arising from the agency’s failure to consider, the Commission
is not “bound to review every document.” Id. We thus reject
INCOMPAS’s challenge.
VI. Preemption
We vacate the portion of the 2018 Order that expressly
preempts “any state or local requirements that are inconsistent
with [its] deregulatory approach.” 2018 Order ¶ 194; see id.
¶¶ 194–204 (“Preemption Directive”). The Commission
ignored binding precedent by failing to ground its sweeping
Preemption Directive—which goes far beyond conflict
preemption—in a lawful source of statutory authority. That
failure is fatal.
The relevant portion of the Order provides that “regulation
of broadband Internet access service should be governed
principally by a uniform set of federal regulations,” and not “by
a patchwork that includes separate state and local
122
requirements.” 2018 Order ¶ 194. In service of that goal, the
2018 Order expressly “preempt[s] any state or local measures
that would effectively impose rules or requirements that we
have repealed or decided to refrain from imposing in this order
or that would impose more stringent requirements for any
aspect of broadband service that we address in this order.” Id.
¶ 195. In other words, the Preemption Directive invalidates all
state and local laws that the Commission deems to “interfere
with federal regulatory objectives” or that involve “any aspect
of broadband service * * * address[ed]” in the Order. Id.
¶¶ 195–196.
The Preemption Directive conveys more than a mere intent
for the agency to preempt state laws in the future if they
conflict with the 2018 Order. As the Commission confirmed
at oral argument, it is not just a “heads up that ordinary conflict
preemption principles are going to apply.” Oral Arg. Tr. 171.
The Order was meant to have independent and far-reaching
preemptive effect from the moment it issued. Id.; see also 2018
Order ¶¶ 195–197. And the Commission meant for that
preemptive effect to wipe out a broader array of state and local
laws than traditional conflict preemption principles would
allow. Oral Arg. Tr. 171 (Q: “It’s broader than ordinary
conflict preemption?” A: “That’s correct.”).
The Governmental Petitioners challenge the Preemption
Directive on the ground that it exceeds the Commission’s
statutory authority. They are right.
A. Express and Ancillary Authority
“The [Commission], like other federal agencies, literally
has no power to act unless and until Congress confers power
upon it.” American Library Ass’n v. FCC., 406 F.3d 689, 698
(D.C. Cir. 2005) (formatting modified). That means that the
Commission “may preempt state law only when and if it is
123
acting within the scope of its congressionally delegated
authority.” Louisiana Pub. Serv. Comm’n v. FCC, 476 U.S.
355, 374 (1986) (“Louisiana PSC”); see also Comcast, 600
F.3d at 654 (applying the “axiomatic principle that
administrative agencies may act only pursuant to authority
delegated to them by Congress”) (formatting modified). Of
course, if a federal law expressly confers upon the agency the
authority to preempt, that legislative delegation creates and
defines the agency’s power to displace state laws. FERC v.
Mississippi, 456 U.S. 742, 759 (1982) (“Insofar as [the statute]
authorizes FERC to exempt qualified power facilities from
‘State laws and regulations,’ it does nothing more than pre-
empt conflicting state enactments in the traditional way.”); cf.
Wyeth v. Levine, 555 U.S. 555, 576–577 & n.9 (2009)
(declining to “defer[] to an agency’s conclusion that state law
is pre-empted” where “Congress ha[d] not authorized [the
agency] to pre-empt state law directly,” and collecting
examples of statutes in which Congress had done so) (emphasis
omitted).
By the same token, in any area where the Commission
lacks the authority to regulate, it equally lacks the power to
preempt state law. After all, an “agency may not confer power
on itself,” and “[t]o permit an agency to expand its power in
the face of a congressional limitation on its jurisdiction would
be to grant to the agency power to override Congress.”
Louisiana PSC, 476 U.S at 374–375; see Public Serv. Comm’n
of Md. v. FCC, 909 F.2d 1510, 1515 n.6 (D.C. Cir. 1990)
(“Maryland PSC”) (recognizing that the Commission may not
“regulate (let alone preempt regulation of) any service that does
not fall within its * * * jurisdiction”). In other words, even “the
allowance of ‘wide latitude’ in the exercise of delegated
powers is not the equivalent of untrammeled freedom to
regulate activities over which the statute fails to confer, or
explicitly denies, Commission authority.” National Ass’n of
124
Regulatory Util. Comm’rs v. FCC, 533 F.2d 601, 618 (D.C.
Cir. 1976) (“NARUC II”) (quoting United States v. Midwest
Video Corp., 406 U.S. 649, 676 (1972) (Burger, C.J.,
concurring)).
The Commission’s regulatory jurisdiction falls into two
categories. The first is the “express and expansive authority”
Congress delegated in the Act to regulate certain technologies.
Comcast, 600 F.3d at 645. This authority extends to “common
carrier services, including landline telephony (Title II of the
Act); radio transmissions, including broadcast television,
radio, and cellular telephony (Title III); and ‘cable services,’
including cable television (Title VI).” Id. (internal citations
omitted).
The second is the Commission’s “ancillary authority.”
Comcast, 600 F.3d at 650. The Commission’s ancillary
authority derives from a provision within Title I of the Act that
empowers 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). That provision
enables the Commission to regulate on matters “reasonably
ancillary to the * * * effective performance of its statutorily
mandated responsibilities.” American Library, 406 F.3d at
692.
For the Preemption Directive to stand, then, the
Commission must have had express or ancillary authority to
issue it. It had neither.
The Preemption Directive could not possibly be an
exercise of the Commission’s express statutory authority. By
reclassifying broadband as an information service, the
Commission placed broadband outside of its Title II
jurisdiction. And broadband is not a “radio transmission”
125
under Title III or a “cable service” under Title VI. So the
Commission’s express authority under Titles III or VI does not
come into play either. Nor did Congress statutorily grant the
Commission freestanding preemption authority to displace
state laws even in areas in which it does not otherwise have
regulatory power.
Neither can the Commission house the Preemption
Directive in its ancillary authority under Title I. “Title I is not
an independent source of regulatory authority.” People of State
of Cal. v. FCC, 905 F.2d 1217, 1240 n.35 (9th Cir. 1990)
(citing United States v. Southwestern Cable Co., 392 U.S. 157,
178 (1968)). As a result, ancillary jurisdiction exists only when
“(1) the Commission’s general jurisdictional grant under Title
I of the Communications Act covers the regulated subject and
(2) the regulations are reasonably ancillary to the
Commission’s effective performance of its statutorily
mandated responsibilities.” American Library, 406 F.3d at
691–692 (formatting modified).
Under binding circuit precedent, those “statutorily
mandated responsibilities” must themselves be dictated by
Title II, III, or VI of the Act—none of which apply since the
Commission took broadband out of Title II. See Comcast, 600
F.3d at 654 (“[I]t is Title II, III, or VI to which the authority
must ultimately be ancillary.”); see also, e.g., National Ass’n
of Regulatory Util. Comm’rs v. FCC, 880 F.2d 422, 429–431
(D.C. Cir. 1989) (“NARUC-III”) (upholding the Commission’s
preemption of state “inside wiring” regulation as ancillary to
its Title II authority over interstate telephone services);
Computer & Commc’ns Indus. Ass’n v. FCC, 693 F.2d 198,
207, 218 (D.C. Cir. 1982) (upholding the Commission’s
preemption of certain state tariff regulations as ancillary to its
Title II ratemaking power).
126
The Commission seemingly agrees because nowhere in
the 2018 Order or its briefing does it claim ancillary authority
for the Preemption Directive. See 2018 Order ¶¶ 194–204;
Commission Br. 121 (acknowledging that the Order “makes no
mention of either Title II or ancillary authority”) (emphasis in
original).
B. The Commission’s Asserted Sources of Authority
With express and ancillary preemption authority off the
table, the Commission was explicit that it was grounding its
Preemption Directive in (i) the “impossibility exception” to
state jurisdiction, and (ii) the “federal policy of nonregulation
for information services.” 2018 Order ¶¶ 198, 202. Neither
theory holds up.
1. Impossibility Exception
Section 152 of the Communications Act provides, as
relevant here, that “nothing in this chapter shall be construed
to apply or to give the Commission jurisdiction with respect to
* * * regulations for or in connection with intrastate
communication service by wire or radio of any carrier.” 47
U.S.C. § 152(b). That provision divides regulatory authority
“into two separate components: interstate communications,
which can be regulated by the [Commission]; and intrastate
communications, which cannot.” Maryland PSC, 909 F.2d at
1514 (internal quotation marks omitted). In doing so, Section
152 “severely circumscribes” the Commission’s “power by
‘fencing off from [its] reach or regulation intrastate matters,’”
including “matters in connection with intrastate service.”
Public Util. Comm’n of Tx. v. FCC, 886 F.2d 1325, 1331 (D.C.
Cir. 1989) (quoting Louisiana PSC, 476 U.S. at 370)
(formatting modified).
127
Needless to say, “the realities of technology and
economics” sometimes obscure the statute’s “parceling of
responsibility.” Louisiana PSC, 476 U.S. at 360. The
“impossibility exception” is a judicial gloss on Section 152 that
attempts to help navigate the Act’s sometimes complicated
division of regulatory power.
The impossibility exception started with the Supreme
Court’s decision in Louisiana PSC. There, the Supreme Court
rejected the Commission’s attempt to preempt States from
applying their own depreciation rules in setting intrastate
telephone rates. The Commission had argued that the state
rules impermissibly “frustrate[d]” the “federal policy of
increasing competition in the industry.” Louisiana PSC, 476
U.S. at 368, 369. The Supreme Court rejected that argument
as driving outside the Commission’s statutory lane. Id. at 369–
370. But the Court also candidly acknowledged that
“jurisdictional tensions may arise as a result of the fact that
interstate and intrastate [telephone] service are provided by a
single integrated system.” Id. at 375. Because “Section 152(b)
“constitutes * * * a congressional denial of power to the
[Commission],” the Supreme Court explained, “we simply
cannot accept an argument that the [Commission] may
nevertheless take action which it thinks will best effectuate a
federal policy.” Id. at 374; see also id. at 370 (“We might be
inclined to accept [the Commission’s argument] were it not for
the express jurisdictional limitations on [Commission] power
contained in § 152(b).”); id. at 376 (“As we so often admonish,
only Congress can rewrite this statute.”).
Having rejected the Commission’s preemption effort, the
Supreme Court added a footnote distinguishing cases where
lower courts had found it “not possible to separate the interstate
and the intrastate components of the asserted [Commission]
regulation.” Louisiana PSC, 476 U.S. at 375 n.4 (citing North
128
Carolina Utils. Comm’n v. FCC, 537 F.2d 787 (4th Cir. 1976),
and North Carolina Utils. Comm’n v. FCC, 552 F.3d 1036 (4th
Cir. 1977)). And with that, the impossibility exception was
born.
This court has applied the impossibility exception just
once, in Maryland PSC, 909 F.2d at 1515. Drawing from
Louisiana PSC, we held that the express denial of Commission
authority codified in Section 152(b) does not apply where (i)
“the matter to be regulated has both interstate and intrastate
aspects”; (ii) “preemption is necessary to protect a valid federal
regulatory objective”; and (iii) “state regulation would negate
the exercise by the [Commission] of its own lawful authority
because regulation of the interstate aspects of the matter cannot
be ‘unbundled’ from regulation of the intrastate aspects.”
Maryland PSC, 909 F.2d at 1515 (formatting modified).
But Maryland PSC and the impossibility exception are of
no help to the Commission. In applying the impossibility
exception, Maryland PSC did not vitiate the need for either an
express delegation of regulatory authority or ancillary
authority. All the impossibility exception does is help police
the line between those communications matters falling under
the Commission’s authority (Section 152(a)) and those
remaining within the States’ wheelhouse (Section 152(b)).
Specifically, if the matter involves interstate communications
or a mix of state and federal matters and it falls within the
impossibility exception, then the Commission may regulate to
the extent of its statutory authority. See Louisiana PSC, 476
U.S. at 374; Maryland PSC, 909 F.2d at 1513–1515. If not, the
matter falls within the States’ jurisdiction. Maryland PSC, 909
F.2d at 1514. In other words, the impossibility exception
presupposes the existence of statutory authority to regulate; it
does not serve as a substitute for that necessary delegation of
power from Congress.
129
Nor can 47 U.S.C. § 152—the statutory hook for the
impossibility exception—by itself provide a source of
preemption authority. We have rejected that precise argument
before. In NARUC II, supra, the Commission asserted that
Section 152 authorized it to preempt state regulation of two-
way communications over cable systems’ leased access
channels.3 That argument failed, we explained, because “each
and every assertion of jurisdiction over cable television must
be independently justified as reasonably ancillary to the
Commission’s power over broadcasting.” NARUC II, 533 F.2d
at 612. So the Commission cannot bootstrap itself into
preemption authority just by pointing to Section 152. It has to
identify an independent source of regulatory authority to which
the preemption action would be “reasonably ancillary.” Id.
(explaining that prior Supreme Court opinions “compel[] the
conclusion that cable jurisdiction, which [the Court has]
located primarily in § 152(a), is really incidental to, and
contingent upon, specifically delegated powers under the Act”)
(citing Southwestern Cable, 392 U.S. at 178; and Midwest
Video, 406 U.S. at 662–663); see also Comcast, 600 F.3d at
654 (“[I]t is Titles II, III, and VI that do the delegating.”);
People of State of Cal., 905 F.2d at 1240 n.35 (recognizing that
“Title I is not a source of regulatory authority”).
All that is a long way of saying that, contrary to the
Commission’s argument, the “impossibility exception” does
not create preemption authority out of thin air.
3
This was before the Cable Communications Policy Act of
1984, Pub. L. No. 98–549, 98 Stat. 2279, established a national
policy governing cable television.
130
2. Federal Policy of Nonregulation
What the Commission calls the “federal policy of
nonregulation for information services,” Commission Br. 123,
cannot sustain the Preemption Directive either.
First, as a matter of both basic agency law and federalism,
the power to preempt the States’ laws must be conferred by
Congress. It cannot be a mere byproduct of self-made agency
policy. Doubly so here where preemption treads into an area—
State regulation of intrastate communications—over which
Congress expressly “deni[ed]” the Commission regulatory
authority, Louisiana PSC, 476 U.S. at 374.
Presumably recognizing as much, the Commission
attempts to house its preemption authority in 47 U.S.C.
§ 230(b)(2). That provision says that “the policy of the United
States [is] * * * to preserve the vibrant and competitive free
market that presently exists for the Internet and other
interactive computer services, unfettered by Federal or State
regulation.” Id.
No dice. As the Commission has itself acknowledged, this
is a “statement[] of policy,” not a delegation of regulatory
authority. Comcast, 600 F.3d at 652 (“The Commission
acknowledges that section 230(b) * * * [contains] statements
of policy that themselves delegate no regulatory authority.”);
see also 2018 Order ¶ 284 (characterizing Section 230(b) as
merely “hortatory, directing the Commission to adhere to the
policies specified in that provision when otherwise exercising
our authority”) (emphasis added); id. ¶ 267 (“We also are not
persuaded that section 230 of the Communications Act is a
grant of regulatory authority.”). To put it even more simply,
“[p]olicy statements are just that—statements of policy. They
are not delegations of regulatory authority.” Comcast, 600
F.3d at 654.
131
Nor do policy statements convey “statutorily mandated
responsibilities” that the Commission may use to support an
exercise of ancillary authority. Comcast, 600 F.3d at 644, 654
(“Although policy statements may illuminate [delegated]
authority, it is Title II, III, or VI to which the authority must
ultimately be ancillary.”); see also Motion Picture Ass’n of
America v. FCC, 309 F.3d 796, 806–807 (D.C. Cir. 2002)
(rejecting the Commission’s “argument that [its] video
description rules are obviously a valid communications policy
goal and in the public interest” because the Commission “can
point to no statutory provision that gives the agency authority”
to issue those rules).
Second, the Commission points to 47 U.S.C. § 153(51),
which defines “telecommunications carrier,” and provides that
“[a] telecommunications carrier shall be treated as a common
carrier under this chapter only to the extent that it is engaged
in providing telecommunications services.”
That does not work either. Section 153(51) is a
definitional provision in Title I, and so is “not an independent
source of regulatory authority.” People of State of Cal., 905
F.2d at 1240 n.35. Quite the opposite. As the parties agree,
that provision is a limitation on the Commission’s authority.
See Governmental Pet’rs’ Br. 43 (characterizing it as
“limit[ing] only the agency’s authority”); Commission Br. 128
n.38 (characterizing it as “a substantive limitation on
government authority”) (citing Verizon, 740 F.3d at 650).
It also would make no sense for Congress to bury the
enormously far-reaching and consequential authority to
override every single State’s statutorily conferred power to
regulate intrastate communications deep within a list of fifty-
nine definitions in a non-regulatory portion of the statute, and
132
then articulate the relevant definition as a restriction of the
Commission’s power.
Third, the Commission points to 47 U.S.C. § 160(e). That
provision says that “[a] State commission may not continue to
apply or enforce any provision of [the Act] that the
Commission has determined to forbear from applying under
subsection (a).” Subsection (a), in turn, gives the Commission
some flexibility to forbear from regulating technologies
classified under Title II. Id. § 160(a).
That Title II provision has no work to do here because the
2018 Order took broadband out of Title II. So the Commission
is not “forbear[ing] from applying any provision” of the Act to
a Title-II technology. 47 U.S.C. § 160(e). On top of that,
Section 160(e)—as a part of Title I—does not itself delegate
any preemption authority to the Commission. People of State
of Cal., 905 F.2d at 1240 n.35.
The best the Commission can do is try to argue by analogy.
It claims that it would be “incongruous” not to extend
preemption authority under Title I, given that Section 160(e)
prohibits States from regulating a service classified under Title
II in instances of federal forbearance. Commission Br. 115–
116.
That is a complaint that the Commission is free to take up
with Congress. Until then, preemption authority depends on
the Commission identifying an applicable statutory delegation
of regulatory authority, and Section 160(e) does not provide it.
The Commission’s “own bruised sense of symmetry” is
irrelevant. NARUC II, 533 F.2d at 614.
Anyhow, there is no such incongruity. By expressly
requiring that communications services under Title II be
regulated as common carriers, the Federal Communications
133
Act grants the Commission broad authority over services
classified under Title II, unlike those classified under Title I.
See 47 U.S.C. § 153(51); Brand X, 545 U.S. at 976; Verizon,
740 F.3d at 630; Comcast, 600 F.3d at 645. Which is also why
the Act carves out more space for federal objectives to displace
those of the States in the Title II context. See 47 U.S.C.
§ 253(a), (d) (expressly authorizing the Commission to
preempt state or local regulations that “may prohibit or have
the effect of prohibiting the ability of any entity to provide any
interstate or intrastate telecommunications service[]”).
The dissenting opinion calls this “a complete non
sequitur,” arguing that it “assumes an asymmetry in
preemption implications” in which preemption protects
“heavy-handed regulation” more than “light-touch regulation.”
Dissenting Op. 10 (emphasis omitted). Not so. The
Commission could choose to enact heavier or lighter regulation
under Title II by exercising less or more of its Title II
forbearance authority, with symmetrical “preemption
implications,” id. It just cannot completely disavow Title II
with one hand while still clinging to Title II forbearance
authority with the other.
3. Case Precedent
Governing precedent nails the coffin shut on the
Preemption Directive.
In Louisiana PSC, the Supreme Court squarely rejected
the Commission’s argument that it “is entitled to pre-empt
inconsistent state regulation” just because it “frustrates federal
policy.” 476 U.S. at 368. In doing so, the Court was explicit
that, if the Commission cannot tether a rule of preemption to a
relevant source of statutory authority, courts “simply cannot
accept [the] argument that the [Commission] may nevertheless
134
take action which it thinks will best effectuate a federal policy.”
Id. at 374. That fits this case to a T.
Likewise, in City of New York v. FCC, on which the
Commission and their amici heavily rely, the Supreme Court
repeated that “an agency literally has no power to act, let alone
pre-empt the validly enacted legislation of a sovereign State,
unless and until Congress confers power upon it.” 486 U.S. 57,
66 (1988). The Court then added that “the best way of
determining whether Congress intended the regulations of an
administrative agency to displace state law is to examine the
nature and scope of the authority granted by Congress to the
agency.” Id. (quoting Louisiana PSC, 476 U.S. at 374).
Needless to say, no such examination can occur if there is no
legislative grant of authority against which to evaluate the
preemptive rule, and certainly not when, as here, Congress
expressly withheld regulatory authority over the matter. 47
U.S.C. § 152(b).
To be sure, in City of New York, the Supreme Court
referenced the “background of federal pre-emption on this
particular issue” as weighing in favor of preemption. 486 U.S.
at 66–67. But the Court said so only after the threshold
requirement of statutory authority had been satisfied.
Specifically, the Court “conclude[d] that the Commission is
authorized under § 624(e) of the Cable Act”—authority
expressly delegated in Title VI—“to pre-empt technical
standards imposed by state and local authorities.” Id. at 70 n.6.
That statutory authority is the fatal gap in the Commission’s
argument here.
Not only is the Commission lacking in its own statutory
authority to preempt, but its effort to kick the States out of
intrastate broadband regulation also overlooks the
Communications Act’s vision of dual federal-state authority
135
and cooperation in this area specifically. See, e.g., 47 U.S.C.
§ 1301(4) (“The Federal Government should also recognize
and encourage complementary State efforts to improve the
quality and usefulness of broadband data.”); id. § 1302(a)
(referring to “[t]he Commission and each State Commission
with regulatory jurisdiction” in a chapter titled “Broadband”);
id. § 1304 (“[e]ncouraging State initiatives to improve
broadband”); cf. id. § 253(b) (“Nothing in this section shall
affect the ability of a State to impose * * * requirements
necessary to * * * protect the public safety and welfare, * * *
and safeguard the rights of consumers.”); id. § 254(i) (“The
Commission and the States should ensure that universal service
is available at rates that are just, reasonable, and affordable.”).
Even the 2018 Order itself acknowledges the States’ central
role in “policing such matters as fraud, taxation, and general
commercial dealings,” 2018 Order ¶ 196, “remedying
violations of a wide variety of general state laws,” id. ¶ 196
n.732, and “enforcing fair business practices,” id. ¶ 196—
categories to which broadband regulation is inextricably
connected.
C. Conflict Preemption
Finally, the Commission argues that we should leave the
Preemption Directive undisturbed because principles of
conflict preemption would lead to the same result. See
Commission Br. 130–133.
Any intuitive appeal this argument might have offered
evaporated at oral argument when the Commission confirmed
what the Preemption Directive’s plain language bespeaks: It
sweeps “broader than ordinary conflict preemption.” Oral Arg.
Tr. 171; see 2018 Order ¶ 195 (preempting “any state or local
measures that would effectively impose rules or requirements
that we have repealed or decided to refrain from imposing in
136
this order or that would impose more stringent requirements for
any aspect of broadband service that we address in this order”).
The necessary consequence of this position is that ordinary
conflict preemption principles cannot salvage the Preemption
Directive. Cf. City of New York, 486 U.S. at 65–66 (“Since the
Commission has explicitly stated its intent to * * * pre-empt
state and local regulation, this case does not turn on whether
there is an actual conflict between federal and state law.”).
Beyond that, the Commission’s conflict-preemption
argument tries to force a square peg into a round hole. Conflict
preemption applies to “state law that under the circumstances
of the particular case stands as an obstacle to the
accomplishment and execution of the full purposes and
objectives of Congress—whether that ‘obstacle’ goes by the
name of conflicting; contrary to; repugnance; difference;
irreconcilability; inconsistency; violation; curtailment;
interference, or the like.” Geier v. American Honda Motor Co.,
Inc., 529 U.S. 861, 873 (2000) (formatting modified). We have
long recognized that “whether a state regulation unavoidably
conflicts with national interests is an issue incapable of
resolution in the abstract,” let alone in gross. Alascom, Inc. v.
FCC, 727 F.2d 1212, 1220 (D.C. Cir. 1984); see also Time
Warner Entertainment Co. v. FCC, 56 F.3d 151, 195 (D.C. Cir.
1995) (“[T]he issue of whether the 1992 Cable Act preempts
state negative option billing laws involves a host of factual
questions peculiar to the state law at issue in each case.”).
Because a conflict-preemption analysis “involves fact-
intensive inquiries,” it “mandates deferral of review until an
actual preemption of a specific state regulation occurs.”
Alascom, 727 F.2d at 1220. Without the facts of any alleged
conflict before us, we cannot begin to make a conflict-
preemption assessment in this case, let alone a categorical
determination that any and all forms of state regulation of
137
intrastate broadband would inevitably conflict with the 2018
Order.
The dissenting opinion, for its part, invents a brand new
source of preemptive power that not even the Commission
claims. Dissenting Op. 5–6, 9. The power to preempt is said
to derive from Chevron deference and the “definitional
ambiguity” that permits the Commission to classify broadband
under Title I. Id. at 9; see Chevron, 467 U.S. 837. In the
dissenting opinion’s view, that interpretive ambiguity alone
spawns a power to preempt with all the might of an express
statutory grant of authority, and is singlehandedly capable of
investing the Commission with the very state-law-displacing
authority that the statute withheld in Section 152(b). That
theory fails for four reasons.
First, this asserted legal basis for preemption is not before
us. The 2018 Order offered two, and only two, sources of
authority for the Preemption Directive: the impossibility
exception and the federal policy of nonregulation for
information services. 2018 Order ¶¶ 197–204 (discussing
these sources under the heading “Legal Authority”). It did not
advance Chevron Step Two as a source of preemption
authority, so it cannot do so here for the first time. See
Chenery, 318 U.S. at 87 (“The grounds upon which an
administrative order must be judged are those upon which the
record discloses that its action was based.”); Clean Air
Council v. Pruitt, 862 F.3d 1, 4, 9 (D.C. Cir. 2017) (per curiam)
(holding that an agency could not invoke on appeal a source of
authority for its action that it “did not rely on” when it acted);
Business Roundtable v. SEC, 905 F.2d 406, 407–408, 417
(D.C. Cir. 1990) (holding that an agency’s regulation exceeded
its authority under the statutory provisions it invoked, and
under Chenery “we cannot supply grounds to sustain the
regulations that were not invoked by the [agency] below”).
138
The Commission’s brief here hewed to the 2018 Order,
advancing the same “two independent bases of authority[,]”
plus “ordinary principles of conflict preemption.”
Commisssion Br. 116–133 (asserting these bases under the
heading “The Order’s Preemption Of Inconsistent State And
Local Regulation Is Lawful”). Once again, the dissenting
opinion’s Chevron Step Two theory is not there. So it is
forfeited. See In re U.S. Office of Personnel Mgmt. Data Sec.
Breach Litig., 928 F.3d 42, 71 (D.C. Cir. 2019) (“And
KeyPoint has not raised a preemption argument in this court,
so any argument to that effect is forfeited for purposes of this
appeal.”); United States v. Gewin, 759 F.3d 72, 87 n.2 (D.C.
Cir. 2014) (“Gewin * * * forfeited that argument, however, by
failing to discuss it in his briefing.”). Of course, the
Commission alluded to its Chevron Step Two interpretation in
explaining its policy reasons for desiring categorical
preemption. See 2018 Order ¶ 194; Commission Br. 115. But
nowhere does it argue what the dissenting opinion does: that
Chevron interpretive ambiguity provides an affirmative source
of legal authority to preempt state laws.
Second, the dissenting opinion fails to explain how the
Commission’s interpretive authority under Chevron to classify
broadband as a Title I information service could do away with
the sine qua non for agency preemption: a congressional
delegation of authority either to preempt or to regulate.
Congress expressly “fenc[ed] off from [the Commission’s]
reach or regulation intrastate matters, * * * including matters
in connection with intrastate service.” Louisiana PSC, 476
U.S. 370 (internal quotation marks omitted). It is also
Congress that chose to house affirmative regulatory authority
in Titles II, III, and VI, and not in Title I. And it is Congress
to which the Constitution assigns the power to set the metes
and bounds of agency authority, especially when agency
authority would otherwise tramp on the power of States to act
139
within their own borders. So to work here, the agency’s
interpretive authority would have to trump Congress’s
calibrated assignment of regulatory authority in the
Communications Act.
But that cannot be right. No matter how desirous of
protecting their policy judgments, agency officials cannot
invest themselves with power that Congress has not conferred.
Louisiana PSC, 476 U.S. at 374; American Library, 406 F.3d
at 698. And nothing in Chevron rewrites or erases plain
statutory text. See Chevron, 467 U.S. at 842–843 (“First,
always, is the question whether Congress has directly spoken
to the precise question at issue. If the intent of Congress is
clear, that is the end of the matter; for the court, as well as the
agency, must give effect to the unambiguously expressed intent
of Congress.”).
The dissenting opinion invokes two cases discussing
implied preemption arising from different agencies’ decisions
to forgo regulation under different statutory schemes. See
Dissenting Op. 14–15. It first cites Arkansas Electric
Cooperative Corp. v. Arkansas Public Service Commission, in
which the Supreme Court observed that “a federal decision to
forgo regulation in a given area may imply an authoritative
federal determination that the area is best left unregulated.”
461 U.S. 375, 384 (1983) (formatting modified). The Court
went on to conclude that the relevant statute did not in fact
imply such a determination, and so the state regulation at issue
was not preempted. Id.
At best, Arkansas Electric sets up one version of the
question. But it gets the dissent no closer to its preferred
answer: that here, Congress delegated to the Commission the
authority to give sweeping preemptive effect to whatever
140
policy determination underlay its Chevron Step Two
interpretation of “offer,” Dissenting Op. 5.
In the second case, Ray v. Atlantic Richfield Co., the
Supreme Court described the “pre-emptive impact” implied by
the “failure of federal officials affirmatively to exercise their
full authority” under a statute that the Court had already
recognized as delegating regulatory power to the agency. 435
U.S. 151, 174, 177–178 (1978) (formatting modified) (“We
begin with the premise that the Secretary has the authority to
establish ‘vessel size and speed limitations.’”) (cited at
Dissenting Op. 14–15).
Those cases do nothing to empower the Commission to
engage in express preemption in the 2018 Order. See Oral Arg.
Tr. 171 (Commission: “No, Your Honor, it’s express
preemption.”). In neither case was the source or existence of
statutory authority for the agency to preempt state regulation at
issue. Nor do those cases speak to a statutory scheme in which
Congress expressly marked out a regulatory role for States that
the federal agency has attempted to supplant. If Congress
wanted Title I to vest the Commission with some form of
Dormant-Commerce-Clause-like power to negate States’
statutory (and sovereign) authority just by washing its hands of
its own regulatory authority, Congress could have said so.
Third, the dissenting opinion’s effort to discern
Congress’s delegation of preemption authority in Chevron and
Brand X does not work either. The dissenting opinion
acknowledges that its theory of Chevron preemption authority
derives entirely from the “ambiguity in the word ‘offer,’”
Dissenting Op. 5, a word that is buried in a definitional section
in a non-regulatory part of the statute, 47 U.S.C. § 153(53).
To be sure, Chevron and Brand X together confirm that the
Commission has interpretive “discretion” to classify
141
broadband as either an information service or a
telecommunications service. Brand X, 545 U.S. at 996–997;
see Chevron, 467 U.S. at 860–862 (reading a statutory gap as
indicating a congressional delegation of power to an agency to
fill it). Congress, in other words, created an interpretive
statutory fork in the road and gave the Commission the
authority to choose the path.
But the Commission’s power to choose one regulatory
destination or another does not carry with it the option to mix
and match its favorite parts of both. The dissenting opinion’s
defense of the Preemption Directive makes the mistake of
collapsing the distinction between (i) the Commission’s
authority to make a threshold classification decision, and (ii)
the authority to issue affirmative and State-displacing legal
commands within the bounds of the classification scheme the
Commission has selected (here, Title I). The agency’s power
to do the former says nothing about its authority to do the latter.
Chevron, after all, is not a magic wand that invests agencies
with regulatory power beyond what their authorizing statutes
provide. Instead, the point of Chevron was simply to draw
lines between the courts’ and administrative agencies’
respective roles in interpreting ambiguous statutes. See
Chevron, 467 U.S. at 842–844.
The dissenting opinion’s theory of Chevron preemption,
in other words, takes the discretion to decide which definition
best fits a real-world communications service and attempts to
turn that subsidiary judgment into a license to reorder the entire
statutory scheme to enforce an overarching “nationwide
regime” that enforces the policy preference underlying the
definitional choice. Dissenting Op. 6. Nothing in Chevron
goes that far. And doing so here would turn every exercise of
Chevron Step-Two interpretation into a bureaucratic
blunderbuss capable of demolishing state laws across the
142
Nation any time the agency fears that state regulation might
intrude on its regulatory or deregulatory ethos.
The Supreme Court has made very clear that Chevron does
not have that much muscle. Congress, the Court has explained,
“does not alter the fundamental details of a regulatory scheme,”
let alone step so heavily on the balance of power between the
federal government and the States, “in vague terms or ancillary
provisions—it does not, one might say, hide elephants in
mouseholes.” Whitman v. American Trucking Ass’ns, 531 U.S.
457, 468 (2001).
And that principle is a well-settled limitation on Chevron.
See, e.g., King v. Burwell, 135 S. Ct. 2480, 2495 (2015)
(quoting Whitman, 531 U.S. at 468); Gonzales v. Oregon, 546
U.S. 243, 267 (2006) (same); see also Natural Res. Def.
Council v. EPA, 661 F.3d 662, 664–665 (D.C. Cir. 2011);
American Chemistry Council v. Johnson, 406 F.3d 738, 743
(D.C. Cir. 2005) (“Congress does not generally hide elephants
in mouseholes, and we think it utterly improbable that
[Congress intended to authorize the EPA’s interpretation] by
creating a list of several hundred toxic chemicals.”) (internal
citation omitted). The mousehole, in short, cannot be the
wellspring of preemption authority that the Commission needs.
Doubly so here, where the Supreme Court has specifically held
that the Commission’s desire to “best effectuate a federal
policy” must take a back seat to Section 152(b)’s assignment
of regulatory authority to the States. Louisiana PSC, 476 U.S.
at 374.
Anyhow, the argument that the Commission needs to save
its classification decision from becoming “meaningless,”
Dissenting Op. 23, still does not work. If the Commission can
explain how a state practice actually undermines the 2018
143
Order, then it can invoke conflict preemption.4 If it cannot
make that showing, then presumably the two regulations can
co-exist as the Federal Communications Act envisions, 47
U.S.C. § 152(b). What matters for present purposes is that, on
this record, the Commission has made no showing that wiping
out all “state or local requirements that are inconsistent with
the [Order’s] federal deregulatory approach” is necessary to
give its reclassification effect. 2018 Order ¶ 194. And binding
Supreme Court precedent says that mere worries that a policy
will be “frustrate[d]” by “jurisdictional tensions” inherent in
the Federal Communications Act’s division of regulatory
power between the federal government and the States does not
create preemption authority. Louisiana PSC, 476 U.S. at 370,
375.
For those same reasons, the dissenting opinion’s concern
that “the most draconian state policy trumps all else,”
Dissenting Op. 1, is a straw man. In vacating the Preemption
Directive, we do not consider whether the remaining portions
of the 2018 Order have preemptive effect under principles of
conflict preemption or any other implied-preemption doctrine.
Much like the dissenting opinion’s effort to wring out of
Arkansas Electric and Ray a source of preemption authority,
the dissenting opinion’s suggestion that the court’s decision
leaves no room for implied preemption confuses (i) the scope
of the Commission’s authority to expressly preempt, with
(ii) the (potential) implied preemptive effect of the regulatory
choices the Commission makes that are within its authority.
4
See Williamson v. Mazda Motor of America, Inc., 562 U.S.
323, 330 (2011) (conflict preemption wipes out “state law that stands
as an obstacle to the accomplishment and execution of the [federal
law’s] full purposes and objectives”) (internal quotation marks
omitted).
144
Fourth, the dissenting opinion’s reliance on the Eighth
Circuit’s opinion in Minnesota Public Utilities Commission v.
FCC (“Minnesota PUC”), 483 F.3d 570 (8th Cir. 2007), is
misplaced. That opinion enumerated the discrete questions it
purported to answer—none of which was whether Congress
delegated to the Commission the authority to preempt. Id. at
577. The Eighth Circuit decided only whether the
Commission’s order was “arbitrary and capricious because it
* * * determined it was impractical or impossible to separate
the intrastate components of VoIP service from its interstate
components,” or because it “determined state regulation of
VoIP service conflicts with federal regulatory policies.” Id.
This set of inquiries does not resolve the purely legal question
of the source of the Commission’s asserted preemption
authority here.
The dissenting opinion concedes that point. Dissenting
Op. 18 (acknowledging that “legal authority * * * was not
formally at issue”). The dissent nevertheless suggests that the
Eighth Circuit’s decision upholding as neither arbitrary nor
capricious the Commission’s finding of “the facts essential for
application of the impossibility exception” implies that, had
that court actually considered the question whether the
Commission had the legal authority to preempt, it would have
disagreed with us. Id. at 17–18. But the Eighth Circuit’s
silence on that question leaves us with nothing to answer.
*****
At bottom, the Commission lacked the legal authority to
categorically abolish all fifty States’ statutorily conferred
authority to regulate intrastate communications. For that
reason, we vacate the Preemption Directive, 2018 Order
¶¶ 194–204. And because no particular state law is at issue in
this case and the Commission makes no provision-specific
145
arguments, it would be wholly premature to pass on the
preemptive effect, under conflict or other recognized
preemption principles, of the remaining portions of the 2018
Order.
VII. Conclusion
Despite the Commission’s failure to adequately consider
the 2018 Order’s impact on public safety, pole-attachment
regulation, and the Lifeline Program and despite our vacatur of
the Preemption Directive, we decline to vacate the 2018 Order
in its entirety.
When deciding whether to vacate an order, courts are to
consider the “the seriousness of [its] deficiencies (and thus the
extent of doubt whether the agency chose correctly) and the
disruptive consequences of an interim change that may itself
be changed.” Allied-Signal, Inc. v. United States Nuclear
Regulatory Comm’n, 988 F.2d 146, 150–151 (D.C. Cir. 1993);
see also Heartland Regional Med. Ctr. v. Sebellius, 566 F.3d
193 (D.C. Cir. 2009) (analyzing the Allied-Signal factors).
Here, those factors weigh in favor of remand without
vacatur. First, the Commission may well be able to address on
remand the issues it failed to adequately consider in the 2018
Order. See Susquehanna Int’l Grp., LLC v. SEC, 866 F.3d 442,
451 (D.C. Cir. 2017) (“[T]he SEC may be able to approve the
Plan once again, after conducting a proper analysis on
remand.”); see also Black Oak Energy, LCC v. FERC., 725
F.3d 230, 244 (D.C. Cir. 2013) (remanding without vacatur
where it was “plausible that FERC can redress its failure of
explanation on remand while reaching the same result”).
Second, the burdens of vacatur on both the regulated parties (or
non-regulated parties as it may be) and the Commission
counsel in favor of providing the Commission with an
opportunity to rectify its errors. Regulation of broadband
146
Internet has been the subject of protracted litigation, with
broadband providers subjected to and then released from
common carrier regulation over the previous decade. We
decline to yet again flick the on-off switch of common-carrier
regulation under these circumstances.
But because the Commission’s Preemption Directive, see
2018 Order ¶¶ 194–204, lies beyond its authority, we vacate
the portion of the 2018 Order purporting to preempt “any state
or local requirements that are inconsistent with [the
Commission’s] deregulatory approach[,]” see id. ¶ 194.
For the foregoing reasons, the petitions for review are
granted in part and denied in part.
So ordered.
MILLETT, Circuit Judge, concurring:
I join the Court’s opinion in full, but not without
substantial reservation. The Supreme Court’s decision in
National Cable & Telecommunications Ass’n v. Brand X
Internet Services, 545 U.S. 967 (2005), compels us to affirm as
a reasonable option the agency’s reclassification of broadband
as an information service based on its provision of Domain
Name System (“DNS”) and caching. But I am deeply
concerned that the result is unhinged from the realities of
modern broadband service.
We have held before, as we do again today, that under the
Supreme Court’s decision in Brand X, “classification of
broadband as an information service was permissible.” USTA
v. FCC, 825 F.3d 674, 704 (D.C. Cir. 2016) (emphasis added).
That is because the Supreme Court “made clear” in Brand X,
“over and over[,] that the [Communications] Act left
[classification] to the agency’s discretion.” USTA v. FCC, 855
F.3d 381, 384 (D.C. Cir. 2017) (Srinivasan and Tatel, JJ.,
concurring in the denial of rehearing en banc); see, e.g., Brand
X, 545 U.S. at 992 (“[T]he statute fails unambiguously to
classify the telecommunications component of cable modem
service as a distinct offering[],” and “[t]his leaves federal
telecommunications policy in this technical and complex area
to be set by the Commission, not by warring analogies[.]”); id.
at 996–997 (“silence suggests * * * instead that the
Commission has the discretion to fill the consequent statutory
gap”).
But that was then, and this is now. Brand X was decided
almost fifteen years ago, during the bygone era of iPods, AOL,
and Razr flip phones. The market for broadband access has
changed dramatically in the interim. Brand X faced a “walled
garden” reality, in which broadband was valued not merely as
a means to access third-party content, but also for its bundling
of then-nascent information services like private email, user
2
newsgroups, and personal webpage development. Today, none
of those add-ons occupy the significance that they used to.
Now it is impossible “to deny [the] dominance of [third-party
content] in the broadband experience.” USTA, 825 F.3d at 698.
“[C]onsumers use broadband principally to access third-party
content, not [ISP-provided] email and other add-on
applications.” Id. (emphasis added). In a nutshell, a speedy
pathway to content is what consumers value. It is what
broadband providers advertise and compete over. And so,
under any natural reading of the statute, the technological
mechanism for accessing third-party content is what broadband
providers “offer.”
As our opinion today recognizes, auxiliary services like
DNS and caching remain in the broadband bundle. But their
salience has waned significantly since Brand X was decided.
DNS is readily available, free of charge, and at a remarkably
high quality, from upwards of twenty different third-party
providers. And caching has been fundamentally stymied by the
explosion of Internet encryption. For these accessories to
singlehandedly drive the Commission’s classification decision
is to confuse the leash for the dog. In 2005, the Commission’s
classification decision was “just barely” permissible. Brand X,
545 U.S. at 1003 (Breyer, J., concurring). Almost fifteen years
later, hanging the legal status of Internet broadband services on
DNS and caching blinks technological reality.
I
A
The Commission’s latest reclassification decision
reinterprets the Communications Act, and so the statutory text
and structure are where I begin. See Ross v. Blake, 136 S. Ct.
1850, 1856 (2016).
3
The Act divides the world of relevant technologies into
two buckets: “information services” subject only to minimal
regulation, and “telecommunications services” subject to the
common carriage requirements of Title II. “Information
service” is defined as “the offering of a capability for
generating, acquiring, storing, transforming, processing,
retrieving, utilizing, or making available information via
telecommunications.” 47 U.S.C. § 153(24).
“Telecommunications,” in turn, is “the transmission, between
or among points specified by the user, of information of the
user’s choosing, without change in the form or content of the
information as sent and received.” Id. § 153(50). And
“telecommunications service” means “the offering of
telecommunications for a fee directly to the public * * *
regardless of the facilities used.” Id. § 153(53).
A telecommunications carrier is “treated as a common
carrier” subject to Title II “to the extent that it is engaged in
providing telecommunications services.” 47 U.S.C. § 153(51).
Title II requires, among other things, that telecommunications
carriers charge just, reasonable, and nondiscriminatory rates,
see id. §§ 201(b), 202(a), and design their systems so that other
carriers can interconnect with their networks, see id. § 251(a).
To be sure, these regulatory enhancements need not
always run with the Title II classification. The Commission is
specifically directed to “forbear from applying” common
carrier regulations whenever forbearance “is consistent with
the public interest,’’ 47 U.S.C. § 160(a)(3), and enforcement is
“[un]necessary” to either “protect[]” consumers or ensure “just
and reasonable” rates, id. § 160(a)(1)–(2). In making that
public interest assessment, the Commission must consider
“whether forbearance * * * will promote competitive market
conditions” that reduce rates and improve product quality. Id.
§ 160(b). In other words, even when the Commission elects
4
the Title II common-carrier pathway, serving the “public
interest” remains the touchstone.
B
In Brand X, the Supreme Court held that the key statutory
term “offering” in the definition of “telecommunications
service” is ambiguous in the following respect. Brand X, 545
U.S. at 989. What a company “offers,” according to Brand X,
can refer to either the “single, finished product” or the
product’s “individual components.” Id. at 991. Resolving that
question in the context of broadband service required the
Commission to determine whether broadband’s data-
processing and telecommunications components “are
functionally integrated * * * or functionally separate,” id., and,
relatedly, “what the consumer perceives to be the integrated
finished product,” id. at 990. According to Brand X, those
questions “turn[] not on the language of [the Communications]
Act, but on the factual particulars of how Internet technology
works and how it is provided, questions Chevron leaves to the
Commission to resolve in the first instance.” Id. at 991.
Brand X recognized that “telecommunications”—in the
form of a “physical connection” between the providers’
computers and end users’ computers, Brand X, 545 U.S. at
1009 (Scalia, J., dissenting)—“was one necessary component”
of broadband service. See id. at 978–979, 988, 990 (majority
opinion). But given the Commission’s definition of the word
“offering,” the key question was whether that transmission
component was sufficiently independent to amount to a “stand-
alone” offering. See id. at 988–989. At Chevron’s second step,
the Court deferred to the Commission’s finding that “the high-
speed transmission used to provide [the information service] is
a functionally integrated component of [an information]
service[.]” Id. at 998.
5
Based on the technological realities of the time, the
Supreme Court held that the Commission reasonably
concluded in 2002 that the “data transport” aspect of broadband
was “inextricably intertwined” with information service
capabilities like DNS, caching, “Usenet newsgroups,” and ISP-
provided email, so that, together, they formed just one “single,
integrated” offering. See Brand X, 545 U.S. at 977–979, 987–
990.
As today’s opinion explains, we are bound to uphold the
Commission’s classification because it hewed closely to the
portions of Brand X that discuss DNS and caching as
information services. 2018 Order ¶ 33; see id. ¶ 33 n.99
(recognizing other functionalities, but only by way of footnote,
with no elaboration, and deeming them non-“determinative”).
In the 2018 Order, the Commission describes DNS as
“indispensable to ordinary users as they navigate the Internet,”
and it claims “the absence of ISP-provided DNS would
fundamentally change the online experience for the consumer.”
Id. ¶ 34. The Commission then largely duplicates Brand X’s
discussion of caching, albeit with some additional technical
detail. Id. ¶ 41. It concludes that they are “functions provided
as part and parcel of” broadband, id. ¶ 42, and should be
“understood as part of a single, integrated information service
offered by ISPs,” id. ¶ 50; see also id. ¶ 33.
Brand X allows that approach. The Supreme Court picked
out DNS and caching to explain why the consumer continues
to make use of a functionally integrated information service,
even when she “goes beyond [the walled garden] and accesses
content provided by third parties other than the cable
company[.]” Brand X, 545 U.S. at 998; id. at 998–1000; see
also 2018 Order ¶ 34. In so doing, the Supreme Court implied
that DNS and caching were themselves information services.
See id. at 998–1000.
6
From our limited institutional perch as a lower court, that
conclusion controls our decision. “[W]e must follow the
binding Supreme Court precedent.” We the People Found.,
Inc. v. United States, 485 F.3d 140, 145 (D.C. Cir. 2007).
II
The Supreme Court, however, is not so constrained. It is
freer than we are to conclude that the “factual particulars of
how Internet technology works,” Brand X, 545 U.S. at 991,
have changed so materially as to undermine the reasonableness
of the agency’s judgments and in particular its “determinative”
reliance on DNS and caching, 2018 Order ¶ 33 n.99. Or
Congress could bring its own judgment to bear by updating the
statute’s governance of telecommunications and information
services to match the rapid and sweeping developments in
those areas. Either intervention would avoid trapping Internet
regulation in technological anachronism.
A
The Commission’s decision to cling to DNS and caching
as the acid test for its regulatory classification “cannot bear
very much reality.”1 Today, the typical broadband offering
bears little resemblance to its Brand X version. The walled
garden has been razed and its fields sown with salt. The add-
ons described in Brand X—“a cable company’s e-mail service,
its Web page, and the ability it provides consumers to create a
personal Web page,” 545 U.S. at 998—have dwindled as
consumers routinely deploy “their high-speed Internet
connections to take advantage of competing services offered by
third parties.” Title II Order ¶ 347. That is why the
1
T.S. Eliot, Burnt Norton, in FOUR QUARTETS 1, 4 (1943).
7
Commission today makes no effort to rely on those ancillary
services. 2018 Order ¶ 33 n.99.
In fact, the significance of the walled garden is likely what
led the Brand X challengers to effectively concede, and likely
what led the Supreme Court to accept, that information services
like email, newsgroups, caching, and DNS were sufficiently
significant to define the overall “offering” and, thus, to control
the classification decision. The only question was whether
those services were sufficiently integrated with transmission to
constitute a single offering. Brand X, 545 U.S. at 987–988.
But such musings about the technological realities that
seemingly informed a Supreme Court decision alone cannot
license this court to disregard Brand X as binding precedent.
See Dronenburg v. Zech, 741 F.2d 1388, 1392 (D.C. Cir. 1984)
(“[W]e doubt that a court of appeals ought to distinguish a
Supreme Court precedent on the speculation that the Court
might possibly have had something else in mind.”).2
With the Commission now having abandoned its reliance
on any additional technologies provided by broadband, see
2018 Order ¶ 33 n.99, the question is whether the combination
of transmission with DNS and caching alone can justify the
information service classification. If we were writing on a
clean slate, that question would seem to have only one answer
given the current state of technology: No. Cf. Brand X, 545
U.S. at 990 (“[C]able companies providing Internet service do
not ‘offer’ consumers DNS, even though DNS is essential to
providing Internet access.”) (emphasis added). Not only does
the walled garden lay in ruin, but the roles of DNS and caching
themselves have changed dramatically since Brand X was
2
To be clear, I agree fully with the majority that Brand X did
not assess the “relative importance” of the data-processing and
transmission components of cable modem. Majority Op. 42.
8
decided. And they have done so in ways that strongly favor
classifying broadband as a telecommunications service, as
Justice Scalia had originally advocated. Brand X, 545 U.S. at
1012–1014 (Scalia, J., dissenting).
DNS, much like email, is now free and widely available to
consumers in the Internet marketplace. As explained in the
Title II Order, “the factual assumption that DNS lookup
necessarily is provided by the broadband Internet access
provider is no longer true today.” Title II Order ¶ 370.
OpenDNS was founded in 2006, just one year after Brand X
was decided, with the mission of providing “a recursive DNS
service for use at home.” About Us, OpenDNS,
https://www.opendns.com/about (last visited July 30, 2019).
Google followed suit in 2010, rupturing the DNS status quo
and rendering free third-party DNS a seamless reality for
interested consumers. Google, Introducing Google Public
DNS, Google Official Blog (Dec. 3, 2009),
https://googleblog.blogspot.com/2009/12/introducing-google-
public-dns.html.
By 2015, OpenDNS and Google were processing over 180
billion queries every day. Title II Order ¶ 370 n.1046. As the
Title II Order recognized, “Internet users are free to use the
DNS provider of their choice, and switching between them
does not require altering any aspect of the Internet access
service itself. Users need only quickly update a single setting
in their operating system’s Internet preferences to point DNS
requests to another server.” Id. (quoting CDT Comments at
14). Today, with a menu of more than twenty third-party
providers of free DNS, cf. J.A. 2214–2215, many millions of
Internet users have simply discarded the Commission’s North
Star—ISP-provided DNS. Cf. 2018 Order ¶ 34 n.109.
9
As for caching, Petitioners explain—and the Commission
does not dispute—that it does not work when users employ
encryption. Mozilla’s Br. 46–47; see 2018 Order ¶ 42 n.147;
J.A. 2182–2184. And encrypted traffic has “increased from
just 2% in 2010 to more than 50% in 2017.” 2018 Order ¶ 42
n.147 (quoting ACLU/EFF Reply).
The Commission’s answer is that encryption is “not yet
ubiquitous,” and that “many sites still do not encrypt.” 2018
Order ¶ 42 n.147 (emphasis added) (quoting Protecting the
Privacy of Customers of Broadband and Other
Telecommunications Services, Report and Order, 31 FCC Rcd.
13911, 13922, ¶ 34 (2016), nullified by Pub. L. No. 115-22, 131
Stat. 88 (2017)). But that response concedes that caching no
longer enjoys the pride of place ascribed to it by the Supreme
Court in 2005. See Mozilla’s Br. 46–47. Whether or not
encryption is “truly” “ubiquitous” is entirely beside the point,
2018 Order ¶ 42 n.147. Caching is no longer even dominant.
These new factual developments call for serious
technological reconsideration and engagement through expert
judgment. Instead, the Commission’s exclusive reliance on
DNS and caching blinkered itself off from modern broadband
reality, and untethered the service “offer[ed]” from both the
real-world marketplace and the most ordinary of linguistic
conventions.
B
The structure of the Communications Act fortifies this
conclusion. The Act announces a clear intention to regulate
market dynamics and to correct for the problems of monopoly
power in the telecommunications industry. See 47 U.S.C.
§ 160(b) (directing the Commission to consider “whether
forbearance [from common carriage regulations] will promote
10
competitive market conditions”); id. § 572(a) (prohibiting
carriers from “purchas[ing] or otherwise acquir[ing] directly or
indirectly more than a 10 percent financial interest, or any
management interest, in any cable operator providing cable
service within the local exchange carrier’s telephone service
area”); id. § 548(a) (aiming to “promote the public interest,
convenience, and necessity by increasing competition and
diversity in the multichannel video programming market”).
Hence, the Commission’s reasonable decision to define
“functional equivalent” in 47 U.S.C. § 332(d)(3) in terms of
market “substitutability.” 2018 Order ¶ 85.
These structural considerations ought to weigh heavily in
classifying what it is that broadband providers truly “offer” in
the marketplace. The Commission’s analysis should key to the
value added to the consumer—and any monopoly rents it might
enable—rather than to any tagalong item that happens to
promote its policy preferences. In this case, the central and
valued “offer” is transmission—technologically taking the user
to and from third-party information providers. To construe and
apply the term as the Commission has, divorced from basic
market realities, is tantamount to “perform[ing] Hamlet
without the Prince”— understanding and applying the key
statutory term without regard for the statute’s internal logic and
purposes, USTA, 825 F.3d at 749 (Williams, J., concurring);
see also Verizon v. FCC, 740 F.3d 623, 661–662 (2014)
(Silberman, J., concurring) (emphasizing that the Act is
designed to combat the monopolistic nature of the
telecommunications market).
C
The parties also debate the “telecommunications
management exception.” 47 U.S.C. § 153(24) (excluding from
an “information service” “any use [of an information service]
11
for the management, control, or operation of a
telecommunications system or the management of a
telecommunications service”). As Justice Scalia explained in
Brand X, that exception may well support excluding broadband
from the information service category. See Brand X, 545 U.S.
at 1012–1013 (Scalia, J., dissenting) (arguing that DNS “is
scarcely more than routing information, which is expressly
excluded from the definition of ‘information service’”) (citing
47 U.S.C. § 153(20)). The Commission’s two major Orders in
this area—the Title II Order and the 2018 Order—labor at
length to reconcile their preferred classifications with the text
and history of the telecommunications management exception.
Compare Title II Order ¶ 356, with 2018 Order ¶ 36.
But ambiguity in the telecommunications management
exception does not mean that anything goes. Ambiguity alone
is virtually never enough to sustain agency action. See Brand
X, 545 U.S. at 985 (asking whether the agency has
“reasonabl[y]” filled the textual gap). Here, as the court’s
opinion recognizes, the exception is fluid by design—it
operates as a means of catching data-processing tools that are,
at most, incidental to the core transmission service.
So when framed in Chevron’s terms, the Commission
faced a choice between classifying the combination of
transmission and DNS/caching as an integrated “information
service” offering, or classifying that package as a
telecommunications service, with DNS/caching falling within
the telecommunications management exception. In my view,
the reasonableness of that choice should turn, at least in part,
upon the “relative importance” of the different capabilities in
the marketplace. So, while the two sides argue at length over
whether functions like DNS and caching should fall within the
exception, the important analytical work should really occur at
the antecedent step when deciding whether the transmission
12
element is so dominant that it would be unreasonable not to
apply the exception to DNS and caching. If precedent did not
dictate otherwise, the answer to that antecedent inquiry would
put DNS and caching squarely into the telecommunications
management exception.
III
According to the Commission, even putting Brand X aside,
broadband is an information service for a new reason—one that
is immune to changes in the “factual particulars of how Internet
technology works and how it is provided.” Brand X, 545 U.S.
at 991. Broadband connection is an information service, the
Commission tells us, because it is “designed and intended”
with the “fundamental purpose[]” of facilitating access to third-
party information services. 2018 Order ¶ 30. In other words,
in the Commission’s view, broadband itself need not include
any data processing at all to satisfy the information-service
definition. It is enough that broadband is a designated
transmission pathway to third-party content—that is, that it
“has the capacity or potential ability to be used to engage in the
activities within the information service definition[.]” Id.
That move is incompatible with Brand X, the basic
mechanics of Title II, and the texts of the relevant definitional
provisions.
For starters, the Commission’s novel interpretation
effectively abrogates the Brand X blueprint. Brand X prized
above all else “consumer perce[ption]” and “functional[]
integration,” leaving those inquiries to the Commission’s
technocratic judgment. Brand X, 545 U.S. at 990–991. But if
the Commission is right today, and pure data transmission is an
information service just because its “purpose” is to facilitate
access to other information services, then there would be no
13
combination of services left for expert technical analysis. “The
entire question,” Brand X tells us, “is whether the products here
are functionally integrated (like the components of a car) or
functionally separate (like pets and leashes).” Brand X, 545
U.S. at 991. The Commission’s approach abandons that test by
simply redesignating the transmission component itself as also
an information service.
The problems with the Commission’s position do not stop
there. As numerous commenters warned, the Commission’s
capacious view of “information service” would imperil the one
proposition on which everyone has so far been able to agree:
traditional telephony belongs within Title II. That worrisome
implication suggests the Commission has drifted far beyond the
statutory design and exceeded its interpretive discretion.
To appreciate why, consider the most ordinary uses of
telephone and broadband service. Both enable casual
conversation—whether via a traditional phone call or voice-
over-Internet protocol. Both also provide the user access to a
wealth of information (in the form of automated information
systems or websites). See Amicus Br. of Members of Congress
at 21–22 (citing the example of “Julie,” Amtrak’s automated
reservation service). And because these overlapping functions
are non-accidental (i.e., by “design”), presto: the old touchtone
phone is now immune from common-carriage regulation.
That definition, though, would render Title II an empty
basket. Nothing of any meaning would be left to qualify as a
telecommunications service. See Mackey v. Lanier Collection
Agency & Serv., Inc., 486 U.S. 825, 837 (1988) (“[W]e are
hesitant to adopt an interpretation of a congressional enactment
which renders superfluous another portion of that same law.”).
14
The Commission says it has “always understood
traditional telephone service ‘to provide basic transmission—a
fact not changed by its incidental use, on occasion, to access
information services.’” FCC’s Br. 34 (emphasis added)
(quoting 2018 Order ¶ 56). But that response avoids the key
question: Whether the Commission’s new position can be
squared with what it has always understood. Historically, the
Commission has viewed telephony as pure transmission
because that is exactly what it is. Any information services—
from directory assistance to automated ordering systems—to
which the phone provided access were never thought to bear
upon telephony’s classification status as a telecommunications
service, and not an information service.
At least not until now. The Commission’s novel and
utterly capacious definition of information services as just
providing the user transmissive access to information requires
that it contend with the traditional use of telephones “to
generate, acquire, store, transform, process, retrieve, utilize,
and make available information.” 2018 Order ¶ 56. An
announced fealty to prior agency practice is no help when the
whole question is whether the new approach imperils the
foundation of that pedigree.
The Commission’s position fares no better when measured
against the text of the statute. The Commission claims
broadband offers the relevant “capabilities” of an information
service because it is “designed” or “intended” to achieve the
“fundamental purpose[]” of acquiring and retrieving
information. 2018 Order ¶ 30. But those purposive qualifiers
are nowhere to be found in the statutory text.
The Commission’s position also requires it to carve out an
unenumerated exception to the statute’s straightforward
definition of “telecommunications service.”
15
“Telecommunications service” is “the offering of
telecommunications”—that is, “the transmission, between or
among points specified by the user, of information of the user’s
choosing, without change in [its] form or content,” 47 U.S.C.
§ 153(50)—“for a fee directly to the public,” id. § 153(53). On
the Commission’s view, a telecommunications pathway that is
“designed” to facilitate information acquisition and
manipulation does not meet the telecommunications definition
and is instead an information service. 2018 Order ¶ 56
(distinguishing broadband from a telecommunications service
because it is “designed * * * to electronically create, retrieve,
modify and otherwise manipulate information”).
The problem is the statute does not include a mens rea
“design” exception. Presumably because every transmission
pathway is designed on some level to acquire and retrieve data.
What would be the point of transmission otherwise? So
following the Commission’s view to its logical conclusion,
everything (including telephones) would be an information
service. The only thing left within “telecommunications
service” would be the proverbial road to nowhere.
So, in addition to upending the only fixed point in our post-
Brand X world (that is, traditional telephony as a
telecommunications service), the Commission’s position treats
the statutory text as an afterthought. Yet agencies are not
supposed to “rewrite clear statutory terms to suit [their] own
sense of how the statute should operate.” Utility Air
Regulatory Grp. v. EPA, 134 S. Ct. 2427, 2446 (2014).
*****
In an area so fraught with political contest and technical
complexity, we ordinarily grant the administering agency the
widest possible berth in interpreting and administering a
16
technical statutory scheme. But that discretion is not unlimited,
and it cannot be invoked to sustain rules fundamentally
disconnected from the factual landscape the agency is tasked
with regulating. By putting singular and dispositive regulatory
weight on broadband’s incidental offering of DNS and caching,
the Commission misses the technological forest for a twig.
Yet, as a lower court, we are bound to “the [Supreme
Court] case which directly controls,” and so we must follow
Brand X, as the court’s opinion does. Agostini v. Felton, 521
U.S. 203, 237 (1997). It is the Supreme Court’s sole
“prerogative” to read Brand X in light of the facts of its day,
id., and to require the Commission to bring the law into
harmony with the realities of the modern broadband
marketplace. Until it does—or until Congress steps up to the
legislative plate—I am bound to concur in sustaining the
Commission’s action.
WILKINS, Circuit Judge, concurring:
I too join the Court’s opinion in full. As Judge Millett’s
concurring opinion persuasively explains, we are bound by the
Supreme Court’s decision in National Cable &
Telecommunications Ass’n v. Brand X Internet Services, 545
U.S. 967 (2005), even though critical aspects of broadband
Internet technology and marketing underpinning the Court’s
decision have drastically changed since 2005. But revisiting
Brand X is a task for the Court – in its wisdom – not us.
WILLIAMS, Senior Circuit Judge, concurring in part and
dissenting in part:
And be these juggling fiends no more believed,
That palter with us in a double sense;
That keep the word of promise to our ear,
And break it to our hope.
So says Macbeth, finding that the witches’ assurances were
sheer artifice and that his life is collapsing around him. The
enactors of the 2018 Order, though surely no Macbeths, might
nonetheless feel a certain kinship, being told that they acted
lawfully in rejecting the heavy hand of Title II for the Internet,
but that each of the 50 states is free to impose just that. (Many
have already enacted such legislation. See, e.g., Cal. S. Comm.
on Judiciary, SB 822 Analysis 1 (2018) (explaining that
California has expressly “codif[ied] portions of the recently-
rescinded . . . rules”).) If Internet communications were tidily
divided into federal markets and readily severable state
markets, this might be no problem. But no modern user of the
Internet can believe for a second in such tidy isolation; indeed,
the Commission here made an uncontested finding that it would
be “impossible” to maintain the regime it had adopted under
Title I in the face of inconsistent state regulation. On my
colleagues’ view, state policy trumps federal; or, more
precisely, the most draconian state policy trumps all else. “The
Commission may lawfully decide to free the Internet from Title
II,” we say, “It just can’t give its decision any effect in the real
world.”
The Commission has invoked the “impossibility
exception,” a well-established ground of FCC preemption. (It
is an “exception” to 47 U.S.C. § 152(b)’s otherwise existing
barrier to Commission jurisdiction over any charges, etc., “in
connection with intrastate communication service by wire or
radio of any carrier” (emphasis added).) As formulated by our
2
circuit, the exception permits the Commission to preempt state
regulation “when (1) the matter to be regulated has both
interstate and intrastate aspects . . . ; (2) FCC preemption is
necessary to protect a valid federal regulatory objective . . . ;
and (3) state regulation would ‘negate[] the exercise by the
FCC of its own lawful authority’ because regulation of the
interstate aspects of the matter cannot be ‘unbundled’ from
regulation of the intrastate aspects.” Public Service Comm’n of
Maryland v. FCC, 909 F.2d 1510, 1515 (D.C. Cir. 1990).
Prong (1) is obviously satisfied, and petitioners bring no
challenge under prong (2)—that “preemption is necessary to
protect a valid federal regulatory objective,” or the all-
important final part of prong (3)—that “regulation of the
interstate aspects of the matter cannot be ‘unbundled’ from
regulation of the intrastate aspects.” Id. The 2018 Order
reasoned that trying to segregate flows of Internet data into
discrete intrastate and interstate components for regulatory
purposes would be quite hopeless:
Because both interstate and intrastate
communications can travel over the same Internet
connection (and indeed may do so in response to a
single query from a consumer), it is impossible or
impracticable for ISPs to distinguish between
intrastate and interstate communications over the
Internet or to apply different rules in each
circumstance. Accordingly, an ISP generally could
not comply with state or local rules for intrastate
communications without applying the same rules to
interstate communications. Thus, because any effort
by states to regulate intrastate traffic would interfere
with the Commission’s treatment of interstate traffic,
the first condition for conflict preemption is satisfied.
3
2018 Order ¶ 200. Although petitioners posed objections to
such findings before the agency, they make none here, despite
the high bar our cases set for the agency on such issues. See,
e.g., Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC, 880 F.2d
422, 430 (D.C. Cir. 1989) (stating that “a valid FCC preemption
order must be limited to [activities] that would necessarily
thwart or impede the operation of a free market in the [relevant
area]” (emphasis added)). Thus the proposition that
disallowance of preemption would thoroughly frustrate the
application of the Commission’s decision is uncontested.
Nor is the preemptive language broader than the
Commission has historically used in exercising impossibility
preemption. See, e.g., Second Computer Inquiry,
Memorandum Opinion and Order, 84 F.C.C. 2d 50 ¶ 155
(1980) (“While this requirement may impair the states’ ability
to establish charges for intrastate service, we have imposed it
only to best implement our jurisdiction under Sections 1 and
2(a) over interstate service. When the exercise of our
jurisdiction over interstate services requires the imposition of
requirements for unbundling and nonusage sensitive charges,
however, inconsistent state regulations must yield to
preeminent claims of the federal regulatory scheme.”).
Given the uncontested findings, petitioners and the
majority rest the case against preemption entirely on the theory
that the Commission lacks authority to preempt. Of course
authority is essential. Preemption by an agency without
authority to preempt would be a contradiction in terms under
our constitutional system, where Congress makes the laws. It
is also uncontested here that Congress did not afford the FCC
express authority to preempt.
But Supreme Court decisions make clear that a federal
agency’s authority to preempt state law need not be expressly
granted. When a federal agency “promulgates regulations
4
intended to pre-empt state law [i.e., with an express statement
of agency intent], the court’s inquiry is . . . limited,” Fidelity
Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 154
(1982):
If [the agency’s] choice represents a reasonable
accommodation of conflicting policies that were
committed to the agency’s care by the statute, we
should not disturb it unless it appears from the statute
or its legislative history that the accommodation is not
one that Congress would have sanctioned.
Id. (quoting United States v. Shimer, 367 U.S. 374, 383
(1961)).
Given the Commission’s undisputed findings here, the
only vulnerability of its position is the possibility suggested in
the last clause—whether “it appears from the statute or its
legislative history that the accommodation is not one that
Congress would have sanctioned.” Inquiry into that question
proceeds in the usual way of discerning congressional intent,
exemplified by City of New York v. FCC, 486 U.S. 57 (1988).
There the Court found that Congress had empowered the FCC
to adopt a prophylactic rule preempting state attempts to
impose on certain cable operators “more stringent” technical
standards than those imposed by the Commission, id. at 63,
regardless of “whether . . . an actual conflict” existed between
the state standards and any federal law or regulation, id. at 65-
66. The Court located that broad pre-emptive authority in
§ 624(e) of the Cable Act, 47 U.S.C. § 544(e) (1982), id. at 70
n.6, even though that section said nothing about preemption. It
rested the inference on the fact that “[w]hen Congress enacted
the Cable Act [of 1984] . . . it acted against a background of
federal pre-emption on [the cable standards] issue.” Id. at 66.
As we shall see, the background of pre-1996 preemption
provides less obvious and emphatic support; only one decision,
5
California v. FCC, 39 F.3d 919 (9th Cir. 1994), expressly
rested on the Commission’s interest in protecting the open
market in services under Title I from state or local frustration.
See below, pp. 16–17. Nonetheless, the statute, its history and
its interpretation give ample reason to infer a congressional
intent that the Commission be authorized to preempt state laws
that would make it “impossible or impracticable” (see ¶ 200,
above) for ISPs to exercise the freedom that the Commission
meant to secure by classifying broadband under Title I.
We start with Chevron’s understanding that where
“Congress has explicitly left a gap for the agency to fill, there
is an express delegation of authority.” Chevron, U.S.A., Inc. v.
Nat’l Res. Def. Council, Inc., 467 U.S. 837, 843–44 (1984).
“Sometimes the legislative delegation to an agency on a
particular question is implicit rather than explicit.” Id. at 844.
In the case of the 1996 Act, via ambiguity in the word “offer,”
see Nat’l Cable & Telecomm. Ass’n v. Brand X Internet Servs.,
545 U.S. 967, 989–92 (2005), Congress implicitly delegated to
the FCC the power to determine whether to locate broadband
under Title II, where it would be potentially subject to the full
gamut of regulations designed for natural monopoly, or under
Title I, which itself authorizes virtually no federal regulation.
(An exception is 47 U.S.C. § 257, which though located in Title
II was expressly written to apply to all of Chapter 5, which
encompasses Titles I through VI.) All members of the panel
agree that here as in Brand X the Commission lawfully placed
broadband service under Title I of the 1996 Act and lawfully
rejected placing it under Title II.
The consequences of the Commission’s choice of Title I
depend on its having authority to preempt. One possible
outcome is that the choice did little more than flick the federal
regulatory switch into the off position, with narrow exceptions
such as authority under § 257, which the Commission has
exercised to assure transparency in ISP behavior. On that view,
6
the Commission’s choice of Title I essentially turned the field
over to states and localities, leaving each free to select as
prescriptive control over broadband as it might think best. Of
course the individual state or locality, if inclined to a genuinely
light-touch regime, would have to face the reality that the
Commission addressed in ¶ 200 of the Order, quoted just
above. Just as an ISP cannot “comply with state or local rules
for intrastate communications without applying the same rules
to interstate communications,” it seems safe to say that an ISP
bound to apply the rules of California to any of its service will
also need—because of the impossibility of “distinguish[ing]
between intrastate and interstate communications over the
Internet,” 2018 Order ¶ 200—to apply those heavy-handed
rules to all its service.
The other possible outcome is that the congressional grant
of power to choose Title I entailed Commission authority to
choose a genuinely light-touch national regime—for all
broadband in the United States. On this view, the choice of
Title I, coupled with preemption of inconsistent state and local
regulation, allows establishment of a genuinely federal policy
for broadband, with service based primarily on consumer and
provider response to market forces.
Under the first view, the feds step aside and leave the
matter to the states (or, more realistically, to the most ardently
regulatory state). Under the second, federal law adopts a
nationwide regime governed primarily by market forces.
As Congress did not specifically grant or withhold
preemption authority in the context of Title I, we must look for
other clues. The strongest (invoked by the Commission, see
2018 Order ¶ 204) is the provision flat-out preempting state
authority to enforce any of the Title II provisions “that the
Commission has determined to forbear from applying.” 47
U.S.C. § 160(e). Within the Title II realm, the statute
7
automatically requires state congruence with the Commission’s
choices as to regulatory stringency (at least to the extent that
choices are made by forbearance or refraining from
forbearance). As the Commission exercises discretion to go
down the scale of dirigisme, Congress requires the states to trail
along.
Yet petitioners tell us not only that mandatory state
congruence collapses automatically once the Commission steps
off the Title II escalator and chooses Title I, but that the
Commission is left with no authority to make its policy choice
a national one. Such a view would put the Commission in
paradoxical bind. The Commission could create an effective
federal policy controlling communications brought under Title
II, within a considerable range of intrusiveness, but if it finds
the light-touch associated with Title I more apt, it then de facto
yields authority over interstate communications to the states.
Of course this inference from statutory forbearance
preemption automatically encounters the maxim expressio
unius est exclusio alterius: Congress’s direction of preemption
for all lawful exercises of forbearance from Title II authority,
with no parallel provision for the Commission’s choice of Title
I, might be taken to exclude any preemption once the
Commission chooses Title I (putting aside preemption aimed at
maintaining the effectiveness of regulation under Title II, see
Comcast Corp. v. FCC, 600 F.3d 642, 654 (D.C. Cir. 2010)).
Such a congressional intent seems improbable. First, the
expressio unius maxim doesn’t really fit: § 160(e) operates to
preempt as a matter of law, whereas here we are talking of
whether the Commission has a discretionary choice to preempt.
The existence of an orange doesn’t imply the absence of an
apple. Second, under Brand X’s reading of the 1996 Act, we
have to infer a congressional belief that the very light touch
associated with Title I would be a reasonable Commission
8
choice. But we also know that Congress wanted a Commission
choice among fine gradations of regulatory intrusiveness to be
applied nationally (to the extent necessary for it to apply fully
to all interstate communications)—by granting the forbearance
power in Title II, coupled with automatic preemption.
Accepting the expressio unius argument requires us to think
that Congress intended to suspend Commission authority to
implement its policy choice nationally just at the point where
the agency’s findings in favor of deregulation cease to be
achievable under the combination of Title II-plus-forbearance.
This dilemma would disappear if the Commission could
move down the forbearance escalator under Title II to a point
very close to the ultra-light-touch of Title I. But it can’t. No
Commission, however intellectually gifted, could write an
order explaining (a) why Title II was suitable because of
serious market failures requiring corrective government action
under its grants of authority, and simultaneously (b) why it was
exercising its authority to forbear from exercising all those
authorities. Section 160(a), after all, requires that in exercising
forbearance the Commission determine that enforcement of the
provision at issue isn’t necessary to assure that rates are just
and reasonable, or for the protection of customers, and that
forbearance is consistent with the public interest. It would be a
neat trick to explain how the “difficult policy choices” that
Brand X said “agencies are better equipped to make than
courts,” 545 U.S. at 980, called for the imposition of Title II
and—simultaneously—for forbearance from all its actual
authorities. Under petitioners’ view, as a practical matter, a
Commission could create a national light-touch regime only by
choosing a place on the escalator (materially more dirigiste than
is implicit in Title I) where it could deftly but persuasively
reconcile Title II with substantial forbearance. It is hard to
imagine a rational Congress providing for use of Title I, but
requiring that any national deregulatory policy be implemented
9
only to the degree that it might prove achievable under the
internal constraints of Title II.
The improbable idea that Commission development of a
national telecommunications policy can occur only within the
constraints of Title II would especially surprise the 1996 Act’s
joint House-Senate conference committee. In introducing the
Act, the committee explained that it was “to provide for a pro-
competitive, de-regulatory national policy framework.” S.
REP. NO. 104-230, at 1 (1996) (Conf. Rep.) (emphasis added).
On petitioners’ view, the committee indulged in a massive self-
contradiction: The policies allowed by the bill could be
deregulatory, or national, but not both—at least not beyond
such deregulation as the Commission could coherently fit under
Title II.
In the end the question turns on whether we see preemption
as serving to protect the federal regulations from state
frustration or to protect federal choice of a regulatory regime
from state frustration. Suppose that the statute, instead of
delegating authority to choose between the two titles via
definitional ambiguity, had said bluntly, “The Commission
shall in its reasonable discretion choose between applying the
regulatory scheme applicable under Title II and the one
applicable under Title I.” And the Commission had responded
by saying it chose the scheme available under Title I, offering
as reasons the sort of policy analysis that it did here. Would
any of the cases rejecting agency preemption efforts bar a
Commission order preempting types of state regulation that
would defeat the purposes the Commission invoked in its
decision to place broadband under Title I?
The majority staunchly believes that preemption serves
solely to protect affirmative federal regulations. Responding
to the Commission’s reliance on the preemption that
automatically follows forbearance under Title II, it says, “the
10
Commission [has] broad authority over services classified
under Title II, unlike those classified under Title I.” Maj. op.
133. True enough. But the lesson it draws is a complete non
sequitur: The broad authority under Title II, says the majority,
is “why the Act carves out more space for federal objectives to
displace those of the States in the Title II context.” Id. This
explanation assumes an asymmetry in preemption implications
between (i) heavy-handed regulation and (ii) light-touch
regulation. If an agency decides that a robust regulatory
scheme is apt in a given sector (say, under Title II), the majority
is ready to infer authority to preempt. But, the majority insists,
if the agency determines that an industry will flourish best
under competitive market norms and accordingly adopts a
“light-touch” path, preemption is suddenly superfluous
because the agency now has less “power to regulate services.”
A clearer insistence on the unsupported notion that preemption
protects only regulation itself, not a regime of lawful regulatory
choices, is hard to imagine.
Viewed as a matter of protecting a lawfully chosen federal
regulatory scheme, an inference of preemptive authority is
sound to the extent that the state action in question would
frustrate an agency’s authorized policy choices and actions.
Dirigiste state regulation in a sector that an agency thinks works
best under market norms would undercut the agency’s aims, no
more, no less, than state rules undermining the agency’s
affirmative regulations.
The majority’s leitmotiv—indeed the entire foundation of
its conclusion—is that only an agency’s possession of
affirmative regulatory authority can support authority to
preempt state regulation (state regulation nominally applying
only to intrastate communications, but because of the
impossibility of separation, in practice engulfing interstate
communications). See Maj. op. 123 (“[I]n any area where the
Commission lacks the authority to regulate, it equally lacks the
11
power to preempt state law.”); id. at 128 (“In other words, the
impossibility exception presupposes the existence of statutory
authority to regulate; it does not serve as a substitute for that
necessary delegation of power from Congress.”); id. at 132
(“[P]reemption authority depends on the Commission
identifying an applicable statutory delegation of regulatory
authority . . . .”); id. at 134 (concluding that courts cannot
evaluate if Congress provided preemption authority “if there is
no legislative grant of authority against which to evaluate the
preemptive rule, and certainly not when, as here, Congress
expressly withheld regulatory authority over the matter”); id. at
138 (“[T]he dissenting opinion fails to explain how the
Commission’s interpretive authority under Chevron to classify
broadband as a Title I information service could do away with
the sine qua non for agency preemption: a congressional
delegation of authority either to preempt or to regulate”). But
reiteration is not proof—no matter how self-assured. The claim
is wrong in its broad form and is inapplicable to the
circumstances here.
I must speak of “the broad form” of the maxim because the
majority offers two variations. Most take the broad form—
denying any possibility of preemption in the absence of
affirmative regulatory authority. But two expressions of the
maxim are accompanied by an acknowledgement that Congress
itself can allow such preemption with express statutory
language. Id. at 123, 138. Thus even the narrow form tacks on
a self-made and unexplained requirement that any such
congressional decision can have legal effect only if it is express,
despite our living in a world where judicial interpretation of
statutes rarely insists on an express provision outside the
context of a clear statement rule or its equivalent. This narrow
version of the maxim, however, appears to be entirely the
majority’s handiwork and to rest entirely on its premise of
asymmetry.
12
The majority’s acknowledgment of congressional
authority is necessary. Congress plainly has power itself to
preempt state regulation interfering with the flow of market
forces in a specified domain, without having regulated or
afforded an agency parallel affirmative regulatory authority.
See, e.g., 49 U.S.C. § 41713(b)(1) (preempting states from
regulating airline prices and routes to protect the deregulation
of the airline industry from state interference). The same
principle undergirds a congressional choice (express or
implied) to grant an agency equivalent preemptive authority
without any parallel federal regulation (by Congress or a
federal agency). See 47 U.S.C. §§ 253 (a), (d) (preempting and
authorizing agency preemption of state and local regulations
that “may prohibit or have the effect of prohibiting the ability
of any entity to provide any interstate or intrastate
telecommunications service”).
Further, the majority’s maxim is inapplicable. There is no
doubt whatsoever that on December 13, 2017, the day before
adoption of what we call the 2018 Order, the Commission had
authority to apply Title II to broadband. By its classification
decision, it forswore any current intention to use Title II vis-à-
vis broadband. But the authority to reclassify broadband back
under Title II, and thus to subject it to all the authorities granted
under Title II, remained. Under the 1996 Act the
Commission’s choice not to exercise a power is not a
permanent renunciation of that power.
We see this rather obviously in relation to forbearance.
When the Commission adopted the Title II Order it also elected
to forbear from a slew of the powers available under Title II.
But everyone recognized that these forbearance decisions were
reversible at the Commission’s election, plus, of course, its
satisfying the usual requirements for regulatory change, most
obviously those of FCC v. Fox Television Stations, Inc., 556
U.S. 502 (2009). There are two ways of characterizing the
13
period of forbearance-and-preemption between the two orders:
One could view the accompanying preemption (executed by
Congress itself) either as explicit provision for preemption
accompanying an absence of regulatory power (anathema to
the majority), or as preemption accompanying the
Commission’s reserved, latent regulatory authority (thereby
satisfying the majority’s maxim). Either way, the current
situation is parallel: Because preemption is necessary to make
the agency’s lawful exercise of power effective, it accompanies
the agency decision to hold its Title II powers over broadband
in abeyance.
The majority assumes without explanation that in allowing
the Commission a choice between full-throttled regulation
under Title II and very light regulation under Title I Congress
had no interest in making sure that the Commission could, if it
exercised the latter choice, establish an effective national
broadband policy (applying directly to interstate
communications and indirectly to intrastate regulations to the
extent that it was impossible to distinguish between intrastate
and interstate communications, i.e., to the extent that it was
called for by the familiar impossibility exception). I can see no
basis for imputing such an outlook to Congress.
The Supreme Court has clearly ruled that authority to
preempt may be inferred to support an agency’s regulatory
scheme. In City of New York, as we’ve seen, the Court found
that Congress had empowered the FCC to preempt state
attempts to apply more stringent technical standards than those
imposed by the Commission, regardless of any conflict
between the federal and state standards. 486 U.S. at 63, 65-66.
(That decision was under a statute enacted against a
background of parallel Commission preemption, an issue I’ll
take up below at pp. 15–17.)
14
Similarly, the Court has said that a “federal decision to
forgo regulation in a given area may imply an authoritative
federal determination that the area is best left unregulated, and
in that event would have as much pre-emptive force as a
decision to regulate.” Arkansas Electric Co-op. Corp. v.
Arkansas Public Service Comm’n, 461 U.S. 375, 384 (1983);
see 2018 Order ¶ 194 & n.726. The majority points out that the
Court found the statute at issue did not, in fact, “imply an
authoritative federal determination that the area is best left
unregulated,” 461 U.S. at 384 (or, as here, a congressional
delegation to the agency of authority to make that choice). But
the reason for this does nothing to undermine the relevance of
Arkansas Electric. The Federal Power Commission had
determined as a jurisdictional matter that another agency had
“exclusive authority” over rural power cooperatives, so that it
in fact had no occasion to “determine that, as a matter of policy,
rural power cooperatives that are engaged in sales for resale
should be left unregulated.” Id. The FCC’s choice of Title I in
the 2018 Order was of course exactly a determination that
broadband should be left free of the burdens of Title II.
And in Ray v. Atlantic Richfield Co., 435 U.S. 151, 178
(1978), the Court held that “the Secretary [of Transportation]’s
failure to promulgate a ban on the operations of oil tankers in
excess of 125,000 [deadweight tons] [a ceiling that the State of
Washington purported to impose] . . . takes on . . . [the]
character” of a ruling “‘that no such regulation is appropriate’”
and thus “States are not permitted to use their police power to
enact such a regulation” (quoting Bethlehem Steel Co. v. N.Y.
State Labor Relations Bd., 330 U.S. 767, 774 (1947)). The
majority brushes Ray aside because, while the Court blessed
agency preemption, it had made an antecedent finding that the
statute in question “delegat[ed] regulatory power to the
agency,” that is, power to make rules concerning vessel sizes
and speeds. Maj. op. 140. But the Court’s relevant decision
was that the statute contemplated “a single decisionmaker” on
15
the regulation of supertankers, 435 U.S. at 177, just as, given
the historic use of the “impossibility exception,” it is a safe
conclusion that the 1996 Act contemplated “a single
decisionmaker” for interstate services located under Title I,
protected from state interference to the extent necessary for its
effectiveness, e.g., where, as the Commission found here, “an
ISP generally could not comply with state or local rules for
intrastate communications without applying the same rules to
interstate communications.” 2018 Order ¶ 200.
I mentioned above that pre-1996 exercises of preemptive
authority by the Commission have generally not rested (or at
least have not rested exclusively) on an implication of power
from the Commission’s election to place services under Title I
and concomitant power to keep states from thwarting the
Commission’s adoption of an ultra-light-touch regulatory
policy. The reason is fundamentally that the Commission, in
implementing its decisions to remove certain services from
Title II, namely customer premises equipment (“CPE”) and
“enhanced services” (the precursor of information services),
has been able to rely on authority ancillary to Title II. Thus in
Computer II it required AT&T to offer enhanced services and
CPE only through a separate subsidiary and required all
common carriers to unbundle charges for CPE from their
charges for telecommunications services. Second Computer
Inquiry, Final Decision, 77 F.C.C. 2d 384 ¶¶ 9, 12 (1980);
Second Computer Inquiry, Memorandum Opinion and Order,
84 F.C.C. 2d at ¶ 66. We upheld these requirements in
Computer & Communications Industry Ass’n v. FCC, 693 F.2d
198 (D.C. Cir. 1982) (“CCIA”), resting on the Commission’s
interest in preventing cross-subsidization of the competitive
services with revenue from the common carrier services. These
requirements at once enabled the Commission to prevent
distortion of the free market for enhanced services and CPE by
carriers’ revenue from monopoly services, id. at 211, and to
protect consumers of the monopoly services from higher rates
16
on those services (that’s the source of the revenue for cross-
subsidization), id. at 213. In Comcast, we expressly tethered
this exercise of power to the Commission’s role in protecting
the consumers of monopoly services. 600 F.3d at 655-56.
CCIA also upheld the Commission’s preemption of any
state inclusion of CPE charges in their tariffs for monopoly
communications services (a similar preemption to assure
structural separation for enhanced services went unchallenged),
resting on the Commission’s exercise of ancillary power to ban
the unbundling. 693 F.2d at 214–18. Thus the preemptions
under Computer II raised no question entirely dependent on the
authority of the Commission to protect its choice of non-
regulation for the services newly removed from Title II.
Similar reasoning governed our approval of the Commission’s
preemption of any state failure to remove “inside wiring” from
common carrier tariffs. National Ass’n of Regulatory
Commissioners v. FCC, 880 F.2d 422 (D.C. Cir. 1989).
When the Commission in Computer III reversed its
position on structural separation, requiring its elimination for
the Bell Operating Companies that succeeded AT&T, its
preemption of contrary state common carrier rules could have
been sustained on the same basis. California v. FCC, 39 F.3d
919, 923–25, 931–33 (9th Cir. 1994); see also California v.
FCC, 905 F.2d 1217, 1243 (9th Cir. 1990). Nonetheless—and
quite logically, because the Commission’s Computer III
preemption rested in part on the Commission’s interest in
assuring fair competition in the rising enhanced services market
located under Title I, California, 39 F.3d at 924—the 9th
Circuit decision upholding preemption went further. It noted
petitioner State of New York’s claims “that the FCC may
preempt state action only when it is acting pursuant to specified
regulatory duties under Title II of the Act,” and that “no
preemption authority exists” when “the FCC’s action is
intended to implement the more general goals of Title I.” Id. at
17
932. It responded unequivocally, “This position must be
rejected.” Id.; see also 2018 Order ¶ 198 & n.738; FCC Br. at
119.
Apart from the 9th Circuit’s 1994 California decision, this
pre-1996 litigation doesn’t offer affirmative support for the
inference of authority to preempt state regulation rendering
impossible its achievement of a deregulatory regime for Title I
services. But no case has rejected that inference—an entirely
reasonable inference, in my view, for the reasons set out above.
The majority appears to believe that the cases above reinforce
its notion that an agency can exercise preemption only in
support of currently deployed affirmative regulatory authority,
Maj. op. 125, but the cases hold no such thing. All could
uphold the Commission in reliance on its Title II authority. It
is striking, however, that in 1994 in California the 9th Circuit
went farther and rested expressly on the Commission’s power
to protect the unregulated market in enhanced services, created
by locating such services under Title I, which the Computer III
decision had sought to protect.
In addition to California (1994), a post-enactment circuit
court decision touches on Commission authority to preempt
state regulations inconsistent with the Commission’s
deregulatory regime for broadband. In Minnesota Public
Utilities Commission v. FCC, 483 F.3d 570 (8th Cir. 2007), the
Eight Circuit upheld an FCC order preempting state regulation
of VoIP under the impossibility exception even before the
agency had decided whether to classify VoIP as an information
service or a telecommunications service. The agency rested on
its view that the matter turned only on the practical issues
revolving around the impossibility exception—whether
separating the intrastate and interstate aspects of the service
was possible or not. The answer in its view would not depend
on the classification. Id. at 578.
18
As the majority points out, legal authority (as opposed to
the facts essential for application of the impossibility
exception) was not formally at issue. But the court’s idea of
what a “conflict” might be is radically different from the
majority’s here. In upholding the FCC’s assertion of
irreconcilable conflict if it later chose to classify VoIP as an
information service, the court pointed to the agency’s “long-
standing,” “market-oriented policy” of “nonregulation of
information services” and upheld the FCC’s bottom line:
“[A]ny state regulation of an information service conflicts with
the federal policy of nonregulation.” Id. at 580. The decision
seems wholly incompatible with the majority’s idea that there
is no Commission preemptive authority vis-à-vis a service
located under Title I (with the narrow exception of regulatory
authority expressly made applicable to Title I, such as that of
§ 257).
The majority says the agency did not adequately flesh out
these arguments in the 2018 Order or in its briefing here.
Flattered as I am at the thought that I deserve credit for all or
most of the thinking in this opinion, it isn’t so.
As I do, the 2018 Order’s section on preemption views the
Commission as adopting an affirmative “federal regulatory
regime” of deregulation, a regulatory regime that can only find
its roots in the Commission’s authority to classify the Internet
under Title I or Title II. 2018 Order ¶ 194; see also, e.g., id.
(describing a “federal regulatory scheme”). As I do, the 2018
Order argues that this “affirmative policy of deregulation is
entitled to the same preemptive effect as a federal policy of
regulation.” Id. ¶ 194 (second emphasis added). The 2018
Order also highlights the incongruity between finding an
implied preemptive power when the Commission adopts an
intrusive Title II regime but not when it adopts a national
deregulatory framework. See Id. ¶ 204 (“It would be
incongruous if state and local regulation were preempted when
19
the Commission decides to forbear from a provision that would
otherwise apply, or if the Commission adopts a regulation and
then forbears from it, but not preempted when the Commission
determines that a requirement does not apply in the first
place.”). It thus directly assails the key asymmetry on which
the majority’s opinion entirely depends—the notion that for
affirmative regulation, preemptive power may be implied, but
for a lawfully adopted deregulatory regime it must be stated by
Congress expressly. And as I do, the 2018 Order notes that “no
express authorization or other specific statutory language is
required for the Commission to preempt state law.” Id. ¶ 204
& n. 749 (citing City of New York v. FCC, 486 U.S. 57 (1988)).
To continue would tax the reader’s patience, but the similarities
do not end there. No matter how you slice it, the Commission
rejected—and asserted ample grounds for doing so—the
majority’s novel notion that for an intrusive regulatory regime
an agency’s preemptive power can be inferred, while a
deregulatory regime is a Cinderella-like waif, and can be
protected from state interference only if Congress expressly
reaches out its protective hand.
Moreover, even if the Commission had not laid this
foundation below, the majority is mistaken in its assumption
that our obligation to “judge the propriety of [agency] action
solely by the grounds invoked by the agency,” Sec. & Exch.
Comm’n v. Chenery Corp., 332 U.S. 194, 196 (1947) (Chenery
II); see also Sec. & Exch. Comm’n v. Chenery Corp., 318 U.S.
80, 87 (1943) (Chenery I), prevents our independent analysis of
the legal issues undergirding preemptive authority. Chenery
prevents a court from upholding agency action based on “de
novo factual findings or independent policy judgments better
left to agency experts.” Sierra Club v. Fed. Energy Regulatory
Comm’n, 827 F.3d 36, 49 (D.C. Cir. 2016); see Canonsburg
Gen. Hosp. v. Burwell, 807 F.3d 295, 305 (D.C. Cir. 2015). But
that principle does not apply when the issue turns on a purely
legal question, such as, here, “our interpretation of [a statute]
20
and binding Supreme Court precedent.” See Sierra Club, 827
F.3d at 49.
Nor do the majority’s concerns about the Commission’s
briefing hold water. The Commission noted that it had
substituted “a light-touch regulatory regime under Title I for
the utility-style Title II regulations that had been adopted in
2015,” and that this light-touch regime could only survive if it
preempted state law. FCC Br. 111. The Commission noted
that its authority to classify supplied authority to preempt. See
id. at 115 (“[T]o the extent the Commission could have read
any ambiguous provisions of the Communications Act to give
it authority to retain the former rules [i.e., persist in wielding
the regulatory authorities supplied by Title II], the
Commission’s decision not to do so . . . supports preemption of
state or local efforts to reinstate those requirements.”). On
appeal, as in the 2018 Order, the Commission attacked the
conclusion “that the Commission’s determination that
broadband Internet access is an information service . . .
deprived it of the power to preempt contrary state regulations.”
Id. at 124. And the Commission argued that its “federal
decision to deregulate preempts contrary state regulatory
efforts just the same as a federal decision to regulate,” id. at
130—again an assault on the linchpin of the majority’s ruling:
asymmetry. It would be the height of formalism to fault the
Commission because, despite making all the correct moves, it
didn’t precisely enough (at least for the majority) articulate the
link between its authority to adopt a deregulatory regime under
Title I and its implied power to protect that regime.
Towards the end, though never acknowledging the
Commission’s finding that an internet service provider
“generally could not comply with state or local rules for
intrastate communications without applying the same rules to
interstate communications,” 2018 Order ¶ 200, the majority
hints that through case-by-case litigation of conflict
21
preemption, the Commission might be able over the years to
obtain relief against some state impositions of regulation
inconsistent with the Commission’s deregulatory scheme. Maj.
op. 142–43 & n.4.
Though the majority never says so as explicitly, some of
its concern appears to stem from the preemption directive’s
scope—its painting with (as they see it) too broad a brush. See,
e.g., id. at 135. I disagree that the 2018 Order sweeps too
broadly; tellingly, the majority offers no examples of possible
state rules, preempted by the Order’s language, that would not
thwart the Commission’s policy objectives. Even if it did,
though, that is no reason to vacate the operative portion of the
order now. Rather, we should wait until a concrete case of
alleged overreach presents itself, at which point the party
adversely affected by preemption of the state law may
challenge the preemption directive as applied in that case. See
Weaver v. Fed. Motor Carrier Safety Admin., 744 F.3d 142,
145 (D.C. Cir. 2014) (“[W]hen an agency seeks to apply the
rule, those affected may challenge that application on the
grounds that it conflicts with the statute from which its
authority derives.” (quotation omitted)).
In any event, the majority’s view of preemption seems to
render any conflict unimaginable (other than a conflict with the
Commission’s affirmative exercise of authority under § 257).
In the majority view, preemption is utterly dependent on the
Commission’s affirmative regulatory authority and cannot
depend on its authority to apply a deregulatory regime to
broadband. Although the majority says that “conflict
preemption” can apply against a state law that “stands as an
obstacle to the accomplishment and execution of the [federal
law’s] full purposes and objectives,” Maj. op. 143 n.4, this
would be of no use to the Commission: The majority rejects
the idea that the Commission has exercised authority as to
which, say, California’s enforcement of a Title II equivalent
22
could “stand[] as an obstacle.” In the majority’s view, when
the Commission adopts a deregulatory regime under Title I,
there’s no there there.
Similarly, the majority’s suggestion that it isn’t really
eviscerating the 2018 Order—it says a Commission
explanation of “how a state practice actually undermines the
2018 Order” would enable it to invoke conflict preemption,
Maj. op. 142–43—magically coexists with its complete
disregard of the Commission’s explanation in ¶ 200 of the way
contrary state regulation would be impossible to exclude from
the interstate market, and with California’s legislation adopting
an equivalent of Title II (see p. 1 above). Of course no one
wants the majority to decide a case not before it; but if the
handwaving toward conflict preemption is to mean anything, it
requires a vision of a Commission exercise of power with
which some state regulation could actually conflict. This the
majority denies absolutely.
Rather, the majority insists that power to preempt (indeed
the Commission’s “jurisdiction,” but see 47 U.S.C. § 152(a))
depends either on the Commission’s “express and expansive
authority” “to regulate certain technologies,” Maj. op. 124, or
on “ancillary authority.” The latter in turn requires that the
Commission’s action be “reasonably ancillary to the
Commission’s effective performance of its statutorily
mandated responsibilities,” id., which are exclusively its
responsibilities under Title II, III, at VI of the Act, see also
Comcast, 600 F.3d at 654. There is no room in this concept for
authority to establish a regulatory regime for broadband as an
information service—meaning, given the extreme paucity of
affirmative regulatory authority under Title I, a highly
deregulatory regime. For the majority, the observation that by
“reclassifying broadband as an information service, the
Commission placed broadband outside of its Title II
jurisdiction,” Maj. op. 124, is pretty much the end of the game.
23
The majority conspicuously never offers an explanation of how
a state regulation could ever conflict with the federal white
space to which its reasoning consigns broadband.
* * *
I pause to make an entirely unrelated observation. The
petitioners advance a bevy of attacks against the Commission’s
conclusion that the market for broadband internet is fairly
competitive—attacks that the majority correctly dismisses. See
Part V.B.2. But the Commission’s case is stronger than the
majority lets on: The petitioners never contest the
Commission’s findings on market concentration as measured
by the familiar HHI for residential fixed broadband service.
2018 Order ¶ 132. Even the HHI for the fastest speed category
(25 Mbps down and 3 Mbps up) “meets the Department of
Justice . . . designation of ‘moderately concentrated’” (2,208,
with the DOJ range being 1500 to 2500). 2018 Order ¶ 132 &
n.478. Those findings, which though doubtless subject to
contextual analysis have gone uncriticized by petitioners, seem
highly relevant and deserving of mention.
* * *
My colleagues and I agree that the 1996 Act affords the
Commission authority to apply Title II to broadband, or not.
Despite the ample and uncontested findings of the Commission
that the absence of preemption will gut the Order by leaving all
broadband subject to state regulation in which the most
intrusive will prevail, see above pp. 1, 2–3, 5–6, and despite
Supreme Court authority inferring preemptive power to protect
an agency’s regulatory choices, they vacate the preemption
directive. Thus, the Commission can choose to apply Title I
and not Title II—but if it does, its choice will be meaningless.
I respectfully dissent.