The big news today is the Supreme Court’s ruling in FCC v. Fox Television Stations, Inc., wherein the Court reversed the Second Circuit’s determination that the FCC acted arbitrarily when it found that “fleeting expletives” uttered by Bono, Cher and Nichole Ritchie at various televised-live award ceremonies were “indecent.” It is not, however, the indecency/broadcst free speech issues that make this case a big [obscene gerrund] deal from my perspective. Rather, the case should have significant impact on the pending Comcast/BitTorrent case now pending in the DC Circuit.
To refresh everyone’s memory, Comcast blocked/degraded/”delayed” peer2peer traffic — notably BitTorrent uploads — as a way of reducing demand on its network. We filed a complaint at the FCC, arguing that this violated the FCC’s Internet Policy Statement and other official statements by the FCC that they would act on a “formal complaint” if a broadband access provider deliberately “blocked or degraded” any content or application. Comcast, for it’s part, argued that their practice of using reset packets to interrupt p2p uploads was a reasonable network management practice (an exception to the “Four Freedoms” of the Internet Policy Statement) and that the FCC was violating due process by trying to enforce a mere “policy statement” as if it were rules.
After some considerable back and forth, the FCC voted 3-2 in our favor and ordered Comcast to disclose its network management practices and to adopt network management/congestion management practices that were “application neutral.” Comcast complied, while simultaneously appealing to the D.C. Circuit. The D.C. Circuit has yet to set a briefing schedule.
So how does today’s decision impact all of this? Because the FCC had adopted its “fleeting expletives” policy via adjudication — the process at issue here in the Comcast/BitTorrent case. As a result, the Court spent a fair amount of time explaining the due process and arbitrary and capricious standard for reviewing FCC complaints. Most of this works out favorably to the FCC. Here are a few headlnes:
1) The General Standard of Review. The Court explicitly rejects certain D.C. Circuit doctrines that Comcast had relied upon — the doctrine that when an agency changes course, it has a greater burden to explain why it is changing direction (set forth in NAACP v. FCC, 682 F.2d 993, 998 (D.C. Cir. 1982)) and the doctrine that the level of First Amendment scrutiny impacts the scrutiny of the Administrative Record (as set forth in Time Warner LLP v. FCC, 240 F.3d 1126 (D.C. Cir. 2001)). Comcast had argued that the FCC’s decision to enforce the policy statement constituted a “change” from a “policy of restraint” similar to the one at issue in the indecency case (you can see Comcast’s filing here (starting at page 14), my reply here). Comcast had also argued that it deserved heightened First Amendment scrutiny. I expect both arguments to be repeated on appeal.
Today, the Surpreme Court made clear that the standard of review of the administrative record is always the same defferential standard regardless of whether the agency “reverses course” and no matter what the level of First Amendment scrutiny. “If the Commission’s action here was not arbitrary and capricious in the ordinary sense, it satisfies the Administrative Procedure Act’s ‘arbitrary or capricious’ standard; its lawfulness is a separate question to be addressed in a constitutional challenge.”
2) Due Process. Comcast’s central argument is that the FCC’s decision to announce its policy through a complaint and/or Petition for Declaratory Rulng violated due process. That is to say, how could the Commission announce that it would enforce something without an actual rule in place. For our part, we argued that this was like the indecency jurisdiction — where the FCC has a general principle (“nothing indecent”) which it refines by adjudications. Central to our argument was that the FCC did not propose to levy a fine or other administrative sanction (as that term is understood in Ad Law). This is why, we argued, the APA treats adjudications the same way as notice-and-comment rulemakings. They have the same effect (prohibitting conduct on a going forward basis), provided there is no retroactive penalty. Yes, Comcast had to stop doing what it had previously been doing, but they would have been in the same position in a notice-and-comment rulemaking.
Here, the Supreme Court agreed with the general principle rather emphatically. “[T]he agency’s decision not to impose any forfeiture or other sanction precludes any argument that it is arbitrarily punishing parties without notice of the potential conequences of their action.” I expect that Comcast will attempt to distinguish this on the grounds that indecency rules existed before the Fox case. The problem for Comcast is that the FCC actually went further in Fox than in Comcast/BitTorrent. In Comcast/BitTorrent, the FCC said “we are clarifying what specific behavior is permitted and what isn’t under general principles we announced previously.” in Fox the FCC actually reversed course and said “even if the fleeting expletives broadcast by Fox had been OK under the old rules, we are now saying that they violate our rules.” It is hard to argue that the FCC can reverse policy consistent with due process, but cannot announce/clarify policy consistent with due process.
3) Empircal Evidence, Deference. Finally, the Supreme Court also admonished the Second Circuit for failing to show proper deference to the FCC’s predictive judgment. In particular, the Court found fault in the insistence that the FCC “obtain the unobtainable” when it made predictive judgments on the impact of indecent speech on children. While not as directly addressing some of the legal issues as the first two, this has the potential to influence the D.C. Circuit in how it analyzes the FCC’s predictive judgment that permitting this kind of network management would be inconsistent with its responsibilties under the Communications Act.
As with all such analysis, it is important to remember that the cases are different and that the D.C. Circuit will apply these standards as it deems appropriate. Still, while not happy about the free speech aspects of today’s decision on broadcast speech, I do think it this is a helpful precedent for us in Comcast BitTorrent.