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Legal Update

DC Circuit Determines That the FCC Exceeded Its Authority in Regulating Comcast’s Network Management Policies—Congressional Action Likely Necessary to Implement Network Neutrality

7 April 2010
Mayer Brown Legal Update

The US Court of Appeals for the District of Columbia has ruled that the Federal Communications Commission (FCC) exceeded its authority when the agency prohibited Comcast, an Internet service provider (ISP), from interfering with subscribers’ use of peer-to-peer networking technologies in an effort to limit bandwidth consumption. Comcast Corp. v. FCC, No. 08-1291 (D.C. Cir. Apr. 6, 2010).

The decision is significant because it sharply curtails the authority of the FCC to regulate the network management practices of ISPs, and it calls into question the FCC’s ability to adopt “network neutrality” or “open Internet” regulations banning such providers from placing limitations on certain Internet applications or content. The court’s decision makes it more likely that Congress would have to provide the FCC with explicit authority to adopt such regulations before the FCC could impose network neutrality requirements.

In an opinion by Judge Tatel, the DC Circuit agreed with Comcast that the FCC did not have jurisdiction over the company’s network management practices, and vacated the FCC’s order. The court began by noting that, under the FCC’s 2002 Cable Modem Order, cable Internet service is neither a telecommunications service subject to FCC regulation under Title II of the Communications Act of 1934 (the “Act”), nor a cable service covered by Title VI of the Act. Instead, the FCC asserted jurisdiction under its so-called “ancillary authority” under Title I.

Such ancillary authority was recognized in a series of US Supreme Court cases concerning the FCC’s authority to regulate cable television services in their inception, before the Act was amended to expressly provide the FCC with jurisdiction to regulate such services. The Supreme Court’s decisions pointed to the broad language of Section 4(i) of the Act, which states that the FCC “may perform any and all acts, make such rules and regulations, and issue such orders … as may be necessary in the execution of its functions.” 

The DC Circuit rejected the FCC’s assertion of ancillary authority to regulate Comcast’s network management, explaining that the FCC could exercise its ancillary jurisdiction only when (i) “the Commission’s general jurisdictional grant … covers the regulated subject” and (ii) “the regulations are reasonably ancillary to the Commission’s effective performance of its statutorily mandated responsibilities.” Here, there was no dispute that Internet service was within the FCC’s general jurisdictional grant, covering “interstate and foreign communication by wire.” But the court found that the FCC had not established that the agency’s attempt to regulate network management policies was sufficiently connected to its “statutorily mandated responsibilities.”

The FCC based its assertion of authority primarily upon several Congressional statements of policy, which the DC Circuit held were insufficient to satisfy the second prong of the ancillary jurisdiction test. The court concluded that such policy statements alone—without some connection to an express delegation to the FCC under the Act—“cannot provide the basis for the Commission’s exercise of ancillary authority.” The court further explained that the FCC “does not rely on section 230(b) or section 1 to argue that its regulation of an activity over which it concededly has no express statutory authority (here Comcast’s Internet management practices) is necessary to further its regulation of activities over which it does have express statutory authority.”

Although recognizing that the Supreme Court had previously indicated that “the Commission remains free to impose special regulatory duties on … ISPs under its Title I ancillary jurisdiction” (Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 996 (2005)), the DC Circuit interpreted Brand X’s language as merely suggesting that the FCC could impose some such regulations, not that it had plenary authority over ISPs.

The court thus achieved a middle ground in its decision. The ruling provides that the FCC may have the authority to impose certain obligations on ISPs. However, the court concluded that the FCC did not demonstrate that the Communications Act provides an express delegation of authority to the FCC to regulate the network management activities of ISPs, or that the FCC has express authority over another activity to which network management authority is ancillary.

This decision leaves open the possibility that the FCC may impose other types of regulations on ISPs. But with respect to Internet network management, the opinion makes it very challenging for the FCC to implement network neutrality requirements absent express Congressional authorization. Network neutrality proponents are likely to seek Congressional action to provide the FCC with such express authority over network management.

For more information about this case, please contact at +1 202 263 3848.

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