Appeals court allows rural broadband fund, fueling Title II debate

A three-judge panel in Denver ruled last Friday that the ambiguities between "information" and "telecommunications services" in existing statutes are different for each section.

Outside the Federal Communications Commission, there's widespread objection to proposed revisions to its Open Internet regulations, allowing for "commercially reasonable" agreements between service providers--agreements that opponents fear would enable ISPs to charge premiums to certain content providers, or even to consumers.

The single alternative thus far is for the FCC to resume regulating the Internet like a public utility. In its Verizon decision earlier this year, the D.C. Appeals Court let the FCC get its foot in the door for Title II regulation under the 1996 Telecommunications Act. Last Friday, the Tenth Circuit Appeals Court in Denver may have pried that door open the rest of the way.

The Tenth Circuit's decision affirms the FCC's right to repurpose its Connect America Fund, or Universal Service Fund geared toward expanding telecommunications service to rural areas, for expanding rural broadband service as well. A list of service providers over seven pages long stood opposed to this move on the grounds that the FCC funding broadband expansion exceeded its statutory authority.

In their argument, the telcos first pointed to the key weakness in the FCC's position, made evident in its defeat to Comcast in 2010: If the Internet truly is an information service, as the FCC itself began defining it, then it falls outside the FCC's own regulatory purview. Second, even though the FCC promised to only fund projects in regions of the U.S. where telcos have not yet established competitive presences, USF would benefit certain companies that were not telcos themselves.

But in their decision Friday, the three-judge panel, literally split the '96 Act into shards, saying that any interpretation of the limits of the FCC's authority to regulate Internet service under Sec. 706(a) should not necessarily apply to Sec. 706(b). Specifically, it's 706(b) that grants the FCC the authority to raise funds to deploy "advanced telecommunications capability... to all Americans in a reasonable and timely fashion," and to take immediate action where necessary to accelerate deployment. Sec. 706(a) grants the FCC similar authority over "telecommunications services," but not "advanced telecommunications capability."

Did Congress mean for these two phrases to mean distinct and separate things? In lieu of a time machine with which we could go ask Congress, legal precedent says that judges can't just come up with an answer on their own. Instead, they must apply what has come to be called "Chevron deference," having nothing to do with the oil company except for the fact that this precedent was set in a case involving Chevron. Essentially, this precedent means that when a law passed by Congress is ambiguous in its meaning, whether unintentionally or by virtue of changing circumstances through history, about the authority it grants any regulatory agency, judges must defer to how that agency interprets the law for itself, so long as it appears reasonable.

The order of proposed rulemaking for USF explicitly stated that the FCC did not believe the issue of whether VoIP services were telecommunications or information services, impeded its own ability to institute this fund. In addition, the FCC's attorneys had argued that the agency interpreted the distinction between the two phrases in sections 706(a) and 706(b) as intentional. On that basis, the Denver court found the FCC's interpretation reasonable, and threw out the telcos' case.

If the Verizon decision gave the FCC a path for re-adopting Title II-style regulation if all else fails, last week's Tenth Circuit decision laid down asphalt and road signs.

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