Thursday, June 24, 2010 - The Progress & Freedom Foundation Blog

The FCC Gets Real Schlick

Said FCC Chairman Julius Genachowski on May 6th, "The [Comcast] opinion therefore creates a serious problem that must be solved so that the Commission can implement important, commonsense broadband policies..."

I'll say. It's a problem, alright. Yet the chutzpah of the ensuing NOI process - in particular, the FCC asking whether its Net Neutrality workaround to reclassify the transmission element of broadband as a Title II service is worth doing / can be done - doesn't make it any better.

Throwing process concerns to the wind (again), FCC General Counsel Austin Schlick recently noted that the FCC may just jump straight to an Order right after the NOI instead of going the more predictable route of issuing a proposed rule first. Claiming that the skipped step is "entirely appropriate," Schlick says that if the FCC simply reclassifies broadband transmission, that exercise represents an "interpretive rule" as opposed to a "legislative rule." This allows the Agency to compress a lot of time and avoid a full rulemaking process.

The interpretive v. legislative rule distinction is no small detail, however. The latter has more process - good stuff to help fashion well-reasoned, sound and sustainable rules that affect all parties fairly and equitably.

To be sure, the Administrative Procedure Act (APA) provides an exemption to its process for "interpretive rules." But, in the present exercise, is it "entirely appropriate," as glibly stated by Schlick? More to the point, would reclassification be an interpretive rule, or would it be more like a legislative rule?

As I see it, I think it looks more like the latter.

Why Does This Matter

The APA was designed to ensure that agencies aren't creating "law" beyond their delegated authority from Congress. But, interpretive rules can allow agencies to go rogue on the APA, enabling them to get around the notice-and-comment process used to develop rules that have legal effect.

When employed properly, interpretive rules generally enable agencies to explain terms in legislative acts. The American Bar Association adds that they "merely [interpret] existing law or [remind] parties of duties under existing law." Essentially, they create no new legal obligations or duties.

Legislative rules are the flipside of this. To get there, agencies generally have to go through a proper rulemaking process because, in essence, it provides an important check on their "mini-Congress-like" activities (only Congress makes law; agencies make rules which effect the law).

In determining whether an interpretive rule is actually a legislative rule, courts examine whether an agency rule has the force of law, or is legally binding - rules which could support enforcement actions, grant benefits, or compel duties or obligations.

FCC "Interpretive Rule" Would Affect Legal Duties of Network Providers

Schlick suggests that the reclassification is a trivial, interpretive matter. It is anything but that. The FCC wants to take the intertwined, unregulated information services / broadband transmission package and split the baby. The two that were once one, now are to be separated as two, allowing the regulation of one - broadband transmission - as its own Title II service (wow, that's a mouthful).

Through the act of separating the Siamese twins, however, the FCC will have created a regulatory delta which goes well beyond mere interpretation of present duties for industry players. As it pertains to network providers, it severely curtails their bundle of rights. Since 2005, network providers could largely do what they wanted with their broadband facilities, responding to marketplace pressures as they saw fit with little intervention from the FCC.

It becomes a different story after reclassification (after all, why do it if it has no effect?).

The NOI hints at this in paragraph 100: "If the Commission decided to alter its current approach to Internet connectivity service, affected providers might need time to adjust to any new requirements" (emphasis added).

You bet they'll need some time to adjust. "Affected providers" - those that could freely respond to competition - will now have to do what's directed by the FCC. The new requirements will clearly change how they deal with all others in the Internet ecosystem.

The Commission Just Can't Wait

While I generally abhor the rulemaking process, I'll be honest here. In this instance, if the FCC moved this divisive issue cleanly through the whole rulemaking procedure - which I think it should - the process would allow for a full airing of the underlying matters, adding proper deliberation, and yes, time, to any Order that issues. NOI to NPRM to Rule.

But the Commission seems bent on a hasty mission. They do not appear to have the time for that to play out. Thus the "interpretive skip-step." They must sense that the Congressional deck will change come November, and this could change a lot for the Agency. Quite simply, the new oversight dynamics that might then ensue stand a good chance of impinging on current FCC practices, likely constraining what the Majority wants to accomplish vis-à-vis regulating broadband providers and the Internet.

I guess they figure that possession being nine-tenth's of the law, they ought to grab a rule while they can, and then let the courts figure it out from there. At least then they can go back to their Free Press base and say, "Heck, at least we tried. We would have been successful but for all those evil corporations (availing themselves of their evil rights and process)." And then all the Saul Alinsky tactics can go from there.

Sure - even if a proper, post-Comcast rulemaking happens, the courts will get involved. That said, however this mess gets prosecuted going forward, the FCC should at least walk its own talk and act with the same "regulatory predictability" it urges for the entities it regulates.

The Commission got into hot Net Neutrality water because it played fast and loose with process. General Counsel Schlick could avoid the "Comcast problem" by not skipping steps and moving everything through a predictably proper rulemaking.

posted by Mike Wendy @ 3:03 PM | Antitrust & Competition Policy , Broadband , Capitol Hill , Communications , Internet , Net Neutrality , PFF , The FCC