Broadband Pendulum Swings: FCC Hoist With Its Own Petard

In February, we discussed satellite broadband and the pending release of the U.S. Federal Communications Commission (FCC)’s National Broadband Plan .

Released in March (available at www.broadband.gov), the plan was packed with goals such as 100 megabits per second throughputs and 500 MHz of spectrum availability in 10 years but had relatively little to say about the satellite sector’s role. Notably, the plan recommends that 90 MHz of the aforementioned 500 MHz come from mobile satellite service spectrum through maximizing ancillary terrestrial component (ATC) license flexibility and by loosening the ATC “gating” criteria for satellite service to be substantially in place before the terrestrial component may be activated. Satellite’s role in emergency preparedness and response also was recognized.

Then the plan was thrown into doubt in April when the U.S. Court of Appeals for the District of Columbia ruled against FCC regulation of broadband providers in a case filed by Comcast Corp. (the largest cable provider and prospective acquirer of NBC Universal). The decision was a major win for Internet backbone providers and a setback for net neutrality proponents, including the FCC. The court ruled that the FCC exceeded its “ancillary authority” under the 1934 Communications Act in attempting to restrict Comcast’s network management practices. The case arose when Comcast subscribers discovered that the cable operator was blocking their use of certain peer-to-peer networking applications, which allow sharing of files without passing through a central server.

A great deal of the published analysis in the wake of the decision took the line that the most likely course for the FCC is to vote to reclassify broadband service as a telecommunications service under the 1934 Communications Act and not, as it is now classified, an information service. As telecommunications service common carriers, broadband providers would be required to provide non-discriminatory access and pricing.

These analyses appeared to ignore the basis of the D.C. Court’s decision, which found that the U.S. Supreme Court’s 2005 Brand X decision, which upheld the FCC’s position that cable modem broadband service was an information service not subject to common carrier regulation but also stated that the FCC would likely have “ancillary authority” to impose regulatory requirements on cable operators offering broadband service was not controlling. The FCC subsequently granted regulatory parity to digital subscriber line providers by also classifying it as an information service.

To reclassify cable broadband service as a telecommunications service, it would be necessary for the FCC not merely to reverse its prior classification but to attempt to distinguish a Supreme Court decision that upheld that classification. Such a reclassification would likely be reversed by the D.C. Court of Appeals based on the Brand X decision, and a subsequent appeal to the Supreme Court would ask that court to revisit and reverse its decision of only five years ago.

Although the ancillary authority argument is weak, an appeal to the Supreme Court based upon it is a faster route to final disposition and could ask the court to revisit Brand X at least for the limited purpose of making the non-binding “dicta” on the FCC’s ancillary authority to regulate cable broadband service binding law. The Supreme Court could also be asked to revisit Brand X above and beyond clarifying the ancillary authority point to the extent necessary to achieve the net neutrality broadband policy goal.

The Comcast decision can be seen as a deregulatory backlash to the pro-regulatory swing of the pendulum that has been taking place since the accounting scandals of the early years of the decade and the financial crisis of the last two years.

Of course, none of these potential judicial/regulatory courses of action precludes legislative action to amend the 1934 Communications Act — as amended by the 1996 Telecommunications Act — to grant the FCC authority to regulate the network management practices of broadband providers. If Congress is ambitious — and a long view is taken — it might even be the occasion to impose the cross-platform and technology-neutral parity that our patchwork and obsolete legislative and regulatory framework so badly needs and which this column has long urged. If that happened, satellite service would be able to compete for its natural part of the consumer and enterprise broadband sector.

Owen D. Kurtin is a founder and principal of private investment firm The Vinland Group LLC and a practising attorney in New York City. He may be reached by e-mail at [email protected].