Verizon v. FCC

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 9, 2013 Decided January 14, 2014

No. 11-1355

VERIZON,

APPELLANT

v.

FEDERAL COMMUNICATIONS COMMISSION,

APPELLEE

INDEPENDENT TELEPHONE & TELECOMMUNICATIONS

ALLIANCE, ET AL.,

INTERVENORS

Consolidated with 11-1356

On Petition For Review and Notice of Appeal

of an Order of the Federal Communications Commission

Helgi C. Walker argued the cause for appellant/petitioner

Verizon. With her on the briefs were Eve Klindera Reed,

William S. Consovoy, Brett A. Shumate, Walter E. Dellinger,

Anton Metlitsky, Samir C. Jain, Carl W. Northrup, Michael

Lazarus, Andrew Morentz, Michael E. Glover, William H.

Johnson, Stephen B. Kinnaird, and Mark A. Stachiw. John T.

Scott III and Edward Shakin entered appearances.

2

Stephen B. Kinnaird, Carl W. Northrup, Michael Lazarus,

Andrew Morentz, and Mark A. Stachiw were on the briefs for

appellants/petitioners MetroPCS Communications, Inc., et al.

John P. Elwood, Sam Kazman, Randolph May, and Ilya

Shapiro were on the brief for amici curiae The Competitive

Enterprise Institute, et al. in support of appellant/petitioner.

Russell P. Hanser, Bryan N. Tramont, and Quentin Riegel

were on the brief for amicus curiae National Association of

Manufacturers in support of appellant/petitioner.

Kenneth T. Cuccinelli, II, Attorney General, Office of the

Attorney General for the Commonwealth of Virginia, E.

Duncan Getchell, Jr., Solicitor General, and Wesley G. Russell,

Jr., Deputy Attorney General, were on the brief for amici

curiae The Commonwealth of Virginia, et al. in support of

appellant/petitioner.

Sean A. Lev, General Counsel, Federal Communications

Commission, argued the cause for appellee/respondent. With

him on the briefs were Catherine G. O’Sullivan and Nickolai

G. Levin, Attorneys, U.S. Department of Justice, Peter

Karanjia, Deputy General Counsel, Federal Communications

Commission, Jacob M. Lewis, Associate General Counsel, and

Joel Marcus and Matthew J. Dunne, Counsel. Robert J.

Wiggers, Attorney, U.S. Department of Justice, R. Craig

Lawrence, Assistant U.S. Attorney, and Richard K. Welch,

Deputy Associate General Counsel, Federal Communications

Commission, entered appearances.

Pantelis Michalopoulos argued the cause for intervenors.

With him on the brief were Stephanie A. Roy, Andrew W. Guhr,

Henry Goldberg, David C. Bergmann, Kurt Matthew Rogers,

and Brendan Daniel Kasper. Markham C. Erickson, Jeffrey J.

3

Binder, Harold J. Feld and James B. Ramsay entered

appearances.

Sean H. Donahue and David T. Goldberg were on the brief

for amici curiae Reed Hundt, et al. in support of

appellee/respondent.

E. Joshua Rosenkranz, Gabriel M. Ramsey, Thomas J.

Gray, and Christina Von der Ahe were on the brief for amici

curiae Venture Capital Investors in support of

appellee/respondent.

Andrew Jay Schwartzman was on the brief for amicus

curiae Tim Wu in support of appellee/respondent.

John Blevins was on the brief for amici curiae Internet

Engineers and Technologists in support of

appellee/respondent.

Kevin S. Bankston and Emma J. Llansó were on the brief

for amici curiae The Center for Democracy and Technology, et

al. in support of appellee/respondent.

Before: ROGERS and TATEL, Circuit Judges, and

SILBERMAN, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge TATEL.

Opinion concurring in part and dissenting in part filed by

Senior Circuit Judge SILBERMAN.

TATEL, Circuit Judge: For the second time in four years,

we are confronted with a Federal Communications

Commission effort to compel broadband providers to treat all

Internet traffic the same regardless of source—or to require, as

4

it is popularly known, “net neutrality.” In Comcast Corp. v.

FCC, 600 F.3d 642 (D.C. Cir. 2010), we held that the

Commission had failed to cite any statutory authority that

would justify its order compelling a broadband provider to

adhere to open network management practices. After Comcast,

the Commission issued the order challenged here—In re

Preserving the Open Internet, 25 F.C.C.R. 17905 (2010) (“the

Open Internet Order”)—which imposes disclosure,

anti-blocking, and anti-discrimination requirements on

broadband providers. As we explain in this opinion, the

Commission has established that section 706 of the

Telecommunications Act of 1996 vests it with affirmative

authority to enact measures encouraging the deployment of

broadband infrastructure. The Commission, we further hold,

has reasonably interpreted section 706 to empower it to

promulgate rules governing broadband providers’ treatment of

Internet traffic, and its justification for the specific rules at

issue here—that they will preserve and facilitate the “virtuous

circle” of innovation that has driven the explosive growth of

the Internet—is reasonable and supported by substantial

evidence. That said, even though the Commission has general

authority to regulate in this arena, it may not impose

requirements that contravene express statutory mandates.

Given that the Commission has chosen to classify broadband

providers in a manner that exempts them from treatment as

common carriers, the Communications Act expressly prohibits

the Commission from nonetheless regulating them as such.

Because the Commission has failed to establish that the

anti-discrimination and anti-blocking rules do not impose per

se common carrier obligations, we vacate those portions of the

Open Internet Order.

5

I.

Understanding this case requires an understanding of the

Internet, the Internet marketplace, and the history of the

Commission’s regulation of that marketplace.

Four major participants in the Internet marketplace are

relevant to the issues before us: backbone networks, broadband

providers, edge providers, and end users. Backbone networks

are interconnected, long-haul fiber-optic links and high-speed

routers capable of transmitting vast amounts of data. See In re

Verizon Communications Inc. and MCI, Inc. Applications for

Approval of Transfer of Control, 20 F.C.C.R. 18433, 18493

¶ 110 (2005). Internet users generally connect to these

networks—and, ultimately, to one another—through local

access providers like petitioner Verizon, who operate the

“last-mile” transmission lines. See Open Internet Order, 25

F.C.C.R. at 17908, 17915 ¶¶ 7, 20. In the Internet’s early days,

most users connected to the Internet through dial-up

connections over local telephone lines. See In re Inquiry

Concerning High-Speed Access to the Internet Over Cable and

Other Facilities, 17 F.C.C.R. 4798, 4802–03 ¶ 9 (2002)

(“Cable Broadband Order”). Today, access is generally

furnished through “broadband,” i.e., high-speed

communications technologies, such as cable modem service.

See In re Inquiry Concerning the Deployment of Advanced

Telecommunications Capability to All Americans in a

Reasonable and Timely Fashion, 25 F.C.C.R. 9556, 9557,

9558–59 ¶¶ 1, 4 (2010) (“Sixth Broadband Deployment

Report”); 47 U.S.C. § 1302(d)(1). Edge providers are those

who, like Amazon or Google, provide content, services, and

applications over the Internet, while end users are those who

consume edge providers’ content, services, and applications.

See Open Internet Order, 25 F.C.C.R. at 17910 ¶ 13. To pull

the whole picture together with a slightly oversimplified

6

example: when an edge provider such as YouTube transmits

some sort of content—say, a video of a cat—to an end user,

that content is broken down into packets of information, which

are carried by the edge provider’s local access provider to the

backbone network, which transmits these packets to the end

user’s local access provider, which, in turn, transmits the

information to the end user, who then views and hopefully

enjoys the cat.

These categories of entities are not necessarily mutually

exclusive. For example, end users may often act as edge

providers by creating and sharing content that is consumed by

other end users, for instance by posting photos on Facebook.

Similarly, broadband providers may offer content,

applications, and services that compete with those furnished by

edge providers. See Open Internet Order, 25 F.C.C.R. at 17915

¶ 20.

Proponents of net neutrality—or, to use the Commission’s

preferred term, “Internet openness”—worry about the

relationship between broadband providers and edge providers.

They fear that broadband providers might prevent their

end-user subscribers from accessing certain edge providers

altogether, or might degrade the quality of their end-user

subscribers’ access to certain edge providers, either as a means

of favoring their own competing content or services or to

enable them to collect fees from certain edge providers. Thus,

for example, a broadband provider like Comcast might limit its

end-user subscribers’ ability to access the New York Times

website if it wanted to spike traffic to its own news website, or

it might degrade the quality of the connection to a search

website like Bing if a competitor like Google paid for

prioritized access.

7

Since the advent of the Internet, the Commission has

confronted the questions of whether and how it should regulate

this communications network, which, generally speaking, falls

comfortably within the Commission’s jurisdiction over “all

interstate and foreign communications by wire or radio.” 47

U.S.C. § 152(a). One of the Commission’s early efforts

occurred in 1980, when it adopted what is known as the

Computer II regime. The Computer II rules drew a line

between “basic” services, which were subject to regulation

under Title II of the Communications Act of 1934 as common

carrier services, see 47 U.S.C. §§ 201 et seq., and “enhanced”

services, which were not. See In re Amendment of Section

64.702 of the Commission’s Rules and Regulations, 77

F.C.C.2d 384, 387 ¶¶ 5–7 (1980) (“Second Computer

Inquiry”). What distinguished “enhanced” services from

“basic” services was the extent to which they involved the

processing of information rather than simply its transmission.

Id. at 420–21 ¶¶ 96–97. For example, the Commission

characterized telephone service as a “basic” service, see id. at

419 ¶ 94, because it involved a “pure” transmission that was

“virtually transparent in terms of its interaction with customer

supplied information,” id. at 420 ¶ 96. Services that involved

“computer processing applications . . . used to act on the

content, code, protocol, and other aspects of the subscriber’s

information”—a definition that encompassed the services

needed to connect an end user to the Internet—constituted

enhanced services. Id. at 420 ¶ 97.

By virtue of their designation as common carriers,

providers of basic services were subject to the duties that apply

to such entities, including that they “furnish . . . communication

service upon reasonable request,” 47 U.S.C. § 201(a), engage

in no “unjust or unreasonable discrimination in charges,

practices, classifications, regulations, facilities, or services,”

id. § 202(a), and charge “just and reasonable” rates, id.

8

§ 201(b). Although the Commission applied no such

restrictions to purveyors of enhanced services, it imposed

limitations on certain entities, like AT&T, which owned the

transmission facilities over which enhanced services would be

provided. Second Computer Inquiry, 77 F.C.C.2d at 473–74

¶¶ 228–29. These restrictions included, most significantly,

requirements that such entities offer enhanced services only

through a completely separate corporate entity and that they

offer their transmissions facilities to other enhanced service

providers on a common carrier basis. Id.

For more than twenty years, the Commission applied some

form of the Computer II regime to Internet services offered

over telephone lines, then the predominant way in which most

end users connected to the Internet. See, e.g., In re Appropriate

Framework for Broadband Access to the Internet Over

Wireline Facilities, 17 F.C.C.R. 3019, 3037–40 ¶¶ 36–42

(2002). Telephone companies that provided the actual wireline

facilities over which information was transmitted were limited

in the manner in which they could provide the enhanced

services necessary to permit end users to access the Internet. Id.

at 3040 ¶ 42. They were also required to permit third-party

Internet Service Providers (ISPs), such as America Online, to

access their wireline transmission facilities on a common

carrier basis. Id.

It was against this background that Congress passed the

Telecommunications Act of 1996, Pub. L. No. 104-104, 110

Stat. 56. Tracking the Computer II distinction between basic

and enhanced services, the Act defines two categories of

entities: telecommunications carriers, which provide the

equivalent of basic services, and information-service

providers, which provide the equivalent of enhanced services.

47 U.S.C. § 153(24), (50), (51), (53); see National Cable &

Telecommunications Ass’n v. Brand X Internet Services, 545

9

U.S. 967, 976–77 (2005). The Act subjects

telecommunications carriers, but not information-service

providers, to Title II common carrier regulation. 47 U.S.C.

§ 153(53); Brand X, 545 U.S. at 975–76.

Pursuant to the Act, and paralleling its prior practice under

the Computer II regime, the Commission then classified

Digital Subscriber Line (DSL) services—broadband Internet

service furnished over telephone lines—as

“telecommunications services.” See In re Deployment of

Wireline Services Offering Advanced Telecommunications

Capability, 13 F.C.C.R. 24012, 24014, 24029–30 ¶¶ 3, 35–36

(1998) (“Advanced Services Order”). DSL services, the

Commission concluded, involved pure transmission

technologies, and so were subject to Title II regulation. Id. at

24030–31 ¶ 35. A DSL provider could exempt its Internet

access services, but not its transmission facilities themselves,

from Title II common carrier restrictions only by operating

them through a separate affiliate (i.e., a quasi-independent

ISP). Id. at 24018 ¶ 13.

Four years later, however, the Commission took a

different approach when determining how to regulate

broadband service provided by cable companies. Instead of

viewing cable broadband providers’ transmission and

processing of information as distinct services, the Commission

determined that cable broadband providers—even those that

own and operate the underlying last-mile transmission

facilities—provide a “single, integrated information service.”

Cable Broadband Order, 17 F.C.C.R. at 4824 ¶ 41. Because

cable broadband providers were thus not telecommunications

carriers at all, they were entirely exempt from Title II

regulation. Id. at 4802 ¶ 7.

10

In National Cable & Telecommunications Ass’n v. Brand

X Internet Services, 545 U.S. 967 (2005), the Supreme Court

upheld the Commission’s classification of cable broadband

providers. The Court concluded that the Commission’s ruling

represented a reasonable interpretation of the 1996

Telecommunications Act’s ambiguous provision defining

telecommunications service, see id. at 991–92, and that the

Commission’s determination was entitled to deference

notwithstanding its apparent inconsistency with the agency’s

prior interpretation of that statute, see id. at 981, 1000–01.

Following Brand X, the Commission classified other types

of broadband providers, such as DSL and wireless, which

includes those offering broadband Internet service for cellular

telephones, as information service providers exempt from Title

II’s common carrier requirements. See In re Appropriate

Framework for Broadband Access to the Internet Over

Wireline Facilities, 20 F.C.C.R. 14853, 14862 ¶ 12 (2005)

(“2005 Wireline Broadband Order”); In re Appropriate

Regulatory Treatment for Broadband Access to the Internet

Over Wireless Networks, 22 F.C.C.R. 5901, 5901–02 ¶ 1

(2007) (“Wireless Broadband Order”); In re United Power

Line Council’s Petition for Declaratory Ruling Regarding the

Classification of Broadband over Power Line Internet Access

Service as an Information Service, 21 F.C.C.R. 13281, 13281

¶ 1 (2006). Despite calls to revisit these classification orders,

see, e.g., Open Internet Order, 25 F.C.C.R. at 18046

(concurring statement of Commissioner Copps), the

Commission has yet to overrule them.

But even as the Commission exempted broadband

providers from Title II common carrier obligations, it left open

the possibility that it would nonetheless regulate these entities.

In the Cable Broadband Order, for example, the Commission

sought comment on whether and to what extent it should utilize

11

the powers granted it under Title I of the Communications Act

to impose restrictions on cable broadband providers. Cable

Broadband Order, 17 F.C.C.R. at 4842 ¶ 77. Subsequently, in

conjunction with the 2005 Wireline Broadband Order, the

Commission issued a Policy Statement in which it signaled its

intention to “preserve and promote the open and

interconnected nature of the public Internet.” In re Appropriate

Framework for Broadband Access to the Internet Over

Wireline Facilities, 20 F.C.C.R. 14986, 14988 ¶ 4 (2005). The

Commission announced that should it “see evidence that

providers of telecommunications for Internet access or

IP-enabled services are violating these principles,” it would

“not hesitate to take action to address that conduct.” 2005

Wireline Broadband Order, 20 F.C.C.R. at 14904 ¶ 96.

The Commission did just that when, two years later,

several subscribers to Comcast’s cable broadband service

complained that the company had interfered with their use of

certain peer-to-peer networking applications. See In re Formal

Complaint of Free Press and Public Knowledge Against

Comcast Corp. for Secretly Degrading Peer-to-Peer

Applications, 23 F.C.C.R. 13028 (2008) (“Comcast Order”).

Finding that Comcast’s impairment of these applications had

“contravene[d] . . . federal policy,” id. at 13052 ¶ 43, the

Commission ordered the company to adhere to a new approach

for managing bandwidth demand and to disclose the details of

that approach, id. at 13059–60 ¶ 54. The Commission justified

its order as an exercise of what courts term its “ancillary

jurisdiction,” see id. at 13034–41 ¶¶ 14–22, a power that flows

from the broad language of Communications Act section 4(i).

See 47 U.S.C. § 154(i) (“The Commission may perform any

and all acts, make such rules and regulations, and issue such

orders, not inconsistent with this chapter, as may be necessary

in the execution of its functions.”); see generally American

Library Ass’n v. FCC, 406 F.3d 689, 700–03 (D.C. Cir. 2005).

12

We have held that the Commission may exercise such ancillary

jurisdiction where two conditions are met: “(1) the

Commission’s general jurisdictional grant under Title I covers

the regulated subject and (2) the regulations are reasonably

ancillary to the Commission’s effective performance of its

statutorily mandated responsibilities.” American Library

Ass’n, 406 F.3d at 691–92.

In Comcast, we vacated the Commission’s order, holding

that the agency failed to demonstrate that it possessed authority

to regulate broadband providers’ network management

practices. 600 F.3d at 644. Specifically, we held that the

Commission had identified no grant of statutory authority to

which the Comcast Order was reasonably ancillary. Id. at 661.

The Commission had principally invoked statutory provisions

that, though setting forth congressional policy, delegated no

actual regulatory authority. Id. at 651–58. These provisions, we

concluded, were insufficient because permitting the agency to

ground its exercise of ancillary jurisdiction in policy

statements alone would contravene the “‘axiomatic’ principle

that ‘administrative agencies may [act] only pursuant to

authority delegated to them by Congress.’” Id. at 654

(alteration in original) (quoting American Library Ass’n, 406

F.3d at 691). We went on to reject the Commission’s

invocation of a handful of other statutory provisions that,

although they could “arguably be read to delegate regulatory

authority,” id. at 658, provided no support for the precise order

at issue, id. at 658–61.

While the Comcast matter was pending, the Commission

sought comment on a set of proposed rules that, with some

modifications, eventually became the rules at issue here. See In

re Preserving the Open Internet, 24 F.C.C.R. 13064 (2009). In

support, it relied on the same theory of ancillary jurisdiction it

had asserted in the Comcast Order. See id. at 13099 ¶¶ 83–85.

13

But after our decision in Comcast undermined that theory, the

Commission sought comment on whether and to what extent it

should reclassify broadband Internet services as

telecommunications services. See In re Framework for

Broadband Internet Service, 25 F.C.C.R. 7866, 7867 ¶ 2

(2010). Ultimately, however, rather than reclassifying

broadband, the Commission adopted the Open Internet Order

that Verizon challenges here. See 25 F.C.C.R. 17905.

The Open Internet Order establishes two sets of

“prophylactic rules” designed to “incorporate longstanding

openness principles that are generally in line with current

practices.” 25 F.C.C.R. at 17907 ¶ 4. One set of rules applies to

“fixed” broadband providers—i.e., those furnishing residential

broadband service and, more generally, Internet access to end

users “primarily at fixed end points using stationary

equipment.” Id. at 17934 ¶ 49. The other set of requirements

applies to “mobile” broadband providers—i.e., those

“serv[ing] end users primarily using mobile stations,” such as

smart phones. Id.

The Order first imposes a transparency requirement on

both fixed and mobile broadband providers. Id. at 17938 ¶ 56.

They must “publicly disclose accurate information regarding

the network management practices, performance, and

commercial terms of [their] broadband Internet access

services.” Id. at 17937 ¶ 54 (fixed providers); see also id. at

17959 ¶ 98 (mobile providers).

Second, the Order imposes anti-blocking requirements on

both types of broadband providers. It prohibits fixed

broadband providers from “block[ing] lawful content,

applications, services, or non-harmful devices, subject to

reasonable network management.” Id. at 17942 ¶ 63. Similarly,

the Order forbids mobile providers from “block[ing]

14

consumers from accessing lawful websites” and from

“block[ing] applications that compete with the provider’s

voice or video telephony services, subject to reasonable

network management.” Id. at 17959 ¶ 99. The Order defines

“reasonable network management” as practices designed to

“ensur[e] network security and integrity,” “address[] traffic

that is unwanted by end users,” “and reduc[e] or mitigat[e] the

effects of congestion on the network.” Id. at 17952 ¶ 82. The

anti-blocking rules, the Order explains, not only prohibit

broadband providers from preventing their end-user

subscribers from accessing a particular edge provider

altogether, but also prohibit them “from impairing or

degrading particular content, applications, services, or

non-harmful devices so as to render them effectively

unusable.” Id. at 17943 ¶ 66.

Third, the Order imposes an anti-discrimination

requirement on fixed broadband providers only. Under this

rule, such providers “shall not unreasonably discriminate in

transmitting lawful network traffic over a consumer’s

broadband Internet access service. Reasonable network

management shall not constitute unreasonable discrimination.”

Id. at 17944 ¶ 68. The Commission explained that

“[u]se-agnostic discrimination”—that is, discrimination based

not on the nature of the particular traffic involved, but rather,

for example, on network management needs during periods of

congestion—would generally comport with this requirement.

Id. at 17945–46 ¶ 73. Although the Commission never

expressly said that the rule forbids broadband providers from

granting preferred status or services to edge providers who pay

for such benefits, it warned that “as a general matter, it is

unlikely that pay for priority would satisfy the ‘no

unreasonable discrimination’ standard.” Id. at 17947 ¶ 76.

Declining to impose the same anti-discrimination requirement

on mobile providers, the Commission explained that

15

differential treatment of such providers was warranted because

the mobile broadband market was more competitive and more

rapidly evolving than the fixed broadband market, network

speeds and penetration were lower, and operational constraints

were higher. See id. at 17956–57 ¶¶ 94–95.

As authority for the adoption of these rules, the

Commission invoked a plethora of statutory provisions. See id.

at 17966–81 ¶¶ 115–37. In particular, the Commission relied

on section 706 of the 1996 Telecommunications Act, which

directs it to encourage the deployment of broadband

telecommunications capability. See 47 U.S.C. § 1302(a), (b).

According to the Commission, the rules furthered this statutory

mandate by preserving unhindered the “virtuous circle of

innovation” that had long driven the growth of the Internet.

Open Internet Order, 25 F.C.C.R. at 17910–11 ¶ 14; see id. at

17968, 17972 ¶¶ 117, 123. Internet openness, it reasoned, spurs

investment and development by edge providers, which leads to

increased end-user demand for broadband access, which leads

to increased investment in broadband network infrastructure

and technologies, which in turn leads to further innovation and

development by edge providers. Id. at 17910–11 ¶ 14. If, the

Commission continued, broadband providers were to disrupt

this “virtuous circle” by “[r]estricting edge providers’ ability to

reach end users, and limiting end users’ ability to choose which

edge providers to patronize,” they would “reduce the rate of

innovation at the edge and, in turn, the likely rate of

improvements to network infrastructure.” Id. at 17911 ¶ 14.

Two members of the Commission dissented. As they saw

it, the Open Internet Order rules not only exceeded the

Commission’s lawful authority, but would also stifle rather

than encourage innovation. See Open Internet Order, 25

F.C.C.R. at 18049–81 (Dissenting Statement of Commissioner

16

McDowell); id. at 18084–98 (Dissenting Statement of

Commissioner Baker).

Verizon filed a petition for review of the Open Internet

Order pursuant to 47 U.S.C. § 402(a) as well as a notice of

appeal pursuant to 47 U.S.C. § 402(b). Because “we plainly

have jurisdiction by the one procedural route or the other,” “we

need not decide which is the more appropriate vehicle for our

review.” Cellco Partnership v. FCC, 700 F.3d 534, 541 (D.C.

Cir. 2012) (internal quotation marks omitted).

Verizon challenges the Open Internet Order on several

grounds, including that the Commission lacked affirmative

statutory authority to promulgate the rules, that its decision to

impose the rules was arbitrary and capricious, and that the rules

contravene statutory provisions prohibiting the Commission

from treating broadband providers as common carriers. In Part

II, we consider Verizon’s attacks on the Commission’s

affirmative statutory authority and its justification for

imposing these rules. We consider the common carrier issue in

Part III. Given our disposition of the latter issue, we have no

need to address Verizon’s additional contentions that the Order

violates the First Amendment and constitutes an

uncompensated taking.

Before beginning our analysis, we think it important to

emphasize that although the question of net neutrality

implicates serious policy questions, which have engaged

lawmakers, regulators, businesses, and other members of the

public for years, our inquiry here is relatively limited.

“Regardless of how serious the problem an administrative

agency seeks to address, . . . it may not exercise its authority in

a manner that is inconsistent with the administrative structure

that Congress enacted into law.” Ragsdale v. Wolverine World

Wide, Inc., 535 U.S. 81, 91 (2002) (internal quotation marks

17

omitted). Accordingly, our task as a reviewing court is not to

assess the wisdom of the Open Internet Order regulations, but

rather to determine whether the Commission has demonstrated

that the regulations fall within the scope of its statutory grant of

authority.

II.

The Commission cites numerous statutory provisions it

claims grant it the power to promulgate the Open Internet

Order rules. But we start and end our analysis with section 706

of the 1996 Telecommunications Act, which, as we shall

explain, furnishes the Commission with the requisite

affirmative authority to adopt the regulations.

Section 706(a) provides:

The Commission and each State commission with

regulatory jurisdiction over telecommunications

services shall encourage the deployment on a

reasonable and timely basis of advanced

telecommunications capability to all Americans

(including, in particular, elementary and secondary

schools and classrooms) by utilizing, in a manner

consistent with the public interest, convenience, and

necessity, price cap regulation, regulatory

forbearance, measures that promote competition in

the local telecommunications market, or other

regulating methods that remove barriers to

infrastructure investment.

47 U.S.C. § 1302(a). Section 706(b), in turn, requires the

Commission to conduct a regular inquiry “concerning the

availability of advanced telecommunications capability.” Id.

§ 1302(b). It further provides that should the Commission find

that “advanced telecommunications capability is [not] being

18

deployed to all Americans in a reasonable and timely fashion,”

it “shall take immediate action to accelerate deployment of

such capability by removing barriers to infrastructure

investment and by promoting competition in the

telecommunications market.” Id. The statute defines

“advanced telecommunications capability” to include

“broadband telecommunications capability.” Id. § 1302(d)(1).

Verizon contends that neither subsection (a) nor (b) of

section 706 confers any regulatory authority on the

Commission. As Verizon sees it, the two subsections amount

to nothing more than congressional statements of policy.

Verizon further contends that even if either provision grants

the Commission substantive authority, the scope of that grant is

not so expansive as to permit the Commission to regulate

broadband providers in the manner that the Open Internet

Order rules do. In addressing these questions, we apply the

familiar two-step analysis of Chevron, U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837 (1984). As the

Supreme Court has recently made clear, Chevron deference is

warranted even if the Commission has interpreted a statutory

provision that could be said to delineate the scope of the

agency’s jurisdiction. See City of Arlington v. FCC, 133 S. Ct.

1863, 1874 (2013). Thus, if we determine that the

Commission’s interpretation of section 706 represents a

reasonable resolution of a statutory ambiguity, we must defer

to that interpretation. See Chevron, 467 U.S. at 842–43. The

Chevron inquiry overlaps substantially with that required by

the Administrative Procedure Act (APA), pursuant to which

we must also determine whether the Commission’s actions

were “arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A);

see National Ass’n of Regulatory Utility Commissioners v.

Interstate Commerce Commission, 41 F.3d 721, 726–27 (D.C.

Cir. 1994).

19

A.

This is not the first time the Commission has asserted that

section 706(a) grants it authority to regulate broadband

providers. Advancing a similar argument in Comcast, the

Commission contended that section 706(a) provided a

statutory hook for its exercise of ancillary jurisdiction.

Although we thought that section 706(a) might “arguably be

read to delegate regulatory authority to the Commission,” we

concluded that the Commission could not rely on this provision

to justify the Comcast Order because it had previously

determined, in the still-binding Advanced Services Order, that

the provision “‘does not constitute an independent grant of

authority.’” Comcast, 600 F.3d at 658 (quoting Advanced

Services Order, 13 F.C.C.R. at 24047 ¶ 77). We rejected the

Commission’s claim that the Advanced Services Order

concluded only that section 706(a) granted it no forbearance

authority—authority to relieve regulated entities of statutory

obligations to which they would otherwise be subject, see 47

U.S.C. § 160—over and above that given it elsewhere in the

Communications Act. Comcast, 600 F.3d at 658. Indeed, the

Advanced Services Order was clearly far broader, explicitly

declaring: “section 706(a) does not constitute an independent

grant of forbearance authority or of authority to employ other

regulating methods.” Advanced Services Order, 13 F.C.C.R. at

24044 ¶ 69 (emphasis added). Because the Commission had

“never questioned, let alone overruled, that understanding of

section 706,” we held that it “remain[ed] bound” by its prior

interpretation. Comcast, 600 F.3d at 659.

But the Commission need not remain forever bound by the

Advanced Services Order’s restrictive reading of section

706(a). “An initial agency interpretation is not instantly carved

in stone.” Chevron, 467 U.S. at 863. The APA’s requirement of

reasoned decision-making ordinarily demands that an agency

20

acknowledge and explain the reasons for a changed

interpretation. See FCC v. Fox Television Stations, Inc., 556

U.S. 502, 515 (2009) (“An agency may not . . . depart from a

prior policy sub silentio or simply disregard rules that are still

on the books.”); Brand X, 545 U.S. at 981 (“Unexplained

inconsistency is, at most, a reason for holding an interpretation

to be an arbitrary and capricious change from agency practice

under the Administrative Procedure Act.”). But so long as an

agency “adequately explains the reasons for a reversal of

policy,” its new interpretation of a statute cannot be rejected

simply because it is new. Brand X, 545 U.S. at 981. At the time

we issued our Comcast opinion, the Commission failed to

satisfy this requirement, as its assertion that section 706(a)

gave it regulatory authority represented, at that point, an

attempt to “‘depart from a prior policy sub silentio.’” Comcast,

600 F.3d at 659 (quoting Fox, 556 U.S. at 515).

In the Open Internet Order, however, the Commission has

offered a reasoned explanation for its changed understanding

of section 706(a). To be sure, the Open Internet Order evinces

a palpable reluctance to accept this court’s interpretation of the

Advanced Services Order, as the Commission again attempts

to reconcile its current understanding of section 706(a) with its

prior interpretation. See Open Internet Order, 25 F.C.C.R. at

17969 ¶ 119 (characterizing the Advanced Services Order as

being “consistent with [the Commission’s] present

understanding”). Of course, such reluctance hardly makes the

Commission’s decision unreasonable, as it is free to express its

disagreement with this court’s holdings. After all, even a

federal agency is entitled to a little pride. Moreover, although

the Open Internet Order inaccurately describes the Advanced

Services Order’s actual conclusion, it does describe what the

Order likely should have concluded. Specifically, the

Advanced Services Order’s rejection of section 706(a) as a

source of substantive authority rested almost entirely on the

21

notion that a contrary interpretation would somehow permit the

Commission to evade express statutory commands forbidding

it from using its forbearance authority in certain circumstances.

See Advanced Services Order, 13 F.C.C.R. at 24045–46 ¶¶ 72–

73. This makes little sense. By the same reasoning, one might

say that Article I of the Constitution gives Congress no

substantive authority because Congress might otherwise be

able to use that authority in a way that violates the Ex Post

Facto Clause. The Open Internet Order characterizes the

Advanced Services Order as simply “disavowing a reading of

Section 706(a) that would allow the agency to trump specific

mandates of the Communications Act,” thus honoring “the

interpretive canon that ‘[a] specific provision . . . controls one[]

of more general application.’” Open Internet Order, 25

F.C.C.R. at 17969 ¶¶ 118–119 (quoting Bloate v. United

States, 559 U.S. 196, 207 (2010)). Perhaps the Commission

should have more openly acknowledged that it was not actually

describing the Advanced Services Order, but instead rewriting

it in a more logical manner. In this latter task, however, the

Commission succeeded: its reinterpretation of the Advanced

Services Order was more reasonable than the Advanced

Services Order itself.

In any event—and more important for our purposes—the

Commission expressly declared: “To the extent that the

Advanced Services Order can be construed as having read

Section 706(a) differently, we reject that reading of the statute

for the reasons discussed in the text.” Open Internet Order, 25

F.C.C.R. at 17969 ¶ 119 n.370. Setting forth those “reasons” at

some length, the Commission analyzed the statute’s text, its

legislative history, and the resultant scope of the Commission’s

authority, concluding that each of these considerations

supports the view that section 706(a) constitutes an affirmative

grant of regulatory authority. Id. at 17969–70 ¶¶ 119–121. In

these circumstances, and contrary to Verizon’s contentions, we

22

have no basis for saying that the Commission “casually

ignored prior policies and interpretations or otherwise failed to

provide a reasoned explanation” for its changed interpretation.

Cablevision Systems Corp. v. FCC, 649 F.3d 695, 710 (D.C.

Cir. 2011) (internal quotation marks omitted).

The question, then, is this: Does the Commission’s current

understanding of section 706(a) as a grant of regulatory

authority represent a reasonable interpretation of an ambiguous

statute? We believe it does.

Recall that the provision directs the Commission

to “encourage the deployment . . . of advanced

telecommunications capability . . . by utilizing . . . price cap

regulation, regulatory forbearance, measures that promote

competition in the local telecommunications market, or other

regulating methods that remove barriers to infrastructure

investment.” 47 U.S.C. § 1302(a). As Verizon argues, this

language could certainly be read as simply setting forth a

statement of congressional policy, directing the Commission to

employ “regulating methods” already at the Commission’s

disposal in order to achieve the stated goal of promoting

“advanced telecommunications” technology. But the language

can just as easily be read to vest the Commission with actual

authority to utilize such “regulating methods” to meet this

stated goal. As the Commission put it in the Open Internet

Order, one might reasonably think that Congress, in directing

the Commission to undertake certain acts, “necessarily

invested the Commission with the statutory authority to carry

out those acts.” Open Internet Order, 25 F.C.C.R. at 17969

¶ 120.

Section 706(a)’s reference to state commissions does not

foreclose such a reading. Observing that the statute applies to

both “[t]he Commission and each State commission with

23

regulatory jurisdiction over telecommunications services,” 47

U.S.C. § 1302(a) (emphasis added), Verizon contends that

Congress would not be expected to grant both the FCC and

state commissions the regulatory authority to encourage the

deployment of advanced telecommunications capabilities. But

Congress has granted regulatory authority to state

telecommunications commissions on other occasions, and we

see no reason to think that it could not have done the same here.

See, e.g., id. § 251(f) (granting state commissions the authority

to exempt rural local exchange carriers from certain

obligations imposed on other incumbents); id. § 252(e)

(requiring all interconnection agreements between incumbent

local exchange carriers and entrant carriers to be approved by a

state commission); see also AT & T Corp. v. Iowa Utilities

Board, 525 U.S. 366, 385–86 (1999) (describing the

Commission’s power and responsibility to dictate the manner

in which state commissions exercise such authority). Thus,

Congress has not “directly spoken” to the question of whether

section 706(a) is a grant of regulatory authority simply by

mentioning state commissions in that grant. Chevron, 467 U.S.

at 842.

This case, moreover, is a far cry from FDA v. Brown &

Williamson Tobacco Corp., 529 U.S. 120 (2000), on which

Verizon principally relies. There, the Supreme Court held that

“Congress ha[d] clearly precluded the [Food and Drug

Administration] from asserting jurisdiction to regulate tobacco

products.” Id. at 126. The Court emphasized that the FDA had

not only completely disclaimed any authority to regulate

tobacco products, but had done so for more than eighty years,

and that Congress had repeatedly legislated against this

background. See id. at 143–59. The Court also observed that

the FDA’s newly adopted conclusion that it did in fact have

authority to regulate this industry would, given its findings

regarding the effects of tobacco products and its authorizing

24

statute, logically require the agency to ban such products

altogether, a result clearly contrary to congressional policy. See

id. at 135–43. Furthermore, the Court reasoned, if Congress

had intended to “delegate a decision of such economic and

political significance” to the agency, it would have done so far

more clearly. Id. at 160.

The circumstances here are entirely different. Although

the Commission once disclaimed authority to regulate under

section 706(a), it never disclaimed authority to regulate the

Internet or Internet providers altogether, nor is there any

similar history of congressional reliance on such a disclaimer.

To the contrary, as recounted above, see supra at 7–9, when

Congress passed section 706(a) in 1996, it did so against the

backdrop of the Commission’s long history of subjecting to

common carrier regulation the entities that controlled the

last-mile facilities over which end users accessed the Internet.

See, e.g., Second Computer Inquiry, 77 F.C.C.2d at 473–74

¶¶ 228–29. Indeed, one might have thought, as the

Commission originally concluded, see Advanced Services

Order, 13 F.C.C.R. at 24029–30 ¶ 35, that Congress clearly

contemplated that the Commission would continue regulating

Internet providers in the manner it had previously. Cf. Brand X,

545 U.S. at 1003 (Breyer, J., concurring) (concluding that the

Commission’s decision to exempt cable broadband providers

from Title II regulation was “perhaps just barely” within the

scope of the agency’s “statutorily delegated authority”); id. at

1005 (Scalia, J., dissenting) (arguing that Commission’s

decision “exceeded the authority given it by Congress”). In

fact, section 706(a)’s legislative history suggests that Congress

may have, somewhat presciently, viewed that provision as an

affirmative grant of authority to the Commission whose

existence would become necessary if other contemplated

grants of statutory authority were for some reason unavailable.

The Senate Report describes section 706 as a “necessary

25

fail-safe” “intended to ensure that one of the primary

objectives of the [Act]—to accelerate deployment of advanced

telecommunications capability—is achieved.” S. Rep. No.

104-23 at 50–51. As the Commission observed in the Open

Internet Order, it would be “odd . . . to characterize Section

706(a) as a ‘fail-safe’ that ‘ensures’ the Commission’s ability

to promote advanced services if it conferred no actual

authority.” 25 F.C.C.R. at 17970 ¶ 120.

Verizon directs our attention to a number of bills

introduced in Congress subsequent to the passage of the 1996

Act that, if enacted, would have imposed requirements on

broadband providers similar to those embodied in the

Commission’s Open Internet Order. See, e.g., Internet

Non-Discrimination Act of 2006, S. 2360, 109th Cong. (2006).

Such subsequent legislative history, however, provides “‘an

unreliable guide to legislative intent.’” North Broward

Hospital District v. Shalala, 172 F.3d 90, 98 (D.C. Cir. 1999)

(quoting Chapman v. United States, 500 U.S. 453, 464 n.4

(1991)). Moreover, even assuming that Congress’s failure to

impose such restrictions would itself cast light on Congress’s

understanding of the Commission’s power to do so, any such

inferences would be largely countered by Congress’s similar

failure to adopt a proposed resolution that would have

specifically disapproved of the Commission’s promulgation of

the Open Internet Order. See H.J. Res. 37, 112th Cong. (2011).

These conflicting pieces of subsequent failed legislation tell us

little if anything about the original meaning of the

Telecommunications Act of 1996.

Thus, although regulation of broadband Internet

providers certainly involves decisions of great “economic and

political significance,” Brown & Williamson, 529 U.S. at 160,

we have little reason given this history to think that Congress

could not have delegated some of these decisions to the

26

Commission. To be sure, Congress does not, as Verizon

reminds us, “hide elephants in mouseholes.” Whitman v.

American Trucking Ass’ns, Inc., 531 U.S. 457, 468 (2001). But

FCC regulation of broadband providers is no elephant, and

section 706(a) is no mousehole.

Of course, we might well hesitate to conclude that

Congress intended to grant the Commission substantive

authority in section 706(a) if that authority would have no

limiting principle. See Comcast, 600 F.3d at 655 (rejecting

Commission’s understanding of its authority that “if accepted

. . . would virtually free the Commission from its congressional

tether”); cf. Whitman, 531 U.S. at 472–73 (discussing the

nondelegation doctrine). But we are satisfied that the scope of

authority granted to the Commission by section 706(a) is not so

boundless as to compel the conclusion that Congress could

never have intended the provision to set forth anything other

than a general statement of policy. The Commission has

identified at least two limiting principles inherent in section

706(a). See Open Internet Order, 25 F.C.C.R. at 17970 ¶ 121.

First, the section must be read in conjunction with other

provisions of the Communications Act, including, most

importantly, those limiting the Commission’s subject matter

jurisdiction to “interstate and foreign communication by wire

and radio.” 47 U.S.C. § 152(a). Any regulatory action

authorized by section 706(a) would thus have to fall within the

Commission’s subject matter jurisdiction over such

communications—a limitation whose importance this court

has recognized in delineating the reach of the Commission’s

ancillary jurisdiction. See American Library Ass’n, 406 F.3d at

703–04. Second, any regulations must be designed to achieve a

particular purpose: to “encourage the deployment on a

reasonable and timely basis of advanced telecommunications

capability to all Americans.” 47 U.S.C. § 1302(a). Section

706(a) thus gives the Commission authority to promulgate only

27

those regulations that it establishes will fulfill this specific

statutory goal—a burden that, as we trust our searching

analysis below will demonstrate, is far from “meaningless.”

Dissenting Op. at 7.

B.

Section 706(b) has a less tortured history. Until shortly

before the Commission issued the Open Internet Order, it had

never considered whether the provision vested it with any

regulatory authority. The Commission had no need to do so

because prior to that time it had made no determination that

advanced telecommunications technologies, including

broadband Internet access, were not “being deployed to all

Americans in a reasonable and timely fashion,” the

prerequisite for any purported invocation of authority to “take

immediate action to accelerate deployment of such capability”

under section 706(b). 47 U.S.C. § 1302(b).

In July 2010, however, the Commission concluded that

“broadband deployment to all Americans is not reasonable and

timely.” Sixth Broadband Deployment Report, 25 F.C.C.R. at

9558 ¶ 2. This conclusion, the Commission recognized,

represented a deviation from its five prior assessments. Id. at

9558 ¶ 2 & n.8. According to the Commission, the change was

driven by its decision to raise the minimum speed threshold

qualifying as broadband. Id. at 9558 ¶ 4. “Broadband,” as

defined in the 1996 Telecommunications Act, is Internet

service furnished at speeds that “enable[] users to originate and

receive high-quality voice, data, graphics, and video

telecommunications using any technology.” 47 U.S.C.

§ 1302(d)(1). In 1999, the Commission found this requirement

satisfied by services “having the capability of supporting . . . a

speed . . . in excess of 200 kilobits per second (kbps) in the last

mile.” In re Inquiry Concerning the Deployment of Advanced

Telecommunications Capability to All Americans in a

28

Reasonable and Timely Fashion, 14 F.C.C.R. 2398, 2406 ¶ 20

(1999). The Commission chose this threshold because it was

“enough to provide the most popular forms of broadband—to

change web pages as fast as one can flip through the pages of a

book and to transmit full-motion video.” Id. That said, the

Commission recognized that technological developments

might someday require it to reassess the 200 kbps threshold. Id.

at 2407–08 ¶ 25.

In the Sixth Broadband Deployment Report, the

Commission decided that day had finally arrived. The

Commission explained that consumers now regularly use their

Internet connections to access high-quality video and expect to

be able at the same time to check their email and browse the

web. Sixth Broadband Deployment Report, 25 F.C.C.R. at

9562–64 ¶¶ 10–11. Two hundred kbps, the Commission

determined, “simply is not enough bandwidth” to permit such

uses. Id. at 9562 ¶ 10. The Commission thus adopted a new

threshold more appropriate to current consumer behavior and

expectations: four megabytes per second (mbps) for end users

to download content from the Internet—twenty times as fast as

the prior threshold—and one mbps for end users to upload

content. Id. at 9563 ¶ 11.

Applying this new benchmark, the Commission found that

“roughly 80 million American adults do not subscribe to

broadband at home, and approximately 14 to 24 million

Americans do not have access to broadband today.” Sixth

Broadband Deployment Report, 25 F.C.C.R. at 9574 ¶ 28.

Given these figures and the “ever-growing importance of

broadband to our society,” the Commission was unable to find

“that broadband is being reasonably and timely deployed”

within the meaning of section 706(b). Id. This conclusion, it

explained, triggered section 706(b)’s mandate that the

Commission “take immediate action to accelerate

29

deployment.” Id. at 9558 ¶ 3 (quoting 47 U.S.C. § 1302(b))

(internal quotation marks omitted).

Subsequently, in the Open Internet Order the Commission

made clear that this statutory provision does not limit the

Commission to using other regulatory authority already at its

disposal, but instead grants it the power necessary to fulfill the

statute’s mandate. See Open Internet Order, 25 F.C.C.R. at

17972 ¶ 123. Emphasizing the provision’s “shall take

immediate action” directive, the Commission concluded that

section 706(b) “provides express authority” for the rules it

adopted. Id.

Contrary to Verizon’s arguments, we believe the

Commission has reasonably interpreted section 706(b) to

empower it to take steps to accelerate broadband deployment if

and when it determines that such deployment is not

“reasonable and timely.” To be sure, as with section 706(a), it

is unclear whether section 706(b), in providing that the

Commission “shall take immediate action to accelerate

deployment of such capability by removing barriers to

infrastructure investment and by promoting competition in the

telecommunications market,” vested the Commission with

authority to remove such barriers to infrastructure investment

and promote competition. 47 U.S.C. § 1302(b). But the

provision may certainly be read to accomplish as much, and

given such ambiguity we have no basis for rejecting the

Commission’s determination that it should be so understood.

See Chevron, 467 U.S. at 842–43. Moreover, as discussed

above with respect to section 706(a), see supra at 24–27,

nothing in the regulatory background or the legislative history

either before or after passage of the 1996 Telecommunications

Act forecloses such an understanding. We think it quite

reasonable to believe that Congress contemplated that the

Commission would regulate this industry, as the agency had in

30

the past, and the scope of any authority granted to it by section

706(b)—limited, as it is, both by the boundaries of the

Commission’s subject matter jurisdiction and the requirement

that any regulation be tailored to the specific statutory goal of

accelerating broadband deployment—is not so broad that we

might hesitate to think that Congress could have intended such

a delegation.

Verizon makes two additional arguments regarding the

Commission’s interpretation of section 706(b), both of which

we can dispose of in relatively short order.

First, Verizon contends that if section 706(b) gives the

Commission any regulatory authority, that authority must be

understood in conjunction with section 706(c), which directs

the Commission to “compile a list of geographical areas that

are not served by any provider of advanced

telecommunications capability.” 47 U.S.C. § 1302(c). Thus,

Verizon claims, any regulations that the Commission might

adopt pursuant to section 706(b) may not “reach beyond any

particular ‘geographical areas that are not served’ by any

broadband provider and apply throughout the country.”

Verizon’s Br. 33 (emphasis omitted). By its own terms,

however, section 706(c) describes simply “part of the inquiry”

that section 706(b) requires the Commission to conduct

concerning broadband deployment. 47 U.S.C. § 1302(c)

(emphasis added). It nowhere purports to delineate all aspects

of that inquiry. Nor does it limit the actions that the

Commission may take if, in the course of that inquiry, it

determines that broadband deployment has not been

“reasonable and timely.”

Second, Verizon asserts that the Sixth Broadband

Deployment Report’s finding that triggered section 706(b)’s

grant of regulatory authority “arbitrarily contravened five prior

31

agency determinations of reasonable and timely deployment.”

Verizon’s Br. 33. The timing of the Commission’s

determination is certainly suspicious, coming as it did closely

on the heels of our rejection in Comcast of the legal theory on

which the Commission had until then relied to establish its

authority over broadband providers. But questionable timing,

by itself, gives us no basis to reject an otherwise reasonable

finding. Beyond its general assertion that the Commission’s

finding was “arbitrar[y],” Verizon offers no specific reason for

thinking that the Commission’s logical and carefully reasoned

determination was illegitimate. We can see none.

C.

This brings us, then, to Verizon’s alternative argument

that even if, as we have held, sections 706(a) and 706(b) grant

the Commission affirmative authority to promulgate rules

governing broadband providers, the specific rules imposed by

the Open Internet Order fall outside the scope of that authority.

The Commission’s theory, to reiterate, is that its regulations

protect and promote edge-provider investment and

development, which in turn drives end-user demand for more

and better broadband technologies, which in turn stimulates

competition among broadband providers to further invest in

broadband. See Open Internet Order, 25 F.C.C.R. at 17910–

11, 17970 ¶¶ 14, 120. Thus, the Commission claims, by

preventing broadband providers from blocking or

discriminating against edge providers, the rules “encourage the

deployment on a reasonable and timely basis of advanced

telecommunications capability to all Americans,” 47 U.S.C.

§ 1302(a), and “accelerate deployment of such capability,” id.

§ 1302(b), by removing “barriers to infrastructure investment”

and promoting “competition,” id. § 1302(a), (b). See Open

Internet Order, 25 F.C.C.R. at 17968, 17972 ¶¶ 117, 123. That

is, contrary to the dissent, see Dissenting Op. at 2–7, the

Commission made clear—and Verizon appears to

32

recognize—that the Commission found broadband providers’

potential disruption of edge-provider traffic to be itself the sort

of “barrier” that has “the potential to stifle overall investment

in Internet infrastructure,” and could “limit competition in

telecommunications markets.” Open Internet Order, 25

F.C.C.R. at 17970 ¶ 120.

Verizon mounts a twofold challenge to this rationale. It

argues that the Open Internet Order regulations will not, as the

Commission claims, meaningfully promote broadband

deployment, and that even if they do advance this goal, the

manner in which they do so is too attenuated from this statutory

purpose to fall within the scope of authority granted by either

statutory provision.

We begin with the second, more strictly legal, question of

whether, assuming the Commission has accurately predicted

the effect of these regulations, it may utilize the authority

granted to it in sections 706(a) and 706(b) to impose

regulations of this sort on broadband providers. As we have

previously acknowledged, “in proscribing . . . practices with

the statutorily identified effect, an agency might stray so far

from the paradigm case as to render its interpretation

unreasonable, arbitrary, or capricious.” National Cable &

Telecommunications Ass’n v. FCC, 567 F.3d 659, 665 (D.C.

Cir. 2009). Here, Verizon has given us no reason to conclude

that the Open Internet Order’s requirements “stray” so far

beyond the “paradigm case” that Congress likely contemplated

as to render the Commission’s understanding of its authority

unreasonable. The rules not only apply directly to broadband

providers, the precise entities to which section 706 authority to

encourage broadband deployment presumably extends, but

also seek to promote the very goal that Congress explicitly

sought to promote. Because the rules advance this statutory

goal of broadband deployment by first promoting

33

edge-provider innovations and end-user demand, Verizon

derides the Commission’s justification as a “triple-cushion

shot.” Verizon’s Br. 28. In billiards, however, a triple-cushion

shot, although perhaps more difficult to complete, counts the

same as any other shot. The Commission could reasonably

have thought that its authority to promulgate regulations that

promote broadband deployment encompasses the power to

regulate broadband providers’ economic relationships with

edge providers if, in fact, the nature of those relationships

influences the rate and extent to which broadband providers

develop and expand their services for end users. See

Cablevision, 649 F.3d at 709 (holding that Commission had

not impermissibly “reached beyond the paradigm case” in

“interpreting a statute focused on the provision of satellite

programming to authorize terrestrial withholding regulations,”

because cable companies’ ability to withhold terrestrial

programming would, in turn, discourage potential competitors

from entering the market to provide satellite programming)

(internal quotation marks omitted).

Whether the Commission’s assessment of the likely

effects of the Open Internet Order deserves credence presents

a slightly more complex question. Verizon attacks the

reasoning and factual support underlying the Commission’s

“triple-cushion shot” theory, advancing these arguments both

as an attack on the Commission’s statutory interpretation and

as an APA arbitrary and capricious challenge. Given that these

two arguments involve similar considerations, we address

them together. In so doing, “we must uphold the Commission’s

factual determinations if on the record as a whole, there is such

relevant evidence as a reasonable mind might accept as

adequate to support [the] conclusion.” Secretary of Labor,

MSHA v. Federal Mine Safety & Health Review Comm’n, 111

F.3d 913, 918 (D.C. Cir. 1997) (internal quotation marks

omitted); see 5 U.S.C. § 706(2)(E). We evaluate the

34

Commission’s reasoning to ensure that it has “examine[d] the

relevant data and articulate[d] a satisfactory explanation for its

action including a rational connection between the facts found

and the choice made.” National Fuel Gas Supply Corp. v.

FERC, 468 F.3d 831, 839 (D.C. Cir. 2006) (quoting Motor

Vehicle Manufacturers Ass’n of U.S. v. State Farm Mutual

Auto Insurance Co., 463 U.S. 29, 43 (1983)) (internal

quotation marks omitted). When assessing the reasonableness

of the Commission’s conclusions, we must be careful not to

simply “‘substitute [our] judgment for that of the agency,’”

especially when the “agency’s predictive judgments about the

likely economic effects of a rule” are at issue. National

Telephone Cooperative Ass’n v. FCC, 563 F.3d 536, 541 (D.C.

Cir. 2009) (quoting State Farm, 463 U.S. at 43). Under these

standards, the Commission’s prediction that the Open Internet

Order regulations will encourage broadband deployment is, in

our view, both rational and supported by substantial evidence.

To begin with, the Commission has more than adequately

supported and explained its conclusion that edge-provider

innovation leads to the expansion and improvement of

broadband infrastructure. The Internet, the Commission

observed in the Open Internet Order, is, “[l]ike electricity and

the computer,” a “‘general purpose technology’ that enables

new methods of production that have a major impact on the

entire economy.” Open Internet Order, 25 F.C.C.R. at 17909

¶ 13. Certain innovations—the lightbulb, for example—create

a need for infrastructure investment, such as in power

generation facilities and distribution lines, that complement

and further drive the development of the initial innovation and

ultimately the growth of the economy as a whole. See Timothy

F. Bresnahan & M. Trajtenberg, General purpose

technologies: ‘Engines of Growth’? 65 J. ECONOMETRICS 83,

84 (1995), cited in Open Internet Order, 25 F.C.C.R. at 17909

¶ 13 n.12; see also Amicus Br. of Internet Engineers and

35

Technologists 17 (citing Hearing on Internet Security Before

the H. Comm. on Science, Space, and Technology, 103d Cong.

(Mar. 22, 1994) (written testimony of Dr. Vinton G. Cerf)).

The rise of streaming online video is perhaps the best and

clearest example the Commission used to illustrate that the

Internet constitutes one such technology: higher-speed

residential Internet connections in the late 1990s “stimulated”

the development of streaming video, a service that requires

particularly high bandwidth, “which in turn encouraged

broadband providers to increase network speeds.” Open

Internet Order, 25 F.C.C.R. at 17911 ¶ 14 n.23. The

Commission’s emphasis on this connection between

edge-provider innovation and infrastructure development is

uncontroversial. Indeed, in its comments to the Commission,

Verizon, executing a triple-cushion shot of its own,

acknowledged:

[T]he social and economic fruits of the Internet

economy are the result of a virtuous cycle of

innovation and growth between that ecosystem

and the underlying infrastructure—the

infrastructure enabling the development and

dissemination of Internet-based services and

applications, with the demand and use of those

services . . . driving improvements in the

infrastructure which, in turn, support further

innovations in services and applications.

Verizon Comments at 42, Docket No. 09-191 (Jan. 14, 2010)

(internal quotation marks omitted).

The Commission’s finding that Internet openness fosters

the edge-provider innovation that drives this “virtuous cycle”

was likewise reasonable and grounded in substantial evidence.

Continued innovation at the edge, the Commission explained,

36

“depends upon low barriers to innovation and entry by edge

providers,” and thus restrictions on edge providers’ “ability to

reach end users . . . reduce the rate of innovation.” Open

Internet Order, 25 F.C.C.R. at 17911 ¶ 14. This conclusion

finds ample support in the economic literature on which the

Commission relied, see, e.g., Joseph Farrell & Philip J. Weiser,

Modularity, Vertical Integration, and Open Access Policies:

Towards a Convergence of Antitrust and Regulation in the

Internet Age, 17 HARV. J. L. & TECH. 85, 95 (2003), cited in

Open Internet Order, 25 F.C.C.R. at 17911 ¶ 14 n.25, as well

as in history and the comments of several edge providers. For

one prominent illustration of the relationship between

openness and innovation, the Commission cited the invention

of the World Wide Web itself by Sir Tim Berners-Lee, who,

although not working for an entity that operated the underlying

network, was able to create and disseminate this enormously

successful innovation without needing to make any changes to

previously developed Internet protocols or securing “any

approval from network operators.” Open Internet Order, 25

F.C.C.R. at 17910 ¶ 13 (citing, inter alia, TIM BERNERS-LEE,

WEAVING THE WEB 16 (2000)). It also highlighted the

comments of Google and Vonage—both innovative edge

providers—who emphasized the importance of the Internet’s

open design to permitting new content and services to develop

at the edge. Id. at 17911 ¶ 14 n.24 & n.25. The record amassed

by the Commission contains many similar examples, and

Verizon has given us no basis for questioning the

Commission’s determination that the preservation of Internet

openness is integral to achieving the statutory objectives set

forth in Section 706. See id. at 17910–11, 17968, 17972 ¶¶ 14,

117, 123.

Equally important, the Commission has adequately

supported and explained its conclusion that, absent rules such

as those set forth in the Open Internet Order, broadband

37

providers represent a threat to Internet openness and could act

in ways that would ultimately inhibit the speed and extent of

future broadband deployment. First, nothing in the record gives

us any reason to doubt the Commission’s determination that

broadband providers may be motivated to discriminate against

and among edge providers. The Commission observed that

broadband providers—often the same entities that furnish end

users with telephone and television services—“have incentives

to interfere with the operation of third-party Internet-based

services that compete with the providers’ revenue-generating

telephone and/or pay-television services.” Open Internet

Order, 25 F.C.C.R. at 17916 ¶ 22. As the Commission noted,

Voice-over-Internet-Protocol (VoIP) services such as Vonage

increasingly serve as substitutes for traditional telephone

services, id., and broadband providers like AT&T and Time

Warner have acknowledged that online video aggregators such

as Netflix and Hulu compete directly with their own “core

video subscription service,” id. at 17917 ¶ 22 & n.54; see also

id. at 17918 ¶ 23 n.60 (finding that a study concluding that

cable companies had sought to exclude networks that

competed with the companies’ own affiliated channels, see

Austan Goolsbee, Vertical Integration and the Market for

Broadcast and Cable Television Programming, Paper for the

Federal Communications Commission 31–32 (Sept. 5, 2007),

“provides empirical evidence that cable providers have acted in

the past on anticompetitive incentives to foreclose rivals”).

Broadband providers also have powerful incentives to accept

fees from edge providers, either in return for excluding their

competitors or for granting them prioritized access to end

users. See id. at 17918–19 ¶¶ 23–24. Indeed, at oral argument

Verizon’s counsel announced that “but for [the Open Internet

Order] rules we would be exploring those commercial

arrangements.” Oral Arg. Tr. 31. And although broadband

providers might not adopt pay-for-priority agreements or other

similar arrangements if, according to the Commission’s

38

analysis, such agreements would ultimately lead to a decrease

in end-user demand for broadband, the Commission explained

that the resultant harms to innovation and demand will largely

constitute “negative externalities”: any given broadband

provider will “receive the benefits of . . . fees but [is] unlikely

to fully account for the detrimental impact on edge providers’

ability and incentive to innovate and invest.” Open Internet

Order, 25 F.C.C.R. at 17919–20 ¶ 25 & n.68. Although

Verizon dismisses the Commission’s assertions regarding

broadband providers’ incentives as “pure speculation,”

Verizon’s Br. 52, see also Dissenting Op. at 15, those

assertions are, at the very least, speculation based firmly in

common sense and economic reality.

Moreover, as the Commission found, broadband providers

have the technical and economic ability to impose such

restrictions. Verizon does not seriously contend otherwise. In

fact, there appears little dispute that broadband providers have

the technological ability to distinguish between and

discriminate against certain types of Internet traffic. See Open

Internet Order, 25 F.C.C.R. at 17923 ¶ 31 (broadband

providers possess “increasingly sophisticated network

management tools” that enable them to “make fine-grained

distinction in their handling of network traffic”). The

Commission also convincingly detailed how broadband

providers’ position in the market gives them the economic

power to restrict edge-provider traffic and charge for the

services they furnish edge providers. Because all end users

generally access the Internet through a single broadband

provider, that provider functions as a “‘terminating

monopolist,’” id. at 17919 ¶ 24 n.66, with power to act as a

“gatekeeper” with respect to edge providers that might seek to

reach its end-user subscribers, id. at 17919 ¶ 24. As the

Commission reasonably explained, this ability to act as a

“gatekeeper” distinguishes broadband providers from other

39

participants in the Internet marketplace—including prominent

and potentially powerful edge providers such as Google and

Apple—who have no similar “control [over] access to the

Internet for their subscribers and for anyone wishing to reach

those subscribers.” Id. at 17935 ¶ 50.

To be sure, if end users could immediately respond to any

given broadband provider’s attempt to impose restrictions on

edge providers by switching broadband providers, this

gatekeeper power might well disappear. Cf. Open Internet

Order, 25 F.C.C.R. at 17935 ¶ 51 (declining to impose similar

rules on “dial-up Internet access service because telephone

service has historically provided the easy ability to switch

among competing dial-up Internet access services”). For

example, a broadband provider like Comcast would be unable

to threaten Netflix that it would slow Netflix traffic if all

Comcast subscribers would then immediately switch to a

competing broadband provider. But we see no basis for

questioning the Commission’s conclusion that end users are

unlikely to react in this fashion. According to the Commission,

“end users may not know whether charges or service levels

their broadband provider is imposing on edge providers vary

from those of alternative broadband providers, and even if they

do have this information may find it costly to switch.” Id. at

17921 ¶ 27. As described by numerous commenters, and

detailed more thoroughly in a Commission report compiling

the results of an extensive consumer survey, the costs of

switching include: “early termination fees; the inconvenience

of ordering, installation, and set-up, and associated deposits or

fees; possible difficulty returning the earlier broadband

provider’s equipment and the cost of replacing incompatible

customer-owned equipment; the risk of temporarily losing

service; the risk of problems learning how to use the new

service; and the possible loss of a provider-specific email

address or website.” Open Internet Order, 25 F.C.C.R. at

40

17924–25 ¶ 34 (footnotes omitted) (citing, inter alia, Federal

Communications Commission, Broadband Decisions: What

Drives Consumers to Switch—Or Stick With—Their

Broadband Internet Provider (FCC Working Paper, Dec.

2010), available at hraunfoss.fcc.gov/edocs_public/

attachmatch/DOC-303264A1.pdf). Moreover, the

Commission emphasized, many end users may have no option

to switch, or at least face very limited options: “[a]s of

December 2009, nearly 70 percent of households lived in

census tracts where only one or two wireline or fixed wireless

firms provided” broadband service. Id. at 17923 ¶ 32. As the

Commission concluded, any market power that such

broadband providers might have with respect to end users

would only increase their power with respect to edge providers.

Id.

The dissent focuses on this latter aspect of the

Commission’s reasoning, arguing at some length that the

Commission’s failure to expressly find that broadband

providers have market power with respect to end users is “fatal

to its attempt to regulate.” Dissenting Op. at 12. But Verizon

has never argued that the Commission’s failure to make a

market power finding somehow rendered its understanding of

its statutory authority unreasonable or its decision arbitrary and

capricious. Verizon does fleetingly mention the market power

issue once in its opening brief, asserting as part of its First

Amendment claim that Turner Broadcasting System, Inc. v.

FCC, 520 U.S. 180 (1997)—in which the Supreme Court,

applying intermediate scrutiny, upheld a congressional statute

compelling cable companies to carry local broadcast television

stations, id. at 185—is distinguishable in part because, unlike

the Commission here, Congress had found “evidence of

‘considerable and growing market power.’” Verizon Br. 46

(quoting Turner, 520 U.S. at 197). But to say, as Verizon does,

that an allegedly speech-infringing regulation violates the First

41

Amendment because of the absence of a market condition that

would increase the need for that regulation is hardly to say that

the absence of this market condition renders the regulation

wholly irrational. Verizon’s bare citation to a Justice

Department submission—relied upon by the dissent, see

Dissenting Op. at 11, 14–15—is even less on point, as that

submission simply advised the Commission to take care to

avoid stifling incentives for broadband investment; it never

asserted, as the dissent does, that such market power is required

for broadband providers to have the economic clout to restrict

edge-provider traffic in the first place. See Department of

Justice Comments at 28, Docket No. 09-51 (Jan. 14, 2010).

Indeed, when pressed at oral argument to embrace our

dissenting colleague’s position, Verizon’s counsel failed to do

so, stating only that it was “possible” that if the Commission

had made a market power finding, the Order could be justified.

Oral Arg. Tr. 10. As we “do not sit as [a] self-directed board[]

of legal inquiry and research,” and Verizon “has made no

attempt to address the issue,” the argument is clearly forfeited.

Carducci v. Regan, 714 F.2d 171, 177 (D.C. Cir. 1983).

In any event, it seems likely that the reason Verizon never

advanced this argument is that the Commission’s failure to find

market power is not “fatal” to its theory. Broadband providers’

ability to impose restrictions on edge providers does not

depend on their benefiting from the sort of market

concentration that would enable them to impose substantial

price increases on end users—which is all the Commission said

in declining to make a market power finding. See Open

Internet Order, 25 F.C.C.R. at 17923 ¶ 32 & n.87; see also

Department of Justice & Federal Trade Commission,

Horizontal Merger Guidelines § 4.1 (2010) (defining product

markets and market power in terms of a firm’s ability to raise

prices for consumers). Rather, broadband providers’ ability to

impose restrictions on edge providers simply depends on end

42

users not being fully responsive to the imposition of such

restrictions. See supra at 39. If the dissent believes that

broadband providers’ ability to restrict edge-provider traffic

without having their end users react would itself represent an

exercise of market power, then the dissent’s dispute with the

Commission’s reasoning appears to be largely semantic: the

Commission expressly found that end users are not responsive

in this fashion even if it never used the term “market power” in

doing so. See Open Internet Order, 25 F.C.C.R. at 17924–25

¶ 34.

Furthermore, the Commission established that the threat

that broadband providers would utilize their gatekeeper ability

to restrict edge-provider traffic is not, as the Commission put it,

“merely theoretical.” Open Internet Order, 25 F.C.C.R. at

17925 ¶ 35. In support of its conclusion that broadband

providers could and would act to limit Internet openness, the

Commission pointed to four prior instances in which they had

done just that. These involved a mobile broadband provider

blocking online payment services after entering into a contract

with a competing service; a mobile broadband provider

restricting the availability of competing VoIP and streaming

video services; a fixed broadband provider blocking VoIP

applications; and, of course, Comcast’s impairment of

peer-to-peer file sharing that was the subject of the Comcast

Order. See id. Although some of these incidents may not have

involved “adjudicated findings of misconduct,” as Verizon

asserts, Verizon’s Br. 50, that hardly means that no record

evidence supports the Commission’s conclusion that the

incidents had in fact occurred. Likewise, the fact that we

vacated the Comcast Order—rendering it, according to

Verizon, a “legal nullity,” Verizon’s Br. 51—did not require

the Commission to entirely disregard the underlying conduct

that produced that order. In Comcast, we held that the

Commission had failed to cite any statutory authority that

43

justified its order, not that Comcast had never impaired Internet

traffic. See Comcast, 600 F.3d at 644. Nor, finally, did the

Commission’s invocation of these examples demonstrate that

it was attempting to “impose an ‘industry-wide solution for a

problem that exists only in isolated pockets.’” Verizon’s Br. 51

(quoting Associated Gas Distributors v. FERC, 824 F.2d 981,

1019 (D.C. Cir. 1987)). Rather, as the Commission explained,

these incidents—which occurred “notwithstanding the

Commission’s adoption of open Internet principles,”

Commission enforcement proceedings against those who

violated those principles, and specific Commission orders

“requir[ing] certain broadband providers to adhere to open

Internet obligations,” Open Internet Order, 25 F.C.C.R. at

17926–27 ¶ 37—buttressed the agency’s conclusion that

broadband providers’ incentives and ability to restrict Internet

traffic could produce “[w]idespread interference with the

Internet’s openness” in the absence of Commission action, id.

at 17927 ¶ 38. Such a “problem” is doubtless “industry-wide.”

Associated Gas Distributors, 824 F.2d at 1019.

Finally, Verizon argues that the Open Internet Order rules

will necessarily have the opposite of their intended effect

because they will “harm innovation and deter investment by

increasing costs, foreclosing potential revenue streams, and

restricting providers’ ability to meet consumers’ evolving

needs.” Verizon’s Br. 52; see also Dissenting Op. at 14–16. In

essence, Verizon believes that any stimulus to edge-provider

innovation, as well as any consequent demand for broadband

infrastructure, produced by the Open Internet Order will be

outweighed by the diminished incentives for broadband

infrastructure investment caused by the new limitations on

business models broadband providers may employ to reap a

return on their investment. As Verizon points out, two

members of the Commission agreed that the rules would be

counterproductive, and several commenters contended that

44

certain regulations of broadband providers would run the risk

of stifling infrastructure investment. See Open Internet Order,

25 F.C.C.R. at 18054–56 (Dissenting Statement of

Commissioner McDowell); id. at 18088–91 (Dissenting

Statement of Commissioner Baker); Verizon Comments at 40–

86, Docket No. 09-191 (Jan. 14, 2010); MetroPCS Comments

at 24–35, Docket No. 09-191 (Jan 14, 2010); see also Open

Internet Order, 25 F.C.C.R. at 17931 ¶ 42 n.143 (discussing

the comments of the Department of Justice and Federal Trade

Commission).

The record, however, also contains much evidence

supporting the Commission’s conclusion that, “[b]y

comparison to the benefits of [its] prophylactic measures, the

costs associated with the open Internet rules . . . are likely

small.” Open Internet Order, 25 F.C.C.R. at 17928 ¶ 39. This

is, in other words, one of those cases—quite frequent in this

circuit—where “the available data do[] not settle a regulatory

issue and the agency must then exercise its judgment in moving

from the facts and probabilities on the record to a policy

conclusion.” State Farm, 463 U.S. at 52. Here the Commission

reached its “policy conclusion” by emphasizing, among other

things, (1) the absence of evidence that similar restrictions of

broadband providers had discouraged infrastructure

investment, and (2) the strength of the effect on broadband

investment that it anticipated from edge-provider innovation,

which would benefit both from the preservation of the

“virtuous circle of innovation” created by the Internet’s

openness and the increased certainty in that openness

engendered by the Commission’s rules. Open Internet Order,

at 17928–31 ¶¶ 40–42. In so doing, the Commission has

offered “a rational connection between the facts found and the

choice made,” State Farm, 463 U.S. at 52 (internal quotation

marks omitted), and Verizon has given us no persuasive reason

to question that judgment.

45

III.

Even though section 706 grants the Commission authority

to promote broadband deployment by regulating how

broadband providers treat edge providers, the Commission

may not, as it recognizes, utilize that power in a manner that

contravenes any specific prohibition contained in the

Communications Act. See Open Internet Order, 25 F.C.C.R. at

17969 ¶ 119 (reiterating the Commission’s disavowal of “a

reading of Section 706(a) that would allow the agency to trump

specific mandates of the Communications Act”); see also D.

Ginsberg & Sons, Inc. v. Popkin, 285 U.S. 204, 208 (1932)

(“General language of a statutory provision, although broad

enough to include it, will not be held to apply to a matter

specifically dealt with in another part of the same enactment.”).

According to Verizon, the Commission has done just that

because the anti-discrimination and anti-blocking rules

“subject[] broadband Internet access service . . . to common

carriage regulation, a result expressly prohibited by the Act.”

Verizon’s Br. 14.

We think it obvious that the Commission would violate

the Communications Act were it to regulate broadband

providers as common carriers. Given the Commission’s

still-binding decision to classify broadband providers not as

providers of “telecommunications services” but instead as

providers of “information services,” see supra at 9–10, such

treatment would run afoul of section 153(51): “A

telecommunications carrier shall be treated as a common

carrier under this [Act] only to the extent that it is engaged in

providing telecommunications services.” 47 U.S.C. § 153(51);

see also Wireless Broadband Order, 22 F.C.C.R. at 5919 ¶ 50

(concluding that a “service provider is to be treated as a

common carrier for the telecommunications services it

provides, but it cannot be treated as a common carrier with

46

respect to other, non-telecommunications services it may offer,

including information services”). Likewise, because the

Commission has classified mobile broadband service as a

“private” mobile service, and not a “commercial” mobile

service, see Wireless Broadband Order, 22 F.C.C.R. at 5921

¶ 56, treatment of mobile broadband providers as common

carriers would violate section 332: “A person engaged in the

provision of a service that is a private mobile service shall not,

insofar as such person is so engaged, be treated as a common

carrier for any purpose under this [Act].” 47 U.S.C.

§ 332(c)(2); see Cellco, 700 F.3d at 538 (“[M]obile-data

providers are statutorily immune, perhaps twice over, from

treatment as common carriers.”).

Insisting it has transgressed neither of these prohibitions,

the Commission begins with the rather half-hearted argument

that the Act referred to in sections 153(51) and 332 is the

Communications Act of 1934, and that when the Commission

utilizes the authority granted to it in section 706—enacted as

part of the 1996 Telecommunications Act—it is not acting

“under” the 1934 Act, and thus is “not subject to the statutory

limitations on common-carrier treatment.” Commission’s Br.

68. But section 153(51) was also part of the 1996

Telecommunications Act. And regardless, “Congress

expressly directed that the 1996 Act . . . be inserted into the

Communications Act of 1934.” AT & T Corp., 525 U.S. at 377

(citing Telecommunications Act of 1996 § 1(b)). The

Commission cannot now so easily escape the statutory

prohibitions on common carrier treatment.

Thus, we must determine whether the requirements

imposed by the Open Internet Order subject broadband

providers to common carrier treatment. If they do, then given

the manner in which the Commission has chosen to classify

broadband providers, the regulations cannot stand. We apply

47

Chevron’s deferential standard of review to the interpretation

and application of the statutory term “common carrier.” See

Cellco, 700 F.3d at 544. After first discussing the history and

use of that term, we turn to the issue of whether the

Commission’s interpretation of “common carrier”—and its

conclusion that the Open Internet Order’s rules do not

constitute common carrier obligations—was reasonable.

A.

Offering little guidance as to the meaning of the term

“common carrier,” the Communications Act defines that

phrase, somewhat circularly, as “any person engaged as a

common carrier for hire.” 47 U.S.C. § 153(11). Courts and the

Commission have therefore resorted to the common law to

come up with a satisfactory definition. See FCC v. Midwest

Video Corp., 440 U.S. 689, 701 n.10 (1979) (“Midwest Video

II”).

In the Nineteenth Century, American courts began

imposing certain obligations—conceptually derived from the

traditional legal duties of innkeepers, ferrymen, and others who

served the public—on companies in the transportation and

communications industries. See Cellco, 700 F.3d at 545. As the

Supreme Court explained in Interstate Commerce Commission

v. Baltimore & Ohio Railroad Co., 145 U.S. 263, 275 (1892),

“the principles of the common law applicable to common

carriers . . . demanded little more than that they should carry for

all persons who applied, in the order in which the goods were

delivered at the particular station, and that their charges for

transportation should be reasonable.” Congress subsequently

codified these duties, first in the 1887 Interstate Commerce

Act, ch. 104, 24 Stat. 379, then the Manns-Elkins Act of 1910,

ch. 309, 36 Stat. 539, and, most relevant here, the

Communications Act of 1934, ch. 652, 48 Stat. 1064. See

Cellco, 700 F.3d at 545–46.

48

Although the nature and scope of the duties imposed on

common carriers have evolved over the last century, see, e.g.,

Orloff v. FCC, 352 F.3d 415, 418–21 (D.C. Cir. 2003)

(discussing the implications of the relaxation of the tariff-filing

requirement), the core of the common law concept of common

carriage has remained intact. In National Association of

Regulatory Utility Commissioners v. FCC, 525 F.2d 630, 642

(D.C. Cir. 1976) (“NARUC I”), we identified the basic

characteristic that distinguishes common carriers from

“private” carriers—i.e., entities that are not common

carriers—as “[t]he common law requirement of holding

oneself out to serve the public indiscriminately.” “[A] carrier

will not be a common carrier,” we further explained, “where its

practice is to make individualized decisions, in particular

cases, whether and on what terms to deal.” Id. at 641.

Similarly, in National Association of Regulatory Utility

Commissioners v. FCC, 533 F.2d 601, 608 (1976) (“NARUC

II”), we concluded that “the primary sine qua non of common

carrier status is a quasi-public character, which arises out of the

undertaking to carry for all people indifferently.” (Internal

quotation marks omitted).

For our purposes, perhaps the seminal case applying this

notion of common carriage is Midwest Video II. At issue in

Midwest Video II was a set of regulations compelling cable

television systems to operate a minimum number of channels

and to hold certain channels open for specific users. 440 U.S. at

692–93. Cable operators were barred from exercising any

discretion over who could use those latter channels and what

those users could transmit. They were also forbidden from

charging users any fee for some of the channels and limited to

charging an “appropriate” fee for the remaining channels. Id. at

693–94. Because at that time the Commission had no express

statutory authority over cable systems, it sought to justify these

49

rules as ancillary to its authority to regulate broadcasting. Id. at

696–99.

Rejecting this argument, the Supreme Court held that the

Commission had no power to regulate cable operators in this

fashion. The Court reasoned that if the Commission sought to

exercise such ancillary jurisdiction over cable operators on the

basis of its authority over broadcasters, it must also respect the

specific statutory limits of that authority, as “without reference

to the provisions of the Act directly governing broadcasting,

the Commission’s jurisdiction . . . would be unbounded.”

Midwest Video II, 440 U.S. at 706. Congress had expressly

prohibited the Commission from regulating broadcasters as

common carriers, a limitation that must then, according to the

Court, also extend to cable operators. Id. at 707. And the

challenged regulations, the Court held, “plainly impose

common-carrier obligations on cable operators.” Id. at 701. In

explaining this conclusion, the Court largely reiterated the

nature of the obligations themselves: “Under the rules, cable

systems are required to hold out dedicated channels on a

first-come, nondiscriminatory basis. Operators are prohibited

from determining or influencing the content of access

programming. And the rules delimit what operators may

charge for access and use of equipment.” Id. at 701–02

(internal citations omitted).

In Cellco, we recently confronted the similar question of

whether a Commission regulation compelling mobile

telephone companies to offer data roaming agreements to one

another on “commercially reasonable” terms impermissibly

regulated these providers as common carriers. 700 F.3d at 537.

From the history and decisions surveyed above, we distilled

“several basic principles” that guide our analysis here. Id. at

547. First, “[i]f a carrier is forced to offer service

indiscriminately and on general terms, then that carrier is being

50

relegated to common carrier status.” Id. We also clarified,

however, that “there is an important distinction between the

question whether a given regulatory regime is consistent with

common carrier or private carrier status, and the Midwest

Video II question whether that regime necessarily confers

common carrier status.” Id. (internal citations omitted). Thus,

“common carriage is not all or nothing—there is a gray area in

which although a given regulation might be applied to common

carriers, the obligations imposed are not common carriage per

se.” Id. In this “space between per se common carriage and per

se private carriage,” we continued, “the Commission’s

determination that a regulation does or does not confer

common carrier status warrants deference.” Id.

Given these principles, we concluded that the data

roaming rule imposed no per se common carriage requirements

because it left “substantial room for individualized bargaining

and discrimination in terms.” Cellco, 700 F.3d at 548. The rule

“expressly permit[ted] providers to adapt roaming agreements

to ‘individualized circumstances without having to hold

themselves out to serve all comers indiscriminately on the

same or standardized terms.’” Id. That said, we cautioned that

were the Commission to apply the “commercially reasonable”

standard in a restrictive manner, essentially elevating it to the

traditional common carrier “just and reasonable” standard, see

47 U.S.C. § 201(b), the rule might impose obligations that

amounted to common carriage per se, a claim that could be

brought in an “as applied” challenge. Cellco, 700 F.3d at 548–

49.

B.

The Commission’s explanation in the Open Internet

Order for why the regulations do not constitute common

carrier obligations and its defense of those regulations here

largely rest on its belief that, with respect to edge providers,

51

broadband providers are not “carriers” at all. Stating that an

entity is not a common carrier if it may decide on an

individualized basis “‘whether and on what terms to deal’ with

potential customers,” the Commission asserted in the Order

that “[t]he customers at issue here are the end users who

subscribe to broadband Internet access services.” Open

Internet Order, 25 F.C.C.R. at 17950–51 ¶ 79 (quoting

NARUC I, 525 F.2d at 641) (emphasis added). It explained that

because broadband providers would remain able to make

“individualized decisions” in determining on what terms to

deal with end users, the Order permitted the providers the

“flexibility to customize service arrangements for a particular

customer [that] is the hallmark of private carriage.” Id. at

17951 ¶ 79. Here, the Commission reiterates that “as long as [a

broadband provider] is not required to serve end users

indiscriminately, rules regarding blocking or charging edge

providers do not create common carriage.” Commission’s

Br. 61. We disagree.

It is true, generally speaking, that the “customers” of

broadband providers are end users. But that hardly means that

broadband providers could not also be carriers with respect to

edge providers. “Since it is clearly possible for a given entity to

carry on many types of activities, it is at least logical to

conclude that one may be a common carrier with regard to

some activities but not others.” NARUC II, 533 F.2d at 608.

Because broadband providers furnish a service to edge

providers, thus undoubtedly functioning as edge providers’

“carriers,” the obligations that the Commission imposes on

broadband providers may well constitute common carriage per

se regardless of whether edge providers are broadband

providers’ principal customers. This is true whatever the nature

of the preexisting commercial relationship between broadband

providers and edge providers. In contending otherwise, the

Commission appears to misunderstand the nature of the inquiry

52

in which we must engage. The question is not whether, absent

the Open Internet Order, broadband providers would or did act

as common carriers with respect to edge providers; rather, the

question is whether, given the rules imposed by the Open

Internet Order, broadband providers are now obligated to act

as common carriers. See Midwest Video II, 440 U.S. at 701–02.

In support of its understanding of common carriage, the

Commission first invokes section 201(a), which provides that

it is the “duty of every common carrier . . . to furnish . . .

communication service upon reasonable request therefor.” 47

U.S.C. § 201(a). No one disputes that a broadband provider’s

transmission of edge-provider traffic to its end-user

subscribers represents a valuable service: an edge provider like

Amazon wants and needs a broadband provider like Comcast

to permit its subscribers to use Amazon.com. According to the

Commission, however, because edge providers generally do

not “request” service from broadband providers, and may have

no direct relationship with end users’ local access providers,

broadband providers cannot be common carriers with respect

to such edge providers. But section 201(a) describes a “duty”

of a common carrier, not a prerequisite for qualifying as a

common carrier in the first place. More important, the Open

Internet Order imposes this very duty on broadband providers:

given the Open Internet Order’s anti-blocking and

anti-discrimination requirements, if Amazon were now to

make a request for service, Comcast must comply. That is,

Comcast must now “furnish . . . communication service upon

reasonable request therefor.” 47 U.S.C. § 201(a).

Similarly flawed is the Commission’s argument that

because the Communications Act defines a “common carrier”

as a “common carrier for hire,” 47 U.S.C. § 153(11) (emphasis

added), a common carrier relationship may exist only with

respect to those customers who purchase service from the

53

carrier. As Verizon aptly puts it in response, the fact that

“broadband providers . . . generally have not charged edge

providers for access or offered them differentiated services . . .

has no legal significance because the avowed purpose of the

rules is to deny providers the discretion to do so now and in the

future.” Verizon’s Reply Br. 5 n.3. In other words, but for the

Open Internet Order, broadband providers could freely impose

conditions on the nature and quality of the service they furnish

edge providers, potentially turning certain edge

providers—currently able to “hire” their service for free—into

paying customers. The Commission may not claim that the

Open Internet Order imposes no common carrier obligations

simply because it compels an entity to continue furnishing

service at no cost.

Likewise, the Commission misses the point when it

contends that because the Communications Act “imposes

non-discrimination requirements on many entities that are not

common carriers,” the Order’s requirements cannot

“transform[] providers into common carriers.” Commission’s

Br. 66–67. In support, the Commission cites 47 U.S.C.

§ 315(b), which requires that broadcasters charge political

candidates nondiscriminatory rates if broadcasters permit them

to use their stations, as well as 47 U.S.C. § 548(c)(2)(B), which

prohibits satellite programming vendors owned in part or in

whole by a cable operator from discriminating against other

cable operators in the delivery of programming. Commission’s

Br. 66–67. But Congress has no statutory obligation to avoid

imposing common carrier obligations on those who might not

otherwise operate as common carriers, and thus the extent to

which the cited provisions might regulate those entities as such

is irrelevant. The Commission, on the other hand, has such an

obligation with respect to entities it has classified as statutorily

exempt from common carrier treatment, and the issue here is

whether it has nonetheless “relegated [those entities], pro

54

tanto, to common-carrier status.” Midwest Video II, 440 U.S. at

700–01.

In these respects, Midwest Video II is indistinguishable.

The Midwest Video II cable operators’ primary “customers”

were their subscribers, who paid to have programming

delivered to them in their homes. There, as here, the

Commission’s regulations required the regulated entities to

carry the content of third parties to these customers—content

the entities otherwise could have blocked at their discretion.

Moreover, much like the rules at issue here, the Midwest Video

II regulations compelled the operators to hold open certain

channels for use at no cost—thus permitting specified

programmers to “hire” the cable operators’ services for free.

Given that the cable operators in Midwest Video II were

carriers with respect to these third-party programmers, we see

no basis for concluding that broadband providers are not

similarly carriers with respect to third-party edge providers.

The Commission advances several grounds for

distinguishing Midwest Video II. None is convincing.

The Commission asserts that, unlike in Midwest Video II,

here the content is delivered to end users only when an end user

requests it—i.e., by clicking on a link to an edge provider’s

website. But the same was essentially true in Midwest Video II:

cable companies’ customers would not actually receive the

content on the dedicated public access channels unless they

chose to watch those channels. The access requested by the

programmers in Midwest Video II, like the access requested by

edge providers here, is the ability to have their communications

transmitted to end-user subscribers if those subscribers so

desire.

55

Nor, contrary to the Commission’s contention, is it at all

relevant that in Midwest Video II only a limited number of

cable channels were available, while in this case the number of

edge providers a broadband provider could serve is unlimited.

Whether an entity qualifies as a carrier does not turn on how

much content it is able to carry or the extent to which other

content might be crowded out. A short train is no more a carrier

than a long train, or even a train long enough to serve every

possible customer.

Finally, Midwest Video II cannot be distinguished on the

basis that the Court there emphasized the degree to which the

Commission’s rules impinged on cable operators’ “editorial

discretion,” and “transferred control” over the content

transmitted. Commission’s Br. 65. The Court made two related

points regarding editorial discretion, neither of which helps the

Commission. First, it observed that the need to protect editorial

discretion was one reason Congress forbade common carrier

treatment of broadcasters in the first place, a rationale that also

applied to cable operators, thus confirming the Court’s

decision to extend that statutory prohibition to the

Commission’s attempt to exercise its ancillary jurisdiction

over such entities. Midwest Video II, 440 U.S. at 700, 706–08.

Here, whatever might be the justifications for prohibiting

common carrier treatment of “information service” providers

and “commercial” mobile service providers, such treatment is

undoubtedly prohibited. See 47 U.S.C. §§ 153(51), 332(c)(2).

Second, the Court emphasized that, unlike the regulations

approved in United States v. Midwest Video Corp., 406 U.S.

649 (1972) (“Midwest Video I”)—which required certain cable

companies to create their own programming and maintain

facilities for local production, id. at 653–55—the regulations in

Midwest Video II “transferred control of the content of access

cable channels from cable operators to members of the public.”

Midwest Video II, 440 U.S. at 700. The Court’s point was

56

simply that the Midwest Video I regulations had created no

common carrier obligations because they had imposed no

obligation on cable operators to provide carriage to any third

party. By giving third parties “control” over the transmissions

that cable operators carried, however, the Midwest Video II

regulations did. The regulations here accomplish the very same

sort of transfer of control: whereas previously broadband

providers could have blocked or discriminated against the

content of certain edge providers, they must now carry the

content those edge providers desire to transmit. The only

remaining question, then, is whether the Open Internet Order’s

rules have so limited broadband providers’ control over edge

providers’ transmissions that the regulations constitute

common carriage per se. It is to that question that we now turn.

C.

We have little hesitation in concluding that the

anti-discrimination obligation imposed on fixed broadband

providers has “relegated [those providers], pro tanto, to

common carrier status.” Midwest Video II, 440 U.S. at 700–01.

In requiring broadband providers to serve all edge providers

without “unreasonable discrimination,” this rule by its very

terms compels those providers to hold themselves out “to serve

the public indiscriminately.” NARUC I, 525 F.2d at 642.

Having relied almost entirely on the flawed argument that

broadband providers are not carriers with respect to edge

providers, the Commission offers little response on this point.

In its briefs, the Commission contends only that if the Open

Internet Order imposes common carriage requirements, so too

would the regulations at issue in United States v. Southwestern

Cable Co., 392 U.S. 157 (1968), which the Supreme Court

declined to strike down. Southwestern Cable involved a

Commission rule that, among other things, compelled cable

operators to transmit the signals of local broadcasters when

57

cable operators imported the competing signals of other

broadcasters into the local service area. Id. at 161. Such a rule

is plainly distinguishable from the Open Internet Order’s

anti-discrimination rule because the Southwestern Cable

regulation imposed no obligation on cable operators to hold

their facilities open to the public generally, but only to certain

specific broadcasters if and when the cable operators acted in

ways that might harm those broadcasters. As the Court later

explained in Midwest Video II, the Southwestern Cable rule

“was limited to remedying a specific perceived evil,” and “did

not amount to a duty to hold out facilities indifferently for

public use.” 440 U.S. at 706 n.16. The Open Internet Order’s

anti-discrimination provision is not so limited, as the

compelled carriage obligation applies in all circumstances and

with respect to all edge providers.

Significantly for our purposes, the Commission never

argues that the Open Internet Order’s “no unreasonable

discrimination” standard somehow differs from the

nondiscrimination standard applied to common carriers

generally—the argument that salvaged the data roaming

requirements in Cellco. In a footnote in the Order itself, the

Commission suggested that it viewed the rule’s allowance for

“reasonable network management” as establishing treatment

that was somehow inconsistent with per se common carriage.

See Open Internet Order, 25 F.C.C.R. at 17951 ¶ 79 n.251. But

the Commission has forfeited this argument by failing to raise

it in its briefs here. See Comcast, 600 F.3d at 660; Roth v. U.S.

DOJ, 642 F.3d 1161, 1181 (D.C. Cir. 2011).

In any event, the argument is without merit. The Order

defines the “reasonable network management” concept as

follows: “A network management practice is reasonable if it is

appropriate and tailored to achieving a legitimate network

management purpose, taking into account the particular

58

network architecture and technology of the broadband Internet

access service.” Open Internet Order, 25 F.C.C.R. at 17952

¶ 82. This provision, the Commission explained, would permit

broadband providers to do two things, neither of which conflict

with per se common carriage. First, “the reasonable network

management” exception would permit broadband providers to

“address[] traffic that is unwanted by end users . . . such as by

providing services or capabilities consistent with an end user’s

choices regarding parental controls or security capabilities.”

Id. Because the relevant service broadband providers furnish to

edge providers is the ability to access end users if those end

users so desire, a limited exception permitting end users to

direct broadband providers to block certain traffic by no means

detracts from the common carrier nature of the obligations

imposed on broadband providers. Second, the Order defines

“reasonable network management” to include practices

designed to protect the network itself by “addressing traffic

that is harmful to the network” and “reducing or mitigating the

effects of congestion.” Id. at 17952 ¶ 82. As Verizon correctly

points out, however, this allowance “merely preserves a

common carrier’s traditional right to ‘turn[] away [business]

either because it is not of the type normally accepted or

because the carrier’s capacity has been exhausted.’” Verizon’s

Br. 20 (quoting NARUC I, 525 F.2d at 641). Railroads have no

obligation to allow passengers to carry bombs on board, nor

need they permit passengers to stand in the aisles if all seats are

taken. It is for this reason that the Communications Act bars

common carriers from engaging in “unjust or unreasonable

discrimination,” not all discrimination. 47 U.S.C. § 202

(emphasis added).

The Commission has provided no basis for concluding

that in permitting “reasonable” network management, and in

prohibiting merely “unreasonable” discrimination, the Order’s

standard of “reasonableness” might be more permissive than

59

the quintessential common carrier standard. See Cellco, 700

F.3d at 548 (characterizing the “just and reasonable” standard

as being that “applicable to common carriers”). To the extent

any ambiguity exists regarding how the Commission will apply

these rules in practice, we think it is best characterized as

ambiguity as to how the common carrier reasonableness

standard applies in this context, not whether the standard

applied is actually the same as the common carrier standard.

Unlike the data roaming requirement at issue in Cellco, which

set forth a “commercially reasonable” standard, see id. at 537,

the language of the Open Internet Order’s anti-discrimination

rule mirrors, almost precisely, section 202’s language

establishing the basic common carrier obligation not to “make

any unjust or unreasonable discrimination.” 47 U.S.C. § 202.

Indeed, confirming that the two standards are equivalent, the

Commission responded to commenters who argued that the

“no unreasonable discrimination” requirement was too vague

by quoting another commenter who observed that

“[s]eventy-five years of experience have shown [the

‘unreasonable’ qualifier in Section 202] to be both

administrable and indispensable to the sound administration of

the nation’s telecommunications laws.” Open Internet Order,

25 F.C.C.R. at 17949 ¶ 77 n.240. Moreover, unlike the data

roaming rule in Cellco—which spelled out “sixteen different

factors plus a catchall . . . that the Commission must take into

account in evaluating whether a proffered roaming agreement

is commercially reasonable,” thus building into the standard

“considerable flexibility,” Cellco, 700 F.3d at 548—the Open

Internet Order makes no attempt to ensure that its

reasonableness standard remains flexible. Instead, with respect

to broadband providers’ potential negotiations with edge

providers, the Order ominously declares: “it is unlikely that

pay for priority would satisfy the ‘no unreasonable

discrimination’ standard.” Open Internet Order, 25 F.C.C.R. at

17947 ¶ 76. If the Commission will likely bar broadband

60

providers from charging edge providers for using their service,

thus forcing them to sell this service to all who ask at a price of

$0, we see no room at all for “individualized bargaining.”

Cellco, 700 F.3d at 548.

Whether the Open Internet Order’s anti-blocking rules,

applicable to both fixed and mobile broadband providers,

likewise establish per se common carrier obligations is

somewhat less clear. According to Verizon, they do because

they deny “broadband providers discretion in deciding which

traffic from . . . edge providers to carry,” and deny them

“discretion over carriage terms by setting a uniform price of

zero.” Verizon’s Br. 16–17. This argument has some appeal.

The anti-blocking rules establish a minimum level of service

that broadband providers must furnish to all edge providers:

edge providers’ “content, applications [and] services” must be

“effectively []usable.” Open Internet Order, 25 F.C.C.R. at

17943 ¶ 66. The Order also expressly prohibits broadband

providers from charging edge providers any fees for this

minimum level of service. Id. at 17943–44 ¶ 67. In requiring

that all edge providers receive this minimum level of access for

free, these rules would appear on their face to impose per se

common carrier obligations with respect to that minimum level

of service. See Midwest Video II, 440 U.S. at 701 n.9 (a carrier

may “operate as a common carrier with respect to a portion of

its service only”).

At oral argument, however, Commission counsel asserted

that “[i]t’s not common carriage to simply have a basic level of

required service if you can negotiate different levels with

different people.” Oral Arg. Tr. 86. This contention rests on the

fact that under the anti-blocking rules broadband providers

have no obligation to actually provide any edge provider with

the minimum service necessary to satisfy the rules. If, for

example, all edge providers’ “content, applications [and]

61

services” are “effectively usable,” Open Internet Order, 25

F.C.C.R. at 17943 ¶ 66, at download speeds of, say, three

mbps, a broadband provider like Verizon could deliver all edge

providers’ traffic at speeds of at least four mbps. Viewed this

way, the relevant “carriage” broadband providers furnish

might be access to end users more generally, not the minimum

required service. In delivering this service, so defined, the

anti-blocking rules would permit broadband providers to

distinguish somewhat among edge providers, just as

Commission counsel contended at oral argument. For example,

Verizon might, consistent with the anti-blocking rule—and

again, absent the anti-discrimination rule—charge an edge

provider like Netflix for high-speed, priority access while

limiting all other edge providers to a more standard service. In

theory, moreover, not only could Verizon negotiate separate

agreements with each individual edge provider regarding the

level of service provided, but it could also charge

similarly-situated edge providers completely different prices

for the same service. Thus, if the relevant service that

broadband providers furnish is access to their subscribers

generally, as opposed to access to their subscribers at the

specific minimum speed necessary to satisfy the anti-blocking

rules, then these rules, while perhaps establishing a lower limit

on the forms that broadband providers’ arrangements with

edge providers could take, might nonetheless leave sufficient

“room for individualized bargaining and discrimination in

terms” so as not to run afoul of the statutory prohibitions on

common carrier treatment. Cellco, 700 F.3d at 548.

Whatever the merits of this view, the Commission

advanced nothing like it either in the underlying Order or in its

briefs before this court. Instead, it makes no distinction at all

between the anti-discrimination and anti-blocking rules,

seeking to justify both types of rules with explanations that, as

we have explained, are patently insufficient. We are unable to

62

sustain the Commission’s action on a ground upon which the

agency itself never relied. Lacson v. Department of Homeland

Security, 726 F.3d 170, 177 (D.C. Cir. 2013); see also United

States v. Southerland, 486 F.3d 1355, 1360 (D.C. Cir. 2007)

(“argument[s] . . . raised for the first time at oral argument [are]

forfeited”). Nor may we defer to a reading of a statutory term

that the Commission never offered. Shieldalloy Metallurgical

Corp. v. Nuclear Regulatory Comm’n, 624 F.3d 489, 495 (D.C.

Cir. 2010).

The disclosure rules are another matter. Verizon does not

contend that these rules, on their own, constitute per se

common carrier obligations, nor do we see any way in which

they would. Also, because Verizon does not direct its First

Amendment or Takings Clause claims against the disclosure

obligations, we have no need to address those contentions here.

Verizon does argue that the disclosure rules are not

severable, insisting that if the anti-discrimination and

anti-blocking rules fall so too must the disclosure

requirements. We disagree. “Whether the offending portion of

a regulation is severable depends upon the intent of the agency

and upon whether the remainder of the regulation could

function sensibly without the stricken provision.” MD/DC/DE

Broadcasters Ass’n v. FCC, 236 F.3d 13, 22 (D.C. Cir. 2001)

(emphasis omitted). At oral argument, Commission counsel

explained that the rules function separately, Oral Arg. Tr. 81–

82, and we are satisfied that the Commission would have

adopted the disclosure rules absent the rules we now vacate,

which, we agree, operate independently. See Davis County

Solid Waste Management v. EPA, 108 F.3d 1454, 1457–59

(D.C. Cir. 1997) (finding promulgated standard to be severable

where EPA asserted in rehearing petition that, contrary to its

position at oral argument, the standards could stand alone).

63

IV.

For the forgoing reasons, although we reject Verizon’s

challenge to the Open Internet Order’s disclosure rules, we

vacate both the anti-discrimination and the anti-blocking rules.

See Northern Air Cargo v. U.S. Postal Service, 674 F.3d 852,

860–61 (D.C. Cir. 2012) (appropriateness of vacatur dependent

on whether “(1) the agency’s decision is so deficient as to raise

serious doubts whether the agency can adequately justify its

decision at all; and (2) vacatur would be seriously disruptive or

costly”); Comcast, 600 F.3d at 661 (vacating the Comcast

Order). We remand the case to the Commission for further

proceedings consistent with this opinion.

So ordered.

SILBERMAN, Senior Circuit Judge, concurring in part and

dissenting in part: I am in general agreement with the majority’s

conclusion that the Open Internet Order impermissibly subjects

broadband providers to treatment as common carriers, but I

disagree with the majority’s conclusion that § 706 otherwise

provides the FCC with affirmative statutory authority to

promulgate these rules. I also think the Commission’s reasoning

violates the Administrative Procedure Act. These differences are

important since the majority opinion suggests possible

regulatory modifications that might circumvent the prohibition

against common carrier treatment.

I.

The Commission’s net neutrality regulation is purportedly

designed to promote innovation among edge providers who, in

turn, provide Internet user experience, thereby increasing user

demand for broadband service and, ultimately, encouraging

broadband providers to invest in infrastructure development to

meet that demand. Open Internet Order, 25 F.C.C.R. 17905,

17907 ¶ 13 (2010). Verizon describes this theory as a “triple

cushion shot.” As I will show, whatever its logic, it is based on

a faulty factual premise. But my first disagreement with the

Commission, and the majority, is to the claimed statutory

authority.

I quite agree with the majority that the relevant statutory

language is § 706 of the Communications Act. 47 U.S.C. §

1302. Although the FCC purports to rely on a scatter shot of

other provisions of the statute, as well as § 706, none of those

other provisions truly bear on the issue. “Emanations from the

penumbra” may once have served to justify constitutional

interpretation, but it hasn’t caught on as legitimate statutory

interpretation. I also agree with the majority – and disagree with

Verizon – that § 706 is a grant of positive regulatory authority,

but it doesn’t come close to sanctioning the Commission’s

regulation.

2

The statute directs the Commission to “encourage the

deployment on a reasonable and timely basis of advanced

telecommunications capability to all Americans . . . by utilizing

. . . price cap regulation, regulatory forbearance, measures that

promote competition in the local telecommunications market, or

other regulating methods that remove barriers to infrastructure

investment.” 47 U.S.C. § 1302(a).1

The FCC contends for, and the majority grants, Chevron

deference as to the interpretation of this language. I don’t

disagree that Chevron is called for, but Chevron “is not a wand

by which courts can turn an unlawful frog into a legitimate

prince.” Associated Gas Distributors v. F.E.R.C., 824 F.2d 981,

1001 (D.C. Cir. 1987).

The key words obviously are “measures that promote

competition in the local telecommunications market or other

regulating methods that remove barriers to infrastructure

investment.” Those are the words that grant actual authority. Yet

the Commission does not ground its regulation on this language.

Indeed, both the Commission and the majority conflate these

two clauses, though they have distinct functions. “Promoting

competition in the telecommunications market” implies a

regulation that encourages broadband providers to compete with

each other, head-to-head, on price and quality. Removing

“barriers to infrastructure investment,” on the other hand, does

not necessarily require any increased competition in the

1

Because § 706(b) contains almost the same language, it is

unnecessary to discuss these two provisions separately. See 47 U.S.C.

§ 1302(b) (The Commission “shall take immediate action . . . by

removing barriers to infrastructure investment and by promoting

competition in the telecommunications market.”).

3

telecommunications market.2 For example, if a particular

broadband provider were a monopolist, then by regulating its

prices, the Commission might encourage it to expand supply to

increase profits, rather than artificially restrict supply so as to

charge supracompetitive rates. Such a regulation would not

increase competition, but it would at least potentially remove a

barrier to investment. This is, essentially, the theory that the

Commission purportedly relies on: If the Commission

theoretically could spur demand for broadband, the Commission

would encourage further infrastructure investment regardless of

head-to-head competition. Thus, it is on the “removing barriers”

clause, primarily,3 that the Order must stand or fall. Yet, the

Commission never actually identifies any practices of the

broadband providers as “barriers to investment” – not once in

over 100 pages – probably because it would be so far fetched an

interpretation of those words.

Nor does the Commission state (or argue in its brief),

contrary to the majority’s opinion, that the “triple cushion shot”

– the means by which the Commission hopes to stimulate

demand for better broadband – is designed to increase

competition in the broadband market. See Majority Op. at 31-32

(citing 25 F.C.C.R. at 17910-11, 17970 ¶¶ 14, 120). Paragraph

2

An example of a paradigmatic barrier to infrastructure investment

would be state laws that prohibit municipalities from creating their

own broadband infrastructure to compete against private companies.

See Klint Finley, Why Your City Should Compete With Google’s

Super-Speed Internet, WIRED, May 28, 2013,

http://www.wired.com/wiredenterprise/2013/05/community-fiber/.

3

The transparency rules at least have the added benefit of

facilitating consumer choice by providing information, which could

lead to greater competition in the broadband market.

4

14 makes no reference to competition,4 and paragraph 120 does

not refer to competition between broadband providers in the

local telecommunications market – which is the statutory

objective. Indeed, paragraph 120 indicates that the

Commission’s objective is to protect the edge providers (not in

4

The Internet’s openness is critical to these outcomes,

because it enables a virtuous circle of innovation in which

new uses of the network – including new content,

applications, services, and devices – lead to increased end-

user demand for broadband, which drives network

improvements, which in turn lead to further innovative

network uses. Novel, improved, or lower-cost offerings

introduced by content, application, service, and device

providers spur end-user demand and encourage broadband

providers to expand their networks and invest in new

broadband technologies. Streaming video and e-commerce

applications, for instance, have led to major network

improvements such as fiber to the premises, VDSL, and

DOCSIS 3.0. These network improvements generate new

opportunities for edge providers, spurring them to innovate

further. Each round of innovation increases the value of the

Internet for broadband providers, edge providers, online

businesses, and consumers. Continued operation of this

virtuous circle, however, depends upon low barriers to

innovation and entry by edge providers, which drive end-

user demand. Restricting edge providers’ ability to reach end

users, and limiting end users’ ability to choose which edge

providers to patronize, would reduce the rate of innovation

at the edge and, in turn, the likely rate of improvements to

network infrastructure. Similarly, restricting the ability of

broadband providers to put the network to innovative uses

may reduce the rate of improvements to network

infrastructure.

25 F.C.C.R. at 17910-11 ¶ 14.

5

the telecommunications market) from content competition with

the broadband providers.5

Indeed, the Commission frankly admits its purpose is much

wider than the statutory objectives. It claims it must regulate

broadly, so as to “protect[] consumer choice, free expression,

end-user control, and the ability to innovate without

permission,” 25 F.C.C.R. at 17949 ¶ 78, which certainly

5

In directing the Commission to “encourage the deployment

on a reasonable and timely basis of advanced

telecommunications capability to all Americans . . . by

utilizing . . . price cap regulation, regulatory forbearance,

measures that promote competition in the local

telecommunications market, or other regulating methods

that remove barriers to infrastructure investment,” Congress

necessarily invested the Commission with the statutory

authority to carry out those acts. Indeed, the relevant Senate

Report explained that the provisions of Section 706 are

“intended to ensure that one of the primary objectives of the

[1996 Act] – to accelerate deployment of advanced

telecommunications capability – is achieved,” and stressed

that these provisions are “a necessary fail-safe” to guarantee

that Congress’s objective is reached. It would be odd indeed

to characterize Section 706(a) as a “fail-safe” that “ensures”

the Commission’s ability to promote advanced services if it

conferred no actual authority. Here, under our reading,

Section 706(a) authorizes the Commission to address

practices, such as blocking VoIP communications,

degrading or raising the cost of online video, or denying end

users material information about their broadband service,

that have the potential to stifle overall investment in Internet

infrastructure and limit competition in telecommunications

markets.

25 F.C.C.R. at 17970 ¶ 120 (emphasis added).

6

indicates a Commission objective that exceeds the statutory

authority granted in § 706.

The majority takes the statutory language even further; it

states that the Commission’s

authority to promulgate regulations that promote

broadband deployment encompasses the power to

regulate broadband providers’ economic relationships

with edge providers if, in fact, the nature of those

relationships influences the rate and extent to which

broadband providers develop and expand services for

end users.

Majority Op. at 33. So much for the terms “promote competition

in the local telecommunications market” or “remove barriers to

infrastructure investment.” Presto, we have a new statute

granting the FCC virtually unlimited power to regulate the

Internet. This reading of § 706, as we said in Comcast Corp. v.

FCC, “would virtually free the Commission from its

congressional tether.” 600 F.3d 642, 655 (D.C. Cir. 2010). The

limiting principles the majority relies on are illusory.

The majority claims that the Commission cannot exceed its

subject-matter jurisdiction over “interstate and foreign

communication by wire and radio.” 25 F.C.C.R. at 17970 ¶ 121

(citing 47 U.S.C. § 152(a)). This is obviously true, but it is not

a limitation on the Commission's interpretation of this specific

statutory provision. The question is not whether the statute

permits the Commission to do absolutely anything – of course

it does not – but, rather, whether § 706 contains any intrinsic

limitations. If the Commission’s subject matter jurisdiction is a

“limiting principle,” then we might as well call the First

Amendment a limiting principle, for surely the Commission

could not censor the Internet, even if doing so did somehow

increase broadband deployment.

7

According to the majority, the Commission is also

restrained because it may only regulate pursuant to § 706 if it

does so to achieve a particular purpose: to “encourage the

deployment on a reasonable and timely basis of advanced

telecommunications capability to all Americans.” 25 F.C.C.R.

at 17970 ¶ 121 (citing 47 U.S.C. § 1302(a)). This is an almost

meaningless limitation, as demonstrated by the Open Internet

Order itself. The Commission’s theory is that an open Internet

will spur demand for broadband infrastructure. Id. at 17907 ¶ 3.

But any regulation that, in the FCC’s judgment might arguably

make the Internet “better,” could increase demand. I do not see

how this “limitation” prevents § 706 from being carte blanche

to issue any regulation that the Commission might believe to be

in the public interest.

To sum up, § 706 requires the Commission to identify a

“barrier[] to infrastructure investment” or a measure that

“promote[s] competition” in the broadband market – which it

has not.

II.

Verizon alternatively argues that, even assuming that §

706 grants the Commission its claimed authority, the regulation

is arbitrary and capricious because its findings – such as they are

– lack substantial evidence. I agree. Although we are not faced

with a formal adjudication which would be judged by substantial

evidence on a closed record, factual determinations that underly

regulations must still be premised on demonstrated – and

reasonable – evidential support. See Motor Vehicle Mfrs. Ass'n

of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43

(1983).

The Commission purports to fear that broadband providers

might discriminate against, or even block, the Internet traffic of

specific edge providers or classes of edge providers, perhaps

8

because broadband providers offer some competing services or

because they might charge certain edge providers for premium

services. The majority puts it even more starkly, asserting that

the Commission found that “broadband providers have the

technical and economic ability to impose . . . restrictions” on

edge providers. Majority Op. at 38 (emphasis added). But the

Commission never actually made such a finding. Its conclusions

are littered with “may,” “if,” and “might.” For example,

according to the Commission, a broadband provider:

• “may have economic incentives to block or

otherwise disadvantage specific edge providers”

• “might use this power to benefit its own or

affiliated offerings at the expense of unaffiliated

offerings”

• “may act to benefit edge providers that have paid

it to exclude rivals”

• “may have incentives to increase revenues by

charging edge providers”6

• “might withhold or decline to expand capacity in

order to ‘squeeze’ non-prioritized traffic”

25 F.C.C.R. at 17915-22 ¶¶ 21-29. To be sure, the majority

correctly observes that we should defer to an agency’s

“predictive judgments as to the economic effect of a rule,”

National Telephone Cooperative Ass’n v. FCC, 563 F.3d 536,

541 (D.C. Cir. 2009), but deference to such a judgment must be

based on some logic and evidence, not sheer speculation. That

6

In this case, Verizon has indicated it does wish to explore two-

sided pricing (charging both edge providers and consumers).

9

a party “may” do something is hardly a finding – at least in

American law – that a party has done or will do something.

Moreover, whether or not the “triple cushion shot” theory is

rational economics (and I have my doubts), it rests, as I have

noted, on a false factual premise – that the evidence supports a

finding that broadband providers across the board, in all

markets, enjoy sufficient economic clout to take the above

actions.

The Commission asserts – and the majority accepts – that

broadband providers act as “gatekeepers” because each one has

a so-called “terminating monopoly” over access to particular end

users. These are terms, largely invented,7 the economic

significance of which the Commission does not explain. All

7

My research has not revealed any use of the phrase “terminating

monopoly” outside of the context of these proceedings before the

FCC. It does not appear to be an accepted economic term. A

“gatekeeper,” on the other hand, is an intermediary between a

consumer and an upstream seller. And a consumer’s willingness to

switch to another available supplier depends on the prospective benefit

measured against the transaction costs (how many blocks am I willing

to walk, or how many phone calls am I willing to make?).

Recent literature suggests that gatekeepers may sometimes

exercise market power against upstream suppliers even when the

gatekeeper does not have enough market share to exercise downstream

market power against consumers. See, e.g., Grimes, Warren S., Buyer

Power and Retail Gatekeeper Power: Protecting Competition and the

Atomistic Seller, 72 ANTITRUST L. J. 563, 580 (2005). One example

would be if I purchase my groceries at a particular store, any food

supplier who wishes to sell to me probably must do so through that

particular store because I am unlikely to switch grocery stores over a

single product. Regardless of any contemporary debates over the

differences between buyer power and seller power, one thing is clear:

The gatekeeper effect is a tool that facilitates the exercise of market

power over sellers; it is not market power itself.

10

retail stores, for instance, are “gatekeepers.” The term is thus

meaningful only insofar as the gatekeeper by means of a

powerful economic position vis-a-vis consumers gains leverage

over suppliers.8 The Commission made no effort to construct an

analytic framework to measure this supposed gateway advantage

– it is a rather slippery concept – nor did it adduce evidence to

establish the economic power it would supposedly afford all

broadband providers against all edge providers.

Without broadband provider market power, consumers, of

course, have options; they can go to another broadband provider

if they want to reach particular edge providers or if their

connections to particular edge providers have been degraded.

The Commission implicitly recognizes this, because it justifies

exempting dial-up Internet providers from the Order by noting

that “telephone service has historically provided the easy ability

to switch among competing dial-up Internet access services.” 25

F.C.C.R. at 17935 ¶ 51. The Commission also exempts

“backbone” Internet providers – which interconnect between

broadband providers – obviously for the same reason. On the

other hand, the Commission asserts that broadband customers

may have few alternatives or they may be locked into long-term

8

The Commission treats each individual edge provider as

analogous to an upstream seller in a retail context. But it seems more

plausible that consumers consider “Internet access” to be the product

that they are buying, and that large product creates greater incentives

to switch to another provider. Although the Commission has argued

that consumers will perceive a slow connection to a particular edge

provider as indicative of a problem with that edge provider, rather than

as a problem with the quality of Internet access provided by the

broadband provider, 25 F.C.C.R. at 17921 ¶ 27, the Commission

presents no evidence to support that conclusion. Indeed, edge

providers have a strong incentive to inform consumers if their

connections are being degraded. Moreover, the transparency rule,

which we uphold, makes this outcome almost impossible.

11

contracts with early-termination fees. To be sure, some difficulty

switching broadband providers is certainly a factor that might

contribute to a firm’s having market power, but that itself is not

market power. There are many industries in which switching

between competitors is not instantly achieved, but those

industries may still be heavily disciplined by competitive forces

because consumers will switch unless there are real barriers. By

pointing to potential difficulties consumers may encounter

switching broadband providers, the Commission is simply

implying that broadband providers have market power (market

power lite?), without actually examining if and where they do.

Although Verizon was reluctant to concede that even if a

broadband provider had market power that would authorize the

Commission to take action under § 706 – presumably because

it challenged any regulatory authority under § 706 – it did bring

to our attention a Justice Department submission, discussed

infra, that emphasized the necessity of the Commission limiting

its regulatory initiatives to the control of broadband market

power. Ex Parte Submission of the U.S. DOJ at 28, Docket No.

09-51 (Jan. 4, 2010). My discussion of market power reflects my

view (and apparently the Justice Department’s) of what evidence

would be adequate to support the Commission’s rule. In any

event, Verizon certainly challenged the factual basis of the

Commission’s “gateway” conclusion, so I don’t think the

existence vel non of market power is really a different

consideration. See Majority Op. at 40-41.

The majority does contend that four possible instances of

broadband providers restricting users’ access to certain edge

providers are sufficient evidence of broadband providers’

“incentives and ability to restrict Internet traffic.” Majority Op.

at 43. That the Commission was able to locate only four

potential examples of such conduct is, frankly, astonishing. In

such a large industry where, as Verizon notes, billions of

connections are formed between users and edge providers each

12

year, one would think there should be ample examples of just

about any type of conduct. But even if examples of such conduct

were more numerous, it would still not be evidence that

broadband providers are economically capable of restricting

consumer choice. And, as the Commission noted, there are

potentially efficient, pro-consumer reasons that an individual

broadband provider might wish to restrict access to some edge

providers. See 25 F.C.C.R. at 17921 ¶ 28 n.80 (“Economics

literature recognizes that access charges could be harmful under

some circumstances and beneficial under others. . . . [T]he

economic literature on two-sided markets is at an early stage of

development.”). The Commission’s anecdotes then do not show

that any broadband providers are capable of actually causing the

harm about which the Commission is concerned.

My view, then, is that the Commission’s failure to conduct

a market power analysis is fatal to its attempt to regulate,

because it means that there is inadequate evidence to support the

lynchpin of the Commission’s economic theory. The

Commission actually recognized that a finding of market power

would enhance its theory. 25 F.C.C.R. at 17923 ¶ 32. Indeed!

But such a finding would, of course, have to be made market to

market (indeed the statute specifically references local

telecommunications markets), and if so, it would be a finding of

a barrier to broadband investment without the mental gymnastics

of the triple cushion shot. If one (or two) broadband providers

have market power in any particular market and thereby could

raise prices while restricting supply, the Commission could well

conclude that was a barrier to broadband investment.

Of course, before the Commission could determine whether

a particular broadband provider possesses market power, it

would have to first define the relevant market. Instead, the

Commission, in this case, simply cited a 2009 study that found

that “nearly 70 percent of households lived in census tracts

where only one or two wireline or fixed wireless firms provided

13

advertised download speeds of at least 3 Mbps and upload

speeds of at least 768 Kbps.” 25 F.C.C.R. at 17923 ¶ 32. Why

are these speeds relevant? Because the Commission has

previously, as part of its statutory duty to assess the state of

broadband deployment, defined “broadband” to mean download

speeds of at least 4 Mbps and upload speeds of at least 1 Mbps.

Sixth Broadband Deployment Report, 25 F.C.C.R. 9556, 9559

¶ 5 (2010). According to the Commission, it is the minimum

speed necessary to stream high quality video while

simultaneously browsing the Internet and using email. Id. I don’t

dispute the legitimacy of that definition. Yet, while the

Commission is free to rely on technical considerations in

defining the statutory term “broadband,” such considerations are

irrelevant when it comes to defining the market in economic

terms. A broadband provider offering a 2 Mbps connection is

not, according to the FCC, really offering broadband. But it is

quite likely that consumers, in deciding which Internet service

to purchase, will compare products at varying speeds and price

points. Slower service providers can still exert competitive

pressure on faster service providers. So, too, can mobile

broadband providers. Before the Commission can conclude that

a market is concentrated, it must first define that market. It has

made no effort to do so.

The Commission, moreover, does not address whether the

trend in the broadband market is towards more or less

competition. Obviously the deployment of broadband

infrastructure is a capital-intensive process, and it should not be

surprising if, during a period of expansion, some areas are

served by fewer competitors than others. But there is no

evidence in the record suggesting that broadband providers are

carving up territory or avoiding head-to-head competition. At

least anecdotally, the opposite seems to be true. Google has now

entered the broadband market as a direct competitor:

14

Google’s ultra-high-speed Internet service may finally

be scaring the big Internet providers into action.

Following Google’s announcement that it will expand

into Austin, Texas, AT&T announced it will offer fiber

Internet in the city, and Time Warner Cable announced

it would offer citywide wireless Internet service.

But smaller companies are also trying to head off

Google before the company even makes an

announcement in their communities. This week, for

example, the Lawrence, Kansas-based Internet

provider Wicked Broadband began taking pre-orders

for a residential fiber Internet service with speeds to

rival Google Fiber’s.

Klint Finley, Google Fiber Spurs Mom-and-Pop Net Providers

T o o , W I R E D , A p r . 2 6 , 2 0 1 3 ,

http://www.wired.com/wiredenterprise/2013/04/google-fiber-

wicked/.

The Commission apparently wanted to avoid a disciplined

inquiry focused on market power, notwithstanding the warning

it received from the Justice Department less than a year before

the regulation issued – which, as I noted, Verizon cited – a

warning that unless the FCC’s focus was on market power, any

regulation could actually discourage broadband development,

thus frustrating the statutory objective:

Although enacting some form of regulation to prevent

certain providers from exercising monopoly power

may be tempting with regard to . . . areas [served by

only one or two broadband providers], care must be

taken to avoid stifling the infrastructure investments

needed to expand broadband access. In particular, price

regulation would be appropriate only where necessary

to protect consumers from the exercise of monopoly

15

power and where such regulation would not stifle

incentives to invest in infrastructure deployment.

Ex Parte Submission of the U.S. DOJ at 28, Docket No. 09-51

(Jan. 4, 2010).

The Commission did postulate one other economic theory

supposedly establishing a “barrier to infrastructure investment”

that does not depend on the broadband providers possessing

market power. It argued, essentially, that innovation among edge

providers is a public good in that every broadband provider

benefits from an open Internet, but each broadband provider has

an individual incentive to charge edge providers for service

because, if broadband providers were to forego that revenue

stream, they would be unable to internalize all of the supposed

benefits to innovation. 25 F.C.C.R. at 17919 ¶ 25. In short, the

Commission speculates that the Open Internet Order prevents

a classic “tragedy of the commons”– a situation in which each

economic actor, behaving in his own self-interest, contributes to

the destruction of a public good. See Garrett Hardin, The

Tragedy of the Commons, 162 SCIENCE 1243 (1968). In such a

situation, each actor would be better off if a central regulator

prevented them from doing what would be in their private

interest if they were acting unilaterally. Again, however, the

Commission fails to make any real economic findings regarding

whether these rules are actually necessary to prevent such a

situation. As such, it is the sheerest of fanciful speculation.

Indeed, if a tragedy of the commons were likely in the

broadband market, then one would expect Verizon and other

broadband providers to support the Open Internet Order,

because such a situation would be economically harmful to them

in the long run. By the same token, when firms oppose, on

antitrust grounds, the merger of competing firms, it is generally

a reliable indicator that the merger is pro-competitive. See Frank

H. Easterbrook, The Limits of Antitrust, 63 TEX. L. REV. 1, 18

16

(1984) (“When a business rival brings suit, it is often safe to

infer that the arrangement is beneficial to consumers.”). Firms

can generally be relied upon to know their own best interest.

Perhaps most troubling, the Commission fails to appreciate

the long-term impact of its own regulations. An unwarranted

government interference in a functioning market is likely to

persist indefinitely, whereas a failure to intervene, even when

regulation would be helpful, is likely to be only temporarily

harmful because new innovations are constantly undermining

entrenched industrial powers. See id. at 3 (“[J]udicial errors that

tolerate baleful practices are self-correcting while erroneous

condemnations are not.”); Tim Wu, THE MASTER SWITCH 11

(2010) (“But as we have said, that which is centralized also

eventually becomes a target for assault[.]”).

Nevertheless, the Commission justifies its aggressive,

prophylactic regulation by asserting that the negative

consequences of regulation (preserving the status quo) are likely

to be minor, while the consequences of allowing the broadband

market to evolve without regulation could be drastic and

permanent. 25 F.C.C.R. at 17909 ¶ 12. I think this is quite

wrong, but in any event, the agency’s judgment about the

propriety of leaping before looking cannot displace the judgment

of Congress which, in enacting § 706, did not so broadly

empower the Commission. Rather, Congress required the

agency to identify an actual barrier to infrastructure investment

or a threat to competition, and the agency must have evidence

that the barrier or threat exists.

III.

Because the Open Internet Order obviously imposes

common carrier obligations on broadband providers, I join

generally the opinion of the Court with respect to Part III.

Indeed, even noted proponents of “net neutrality” acknowledge

17

as much: “[N]et neutrality is the twenty-first century’s version

of common carriage. . . . In the case of the Internet, common

carriage under the name of net neutrality amounts to an FCC

rule that bans any degree of blocking individual sites, [or]

transmission of data.” Tim Wu, THE MASTER SWITCH 236

(2010).

I have, however, one quibble with the majority’s analysis of

the anti-blocking rules. Although ultimately concluding that the

anti-blocking rules are unlawful, the majority says that whether

those rules “likewise establish per se common carrier

obligations is somewhat less clear.” Majority Op. at 60.

Although the Order states that, under the anti-blocking rules,

broadband providers may not degrade content so as to make it

“effectively unusable,” the majority supposes that a broadband

provider might voluntarily choose to offer service that is faster

than the anti-blocking rules require, i.e., faster than the

minimum speed necessary to make each edge provider

effectively usable by consumers. By exceeding the minimum

level of service, the majority suggests, the broadband providers

would have wide latitude to engage in individualized bargaining,

which might take this rule outside of common carriage per se.

My concern with this hypothesis is that the phrase “effectively

unusable” is subject to manipulation. I think it should mean that

whatever speed is generally offered to most edge providers is the

minimum necessary to be effectively usable. After all, it is

artificial to distinguish between what is “effective” and what

consumers expect. If a faster speed were to become standard, we

would likely consider a slower speed to be effectively unusable.

Thus, while there is a possibility that a “fast lane” Internet

service might be offered on a non-common carriage basis, the

service that most users receive under this rule would still have

to be offered as common carriage, at a regulated price of zero.

In any event, as the majority recognizes, the Commission did not

18

make this argument, so the anti-blocking rules must fall.9

***

This regulation essentially provides an economic preference

to a politically powerful constituency, a constituency that, as is

true of typical rent seekers, wishes protection against market

forces. The Commission does not have authority to grant such

a favor.

9

I do think that the transparency rules rest on firmer ground. The

Commission is required to make triennial reports to Congress on

“market entry barriers” in information services, 47 U.S.C. § 257, and

requiring disclosure of network management practices appears to be

reasonably ancillary to that duty. I also agree with the majority’s

conclusion that the disclosure rules are severable from the anti-

discrimination and anti-blocking rules.