Why Comcast Can’t Appeal — A Story of Prior Notice and Procedural Problems.
Why Comcast Can’t Appeal — A Story of Prior Notice and Procedural Problems.
Why Comcast Can’t Appeal — A Story of Prior Notice and Procedural Problems.

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    As the Comcast/BitTorrent Complaint appears to wind down to its final conclusion, the critical questions revolve around whether the FCC has authority to resolve the complaint at all. Comcast argues that the FCC never gave any warning it would “enforce the policy statement,” that it has no basis for doing so anyway, and that even if the FCC had any authority, it would need to have a rulemaking to make rules first before it could resolve any complaints. At the same time, in a last ditch effort to avoid what looks like a total win for Free Press and the other parties to the complaint, Comcast has quietly floated the idea of a settlement decree. As bait for a settlement, Comcast holds out the risk of going to court and having the D.C. Circuit — famed for its open hostility to FCC ancillary jurisdiction and industry regulation generally — find that the FCC has no authority whatsoever to regulate broadband practices. It also has attempted to intimate that deciding this by adjudication would somehow make it more difficult for a future FCC to actually establish rules.

    Unfortunately for Comcast, its arguments fail on several counts. Most notably, however, as my employer recently explained in this FCC filing, the Commission actually already addressed all the hard questions about jurisdiction, adjudication, and how the policy statement works two years ago — in a proceeding in which Comcast was a party. So not only did Comcast have explicit notice, it missed its chance to appeal the jurisdictional and procedural arguments. In addition, because Comcast has invoked Section 312(b) and 312(c) of the Communications Act, the FCC is likely to issue a “show cause” order rather than a final rule, although accompanied by a stay motion pending an evidentiary hearing. Unless Comcast is willing to go through the hearing it has itself demanded, it cannot appeal to the D.C. Circuit (or anyone else) because Comcast will have failed to have exhausted its administrative remedies. Mind you, the D.C. Circuit is quite capable of anything, but Comcast has certainly made it difficult for itself.

    Allow me to take each of these in turn:

    The Commission Resolved All the Hard Questions Two Years Ago When It Gave Comcast Explicit Notice It Had jurisdiction And Would Act on Complaints (you can read a somewhat longer version on my Wetmachine blog.)

    Almost exactly two years ago today, the FCC issued its order allowing Comcast and Time Warner to divide up the bankrupt Adelphia cable and swap systems between them. MAP, on behalf of Free Press and others, pressed the FCC to adopt a bunch of conditions designed to make sure Comcast and Time Warner did not block or degrade content. The FCC declined, siding with Comcast in the belief that emerging competition would keep Comcast from trying to mess with content or applications.

    But the FCC didn't stop there. It went on to say:

    If in the future evidence arises that any company is willfully blocking or degrading Internet content, affected parties may file a complaint with the Commission

    The Commission went on to explain that Internet Policy Statement “reflects the Commission's view that it has the jurisdiction necessary to ensure that providers of telecommunications for Internet access or Internet Protocol-enabled (IP-enabled) services are operated in a neutral manner,” and that while the policy statement did not “create rules,” it “contains principles against which the conduct of Comcast, Time Warner, and other broadband service providers can be measured.”

    Or, in other words, the FCC explicitly told Comcast and Free Press that while the FCC didn't think Free Press had made its case for any rules or merger conditions, it should come back later and file a complaint if it found evidence of Comcast or any other provider “willfully blocking or degrading” any internet content or applications. The FCC explicitly invoked the Madison River complaint as both the basis of its authority and as an example of the sort of complaint on which it would act.

    So the FCC already addressed Comcast's supposedly big gun argument two years ago. I will add that every Commissioner (except Copps) voted to approve the Order, so Commissioners McDowell and Tate (or Adelstein for that matter, although it hardly seems necessary to say so in his case) should not suddenly claim that they don't think the FCC has authority to address this issue by complaint. They both voted for an order that not only found that the FCC does have authority, it explicitly invited Free Press to come back later if it had evidence that any broadband access provider was “willfully blocking or degrading” any content or applications. Nor can Comcast claim this is some big, unfair surprise. The FCC told them explicitly that (a) we have authority to resolve complaints over blocking or degrading content or applications; (b) we invite anyone who has evidence you are doing this to file complaints a la Madison River; and, (c) the Internet Policy Statement does not “create rules,” but it tells you the kind of behavior we expect to see.

    Oh, and in case anyone thought the Commission didn't really mean it, it repeated the whole thing in the AT&T/BellSouth Merger Order. Once again, the Commission asserted it had jurisdiction, it would resolve individual complaints rather than set rules, and that the Policy Statement created a set of basic guidelines to help broadband providers stay out of trouble. As everyone other than McDowell (who had recused himself) voted for this Order, we can say that every single Commissioner has voted to find that the FCC has authority to adjudicate the Free Press Complaint.

    Why Can't Comcast Appeal Now?

    This creates problems for Comcast, which has counted on challenging the FCC's authority. But Comcast has lost more than its claim of surprise. Because Comcast was an actual participant in the adjudication in which the FCC announced it had jurisdiction and would review future complaints, it had an obligation to seek reconsideration or judicial review when the FCC announced its decision back in July 2005. AS the D.C. Circuit explained in a 1998 Case called Tribune Co. v. FCC, 133 F.3d 61 (D.C. Cir. 1998), even though the FCC granted Comcast's request for license transfers, Comcast had an obligation to challenge any aspect of the Order it didn't like by filing a Petition for Reconsideration with the FCC. By failing to do this, Comcast waived any right to complain later.

    OTOH, it turns out it is Free Press that has the right to complain if the FCC refuses to act, rather than Comcast that has the right to complain if the FCC does act. The FCC explicitly told Free Press — not once, but twice — that if they ever came up with evidence that Comcast or anyone else was “willfully blocking or degrading” any content or apps they should come back and file a formal complaint a la Madison River. So Free Press took the FCC at its word and did just that.

    Why Can't Comcast Still Appeal The Substance If It Loses?

    So Comcast has waived all its big gun arguments about authority and jurisdiction and notice. But it could still appeal the actual determination that its conduct amounted to “willfully blocking and degrading” in violation of the “neutral manner” in which the FCC has decreed the internet must operate. While a much tougher row to hoe, as such technical determinations are usually subject to considerable deference from the courts, Comcast could still hope that the pack of judicial activists and Federalist Society refugees on the court would pounce on the opportunity to reverse the FCC like a pack of feral dogs on a fresh t-bone steak (although even the D.C. Circuit is starting to look askance at Comcast and its insistence that the FCC “has it in for them” by enforcing the law). But Comcast has created its own stumbling block to review, which makes getting even this much in front of the D.C. Circuit difficult.

    Again, you can see more details on my Wetmachine blog here. Briefly, in an effort to throw sand in the gears and create a possible procedural argument later on, Comcast argued in one of its filings that the Commission can only issue a permanent “Cease and Desist” Order (which Comcast argues a ruling here would be) by following the procedures set out in Section 312(c). That requires the FCC to first issue a “show cause” order and give Comcast a hearing if it wants one — and give Comcast at least 30 days so Comcast can gather up the evidence it wants.

    The problem for Comcast is that all the Commission has to do is give it the process it has requested and convert the existing order into a “show cause” order. That prevents Comcast from going to the D.C. Circuit (or anywhere else) because it must still exhaust its administrative remedies. It also makes it easier for the Commission to prove its case factually, because the Commission only needs enough evidence to require that Comcast “show cause” why it should not face a permanent cease and desist order. Thus, Comcast's repeated insistence that Free Press needs to provide evidence about the inner workings of its network falls by the wayside because, since this is only a prelude to the factual hearing where the Commission will be able to compel the production of evidence, testimony under oath, etc., etc., it is enough that Free Press has provided enough evidence for a prima facie case against Comcast, i.e.,, enough to go to hearing.

    Meanwhile, the FCC can issue a temporary injunction requiring Comcast to cease its activity until Comcat receives the hearing it has requested (or, if Comcast opts to forgo a hearing, the injunction will become permanent). For those who doubt me here, I recommend reading United States v. Southwestern Cable, 392 U.S. 157 (1968). Here, where the Supreme Court announced the FCC had ancillary jurisdiction, the Commission faced a similar situation and a similar procedural posture. Faced with a complaint as to whether to apply its “distant signal” rule to cable systems (then not explicitly regulated under the Communications Act), the Commission decided — after briefs but before a hearing — to issue a temporary injunction against the cable operator to prevent it from importing distant signals.

    The Supreme Court, reversing the D.C. Court of Appeals, found that the FCC had authority — even when acting pursuant to ancillary authority — to issue such an order. As the Supreme Court explained:

    In these circumstances, we hold that the Commission's order limiting further expansion of respondents' service pending appropriate hearings did not exceed or abuse its authority under the Communications Act. And there is no claim that its procedure in this respect is in any way constitutionally infirm.

    So by invoking Section 312(b) and (c), Comcast has deprived itself of its other major avenue of an appeal. To get to court, Comcast would have to argue that the temporary injunction pending a hearing is either beyond the FCC's authority or arbitrary and capricious, the arguments foreclosed by the Supreme Court in a case which, conveniently, involved an adjudication in which the FCC announced ancillary authority over a previously unregulated service.

    To sum up, Comcast now finds itself trapped in a box of its own making. It failed to challenge the FCC's authority to resolve complaints about blocking or degrading applications when it had the chance two years ago, so it has forfeited its strongest arguments on process or authority. By invoking Section 312(b) and (c), it has created a well-nigh insuperable barrier to appealing the substance of the ruling, and lowered the bar for the FCC as a matter of factual determinations. And finally, a Supreme Court decision directly on point forecloses Comcast's argument that the FCC cannot issue a temporary injunction pending a section 312(c) hearing.

    Similarly, those Commissioners that would prefer to argue the authority question find themselves in a bind. At one time or another every single commissioner has voted for an assertion of jurisdiction and extended an invitation — specifically to Free Press, no less! — for parties with evidence that Comcast or other providers are willfully blocking or degrading content or applications should file Madison River-style complaints.

    I expect Comcast will file an answer to my ex parte in a day or so. Corporate giants do not go gently into that good night, or meekly accept that they have managed to paint themselves into legal corners. Still, given that the Commission gave Comcast a roadmap on how it would behave nearly two years ago today, I have trouble thinking how Comcast will try to argue its way out of this one.