Appeal of net neutrality rules "fatally premature"

Verizon's attempt to challenge FCC rules fails in D.C. Circuit, at least for the moment.

Since the Federal Communications Commission (FCC) voted 3-2 to approve an order on network neutrality on Dec. 21, 2010, the rules, which prohibit broadband Internet providers from blocking or discriminating in transmitting legal traffic, have taken criticism from all sides. Net neutrality advocates have argued the FCC’s Open Internet Order doesn’t go far enough because it doesn’t appear to apply to wireless broadband providers and that it is unnecessarily broad in its definitions. On the other side, Internet Service Providers (ISPs) have their own concerns about the sweeping new regulations, arguing that government intervention has no statutory basis and will slow innovation.

The D.C. Circuit became the first court to rule on a legal challenge to the FCC order on April 4 when, in response to a lawsuit from wireless carrier Verizon (and a similar lawsuit from MetroPCS that tailed the Verizon action), it dismissed the case with a clear and simple message: Try again later.

The problem the court found with Verizon’s suit was that challenges to federal regulations can only be filed in the 30 days after the FCC publishes them in the Federal Register, and as yet it has not done so. So the court declared Verizon’s lawsuit “fatally premature” and dismissed it.

But Verizon’s case didn’t falter because of a mistimed filing. The company was making a novel attempt to land its challenge before the D.C. Circuit, which ruled in April 2010 in Comcast v. FCC that the commission lacks the authority to regulate an ISP’s network management practices.

“Tactically, Verizon wanted to be in the D.C. Circuit because it ruled against the FCC in the Comcast case and is generally more critical of the FCC than our other courts of appeal,” says Steve Augustino, a partner at Kelley Drye & Warren. “Most of the FCC orders get appealed to the D.C. Circuit, so they’re very familiar with the FCC and tend to be less deferential to it than other courts are.”

Plan B

Section 402 of the Communications Act provides two separate types of judicial review of FCC decisions. Most FCC orders have to be challenged under 402(a), under which parties file petitions for review in any federal court of appeals. Multiple filings across jurisdictions regarding one order go into a judicial lottery to determine which court hears the case.

However, Verizon filed its challenge as a notice of appeal under 402(b), which exclusively applies to licensing decisions—usually individualized FCC decisions regarding an application to, say, launch a radio station or sell a TV station. This explains Verizon’s premature filing—unlike 402(a) challenges, under 402(b) the Federal Register requirement doesn’t apply.

Verizon had good reason for attempting the 402(b) notice of appeal—under the statute, all appeals of FCC licensing decisions go before the D.C. Circuit.

“What Verizon tried to argue was, while net neutrality has a lot of broad provisions, the new rules the commission is adopting will clearly have a specific limiting effect on certain of Verizon’s licenses, and thus this becomes a licensing proceeding applicable under 402(b),” says Harry Cole, an attorney at Fletcher, Heald & Hildreth. “It’s a novel argument because you look at the FCC’s net neutrality decision overall and it has broad applicability across several industries—normally, the knee-jerk reaction is it’s clearly a 402(a) petition for review document.”

Unpublished, Unappealed

Cole calls the argument a clever and innovative approach despite the fact that the D.C. Circuit roundly rejected it. The court emphasized that 402(b) applies only to individual licensing decisions and waivers as to specific parties.

“The Open Internet Order plainly falls outside that description,” the court wrote. “It establishes general rules that apply to all fixed and wireless mobile ISPs, not to any specific ISP. … Second … [the order] is a pure rulemaking decision of general applicability that does not adjudicate any individual license matter.”

Although Verizon’s argument failed, Cole points out that the company hasn’t really lost anything beyond the ability to lock down jurisdiction early in the D.C. Circuit. When the time comes for filing 402(a) petitions for review, it’s a distant possibility that all the parties could file in the D.C. Circuit and thus that court would still hear the challenges. If not, a judicial lottery could still place the case in the D.C. Circuit.

Now that the D.C. Circuit has made clear that challenges to the FCC’s net neutrality order can only be filed after the rules’ publication in the Federal Register, the lack of publication means parties are left waiting. And many, including at least one legislator, have pointed out that the wait has become unusually long, although the FCC has said it is following normal procedures to ready a complex rule.

“It’s a little unusual because the order was released in December and it still hasn’t shown up,” Cole says. “Maybe there are good and practical reasons for the delay that’s occurred. It’s also possible that it’s an effort by the commission to forestall the appellate process.” Of course, while the order’s absence from the Federal Register means parties can’t start the review process, it also means the FCC is unable to enforce the rules.

Associate Editor

Melissa Maleske

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