ORAL ARGUMENT NOT YET SCHEDULED BRIEF FOR APPELLEE/RESPONDENTS IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT NO. 11-1355 VERIZON ET AL., APPELLANTS/PETITIONERS, V. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, APPELLEE/RESPONDENTS. ON PETITIONS FOR REVIEW AND NOTICES OF APPEAL OF AN ORDER OF THE FEDERAL COMMUNICATIONS COMMISSION SEAN A. LEV GENERAL COUNSEL PETER KARANJIA DEPUTY GENERAL COUNSEL JACOB M. LEWIS ASSOCIATE GENERAL COUNSEL JOEL MARCUS COUNSEL WILLIAM J. BAER ASSISTANT ATTORNEY GENERAL CATHERINE G. O’SULLIVAN NICKOLAI G. LEVIN ATTORNEYS UNITED STATES DEPARTMENT OF JUSTICE WASHINGTON, D.C. 20530 FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 (202) 418-1740 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 1 of 122 C E R T I FI C A T E AS TO PARTIE S , RULIN G S , AND RELATE D CASES 1 . Parties . Appellant s/Petition e r s : Verizon MetroPCS Appellee/Responde n t s : Federal Communic a t i o n s Commissi o n United States of America Interve n o r s : ITTA Open Interne t Coalitio n Public Knowledg e Vonage All partie s that appear e d before the agency are listed in the briefs of appella n t s/petitio n e r s. 2 . Rulings under review . Preserving the Open Internet, Report and Order, 25 FCC Rcd 17905 (2010) (JA 1). 3 . Related cases. Verizon claims (Br. xii-xiii) that Cellco P’ship v. FCC, No. 11-1135, is related ; MetroPCS (Br. xiii) disagre e s. The Cellco c a s e presen t s some legal issues simi la r to those presen t e d here, but it invol v es entir e l y diffe r e n t factu a l and regulat o r y circums t a n c e s. The Court’ s decisi o n in either case does not contr o l the outco m e of the other one. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 2 of 122 i TABLE OF CONTENTS TABLE OF AUTHORITIES .......................................................................... iv GLOSSARY.................................................................................................... xi JURISDICTION................................................................................................1 QUESTIONS PR ESENTED.............................................................................2 STATUTES AND REGULATIONS ................................................................2 INTRODUCTION.............................................................................................2 COUNTERSTATEMENT ................................................................................5 1. Statutor y And Regul ator y Backgr ound. ............................................5 2. The Open Internet Proceeding. .......................................................10 3. Openness Drives Invest ment. ..........................................................11 4. Threats To Internet Ope nnes s And Inve stment. .............................12 5. The Open Intern et Rules. ................................................................15 a. Fixed Servi ce Rules. ...................................................................16 b. Mobile Wirele ss Rules. ...............................................................17 SUMMARY OF ARGUMENT ......................................................................18 STANDARD OF REVIEW ............................................................................22 ARGUMENT ..................................................................................................25 I. THE FCC REASONABLY INTERPRETED SECTION 706 AND TITLE III AS GRANTS OF DIRECT AUTHORITY TO IMPLEMENT THE OPEN INTERNET RULES. ............................25 A. The Commissi o n Reasonab l y Read Section 706 As A Grant Of Direct Authorit y And Properly Found That The Open Interne t Rules Woul d Carry Out The Statutor y Mandate. ..............................................................................................25 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 3 of 122 i i 1. The Commissi o n’s Reading Of Section 706 Is Consisten t With Its Plai n Languag e And Entitle d To Defer ence. .......................................................................................25 2. The Commission Reasonably Deter min ed That The Open Interne t Rules Woul d Advance The Statutory Mandate. ..........................................................................................37 a. Protect i n g Innovat i o n That Drives Demand For And Investme n t In Intern et Infrastru cture. .........................................37 b. Protect i n g A Stable Enviro nmen t For Investment. .....................41 c. Protecti n g Competit i o n In Teleco mmu n i c a t i o n s Markets........................................................................................42 B. The Commissi o n Reasonab l y In terpret e d Title III Of The Communic a t i o n s Act To Grant Authorit y For The Mobile Rules. ...................................................................................................43 II. THE FCC REASONABLY DETERMINED THAT THE OPEN INTERNET RULES FURTHER OTHER STATUTORY DUTIES...........................................................................48 A. Section 201(b) Of The Comm unic a t i o n s Act Grants Authority To Adopt Rules Protect i n g Telepho n e Competition. ........................................................................................50 B. Provisions In Titles VI A nd III Grant Authori t y To Protect Competit i o n In Video Markets. ..............................................53 1. Title VI. ...........................................................................................53 2. Title III. ...........................................................................................57 C. The Transpare n c y Rule Is Supporte d By Statutor y Reporti n g Respons ibilities. .................................................................59 III. THE COMMISSION PROPERLY DETERMINED THAT THE OPEN INTERNET RULES DO NOT TREAT BROADBAND PROVIDERS AS COMMON CARRIERS...................60 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 4 of 122 i i i IV. THE OPEN INTERNET RULES ARE CONSISTENT WITH THE FIRST AND FIFTH AMENDMENTS. ..............................68 A. First Ame ndment. ................................................................................68 B. Fifth Ame ndment. ...............................................................................75 V. THE OPEN INTERNET RULES ARE BASED ON SUBSTANTIAL EVIDENCE. ................................................................77 CONCLUSION ...............................................................................................79 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 5 of 122 i v TAB L E OF AUTH O R I T I E S CASES * Ad Hoc Telecommunications Users Committee v. FCC, 572 F.3d 903 (D.C. Cir. 2009)........................................ 24, 27, 36, 78 Alascom, Inc. v. FCC, 727 F.2d 1212 (D.C. Cir. 1984)...........................................................................................52 American Library Ass’n v. FCC, 406 F.3d 689 (D.C. Cir. 2005).................................................................................... 23, 49 Ass’n of Civilian Techs. v. FLRA, 22 F.3d 1150 (D.C. Cir. 1994)...........................................................................................26 AT&T Corp. v. FCC, 394 F.3d 933 (D.C . Cir. 2005) .....................................24 Auer v. Robbins, 519 U.S. 452 (1997) ............................................................24 Building Owners v. FCC, 254 F.3d 89 (2001) ................................................76 Cablevision Systems Corp. v. FCC, 570 F.3d 83 (2nd Cir. 2009) ............................................................................................76 * Cablevision Systems Corp. v. FCC, 649 F.3d 695 (D.C. Cir. 2011) ........................................................................ 25, 37, 54, 56 CBS v. Democratic National Committee, 412 U.S. 94 ( 1973) ......................................................................................44 CCIA v. FCC, 693 F.2d 198 (D.C. Ci r. 1982) ........................................... 6, 51 Cellco Partnership (No. 11- 1135) ..................................................................48 Celtronix Telemetry, Inc. v. FCC, 272 F.3d 585 (D.C. Cir. 2001)...................................................................................... 2, 44 Charter Communications, Inc., 393 F.3d 771 (8th Cir. 2005) .............................................................................................70 City of Ladue v. Gilleo, 512 U.S. 43 (1994) ...................................................75 * Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010) ................................................ 10, 27, 29, 30, 34, 49, 51, 59 Committee for Effective Cellular Rules v. FCC, 53 F.3d 1309 (D.C . Cir. 1995) .................................................................... 44 Consumer Electronics Ass’n v. FCC, 347 F.3d 291 (D.C. Cir. 2003)...........................................................................................24 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 6 of 122 v FCC v. Midwest Video Corp., 440 U.S. 689 (1979) .................... 63, 64, 65, 67 FCC v. NCCB, 436 U.S. 775 (1978) ...............................................................46 FCC v. Pottsville Broadcasting Co., 309 U.S. 134 (1 940) ................................................................... 5, 35, 44, 46 FCC v. Sanders Bros. Radio Station, 309 U.S. 470 (1 940) ....................................................................................46 FCC v. Storer Broadcasting Co., 351 U.S. 192 (1 956) ....................................................................................46 FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000) ....................................................................... 23, 35, 36 Full Value Advisors, LLC v. SEC, 633 F.3d 1101 (D.C. Cir. 2011)...........................................................................................77 Howard v. America Online Inc., 208 F.3d 741 (9th Cir. 2000) .............................................................................................61 Iowa Telecomms. Servs. v. Iowa Utils. Bd., 563 F.3d 743 (8th Cir. 2009)....................................................................... 66 J.J. Cassone Bakery, Inc. v. NLRB, 554 F.3d 1041 (D.C. Cir. 2009)...........................................................................................24 Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1 982) ....................................................................................76 MCI v. AT&T, 512 U.S. 218 (1994) ................................................................47 Mobile Relay Assocs. v. FCC, 457 F.3d 1 (D.C. Cir. 2006)...........................................................................................46 MPAA v. FCC, 309 F.3d 796 (D.C. Ci r. 2002) ........................................ 23, 47 NARUC v. FCC, 525 F.2d 630 (D.C. Ci r. 1976) ..................................... 61, 63 NARUC v. FCC, 533 F.2d 601 (D.C. Cir. 1976 ) ............................................23 Nat’l R.R. Passenger Corp. v. Boston & Maine Corp., 503 U.S. 407 (1992) .........................................................................23 National Telephone Co-Op Ass’n v. FCC, 563 F.3d 536 (D.C . Cir. 2009) .................................................................... 37 NBC v. United States, 319 U.S. 190 (1943) ................................. 33, 44, 45, 49 * NCTA v. Brand X Internet Services, 545 U.S. 967 (2005) ........................................................... 6, 7, 9, 23, 30, 34 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 7 of 122 v i Orloff v. FCC, 352 F.3d 415 (D.C. Cir. 20 03)................................................51 PBGC v. LTV Corp., 496 U.S. 633 (1990) ......................................................37 Railway Labor Executives’ Ass’n v. U.S. R.R. Retirement Bd., 749 F.2d 856 (D.C. Cir. 1984 ) ..........................................78 * Recording Indus. Ass’n v. Verizon Internet Servs., Inc., 351 F.3d 1229 (D.C. Cir. 2003 ) ..........................................................69 * Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S. 47 (2006) ..................................................... 70, 71, 73 Schurz Communications, Inc. v. FCC, 982 F.2d 1043 (7th Cir. 1992)..................................................................... 44 Secretary of Labor v. Federal Mine Safety and Health Review Comm’n, 111 F.3d 913 (D.C. Cir. 1997).................................................................................... 24, 40 Southwestern Bell Tel. Co. v. FCC, 19 F.3d 1475 (D.C. Cir. 1994)...........................................................................................63 Tax Analysts v. IRS, 350 F.3d 100 (D.C . Cir. 2003) .......................................37 Turner Broadcasting System Inc. v. FCC, 512 U.S. 622 (1994) ....................................................................... 72, 73, 74 United States v. Midwest Video Corp., 406 U.S. 649 (1 972) ....................................................................................51 * United States v. Southwestern Cable Co., 392 U.S. 157 (1968) ................................................. 5, 35, 49, 57, 58, 67, 77 * USTA v. FCC, 295 F.3d 1326 (D.C. Cir. 2002 ) ..............................................61 Vernal Enters., Inc. v. FCC, 355 F.3d 650 (D.C. Cir. 2004).............................................................................................1 Vitelco v. FCC, 198 F.3d 921 (D.C. Cir. 1999 ) ..............................................65 Whitman v. Am. Trucking Ass’ns, 531 U.S. 457 (2001) ....................................................................................36 Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172 (1985) ......................................................76 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 8 of 122 v i i ADMI NISTRATI VE DECI SIONS Amendment of Section 64.702 of the Commission's Rules and Regulations (“Second Computer Inquiry”), 77 FCC 2d 384 (198 0) .................................................................5 Appropriate Framework for Broadband Access to the Internet Over Wireline Facilities (“Internet Policy Statement”), 20 FCC Rcd 14, 986 (2005 )...........................................9 * Appropriate Framework for Broadband Access to the Internet Over Wireline Facilities (“Wireline Broadband Order”), 20 FCC Rcd 14,853 (2005).................................. 8, 36 Appropriate Regulatory Treatment for Broadband Access to the Internet Over Wireless Networks (“Wireless Broadband Order”), 22 FCC Rcd 5, 901 (2007 ) .............................................................................8 Broadband Industry Practices (“Broadband Industry Practices”), 22 FCC Rcd 7, 894 (2007 ) ........................................11 Comment Sought on Petition for Rulemaking to Establish Rules Governing Network Management Practices By Broadband Network Operators (“Network Management Practices”), 23 FCC Rcd 343 (2008). .............................................................................11 Deployment of Wireline Services Offering Advanced Telecommunications Capability (“Advanced Services Order”), 13 FCC Rcd 24,012 (1998) ...................................... 7, 29 Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation for Secretly Degrading Peer-To-Peer Applications (“Comcast Corp.”), 23 FCC Rcd 13,028 (2008)........................................10 Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities (“Cable Modem Order”), 17 FCC Rcd 4, 798 (2002) .............................................7, 8 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 9 of 122 v i i i Inquiry Concerning the Deployment of Advanced Telecommunications Capability To All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Purusant to Section 706 of the Telecommunications Act of 1996, As Amended by the Broadband Data Improvement Act (“Sixth Broadband Deployment Report”), 25 FCC Rcd 9,556 (2010) .................................................................... 27, 34 Madison River Communications, LLC and Affiliated Companies (“Madison River Communications”), 20 FCC Rcd 4,295 (2005) ...................................................................... 9, 50 Preserving the Open Internet Broadband Industry Practices (“Open Internet Notice”), 24 FCC Rcd 13, 064 (200 9) .........................................................................11 Service Rules for the 698-746, 747-762 and 777- 792 MHZ Bands (“700 MHz Order”), 22 FCC Rcd 15, 289 (200 7) ...........................................................................9 S T A T U T E S AND REGUL A T I O N S 17 U.S.C. § 512(a)...........................................................................................70 28 U.S.C. § 2344 .............................................................................................34 47 U.S.C. § 151 .................................................................................... 5, 31, 48 47 U.S.C. § 152 ...............................................................................................31 47 U.S.C. § 152( a)...................................................................................... 5, 34 47 U.S.C. § 153( 11) ................................................................................. 62, 68 47 U.S.C. § 153(24) ..........................................................................................6 47 U.S.C. § 153( 51) ................................................................................. 67, 68 47 U.S.C. § 153( 53) ................................................................................... 6, 62 47 U.S.C. § 154(i) ...........................................................................................48 47 U.S.C. § 154(k)...........................................................................................59 * 47 U.S.C. § 201(a).................................................................................... 21, 62 47 U.S.C. § 201(b)...........................................................................................50 47 U.S.C. § 218 ...............................................................................................59 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 10 of 122 i x * 47 U.S.C. § 230(b)(1)......................................................................................29 * 47 U.S.C. § 230(b)(2)........................................................................................7 * 47 U.S.C. § 230( b)(3)................................................................................. 7, 29 47 U.S.C. § 230( c)(1) ......................................................................................70 47 U.S.C. § 257 ...............................................................................................59 47 U.S.C. § 301 .......................................................................................... 5, 43 * 47 U.S.C. § 303(b) .............................................................................. 43, 46, 47 47 U.S.C. § 303( g).................................................................................... 43, 57 47 U.S.C. § 303(r) ...........................................................................................43 47 U.S.C. § 307( a)...................................................................................... 5, 43 47 U.S.C. § 309( j)(3)(A) .................................................................................45 47 U.S.C. § 309( j)(3)(B) .................................................................................45 47 U.S.C. § 315(b)...........................................................................................67 * 47 U.S.C. § 316 ........................................................................................ 44, 46 47 U.S.C. § 332(c) (2) ............................................................................... 67, 68 47 U.S.C. § 405(a)...........................................................................................60 47 U.S.C. § 536 ...............................................................................................55 47 U.S.C. § 536(a)...........................................................................................55 47 U.S.C. § 536( a)(3) ......................................................................................55 47 U.S.C. § 541(c)...........................................................................................68 47 U.S.C. § 548(b)...........................................................................................53 47 U.S.C. § 548( c)(1) ......................................................................................53 47 U.S.C. § 548( c)(2)(B).................................................................................67 * 47 U.S.C. § 1302 (a).................................................................. 6, 25, 26, 29, 32 * 47 U.S.C. § 1302(b ) ............................................................................... 6, 7, 27 47 U.S.C. § 1302(d)(1 )....................................................................................26 Pub. L. No. 104-66, Title III, § 3003, 109 Stat. 707 (Dec. 21, 1995) ............................................................................................59 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 11 of 122 x 47 C.F.R. § 8.3 ................................................................................................16 47 C.F.R. § 8.5(a) ............................................................................................16 47 C.F.R. § 8.5(b) ............................................................................................17 47 C.F.R. § 8.7 ................................................................................................16 47 C.F.R. § 8.11(a) ..........................................................................................16 O T H E R S * S. Rep. No. 104-23 (1995) ..............................................................................28 H.R.J. Res. 37, 112t h Cong. (2011) ................................................................37 http://compu t e r.howst u f f w o r k s.co m/intern e t/ basics/inter n et.htm .......................................................................................62 http://gigao m.com/2012/09/03/happy-birth d a y- skype-in-9-years-you-c hange d-tele co m/. ....................................................14 https://www.pwcmo neytree. co m/MTPublic/ns/mon eyt r e e/fileso u r c e/exhibi t s/11Q4MTPressrele a s e. pdf ................................................................................................................ 40 Stuart Minor Benjamin, Transmitting, Editing, And Communicating: Determining What “The Freedom Of Speech” Encompasses, 60 Duke L.J. 1673 (2 011)............................................................................71 Telecomm u n i c a t i o n o n s In dustr y Associat i o n, TIA’S 2012 ICT Market Review and Forecast 1-7 (2012).....................................40 * Verizon Comments, CC Docket No. 02-33 (filed May 3, 20 02) .......................................................................................... 8, 35 * Cases and other authorities principally relied upon are marked with asterisks. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 12 of 122 x i G L O S S A RY DSL Digital Subscrib e r Li ne Service. Broadban d Internet access via teleph o n e wires. Edge Provider An entity that ma k es conte n t, applic a t i o n s, or service s availab l e via the Inter n et. Includes web sites, blogs, twitte r feeds, applic a t i o n s, and other services. End User A subscr i b e r to broa db a n d Internet access servic e. VoIP Voice over Interne t Proto col. An Internet-based telepho n e service. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 13 of 122 IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT NO. 11-1355 VERIZON ET AL., APPELLANTS/PETITIONERS, V. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, APPELLEE/RESPONDENTS. ON PETITIONS FOR REVIEW AND NOTICES OF APPEAL OF AN ORDER OF THE FEDERAL COMMUNICATIONS COMMISSION BRIEF FOR APPELLEE/RESPONDENTS J U R I S D I CT I O N The Court has juris d ict i o n under 47 U.S.C. § 402(a) and 28 U.S.C. § 2342(1), but not under 47 U.S.C. § 402(b). Section 402(b) provid e s for appea l of order s in ten speci f i c categ o r i e s ; revie w of all other order s is under Section 402(a). The provis i o n s are “mutu a l l y exclu s i v e.” Vernal Enters., Inc. v. FCC, 355 F.3d 650, 655 (D.C. Cir. 2004). As demons t r a t e d in motio n s to dismi s s file d October 5 and Novemb er 7, 2011, S ection 402(b)(5), invoke d by petit i o n er s, appli e s only wh en licen s e s are modif i e d throu g h USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 14 of 122 2 individ u a l adjud i c a t i o n s. Celtronix Telemetry, Inc. v. FCC, 272 F.3d 585, 589 (D.C. Cir. 2001). Q U E S T I O N S PRESE N T E D In the order on review, Preserving the Open Internet, 25 FCC Rcd 17905 (2010) ( Order), the Commiss i o n promu l g a t e d high-level rule s to ensure that consum e r s retain the abilit y to acces s Interne t sites of their choosi n g. The questio n s presen t e d are: 1) Whether the Commissi o n prope r l y de te r mi n e d that it had statu t o r y autho r i ty to adopt the Open Interne t Rules; 2) Whether the Commi ssio n proper l y determi n e d that the Open Interne t Rules do not impos e commo n-carri a g e oblig a t i o n s on broad b a n d Interne t acce s s servi c e provi d e r s ; 3) Whether the rules are consi s t e n t with the First and Fifth Amendme n t s ; and 4) Whether the rules are suppo r t ed by substan t i a l evide n c e. S TATU T E S AND REGUL AT I O N S Pertinent mater i a l s are includ e d in the append i x. I N T R O D U C T I O N The Interne t was desig n e d and devel o p e d as an open netwo r k in which a user can go to any websi t e and us e any appli c a t i o n witho u t his acces s provid e r acting as a gateke e p e r. By th e same token, “edge provide r s ” – the USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 15 of 122 3 provide r s of conten t, applic a t i o n s, a nd servi c e s, such as Amazon, Twitter, Netflix, or the Wall Street Journal – may be reach e d by any end user witho u t permi s s i o n from the end user’s acces s provi d e r. Openness has been essen t i a l to the Inte rnet’s extrao r d i n a r y succes s. By keepin g barri e r s to entry low, openne s s enabl e s anyon e – from large corpo r a t i o n s, to start-up comp a n i e s, to colleg e studen t s – to create innova t i v e appli c a t i o n s. The resul t i n g explo s i o n of servi c e s has incre a s e d the Interne t’s useful n e s s in ways that have made it centr a l to moder n commu n i c a t i o n s. As more servi c e s and appli c a t i o n s have be come availab l e, especi al l y ones like video deli v e r y and cloud stor a g e that requi r e the trans mi s s i o n of volumi n o u s data, consum e r deman d for high-sp eed Interne t acces s has grown signif i c a n t l y. That deman d has drive n in ves t men t in Interne t netwo r k s that enable consu m e r s to use the latest innov a ti o n s. Prior to the Order un der revie w, howeve r, there wer e signif i c a n t threa t s to openne s s, and thus to the engine th at has drive n inves t m e n t in broad b an d facil i t i e s. Several broa d b a n d acces s provi d e r s had blocke d or degrad e d servi c e. Other provid e r s have the techno l o g i c a l capac i t y and the econom i c incen t i v e to engage in simila r acts. And with the major i t y of American s havin g only two wirel i n e broad b a n d choi c e s (many have only one), marke t disci p l i n e alone could not gua rant e e continu e d opennes s. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 16 of 122 4 The Commissi o n respo n d e d to these threa t s by adopt i n g modes t, high- level rules – in large measu r e conti n u a t i o n s of longst a n d i n g, bipart i s a n FCC policie s – that prese r v e Interne t ope nn e s s and its conco mi t a n t incen t i v e s for innova t i o n and invest m e n t. The rules prohi b i t block in g of acces s to lawfu l Interne t conte n t, preven t unrea s o n a b l e discr i mi n a t i o n (but not measu r e s requir e d to protec t or manage the netw o r k), and requi r e discl o s u r e of key infor ma t i o n. These sensi b l e rules of the road fu lfil l specif i c statut o r y direct i v e s to advan c e broad b a n d inves t m e n t and to ensure that wirele s s licen s e e s act in the public interest. They follow from decad e s of prior practi c e reg a rd i n g access to the Internet and its precur s o r s. The rules have been accept e d by acces s provi d e r s, edge provid e r s, invest o r s, and consum e r groups. Even Verizon has expre s s e d the belie f that it is “essen t i a l ” that the “Interne t re mai n s an unres t r i c t e d and open platf o r m, where people can access the lawful conten t, servic e s, and applic a t i o n s of their choice.” 1 Of the entire Internet indust r y, Ve rizon and MetroPCS alone chall e n g e the rules. As we show below, their challen g e s are baseles s. 1 Verizon Jan. 14, 2010, ex parte at 2 (JA 751). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 17 of 122 5 C O U N T E R S TAT E M E N T 1. St a t u t o r y And Regu l a t o r y Backg ro u n d . Congress vested the FCC with author i t y over “all inter s t a t e and forei g n commu n i c a t i o n by wire or radio.” 47 U.S.C. § 152(a). Congress inten d e d the Commissi o n to be the count r y’s “centr a l i z [ e d ] autho r i t y ” for commu n i c a t i o n s policy. 47 U.S.C. § 151; see United States v. Southwestern Cable Co., 392 U.S. 157, 168 (1968). Similarl y, to “main t a i n the contr o l of the United States over all the chann e l s of radio trans mi s s i o n,” 47 U.S.C. § 301, Congress allow e d the Commissi on to grant license s to use ra dio spect r u m insof a r as doing so would serve the “publi c conve n i e n c e, intere s t, or neces s i t y,” 47 U.S.C. § 307(a). The authori t y grante d by Congress was inten t i o n a l l y desig n e d to acco mmo d ate “the dynami c aspects” of commu n i c a t i o n s techn o l o g y. FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 138 (1940). The Commissi o n has long exerc i s e d autho r i t y over compu t e r-based netwo r k s to imple m e n t polic i e s gover n i n g access to the Internet and its precur s o r s. In the early 1980s , the Commission adopted the “ Computer ” regime to ensure that wireli n e co mmu n i c a t i o n s plat f o r ms were made avail a b l e on equal terms to all comp a n i e s seek i n g to provid e servic e. See Second Computer Inquiry, 77 FCC 2d 384 (1980), aff’d CCIA v. FCC, 693 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 18 of 122 6 F.2d 198 (D.C. Cir. 1982); see NCTA v. Brand X Internet Services, 545 U.S. 967, 976-977 (2005). In the Telecommu n i c a t i o n s Act of 1996, Congress grante d the FCC a centr a l role in makin g and imple m e n t i n g feder a l polic y regar d i n g the Interne t. Congress left to the Commiss i o n’s disc r e t i o n the funda m e n t a l polic y decis i o n wheth e r to classi f y broad b a n d acce ss as a “teleco m m u n i c a t i o n s service ” subjec t to the co mmon carrie r provis i o n s of Title II of the Communica t i o n s Act or as an “info r ma t i o n servi ce ” not subje c t to Title II. See 47 U.S.C. § 153(24), (53); Brand X, 545 U.S. at 976-977. Further mo r e, in Section 706(a) of the Telecommu n i c a t i o n s Act of 1996, Congress direc t e d the Commissi o n to “enco u r a g e the deplo y me n t on a reaso n a b l e and timel y basis of advan c e d teleco m mu n i c a t i o n s capabi l i t y to all American s ” by using “meas u r e s that promot e co mp et i t i o n in the local telec o m m u n i c a t i o n s marke t ” and “oth e r regul a t i n g metho d s that remov e barri e r s to infras t r u c t u r e inves t m e n t.” 47 U.S.C. § 1302(a) (h ereaf t e r, Section 706(a)). Section 706(b), moreov e r, direc t s the Commiss i o n to deter mi n e perio d i c a l l y if broad b a n d “is being depl oy e d to all Americans in a reasona b l e and timel y fashi o n.” 47 U.S.C. § 1302(b) (h ereinaf t e r Section 706(b)). If the Commissi on determi n e s that “reason a b l e and timely ” deplo y m e n t is not occurr i n g, the Commissi o n “ shall take immediate action to accelerat e USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 19 of 122 7 deploy me n t of such capab i l i t y by re mov i n g barri e r s to infra s t r u c t u r e inves t men t and by promo t i n g comp e t i t i o n in the telec o m mu n i c a t i o n s market.” Ibid. (emphas i s added). Congress also declar e d it to be “the policy of the United States” to promot e “tec h n o l o g i e s which maximi z e user contr o l over what infor m a t i o n is recei v ed ” ove r the Interne t, and to “pres e r v e the vibran t and co mp et i t i v e free market that pr esen t l y exists for the Internet.” 47 U.S.C. § 230(b)(2) & (3). In 1998, the Commissi o n decid e d that Interne t acces s servi c e provid e d over exist in g wires by telep h o n e comp a n i e s (digita l subsc r i b e r line or DSL service) includ e d eleme n t s of both telec o m m u n ic a t i o n s and infor ma t i o n services. Advanced Services Order, 13 FCC Rcd 24012, 24029-24031 (1998). DSL service thus was subj e c t to regul a t i o n under both the commo n carri e r provi s i o n s of Title II (to the degre e it invol v ed trans mi s s i o n of infor ma t i o n) and the Computer regime (to the degre e it invol v ed proce s s i n g of infor ma t i o n). In 2002, the Commissi o n class i f i e d cable modem service as exclu s i v e l y an “info r m a t i o n serv ic e ” under Title I of the Act. See Cable Modem Order, 17 FCC Rcd 4798 (2002), aff’d, Brand X, 545 U.S. 967. Ultimatel y, the Commissio n classi f i e d all reside n t i a l broad b a n d, includ i n g DSL, as exclu s i v e l y “info r mat i o n servi c e s.” Wireline Broadband Order, 20 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 20 of 122 8 FCC Rcd 14853 (2005); Wireless Broadband Order, 22 FCC Rcd 5901 (2007). The Commissi o n’s decisi o n s not to apply Title II common carri e r regula t i o n to wireli n e broadb a n d ac ces s servi c e were groun d ed in the under s t a n d i n g that it retai n e d autho r i t y to set polic y for broadb a n d Internet access servic e, inclu d i n g any necess a r y “cons u me r prote c t i o n, netwo r k relia b i l i t y, or nation a l secur i t y oblig a t i o n.” Wireline Broadband, 20 FCC Rcd at 14914; see also Cable Modem Order, 17 FCC Rcd at 4844 (expres s i n g concer n over the “threa t that subscr i b e r access to intern e t conten t or servic e could be block e d or impai r e d ”). Th en-Chairman Powell expla i n e d that the Cable Modem Order d i d not leave the Commissi o n “powe r l e s s to prote c t the public interes t,” but that the Commi ss i o n retai n e d “ampl e autho r i t y under Title I.” Id., 17 FCC Rcd at 4867. Veri zon expre s s e d the same unders t a n d i n g, informi n g the Commi ssi o n in the DSL reclass i f i c a t i o n proce e d i n g that clas s i f i c a t i o n of broa db a n d as an inform a t i o n servic e wo uld not precl u d e regul a t i o n, but would “allo w the Commissi o n to write on a clean regula t o r y slate” and to impose “those regu l a t i o n s that are truly neces s a r y in the public intere s t.” Verizon Comment s, CC Docket No. 02-33, at 18 (filed May 3, 2002) (http://apps.fcc.g ov/ecfs/documen t/v iew? i d = 6513190589) (“Verizon 02-33 Comments ”). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 21 of 122 9 Affirmin g the Commissi o n’s class i f i c a t i o n regime, the Supreme Court likew i s e deter mi n e d that, altho u g h un der the Commissi o n’s decisi o n s, “info r mat i o n-servi c e provi d e r s … ar e not subje c t to manda t o r y commo n- carrier reg u lati o n,” “the Commission remains free to impose special regul a t o r y dutie s on” br oad b a n d provi d e r s. Brand X, 545 U.S. at 976, 996. Under this regime, the Commissi o n c onsis t e n t l y has acted to prote c t Interne t openn e s s. On the same day it recl as s i f i e d DSL as an inform a t i o n service, the Commis sion unanimo u s l y issue d an Internet Policy Statement, 20 FCC Rcd 14986 (2005), explai n i n g that c onsu me r s of Interne t acces s servi c e are entit l e d, among other thing s, to “acce s s the lawfu l Interne t conte n t of their choic e ” and “run appli c a t i o n s and us e servic e s of their choice.” Id. at 14987- 14988. The Commissi o n likew i s e has condi t io n e d spect r u m licen s e s on the requir e m e n t that the licens e e mainta i n an “open platf o r m” simi l a r to Open Internet protec t i o n s. 700 MHz Order, 22 FCC Rcd 15289 (2007). The Commissio n has also used enfo rc e m e n t proce e d i n g s to protec t openn e s s. When Madison River, a te lep h o n e-based broad b a n d provi d e r, was allege d to have in ter f e r e d with co mp e t i n g Intern et-based voice services, the Commissi o n entere d into a consen t d ecree to stop the interf e r e n c e. Madison River Communications, 20 FCC Rcd 4295 (2005). When Comcast, a cable- based broad b a n d provi d e r, in terf e r e d with its subscr i b e r s’ use of a file- USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 22 of 122 10 sharin g appli c a t i o n, the Commissi o n d eclar e d that Comcast had violate d federa l Internet policy. Comcast Corp., 23 FCC Rcd 13028 (2008). In Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010), this Court found that the Comcast a d m i n i s t r a t i v e enforc e m e n t order had fai led to tie the agency’s author i t y to a specif i c st atu t o r y grant of power. Congress’s establ i s h m e n t of Interne t polic y in 47 U.S.C. § 230(b), the Court held, did not grant the agenc y autho r i t y to regul a t e Interne t acces s. 600 F.3d 652-658. The Court recog n i z e d that Section 706 of the 1996 Act could “ b e read to deleg a t e regul a t o r y autho r i t y,” but th e Commissi o n itsel f in “an earli e r, still- bindin g orde r ” had inter p r e t e d the statu t e other w i s e and “rema i n s bound by its earlie r conclu s i o n.” Id. at 658, 659. The Court d eclin e d to addres s sever a l other asser t e d bases for author i t y b ecaus e the Commissio n had raised them only in its brief on appea l. Id. at 660. 2 . The Open Internet P ro c e e d i n g . While the Comcast m a t t e r was pendi n g, th e Commissi o n began the proce e d i n g that resul t e d in the Open Internet rules. The Order was issued, however, after the Comcast d e c i s i o n, and it reste d on full publi c comme n t that did not exist in the Comcast matter and autho r i t i e s that the Commissi o n had not relie d on in that proce e d i n g. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 23 of 122 11 In 2007, the Commissi o n issue d a Notice of Inquiry seeki n g input on industr y practi c e s. Broadband Industry Practices, 22 FCC Rcd 7894 (2007). The follo w i n g year, the Commissi o n s ough t public comme n t on wheth e r it should propo s e openn e s s rules. Network Management Practices, 23 FCC Rcd 343 (2008). In 2009, the Commissi o n took “the next step” in its “long s t a n d i n g effor t ” to prese r v e In ternet openne s s, a nd soug h t comm e n t on propose d rules. Open Internet Notice, 24 FCC Rcd 13064, 13065 (2009). After recei v i n g more than 100,0 00 commen t s and condu c t i n g heari n g s and works h o p s, Order ¶2 (JA 2), the Commissi o n adopt e d high-level rules to effect u a t e the agency’s longst a n d i n g protec t i o n of Internet openne s s. The commen t s were unani mo u s that the Interne t shoul d remai n open. Id. ¶11 (JA 4-5). 3 . Openne s s Drive s Inves t m e n t . Citing econo mi c analy s i s and other record eviden c e, the Commissio n conclu d e d that Internet openn e s s has drive n innov a t i o n and inve s t men t in broadb a n d facili t i e s. Edge provi d e r s’ low barri e r s to entry under an open Interne t led to “new uses of the networ k,” in the form of “conte n t, applica t i o n s, service s, and device s ” av ail a b l e to all end users. Order ¶3 (JA 3). Each innov a t i o n, the Commiss i o n expl a i n e d, promot e s “incr e a s e d end- user dema n d for broad b a n d,” which dr ive s broad b a n d acces s provid e r s to USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 24 of 122 12 invest in “netw o r k impro v e m e n t s,” whic h in turn lead to “furth e r innov at i v e netwo r k uses,” thus creat i n g a deman d-dr ive n “virtuo u s circl e ” of innov a t i o n and invest m e n t. Id. ¶14 (JA 6-7). 4 . T h rea t s To Inter n e t Openn e s s And Inves t m e n t . There is, however, no techno l o g i c a l requi r e men t that the Interne t remai n open. “[S]ophist i c a t e d netw o r k manag e m e n t tools ” now give broadb a n d Interne t acces s provi d e r s the “abili t y to make fine-graine d disti n c t io n s in their handl i n g of netwo r k traff i c.” Order ¶31 (JA 19). In particu l a r, “deep packet inspec t i o n ” a llow s broad b a n d provid e r s to deter mi n e the conten t s (telepho n e call, video, etc. ) and sourc e of a partic u l a r packe t of Internet data. See Open Internet Notice ¶57 (JA 331). Using that infor ma t i o n, the provi d e r could slow, st op, or manip u l a t e data to affec t its deliv e r y. A servic e provid e r could preven t an end user from accessi n g Netflix, or the New York Times, or even this Court’s own websi t e, unles s the website paid the provide r to allow cu sto me r access. Similarl y, a servic e prov id e r coul d dema n d paym e n t from edge provi d er s for deliv e r y speed s that make viable data-intens i v e servic e s like video delive r y. Demand for payme n t from an edge pr ovid e r to allow end-user acces s would incre a s e barri e r s to entry of ne w servi c e s and would make it more diffi c u l t to attra c t the neces s a r y finan c i n g for start-up Interne t ventu r e s. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 25 of 122 13 Order ¶42 (JA 26-27). The nex t Google or Facebook might never begin. Uncertai n t y over the regul a t o r y e nvir o n me n t could also disco u r a g e inves t men t. Id. & n.137 (JA 26-27). Increas i n g barri e r s to entry and limit i n g end users’ abilit y to choos e which edge provi d e r s to patro n i z e, the Commissi o n expla i n e d, “would reduc e the rate of innova t i o n at the edge and, in turn, the likel y rate of impro v e m e n t s to networ k infra s t r u c t u r e.” Id. ¶14 (JA 7). The Commissio n identi f i e d three servi c e provi d e r incen t i v e s to interf e r e with custom e r choic e a nd “reduc e the curren t openn e s s of the Internet.” Order ¶21 (JA 11). First, some broad b a n d provi d er s ha ve an econo mi c incen t i v e “to block or otherw is e disadv a n t a g e specif i c e dge provi d e r s or class e s of edge provi d e r s … to benef i t [thei r ] own or affil i a t e d offer i n g s at the expens e of unaffi l i a t e d offeri n g s.” Ibid. For instance, cable comp a n i e s that also provi d e broad b a n d acces s servi c e have an incen t i v e to inter f e r e with their custo m e r s’ access to Internet-based video servic e s like Netflix. Ibid. (JA 11-12); id. ¶23 & n.60 (JA 14). Telephon e comp a n i e s such as Verizon have the same incent i v e to interf e r e with Internet-bas ed voice servic e s like Vonage or Skype USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 26 of 122 14 (which is repor t e d to accou n t for one -third of all long distanc e minute s 2). See id. ¶22 (JA 12). And compani e s that offe r a “tripl e-play” of voice, cable, and broad b a n d – such as Verizon’s Fi OS – would have the incent i v e to discr i mi n a t e again s t comp e t i n g provi d e r s of both video and voice servi c e s. See ibid. Second, altho u g h edge provi d er s “alre a d y pay for their own connec t i o n s to the Internet,” Order ¶24 (JA 15), an end-user’s provid e r could interf e r e with or block its custom e r s’ access to the edge provid e r unles s the edge provid e r paid anoth e r fee to that provi d e r, ibid. Because many edge provid e r s are small entrep r e n e u r s, they are especia l l y sensit i v e to such a barrie r to entry. Id. ¶26 (JA 16). Third, the Commissi o n deter mi n e d th at, if broad b a n d provid e r s could “prof i t a b ly charg e edge provid e r s for priorit i z e d access,” they would have “an incent i v e to degrad e or declin e to in crea s e the qualit y of the servic e they provid e to non-priori ti z e d traff i c.” Order ¶29 (JA 18). Moreover, the Commissi o n found that the threa t s could be “exace r b a t ed by … market power” exer c i s e d by acces s provi d e r s. As of Decemb er 2009, nearly 70 percen t of hou seh o l d s live in areas serve d by one 2 See h t t p ://gigao m.com/2012/09/03/happ y-birthd a y-skype-in-9-years-you- changed-teleco m/. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 27 of 122 15 or two provi d e r s of broad b a n d servi c e, and 20 percen t have only one optio n. Order ¶32 (JA 19-20). Provider incen t i v e s to reduc e openn e s s were not merely theore t i c a l ; the recor d showe d that broad b a n d provid e r s had acted to block or discr i mi n a t e again s t disfa v o r e d appli c a t i o n s. In additi o n to the Comcast and Madison River incid e n t s, Cox, anothe r major cable mode m provi d e r, admitt e d to block i n g file-sharin g appli c a t i o n s, a nd cable/telep h o n e comp a n y RCN settled litig a t i o n alleg i n g it had done the same thing. Order ¶36 & nn.108-111 (JA 22). AT&T admitte d l y restri c t e d its m obil e custo me r s’ abilit y to use vario u s comp e t i n g calli n g appli c a t i o n s, such as Skype, from their cell phone s. Ibid. & n.107 (JA 21-22). Indeed, Skype has “face d signi f i c a n t diffi c u l t y in gainin g access across wirele s s Internet connec t i o n s.” Id. ¶100 & n.308 (JA 56). And a mobil e broad b a n d provid e r wa s charg e d with block i n g credi t card proces s i n g servic e s that co mp et e d with affili a t e d operat i o n s. Id. ¶35 (JA 21). The Commission al so noted that “bro ad b a n d provid e r s’ terms of servic e commo n l y reser v e to the provi d e r sweep i n g rights to block, degra d e, or favor traffic.” Ibid. & nn.112-113 (JA 21). 5 . The Open Internet Rules. The Commissio n ad opte d three rules th at prese r v e a custo me r’s abilit y to “go where [he or she] wants on th e Interne t and commu n i c a t e with anyon e USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 28 of 122 16 else on line.” Order ¶43 (JA 27). The rules a pply to “broa d b a n d Interne t acces s servi c e,” whi ch the Commissi o n de fin e d as “a mass-marke t retai l servic e that provid e s the cap abi l i t y to tr ansmi t data to and receive data from all or subst a n t i a l l y all Interne t end point s.” Id. ¶44 (JA 28); 47 C.F.R. § 8.11(a). a . Fixed Servic e Rules . The rules apply differ e n t l y to fi xed and mobil e wirel e s s servi c e provid e r s ; we descr i b e the fixed serv i c e rule s firs t. T r a n s p a r e n c y . A broadb a n d prov id e r mu st “publ i c l y discl o s e accur a t e infor ma t i o n regar d i n g th e network manage m e n t practi c e s, performa n c e, and commer ci a l ter ms of its broadb a n d Internet access servi c e s.” Order ¶54 (JA 33); 47 C.F.R. § 8.3. A n t i - B l o c k i n g . Broadban d provi d e r s may not block custo m e r acces s to lawful conten t, applic a t i o n s, servic e s, or device s. Order ¶63 (JA 38); 47 C.F.R. § 8.5(a). The rule also preven t s “imp a i r i n g or degra d i n g parti c u l a r conte n t, applic a t i o n s, servic e s, or non- harmf u l devic e s so as to rende r them effect i v e l y unusab l e.” Ibid.; see Order ¶66 (JA 39). N o Unrea s o n a b l e Discr i m i n a t i o n . Broadban d provi d e r s “shal l not unreasonably discri mi n at e in trans mi t t i n g lawfu l netwo r k traff i c ” to their custom e r s. Order ¶68 (JA 40) (emphas i s added); 47 C.F.R. § 8.7. Network USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 29 of 122 17 practice s are reason a b l e if they are “t ail o r e d to achie v i n g a legiti m a t e netwo r k manag e m e n t purpo s e,” Order ¶82 (JA 48), such as “ensu r i n g netwo r k secur i t y and integ r i t y,” conte n d i n g w ith “traf f i c that is unwan t e d by end users ” (by imple m e n t i n g paren ta l contr o l s), or “reduc i n g or mi tiga t i n g the effect s of conges t i o n on the networ k.” Ibid. b . M o b i l e Wirele s s Rules. The Commissio n ap plie d even light e r rules to mobil e broad b a n d service ( e.g., v i a cellu l a r netwo r k s). Mobile broad b a n d is less matur e and more rapid l y evolv i n g than fixed serv i c e ; cons u me r s have more choi c e s for mobil e broad b a n d ; and provid e r s face “oper a t i o n a l const r a i n ts ” that fixed broad b a n d netwo r k s do not. Order ¶¶94-95 (JA 52-53). The Commissio n ap plie d to mobile provid e r s the same transp a r e n c y rule that applie s to fixed servi c e provi d e r s. Order ¶ 98 (JA 55). The Commissi o n prohi b i t e d mobil e Inte rn e t acces s provi d e r s from block i n g custo m e r acces s to lawfu l websi t e s or applic a t i o n s that co mp et e with the servi c e provi d e r s’ own voice or video telep h o n y servi c e s. Id. ¶99 (JA 55); 47 C.F.R. § 8.5(b). The Commiss i o n dec li n e d, howeve r, to apply to mobil e servi c e the rule forbid d i n g unreas o n a b l e discr i mi n a t i o n, decid i n g inste a d to rely on the anti-blocki n g rule while c onti n u i n g to “moni t o r the devel o p m e n t of the mobile broa dban d marketpl a c e.” Order ¶104 (JA 58). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 30 of 122 18 Verizon and MetroPCS (hereaf t e r “Verizon”) now ask that the Open Internet Rules be vacat ed. S U M M A RY OF ARGUM E N T The Interne t devel o p e d and flour i s h e d in an envir o n m e n t of openn e s s. That openne s s has been essent i a l to the creat i o n of servi c e s and appli c a t i o n s that have driven consu m e r deman d for and corr e s p o n d in g inve s t men t in broad b a n d acces s servi c e. Congress assig n e d the FCC – in which it veste d poli c y-makin g auth o r i t y over all commu n i c a t i o n by wire and radio – a centr a l role in protec t i n g Interne t openn e s s and the resul t i n g inves t me n t in broad b a n d facili t i e s. Congress recogn i z e d that c onsu m e r deman d for Interne t acces s, stimu l a t e d by vigor o u s innov a t i o n in serv ic e s availa b l e on the Internet, is the ultima t e drive r of such inves t me n t. Verizon’s attack on the Open Intern e t Rules rests on two funda m e n t a l – and fundam e n t a l l y flawe d – premi s e s . Verizon first chara c t e r i z e s the Commissi o n as havin g “conj u r e d a role” and “inser ted itsel f ” into broadb a n d. But that descr i p t i o n canno t be squar e d with multip l e indica t i o n s to the contra r y : the FCC’s congre s s i o n a l l y assig n e d role in commun i c a t i o n s, the histo r y of overs i g h t of compu t e r-based services, the ag ency’s discretion, confi r med by the Supreme Court, to cla ss i f y broa d b an d as an infor ma t i o n or telec o m m u n i c a t i o n s servi c e, the specif i c comma n d s of Section 706, the USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 31 of 122 19 Commiss i o n’s estab li s h e d autho r i t y to issue and mo dif y sp ectrum li censes in the publi c inter e s t, and the Commissi o n’ s longs t a n d i n g autho r i t y to craft poli c y for infor ma t i o n serv i c e s to furth e r its numer o u s othe r func t i o n s. Verizon’s secon d flawe d premi s e is that the Open Interne t Rules are a solut io n in searc h of a probl e m and serve no polic y purpo s e. In fact, the record before the Commissio n showed multi p l e incid e n t s of broad b a n d provi d e r s inter f e r i n g with their custo m e r s’ ability to use Internet servic e s, from file shari n g servi c e s to Interne t -based telep h o n y. The Commissi o n also ident i f i e d a trio of power f u l econo mi c incen t i v e s, ampli f i e d by incre a s i n g techn o l o g i c a l capab i l i t y and limite d co mp e t i t i o n among broad b a n d provi d e r s, to discr i mi n a t e among edge provi d e r s and to block custo me r acces s to Interne t sites of their choos i n g. Th at recor d itsel f justi f i e s Commissi o n action, but the law does not demand the Commissi o n to wait until harm has alread y occurr e d. The Open Internet Rules were a reasonab l e exer cise of the Commiss i o n’s discr e t i o n : 1. Sections 706(a) and (b) of the 1996 Act grant direc t autho r i t y to set polic y for broad b a n d Interne t access servic e. Both provis i o n s state that th e Commissi o n “shal l ” – the langu a g e of comma n d – take actio n to foste r incre a s e d inves t m e n t in broad b an d infra s t r u c t u r e. As the legisl a t i v e histor y USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 32 of 122 20 establi s h e s, Congress intend e d that co mma n d to be a “fail safe” sourc e of autho r i ty in addit i o n to other statu t o r y power s. 2. The Commissi o n’s plena r y aut ho r i t y over spect r u m licen s e s under Title III of the Communic a t i o n s Act se para t e l y autho r i z e s the mobil e broadb a n d rules. The Commis sion may issue a li cen s e only when doin g so will serve the public inter e s t, and it may modify licen s e s when the public interest requires. The Co mmis sio n also has author i t y to prescr i b e the nat u re of a licens e e’s servic e. The mobile Open Interne t Rules fall comf o r t a b l y withi n the terms of the statu t e. 3. The Commissi o n has autho r i t y to adopt these rules to furth e r its other statu t o r y respo n s i b i l i t i e s. Most partic u l a r l y, Section 201(b) of the Act gives the Commiss i o n power to ensur e that teleph o n e rates are just and reaso n a b l e. Rules that prote c t Inte rne t-based telep h o n e servi c e from being blocke d serve that mandat e by pres e r v i n g comp e t i t i o n in the telep h o n e marke t. Section 628 of the Act give s the Commiss i o n autho r ity to prote c t co mp et i t i o n in video distri b u t i o n. W ith Interne t-based video servi c e s beco mi n g an incre a s i n g l y impor t a n t as pec t of co mp e t i t i o n betwe e n cable syste ms and satel l i t e syste ms, blocki n g or degra d i n g of Interne t traff i c threa t e n s to evisc e r a t e Congress’s intent to prote c t comp e t i t i o n. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 33 of 122 21 Because the Commis sion rooted its au thori t y to promulg a t e the Open Interne t Rules in the speci f i c statu t o r y manda t e s of Sections 706(a) and (b), Title III, Section 201, Section 628, and others, this case is not simp ly (as Verizon sugge s t s) a rerun of Comcast. There, the Court reversed the Commissi o n’s assert i o n of enfor c e m e n t power becau s e the Commissi o n had not tied its autho r i t y to speci f i c subst a n t i v e statute s. Here, by contras t, the Commissi o n devel o p e d a co mpr e h e n s i v e admin i s t r a t i v e recor d demon s t r a t i n g that action was neces s a r y to car ry out the co mmand s of several specifi c statu t o r y manda t e s – none of which the Comcast p a n e l addre s s e d on its merit s. The Commissi o n doe s not rely here on any subst a n t iv e autho r i ty that Comcast r e j e c t e d on the merit s. 4. The Commissi o n reaso n a b l y concl u d e d that the Open Internet Rules do not treat broad b a n d provid e r s as co mm on carriers. Under th e Communica t i o n s Act, co mmon carri a g e is a servi c e provid e d “upon reaso n a b l e reque s t.” 47 U.S.C. § 201(a) . Edge provid e r s do not reques t servi c e from the end users’ broadb a n d provi d e r ; they have their own Interne t access provid e r. It is the end user that makes the relev a n t “requ e s t ” for servi c e, and even Verizon does not argue that the rules cr eate a co mmon- carriag e obligat i o n as to the en d user. Access to a websi t e on the Interne t USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 34 of 122 22 therefo r e does not resemb l e carri a g e of progra m m i n g on a cable syste m, which is initia t e d at the reques t of the progra m m e r and not the viewer. 5. The Open Internet Rules are c onsi s t e n t with the First and Fifth Amendmen t s. Interne t acces s provi d e r s do not engage in speech ; they transp o r t the speech of others, as a messe n g e r deliv e r s doc um e n t s conta i n i n g speech. Unlike cable syst ems, newspaper s, and other curat e d media, broadb a n d provi d e r s do not exerc i s e edito r i a l discr e t i o n. Verizon has defen d e d itsel f from lawsu i t s on that ve ry groun d. If the First Amendmen t applie s at all, the Open Internet Rule s are narro w l y tailo r e d to serve impor t a n t gover n me n t inter e s t s. The rules resul t in no taking wit ho u t just comp en s a t i o n becau s e, among other thing s, broadb a n d acces s provid e r s are co mpen s a t e d for the use of their networ k s. 6. Finally, the record suppo r t s the ru les, which are neithe r arbit r a r y nor caprici o u s. S TA N D A R D OF REVI E W 1. Review of the Commissi o n’s interp r e tat i o n of the statu t e s it admin i s t e r s is gover n e d by Chevron USA, Inc. v. NRDC, 467 U.S. 837 (1984). Under Chevron, i f the statut o r y langu a g e does not reveal the “unamb i g u o u s ly expre s s e d inten t of C ongress ” on the “preci s e quest i o n ” at USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 35 of 122 23 issue, 467 U.S. at 842-843, t h e Court mus t accept th e ag ency’s interpr e t a t i o n as long as it is reaso n a b l e and “is not in confli c t with the plain langu a g e of the statute,” Nat’l R.R. Passenger Corp. v. Boston & Maine Corp., 503 U.S. 407, 417 (1992). Deferenc e appli e s e qual l y when an agenc y chang e s its interp r e t a t i o n of a statut e. Brand X, 545 U.S. at 980-982. Chevron deferen c e applie s to an agen c y’s interp r e t a t i o n of its own jurisdi c t i o n. See Transmission Agency of N. California v. FERC, 495 F.3d 663, 673 (D.C. Cir. 2007); accord FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132-133 (2000). Verizon claims other w i s e (Br. 13-14), arguin g that American Library Ass’n v. FCC, 406 F.3d 689 (D.C. Cir. 2005), MPAA v. FCC, 309 F.3d 796 (D.C. Cir. 2002), and NARUC v. FCC, 533 F.2d 601 (D.C. Cir. 1976), establ i s h a st anda r d of de novo review. Those cases say no such thing. In American Library, the Court expli c i t l y “appl [ i e d ] the famil i a r sta nda r d s of review enun c i a t e d … in Chevron.” Id. at 698. The Court then deter m i n e d that the plain meani n g of the statute deprived the Commiss i o n of autho r it y. See Transmission Agency, 495 F.3d at 673. The same is true of MPAA, 309 F.3d at 801. In NARUC, which predat e d Chevron, t h e Court agree d that the FCC “is entitl e d to great defere n c e in the constr u c t i o n of its ow n statu t e,” but found “expl i c i t statu t o r y limit a t i o n s ” on FCC authori ty. 533 F.2d at 618. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 36 of 122 24 2. The Commissi o n’s inter p r e tat i o n of its own prior order s is “cont r o l l i n g ” unles s “p lain l y errone o u s.” Auer v. Robbins, 519 U.S. 452, 461 (1997). 3. In deter mi n i n g whet h e r the FC C acted arbit r a r i l y and capri c i o u s ly, the Court “pres u me [ s ] the valid i t y of the Commissi o n’s action and will not inter v e n e unles s the Commissi o n faile d to consid e r releva n t factor s or made a manife s t error in judgme n t.” Consumer Electronics Ass’n v. FCC, 347 F.3d 291, 300 (D.C. Cir. 2003). “That stand a r d is parti c u l a r l y defer e n t i a l in matter s … which implic a t e comp et i n g polic y choic e s … and predi c t i v e market judgme n t s.” Ad Hoc Telecommunications Users Committee v. FCC, 572 F.3d 903, 908 (D.C. Cir. 2009). 4. Challenges to the adequac y of the ad minist r a t i v e record are revie w e d for subst a n t i a l evidenc e. AT&T Corp. v. FCC, 394 F.3d 933, 936 (D.C. Cir. 2005). The ag ency’s concl u s i o n “may be suppo r t e d by subst a n t i a l eviden c e even though a plausi b l e altern a t i v e inter p r e t a t i o n of the eviden c e would suppo r t a contra r y view.” Secretary of Labor v. Federal Mine Safety and Health Review Comm’n, 111 F.3d 913, 918 (D.C. Cir. 1997) (intern a l quota t i o n s omitt e d). 5. Constitu t i o n a l claims are review e d de novo. J.J. Cassone Bakery, Inc. v. NLRB, 554 F.3d 1041, 1045 (D.C. Cir. 2009). The presen c e of a USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 37 of 122 25 constitu t i o n a l claim, howev er, does not affect the st and a r d of revie w of non- constit u t i o n a l issues. See Cablevision Systems Corp. v. FCC, 649 F.3d 695, 709 (D.C. Cir. 2011) (Court does not “aban d o n Chevron deference at the mere menti o n of a possi b l e consti t u t i o n a l proble m”). ARGUM ENT I. T H E FCC REASONA B LY IN TER P R E T E D SECTI O N 706 AND TITL E III AS GRANT S OF DIREC T AUTH O R I T Y TO IMPLEMEN T THE OPEN INTERNET RULES. A. T h e Commi s s i o n Reaso n a b ly Read Secti o n 706 As A Grant Of Dire c t Autho r i t y And Prope r l y Found That The Open Interne t Rules Wo uld Carry Out The Statu t o r y Manda t e . Consiste n t with the statu t o r y langu a g e, the Commissi o n reaso n a b l y const r u e d Section s 706(a) and 706(b) to grant the Commiss i o n auth o r ity for the Open Internet Rules. 1 . T h e Commi s s i o n ’s Readi n g Of Secti o n 706 Is Consi s t e n t With Its Plain Langu a g e And Entit l e d To Deferen ce . a. Section 706(a) of the Teleco mm u n i c a t i o n s Act of 1996 instr u c t s that the Commissi o n “shal l encou r a g e the deplo y m e n t on a reason a b l e and timel y basis of advan c e d telec o m mu n i c a t i o n s capab i l i t y to all American s ” by using “meas u r e s that promo t e comp e t i t i o n in the local telec o m mu n i c a t i o n s marke t ” and “oth e r regul a t i n g metho d s th at remove barri e r s to infras t r u c t u r e inves t men t.” 47 U.S.C. § 1302(a). “[A]dvanc e d telec o m mu n i c a t i o n s USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 38 of 122 26 capabil i t y ” includ e s broadb a n d Internet acces s. 47 U.S.C. § 1302(d)(1); see Order ¶117 & n.359 (JA 64). The Commiss i o n reaso n a b l y inter p r e t e d Section 706(a) as havin g “investe d the Commi ssion with the stat u t o r y autho r ity to carry out” its co mmands. Order ¶120 (JA 65); accord id. ¶122 (Section 706(a) “provi d e s ... a specific deleg at i o n of legisla t i v e author i t y to promot e the deplo y m e n t of advanc e d servic e s.”) (JA 67). 3 Congress’s use of the word “shal l ” “gene r a l l y indic a t e s a comma n d that admit s of no discr e t i o n,” Ass’n of Civilian Techs. v. FLRA, 22 F.3d 1150, 1153 (D.C. Cir. 1994), and thus requir e s the Commissi o n to take actio n. Here, Congress (1) told the Commissi o n that it “shall ” “enco u r a g e the deploy m e n t on a reaso n a b l e and timel y basis of advance d teleco m mu n i c a t i o n s capabi l i t y to all American s ” ; and (2) gave the Commissi o n the discr e t i o n to use its exper t judgme n t to use not only speci f i e d tools, but also “meas u r e s that promot e comp e t i t i o n in the local telec o m m u n i c a t i o n s marke t ” and “oth e r regul a t i n g metho d s that remov e barri e r s to infra s t r u c t u r e inves t m e n t.” 47 U.S.C. § 1302(a). 3 Verizon charac t e r i z e s the Commissi o n’s relia n c e on Section 706(a) in the Order a s resti n g on a theor y of “anci l l a r y ” author i t y, Br. 24, 25, 26, but the agency det er min e d that the stat u t e grante d direct author i t y. See Order ¶122 (JA 67). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 39 of 122 27 The Commissi o n’s interp r e t a t i o n of Section 706(a) is theref o r e consi s t e n t with the plain langu a g e of the statut e. Indeed, this Court has recogn i z e d that the statut e “at least ar gua b l y … deleg a t e s ” that autho r i ty to the FCC. Comcast, 600 F.3d at 658. Thus, at a minimu m, the agenc y has discr e t i o n under Chevron to interpr e t the provisi o n. See also Ad Hoc, 572 F.3d at 906-907 (the “gene r o u s phras i n g of § 706 means that the FCC possess e s signif i c a n t, albeit not unfet t e r e d, author i t y and discr e t i o n to settle on the best regula t o r y or deregu l a t o r y appro a c h to broadb a n d ”). b . Section 706(b) indepe n d e n t l y grant s autho r i t y for the Open Interne t Rules. Order ¶123 (JA 68). That provi s io n direc t s the Commiss i o n to deter mi n e perio d i c a l l y if broad b a n d “is being deploy e d to all Americans in a reaso n a b l e and timel y fash i o n. If th e Commissi o n’s deter mi n a t i o n is negat i v e it shall take immediate action to acceler a t e deploy m e n t of such capab i l i t y by remov i n g barr i e r s to infras t r u c t u r e inve s t m e n t and by promo t i n g comp e t i t i o n in the teleco m mu n i c a t i o n s market.” 47 U.S.C. § 1302(b) (emphas i s added). In July 2010, the Commissi o n concl u d e d in the Sixth Broadband Deployment Report, 25 FCC Rcd 9556, 9558 ¶¶2-3 (2 010), that “broa d b a n d deplo y m e n t to all American s is not reaso n a b l e and timel y,” thus trigg e r i n g Section 706(b) “as a conseq u e n c e of that concl u s i o n.” Order ¶123 (JA 68). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 40 of 122 28 In light of that findi n g, Section 706( b) author i z e s – indee d requi r e s – the Commiss i o n to accel e r a t e deplo y me n t of broad b a n d and promo t e co mp et i t i o n in teleco m m u n i c a t i o n s market s. The Open Interne t Rules serve both of those goals. Ibid. According l y, Secti on 706(b) indepe n d e n t l y authori z e s the Open Internet Rules. c . Legislat i v e histo r y buttr e s s es th e Commissi o n’s interp r e t a t i o n of Sections 706(a) and (b). The Senate Re port for the bill that conta i n e d Section 706 explain e d that it was “inte n d e d to ensur e that one of the prima r y objec t i v e s of [the 1996 Act] – to accele r a t e deploy m e n t of advanc e d teleco m m u n i c a t i o n s capabi l i t y – is achiev ed,” and that the FCC was empow e r e d to “prov id e the prope r incen t i v e s for infras t r u c t u r e invest m e n t.” S. Rep. No. 104-23 at 50 (1995); see Order ¶120 (JA 65). Section 706, the Senate Report stated, “is a necessary fail-safe to ensure ... acceler a t e [ d ] deplo y me n t ” of broad b a n d infra s t r u c t u r e. S. Rep. No. 104-23 at 51 (emphas i s added). “It would be odd,” the Commissi o n expla i n e d, for Congress to have descr i b e d Section 706 as a “fail safe” “if it confe r r e d no actual authori t y ” the agency did not alrea d y have. Order ¶120 (JA 66). The Commissi o n’s inter p r e t a t i o n of S ection 706 is also bolst e r e d by its furth e r a n c e of sever a l statu t o r y “poli c [ i e s ] of the United States”: to “promo t e the conti n u e d devel o p m e n t of the Inte rne t,” to promo t e “tech n o l o g i e s which USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 41 of 122 29 maxi mi z e user contr o l over what infor m a t i o n is recei v e d ” over the Interne t, and to “pres e r v e the vibra n t and co mp etit i v e free market that presently exists for the Interne t.” 47 U.S.C. § 230(b)(1), (3) (emphas i s added); see Order ¶ ¶71, 116 (JA 40, 63). Such polic y pr ov i s i o n s may “she d ligh t on … expre s s statu t o r y deleg a t i o n [ s ] of author i t y.” Comcast, 600 F.3d at 655. d . Verizon argue s (Br. 29-30) that Section 706(a) should be read to allow the FCC to use only autho r i ty alrea d y grant e d in other statu t o r y provis i o n s. That claim has no basis in – and is certa i n l y not manda t e d by – the statut o r y text and, as discus s e d, is con tra r y to legisl a t i v e histor y. Congress could have enact e d an expli c i t limit a t i o n in Section 706 of the kind that Verizon imagi n e s, or it could ha ve create d an exclus i v e list of the author i t i e s the Commissi o n co uld exerc i s e to furthe r the statut o r y goal. It did neithe r. Instead, Section 706(a) delega t e s to the Commissi o n the autho r i t y to use “othe r regul a t i n g metho d s that remov e barri e r s to infra s t r u c t u r e inve s t men t.” 47 U.S.C. § 1302 (a). By its terms, that comma n d is not tied to other “speci f i c a l l y-enumer a t e d ” regula t o r y mechan i s m s. 4 Verizon’s relian c e (Br. 28-29, 32) on the Advanced Services Order, 13 FCC Rcd 24012, as interp r e t e d in Comcast, 600 F.3d at 658-659, is 4 That Section 706(a) also refer s to state regul a t o r y commi s s i o n s is immat erial. See Br. 28. As this Court indicat e d in Comcast, sectio n 706 “conta i n s a direc t manda t e ” gr anti n g the FCC authori t y. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 42 of 122 30 misplac e d. There, the Court read the Advanced Services Order a s a holdi n g by the Commissi o n that Section 706(a) did not “cons t i t u t e an indep e n d e n t grant of autho r i t y.” The Court foun d that inter p r e t a t i o n “stil l bindi n g ” becaus e the Commis si o n had “never que st i o n e d, let alone overr u l e d it.” 600 F.3d at 658. In the Order, h o w e v e r, the Commiss i o n did just that. It held that if the Advanced Services Order c o u l d be inter p r e t e d as havin g decli n e d to read Section 706(a) as a grant of autho r ity, “we rejec t that readi n g of the statu t e,” for the reaso n s set forth in parag r a p h s 117-123 of the Order. Order n.370 (JA 65). That should end the matter. An agen cy’s readi n g of a statu t e is not “carve d in stone” ; rather, the agency “must consi d e r varyi n g inter p r e t a t i o n s and the wisdo m of its polic y on a conti n u i n g basis.” Chevron, 467 U.S. at 863-864. Chevron defere n c e thus appli e s even if the agen cy has previo u s l y inter p r e t e d the statu t e diffe r e n t l y. Brand X, 545 U.S. at 981-982. Here, the Commiss i o n expla i n e d why its in ter p r e t a t i o n was the prope r one. 5 See Order ¶¶117-123 (JA 64-68). 5 The Commission al so clarifie d that the Advanced Services Order d i d not reject Section 706 as a source of any a u t h o r i t y, but addres s e d only the quest i o n wheth e r Section 706 grante d the Commissi on authori t y to act “ through the mechanism of forbearance,” when a forbea r a n c e reque s t does not meet the standa r d s for forbea r a n c e set out in 47 U.S.C. § 160. Order ¶118 (JA 65) (emphas i s added). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 43 of 122 31 e. Nor is Verizon corre c t that, if Section 706 grants the Commissi o n autho r i ty for the Open Interne t Rules, “there is no stopp in g point to the autho r i ty [the Commiss i o n ] could a sser t over the Interne t.” Br. 31; see id. 26-27. The Commis sion recognized se ver a l inher e n t limit a t i o n s on its autho r i ty. First, the agenc y expla i n e d that its “mand a t e under S ection 706(a) must be read consi s t e n t ly with Section s 1 and 2 of the Act,” 47 U.S.C. §§ 151, 152, “which define the Commissio n’s subject matt er jurisd i c t i o n over ‘inter s t a t e and foreign co mmerc e in co mmuni c a t i o n s by wire and radio.’” Order ¶121 (JA 66). The same consi d e r a t i o n woul d apply to Section 706(b). Verizon wrong l y sugge s t s (Br. 26-27, 31) that th e Commiss i o n claims autho r i ty over edge provid e r s and others that utiliz e the servic e s of wire- and radio-based commu n i c a t i o n s provi d e r s. Unless an e dge provid e r rende r s servi c e s (such as voice service) that th emselv e s fall w ithi n the Act, the Commissi o n would have no more autho r it y over an edge provid e r than it has over the custo m e r s USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 44 of 122 32 of ordina r y telep h o n e servi c e, who also use fixed and mobil e commu n i c a t i o n s media. 6 Second, the Commissi o n reco gni z e d that the text of the statut e requir e s that any regul a t i o n under Section 706 (a) must “enco u r a g e the deplo y me n t on a reason a b l e and timel y basis of adva nce d teleco m m u n i c a t i o n s capabi l i t y to all American s.” 47 U.S.C. § 1302(a). Thus, to invoke Section 706(a), the Commissi o n must estab l i s h, as it did in detai l here, see p p. 37-43, infra, that its regula t o r y action s will enco ur a g e depl o y me n t of broa db a n d facili t i e s. Likewise, to act under Section 706(b) , the Commissi o n must find that broad b a n d is not being deplo y e d in a “reaso n a b l e and timel y ” way. Third, as releva n t here, Section 706(a) permit s the FCC to take only two categ o r i e s of actio n : “meas u r e s that promot e comp e t i t i o n in the local telec o m m u n i c a t i o n s marke t ” and “oth e r regul a t i n g metho d s that remov e barri e r s to infras t r u c t u r e inves t m e n t.” Order ¶121 (JA 66). Section 706(b) is likew i s e limit e d to simil a r meas u r e s. 47 U.S.C. § 1302(b). 6 In its Statemen t of the Case, Verizon sugges t s that the Commi ssi o n “expr e s s l y reser v e d the right to regula t e the prices that broadb a n d provi d er s charg e their own end-users,” Br. 9, citing Order n.381 (JA 67). The footno t e cites the price regul a t i o n provi s i o n of S ection 706 to illust r a t e that Congress did not autho r i z e only dereg u l a t i o n. The Commissi o n said nothi n g about a “right ” to regul a t e end-user prici n g. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 45 of 122 33 Section 706 of the 1996 Act thus is less open-ended than secti o n s of the Communic a t i o n s Act that have been uphel d again s t legal chall e n g e. For insta n c e, 47 U.S.C. § 201(b) author i z e s the FCC to ensure “just” and “reaso n a b l e ” common carrie r rates a nd prac t i c e s, and Title III allows regul a t i o n of wirele s s servi c e s in the “publi c inter e s t.” See, e.g., NBC v. United States, 319 U.S. 190, 216 (1943) (public inter e s t stand a r d is “as concret e as the co mp lic a t e d factors for judgme n t in such a field of deleg a t e d autho r i t y permi t ”); Order ¶122 (JA 67). Indeed, in addit io n to the limi t s discu s s e d above, Section 706(a) also contai n s the same public-intere s t limit a t i o n s that apply to the FCC's grant of Title III licens e s. See id. ¶121 (JA 66). f. Verizon admit s that Section 706(b) grants the FCC some autho r it y, but conte n d s that the grant of autho r it y is limit ed to “geogr a p h i c a l areas that are not serve d by any provid e r ” of broad b a n d servic e. Br. 33. But the statute conta i n s no such limita t i o n, and Veriz on identi f i e s none. The refere n c e to “geogr a p h i c a l areas ” on which Veriz on relie s comes from Section 706(c), which does not limit 706(b), but merel y speci f i e s that the Commissi o n is oblig a t e d to set forth a list of unserv e d geogra p h i c a l areas. Verizon also fleet i n g l y chall e n g e s (Br. 33) the FCC’s 2010 finding that broad b a n d was not being timel y deplo y e d, which trigg e r e d the agenc y’s USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 46 of 122 34 Section 706(b) author i t y. Sixth Broadband Report, 25 FCC Rcd at 9558. That two-year-old decisi o n is not subject to review here, see 28 U.S.C. § 2344 (60-day perio d for revie w) , a n d Verizon cites no prece d e n t requi r i n g the Commissi o n to reopen that issue now. g . At bottom, Verizon’s argume n t rests on the sweep i n g asser t i o n that Congres s fence d Interne t acces s off fro m FCC policym a k i n g and thus that the Commiss i o n’s readin g of Section 706 (and other provi s io n s that grant autho r i ty) depart s from that estab l i s h e d direc t i v e. See Br. 2, 23. That argume n t is simp l y wrong. The Act grants the FCC undispu t ed subje c t matte r juris d i c t i o n over “all inter s t a t e and forei g n commu n i c a t i o n by wire or radio.” 47 U.S.C. § 152(a). When Congr es s enact e d the 1996 Act, moreov e r, it did so again s t the backd r o p of the FCC’s longstan d i n g Computer regime. See p p. 5-6, supra. In the 1996 Act, Congress di d not strip the FCC of that autho r i ty, but left to the Commissi o n’s discr e t i o n the decis i o n wheth e r broad b a n d acces s shoul d be regul a t e d as a Title II teleco m mu n i c a t i o n s servi c e or a Title I informa t i o n servi c e. See Brand X, 545 U.S. at 976-977. And, in additi o n to Section 706, Congre ss enact e d Section 230(b), which sets forth polici e s – inclu d i n g consu m e r s’ c ontro l over the Interne t conte n t they access – to guide the agency’s exer c i s e of its “stat u t o r i l y manda t e d respon s i b i l i t y.” Comcast, 600 F.3d at 661. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 47 of 122 35 In its commen t s to the Commi ssi o n durin g the rulema k i n g proce e d i n g that conside r e d wh ether to clas sif y wireli n e broadb a n d Internet access as a Title I inform a t i o n servi c e, Verizon took a very diffe r e n t posit i o n. It conte n d e d then that “[r] e g u l a t i n g broa d b a n d under Title I does not necessarily mean completely deregulating broadband facilities and services; it means apply in g regul a t i o n s tailo r e d to suit the needs of the broad b a n d marke t.” Verizon 02-33 Comments a t 42 (emphasi s added). Verizon may believ e that these partic u l a r rules are not “suit [ e d ]” to “the needs of the broad b a n d marke t,” but that sec on d-guess e s only the agenc y’s polic y judgme n t, not its statu t o r y autho r i t y. Verizon’s relian c e (Br. 12, 22, 23, 24) on Brown & Williamson, 529 U.S. 120, is mispla c e d. Contrary to Verizon’s argum e n t, “commo n sense,” id. 133, suggest s that the federa l agency with “unif i ed juris d i c t i o n ” over “all forms of elect r i c a l commu n i c a t i o n,” Southwestern Cable, 392 U.S. at 168, and with the abili t y to estab l i s h po lic i e s to accom m o d a t e “the dynami c aspec t s ” of commu n i c a t i o n s techn o lo g y, Pottsville Broadcasting, 309 U.S. at 138, has the author i t y to act to preser v e the key attri b u t e s of the most sign if i c a n t medi u m of commu n i c a t i o n toda y. As discus s e d, the text and legisl a t i v e histo r y of the releva n t stat u t e s and the regul a t o r y backd r o p again s t which Congress acted confi r m that conclus i o n. Unlike the FDA in Brown & USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 48 of 122 36 Williamson, the FCC has never “disa v o w e d ” its autho r i t y, id. 125, o v e r Interne t acces s, but has conti n u o u s l y exer c i s e d that autho r i ty since the earli e s t days of the Internet. See Wireline Broadband Order, 20 FCC Rcd at 14914; pp. 5-9, supra. And unlike with tobacco, Ve rizon canno t show here that “Congress has direc t l y spoke n to the issue here and preclu d e d the [FCC’s] jurisd i c t i o n to regul a t e ” broad b a n d In terne t acces s servi c e throu g h other statu t e s. 529 U.S. at 133. Verizon is simil a r l y wrong to asser t that Commiss i o n autho r ity under Section 706 (as well as Title III and othe r provi s i o n s discu s s e d below), would resul t in Congress’s havin g “hid [ d e n ] eleph a n t s in mouse h o l e s.” Br. 23, quotin g Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468 (2001). Section 706 plain ly envis i o n s an FCC role in broad b a n d policy, see Ad Hoc, 572 F.3d at 907, and Section 706(b) comman d s th e Commissi o n to act immed i a t e l y to enhan c e broad b a n d deplo y me n t and comp e t i t i o n. Congr ess descr i b e d Section 706 as a “fail safe” provi s io n to ensu re the FCC’s abil ity to promote broad b a n d deplo y me n t. There is not hin g trivi a l or obscu r e about such explic i t statut o r y comman d s. h. Finally, Verizon is incorr e c t in cl aimi n g that congr e s s i o n a l inact i o n on legis l a t i o n grant in g the FCC specifi c autho r it y to adopt Open Interne t Rules “co n fir m s that the Commission lack s author i t y to promul g a t e ” rules. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 49 of 122 37 Br. 23. Such “subse q u e n t legisl a t i v e histo r y ” is “an unrel i a b l e guide to legisla t i v e intent,” Tax Analysts v. IRS, 350 F.3d 100, 104 (D.C. Cir. 2003), partic u l a r l y when it conce r n s “pro p o s a l s that do not become law,” PBGC v. LTV Corp., 496 U.S. 633, 650 (1990) (citati o n s omitt e d). In any event, the subse q u e n t legis l a t i v e histo r y is mixe d, as Congres s also faile d to pass a resol u t i o n that would have struc k down the Open Internet Rules. See H.R.J. Res. 37, 112th Cong. (2011). 2 . T h e Commi s s i o n Reaso n a b ly Deter m i n e d That The Open Intern e t Rul e s Would Advanc e The Statut o r y Manda t e . Determin i n g how best to imple m e n t the mandat e of Section 706 is a quintess e n t i a l exercis e of the FCC’ s discre t i o n and exper t i s e to make predi c t i v e judgme n t s. This Court ha s recogn i z e d the “the substa n t i a l defer e n c e ” it gives to such judgme n t s, Cablevision, 649 F.3d at 716, and parti c u l a r l y the high degre e of defer e n c e it accor d s to predi c t io n s about the “like l y econo mi c effec t s of a rule,” National Telephone Co-Op Ass’n v. FCC, 563 F.3d 536, 541 (D.C. Cir. 2009). a . P ro t e c t i n g Innov a t io n That Drive s Deman d For And Inves t m e n t In Inter n e t Infra s t r u c t u re . As the Commission explain e d, the Ru les will encou r a g e and accele r a t e depl o y me n t of broad b a n d faci l i t i e s thro u g h the virtuo u s circl e, a concep t ackno w l e d g e d by numero u s comme n t e r s, includ i n g Verizon. The value of USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 50 of 122 38 the Interne t to users lies in the conten t, servic e s, and applic a t i o n s it makes availa b l e. Continued i nnov a t i o n in servi c e s depen d s on low barri e r s to entry and the as suran c e that users wi ll be able to reach ed ge provide r s. The Open Internet Rules thus protect the crea t i o n of new servi c e s. The resul t i n g consu me r deman d for more, faste r, and bette r Interne t conne c t i o n s driv e s acces s provi d e r inves t m e n t in infra s t r u c t u r e to satis f y that deman d, thus servi n g the goals that the Commissi o n must furth e r under Section 706(a) and (b). Order ¶117 (JA 64). Verizon derid e s the Commissi o n’s predic t i o n as a “tripl e cushio n shot.” Br. 28. But the Commiss i o n’s predi c t i o n is both logic a l and roote d firmly in the record. Historica l l y, the Commissi o n found, demand for Internet-based service s has “led to major netw o r k impr o v e men t s.” Order ¶14 (JA 7), citing, inter alia, Comcast Comments at 2, 8 (JA 685, 691); Sony Comments at 5 (JA 745). The record s howe d that “the increa s i n g avail a b i l i t y of multim e d i a applic a t i o n s ” (such as YouTube, Netflix, and Hulu) “helpe d creat e deman d for resid e n t i a l broad b a n d servi c e s,” and that broad b a n d prov id e r s “res p o n d e d by adop ti n g ne w networ k infra s t r u c t u r e, modem techn o l o g ie s, and netwo r k proto c o l s.” Order n.23 (JA 7), citing Chetan Sharma, Managing Growth and Profits in the Yottabyte Era (2009) (JA 277). A paper by econo mi s t Nichola s Economi d e s, submi t t e d by Google, simil a r l y USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 51 of 122 39 conclu d e d that prese r v i n g an open Interne t “will be highl y benef i c i a l ” in prese r v i n g consu m e r deman d-driven inve st m e n t in broadb a n d infras t r u c tu r e. Google Comments, App. A at 13, 14 (JA 630, 631). Other indus t r y parti c i p a n t s – inclu d i n g both petit i o n er s here – concu r r e d that consu m e r deman d c ould drive netwo r k inves t m e n t. See CTIA Reply at 22 (Supp JA 3); CTIA Co mments at 32 (JA 716); Sony Reply at 6 (JA 827); Google Comments at 5, 34-36 (JA 592, 607-609); Skype Reply at 14 (JA 817); Software & Informa t i o n Industr y Associat i o n Comments at 3 (JA 737); Earthlin k Reply at 4 (JA 801); Clearwir e Comments at 7 (JA 643). Indeed, petit i o n e r MetroPCS called the In terne t “the model of the virtu o u s cycle: innova t o r s are creati n g cont e n t and appli c a t i o n produ c ts that consu me r s desir e, which drive s cons um e r s to purcha s e from servic e and equip me n t prov i d e r s, which in turn driv e s inve s t men t in infra s tr u c t u r e and new techn o l o g y in respo n s e to cons u me r deman d.” MetroPCS Comments (Jan. 14, 2010) at 16 (JA 552). Verizon, as part of a consor t iu m of leadin g broad b a n d provi d e r s and trade assoc i a t i o n s, stated that innov a t io n by both edge provi d e r s and acces s provi d e r s “mutu a l l y expa n d s oppor t u n i t i e s for the other,” an d that “the better the ne twor k capab i l i t i e s avail a b l e to ‘edge’ provid e r s, the great e r the oppor tu n i t y for them to devel o p innov a t i v e servi c e s USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 52 of 122 40 that increa s e consu me r deman d fo r broadb a n d.” NCTA, Verizon, et al. Feb. 22, 2010, ex parte a t 4 (JA 762). Verizon relie s on some comme n t e r s’ assert i o n s that Open Interne t Rules wou ld not lead to greater invest m e n t. Br. 7, 31. But, as noted, the record also contai n s consid e r a b l e eviden c e ratify i n g the Commissio n’s judgme n t that innov at i o n in edge servi c e s drive s inves t men t by acces s provid e r s, and the Commissi o n concl u d e d that its posit i o n was suppo r t e d by the weight of the evidenc e. Order ¶40 (JA 24-25). With evide n c e on both sides, the agency’s conc lu s i o n s are suppor t e d by substa n t i a l evide n c e “even thoug h a plausi b l e alter n a t i v e inter p r e t a t i o n of the eviden c e would suppor t a contr a r y view.” Secretary of Labor, 111 F.3d at 918. In fact, subseq u e n t to the adopt i o n of the Open Interne t Rules, inves t men t has surge d, with ventu r e capit a l fundi n g for Interne t-speci f i c comp a n i e s risin g 68 percen t, 7 and inves t men t in wired and wirel e s s netw o r k infra s t r u c tu r e risin g by 24 percen t from 2010 to 2011. 8 7 See https://www.pwcmoneytree.co m/ MTPublic/ns/moneyt r e e/ fileso u r c e/exhibi t s/11Q4MTPressrele a s e.pdf. 8 Telecommu n i c a t i o n s Industr y Associa t i o n, TIA’S 2012 ICT Market Review and Forecast 1-7, fig. 1-1.3 (2012). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 53 of 122 41 b . P ro t e c t i n g A Stable Enviro n m e n t For Inves t m e n t . By creatin g greate r certai n t y that th e condit i o n s essent i a l to Internet innov a t i o n would persi s t, the rules stren g t h e n the virtu o u s circle. The Commiss i o n noted “sign if i c a n t uncer t a i n t y ” in the indus tr y conce r n i n g acces s provid e r s’ networ k pract i c e s. Comment e r s, “inclu d in g leadi n g broad b a n d provid e r s,” confir m e d that “great e r predi c t a b i l i t y ” would “enco u r a g e inves t men t and innov a t i o n.” Order ¶42 & n.137 (JA 25-26), citing Stateme n t of AT&T (JA 1038). A numb er of lead i n g ventu r e capit a l i s t s expla i n e d that the rules “will promo t e inves t m e n t in the Interne t ecosy s t e m by remov i n g regul a t o r y uncer t a i n t y.” Order n.137 (citing numer o u s sourc e s). See also Vonage Comments at 6, 16 (JA 658, 661); XO Comments at 4 (JA 671). At the same time, the Commissi o n calib r a t e d its light-touch appro a c h to retai n broad b a n d provid e r s’ invest men t incen t i v e s. Despite calls for more exten s i v e regul a t i o n under Title II, see e.g., Free Press April 9, 2010, ex parte (JA 790), the Commissi o n opted for high-l evel rules that preser v e exist i n g openne s s. In keeping with its balance d ap proach, the Commis sion clarifie d broad b a n d provi d e r s’ abilit y to engage in a nu mb e r of revenu e-enhanc i n g pract i c e s. It did not, for insta n ce, pr eclu d e usage-based prici n g, under which heavi e r users of the netwo r k pay more than other s. Order ¶72 (JA 41). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 54 of 122 42 Access provi d e r s may also offer reve n u e-genera t i n g speci a l i z e d servi c e s, id. ¶112 (JA 61), as well as servic e s that “p rov i d e [ ] acces s to a subst a n t i a l subse t of Interne t endpo i n t s based on end users prefer e n c e to avoid certai n conten t, applic a t i o n s, or servic e s,” id. ¶47 & n.148 (JA 29). c. P ro t e c t i n g Compe t i t i o n In Telec o m m u n i c a t i o n s Marke t s . The Open Interne t Rules fost er “co mpe t i t i o n in the local teleco m m u n i c a t i o n s market ” as direc t e d by Section 706(a) and “comp e t i t i o n in the teleco mmu n i c a t i o n s market” as direct e d by Section 706(b). The transp a r e n c y rule, in partic u l a r, “ensur e s that end users can make infor me d choic e s regar d i n g the purch a s e and use of broad b a n d servi c e, which promo t e s a more co mp etitive market fo r broadb a n d servic e s.” Order ¶53 (JA 32). The rules also promot e co mp et i t i o n by protec t i n g Interne t-based telep h o n e servi c e s from being block e d by incumb e n t provi d e r s. The Commissi o n expla i n e d that Interne t -based telep h o n e servi c e s known as “Voice over Interne t Protocol ” or “VoIP” “are incre a s i n g ly being used as a substit u t e for tradi t io n a l telep h o n e servi c e.” Order ¶22 & nn.49-50 (JA 12- 13) (quotat i o n mark s omit t e d). Broa dban d provid e r s who also sell their custom e r s teleph o n e servic e thus have the incent i v e to discri mi n a t e agains t such co mp eti t i o n. Id. ¶¶22-24 (JA 12-15); see Vonage April 21, 2010, ex parte at 3 (JA 793); Skype Nov. 30, 2010, ex parte at 2 (JA 1033); NCTA USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 55 of 122 43 Dec. 10, 2010 ex parte a t 2-3 (JA 1051-1052). The prohib i t io n s on block i n g and unrea s o n a b l e discr i mi n a t i o n w ill protec t co mp et i t i o n in local teleco mm u n i c a t i o n s markets an d directly fulfi l l the statu t o r y manda t e. B. T h e Com mis s i o n Reason a b l y Interp ret ed Title II I Of The Commu n i c a t i o n s Act To Grant Autho r i t y For The Mobil e Rules . Title III of the Communic a t i o n s Act separa t e l y grant s the Commissi o n direc t autho r i t y to promu l g a t e Open Interne t Rules for wirel e s s broad b a n d Internet access. Under Title III, the FC C is to “maint a i n the contro l of the United States over all the chann e l s of radio trans mi s s i o n.” 47 U.S.C. § 301. Congress empow e r e d the agenc y to gran t licen s e s to use radio spect r u m only when the “publi c conven i e n c e, intere s t, or necess i t y will be served ” by a grant. 47 U.S.C. § 307(a). It direct e d the Commiss i o n to “[p]r e s c r i b e the nature of the servic e to be rende r e d by … each [r adi o ] stati o n withi n any class,” 47 U.S.C. § 303(b), and to “enc ourage the lar g er and more effecti v e use of radio in the public inter e s t,” 47 U.S.C. § 303(g). To effectu a t e these comman d s, C ongress accor d e d the Commissi o n the autho r i ty to “[m]a k e such rules and regul a t i o n s and presc r i b e such restr i c t i o n s and condi ti o n s … as may be neces s a r y to carry out the provi s io n s ” of the Communic a t i o n s Act. 47 U.S.C. § 303(r). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 56 of 122 44 Title III gives the Commissi o n “expan s i v e powers ” and a “comprehensive man d ate” over spectr u m licens e s. NBC, 319 U.S. at 219. The public intere s t standa r d “serve s as a supple instr u m e n t for the exerc i s e of discr e t i o n by the exper t body which Congres s has charg e d to carry out its legisla t i v e policy.” Pottsville Broadcasting, 309 U.S. at 137-138. See CBS v. Democratic National Committee, 412 U.S. 94, 122-123 (1 973) (Congress left polic y quest i o n s for the FCC); Schurz Communications, Inc. v. FCC, 982 F.2d 1043, 1048 (7th Cir. 1992) (Posner , J.) (Commiss i o n has “enor mo u s discr e t i o n ” to impos e publi c inter e s t oblig a t i o n s). The Commiss i o n’s plena r y autho r it y over spectr u m licens e s allows the Commissi o n to place publi c inter e s t condi t i o n s not only on newly issue d licens e s, but also on existi n g licens e s, whenev e r doing so “will promo t e the publi c inter e s t, conven i e n c e and neces s i t y .” 47 U.S.C. § 316. Because that grant of autho r it y is not limit e d by any other provis i o n in the Act, a license e has “no veste d right to any speci f i c [lice n s e ] terms.” Celtronix, 272 F.3d at 589; see Committee for Effective Cellular Rules v. FCC, 53 F.3d 1309 (D.C. Cir. 1995) (affirmi n g rule chang e s th at effect i v e l y modifi e d licens e s). The mobil e Open Internet Rules fall well within these estab l i s h e d stand a r d s. The rules “a re necess a r y to advanc e the publi c inter e s t in innova t i o n and invest m e n t ” using wirel e s s licen s e s. Order ¶134 (JA 75). In USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 57 of 122 45 particu l a r, for the reaso n s discu s s e d in detai l at pages 37-43 above, the rules (among other thing s) fulfi l l Congres s’s di rect i v e s that the Commissio n use its spectr u m licens i n g author i t y to “seek to promot e … the develo p m e n t and rapid deplo y me n t of new techn o l o g i e s, pr oduc t s and servic e s for the benefi t of the publi c,” 47 U.S.C. § 309(j)(3)(A), a n d “ensu r [ e ] that new and innova t i v e techno l o g i e s are readil y acce ss i b l e to the American people,” 47 U.S.C. § 309(j)(3)(B). I ndeed, as the Commissi o n point e d out, in 2007 it had place d an open platf o r m condi t i o n rese m b l i n g the Open Interne t Rules on licens e s in the 700 MHz block. (Not ably, Verizon was the high bidde r for and was award e d those licen s e s.) Order ¶134 (JA 75). Verizon would inter p r e t Title III of the Co mmunica t i o n s Act as a strait j a c k e t that grants only “speci f i c autho r i t y relat i n g to issues such as prevent i n g interf e r e n c e and assi gni n g cl ass e s of stati o n s to parti c u l a r frequ e n c y bands.” Br. 38. That limit a t i o n has no basis in the statu t o r y langua g e, and Veri zon cites none. See id. 37-41. Verizon’s argume n t also clash e s with the Supreme Court’s holdi n g, reject i n g a subst a n t i a l l y simil a r clai m, that “[t ]he [Communicati o n s ] Act itself establ i s h e s that the Commiss i o n’s [Title III] power s are not limit e d to the engin e e r i n g and techn i c a l aspec t s of radio commu n i c a t i o n.” NBC, 319 U.S. at 215. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 58 of 122 46 Verizon’s clai m that there is no legisl a t i v e “gran t of autho r i ty ” over the terms of servi c e offer e d by wirel e s s licen s e s, Br. 38-39, is bewild e r i n g. The Act grants the FCC authori t y to, among ot he r thin g s, “[p]r e s c r i b e the nature of the servic e to be render e d by … each [rad i o ] stat i o n with i n any clas s,” 47 U.S.C. § 303(b), and “modi f y ” the terms of such licen s e s in the publi c intere s t, id. § 316. Such provi s i o n s give the agency the author it y t o adapt to an ever-chang i n g indus t r y. See Pottsville Broadcasting, 309 U.S. at 137-138. Under them, the Supreme Court has uphel d such FCC action as restri c t i o n s on broad ca s t stati o n s’ owners h i p of newsp a p e r s, FCC v. NCCB, 436 U.S. 775 (1978) (FCC can adopt rules to achie v e “permi s s i b l e publi c-inter e s t goals ”), and limit s on the numb e r of li cen s e s an entit y could hold, FCC v. Storer Broadcasting Co., 351 U.S. 192 (1956); see Mobile Relay Assocs. v. FCC, 457 F.3d 1, 12 (D.C. Cir. 2006). Verizon’s cases are inapt. FCC v. Sanders Bros. Radio Station, 309 U.S. 470 (1940), does not bar the FCC from impo s i n g any requ i r e m e n t that “regula t e [ s ] the busines s ” of an FCC li cen see. There, contrast i n g the FCC’s regula t i o n of broad c a s t e r s with that of common carrie r s, the Court stated that the FCC “is given no super v i s o r y contro l of the [bro a d c a s t e r’s] progr a ms, of busin e s s manag e m e n t or of polic y.” 309 U.S. at 475. Verizon serio u s ly misco n s t r u e s that passa g e to mean th at th e FCC cannot im pos e any regul a t i o n USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 59 of 122 47 affecti n g a licens e e’s busine s s. Ever y reg u la t i o n will affect a licens e e’s busin e s s in some w a y. But Congress gave th e Commiss i o n auth o r it y to specif y “the nature of the servic e to be render e d,” by a licens e e, 47 U.S.C. § 303(b), and the Commissi o n merel y exerc i s e d that author i t y. MPAA v. FCC, 309 F.3d 796 (D.C. Cir. 2002 ), has no bearin g here becaus e, unlike the rules at issue there, the mobile wirele s s Open Internet Rules ar e authori z e d direc t l y by statut e, includ i n g Section s 303(b) and 316. Finally, Verizon assert s that the Open Interne t Rules unlawf u l l y “fund a m e n t a l l y chang e ” the terms of its wirele s s licen s e s. Br. 40. That assert i o n canno t be square d eithe r with the realit y of the Commissi o n’s action or with Verizon’s own state m e n t s. Verizon’s licens e s entit l e it to provid e mobil e co mmu n i c a t i o n s servi c e s, and Verizon may still provi d e the same wirel e s s servi c e s over the same frequ e n c i e s to the same custom e r s. Moreover, Verizon argue s in its brie f that “bro a d b an d prov i d er s toda y gener a l l y provid e subsc r i b e r s acces s to all lawfu l [Intern e t ] conte n t … and have strong econo mi c incen t i v e s to con tin u e to do so,” Br. 51. That, in additi o n to transp a r e n c y, is all th e wirele s s mobile rules requir e. MCI v. AT&T, 512 U.S. 218 (1994), which Veriz on cites (Br. 40), overtu r n e d an FCC order issue d under autho r it y to “modi f y ” tarif f filin g rules but that eliminated a rule. It is not to the contr a r y. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 60 of 122 48 MetroPCS’s separat e attack on the Co mmiss i o n’s asser t i o n of autho r i ty under Title III is contra r y to the ar gum e n t s MetroPCS is simu l t a n e o u s l y makin g to this Court in anoth e r pendi n g case, Cellco Partnership (No. 11- 1135). There, MetroPCS has recogn i z e d that “by its plain langu a g e, §303(b) [of the Communi c a t i o n s Act] may … be used to affir ma t i v e l y expan d a licens e e’s obliga t i o n s.” Br. of MetroP CS in No. 11-1135 at 2. Indeed, in makin g that argume n t, MetroPCS relies, ibid., on the 700 MHz Order that requi r e d – simil a r to the Open Interne t Rules – licen s e e s to mainta i n an open platfo r m for Interne t acces s. I I . TH E FCC REAS ONABLY DETERMINED THAT THE OPEN INTERN E T RULES FURT H ER OTH ER STATU TO RY DUTIE S . Congress charg e d the Commiss i o n with regul a t i n g commu n i c a t i o n s facil i t i e s “to make avail a b l e … to all th e people of the United States … a rapid, efficie n t, Nation-wide and wo rld-wide wire and radio commu n i c a t i o n servi c e.” 47 U.S.C. § 151. Congress gr an t e d the Commissi o n autho r i ty to “perf o r m any and all acts [and] make su ch rules and regul a t i o n s … as may be necess ar y in the execut i o n of its functi o n s.” 47 U.S.C. § 154(i). Consiste n t with such flexib l e grant s of author i t y, the Supreme Court has warned again s t “ster e o t y p [ i n g ] the powers of the Commi ssi o n to specif i c detail s in regula t i n g USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 61 of 122 49 a field of enterp r i s e the domina n t char a c t e r i s t i c of which was the rapid pace of its unfold i n g.” NBC, 319 U.S. at 219-220. The Commissi o n thus may have autho r i ty over commu n i c a t i o n s matter s even where Congress gran t e d “no expre s s autho r i ty.” Comcast, 600 F.3d at 646. Such “ancil l a r y ” autho r i t y exist s when (1) the subjec t matte r falls under Title I of the Act, i.e. consti t u t e s co mmu n i c a t i o n by wire or radio ; and (2) when such au thor i t y is “reas o n a b l y ancil l a r y to the Commissi o n’s effect i v e perfo r ma n c e of its stat u t o r i l y manda t e d respo n s i b i l i t i e s.” Ibid., citing American Library, 406 F.3d at 691-692. 9 There is no dispu t e conce r n i n g th e first prong of that test. The Commiss i o n iden t i f ied a numb e r of pr ovis i o n s in the Communic a t i o n s Act that satisf y the second prong. Order ¶ ¶ 124-137 (JA 68-77). Verizon asser t s (Br. 23) that th e Commissi o n’s relian c e on multip l e statu t e s to suppor t its action s someh o w in dicat e s a lack of aut hori t y, parado x i c a l l y sugge s t i n g that an actio n suppo r t e d by more statu t o r y provis i o n s is less likely to be withi n a grant of autho r i t y. But Congress grant e d the Commissi o n au tho r i t y over the telep h o n e, broadc a s t i n g, and cable telev i s i o n indus t r i e s, and the Interne t is causi n g funda m e n t a l shift s in each of 9 The Commissi o n belie v e s that this Court’ s test is more restri c t i v e than the “vario u s respo n s i b i l it i e s ” test es tab l i s h e d by the Supreme Court in Southwestern Cable, 392 U.S. at 178, and simila r cases. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 62 of 122 50 them. The Commiss i o n must take accou n t of those chang e s in disch a r g i n g its statu t o r y respo n s i b i l it i e s. As we s how below, the Commissi o n demon s t r a t e d how the Open Interne t Rules furth e r th e Commissi o n’s perfor m a n c e of dutie s assig n e d to the agenc y in Titles II, III, and VI of the Communic a t i o n s Act. A. S e c t i o n 201(b) Of The Co mmu n i c a t i o n s Act Grant s Autho r i t y To Adopt Rules Prote c t i n g Telep h o n e Compe t i t i o n . Section 201(b) makes it unlaw f u l for any “char g e s, practi c e s, classi f i c a t i o n s, and regula t i o n s ” for comm o n carri e r servi c e s to be “unju s t or unrea s o n a b l e ” and grant s the Commissi o n the author i t y to “presc r i b e such rules and regul a t i o n s as ma y be necess ar y in the public intere s t to carry out” that comma n d. 47 U.S.C. § 201(b). VoIP servic e is “incr e a s i n g l y being used as a subst i t u t e for tradi t i o n a l telepho n e service.” Order ¶125 (JA 68); see id. ¶22 (JA 12) (citing recor d comme n t s). By presen t i n g a comp et i t i v e alter n a t i v e to tradi t i o n a l telep h o n e servic e, VoIP therefo r e can “contr i b u t e to the mark etp l a c e discipl i n e of voice teleco mm u n i c a t i o n s services.” Id. ¶125 (JA 68). Yet comp an i e s that provi d e both Interne t acces s and tr adit io n a l teleph o n e servic e (s uch as Verizon) “have the incent i v e and abilit y to block, de grad e, or otherw i s e disad v a n t a g e the servic e s of their online voice comp et i t o r s.” Ibid. (JA 69). Indeed, the Madison River c a s e, 20 FCC Rcd 4295, involv e d exactl y that practi c e, Order USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 63 of 122 51 ¶35 & n.104 (JA 21). Similar l y, AT&T ha s restr i c t e d its mobil e custo m e r s’ abilit y to use comp et i n g calli n g appli c a t i o n s, such as Skype, from their cell phone s. Ibid. & n.107 (JA 21-22); see also id. ¶100 & n.308 (JA 56). As a comp et i t i v e alter n a t i v e to lo cal telep h o n e comp a n i e s, VoIP helps ensure reason a b l e prices and practi c e s that the Commissi o n must polic e under Section 201(b). Order ¶125 (JA 68). Thus, the FCC reasona b l y concl u d e d that the Open Internet Rules furt h e r the FCC’s “statu t o r i l y manda t e d respons i b i l i t i e s.” Comcast, 600 F.3d at 646. Verizon as serts that the Commi ssio n may not rely on such marke t- based econ o mi c mech a n i s ms to fulfi ll its dutie s, but ma y only “add r e s s any concer n s about unrea s o n a b l e commo n-carri e r rates by regula t i n g such rates” direc t l y. Br. 34. But rate reg u la t i o n is at best a substi t u t e for comp et i t i v e forces, and the Commissio n is entitl e d to rely on marke t force s in order to avoid the need for such regul a t i o n. CCIA, 693 F.2d at 211; see also Orloff v. FCC, 352 F.3d 415, 419 (D.C. Cir. 2003) (uphold in g relia n c e on marke t forces to ensure just and reason a b l e rat es). In any ev ent, the Commissio n may carry out its statu t o r y respo n s i b i l i t i es not only to prote c t, but also to “promo t e ” the polic i e s for which it has been given autho r i ty. United States v. Midwest Video Corp., 406 U.S. 649, 667 (1972). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 64 of 122 52 Verizon also tries to disti n g u i s h Madison River on the groun d that it did not invol v e a broadb a n d provi d e r. Br. 34. That is incorre c t. Order ¶35 (JA 21). Indeed, the co mp an y was charge d with block i n g its custo m e r s’ VoIP servic e – somet h i n g that could be done only by a broadb a n d provi d er. In any event, the Commissi o n reaso n a b l y conc l u d e d (and Verizon does not contes t) that incumb e n t teleph o n e co mp an i e s have the incent i v e and the abilit y to interf e r e with Internet-based comp e t i t o r s. Prophyla c t i c rules would be justi f i e d even in the absen c e of docum e n t e d abuse s. Verizon also asser t s that Sectio n 201(b) can autho r iz e the Open Interne t Rules only in conne c t i o n with In ternet-based teleph o n y. Br. 34. As the Commiss i o n expla i n e d, howev e r, “it is unlik e l y that broad b a n d provid e r s could relia b l y ident i f y [VoIP] traffi c in al l circu ms t a n c e s, part icu l a r l y if voice or video traffi c origin a t e d from new servi c e s using uncom mo n proto c o ls.” Order ¶48 & n.151 (JA 29). That is so “notw i t h s t an d i n g the incre a s i n g sophis t i c a t i o n of netwo r k manag e m e n t tools.” Ibid. In such cas es of insep a r a b i l i t y betwe e n regul a t e d and unreg u l a t e d activ i t y, the Commissi o n’s author i t y extend s to all matter s neces s ar y to achie v e its polic y goals. E.g., Alascom, Inc. v. FCC, 727 F.2d 1212, 1220 n.30 (D.C. Cir. 1984) (Commissi o n has autho r i ty over intra s t a t e commun i c a t i o n s when insepa r a b l e from inter s t a t e co mmu n i c a t i o n s). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 65 of 122 53 B. P ro v i s i o n s In Title s VI And III Grant Autho r i t y To Prote c t Compe t i t i o n In Video Marke t s . 1. Ti tle VI. Two provis i o n s of Title VI, which govern s cable progr a m m i n g, suppor t the Open Internet Rules. First, Section 628, entitl e d “Developm e n t of Competi t i o n and Diversi t y in Video Program mi n g Distribu t i o n,” makes it unlaw f u l for cable opera t o r s and their affil i a t e d satel l i t e cable progr a m mi n g vend o r s to “enga g e in unfai r metho d s of comp e t i t i o n … the purpo s e or effec t of which is to hinde r signi f i c a n t l y or to preve n t any multi c h a n n e l video progr a m m i n g distr i b u t o r from provid i n g ” progr a m mi n g to its subscr i b e r s. 47 U.S.C. § 548(b). 10 The administr a t i v e record showed th at video progr am m i n g distr i b u t o r s “are seeki n g to keep and win custo me r s by expan d i n g their [vide o ] offer i n g s to includ e onlin e acces s to their progr a m m i n g.” Order ¶131 (JA 73). For exampl e, DISH, a satell i t e broad c a s t serv i c e, provid e s its custom e r s acces s to on-line video progr am m i n g to comp e t e with other video distr ib u t o r s, like Verizon, that contr o l the broad b a n d In ternet access networ k s on which DISH depends. The Commissi o n deter mi n e d that “the co mp eti t i v e viabil i t y of stand-alone [video distri b u t o r s such as DISH] depend s on their abili t y to offer 10 Because Congress expres s l y direct e d the Commissi o n to adopt rules to imple m e n t Section 628, 47 U.S.C. § 548(c)(1), the statu t e grant s direc t as well as an cillar y authorit y. Order ¶129 (JA 71). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 66 of 122 54 an online video experi e n c e of the same quali t y as the onlin e video offer i n g s of integr a te d broad b a n d provid e r s.” Ibid., quoti n g DISH Reply Comment s 7 (JA 837). The record also showed that broadb a n d provid e r s “view these services as a … threat” to their video opera t i o n s, Order ¶22 & n.54 (JA 13), and can block comp e t i n g Interne t-based video distr i b u t i o n servic e s. DISH Comments 5-6 (JA 677-678); Pub lic Knowledge Dec. 14, 2010, ex parte (JA 1087). In such circu ms t a n c e s, the Open Inte rnet Rules “furth e r [the agency’s] manda t e under Section 628.” Order ¶131 (JA 73). By interf e r i n g with the strat e g i e s of comp e t i n g video distr i b u t o r s, which depen d incre a s i n g l y on Interne t-based distr i b u t i o n, see id., a broad b a n d acces s provid e r’s block i n g or degra d a t i o n would “hind e r or preve n t ” those comp a n i e s from provi d i n g progr a m m i n g to subsc r i b e r s. That outco m e woul d “fru st r a t e Congress’s state d goals ” in enact i n g Section 628, which inclu d e “promo t i n g co mp et i t i o n,” increa s i n g the availa b i l i t y of progr a m mi n g “to perso n s in rural and other areas not curre n t l y able to recei v e such progr a m mi n g,” and “spurr i n g the develo p m e n t of co mmun i c a t i o n s techno l o g i e s.” Id. ¶129 (JA 71-72). This Court has simil a r l y r ecog n iz e d that reduc i n g the “comm e r c i a l attra c t i v e n e s s ” of progr a m m i n g can am ount to a “signi f i c a n t [ ] hind[r a n c e ] ” under Section 628. Cablevision, 649 F.3d at 708. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 67 of 122 55 Independ e n t l y, Section 616, 47 U.S .C. § 536, requir e s the Commiss i o n to “esta b l is h regul a t io n s gover n i n g pr ogra m carria g e agreem e n t s and relat e d practi c e s betwee n cable operat o r s … and video progr a m m i n g vendo r s ” to protect comp et i t i o n in the video di stri b u t i o n market p l a c e. 47 U.S.C. § 536(a). Among the requi r e d regul a t i o n s are those that preve n t a video distr i b u t o r from “eng a g i n g in … unrea s o n a b l [ e ] restra i n [ t ] [o f] the ability of an unaff i l ia t e d video progr a m mi n g vendo r to comp e t e fairl y by discr i mi n a t i n g … on the basis of affil i a t i o n or nonaf f i l i a t i o n.” 47 U.S.C. § 536(a)(3). The Commissi o n expla i n e d th at video distr ib u to r pract i c e s “that disc r i mi n a t o r i ly impe d e comp e t i n g video progr a m m i n g vendo r s’ onlin e deliv e r y of progr a m mi n g to consu me r s aff ect the vendor s’ abilit y to ‘compe t e fairl y’ for viewer s just as surely as [vid e o dist r ib u to r s’] discr i mi n a t o r y selec t i o n of video progr a m mi n g for carri a g e on cab le systems has this effect.” Order ¶132 (JA 74). Such practi c e s ar e “relate d ” to program carria g e agree m e n t s, the Commiss i o n found, and thus within the scope of Section 616(a). Ibid. Verizon provi d e s only a curso r y respo n s e. Its princ i p a l argum e n t is that Sections 628 and 616 apply only to “c able opera t o r s ” (such as Verizon in its FiOS busines s) and thus suppl y autho r i t y only insof a r as a cable opera t o r USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 68 of 122 56 is acting in its capaci t y as a video dist r i b u t o r and not when it is actin g as a broadb a n d provi d e r. Br. 36. Verizon reads these statu t e s too narro w l y. This Court has previ o u s l y found that Section 628 applie s to terre s t r i a l progr a m m e r s – which are not expre s s l y addre s s e d by the statu t e – when they withh o ld progr a m mi n g from a comp e t i n g video provi d e r in order to benef i t a commo n l y contr o l l e d cable servic e provid e r. See Cablevision, 649 F.3d at 719. The same logic applies here. Regardle s s of corpo r a t e orga n i z a t i o n, when a broadb a n d provid e r block s Interne t-based co mp e t i t i o n in or der to prote c t the profi t a b i l i t y of its affil i a t e d cable busin e s s, it is actin g fo r the benefi t of the cable system. Verizon also conten d s that Sect ion s 628 and 616 do not suppl y ancill a r y author i t y becaus e th e Open Interne t Rules are not “neces s a r y ” to furth e r their purpo s e s. Br. 37. But as descr i b e d above, the Commissi o n found, and Verizon does not chall e n g e, that Interne t-based distr i b u t i o n is beco mi n g essent i a l to the succes s of vide o dist r ib u to r s and prog r a m mi n g vendo r s and that cable comp a n i e s have both the incen t i v e and abili t y to inter f e r e with comp e t i t i o n from th ese new rivals. The Commissio n reaso n a b l y concl u d e d on that recor d that the congr e s s i o n a l policy behin d Section s 628 and 616 could be frust r a t e d in the absenc e of protec t i v e rules. Its predic t i v e judgme n t s ar e entitl e d to defere n c e. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 69 of 122 57 It is not enoug h, as Verizon wrong l y conten d s, that “the FCC can address direct l y ” any inci d e n t s of block i n g. Br. 37. We refute d an analo g o u s claim as to Title II at page 52, supra. Moreover, the Commissi o n should not be force d to play cat-and- mouse with broad b a n d provi d e r s, whose custo m e r s may not even know that their access to a website is bein g block e d or degra d e d. As to the argume n t th at no cable-based broad b an d provi d er has been found inter f e r i n g with comp e t i t i o n, Br. 37, Verizon’s own brief confir ms that this is a live issue wh en it object s to the duty to “carry the traffi c of all ‘edge provid e r s,’” Br. 2. In any event, the Supreme Court has explai n e d that the Commissi o n may “pla n in advance of foresee a b l e ev ents, instead of waiting to react to them.” Southwestern Cable, 392 U.S. at 176- 177. 2 . Title III. Under Title III of the Communic a t i o n s Act, the Commiss i o n has authori t y to make rules that ar e necess a r y to ensure the “order l y devel o p m e n t … of local telev i s i o n broad c a s t i n g,” Southwest Cable, 392 U.S. at 177, and the “more effec t i v e use” of the radi o spect r u m, 47 U.S.C. § 303(g). The Commiss i o n deter mi n e d that “Intern e t video distr i b u t i o n is incre a s i n g l y impor t a n t to … local telev i s i o n broad c a s t servi c e.” Order ¶128 (JA 71). For examp l e, local telev i s i o n and radio st ati o n s “now provi d e news and other USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 70 of 122 58 informa t i o n onli n e via their own websi t e s ” and other websi t e s such as Hulu. Id. ¶16 (JA 8). Thus, the Commissi o n ex pla i n e d, “onli n e distr i b u ti o n has a strateg i c value for broadca s ters,” which, the agen cy predi c t e d, “is likel y to provid e an incre a s i n g l y impor t a n t sour c e of fundin g for broadc a s t news and entert a i n m e n t progr am m i n g.” Ibid. Broadban d provid e r s offer video serv i c e s and have the incen t i v e and abilit y to interf e r e with broadc a s t e r s’ deliv e r y of comp e t i n g video progr a m m i n g. Order ¶¶21-23 & n.60 (JA 11-15). In the absen c e of the Open Internet Rules, such interf e r e n c e coul d “jeop a r d i z e broad c a s t e r s’ abilit y to offer … progr a m mi n g over the Interne t ” and would “thre a t e n to impai r [broa d c a s t e r s’] abilit y to offer hi gh-quality broadc a s t conten t.” Id. ¶128 (JA 71). Thus, the Open Internet Rules are within the Comm iss i o n’s autho r it y to regula t e over-the-air broad c a s t i n g under Title III in th e same way that cable telev i s i o n regul a t i o n wa s within the Commissi o n’s author i t y in Southwestern Cable, 392 U.S. at 177. The Commissi o n expli c i t l y relie d on this theor y in Paragrap h 128 of the Order, b u t Verizon does not respo n d to it and thus has waive d any objec t i o n. Notably, NCTA, which repr es e n t s cable opera t o r s that are among the larges t broad b a n d provid e r s in th e co untry, argued that the Commis sion USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 71 of 122 59 had author i t y to adopt the Open Intern e t Rules on that ground. NCTA Dec. 10, 2010, ex parte at 3 (JA 1052). C. T h e Trans p a re n c y Rule Is Suppo r t e d By Statu t o r y Repor t i n g Respo n s i b i l i t i e s . The transp a r e n c y rule is separa t e l y suppo r t e d by the Commiss i o n’s respon s i b i l i t y to provid e a variet y of report s to Congress. Specific a l l y, Congress direct e d the Co mmissi o n to repor t trien n ia l l y on “mark e t entry barri e r s ” in servi c e s inclu d i n g infor ma t i o n servi c e s. 47 U.S.C. § 257; see Order n.444 (JA 76). 11 Similar l y, “to perfo r m the dutie s and carry out the object s for which it was create d ” th e Commissi o n may “inqui r e into the manage m e n t of the busine s s ” of any co mmon carrie r and its affili a t e s. 47 U.S.C. § 218. That provi s i o n allow s the Commissi o n “to requir e the provis i o n of infor ma t i o n such as that cover e d by the trans p a r e n c y rule.” Order ¶137 (JA 77). In Comcast, this Court “readil y accep t e d ” that “discl o s u r e requir e m e n t s ” like the transp a r e n c y ru les “coul d be ‘reas o n a b l y ancil l a r y’ to the Commissi o n’s statu t o r y respo n s i b i l i t y to issue a report to Congress.” 600 F.3d at 659. The transp a r e n c y rule fits that descri p t i o n. Order ¶136 (JA 76- 77). 11 We do not rely on 47 U.S.C. § 154(k) in light of Pub. L. No. 104-66, Title III, § 3003, 109 Stat . 707, 734 (Dec. 21, 1995). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 72 of 122 60 Verizon respon d s that “the transp a r e n c y rule does not relate to any actua l repor t i n g or infor ma t i o n colle c t i o n requi r e m e n t ” but serve s only “to advan c e the FCC’s ‘openn e s s polic i e s.” Br. 42. Verizon does not appea r to have raised that clai m before the ag en cy, so it is now barred by 47 U.S.C. § 405(a). In any event, the trans p a r e n c y requi r e m e n t both allows end users access to inform a t i o n and allows the Commissio n to fulfil l its statut o r y repor t i n g dutie s (which may well be infor m e d by publi c inpu t base d on infor ma t i o n discl o s e d by broad b a n d provid e r s). I I I . T H E COMMI S S I O N PROPE R LY DETER M I N E D THAT THE OPEN INTERNE T RULES DO NOT TREAT BROAD B A N D PROVI D E R S AS COMMO N CARRI E R S . Verizon ar gues that the Open Intern e t Rules unlawf u l l y treat broad b a n d provider s as co mmo n carriers. Veriz on’s clai m is that, by forbid d i n g access provid e r s from block i n g or charg i n g edge provid e r s, the Commiss i o n has requi r e d acces s provi d e r s to “carr y ” Inte rne t progr am m i n g for edge provi d e r s. Br. 16-17. That clai m misstat e s both the natur e of Interne t acces s servi c e and the Open Internet Rules. It has no basis in the Communic a t i o n s Act or decis i o n s inter p r e t i n g the te rm “commo n carri e r.” After the Order, as before, Verizon is free to offer or declin e to sell broadb a n d Interne t acces s servi c e to any end user. Verizon need not hold itself out to offer servi c e indif f e r e n t l y to anyone. The only thing s that USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 73 of 122 61 Verizon (and other broad b a n d Intern e t acces s provi d e r s) cannot do are bloc k i n g its end user s from reac h i n g lawfu l conte n t and charg i n g edge provide r s to allow en d users to reach them. See Order ¶24 (JA 15). Verizon claims, at least somet i m e s , that it has not done those thing s and does not inten d to do them. E.g. Br. 51. In any event, the Commissi o n prope r l y conclu d e d, in accord with the text of the Communica t i o n s Act and court preced e n t, that, as long as Verizon is not requi r e d to serve end users i ndis c r i mi n at e l y, rule s rega r d i n g bloc k i n g or charg i n g edge provi d e r s do not create co mmon carriag e. The Commi ssion has decade s of experi e n c e with the c oncep t of co mmon carria g e, and courts have recog n i z e d its discr e t i o n to inte r p r e t and apply commo n-carri a g e statu s under the Communic a t i o n s Act. See USTA v. FCC, 295 F.3d 1326, 1332 (D.C. Cir. 2002); Howard v. America Online Inc., 208 F.3d 741, 752-753 (9th Cir. 2000). 12 The Commissi o n acted well within that discre t i o n here. 1. A common carri e r relat i o n s h i p is establ i s h e d when a customer reques t s servi c e offer e d by the carri e r. Under the Communic a t i o n s Act, it is 12 Verizon assert s that the Commissi o n is not entit l e d to discr e t i o n in its inter p r e t a t i o n of commo n carri a g e. Br. 14 n.4 (citing NARUC v. FCC, 525 F.2d 630, 644 (D.C. Cir. 1976)). Verizon fails to disti n g u i s h the more recen t contr a r y decis i o n s. Furthermo r e, in NARUC t h e Court reject e d only “ unfettered d i s c r e t i o n in the Commissio n ” as to commo n carri e r statu s, not ordin a r y Chevron defere n c e. 525 F.2d at 644 (emphas i s added). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 74 of 122 62 “the duty of every commo n carri e r … to furnis h … commu n i c a t i o n servic e upon reasonable request therefor. ” 47 U.S.C. § 201(a) (emphas i s added). Similar l y, the Act defin e s a “co mmon carrie r ” as a carrier avail ab l e “for hire” by a perso n reque s t i n g servi c e. 47 U.S.C. § 153(11); see also id. § 153(53) (defining a “teleco m m u n i c a t i o n s service, ” which is a co mmon carrier service, as the offeri n g of servic e “for a fee”). Thus, as the Commissi o n explain e d, the relev a n t custo m e r s are “the end users who subsc r i b e to broad b a n d In ternet access servic e s ” – the entiti e s that “reque s t ” servi c e – and not edge provid e r s. Order ¶79 (JA 47). That deter mi n a t i o n follo w s from the struc t u r e of the Internet and the text of the Communic a t i o n s Act. Broadban d Internet access servic e allows an end-user subscriber – who pays for broad b a n d acces s serv i c e – to “tran s mi t data to and receiv e dat a from all or substa n t i a l l y all Internet endpoi n t s.” Order ¶44 (JA 28).13 Indeed, an edge provid e r has no dire c t relat i o n s h i p with the end user’s access provid e r (Verizon, in this cas e) and typica l l y does not know the access 13 When an end user naviga t e s to a we bsi t e, he sends a reque s t to his acces s prov id e r ( e.g., by enter i n g the site addre s s or click i n g on a link) to retrie v e data from the reques t e d site . The access provid e r trans p o r t s the reques t to the Interne t “back b o n e,” trans i t netwo r k s opera t e d by third parti e s. The backbo n e provid e r s in turn trans mi t th e reque s t to the acces s provi d e r to which the edge provid e r subsc r ib e s. The edge provid e r then transmi t s the reque s t e d data (for examp l e, a web page, blog post, or applic a t i o n data) back to the end user throug h the revers e proce s s. See generally http://compu t e r.howst u f f w o r k s.co m/interne t/basics/interne t.htm. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 75 of 122 63 provid e r’s identi t y. As descri b e d in note 13, end users and ed ge provi d er s have indepe n d e n t subsc r i b e r relat i o n s h ip s with their own acces s provid e r s, with typic a l l y at least one (and so met i mes many) third-party back b o n e netwo r k s betwe e n them. As the Comm iss i o n pointed out, the Open Interne t Rules “becom e effect i v e only after … a provid e r has volun t a r i ly enter e d into a[n] … arran g e men t with the end user” th at allows him to reach the con ten t of his choic e. Id. ¶79 (JA 47). An edge provi d e r does not “requ es t ” servi c e from or seek to “hire” Verizon. This Court’s decisi o n s are consis t e n t with that analys i s. The Court has recogn i z e d “that to be a common ca rri e r one must hold onese l f out indis c r i mi n a t e l y to the clientele one is suited to serve.” NARUC v. FCC, 525 F.2d 630, 641 (D.C. Cir. 1976) (emphas i s adde d); see also Southwestern Bell Tel. Co. v. FCC, 19 F.3d 1475, 1481 (D.C. Cir. 1994) (where a carrier “ chooses its clients on an indiv id u a l basis ” it is not a common carri e r). In other words, commo n carriage is a re lat i o n s h i p betwe e n a carri e r and its custom e r s, not betwee n a carrie r and a noth e r entit y that has never reque s t e d servi c e s from that carri e r. Verizon relie s on FCC v. Midwest Video Corp., 440 U.S. 689 (1979) (Midwest II), a cable carriage case, but that case suppo r t s the Commissi o n’s positio n, not Verizon’s. The differ e n c e s betwee n the rules at issue there and USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 76 of 122 64 those at issue here illus t r a t e why th e Open Internet Rules do not impose a co mmon carria g e req u ir e m e n t on broad b an d acces s provid e r s. The Midwest II rules requi r e d cable opera t o r s to “hold out dedic a t e d chann e l s,” occup y i n g up to 20 percen t of the system’s total capac i t y, for use “on a first-come, nondi s c r i mi n a t o r y basi s ” by any progr a m m e r that reque s t e d carri a g e from the cable opera t o r. 440 U.S. at 692-693, 701-702. Moreover, given the natur e of cable telev i s i o n syst e ms at the time, carry i n g unwa n t e d progr a m m i n g on reser v e d chann e l s preve n t e d the cable opera t o r from offer i n g its subsc r i b e r s other chann e l s of the operat o r’s choosi n g. Carriage of one progr am would thus “rest r ict expa n s i o n of other cable servi c e s ” and “inter f e r e with … the [cable provid e r’s ] total servi c e offer i n g ” on its finite channels. Id. at 707 n.17. The Commissi o n’s rules there “tran s f e r r e d contr o l of the conten t of access cable ch annel s from cable operato r s to [progra m m e r s ] who wish to communi c a t e by the cable mediu m.” 440 U.S. at 700. The circumst ances here ar e entirely differ e n t. Unlike the progr a m m e r s in Midwest II, edge provide r s are not “reques t i n g ” any acc es s from Verizon. Rather, their conten t is delive r e d only at the reques t of an end user who is Verizon’s custom e r. In the absenc e of the custom e r’s reques t for its conten t, the edge provi d e r has no right to deliv e r y. Nor do edge provid e r s use a USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 77 of 122 65 “dedica t e d channe l ” that is assign e d on a “first-come” basis at their reques t. And, unlike in Midwest II, connec t i n g an end user to an edge provid e r over the Interne t does not by itsel f precl u d e conne c t i n g any other custo me r to the conte n t of his choic e. See Order n.246 (Open Internet Ru les do not “req u i r [ e ] a broad b a n d provi d er to ‘hold out’ any cap aci t y for the exclus i v e use of third parti e s or make a pu blic offe ri n g of its service ”) (JA 46). There is also no “tran s f e r r e d cont ro l ” here, becaus e, as Verizon acknow l e d g e s, see Br. 43, 51, and unlik e cable syste ms, Interne t acces s provid e r s tradi t i o n a l ly have not decide d what sites their end users visit. That is fundam e n t a l l y differ e n t from Midwest II, where the Court empha s i z e d that the requir e m e n t to hold out dedica t e d ch ann e l s on a first-come, first served basis, see 440 U.S. at 701, 706 n.16, signif i c a n t l y impin g e d on the “edit o r i a l discr e t i o n ” that cable ope ra t o r s had exerc i s e d in choos i n g their chann e l lineu p. Id. at 707; see id. at 706-09 & n.15. Verizon’s relia n c e (Br. 18) on Vitelco v. FCC, 198 F.3d 921, 930 (D.C. Cir. 1999), is mispla c e d. There, a provi d e r of subma r i n e cable telep h o n e servi c e enter e d into custo me r relat i o n s h i p s with a numb er of other carri e r s, who then resold the servic e to their own custo me r s, the end users of the servi c e. In affirmi n g the FCC’s determ i n a t i o n that the initia l sale of servic e did not consti t u t e co mmo n carri a g e, the C ourt recogn i z e d that a carrie r need USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 78 of 122 6 6 not sell servic e direct l y to the ultima t e “e nd user” of the servi c e in order to be deemed a co mmon carrie r. The Court neithe r held nor sugges t e d, howeve r, that a common carri a g e relat i o n s h i p coul d exist with a party that did not request service. 14 Despite Verizon’s repeate d clai ms (B r. 15-17), the Open Internet Rules do not set comp e n s a t i o n for deliv e r y of traffi c at zero. Rather, broadb a n d provid e r s set their own price s for serv ice and may charge diffe r e n t rates to diffe r e n t end-user custo me r s (or decide not to serve cert ain en d users). Edge provid e r s simi l a r l y pay for thei r conn e c t i o n s to the networ k under whate v e r price s, terms, and condi t io n s their br oad b a n d provid e r wishe s to charge. See Order ¶24 (JA 15). Verizon may wish to colle c t a second fe e each time one of its custo m e r s seeks to visit a we bsit e conne c t e d to the Interne t by a differ e n t access provid e r, but its inab il i t y to impose such a ch arge does not make its servic e free. Finally, Verizon does not demons t r a t e why the Order’s nondis c r imi n a t i o n requi r e m e n t (or the an ti-blocki n g rule, which is the only restr i c t i o n on mobil e wire l e s s prov i d e r s) trans f o r ms prov id e r s into commo n carri e r s. The Communic a t i o n s Act im pos e s non-discr i mi n a t i o n requi r e m e n t s 14 Iowa Telecomms. Servs. v. Iowa Utils. Bd., 563 F.3d 743 (8th Cir. 2009), consid e r e d simil ar issue s and is irrel e v a n t for the same reaso n. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 79 of 122 67 on many entit i e s that are not commo n carri e r s. See, e.g., 47 U.S.C. § 315(b) (requir i n g that broad c a s t stati o n s charg e polit i c a l candi d a t e s non- discr i mi n a t o r y lowes t-unit rates) ; 47 U.S.C. §548(c)(2)(B) (prohib it i n g discr i mi n a t i o n by satel l i t e cable progr a m mi n g vend o r s). In this regar d, Verizon conte n d s brief l y (B r. 20-21) that even if th e Open Internet rules do not creat e commo n-carri a g e rela t i o n s h ip s, they imper mi s s i b l y impo s e requi r e m e n t s that are simil a r to Title II obligat i o n s. The statut e, howev e r, prohib i t s treat m e n t “as a commo n carri e r,” see 47 U.S.C. §§ 153(51), 332(c)(2), and Verizon point s to nothin g in the statu t o r y text that prohi b it s rules that share so me chara c t e r i s t i c s of Title II obligat i o n s but do not create co mmon carriage per se. See Order n.250 (JA 47). In any event, the Open Internet Ru les do not “repl i ca t e key aspec t s of Title II” (Br. 20), and whethe r any given requir e m e n t consti t u t e s co mmo n carriage is a matter fo r Comm issi o n discr e t i o n in the first insta n ce. Indeed, if Verizon’s broad assert i o n s as to the scope of co mm on carriag e were correct, the Supreme Court would have stru c k down the rules chall e n g e d in Southwestern Cable, which requi r e d cable syste ms to carry, upon reque s t, the signa l s of local broad c a s t stati o n s. 392 U.S. at 177. The Court confi r m e d in Midwest II, howeve r, that those rules were permis s i b l e becau s e they did not USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 80 of 122 68 create “a duty to hold out facil i t i e s indif f e r e n t l y for public use.” 440 U.S. at 706 n.16. 2. Even if the Open Internet Ru les could be const r u e d as impos i n g a co mmon-carria g e obliga t i o n, they still would not violat e Sections 153(51) and 332(c)(2) of the Communic a t i o n s Act. Those provi s i o n s prohib i t commo n-carri a g e treat me n t of infor ma t i o n servi c e provi d e r s only “unde r this [Act]” – i.e., the Communic a t i o n s Act of 1934, as amende d. 47 U.S.C. §§ 153(51) & 332(c)(2). As explai n e d above, the Commissi o n has suffic i e n t autho r i ty to adopt the rules under Sec tion 706 alone, witho u t rely i n g on any other autho r i t y. Section 706 is not part of the Communic a t i o n s Act of 1934 and thus not subje c t to the statu t o r y limit a t i o n s on commo n-carri e r treat m e n t. See Order n.248 (JA 46). Notably, not a ll Communi c a t i o n s Act provis i o n s barrin g common-carria g e treatm e n t are limit e d to treat m e n t under “this Act.” See 47 U.S.C. § 153(11) (no commo n carri a g e for broad c a s t e r s); see also 47 U.S.C. § 541(c). I V . T H E OPEN INTERNE T RU LES ARE CONSI S T E N T WITH THE FIRS T AND FI FTH AMENDMENTS. A. F i r s t Amend m e n t . Verizon as serts that the Open In ternet Rules violat e the First Amendmen t becau s e they “limi t br oad b a n d provi d e r s’ own speech and co mpel carria g e of others’ speech.” Br. 43. That clai m fails. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 81 of 122 6 9 1. The Commiss i o n corre c t l y deter mi n e d that broadb a n d provid e r s are not “speak e r s ” at all, but only “condu i t s for speech ” of others and that the Open Interne t Rules theref o r e do not implic a t e the First Amendment. Order ¶141 (JA 78). End users purch a s e servi c e so that “they can obtai n acces s to all or subst a n t i a l l y all conte n t that is avail a b l e on the Interne t,” withou t editor i a l select i o n by the servic e provid e r. Ibid. Verizon ad mits as mu ch when it argue s that “broa d b a n d provi d e r s today gener a l l y provid e subsc r i b e r s acces s to all lawfu l [Inter net] co ntent.” Br. 51. In fact, as the Commissio n pointe d out, broad b a n d provi d e r s obtai n immu n i t y from copyr i g h t viol a t i o n s and ot her liabi li t y for mater i a l distr ib u t e d on their netwo r k s on the very groun d that “they lack contr o l over what end users transm i t and receiv e.” Order ¶142 & n.456 (JA 78). Thus, Verizon argue d – and this Court agree d – that it is not subjec t to subpoen a in a copyri g h t infri n g e m e n t case becaus e as a broad b a n d provid e r it “act[ s ] as a mere condu i t for the trans mi s s i o n of inform a t i o n sent by others.” Recording Indus. Ass’n v. Verizon Internet Servs., Inc., 351 F.3d 1229, 1237 (D.C. Cir. 2003); see also Charter Communications, Inc., 393 F.3d 771, 777 (8th Cir. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 82 of 122 70 2005) (no subpo e n a becau s e broad b a n d provi d e r is “limi t e d to actin g as a condu i t ”). 15 That should be the end of the matter. In that regar d, this case is simil a r to Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S. 47 (2006) ( FAIR). There, a statut e comp e l l e d law schoo l s to grant milit a r y recru i t e r s acces s to the schoo l s’ job r ecrui t i n g facili t i e s. The school s claime d that the requi r e men t amoun t e d to comp e l l e d speec h. The Court unani mo u s l y reject e d the claim. The requir e m e n t, it ruled, “re gul a t e s conduc t, not speech. It affect s what law schoo l s mu st do – affor d equal acces s to milit a r y recru i t e r s – not what they may or may not say.” Id. at 60. That was so, the Court held, because: schoo l s are not speak i n g when they host inter v i e w s and recru i t i n g recep t i o n s.… A law schoo l’s recru i t i n g servi c e s lack the ex press i v e qualit y of a parade, a newslette r, or the edito r i a l page of a newspa p e r ; its accom m o d a t i o n of a milita r y recrui t e r’s messag e is not co mp el l e d speech becaus e the acco mm o d a t i o n does not suffic i e n t l y interf e r e with any messag e of the school. 15 See also 47 U.S.C. § 230(c)(1) (“[n]o provi d e r … of an inter a c t i v e co mpute r service shall be treat ed as the publi s h e r or speak e r of any infor ma t i o n provid e d ” over its syst e m); 17 U.S.C. § 512(a) (exemp t i n g broad b a n d provi d e r s from liabi l i t y “for infri n g e men t of copyr i g h t by reaso n of the provi d e r’s tran s mi t t i n g, routi n g, or provid i n g conne c t i o n s ” on their netwo r k s). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 83 of 122 71 547 U.S. at 64. As in that case, Veriz on has artic u l a t e d no plaus i b l e claim of expre s s i v e activ i t y in provi d i n g its end users acces s to their chose n Interne t conte n t. By delive r i n g the infor m a t i o n reque s t e d by its custo m e r s, Verizon is no diffe r en t from a messe n g e r deliv e r i n g docume n t s that contai n speech. See Stuart Minor Benjamin, Transmitting, Editing, And Communicating: Determining What “The Freedom Of Speech” Encompasses, 60 Duke L.J. 1673, 1685 (2011). Moreover, the Open Interne t requi r e men t s do not amoun t to comp e l l e d speec h becau s e they do not “inter f e r e with any messag e ” of the servic e provid e r. FAIR, 547 U.S. at 63. Verizon rema i n s free to conve y any conte n t it wishes on its facili t i e s, just as la w schoo l s “rema i n [ e d ] free … to expre s s whate v e r views they may have on the milit a r y [ ].” Id. at 60. To the extent Verizon wishes to exerci s e edito r i a l discr e t i o n, it may host its own websi t e on which it may disse mi n a t e any conte n t of its choice. Moreover, the Open Interne t Rules apply only to “broad b a n d Internet access servic e,” which the Commissi on defined to mean a service th at enabl es user acces s to all Internet endpo i n ts. Order ¶44 (JA 28). Verizon is free to provi d e to its custo m e r s “a wide range of ‘edited’ service s,” such as “Best of the Web,” that refle c t Verizon’s select i o n of Interne t conte n t. Id. ¶47 (JA 29). It may also offer USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 84 of 122 72 Speciali z e d Services such as “Interne t Protocol-video offer i n g s ” that also reflec t Verizon’s edit or i a l judgme n t s. Id. ¶¶112, 143 (JA 61, 79). The same reaso n i n g disti n g u i s h e s Turner Broadcasting System Inc. v. FCC, 512 U.S. 622 (1994). The Court deter m i n e d there that cable telev i s i o n opera t o r s have First Ame ndmen t right s becau s e they “enga g e in and trans mi t speec h ” throu g h “orig i n a l progr a m m i n g or by exerc i s i n g edito r i a l discr e t i o n over which stati o n s or progr a ms to includ e in [their ] repert o i r e.” Id. at 636 (quota t io n mark s omit t e d). Thus, ca ble operat o r s “see[k ] to commun i c a t e messa g e s on a wide varie t y of topic s a nd in a wide varie t y of forma t s ” and “exerc i s [ e ] edito r i a l discr e t i o n over whic h stati o n s or progra ms to includ e ” in their chann e l lineu p. Id. at 636 (quotat i o n marks omitt e d). Verizon has provid e d no basis to belie v e that it perfo r ms a simil a r func t i o n. Moreover, the must-carry rules “redu ce[d ] the nu mb er of chan nels over which cable operat o r s exerci s e [ d ] ” c ont r o l and “ren d e r [ e d ] it more diffi c u l t for cable programm e r s to comp ete fo r carri a g e on the limit e d chann e l s remai n i n g.” Turner, 512 U.S. at 637. No such ci rcu ms t a n c e s exist here. As descri b e d at pages 63-65 above, Internet access doe s not functi o n like a cable syste m. Verizon never co mes to terms with its self-descri b e d role as a mere condu i t for other s’ speech or with its own char ac t e r i z a t i o n of that functi o n USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 85 of 122 73 (on which this Court has relie d) in c opyr i g h t cases. It assert s, witho u t found a t i o n, that it acts “just as a newspa p e r ” does, Br. 43, but that descri p t i o n canno t be recon c i l e d with th e reali t y of Interne t acce ss servic e, which, as the Commiss i o n foun d, “does not involv e an exerci s e of editor i a l discre t i o n.” Order ¶141 (JA 78). Verizon sugge s t s that it would like to be able to “give diffe r e n t ial prici n g or prior i t y acces s ” to its own reven u e-gener a t i n g servi c e s, Br. 44, and to engag e in “two sided prici n g model s ” by charg i n g edge provi d e r s, Br. 17. Those finan c i a l conce r n s do not trans f o r m Verizon into a speake r under the First Amendme n t and would “tri v i a l i z [ e ] the freedom protec t e d ” under the Constitu t i o n. FAIR, 547 U.S. at 62. 2. If the Court were to conclu d e that the First Amend men t appli e s here, the Open Internet Rules satisf y inter m e d i a t e scrut i n y. Under that stand a r d, a conten t-neutr a l restr i c t i o n on speech will be upheld if it “furth e r s an impor t a n t or substan t i a l gover n m e n t in tere s t ” and if “the means chosen ” to achiev e that intere s t “do not burden substa n t i a l l y more speech than is necess ary.” Turner, 512 U.S. at 662 (citatio n s omitt e d). The governm e n t has at least three s ubst a n t i a l inter e s t s in prese r v i n g the openn e s s of the Interne t. First, openne s s drive s infra s t r u c t u r e inves t m e n t, which fulfi l l s numer o u s polic i e s that benefi t the public. See p p. 37-43, supra. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 86 of 122 74 Verizon itsel f has opine d that “the minut e that anyon e, whethe r from the gover n me n t or the priva t e secto r, starts to contr o l how peopl e acces s and use the Internet, it is the beginn i n g of the end of the Net as we know it.” Verizon Jan.14, 2010, ex parte at 7 (JA 756). Second, as also discus s e d above, the Open Internet Rules protec t comp e t i t i o n both among edge provi d e r s and betwe e n edge provi d e r s and acces s provi d e r s. Protecti n g consu me r s throu g h marke t force s is plain l y an impor t a n t gover n me n t inter e s t. Turner, 512 U.S. 662-663. Third, the Open Internet Rules protec t the abilit y of all Interne t users to receiv e all conten t of their choice and to share that co nten t with others throu g h YouTube or a lette r to the editor, thus “assur i n g that the public has access to a multip l i c i t y of inform a t i o n sourc e s,” which “is a gover n men t a l purpos e of the highes t order.” Turner, 512 U.S. at 663. Balanced again s t those impor t a n t gover n m e n t a l inter e s t s is the minima l effec t (if any) on speech impos e d by the Open Interne t Rules. The rules do not “burd e n subst a n t i a l l y more speech than necess a r y ” becaus e they do not burde n any ident i f i ab l e speec h (and, even if all of Verizon’s argume n t s were accep t e d, the rules would still barel y bur de n speec h). Verizon remai n s free to provid e any infor ma t i o n it choos e s to its custo me r s and other Interne t users, USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 87 of 122 75 and it also may offer edite d acces s servi c e s in which Verizon selec t s the conte n t avail a b l e to end users. Verizon argues that the threat to Internet openne s s is specul a t i v e (Br. 46-47), but the Commiss i o n deter mi n e d that broadb a n d provid e r s have the incen t i v e and abili t y to block and de grad e traffi c and have done so. See p p. 13-15, supra. Finally, after arguin g that the Open Interne t Rules are uncon s t i t u t i o n a l becau s e they sweep too broadly, Verizon fleet i n g l y claims (Br. 48) that the rules are uncon s t i tu t io n a l l y underinclusive. But this case is nothin g like City of Ladue v. Gilleo, 512 U.S. 43 (1994), on which Ve rizon relies. That case involv e d diffe r e n t i a l regul a t i o n of signa g e, and the Court expla in e d that “an exempt i o n from an otherw i s e per mis s i b l e regul a t i o n of speec h may repre s e n t a govern m e n t a l attemp t to give one si de of a debata b l e publi c quest i o n an advant a g e in expres s in g its views to the people.” Id. at 51 (citati o n omitt e d). Verizon does not argue that any such c once r n exist s here, nor does it provi d e eviden c e establ i s h i n g that other partie s are simil a r l y situa t e d to broad b a n d Interne t acces s provi d e r s that trans mi t conte n t. B. F i f t h Amend m e n t . 1. Verizon argue s (Br. 49) that the Open Internet rule prohib i t i n g block i n g amoun t s to a “perman e n t physi c a l occup a t i o n ” of broad b a n d USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 88 of 122 76 provid e r s’ prope r ty with o u t comp e n s a t i o n in violati o n of the Takings Clause. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 441 (1982). But there is co mpens at i o n here: Veriz on gets paid for carry i n g traff i c at whatev e r rate it choose s to charge its end users, a nd it need not serve any end user it wishes not to. If the Fifth Amend men t is implic a t e d at all, Verizon’s recour s e is a co mp e n s a t i o n comp l a i n t in the Court of Federal Claims. See Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172, 194- 195 (1985); Building Owners v. FCC, 254 F.3d 89, 101 (2001) (Randolph, J., concur r i n g). In any event, trans mi s s i o n of Interne t packe t s does not amoun t to “perma n e n t physic a l occupa t i o n.” Inde ed, the only appel l a t e court to have consid e r e d the issue held that “elect r o n s or photon s [trave l l i n g ] at the speed of light” throu g h an owner’s netw or k “does not involv e a physic a l occupa t i o n ” of proper t y. Cablevision Systems Corp. v. FCC, 570 F.3d 83, 98 (2nd Cir. 2009). Verizon also claims that the Open Interne t Rules const i t u t e a regula t o r y taking. Br. 49. Agai n, howeve r, Verizon is paid for the use of its networ k at whatev e r rate it estab l i s h e s. Verizon thus has faile d to show the “depr i v a t i o n USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 89 of 122 77 of all or most econo mi c use” requi r e d to state a claim of regula t o r y takin g. Full Value Advisors, LLC v. SEC, 633 F.3d 1101, 1109 (D.C. Cir. 2011). V. T H E OPEN INTERNE T RU LE S ARE BASE D ON SUBSTA N T I A L EVIDEN C E . Verizon argues brief ly that the Open Internet Rules are arbitr a r y and capric i o u s. Br. 50-52. The gist of the cl ai m is that the reco rd “fail s to evince any probl em suffi c i e n t to justify the rules.” Br. 51. The Commiss i o n deter mi n e d that br oad b a n d provid e r s have econo mi c incenti v e s to reduce Internet opennes s. Order ¶¶21-34 (JA 11-21). They also have the techn i c a l capab i l i t y to do so – and have inter f e r e d with Interne t trans mi s s i o n s in the past. See p p. 12-15, supra. The Commis sion indicated that the numbe r of block i n g incid e n t s would have been even highe r were it not for the deterr e n t effect of the Internet Policy Statement and severa l merge r condi t io n s requi r in g a dher e n c e to its polici e s. Id. ¶37 & nn.116-118 (JA 22-23). It is of cours e impos s i b l e to “predi c t with certai n t y ” the future course of a regula t e d market, but th e Commissi o n may “plan in advanc e of foreseea b l e ev ents, instead of waiting to react to them.” Southwestern Cable, 392 U.S. at 176-177. That is especi a l l y so when the “harms of open Interne t violat i o n s ” – such as preven t i n g deve lo p m e n t of the next Faceb ook or other world-chang i n g appli c a t i o n – “may be subst a n t i a l, costly, and in some cases potent i a l l y irreve r s i b l e.” Order ¶4 (JA 3). USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 90 of 122 78 Finally, Verizon makes token argum e n t s that the rules unfai r l y disc r i mi n a t e amon g simil a r l y situ a t e d pa rti e s and that the FCC departe d from a prior “dere g u l a t o r y frame w o r k for broadb a n d.” Br. 52. Those passin g menti o n s do not preser v e the claims, see Railway Labor Executives’ Ass’n v. U.S. R.R. Retirement Bd., 749 F.2d 856, 859 n.6 (D.C. Cir. 1984). They are wrong in any event. On the first point, Verizon does not attem p t to show that the other “playe r s ” ar e situate d simila r l y to comp a n i e s that provi d e – and contro l – Interne t acces s. On the se cond, the FCC has never estab l i s h e d an exclu s i v e l y dereg u l a t o r y frame w o r k, see, e.g., Ad Hoc, 572 F.3d at 906-907, but has set polic i e s to fit the situa t i o n s before it. The Op en Interne t Rules adopt the mini mu m necess ar y restri c t i o n s to addre s s the probl e ms discl o s e d by the compre h en s i v e record befor e the Commissi o n. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 91 of 122 79 C O N C L U S I O N The notice s of appea l shoul d be di smi s s e d and the petit i o n s for revie w should be denie d. Respectf u l l y submi t t e d, WILLIAM J. BAER ASSISTANT ATTORNEY GENERAL CATHERINE G. O’SULLIVAN NICKOLAI G. LEVIN ATTORNEYS UNITED STATES DEPARTMENT OF JUSTICE WASHINGTON, D.C. 20530 SEAN A. LEV GENERAL COUNSEL PETER KARANJIA DEPUTY GENERAL COUNSEL JACOB M. LEWIS ASSOCIATE GENERAL COUNSEL /s/ Joel Marcus JOEL MARCUS COUNSEL FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 (202) 418-1740 January 16, 2013 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 92 of 122 IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT VERIZON ET AL., APPELLANTS/PETITIONERS, v. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, APPELLEE/RESPONDENTS. NO. 11-1355 CERTIFICATE OF COMPLIANCE Pursuant to the requi r e men t s of Fe d. R. App. P. 32(a)(7), I hereby certi f y that the accom p a n y i n g Brie f for Appellee/Respond e n ts in the captio n e d case contai n s 15,963 words. /s/ Joel Marcus Joel Marcus Counsel Federal Communic a t i o n s Commissi o n Washingt o n, D.C. 20554 (202) 418-1740 (Telephon e) (202) 418-2819 (Fax) January 16, 2013 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 93 of 122 STATUTORY APPENDIX 47 U.S.C. § 151 47 U.S.C. § 152(a) 47 U.S.C. § 153(11), (24), (53) 47 U.S.C. § 154(i) 47 U.S.C. § 201(a), (b) 47 U.S.C. § 218 47 U.S.C. § 230(a), (b) 47 U.S.C. § 301 47 U.S.C. § 303(a), (b), (g), (r) 47 U.S.C. § 307(a) 47 U.S.C. § 316 47 U.S.C. § 536 47 U.S.C. § 548(a), (b), (c) 47 U.S.C. § 1302 47 C.F.R. § 8.3 47 C.F.R. § 8.5 47 C.F.R. § 8.7 47 C.F.R. § 8.11 USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 94 of 122 47 U.S.C. § 151 § 151. Purpo s e s of chapt e r ; Fe der a l Commu n i c a t i o n s Commi s s i o n creat e d For the purpo s e of regul a t i n g inte r s t a t e and forei g n comme r c e in commu n i c a t i o n by wire and radio so as to make avail a b l e, so far as possi b l e, to all the people of the United States, witho u t disc r imi n a t i o n on the basis of race, color, religi o n, nation a l origin, or sex, a rapid, efficie n t, Nation-wide, and world-wide wire and radio co mmun i c a t i o n servic e with adequa t e facili t i e s at reason a b l e ch arge s, for the purpos e of the nation a l defen s e, for the purpo s e of promo t i n g safet y of life a nd prope r t y throu g h the use of wire and radio commu n i c a t i o n s, and for the purpo s e of secur i n g a more effect i v e execu t i o n of this polic y by centr a l i z i n g autho r it y heret o f o r e grant e d by law to severa l agenc i e s and by gran ti n g addit i o n a l autho r i t y with respect to interst a t e and foreign co mmerc e in wi re and radio co mmuni c a t i o n, there is cr eat ed a commi s s i o n to be known as the “F ederal Communic a t i o n s Commissi o n ”, which shall be consti t u t e d as herein a f t e r provi d e d, and which shall execu t e and enforc e the provis i o n s of this chapte r. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 95 of 122 47 U.S.C. § 152 § 152. Appli c a t i o n of chapt e r (a) The provis io n s of this chapt e r sha ll apply to all inter s t a t e and forei g n commu n i c a t i o n by wire or radio and all in ter s t a t e and forei g n trans mi s s i o n of energ y by radio, which origi n a te s and/or is receiv e d withi n the United States, and to all person s engag e d withi n the United States in such commun i c a t i o n or such trans mi s s i o n of energ y by radio, and to the licen s i n g and regul a t i n g of all radio stati o n s as herei n a f t e r provi d e d ; but it shall not apply to perso n s engag e d in wire or radio commu n i c a t i o n or trans mi s s i o n in the Canal Zone, or to wire or radio commu n i c a t i o n or trans mi s s i o n wholl y within the Canal Zone. The provisi o n s of this chapter shall apply with respect to cable ser v ice, to all perso n s engag e d withi n the United States in provi d i n g such servi c e, and to the facil i t i e s of cable opera t o r s which relate to such serv ic e, as provid e d in subchap t e r V-A. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 96 of 122 47 U.S.C. § 153 § 153. Defin i t i o n s (11) Common carri e r The ter m “co mmon carrier ” or “carri e r ” means any perso n engag e d as a common carri e r for hire, in inter s t a t e or forei g n commu n i c a t i o n by wire or radio or inter s t a t e or forei g n radio trans m i s s i o n of energ y, excep t where refer e n c e is made to commo n carri e r s not subjec t to this chapte r ; but a person engag e d in radio broad c a s t i n g shall not, in sofa r as such perso n is so engag e d, be deemed a co mmo n carrier. (24) Informati o n servic e The term “info r mat i o n servi c e ” mean s the offerin g of a cap abil i t y for gener a t i n g, acquir i n g, storin g, transf o r mi n g, proces s i n g, retrie v i n g, utiliz i n g, or makin g avail a b l e infor ma t i o n via telec o m mu n i c a t i o n s, and inclu d e s elect r o n i c publi s h i n g, but does not inclu d e any use of any such capab i l i t y for the manag e m e n t, contro l, or opera t i o n of a teleco m mu n i c a t i o n s syste m or the manage m e n t of a teleco m mu n i c a t i o n s servic e. (53) Telecommu n i c a t i o n s servic e The ter m “teleco mm unications se rvi c e ” means the of fer i n g of teleco mm u n i c a t i o n s for a fee di rectly to the public, or to such classe s of users as to be effect i v e l y availa b l e direct l y to the public, regard l e s s of the facili t i e s used. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 97 of 122 47 U.S.C. § 154 § 154. Feder a l Commu n i c a t i o n s Commi s s i o n (i) Duties and power s The Commissi o n may perfo r m any and all acts, make such rules and regul a t i o n s, and issue such order s, not in cons i s t e n t with this chapte r, as may be neces s a r y in the execu t i o n of its funct io n s USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 98 of 122 47 U.S.C. § 201 § 201. Servi c e and charg e s (a) It shall be the duty of every comm o n carri e r engag e d in inter s t a t e or forei g n commu n i c a t i o n by wire or ra dio to furnis h such commu n i c a t i o n servi c e upon reason a b l e reque s t there f o r ; and, in acco rdan c e with the orders of the Commissio n, in cases where th e Commissi o n, after oppor t u n i ty for heari n g, finds such actio n neces s a r y or desira b l e in the public intere s t, to estab l i s h physi c a l conne c t i o n s with other carri e r s, to estab l i s h throu g h route s and charg e s appli c a b l e there t o and the divis i o n s of such charg e s, and to estab l i s h and provi d e facil i t i e s and regul a t i o n s for opera t i n g such throu g h route s. (b) All charges, practices, class i fica t i o n s, and regul a t i o n s for and in conne c t i o n with such commu n i c a t i o n serv ic e, shall be just and reasona b l e, and any such charge, practic e, classif i c a t i o n, or regula t i o n that is unjus t or unreas o n a b l e is declar e d to be unlawf u l : Provided, That commu n i c a t i o n s by wire or radio subje c t to this chapte r may be class i f i e d into day, night, repeated, unrepeat e d, letter, commerci al, press, Governme n t, and such other classes as the Commission may decide to be just and reason a b l e, and differ e n t charg e s may be made for the diffe r e n t class e s of commu n i c a t i o n s : Provided further, That nothin g in this chapte r or in any other provis i o n of law shall be constr u e d to preven t a co mmon carrie r su bje c t to this chapt e r from enter i n g into or opera t i n g under any contr a c t with any co mmo n carri e r not subje c t to this chapte r, for the exchan g e of thei r servi c e s, if the Commissi o n is of the opinio n that such contra c t is not contra r y to the public inter e s t : Provided further, That nothin g in this chapt e r or in any other provis i o n of law shall preven t a common carrie r subjec t to th is chapt e r from furni s h i n g repor t s of posit io n s of ships at sea to newsp a p e r s of gener a l circu l a t i o n, either at a nomin a l charg e or witho u t charg e, provi de d the name of su ch co mmon carrier is displ a y e d along with such ship posit io n repor t s. The Commiss i o n may presc r i b e such rules and regul a t i o n s as may be neces s a r y in the publi c inter e s t to carry out the provis i o n s of this chapte r. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 99 of 122 47 U.S.C. § 218 § 218. Manag e m e n t of busin e s s ; inqui r ie s by Commi s s i o n The Commissi o n may inqui r e into the manag e m e n t of the busin e s s of all carri e r s subje c t to this chapt e r, and sha ll keep itsel f infor me d as to the manne r and metho d in which the same is condu c t e d and as to techn i c a l devel o p m e n t s and impr o v e men t s in wire and radi o co mmu n i c a t i o n and radi o tran s mi s s i o n of energ y to the end that the benef i t s of new inventions a nd deve l o p me n t s may be made availa b l e to the people of the United States. The Commissi o n may obtai n from such carri e r s and from perso n s direc t l y or indir e c t l y contr o ll i n g or contr o lled by, or under direc t or indir e c t commo n contr o l with, such carrie r s full and co mple t e infor m a t i o n ne ces s a r y to enabl e the Commissi o n to perfo r m the dutie s and carry out th e object s for which it was creat ed. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 100 of 122 47 U.S.C. § 230 § 230. Protec t i o n for privat e blocki n g and scree n i n g of offen s i v e mater i a l (a) Finding s The Congress finds the follow i n g : (1) The rapid l y devel o p i n g array of Inte rnet and other interact i v e co mputer servic e s availa b l e to indivi d u a l Americ an s repre s e n t an extrao r d i n a r y advan c e in the avail a b i l i t y of educa t i o n a l and in form a t i o n a l resour c e s to our citize n s. (2) These servic e s offer us ers a great degree of cont r o l over the info r ma t i o n that they receiv e, as well as the potent i a l for even great e r contro l in the future as techn o lo g y devel o p s. (3) The Internet and other interac t i v e co mpu t e r servi c e s offer a forum for a true divers i t y of politi c a l disc o u r s e, unique oppor t u n i t i e s for cultu r a l develo p m e n t, and myriad ave nu e s for intel l e c t u a l activ i t y. (4) The Internet and other interac t i v e co mpu t e r servic e s have flouri s h e d, to the benefi t of all American s, with a minim u m of gover n m e n t regul a t i o n. (5) Increas i n g l y America n s are relyi n g on inter a c t i v e media for a varie t y of politi c a l, educat i o n a l, cultur a l, and entert a i n me n t servi c e s. (b) Policy It is the polic y of the United States-- (1) to promot e the contin u e d devel o p m e n t of the Interne t and other inter a c t i v e compu t e r servi c e s and ot her interactive media; (2) to preser v e the vibran t and co mp et i t i v e free market that presen t l y exists for the Internet and other intera c t i v e compu t e r servic e s, unfet t e r e d by Federal or State regul a t i o n ; USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 101 of 122 47 U.S.C. § 230 (con’t) (3) to encour a g e the develo p m e n t of techn o l o g i e s which maximi z e user contr o l over what infor ma t i o n is re cei v e d by indiv i d u a l s, famil i e s, and schoo l s who use the Interne t and other inter a c t i v e compu t e r servi c e s ; (4) to remove disinc e n t i v e s for the de ve l o p me n t and util i z a t i o n of blocki n g and filter i n g techn o l o g i e s that empowe r paren t s to restr i c t their child r e n 's access to objecti o n a b l e or ina pp r o p r i a t e onlin e mater i a l ; and (5) to ensure vigoro u s enforc e m e n t of Federal crimi n a l laws to deter and punish traff i c k i n g in obscen i t y, stal ki n g, and haras s m e n t by means of co mputer. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 102 of 122 47 U.S.C. § 301 § 301. Licen s e for radio commu n i c a t i o n or transm i s s i o n of energy It is the purpo s e of this chapt e r, among ot her thing s, to maint a i n the contr o l of the United States over all the channe l s of radio trans mi s s i o n ; and to provi d e for the use of such chann e l s, but not the owner s h i p there o f, by perso n s for limit e d perio d s of time, under licen s e s grant e d by Federal autho r i t y, and no such licens e shall be constr u e d to creat e any right, beyon d the terms, condit i o n s, and period s of the licens e. No person shall use or opera t e any appara t u s for the transm i s s i o n of ener gy or commun i c a t i o n s or signal s by radio (a) from one place in any State, Territor y, or posse s s i o n of the United States or in the District of Columbi a to an other place in the same State, Territor y, posses s i o n, or District ; or (b) from any State, Territor y, or posses s i o n of the United States, or from th e District of Columb ia to any other State, Territor y, or posse s s i o n of the Un ited States; or (c) from any place in any State, Territor y, or posse s s io n of the United States, or in the District of Columbia, to any place in any forei g n co unt r y or to any vesse l ; or (d) within any State when the effect s of such use exten d beyon d the borde r s of said State, or when interf e r e n c e is caus ed by such use or operat i o n with the trans mi s s i o n of such energ y, commu n i c a t i o n s, or signa l s from withi n said State to an y place beyon d its border s, or from any place beyon d its border s to any place withi n said State, or with the trans mi s s i o n or recept i o n of such energ y, commun i c a t i o n s, or signa l s from and/or to places beyond the border s of said State; or (e) upon any vessel or ai rcra f t of the United States (except as provi d e d in secti o n 303(t) of this title); or (f) upon any other mobil e stati o n s withi n the juris d i c t i o n of the United States, except under and in accord a n c e with this chapte r and with a licens e in that behal f grant e d under the provis i o n s of this chapte r. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 103 of 122 47 U.S.C. § 303 § 303. Powe r s and dutie s of Commi s s i o n Except as other w i s e provid e d in this chapter, the Commissio n from ti me to time, as public conven i e n c e, interes t , or necess i t y requi r e s, shall-- (a) Classify radio stati o n s ; (b) Prescribe the nat u re of the service to be rende r e d by each class of licen s e d stati o n s and each stati o n withi n any class ; ( g ) Study new uses for radio, provid e fo r experi m e n t a l uses of freque n c i e s, and genera l l y encour a g e the lar g er and more effecti v e use of radio in the publi c inter e s t (r) Make such rules and regul a t io n s a nd prescr i b e such restri c t i o n s and condit i o n s, not incons i s t e n t with law, as may be necess a r y to carry out the provis i o n s of this chapt e r, or any inte rn a ti o n a l radio or wire commun i c a t i o n s treat y or conven t i o n, or regula t i o n s a nnex e d there t o, inclu d i n g any treat y or conve n t i o n insof a r as it rela te s to the use of radio, to which the United States is or may hereaft e r beco me a party USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 104 of 122 47 U.S.C. § 307 § 307. Licen s e s (a) Grant The Commissio n, if public conven i e n c e, in teres t, or necessi t y will be served there b y, subjec t to the limit a t i o n s of th is chapte r, shall grant to any applic a n t there f o r a statio n licen s e provi d e d for by this chapte r USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 105 of 122 47 U.S.C. § 316 § 316. Modif i c a t i o n by Commi s s i o n of statio n licen s e s or constr u c t i o n permi t s ; burde n of proof (a)(1 ) Any statio n licen s e or const r u c t i o n permi t may be modif i e d by the Commissi o n eithe r for a limit e d time or fo r the durat i o n of the term there o f, if in the judgme n t of th e Commiss i o n such actio n will promo t e the publi c inter e s t, conven i e n c e, and necess i t y, or th e provi s io n s of this chapt e r or of any treat y ratif i e d by the United States will be more fully co mp l i e d with. No such order of modifi c a t i o n shall beco me fi nal until the holder of the licens e or permi t shall have been notif i e d in wr iti n g of the propo s e d actio n and the groun d s and reaso n s there f o r, and shall be given reaso n a b l e oppor t u n i ty, of at least thirt y days, to prote s t such propo s e d order of modif i c a t i o n ; excep t that, where safet y of life or prope r ty is involv e d, the Commissi o n may by order provid e, for a short e r perio d of notic e. (2) Any other licen s e e or permi t t e e who belie v e s its licen s e or permi t would be modif i e d by the propo s e d actio n ma y also prote s t the propo s e d actio n before its effectiv e date. (3) A protest filed pursu a n t to this subsec t i o n shall be subjec t to the requir e m e n t s of sectio n 309 of th is title for petiti o n s to deny. (b) In any case where a hearin g is condu c t e d pursu a n t to the provi s i o n s of this secti o n, both the burde n of proce e d i n g with the introd u c t i o n of eviden c e and the burden of proof shall be upon the Commissi o n ; excep t that, with respec t to any issue that addres s e s the questi o n of wheth e r the propo s e d actio n would modif y the licen s e or permi t of a perso n descr i b e d in subse c t i o n (a)(2) of this sectio n, such burden s shall be as deter mi n e d by the Commiss i o n. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 106 of 122 47 U.S.C. § 536 § 536. Regula t i o n of carria g e agree m e n t s (a) Regulati o n s Within one year after October 5, 1992, the Commissi o n shall estab l i s h regul a t i o n s gover n i n g progr a m carri a g e agree m e n t s and relat e d pract i c e s betwee n cable operat o r s or othe r multi c h a n n e l video progr a m mi n g dist r ib u to r s and video prog r a m mi n g ve ndo r s. Such regul a t i o n s shall-- (1) includ e provi s i o n s desig n e d to pr even t a cable opera t o r or other multi c h a n n e l video progr a m m i n g distr i b u t o r from requi r i n g a financ i a l intere s t in a program servic e as a c ondi t i o n for carri a g e on one or more of such opera t o r 's syste ms ; (2) includ e provi s i o n s desig n e d to pr ohib it a cable opera t o r or other multi c h a n n e l video progr a m m i n g di str i b u t o r from coerc i n g a video progr a m m i n g vendo r to provid e, and fro m retal i a t i n g again s t such a vendor for faili n g to provi d e, exclus i v e ri ght s again s t other multi c h a n n e l video progr a m m i n g distr i b u t o r s as a condi t i o n of carri a g e on a syste m; (3) contain provis i o n s design e d to prev e n t a multic h an n e l video progr a m mi n g distr ib u to r from engag i n g in condu c t the effec t of which is to unrea s o n a b l y restra i n the abilit y of an unaffi l i a t e d video progr a m mi n g vend o r to comp e t e fair l y by discr i mi n a t i n g in video prog r a m mi n g distr i b u t i o n on the basis of affil i a t i o n or nonaf f i l i a t i o n of vendo r s in the selec t i o n, terms, or condi t i o n s for carri a g e of video progr a m m i n g provi d e d by such vendo r s ; (4) provid e for exped i t e d revie w of any comp l a i n t s made by a video progr a m m i n g vendo r pursu a n t to this secti o n ; (5) provid e for approp r i a t e penal t i e s and remed i e s fo r violat i o n s of this subsec t i o n, includi n g carria g e ; and (6) provide penalt i e s to be assess e d ag ain s t any perso n filin g a frivo l o u s co mp l a i n t pursu a n t to this sectio n. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 107 of 122 47 U.S.C. § 536 (con’t) (b) “Video progr a m mi n g vendo r ” defin e d As used in this sectio n, the term “vide o progr a m mi n g vendo r ” means a perso n engag e d in the produ c t i o n, creati o n, or whole s a l e distr i b u t i o n of video progr a m m i n g for sale. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 108 of 122 47 U.S.C. § 548 § 548. Devel o p m e n t of compe t i t i o n an d diver s i t y in video progr a m m i n g distr i b u t i o n (a) Purpose The purpos e of this secti o n is to prom ot e the public intere s t, conven i e n c e, and neces s i t y by incre a s i n g comp e t i t i o n and diver s i t y in the multi c h a n n e l video progra m m i n g market, to increa s e th e availabi l i t y of satellit e cab le progr a m m i n g and satel l i t e broad c a s t pr ogr a m mi n g to perso n s in rural and other areas not current l y able to recei v e such progra m m i n g, and to spur the devel o p m e n t of commu n i c a t i o n s techn o l o g i e s. (b) Prohibi t i o n It shall be unlawf u l for a cable opera t o r, a satell i t e cabl e prog r a m mi n g vend o r in which a cable opera t o r has an attri b u t able interest, or a satel l i t e broad c a s t progr a m m i n g vendo r to enga g e in unfai r metho d s of comp e t i t i o n or unfai r or decept i v e acts or practi c e s, the purpos e or effect of which is to hinder signi f i c a n t l y or to preve n t any multi c h a n n e l video progr a m m i n g distr i b u t o r from provi d i n g satel l i t e cable progr a m mi n g or satell i t e broadc a s t progr a m m i n g to subsc r i b e r s or consu me r s. (c) Regulati o n s requir e d (1) Proceedi n g requi r e d Within 180 days after October 5, 1992, the Commissi o n shall, in order to promo t e the publi c inter e s t, conven i e n c e, and neces s i t y by incre a s i n g co mp e t i t i o n and diver s i t y in the multi c h a n n e l video progr a m m i n g marke t and the conti n u i n g develo p me n t of comm un i c a t i o n s techno l o g i e s, prescr i b e regul a t i o n s to specif y parti c u l a r condu c t that is prohi b i t e d by subse c t i o n (b) of this sectio n. (2) Minimum conte n t s of regula t i o n s The regul a t i o n s to be promu l g a t e d under this secti o n shall-- USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 109 of 122 47 U.S.C. § 548 (con’t) (A) establ i s h effec t i v e safeg u a r d s to pr even t a cable operat o r which has an attrib u t a b l e intere s t in a satell i t e cable progr a m m i n g vendo r or a satell i t e broad c a s t progr a m m i n g vendo r from undul y or impro p e r l y influ e n c i n g the decis i o n of such vendo r to sell, or the pr ice s, terms, and condi ti o n s of sale of, satell i t e cable progr am m i n g or satel l i t e broad c a s t progr a m mi n g to any unaff i l i a t e d multi c h a n n e l vide o progr a m mi n g distr i b u t o r ; (B) prohib i t discr i mi n a t i o n by a satel l i t e cable progr a m mi n g vendo r in which a cable op erat o r has an attribu t a b l e intere s t or by a satell i t e broadc a s t progr a m m i n g vendo r in the price s, terms, and condi ti o n s of sale or deliv e r y of satel l i t e cable progr am m i n g or satel l i t e broa d c a s t prog r a m mi n g amon g or betwe e n cabl e syst e ms, cable opera t o r s, or other multi c h a n n e l video progr a m m i n g distr i b u t o r s, or their agen t s or buyin g group s ; excep t that such a satel l i t e cable progr am m i n g vendo r in which a cable operato r has an attrib u t a b l e intere s t or such a sa tel l i t e broad c a s t progr a m m i n g vendo r shall not be prohib i t e d from-- (i) imposi n g reaso n a b l e requi r e m e n t s for cr edi t w o r t h i n e s s, offeri n g of servi c e, and finan c i a l stabi l i t y and stand a r d s re gard i n g charac t e r a nd techn i c a l quali t y ; (ii) establi s h i n g differ e n t prices, ter ms, and condit i o n s to take into accoun t actua l and reason a b l e diffe r e n c e s in the co st of creati on, sale, delivery, or trans mi s s i o n of satel l i t e cable pr ogra m m i n g or satell i t e broadc a s t progr a m m i n g ; (iii) establ i s h i n g differ e n t price s, term s, and condi t i o n s which take into accou n t econo mi e s of scale, cost savi ng s, or other direc t and legiti m a t e econo mi c benef i t s reaso n a b l y attri b u t a b l e to the number of subscr i b e r s serve d by the distr i b u to r ; or (iv) enterin g into an exclus i v e contra c t that is permi t t e d under subpa r a g r a p h (D); (C) prohibi t practi c e s, unders t a n d i n g s, a rran g e men t s, and activ i t i e s, inclu d i n g exclus i v e contra c t s for satell i t e cable progr a m m i n g or satell i t e broad c a s t progra m m i n g betwee n a cable operat o r and a satell i t e cable progr a m m i n g vendo r or satel l i t e broad c a s t progr a m mi n g vendor, that preven t a USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 110 of 122 47 U.S.C. § 548 (con’t) multic h a n n e l video progr a m m i n g di str i b u t o r from obtai n i n g such progr a m m i n g from any satel l i t e cable progr a m m i n g vendo r in which a cable operat o r has an attrib u t a b l e intere s t or an y satel l i t e broad c a s t progr a m m i n g vendo r in which a cable opera t o r has an a ttrib u t a b l e inter e s t for distri b u t i o n to perso n s in areas not serve d by a cable opera t o r as of October 5, 1992; and (D) with respec t to distri b u t i o n to person s in areas served by a cable oper ator, prohib i t exclu s i v e contr a c t s for sa tel l i t e cable progr am m i n g or satel l i t e broad c a s t progr a m m i n g betwe e n a ca ble operato r and a satelli t e cable progra m m i n g vendor in which a cable operat o r has an attrib u t a b l e inter e s t or a satell i t e broad c a s t progr a m m i n g vendor in which a cable op erat o r has an attribu t a b l e interes t, unless the Comm issi o n deter m i n e s (in accord a n c e with parag r a p h (4)) that such contr a c t is in the publi c inter e s t. (3) Limitat i o n s (A) Geograph i c limit a t i o n s Nothing in this secti o n shall requi r e a ny perso n who is engag e d in the natio n a l or regio n a l distr i b u t i o n of video pr ogr a m m i n g to make such progr a m m i n g avail a b l e in any geogra p h i c area beyond which such progr a m mi n g has been autho r i z e d or licen s e d for distr ib u t i o n. (B) Applicab i l i t y to satel l i t e retra n s mi s s i o n s Nothing in this secti o n shall apply (i) to the signal of any br oadc a s t affili a t e of a natio n a l telev i s i o n netwo r k or other telev i s i o n signa l that is retra n s mi t t e d by satell i t e but that is not sate l l i t e broad c a s t progr a m m i n g, or (ii) to any inter n a l satel l i t e co mmu n i c a t i o n of any broadc a s t ne two r k or cable netwo r k that is not satell i t e broadc a s t progra m mi n g. (4) Public inter e s t deter mi n a t i o n s on exclu s i v e contr a c t s In determi n i n g whether an ex clusi v e c ontr a c t is in the publi c inter e s t for purpo s e s of parag r a p h (2)(D), the Co mmi ssio n shall consid e r each of the followi n g factor s with respect to the effe c t of such contr a c t on the distr i b u t i o n of video progr a m mi n g in areas that are serve d by a cable oper at o r : USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 111 of 122 47 U.S.C. § 548 (con’t) (A) the effect of such excl u s i v e contr a c t on the devel o p me n t of co mp e t i t i o n in local and natio n a l multi c h a n n e l video progr a m m i n g distr i b u t i o n marke t s ; (B) the effect of such exclus i v e contra c t on co mp et i t i o n from multic h a n n e l video progr a m mi n g distr i b u t i o n techn o l o g ie s other than cable ; ( C ) the eff ect of such exclusive c ontr a c t on the attra c t i o n of capit a l inves t men t in the produ c t i o n and distr i b u t i o n of new satel l i t e cable progr a m m i n g ; (D) the eff ect of such exclusiv e contr a c t on divers i t y of progra m m i n g in the multic h a n n e l video progr a m m i n g distr i b u t i o n marke t ; and (E) the durati o n of the exclus i v e contra c t. (5) Sunset provis i o n The prohib i t i o n requi r e d by parag r a p h (2)( D) shall cease to be effect i v e 10 years after October 5, 1992, unless the Commissi o n finds, in a procee d i n g condu c t e d durin g the last year of such 10-year perio d, that such prohib i t io n conti n u e s to be necess a r y to preser v e and prote c t comp e t i t i o n and diver s i t y in the distr i b u t i o n of video progr am m i n g. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 112 of 122 47 U.S.C. § 1302 § 1302. Advan c e d telec o m m u n i c a t i o n s incen t i v e s (a) In genera l The Commission an d each State co mmis s i o n with regul a t o r y juris d i c t i o n over teleco mm u n i c a t i o n s services shall enc our a g e the deploym e n t on a reaso n a b l e and timely basis of advanc e d telec o m mu n i c a t i o n s capab i l i t y to all American s (includ in g, in parti c u l a r, eleme n t a r y and secon d a r y schoo l s and class r o o m s) by utiliz i n g, in a manner consis t e n t with the public intere s t, conven i e n c e, and necess i t y, price cap regula t i o n, regula t o r y forbe a r a n c e, measur e s that promot e co mp et i t i o n in the local teleco m m u n i c a t i o n s marke t, or other regul a t i n g metho d s that remove barri e r s to infras t r u c t u r e inves t m e n t. (b) Inquiry The Commiss i o n shall, withi n 30 months after February 8, 1996, and annua l l y there a f t e r, initia t e a notice of inquir y conce r n i n g the availa b i l i t y of advanc e d telec o m m u n i c a t i o n s capab i l i t y to all Am erican s (includ i n g, in partic u l a r, elemen t a r y and secon d a r y schoo l s and class r o o ms) and shall comp l e t e the inqui r y withi n 180 days after its initi a t i o n. In the inqui r y, the Commissi o n shall determi n e wh ethe r advanc e d teleco m mu n i c a t i o n s capabi l i t y is being deployed to all Americans in a reas on a b l e and timely fashio n. If the Commiss i o n 's dete r mi n a t i o n is negat i v e, it shall take immedi a t e action to accel e r a t e deplo y me n t of such capab i l i t y by remov i n g barri e r s to infra s t r u c t u r e inves t m e n t and by promo t i n g comp e t i t i o n in the teleco mm unications market. (c) Demograp h i c infor m a t i o n for unser v e d areas As part of the inqui r y requi r e d by subse c t i o n (b), the Commissi o n shall co mpile a list of geograph i c a l areas th at are not serve d by any provid e r of advance d teleco m mu n i c a t i o n s capabi l i t y (as defin e d by subse c t i o n (d)(1) of this secti o n) and to the exten t that da ta fr om th e Census Bureau is avail ab l e, deter mi n e, for each such unserv e d area-- (1) the popula t i o n ; USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 113 of 122 47 U.S.C. § 1302 (con’t) (2) the popula t i o n densit y ; and (3) the average per capita income. (d) Definiti o n s For purpo s e s of this subse c t i o n : (1) Advanced teleco m m u n i c a t i o n s capabi l i t y The term “advan c e d telec o m mu n i c a t i o n s capab i l i t y ” is define d, withou t rega r d to any trans mi s s i o n medi a or techno l o g y, as high-speed, switche d, broadb a n d teleco m m u n i c a t i o n s capabi l i t y th at enabl e s users to origi n a t e and receiv e high-qualit y voice, dat a, gra phi c s, and video telec o m m u n i c a t i o n s using any techn o l o g y. (2) Elementa r y and secon d a r y schoo l s The term “elem e n t a r y and secon d a r y school s ” means elemen t a r y and second a r y schoo l s, as define d in secti o n 7801 of Title 20. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 114 of 122 47 C.F.R. § 8.3 § 8.3 Tra nsp a r e n c y . A person engag e d in the provi s io n of br oadba n d Internet access servic e sh all publi c l y discl o s e accur a t e infor m a t i o n regar d i n g the netwo r k manag e m e n t practic e s, performa n c e, and commer ci a l terms of its broad b a n d Intern e t acces s servi c e s suffi c i e n t for consum e r s to make infor me d choic e s regar d i n g use of such servi c e s and for conte n t, applica t i o n, service, and device prov id e r s to devel o p, marke t, a nd maint a i n Interne t offer i n g s. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 115 of 122 47 C.F.R. § 8.5 § 8.5 No Blocki n g . (a) A person engag e d in the provi s io n of fixe d broad b a n d Intern e t acce s s servi c e, insofa r as such perso n is so e ngag e d, shall not block lawfu l conte n t, appli c a t i o n s, servi c e s, or non-harmf u l de vic e s, subjec t to reaso n a b l e netwo r k manag e m e n t. (b) A person engag e d in the provi s io n of mobil e broad b a n d Intern e t acces s servi c e, insofa r as such perso n is so engage d, shall not bloc k cons u me r s from access i n g lawfu l Web sites, subjec t to reaso n a b l e netw o r k mana g e men t ; nor shall such perso n block appli c a t i o n s that compet e with the pr ovi d e r 's voice or video telep h o n y servi c e s, subjec t to reaso n a b l e netwo r k manag e m e n t. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 116 of 122 47 C.F.R. § 8.7 § 8.7 No Unreas o n a b l e Discr i m i n a t i o n . A person engag e d in the provi s io n of fi xed broad b an d Intern e t acces s servi c e, insofa r as such person is so engage d, shall not unre a s o n a b l y disc r i mi n a t e in trans mi t t i n g lawfu l netwo r k traff i c ove r a consume r ' s broad b a n d Interne t acces s servi c e. Reasonab l e netwo r k man age m e n t shall not consti t u t e unrea s o n a b l e discr i mi n a t i o n. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 117 of 122 47 C.F.R. § 8.11 § 8.11 Defin i t i o n s . (a) Broadban d Interne t acces s servi c e. A mass-market retai l servi c e by wire or radio that provid e s the capabi l i t y to tran smi t data to and receive data from all or subst a n t i a l l y all Interne t endpo i n t s, includi n g any cap abili t i e s that are incide n t a l to and enable the operat i o n of the commu n i c a t i o n s servi c e, but exclu d i n g dial-up Interne t acces s servi ce. This ter m also enco mp as s e s any servic e that the Commissi o n finds to be provid i n g a functi o n a l equiv a l e n t of the servic e descr i b e d in the previo u s se nten c e, or that is used to evade the protec t i o n s set forth in this part. (b) Fixed broad b a n d Inte rne t acces s servi c e. A broadba n d Interne t acces s servi c e that serve s end users prima r i l y at fixed endpo i n t s using stati o n a r y equip me n t. Fixed broad b a n d Interne t acces s servi c e inclu d e s fixed wirel e s s servi c e s (includ i n g fixed unlic e n s e d wi rele s s servic e s), and fixed satel l i t e services. (c) Mobile broadb a n d Internet access servi c e. A broadb a n d Interne t acces s servi c e that serve s en d users pr ima r i l y using mobil e stati o n s. (d) Reasonable netwo r k managem e n t. A network manag e m e n t pract i c e is reaso n a b l e if it is appro p r i a t e and tailo r e d to achie v i n g a legiti m a t e netwo r k manag e m e n t purpo s e, takin g into accou n t the partic u l a r networ k archit e c t u r e and techno l o g y of the broadb a n d Interne t acces s servi c e. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 118 of 122 C E R T I FI C A T E OF SERVI CE I, Joel Marcus hereby certify that on January 16, 2013, I electronically filed the foregoing Brief for Respondents with the Clerk of the Court for the United States Court of Appeals for the D.C. Circuit by using the CM/ECF system. Participants in the case who are registered CM/ECF users will be served by the CM/ECF system. Others, marked with an asterisk, will receive service by mail unless another attorney for the same party is receiving service through CM/ECF. Helgi C. Walker Eve K. Reed William S. Consovoy Brett A. Shumate Wiley Rein LLP 1776 K Street, N.W. Washington, D.C. 20006 Counsel for: Verizon Michael E. Glover Edward Shakin William H. Johnson Verizon 1320 North Courthouse Road 9th Floor Arlington, VA 22201 Counsel for: Verizon John T. Scott, III William D. Wallace Verizon Wireless 1300 I Street, N.W. Suite 400 West Washington, D.C. 20005 Counsel for: Verizon Walter E. Dellinger O’Melveny & Myers LLP 1625 Eye Street, N.W. Washington, D.C. 20006 Counsel for: Verizon Carl W. Northrop Michael L. Lazarus Andrew M. Morentz Telecommunications Law Professionals PLLC 875 15th Street, N.W., Suite 750 Washington, D.C. 20005 Counsel for: MetroPCS Communications, Inc., et al. Mark A. Stachiw General Counsel, Secretary & Vice Chairman MetroPCS Communications, Inc. 2250 Lakeside Blvd. Richardson, TX 75082 Counsel for: MetroPCS Communications, Inc., et al. Stephen B. Kinnaird Paul & Hastings LLP 875 15th Street, NW Washington D.C. 20005 Counsel for: MetroPCS Communications, Inc. Samir C. Jain Wilmer Cutler Pickering, et al. 1875 Pennsylvania Avenue, N.W. Washington, D.C. 20006 Counsel for: Verizon USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 119 of 122 Henry Goldberg Goldberg, Godles, Wiener & Wright 1229 Nineteenth Street, N.W. Washington, D.C. 20036 Counsel for: Open Internet Coalition Harold J. Feld Public knowledge 1818 N Street, N.W. Suite 410 Washington, D.C. 20036 Counsel for: Intervenor Public Knowledge David Bergman Law Office of David C. Bergmann 3293 Noreen Drive Columbus, OH 43221 Counsel for: NASUCA Jeffrey J. Binder Law Office of Jeffrey Binder 2510 Virginia Avenue, NW Suite 1107 Washington, DC 20037 Counsel for: Vonage Holdings Corporation *Kurt M. Rogers Brendan D. Kasper Vonage Holdings Corp. 23 Main Street Homdel, NJ 07333 Counsel for: Vonage Holdings Corporation Earle D. Getchell, Jr. Esq. *Wesley G. Russell, Jr. Office of the Attorney General, Commonwealth of Virginia 900 East Main Street Richmond, VA 23219 Counsel for: Commonwealth of Virginia James B. Ramsay General Counsel National Association of Regulatory Utility Commissioners 1101 Vermont Avenue, NW Suite 200 Washington, D.C. 20005 Counsel for: NARUC Genevieve Morelli ITTA 1101 Vermont Avenue, N.W. Suite 501 Washington, D.C. 20005 Counsel for: ITTA Ilya Shapiro, Esq. The Cato Institute 1000 Massachusetts Avenue, NW Washington, D.C. 20001 Counsel for: Cato Institute USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 120 of 122 John P. Elwood Vinson & Elkins LLP 2200 Pennsylvania Avenue, NW Suite 500 West Washington, D.C. 20037 Counsel for: Cato Institute, Competitive Enterprise Institute, Free State Foundation, TechFreedom Quentin Riegel Deputy General Counsel National Association of Manufacturers 1331 Pennsylvania Avenue, NW North Tower – Suite 1500 Washington, D.C. 20004 Counsel for: NAM Russell P. Hanser *Bryan N. Tramont Wilkinson Barker Knauer, LLP 2300 N Street, NW Suite 700 Washington, D.C. 20037 Counsel for: NAM *Randolph J. May The Progress & Freedom Foundation 1444 Eye Street, NW Suite 500 Washington, DC 20005 Counsel for: Free State Foundation *Sam Kazman Competitive Enterprise Institute 1899 L Street, NW 12th Floor Washington, D.C. 20036 Counsel for: Competitive Enterprise Institute Andrew J. Schwartzman Media Access Project 1625 K Street, NW Suite 1000 Washington, D.C. 20006 Counsel for: Tim Wu Kevin S. Bankston Emma J. Llanso Center for Democracy and Technology 1634 I Street, NW Suite 1100 Washington, D.C. 20006 Counsel for: Center for Democracy and Technology, Marvin Ammori, Jack M. Balkin, Michael J. Burstein et al. John F. Blevins Loyola University New Orleans College of Law 7214 St. Charles Avenue Box 901 New Orleans, LA 70118 Counsel for: Paul Vixie, Leonard Kleinrock, Scott Bradner, et al. USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 121 of 122 E.J. Rosenkranz Orrick, Herrington & Sutcliffe LLP 51 West 52nd Street New York, NY 10019 Counsel for: Stewart Alsop, Brian Ascher, Brad Burnham, et al. Sean H. Donahue Law Office of Sean H. Donahue 2000 L Street, NW Suite 808 Washington, D.C. 20036 Counsel for: National Association of Telecommunications Officers and Advisors, et al. R.C. Lawrence U.S. Attorney’s Office Civil Division 555 4th Street , NW Washington, D.C. 20530 Counsel for: U.S.A. Nickolai G. Levin Catherine G. O’Sullivan Robert J. Wiggers U.S. Department of Justice Appellate Section 950 Pennsylvania Avenue, NW Washington, D.C. 20530 Counsel for: U.S.A. /s/ Joel Marcus Joel Marcus USCA Case #11-1355 Document #1415568 Filed: 01/16/2013 Page 122 of 122