So what happens now? The FCC has not yet published the text of the Restoring Internet Freedom Order, but we don’t expect any significant changes between the draft item and the final item. Once the item is released, the Office of Management and Budget (OMB) must review the item and publish it in the Federal Register, which will trigger implementation dates (60 days from publication, except for items requiring further OMB approval) and start the clock for parties to challenge the order through an appeal or petition for reconsideration. Based on news reports and the trade press, we expect the following things to happen:

• Several parties will appeal the Order. As has happened after each of the open Internet orders, we expect parties will file federal appeals, and we expect the cases will be consolidated in a single appeal in the U.S. Court of Appeals for the D.C. Circuit. Several parties, including Public Knowledge, Free Press, Incompas, the National Hispanic Media Coalition, and New York Attorney General Eric Schneiderman on behalf of a multi-state lawsuit, are expected to file suit in the near term. The deadline for appeal—for all practical purposes—is ten days after publication in the Federal Register. As we discussed in our earlier blog post on this issue, appellate courts give substantial deference to agency decisions, so long as the ultimate decision addresses the relevant facts and arguments and the outcome is within the zone of reasonable interpretations of the statute. It is possible, therefore, that the court of appeals will uphold the 2017 rollback of the Title II classification without finding that the 2015 ruling was unreasonable.
• Democrats in Congress are working to nullify the Order. Democrats in Congress have already begun the process of trying to nullify the Order through a Congressional Review Act (CRA) resolution. While CRA resolutions are a powerful tool in the hands of the majority—as we saw with the rollback of the Broadband Privacy Order earlier this year—as the minority party, the Democrats are at a significant disadvantage. We don’t expect the CRA resolution to pass, or for the President to sign it if it did.
• Republicans in Congress will attempt to pass net neutrality legislation. We expect Republicans and BIAS providers to push for a bill that enshrines the basic bright-line net neutrality protections (i.e., blocking and throttling) in law, formally classifies BIAS as an information service, and otherwise prohibits the FCC from expanding its net neutrality authority and preempts the states from passing their own net neutrality protections. House Communications Subcommittee Chairman Marsha Blackburn of Tennessee introduced just such a bill on Wednesday (The Open Internet Preservation Act), raising significant concerns from Democrats and representatives of edge providers, such as the Internet Association, that the bill failed to address important protections, including a ban on paid prioritization.
• States will attempt to introduce their own net neutrality protections. In the wake of the Restoring Internet Freedom Order, several states announced initiatives to impose their own net neutrality protections on ISPs operating within their jurisdiction. For example, legislators in Washington state and California have introduced bills to reinstate net neutrality protections, although federal law may preempt such laws. Gov. Inslee of Washington State also suggested using the states’ power as a large purchaser of BIAS and telecommunications services to make net neutrality a condition of state contracting.
• The Federal Trade Commission and Department of Justice will fill the enforcement gap using general consumer protection and antitrust laws. As mentioned above, the Restoring Internet Freedom Order cedes most net neutrality enforcement authority to the FTC. In response to last week’s vote, FTC Acting Chairman Maureen Ohlhausen stated that the agency looks forward to serving as “the cop on the broadband beat.” However, as we’ve discussed in detail in earlier posts, the scope of the FTC’s jurisdiction is still undergoing review in the Ninth Circuit, where the entire court is reviewing (en banc) an earlier decision by the court that the “common carrier exemption” of Section 5 of the FTC Act exempts all activities of common carriers—e.g., telecommunications providers—from FTC jurisdiction (known as a “status-based exemption”). If the Ninth Circuit upholds the earlier panel decision, it would leave many ISPs outside the jurisdictional reach of the FTC and FCC, and would create a “circuit split” between the Ninth Circuit and the Second Circuit (which interprets the common carrier exemption as limited to the common carrier activities of common carriers). Then it would be up to the Supreme Court to resolve the split, unless Congress clarifies or eliminates the exemption. Nevertheless, last week the FTC and FCC forged ahead with a Memorandum of Understanding to coordinate and cooperate on net neutrality enforcement activities and consumer education efforts. Further, in the wake of the vote, the Antitrust Division of the Department of Justice noted that it “stands ready to vigilantly protect American consumers and free markets” from activities of ISPs that violate the antitrust laws. The House Antitrust Subcommittee recently held a hearing to explore the role of antitrust law in protecting consumers from net neutrality harms, which we covered in a separate post.

A Notice of Apparent Liability issued today by the Federal Communications Commission against AT&T for numerous alleged violations of microwave point-to-point license rules after a lengthy investigation by the Enforcement Bureau, but the two Republican Commissioners took the Commission and Bureau to task for failing to provide transparent factual bases and justifications for both the base violations and also the grounds for proposed upward adjustments. Commissioner Ajit Pai made a point of concurring and Commissioner Michael O’Reilly concurred in part and dissented in part.

The Notice described a multi-year investigation which ostensibly raises the question why the Commission only issued the Notice now, after more than 80% of the licenses that allegedly were operating in violation of the rules could no longer be the direct subject of forfeiture proceedings due to the applicable one-year statute of limitations. This matter had a humble beginning. In October 2011, the Wireless Telecommunications Bureau referred to the Enforcement Bureau the matter of a single AT&T microwave license in Puerto Rico that was operating on an unauthorized frequency. Following a Letter of Inquiry issued by the Bureau in 2012, settlement negotiations ensured regarding this and one other license. In September 2013, however, AT&T disclosed “inconsistencies between the licensed parameters and the constructed facilities of a large number of common carrier fixed point-to-point microwave licenses that it acquired from 2009 through 2012” from Centennial Communications Corporation and Verizon Wireless. The Notice notes that the Bureau then “expanded its investigation,” and that AT&T took almost another year to complete its investigation of 691 acquired licenses. 240 of these licenses, per AT&T, more than one-third of the total, required modifications to bring them into compliance with how they were, in fact, being operated – at least fifty of the modifications were major. The Notice is silent as to when most of these modifications were filed relative to the period of investigation, and notes that since January 30, 2014 -- the start of the relevant statute of limitations period for the NAL – the remaining 34 of these out-of-compliance licenses were either cancelled, the subject of major or minor modification filings, or yet require modifications to be filed.

The Notice sliced and diced in several ways the extent of AT&T’s alleged non-compliance revealed by the investigation to have occurred over the past four to five years, noting that 59 licenses were operated at variance from their authorized parameters in violation of Section 301 of the Communications Act of 1934, as amended, and FCC rules. Major modifications of microwave licenses in such cases include changes to antenna locations (> 5 seconds in latitude or longitude), increases in transmit antenna height by more than 3 meters, changes in transmit antenna polarization, and changes in transmit antenna azimuth by greater than 1 degree, for example. In addition, 190 of the licenses were the subject of untimely minor modifications, which can include changes to address less severe variances from licensed parameters or correcting incorrect license contact information.

But in the end, due to the timing of the NAL and the one-year statute of limitations, the Commission’s window of opportunity remained open only to impose a penalty with respect to 34 of the licenses. For 26 of those, the Commission found that AT&T had operated in an unauthorized fashion and imposed a base forfeiture amount of $104,000 (applying the base forfeiture amount of $4000 per violation). For the remaining eight licenses, faulting AT&T for failing to file timely notices regarding minor modifications, the Commission imposed another $24,000 (applying the $3,000 base amount per violation). The Notice then proceeded to propose a quintupling of the fine due to “the totality of the circumstances,” citing the extended period of AT&T’s unauthorized operation or failure to make minor modifications for the 240 licenses that were part of the investigation. The Commission criticized AT&T, “a sophisticated licensee” for its failure to conduct a “more timely technical review of newly acquired licenses” and delayed filing of corrections for up to five years, particularly in light of the number of acquired licenses. The Commission also justified the upward adjustment to $640,000 because AT&&T’s multi-billion dollar scale warranted a larger penalty to “ensure an effective deterrent.” No downward adjustment was merited, the Notice said, because of AT&T, as sophisticated licensee, was well aware of the rules that were allegedly violated. The Notice added that, regardless of a licensee’s sophistication, all Commission licensees are responsible for knowing the applicable regulatory obligations. In addition, the Commission found AT&T’s years-long delays in filing conforming major modification applications and minor modification notices to be inexcusable (even allowing for some transition issues after the acquisitions). The Commission underscored that, for all licensees, corrective measure taken after an investigation has begun “do not nullify or mitigate past violations.”

In separate statements, Commissioners Pai and Reilly took aim at the NAL, but in somewhat different ways. Both men criticized the Bureau for not providing certain details, such as which 34 licenses were the subject of the alleged violations within the statutory period or what specific apparent violations occurred with each of the licenses, rendering it difficult to know how “egregious” AT&T’s conduct actually was. Interestingly, Commission Pai noted that, depending upon the alleged violations regarding each of the licenses at issue, which he suggested the Commission itself had not yet pinned down, the base forfeiture ”might actually be too low.” At the same time, he was displeased with the lack of consideration given to the “voluntary” disclosure by AT&T of its conduct which led to the expansion of the investigation. Commissioner O’Reilly was even more hard hitting, hinting that the upward adjustment, about which he dissented, may largely be an unwarranted penalty for violations occurring outside the statutory period, although he acknowledged certain precedent to take such violations into account. He concluded that if the upward adjustment is based on “apparent" violations outside the one-year period, he has “deep concerns” since the Commission failed to act on those possible violations.

In short, the statements of the Republicans signal that there may be much more that will have to be brought to light before this proceeding is completed. Yet the Notice does not reveal the extent to which AT&T, in the course of the investigation, may have all but conceded that the violations occurred or, alternatively, is prepared to fight. AT&T has 30 days to respond to the alleged violations and the proposed forfeiture amounts. If AT&T does fight and this results in a final forfeiture order, this proceeding has the potential of forcing the Bureau and Commission to inject more transparency and method in how they set base forfeitures and make adjustments to those amounts in enforcement proceedings, including the extent to which alleged violations outside the statutory period will count.

In the Verizon Net Neutrality Order, the Court deferred to the FCC’s understanding of its authority with respect to Internet access providers, and affirmed the agency’s finding that Section 706 of the 1996 Telecommunications Act vests the FCC with certain authority to regulate how broadband providers treat edge providers of content and applications. Today’s announcement by Chairman Wheeler invited the Commission to build on this authority by proposing new enforceable rules “that will meet the court’s test for preventing improper blocking of and discrimination among Internet traffic.” Chairman Wheeler also said the Commission will consider how Section 706 can be used to further non-discrimination, including setting an enforceable legal standard, evaluating individual cases to determine whether that standard has been met, and identifying undesirable broadband provider behavior.

In newly-created Docket 14-28, the FCC solicits comments on the conduct of the Verizon Net Neutrality Order’s remand, specifically “what actions the Commission should take, consistent with our authority under section 706 and all other available sources of Commission authority, in light of the court’s decision.” The Public Notice sets no comments timeline, but states that comments filed within the next thirty days (March 21, 2014) “will be especially helpful.” And, while the Public Notice seeks comments on authority in addition to the Commission’s authority under Section 706, Chairman Wheeler’s statement today appears to reserve judgment on reclassifying Internet access service as a telecommunication service, stating that “the Commission has the ability to utilize it if warranted.”

Finally, in light of the new docket and proposed rules, Chairman Wheeler indicated that the Commission would forgo seeking further judicial review of the Verizon Net Neutrality Order, but the agency would hold “major internet service providers” to their commitments to honor the safeguards in the 2010 Open Internet Order during formulation of the new proposed rules.

Not surprisingly, in response to the opening of the new docket, the two Republican Commissioners registered their dismay in separate statements, each voicing a concern that Open Internet rules are a solution in search of a problem. Commissioner Ajit Pai voiced his concern that the Commission did not first seek guidance from Congress before proceeding and “the specter of Title II reclassification hovers ominously in the background.” Commissioner Michael O’Rielly expressed his fear that adoption of further net neutrality rules under authority of Section 706 could “be used not just to regulate broadband providers, but eventually edge providers.”