In a long-awaited decision, today the U.S. Court of Appeals for the D.C. Circuit upheld a January 2018 decision by the FCC to repeal most net neutrality rules and classify broadband as an unregulated “information service,” despite requiring the FCC to conduct further proceedings to justify certain aspects of its decision.  At the same time, the Court found that the FCC exceeded its authority in attempting to preempt any state net neutrality or similar laws regulating broadband.

Reflecting the continued divide over net neutrality, the three Republicans that form the majority of the five-member FCC praised the decision and largely declared victory.  The Commission’s two Democrats, in contrast, focused on the potential for state regulation of net neutrality.

Background.  In 2015’s Protecting and Promoting the Open Internet Order, the FCC classified broadband as a type of service subject to common carrier-style regulation.  This provided the statutory grounding for the FCC to impose specific net neutrality rules (no blocking, no throttling, and no paid prioritization) and restrictions on broadband providers that previously would not have been permissible.

Following the changeover in the Administration, in 2018, the FCC’s Restoring Internet Freedom Order reverted to the pre-2015 position that broadband Internet is an “information service,” and mobile broadband is a “private mobile service,” and thus not subject to common carrier regulation.  Thus, the rules adopted in 2015 were removed, while the FCC largely left in place a “transparency” rule requiring broadband providers to disclose information about network management practices, performance, and commercial terms of service.  It reasoned that these transparency disclosures and FTC oversight of failure of broadband providers to live up to the promises in those disclosures would serve to protect the open Internet.  Aware that states were beginning to consider adopting their own net neutrality rules, the FCC also held that any state law that is “inconsistent” with the deregulatory approach taken at the federal level would be preempted.

Numerous parties challenged the FCC decision in court, while others intervened in defense of the FCC.  Oral argument was held on Feb. 1, 2019, and all stakeholders have eagerly awaited a decision from the court.  That decision came today.

The Court’s Decision.  On October 1, 2019, the D.C. Circuit largely upheld the FCC’s 2018 Order, including the decision to repeal the net neutrality rules (on no blocking, no throttling and no paid prioritization), classify broadband as an unregulated information service, and classify mobile broadband as an unregulated private mobile service.  The court also held that the FCC had justified its decision to maintain the transparency rule without grounding it in common carrier authority.  The Court nevertheless ordered the FCC to conduct further proceedings to consider the effect of the repeal on three issues:  public safety, regulation of pole attachments, and effect on the FCC’s Lifeline Program (a program that lowers the monthly cost of phone and Internet).  Despite finding that the FCC inadequately considered the effect of the 2018 Order on these three areas, it allowed the Order to remain in effect, or, in legal parlance, it did not “vacate” the order.

The Court’s decision would have been, effectively, a total victory for the FCC were it not for the Court’s decision to vacate (i.e., strike down) the 2018 Order’s “Preemption Directive.” That aspect of the Order would have barred states from imposing any rule or requirement that the Commission ‘repealed or decided to refrain from imposing’ in the Order or that is ‘more stringent’ than the Order.”  This aspect of the decision leaves open the possibility for states to implement additional net neutrality regulations, such as the restrictions on blocking, throttling, and paid prioritization that the 2018 Order overturned.

With this portion of the 2018 Order vacated, we may begin to see an uptick in state-level regulation of broadband Internet, such as laws adopted in 2018 by California and Vermont that implemented regulations akin to those in the 2015 Order.  Those states’ laws were challenged by a coalition of broadband providers, though the states agreed to hold off on enforcing the laws pending the outcome of the litigation (including any Supreme Court review) over the FCC’s action.  Now that the D.C. Circuit has ruled on the FCC order, we likely will see litigation resume over those two state laws and potentially others.  The decision may motivate other states to enact laws as well.