The print is not even dry on the March 12, 2015 release of the FCC’s Net Neutrality and Municipal Broadband Orders and already the court appeals have begun. The filings are procedural at this point to preserve the standing of the appealing parties. Thus, they do not include details of the arguments against the Commission’s actions. Those will be filed later. However, the appeals do illustrate where the aggrieved parties believe the Commission erred. Moreover, they portend the future of the industry for the next few years – complete uncertainty.

So far, appeals against the Net Neutrality Order have been filed by USTelecom and Alamo Broadband. In a petition filed with the DC Circuit Court, USTelecom indicated that it will attack the Commission’s reclassification of broadband Internet access service as a Title II telecommunications service, both from a procedural (improper notice provided in violation of the Administrative Procedure Act) and substantive (Commission did not adequately justify need for reclassification) basis:

USTelecom seeks review of the Order on the grounds that it is arbitrary, capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act…violates federal law, including, but not limited to, the Constitution, the Communications Act of 1934, as amended, and FCC regulations promulgated there under; conflicts with…notice-and-comment rulemaking requirements…and is otherwise contrary to law (USTelecom Petition, at p. 1).

Alamo Broadband, a Texas broadband company, filed its appeal with the Fifth Circuit Court in New Orleans. Alamo appealed the Order because it claims that the reclassification of broadband Internet access service will cause increased hardship, presumably due to the additional costs it will incur due to the regulatory requirements of Title II. 

The fact that the filings were made in two separate courts normally would result in a lottery held to determine which court would handle the case. However, the Fifth Circuit could voluntarily hand the case off to the DC Circuit if it determines it does not have the expertise to decide it.

It will be fascinating to see which court does handle the appeal. The DC Circuit has traditionally been tough on the FCC and, in fact, rejected the Commission’s 2010 Net Neutrality Order. However, in recent years, the Court has been packed with Democrats, and may now be much more predisposed to favor the increased government intervention of Title II.

The Fifth Circuit Court has traditionally been staunchly conservative but does have three vacancies due to be filled by President Obama. If the Court does stay as it is today, and hears the case, it could be be an uphill battle for the Commission.

In the Municipal Broadband Order, the Commission preempted state law in Tennessee and North Carolina in order to permit local municipalities in these states to build out their own broadband networks outside of their local jurisdictions to compete with Internet service providers and cable companies. The state of Tennessee, believing the Commission overstepped its bounds, filed its appeal at the Sixth Circuit Court in Cincinnati:

In the Order, the FCC preempts Tennessee law pertaining to the operation of municipal electric plants, including the Electric Power Board of Chattanooga, an instrumentality of the City of Chattanooga, created and controlled by the State of Tennessee. In so doing, the FCC has unlawfully inserted itself between the State of Tennessee and the State’s own political subdivisions. The State of Tennessee, as a sovereign and a party to the proceeding below, is aggrieved and seeks relief on the grounds that the Order: (1) is contrary to the United States Constitution; (2) is in excess of the Commission’s authority; (3) is arbitrary, capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act; and (4) is otherwise contrary to law (Tennessee Petition at p. 2).

The Sixth Circuit Court is known for its ideological extremes between judges. It has also had the highest percentage of its decisions rejected by the US Supreme Court. Therefore, regardless of its decision here, the case is likely to be ultimately decided by the High Court.

There are undoubtedly more lawsuits to come this year in these and other proceedings. ILECs are likely to appeal any attempt by the Commission to toughen regulations governing their special access services. They are also likely to oppose regulations that require them to provide functionally equivalent Internet Protocol services as the industry transitions away from special access. CLECs are just as likely to appeal if their wholesale services are not protected by the Commission during the IP transition. 

The only way to stop the years of uncertainty ahead for the industry is through a Congressional rewrite the 1996 Telecommunications Act. While it is difficult for both political parties to work together, it should be clear that the continued telecom uncertainty will discourage investment and could bring real harm to the economy. ILECs and CLECs would be well advised to put their battles on hold for a little while and lobby together for a needed rewrite that could help everyone, including the public.

By Andy Regitsky, CCMI