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Here's Big Cable's plan to stop the FCC's net neutrality rules

Former FCC Chairman Michael Powell is leading the cable industry's fight against the new network neutrality rules.
Former FCC Chairman Michael Powell is leading the cable industry's fight against the new network neutrality rules.
Jeff Schear/WireImage / Getty

It was a moment big broadband providers have been anticipating for weeks. The official publication of the Federal Communications Commission's network neutrality rules on Monday gave a green light for challenging those rules in court. This week, industry groups representing almost every type of internet service provider have filed lawsuits arguing that the FCC's new regulations are illegal. If these lawsuits succeed, they could strip the FCC of legal authority to establish strong net neutrality protections.

The groups won't be required to spell out their legal arguments until later in the legal process. But this week I talked to two industry insiders — including Michael Powell, who represents the cable industry as the head of the National Cable and Telecommunications Association — to get a preview of the industry's arguments.

The lawsuits will include a direct attack on the legal foundations of the FCC order: the decision to regulate internet access like a public utility. That was an essential precondition for enacting tough network neutrality rules. And industry groups say it goes beyond the authority Congress provided to the FCC.

But the telecom industry may have a difficult time convincing the courts on this issue. A landmark 2005 Supreme Court decision stressed that the FCC has considerable flexibility to decide how to regulate internet access. Network neutrality supporters say that ruling gives the FCC clear legal authority for the rules the agency established in February. Either way, this is a fight that's going to continue for years to come.

The legal fight over net neutrality focuses on a 19-year-old law

President Bill Clinton and House Speaker Newt Gingrich in 1998. The 1996 Telecommunications Act was passed in 1996 by the Republican House and signed by Clinton. (PAUL J. RICHARDS/AFP/Getty Images)

To understand the current legal fight, you have to go back to the last time Congress updated telecommunications law, in 1996. Online services had just begun to be a mainstream phenomenon, and the Republican majority in Congress faced a dilemma. On the one hand, too much regulation could hamper the evolution of these services. Yet total deregulation could allow incumbent telephone monopolies to strangle these services in their cradle.

So Congress established two sets of rules. Online services like AOL were defined as "information services" and were exempted from most regulations. But the telephone connections most people used to reach services like AOL were defined as "telecommunications services" and were subject to strict regulations.

Ever since then, telecom debates have focused on how to apply those 1996 categories to new types of internet service. And this is a hard question, because modern ISPs often play both roles: they provide the physical connection needed to get online (like old-fashioned telephone monopolies) and digital services that add value to that basic transmission capacity (like AOL in the 1990s).

After cable companies started offering internet access, a deregulation-minded Republican majority decided in 2002 to put cable internet access in the lightly regulated information-service category. (Michael Powell, now the top lobbyist for the cable industry, was head of the FCC at the time.)

That decision led to a lawsuit that went all the way to Supreme Court. In 2005, the Supreme Court ruled that the law was ambiguous. There were good arguments for either classification, so the court decided to defer to the FCC on the best approach.

Industry groups say the FCC can't regulate ISPs as common carriers

Now the FCC wants to reverse its own 13-year-old decision. A 2014 court ruling limited the agency's ability to impose strong network neutrality regulations while treating broadband as an information service. Switching categories could provide the legal basis for stricter regulations.

Industry groups such as the National Cable and Telecommunications Association, which represents big cable companies, argue that the law doesn't allow the FCC to do this. They say ISPs have always been treated as lightly regulated information services, and that the law doesn't allow the FCC to subject internet access to utility-style regulation.

Liberals like Harold Feld of Public Knowledge say this is nonsense. They say that until 2005, DSL service was subject to utility-style regulation. Indeed, they say that in the late 1990s, it wasn't even controversial to subject the internet access provided by phone companies to the same strict regulations as conventional phone service.

The changing nature of ISPs

Broadband providers want to be in the same legal category as dial-up online services like AOL. (Julie Thurston Photography/Moment Mobile/Getty)

So who's right? These apparently contradictory positions reflect a subtle change in the meaning of the term "ISP" that occurred around the turn of the century. Remember, to get on the internet in the 1990s, you needed to get a physical phone line and service from a dial-up provider such as AOL or Earthlink. The term "ISP" only referred to internet service, not the physical cable that connected you to the network. And it's true that standalone ISPs in this older sense of the term were never subject to utility-style regulations.

Today, however, those old-school ISPs are nearly extinct. We use the term ISP to refer to companies that provide both a physical connection and the ability to send and receive information over the internet. And it's true that the courts have never clearly ruled on whether this new type of ISP can be subject to utility-style regulations.

Why broadband providers face an uphill battle

Antonin Scalia is one of the Supreme Court's most conservative members, but liberals loved his 2005 dissent on broadband regulation. (NICHOLAS KAMM/AFP/Getty Images)

There's always some uncertainty about how the courts will rule, but the industry's argument here seems like a long shot. A prominent theme in the Supreme Court's 2005 ruling — and other court rulings on telecommunications regulation — is that the FCC is entitled to significant latitude in deciding how best to apply an ambiguous law to a fast-changing industry. It's also notable that the three dissenting justices in that 2005 ruling — including two who are still on the court, Justices Antonin Scalia and Ruth Bader Ginsburg — believed the law required internet service from cable companies to be regulated as public utilities. So it won't be easy to convince the courts that the law actually prohibits such regulations.

The industry's argument seems to rely on resurrecting a sharp distinction between the physical network connection (provided by phone companies in the dial-up era) and the services provided by old-school ISPs. Industry groups can't deny that the first type of service can be regulated as a telecommunications service, but they want to convince the court that regulating the second type of service goes too far. But the Supreme Court's 2005 decision didn't seem to focus too much on this distinction. It treated internet service as an integrated whole, and ruled that the commission had a fair amount of latitude to decide how to regulate the bundle of services ISPs provided.

Supporters of the FCC's ruling also point out that the internet has evolved in a way that strengthens the agency's argument. In 2002, many customers relied on ISPs to provide online services such as email and personal websites — in addition to raw access to the internet. Many ISPs still offer email accounts, of course, but people are more likely to use web-based email service from third parties such as Google, Yahoo, and Microsoft. This makes it more difficult to characterize the internet access provided by companies such as Time Warner Cable or Verizon as an online service in its own right rather than a way to reach online services provided by third parties such as Facebook or Netflix.

WATCH: 'Ezra Klein on the new net neutrality developments from late February'