Regulatory Ping Pong: When Congress Ignores its Legislative Role in Net Neutrality Policies Shifting Leadership at the FCC Causes Uncertainty

A recurring telecommunications issue in recent years has been net neutrality — the principle first articulated by then Columbia University law professor Tim Wu that Internet service providers (ISPs) must treat all Internet communications equally, and not discriminate or charge differently based on user, content, website, platform, application, type of equipment, source address, destination address, or method of communication.  Significantly, Wu is now a senior economic counselor to President Biden.  Sounds simple enough:  set a policy for regulation of ISPs that treats all communications equally.  There is great divergence, however, among industry and policy makers about how to achieve that without damaging the growth of the Internet.  This debate is demonstrated by competing regulatory regimes adopted in recent years by the Federal Communications Commission over Internet broadband.

Net neutrality is a prime example of regulatory “ping pong,” where administrative agencies change policy back and forth as the party controlling the White House changes because the President appoints the leadership of agencies and independent commissions like the FCC, and when the Congress, which is the only actor that can adapt a long-term policy, consistently fails to act.

President Biden has endorsed a more aggressive net neutrality position in his recently announced competition initiatives.  In his July 9, 2021, Executive Order aimed at “promoting competition in the American economy,” the President asked the FCC to reinstate net neutrality protections alongside other measures to make broadband pricing more transparent and affordable.^[1]  Whether this is a good idea is the subject of debate.  What is certain, however, is that the President’s initiative represents the second 180º policy change on the question of net neutrality in the last six years.  Instead of Congress passing legislation to address net neutrality, the FCC can employ its considerable authority granted by its organic statute, the Communications Act of 1934, as amended,[2] facilitated by latitude granted the Supreme Court, to act in the void created by Congress.  However, the FCC’s decisions are subject to reversal when there is a change in the White House and a change in the leadership of the FCC, and all the other those commissions and agencies that must be nominated by the President.

In the case of net neutrality, regulation of the Internet revolves around whether the FCC classifies Internet broadband as “telecommunications services” under Title II of the Communications Act[3] or “information services” under Title I.[4]  Title II regulation entails common carrier status[5] and triggers an array of statutory restrictions and requirements (subject to “forbearance” – a policy decision to refrain from exercising regulatory authority at the FCC’s election).  By contrast, the FCC generally maintains a “hands off” regulatory oversight of “information services.”

Going back to the Clinton Administration and the Telecommunications Act of 1996, Internet broadband has generally been treated as an “information service”.  In 2015, however, the Obama Administration began to push for a more vigorous regulation of ISPs and the policies that we have come to know as net neutrality.  On a 3-2 decision with all Democrat-appointed members voting in favor, the FCC adopted a regulatory regime subjecting broadband Internet to classification as a “telecommunications service,” which was upheld by the U.S. Court of Appeals for the D.C. Circuit.[6]  The Supreme Court declined to hear an appeal by telecom interests.

Yet the pendulum swung back 180º again two years later when, once more on a party-line vote, the FCC, but now under Chairman Ajit Pai appointed to office by then-President Trump, voted to remove the Title II telecommunications service regulatory hold on Internet broadband.  The Commission restored the “information service” regulatory structure.[7]  Once again, the U.S. Court of Appeals for the D.C. Circuit upheld the FCC’s decision.[8]

Now, President Biden’s Executive Order portends a return to the stronger regulation adopted during the Obama Administration under then FCC Chair Thomas Wheeler, but which was cast out in 2018.

What is holding back this change?  The Biden Administration has yet to decide who will be the full-time Chairman of the agency.  Acting FCC Chair Jessica Rosenworcel had been expected by many to be nominated for another term and designated as the Chair of the FCC.  More than six months into the Biden Administration, however, there is no sign of a decision on making Rosenworcel full-time chair, much less a nomination to fill the remaining vacancy on the FCC created by the resignation of former Chairman Pai in January 2021.  It is highly unlikely that lacking a majority for a return to “net neutrality” policies, such an initiative would be moved forward by Acting Chair Rosenworcel in the likelihood of an outcome tied 2-2.

What is certain, however, is that if past is prologue, the U.S. Court of Appeals would likely uphold the decision by an FCC controlled by a Democrat majority, provided that the new order can point to statutory authority to impose greater regulation over Internet broadband.  The FCC’s authority under the Communications Act includes classifying various services into the appropriate statutory categories.[9]  Further, under the Supreme Court’s landmark decision in Chevron, U.S.A., Inc. v. Natural Res. Def. Council,[10] an administrative agency like the FCC is afforded considerable discretion in interpreting its statutory mandate from Congress.  However, that remit is not unlimited.  As the D.C. Circuit noted in Comcast Corp. v. FCC, it is “axiomatic” that “administrative agencies may act only pursuant to authority delegated to them by Congress”.[11]  But as long as the FCC can make its new net neutrality rules seem like the 2015 regulatory structure, the courts should affirm the decision.

Meanwhile, how are telecom and Internet companies expected to be able to make long-term financial commitments and allow consumers to have reasonable expectation of stability in services when the regulatory situation is so prone to change every 4-8 years?  The answer is legislation enacted by Congress that would bring this regulatory argument to a conclusion.  Certainly it is timely:  the last foray by Congress into significant telecommunications legislation was 25 years ago, with the adoption of the Telecommunications Act of 1996.  With both major parties dissatisfied with Big Tech, net neutrality would now seem to present a significant opportunity to achieve bipartisan legislation to produce a balanced approach to net neutrality, one that satisfies the concerns of consumer advocates while still providing sufficient incentive to allow telecom companies and Big Tech companies to continue to grow the Internet.

The apparent success of a bipartisan group to reach agreement on a major infrastructure bill suggests that the reports of the death of bipartisanship might still be premature.  Can net neutrality prove another opportunity to declare wrong the critics of bipartisanship?  Only time will tell.

Meanwhile, we can expect another round of regulatory ping pong on net neutrality and the regulation of Internet broadband.

[1] Executive Order 14036 of July 9, 2021, “Promoting Competition in the American Economy,” 86 Fed. Reg. 36987, 36994-95 (Jul. 14, 2021).

[2] 47 U.S.C. §§ 151, et seq.

[3] 47 U.S.C §§ 201-276.

[4] 47 U.S.C. §§ 151-163.

[5] See 47 U.S.C. § 153(51) (defining “telecommunications carrier”)

[6]In re Protecting and Promoting the Open Internet, 30 FCC Rcd 5601 (2015) (“Title II Order”), aff´d sub nom. United States Telecom Association v. FCC, 825 F.3d 674, 689–697 (D.C. Cir. 2016).

[7] In re Restoring Internet Freedom, 33 FCC Rcd 311 (2018) (“2018 Order”).

[8] Mozilla Corp. v. FCC, 940 F.3d 1 (D.C. Cir. 2019) (per curiam).

[9] National Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 980–981 (2005).

[10] 467 U.S. 837 (1984).

[11] 600 F.3d 642, 654 (D.C. Cir. 2010).

Stephen Díaz Gavin is a Partner in Rimon’s Washington, D.C. office. Mr. Díaz Gavin combines legal acumen and litigation experience with public policy advocacy skills to help a diverse range of clients, both international and domestic, in dealing with legal and policy issues facing them in the United States and overseas. Mr. Díaz Gavin specializes in international litigation and arbitration, including sovereign representation.  In addition, for more than 30 years, he has represented companies and individuals in matters before the Federal Communications Commission. Over the years, he has also advised foreign governments and foreign government entities on issues involving various aspects of relations with the United States. Read more here.