The Scope of the FCC’s Ancillary Jurisdiction After the D.C. Circuit’s Net Neutrality Decisions Christopher J. Wright* TABLE OF CONTENTS I. INTRODUCTION .................................................................................. 20 II. THE STATUTORY FRAMEWORK AND THE SUPREME COURT’S ANCILLARY AUTHORITY DECISIONS ................................................ 23 III. JUDGE TATEL’S SYNTHESIS OF THE D.C. CIRCUIT PRECEDENT ....... 26 A. Comcast v. FCC ......................................................................... 26 B. Verizon v. FCC ........................................................................... 28 IV. THE ANCILLARY JURISDICTION TEST AFTER VERIZON ..................... 32 A. Express Delegations Versus Mere Policy Statements ................ 32 B. Consistency with the Act ............................................................. 37 V. CONCLUSION ..................................................................................... 40  Christopher J. Wright is the head of the appellate practice at Harris, Wiltshire & Grannis LLP. He was General Counsel of the FCC from 1997 to 2001. - 19 - 20 FEDERAL COMMUNICATIONS LAW JOURNAL Vol. 67 I. INTRODUCTION Whether the Federal Communications Commission can and should reenact net neutrality rules similar to those invalidated by the U.S. Court of Appeals for the D.C. Circuit in Verizon v. FCC1 has been the focus of most commentary on the case. But the decision in Verizon is also noteworthy for its effect on the scope of the FCC’s “ancillary jurisdiction”—that is, the FCC’s authority to adopt regulations based largely on the provisions in Title I of the Communications Act of 19342 that grant the agency general, rather than specific, authority. This issue is important because the validity of many FCC regulations adopted since the enactment of the 1934 Act depends on the scope of the FCC’s ancillary jurisdiction. Given the dynamic nature of the communications sector, questions concerning the scope of the FCC’s ancillary authority are sure to arise again as new technologies emerge. This essay thus focuses on the scope of the FCC’s ancillary authority after Verizon, rather than on how the FCC should respond to the opinion with respect to net neutrality.3 The provisions that provide the basis for the FCC’s ancillary authority include section 2(a) of the Communications Act,4 which gives the FCC jurisdiction over “all interstate and foreign communications by wire or radio;” section 1,5 which provides that the FCC is required to endeavor to “make available . . . to all the people of the United States . . . a rapid, efficient, Nation-wide, and world-wide wire and radio communication service;” and section 4(i), which gives the FCC authority to “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.”6 As the Supreme Court has explained, although the Act gives the FCC “expansive powers,”7 they are not “unbounded.”8 In 1968, in United States v. Southwestern Cable, the Court emphasized the expansive nature of the FCC’s powers in approving the FCC’s regulation of community antenna television (“CATV”), an early version of cable television, at a time when the 1. Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014), aff’g in part, vac’g in part sub nom. Preserving the Open Internet, Report and Order, FCC 10-201, 25 FCC Rcd. 17905 (2010) [hereinafter 2010 Open Internet Order]. 2. Communications Act of 1934, ch. 652, 48 Stat. 1064 (codified at 47 U.S.C. §§ 151–162 (2012 & Supp. 2013)) [hereinafter Communications Act]. 3. After Verizon, the FCC initiated a rulemaking regarding the future of net neutrality. See Protecting and Promoting the Open Internet, Notice of Proposed Rulemaking, FCC 14-61, 29 FCC Rcd. 5561, 5569, paras. 22–24 (2014). 4. Communications Act § 2(a) (codified at 47 U.S.C. § 152(a) (2012)). 5. Id. § 1 (codified at 47 U.S.C. § 151 (2012)). 6. Id. § 4(i) (codified at 47 U.S.C. § 154(i) (2012)). 7. NBC v. United States, 319 U.S. 190, 219 (1943). 8. FCC v. Midwest Video Corp. (Midwest Video II), 440 U.S. 689, 706 (1979). Issue 1 SCOPE OF THE FCC’S ANCILLARY JURISDICTION 21 Communications Act made no mention of CATV.9 The Court found “no need . . . to determine in detail the limits of the Commission’s authority,” adding that “[i]t is enough to emphasize that the authority which we recognize today under [section 2(a)] is restricted to that reasonably ancillary to the effective performance of the Commission’s various responsibilities for the regulation of television broadcasting.”10 The Court thus introduced the concept of “ancillary” jurisdiction.11 In 1979, in FCC v. Midwest Video Corp. (Midwest Video II), the Court held that the FCC “was not delegated unrestrained authority” and rejected the FCC’s attempt to exercise its ancillary authority to require CATV operators to set aside a portion of their channel capacity for access by third parties.12 The Court noted that the Act specifically prohibits the FCC from regulating broadcasters as common carriers, concluding that the FCC “may not regulate cable systems as common carriers” either.13 Since 1979, federal courts of appeals—primarily the D.C. Circuit— have attempted to develop the ancillary jurisdiction doctrine to recognize the FCC’s broad authority under the Act while ensuring that it is not unbounded. Two recent net neutrality cases represent the court’s most recent attempt to navigate between these poles.14 The Communications Act is hardly a model of clarity with respect to the limits on the FCC’s power and neither the Supreme Court nor the federal courts of appeals have provided a clear framework for determining whether a particular exercise of ancillary authority is permissible. In the second edition of Digital Crossroads, published before the D.C. Circuit’s Verizon decision, telecommunications scholars Jonathan Nuechterlein and Phil Weiser opined that the scope of “ancillary authority has always been murky.”15 They also expressed concern that the legal issues involved in debates about questions such as the FCC’s authority with respect to Internet issues “can be mind-numbing in their scholastic complexity” and “are increasingly unhinged from the underlying economic and engineering realities that should be driving the policy debate.”16 Professor John Blevins, who wrote the most recent, comprehensive review of the scope of the FCC’s ancillary authority, has described the relevant Supreme Court cases as “to put it mildly, not a model of 9. United States v. Sw. Cable Co., 392 U.S. 157, 178 (1968). 10. Id. 11. See id. 12. Midwest Video II, 440 U.S. at 706. 13. Id. at 709. 14. See Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010); Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014). 15. JONATHAN NUECHTERLEIN & PHIL WEISER, DIGITAL CROSSROADS: TELECOMMUNICATIONS LAW AND POLICY IN THE INTERNET AGE 233 (2d ed. 2013) (internal quotations and citation omitted). 16. Id. at 230. 22 FEDERAL COMMUNICATIONS LAW JOURNAL Vol. 67 coherence.”17 While arguing for “a new theory of the FCC’s ancillary jurisdiction, arguing that it is best understood as an authority to promote market competition,”18 Blevins acknowledged that a case can be made that “there is simply no logic to the ancillary jurisdiction cases.”19 In 2010, Judge Tatel of the D.C. Circuit confronted this disjointed doctrine in Comcast v. FCC, in which his opinion for the court sought to reconcile all of the Supreme Court and D.C. Circuit ancillary authority decisions.20 More recently, Judge Tatel’s majority opinion in Verizon v. FCC illustrates how that standard is to be applied.21 Despite his Herculean effort to harmonize the earlier cases, the scope of the FCC’s ancillary authority remains murky and disconnected from economic and engineering realities. Disputes over the scope of the FCC’s ancillary authority are sure to arise again in varied and important contexts because, as the Supreme Court noted in 1943, the communications field is “dynamic.”22 Just as the Congress that enacted the Communications Act in 1934 did not foresee cable television or grasp the importance of broadcast networks,23 and the Congress that substantially amended the Communications Act in 1996 did not fully appreciate how important broadband Internet service would become,24 lawmakers have also surely overlooked emerging technologies and practices that will become important in the future. Under the law as it stands, whether the FCC may address such technologies will depend more on how complex and mind-numbingly scholastic legal issues are resolved than on whether particular regulations are warranted on the merits. This essay first reviews the statutory framework and the Supreme Court decisions governing the scope of the FCC’s ancillary authority. The essay then analyzes how Judge Tatel’s decisions in Comcast and Verizon have reshaped the scope of the FCC’s ancillary jurisdiction. Although Judge Tatel’s synthesis of the relevant cases has produced a test that is largely true to D.C. Circuit precedent, this test is unlikely to shift judicial results away from complex issues having little to do with real-world matters and toward the merits of the FCC’s actions as a matter of economic policy and engineering realities. 17. John Blevins, Jurisdiction as Competition Promotion: A Unified Theory of the FCC’s Ancillary Jurisdiction, 36 FLA. ST. U. L. REV. 585, 619 (2009). 18. Id. at 585. 19. Id. at 611. 20. See Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010). 21. Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014). 22. NBC v. United States, 319 U.S. 190, 219 (1943). 23. See id. 24. See Edward Wyatt, Communications Law to Be Reviewed, N.Y. TIMES, May, 25, 2010, at B2, available at http://www.nytimes.com/2010/05/25/technology/25broadband.html?_r=0 (noting that the 1996 Act “barely mention[s] the Internet”). Issue 1 SCOPE OF THE FCC’S ANCILLARY JURISDICTION 23 II. THE STATUTORY FRAMEWORK AND THE SUPREME COURT’S ANCILLARY AUTHORITY DECISIONS In its 1943 decision in NBC v. United States, the Supreme Court reviewed FCC regulations that comprehensively regulated the relationships between broadcast networks and broadcast stations.25 The issue of the FCC’s authority arose because the Communications Act of 1934 set forth no rules regarding broadcast networks,26 even though these networks had played an important role in broadcasting even prior to the Act’s enactment. As Tom Krattenmaker and Richard Metzger have explained, although section 303(i) of the Act empowers the FCC to regulate “stations engaged in chain broadcasting,” it does not apply to chain broadcasting itself—such as the operation of a broadcast network.27 Hence the Court soon faced a dispute concerning the source of the FCC’s authority over broadcast networks. As Justice Frankfurter, writing for the Court, acknowledged, “[t]rue enough, the Act does not explicitly say that the Commission shall have power to deal with network practices found inimical to the public interest.”28 Although the Court did not regard section 303(i) as resolving the issue,29 it emphasized that “the Act gave the Commission not niggardly but expansive powers.”30 Among the provisions of the Act the Court discussed was section 303(r),31 which gives the FCC authority to “make such rules and regulations and prescribe such restrictions and conditions, not inconsistent with law, as may be necessary to carry out the provisions of this” Act;32 and section 303(g), which directs the FCC to “generally encourage the larger and more effective use of radio in the public interest.”33 The Court described the public interest standard as “a criterion which ‘is as concrete as the complicated factors for judgment in such a field of delegated authority permit.’”34 The Court held that those powers were broad enough to comprehensively regulate 25. NBC, 319 U.S. at 196. 26. See generally Communications Act of 1934, ch. 652, 48 Stat. 1064 (codified at 47 U.S.C. §§ 151–162 (2012 & Supp. 2013)). 27. Tom Krattenmaker & Richard Metzger, FCC Regulatory Authority over Commercial Television Networks: The Role of Ancillary Jurisdiction, 77 NW. U. L. REV. 403, 448 (1982) (citing Communications Act § 303(i); 47 U.S.C. § 303(i) (2012) (emphasis added)). 28. NBC, 319 U.S. at 218–19. 29. Id. at 220. 30. Id. at 219. 31. Communications Act § 303(r) (codified at 47 U.S.C. §303(r) (2012)). 32. Section 303(r) is similar to section 4(i), the Act’s “necessary and proper” clause, but section 303(r) is in Title I rather than Title III. 33. Communications Act § 303(g) (codified at 47 U.S.C. § 303(g) (2012)). 34. NBC, 319 U.S. at 216 (quoting FCC v. Pottsville Broad. Co., 309 U.S. 134, 138 (1940)). 24 FEDERAL COMMUNICATIONS LAW JOURNAL Vol. 67 networks’ relationships with radio stations, notwithstanding the absence from the Act of a specific grant of authority to the FCC.35 In United States v. Southwestern Cable Co., the first case to speak of the FCC’s “ancillary” jurisdiction, the Court upheld the FCC’s authority to broadly regulate CATV—now known as cable television—even though the Communications Act did not address CATV, as Congress had not anticipated the development of cable TV in 1934.36 Justice John Marshall Harlan II emphasized the reach of section 2(a) of the Act, which gives the FCC authority over “‘all interstate and foreign communication by wire or radio.’”37 The Court rejected the argument that section 2(a) “does not independently confer regulatory authority upon the FCC, but instead merely prescribes the forms of communications to which the Act’s other provisions may separately be made applicable.”38 Rather, the Court held that “[n]othing in the language of § 152(a), in the surrounding language, or in the Act’s history or purposes limits the Commission’s authority to those activities and forms of communication that are specifically described by the Act’s other provisions.”39 The Court also invoked section 1 of the Act, which provides that the FCC “is required to endeavor to ‘make available . . . to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communication service.’”40 The Court quoted President Roosevelt’s message to Congress concerning the need for the Communications Act and the Senate Report accompanying the bill, stating that the FCC is “to serve as the ‘single Government agency’ with ‘unified jurisdiction’ and ‘regulatory power over all forms of electrical communication, whether by telephone, telegraph, cable, or radio.’ It was for this purpose given ‘broad authority.’”41 However, as already noted, while finding “no need . . . to determine in detail the limits of the Commission’s authority,” the Court added that “it is enough to emphasize that the authority which we recognize today under [Section 2(a)] is restricted to that reasonably ancillary to the effective performance of the Commission’s various responsibilities for the regulation of television broadcasting.”42 In Midwest Video I, decided in 1972, the Supreme Court upheld the FCC’s program origination rules, which required cable operators to produce local programming.43 Justice William J. Brennan, writing for the plurality, 35. NBC, 319 U.S. at 216–17. 36. United States v. Sw. Cable Co., 392 U.S. 157, 172 (1968). 37. Id. at 167 (quoting 47 U.S.C. § 152(a)). 38. Southwestern Cable, 392 U.S. at 171–72. 39. Id. at 172. 40. Id. at 167 (quoting 47 U.S.C. § 151). 41. Southwestern Cable, 392 U.S. at 167–68 & nn.25–28 (citations omitted). 42. Id. at 178. 43. United States v. Midwest Video Corp. (Midwest Video I), 406 U.S. 649, 673 (1972) (plurality opinion). Issue 1 SCOPE OF THE FCC’S ANCILLARY JURISDICTION 25 did not dispute the lack of explicit congressional authorization for the rules, but emphasized an FCC report that stated the program origination rule furthered “long-established regulatory goals in the field of television broadcasting by increasing the number of outlets for community self- expression.”44 Justice Brennan emphasized the breadth of the policy goals enunciated in sections 1 and 303(g) of the Act, thus reading Southwestern Cable as holding that sections 2(a) and 303(r) are sources of regulatory power, not merely policy statements.45 Justice William O. Douglas, writing for four dissenters, stated that “there is not the slightest clue in the Act that CATV carriers can be compulsorily converted into broadcasters.”46 He also noted that “origination requires new investment and new and different equipment, and an entirely different cast of personnel.”47 The dissenters concluded that upholding the program origination rule under the FCC’s ancillary authority “is a legislative measure so extreme that we should not find it interstitially authorized in the vague language of the Act.”48 Chief Justice Warren Burger cast the deciding vote in Midwest Video I.49 He acknowledged that “the Communications Act did not explicitly contemplate either CATV or the jurisdiction the Commission has now asserted.”50 But, he noted, the “statutory scheme plainly anticipated the need for comprehensive regulation as pervasive as the reach of the instrumentalities of broadcast,” adding that “[c]andor requires acknowledgment, for me at least, that the Commission’s position strains the outer limits of even the open-ended and pervasive jurisdiction that has evolved by decisions of the Commission and the courts.”51 The Chief Justice urged the national legislature to act “so that the basic policies are considered by Congress and not left entirely to the Commission and the courts.”52 In Midwest Video II, decided seven years later, the Supreme Court, for the first and only time, struck down an FCC rule on the ground that it exceeded the FCC’s ancillary authority.53 The rules at issue required cable operators to develop a twenty channel capacity and to permit access to certain channels by third parties. The Court did not overrule Midwest Video I. Instead, Justice Byron White writing for the six-member majority 44. Id. at 654 (quoting Amendment of Part 74, Subpart k, of the Comm’n’s Rules & Regulations Relative to Cmty. Antenna Television Sys., First Report & Order, FCC 69- 1170, 20 F.C.C.2d 201, 202, paras. 3–4 (1969)). 45. Midwest Video I, 406 U.S. at 669 n.28. 46. Id. at 680 (Douglas, J., dissenting). 47. Id. at 678. 48. Id. at 681. 49. Midwest Video I, 406 U.S. at 675 (Burger, C.J., concurring). 50. Id. 51. Id. at 675–76. 52. Id. 53. Midwest Video II, 440 U.S. 689 (1979). 26 FEDERAL COMMUNICATIONS LAW JOURNAL Vol. 67 distinguished the case on the grounds that “the origination rule did not abrogate the cable operators’ control over the composition of their programming, as do the access rules.”54 That distinction was critical, the Court concluded, because “the Commission has transferred control of the content of access cable channels from cable operators to members of the public . . . . Effectively the Commission has relegated cable systems, pro tanto, to a common carrier status.”55 The Court then held that this relegation was improper because section 3(h) prohibits the FCC from treating broadcasters as common carriers, concluding that this “limitation is not one having peculiar applicability to television broadcasting.”56 Given Congress’ “outright rejection of a broad right of public access on a common-carrier basis,” the Court held that the FCC “may not regulate cable systems as common carriers,” either.57 More generally, the Court explained that “[t]hough afforded wide latitude in its supervision over communication by wire, the Commission was not delegated unrestrained authority.”58 The Court did not dispute its earlier holding that section 2(a) grants the FCC broad jurisdiction over communication by wire and radio, but concluded that “without reference to the provisions of the Act directly governing broadcasting, the Commission’s jurisdiction under § 2(a) would be unbounded.”59 III. JUDGE TATEL’S SYNTHESIS OF THE D.C. CIRCUIT PRECEDENT A. Comcast v. FCC When the Comcast case reached the D.C. Circuit in 2010, Judge David Tatel, writing for a unanimous panel including Chief Judge David Sentelle and Senior Judge A. Raymond Randolph, described the principal issue before the court as whether the FCC has ancillary jurisdiction to regulate an Internet service provider’s network management practices.60 Judge Tatel described the test as turning on whether the FCC’s rules were “ancillary . . . to the effective performance of its statutorily mandated responsibilities,” concluding that the FCC had not adequately supported “its 54. Id. at 700. 55. Id. at 700–01. 56. Id. at 707. 57. Id. at 708–09. 58. Id. at 706. 59. Id. 60. Comcast Corp. v. FCC, 600 F.3d 642, 644 (D.C. Cir. 2010) (citing Am. Library Ass’n v. FCC, 406 F.3d 689, 692 (D.C. Cir. 2005)). Issue 1 SCOPE OF THE FCC’S ANCILLARY JURISDICTION 27 exercise of ancillary authority over Comcast’s network management practices.”61 In his opinion, Judge Tatel sought to harmonize the Supreme Court cases described above with the many D.C. Circuit ancillary jurisdiction cases that had been decided since Midwest Video II was handed down in 1979.62 This was a Herculean effort—but most similar to Hercules’ cleansing of the Augean stables. With respect to the Supreme Court cases, Judge Tatel read them as many prior D.C. Circuit decisions had, although not necessarily in the same way as the Court’s opinions were written. Judge Tatel dismissed NBC as a case in which “ancillary authority was . . . never addressed.”63 He essentially dismissed the reliance on congressional statements of policy in Southwestern Cable and Midwest Video I as well. Following the approach set out in National Ass’n of Regulatory Utility Commissioners v. FCC,64 Judge Tatel said that the FCC’s ancillary authority “is really incidental to, and contingent upon, specifically delegated powers under the Act”— emphasis by the D.C. Circuit—notwithstanding the frequent references to statutory provisions such as sections 1 and 4(i) in the Supreme Court’s decisions.65 Judge Tatel described “[t]he teaching of Southwestern Cable, Midwest Video I, Midwest Video II,” as interpreted by the D.C. Circuit in NARUC II, as being that “policy statements alone cannot provide the basis for the Commission’s exercise of ancillary authority.”66 Rather, the court invoked “the ‘axiomatic’ principle that ‘administrative agencies may [act] only pursuant to authority delegated to them by Congress.’”67 Judge Tatel thus read the D.C. Circuit authority as sustaining the exercise of ancillary authority only when the FCC “had linked the cited policies to express delegations of regulatory authority.”68 Judge Tatel acknowledged that Rural Telephone Coalition v. FCC was a case where the D.C. Circuit had approved FCC action without linking it to any express delegation of regulatory authority.69 In that case, which approved the FCC’s creation of the Universal Service Fund at a time when the Act made no mention of such a fund, the D.C. Circuit upheld the FCC’s creation of the Fund relying exclusively on sections 1 and 4(i).70 Judge Tatel acknowledged it was “[t]rue, as the Commission observes, [that] our 61. Comcast, 600 F.3d at 644. 62. Id. 63. Id. at 658. 64. Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC (NARUC II), 533 F.2d 601 (D.C. Cir. 1976). 65. Comcast 600 F.3d at 653 (quoting NARUC II, 533 F.2d at 612). 66. Comcast, 600 F.3d at 654. 67. Id. (citing Am. Library Ass’n v. FCC, 406 F.3d 689, 691 (D.C. Cir. 2005)). 68. Comcast, 600 F.3d at 655. 69. Id. at 656 (citing Rural Tel. Coalition v. FCC, 838 F.2d 1307 (D.C. Cir. 1988)). 70. Rural Telephone Coalition, 838 F.2d at 1315. 28 FEDERAL COMMUNICATIONS LAW JOURNAL Vol. 67 discussion of ancillary authority never cites Title II”—which governs common carriers—or any other provision outside Title I of the Act.71 But he explained the failure away: because “the Universal Service Fund was proposed in order to further the objective of making communication service available to all Americans at reasonable charges,” and the FCC has authority under Title II to ensure that interstate telephone rates are reasonable, then “any such citation would simply have restated the obvious.”72 Judge Tatel made clear that the Comcast decision—like Midwest Video II—reflected the court’s concern about setting a precedent whereby “the Commission’s [ancillary] jurisdiction . . . would be unbounded.”73 The Comcast court therefore rejected any reading of the statute that “would virtually free the Commission from its congressional tether.”74 The court also considered whether the network management rules at issue in Comcast were sufficiently linked to any of the more specific provisions outside of Title I of the Act cited by the FCC, but rejected each of the FCC’s contentions.75 B. Verizon v. FCC In Comcast, the court rejected the FCC’s attempt to link its action to section 706 of the Telecommunications Act of 1996,76 reasoning that the FCC had previously forsworn reliance on section 706 by construing it to be a policy statement rather than a grant of regulatory authority.77 In the Open Internet Order on review in Verizon v. FCC, the FCC reexamined its interpretation of section 706 and concluded that it was not a mere statement of policy, but rather granted the FCC explicit regulatory authority.78 The FCC then adopted the net neutrality rules at issue in Verizon, relying on section 706, among other provisions, as providing the link to regulatory authority outside Title I of the Act.79 Section 706 states that the FCC “shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans . . . 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 71. Comcast, 600 F.3d at 656. 72. Id. 73. Id. at 654 (quoting Midwest Video II, 440 U.S. 689, 706 (1979)). 74. Comcast, 600 F.3d at 655. 75. Id. at 658–61. 76. Telecommunications Act of 1996 § 706, Pub. L. No. 104-104, 110 Stat. 56 (codified at 47 U.S.C. § 1302 (2012)). 77. Comcast, 600 F.3d at 658–59 (citing Deployment of Wireline Servs. Offering Advanced Telecomms. Capability, Memorandum Opinion and Order and Notice of Proposed Rulemaking, FCC 98-188, 13 FCC Rcd. 24012, 24044–45, para. 69 (1998)). 78. See generally 2010 Open Internet Order, supra note 1. 79. Id.