The beast is back: The FCC’s net neutrality case gets its day in court

Update: For a sense of where one analyst thinks the court may be heading, check out this story.

Lawyers for Verizon and the FCC are stepping up Monday to argue over the future of network neutrality before the D.C. Circuit Court of Appeals on Monday. The case, which is over¬†FCC rules forbidding ISPs from discriminating against packets on their networks, has ramifications for entrepreneurs, consumers and even the agency’s ability to provide regulatory oversight over the web.

While the arguments are arcane, this is a case that could determine if broadband providers could charge companies such as Skype or Netflix¬†— to send their content over their pipes. The network neutrality rules also ensure that if a broadband provider wants to throttle or affect broadband speeds for consumers they must do so in a fair and transparent way. And, while the rules are weaker on the wireless side, they do leave open the possibility of FCC regulation should a wireless provider attempt to block a competitive service, such as WhatsApp or other over-the-top option.

The debate over network neutrality, which is the idea that ISPs can’t discriminate against the traffic flowing over their broadband pipes, go back eight years — we have a nifty timeline here covering 2005 to the 2010 issue of the rules — and this case could finally lay the issue to rest. Or the court could discard parts of the rules and leave the FCC scrambling to ask Congress for more power or Congress to take some other action based on partisan ideals on how the internet should work.

In short, this could entrench the status quo of the last few years, or it could throw us aback into a policy mess that leaves ISP’s, web firms and consumers unsure of what they can or cannot expect from their broadband connection.

The arguments Verizon will use

Verizon will invoke three arguments, beginning with one that says the FCC doesn’t have the legal authority to implement any rules governing how ISPs manage their “information” networks. The company will also call out the FCC under the First and Fifth Amendment for violating its constitutional right to free speech, and for seizing its property without just compensation. The telco is also bringing in the 1996 Telecommunications Act, saying that the rules prevent Verizon from charging money for content going over its pipes, something it claims the 1996 act forbids. For a detailed look at its arguments, I’ve covered them here.

While some of these seem over-the-top, the first has the most people concerned. Way back in 2008 the FCC censured Comcast for blocking BitTorrent files on its network and Comcast sued, arguing that the FCC didn’t have the authority to censure it because the FCC has authority over the pipes themselves, but not the information flowing over those pipes. The FCC had given up the right to regulate the information in a series of decisions dating back to 2002.

This the FCC is now in a position, where it can regulate the pipes, but not the bits, based on the court’s decision in Comcast. The same court, and one of the same judges is now sitting judgment on the current network neutrality case. The FCC had the option of asking congress to help it fix the authority question when it was writing the network neutrality rules, but politics and a weak FCC chairman decided it didn’t need to. That decision is now going up for a test, and could drastically change the former FCC Chairman Julius Genachowski’s legacy.

FCC Chairman Julis Genachowski

FCC Chairman Julis Genachowski

If the courts decide the FCC doesn’t have the legal authority to enforce the network neutrality rules, it not only could gut the rules, but it also gives ISPs a free pass to start making decisions about the information aspects of their service — and in today’s non-competitive broadband environment — that could mean throttling Netflix or charging Google more money to deliver a clean YouTube stream. It also neuters the agency moving forward when all content will flow as information over broadband pipes — from TV to your doctor visits.

Ironically, Comcast, the company whose packet-blocking and lawsuit brought this issue to a head, would be the most negatively affect if the FCC loses on this, since it has to abide by open internet rules until 2018 as part of its merger with NBC Universal.

So let’s handicap the judges

Given what’s at stake here, let’s look at how this could play out. the case will be heard by three judges, two Democrats and one Republican. Of course ideology may not matter (Democrats are more likely to agree with the FCC’s policies here), but one of the Democratic judges, David Tatel, wrote the 2010 opinion that overturned the FCC’s Comcast order on blocking P2P files. This is the man who threw the entire question of the FCC’s authority into the mix. A note this morning from telecommunications analyst firm Stifel Nicolaus states:

So while the key today will be whether at least two of the judges express leanings one way or another, we note the particular importance of Judge Tatel in this case. Not only do we see him ideologically as in the middle compared to the other two judges (Democratic appointee Judith Rogers and Republican appointee Laurence Silberman), but we note he also authored the two D.C. Circuit rulings — on Comcast-P2P and data roaming — that have the most precedential value, which suggests to us he will be particularly influential in this case and could well write the opinion. We thus expect that as Judge Tatel goes, so will go this panel, whether 2-1 or 3-0.

The FCC could prevail

mobile phone and telecommunication towers
Despite the nebulous legal footing the FCC is standing on when it comes to its authority, some recent court cases — one decided by the Supreme Court in June this year — could set a legal precedent that will help it prevail. In the Supreme Court case, which dealt with an FCC order on tower siting, the City of Arlington argued that the FCC couldn’t make rules that countermanded city zoning.

On the surface this has little to do with the FCC’s net neutrality case, but it set a legal precedent that allows the agency to set its own jurisdiction for implementing “reasonable” policies that didn’t violate clear laws. In another case further back in December, the D.C. Circuit upheld an FCC order imposing data-roaming obligations on mobile data providers that addresses some of the arguments Verizon is making against the FCC “seizing its pipes” and violating he common-carriage aspects of the 1996 Telecommunications Act.

The bottom line

With a decision expected in late fall or winter, it’s time to sit back and wait. The future of the Internet is at stake here — held in the hands of three judges and the arguments of Verizon’s and the FCC’s lawyers. Whatever comes our of this case, be it a total victory for the FCC that leaves everything as it stands or a partial victory that sends the agency scurrying back to Congress to give it more power, we still need to keep the conversation going about how we’re making rules and laws around broadband as it becomes more central to our society and economy.