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FCC Runs Net Neutrality Gauntlet in D.C.

The FCC took another crack Monday at arguing its authority to regulate Internet access services and the early read from court watchers was that it had an uphill climb this time, too.

That came in oral argument Monday before a three-judge panel of the U.S. Court of Appeals for the District of Columbia of the FCC's Open Internet order, which was challenged by Verizon. The three judges were Judith Rogers, David Tatel, and Laurence Silberman. Only Tatel was on the 2010 panel that ruled the FCC had not justified its BitTorrent discrimination finding against Comcast.

Helgi Walker, the attorney for Verizon, was also making a repeat performance, having made Comcast's winning argument back in 2010 when the court overturned the FCC's discrimination finding against Comcast over BitTorrent traffic.

"It was a very good day for broadband providers in that two of the three judges strongly signaled that the FCC did not have the authority to mandate common carrier-like anti-discrimination regulation on broadband providers," said Scott Cleland, Chairman NetCompetition an e-forum supported by broadband interests. "Specifically, Judges Tatel and Silberman appear to agree that the FCC does not have the authority to force broadband providers to provide their service for free to edge companies."

With the usual caveats about reading judges' arguments--they sometimes play devil's advocate--"It sure looks like a reversal," said one public interest lawyer. "The non-discrimination rule is likely to be thrown out. He said the question appears to be whether the court will also throw out the anti-blocking and transparency rules."

Without anti-discrimination regs, ISPs could strike deals to charge Web sights for speedier user access, though they could charge for access to standard speeds if the no-blocking provision were retained.

"Judge Tatel was reasonably straightforward in saying that he thinks the anti-discrimination rule is a form of common carriage, and wasn't buying the FCC's efforts to justify it," said the attorney. "Silberman is a likely vote for reversal, he said. Rogers seems the most likely to uphold the FCC. She did not ask many questions during argument.

The Judges probed both sides and at times seemed to have trouble wrapping their minds around some of the FCC's reasoning surrounding just exactly what the rules did and did not allow, and why.

The courtroom was packed with standing-room only and dozens more in an overflow room listening in.

The court essentially threw away the clocks, giving each side perhaps double its allotted time as the judges came back to some common themes, including the FCC's congressional authority, the common carrier issues, and particularly the difference between the anti-discrimination and anti-blocking elements of the FCC's Open Internet order.

Walker made it clear what the stakes were. She said that her client was interested in exploring charging edge providers--like Google--for priority access to the Internet, but could not because of the FCC rules. Silberman pointed out that customers paid ISPs for access, and backbone providers charged for interconnection, and it seemed only the networks that could not charge their edge-provider end users. The FCC disputes that those edge providers are actually end users.

Judge Tatel suggested that if the court were to vacate the non-discrimination provision, but leave the blocking provision intact--allowing the pay-for-prioritization the FCC permits for specialized services not traveling on the public Internet--that would provide the flexibility that could resolve some of the problems with the FCC applying common carrier rules to an uncommon carrier service. "Non-discrimination seems like classic common carriage to me," he said.

Walker agreed, but also said that the no-blocking provision was also a de facto nondiscrimination provision, since it said all edge providers had to be carried, and at a price for zero since Verizon could not not carry them, which would prevent price discrimination.

She also pointed out that the FCC had to raise the issue of severability--that the court could uphold one part of the rules and not another--and that the court should vacate them in their entirety.

Judge Silberman found it hard to fathom how the FCC rules did not stray into common carriage if edge providers, the end user, had to be given access.

FCC attorney Sean Lev argued that edge providers were not the end user, and that networks and backbone providers were already being paid through interconnection agreements.

Verizon is looking to get paid twice, said Pantelis Michelopoulos, arguing for Public Knowledge, Vonage, and others who intervened in support of the FCC. He argued that the rules were needed because Verizon had the ability and incentive to degrade edge providers like  Netflix, who were relying for access on a company that would like to compete with it for entertainment-watching eyeballs.

Walker took aim at the FCC's justification of the rules under its congressional mandate to spread broadband throughout the land. She said Congress would not have taken that obscure, mandatory access path to authority over deployment, and that the FCC was trying to bootstrap that to justify its net neutrality regs when Congress also said that it wanted the 'net free of regulation.

Tatel and the other judges probed hard at Walker's argument that the FCC was fishing for authority when it came up with the rules, and retro engineered their defense under its general congressional mandate to deploy broadband. The FCC has been declining to say the broadband market is competitive, the absence of which triggers authority to take steps to effect that via regulations.

Tatel suggested it was not unreasonable for the FCC to draw the connection between access to a search engine and the forces that spurred the growth of the net, which included access to search engines, and to regulate to address that market power barrier.

Silberman pointed out that the FCC had only posited that blocking or discrimination "may," discourage investment in broadband rollouts, not that it had, but Lev said by "may" the FCC meant that while not all 200 million people will be affected, some definitely will.

Walker initially conceded that if the FCC had found specific instances of undue market power discouraging getting broadband to totally unserved households, it might have some justification for the rules, but was given a chance to back away from that and did, saying that even such a "flat finding" did not justify the Open Internet order.