ORAL ARGUMENT NOT YET SCHEDULED SURREPLY BRIEF FOR 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 MATTHEW J. DUNNE 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 #1415570 Filed: 01/16/2013 Page 1 of 15 i TAB L E OF CONT E N T S TABLE OF AUTHORITIES ........................................................................... ii ARGUMENT ....................................................................................................1 1. Title III ..............................................................................................1 2. Common Carriage .............................................................................4 3. Fifth Amendment ..............................................................................7 CONCLUSION .................................................................................................7 USCA Case #11-1355 Document #1415570 Filed: 01/16/2013 Page 2 of 15 ii TAB L E OF AUTH O R I T I E S CASES * Cellco Partnership v. FCC, No. 11-1135 (December 4, 2012).................................................................. 1, 2, 3, 4, 5, 7 Motor Vehicle Mfrs. Ass’n v. State Farm, 463 U.S. 29 (1983) .......................................................................................................3 SEC v. Chenery Corp., 332 U.S. 194 (1947) ...................................................3 ADMI NISTRATI VE DECI SIONS 700 MHz Order, 22 FCC Rcd 15365 (2007) ....................................................3 In Re Access Charge Reform, 14 FCC Rcd 14221 (1999) ............................................................................................................6 S T A T U T E S AND REGUL A T I O N S 47 U.S.C. § 201(a).............................................................................................5 47 U.S.C. § 303(b).........................................................................................1, 2 47 U.S.C. § 303(r) .............................................................................................2 47 U.S.C. § 316 .............................................................................................2, 3 * Authorities upon which we chiefly rely are marked with asterisks. USCA Case #11-1355 Document #1415570 Filed: 01/16/2013 Page 3 of 15 ARGUM ENT As demonstrated in our principal brief, the Commission acted within its statutory authority – and consistently with the APA and the Constitution – in adopting the Open Internet Order. In this surreply, we focus on this Court’s recent decision in Cellco Partnership v. FCC, No. 11-1135 (December 4, 2012), which reaffirms the Commission’s conclusions concerning: (1) its authority under Title III of the Communications Act; (2) the absence of any common carriage mandate under the Order; and (3) the Order’s compliance with the Fifth Amendment. 1 . Ti t l e III Cellco confirms that the FCC has authority under Title III of the Communications Act to establish Open Internet rules applicable to wireless mobile broadband providers. Cellco upheld an FCC rule requiring cellular telephone companies to enter into agreements for “data roaming” – arrangements that allow a customer outside the range of his own wireless provider’s network to access mobile data services using another provider’s network. This Court held that the rule was within the Commission’s authority under Section 303(b) of the Act to “[p]rescribe the nature of the service to be rendered” by the holders of FCC-issued spectrum licenses. Slip op. 13 (“[T]he data roaming rule merely USCA Case #11-1355 Document #1415570 Filed: 01/16/2013 Page 4 of 15 2 defines the form mobile-internet service must take for those who seek a license to offer it.”). The Court found it “clear” that the data roaming rule fell “well within the Commission’s Title III authority,” particularly when considered together with the Commission’s authority both under Section 303(r) to promulgate implementing rules and under Section 316 to modify radio licenses. Id. So too here. By setting basic “rules of the road” establishing that wireless broadband Internet access providers may not block lawful data traffic in using their FCC-licensed spectrum, Order ¶¶42, 99 (JA 27, 55), the Commission’s Open Internet Rules likewise “prescribe the nature of the service to be rendered” by the holders of those licenses. 1 See FCC Br. 43-46. Petitioners err in their contention that the Commission did not rely on Section 303(b) in the Order and therefore may not do so here. Verizon Reply 17; MetroPCS Reply 5. The Commission expressly grounded its Open Internet Rules on its authority under “Title III of the Communications Act,” Order ¶133 (JA 74); see id. at ¶¶127, 128 (JA 70-71), and the “Ordering 1 Nothing in Section 303(b) as construed in Cellco limits that provision to regulations concerning “spectrum management.” Verizon Reply 18. Regardless, by ensuring that spectrum is used in a manner that will spur demand, innovation, and investment, see Order ¶134 (JA 75), the Order ensures spectrum will be “manage[d]…in the public interest.” Cellco, slip op. 11; see Br. 37-39. USCA Case #11-1355 Document #1415570 Filed: 01/16/2013 Page 5 of 15 3 Clauses” make clear that the Order was adopted “pursuant to,” inter alia, “section[] 303…of the Communications Act,” Order ¶170 (JA 87). Moreover, the Commission relied on precedent adopting similar rules for wireless providers pursuant to, inter alia, Section 303(b). See id. ¶134 & nn.433, 434 (JA 75); 700 MHz Order, 22 FCC Rcd 15365 ¶207 n.471 (2007). Accordingly, this is not a case in which the Court must “guess at the theory underlying the agency’s action.” SEC v. Chenery Corp., 332 U.S. 194, 197 (1947); see Motor Vehicle Mfrs. Ass’n v. State Farm, 463 U.S. 29, 43 (1983) (Chenery satisfied where “agency’s path may reasonably be discerned”). Cellco likewise confirms that the Order is within the Commission’s independent power to modify licenses (including by rulemaking) under Section 316 of the Act. The Cellco Court rejected Verizon’s claim that a data roaming obligation was a “fundamental” change to radio license terms that exceeded the Commission’s license-modification authority. Slip op. 15. Petitioners now argue that the rule in Cellco imposed only a “limited obligation,” while this Order works a “fundamental change,” Verizon Reply 20-21; MetroPCS Reply 10. But the Order, “grounded in broadly accepted Internet norms,” Order ¶1 (JA 2), simply preserves the status quo. By contrast, the rule in Cellco imposed a new duty to negotiate roaming agreements with competing providers on “commercially reasonable terms.” USCA Case #11-1355 Document #1415570 Filed: 01/16/2013 Page 6 of 15 4 See Cellco, slip op. 3. Under Cellco, the Open Internet Order – which does not prevent Verizon from engaging in any anticipated business practices, see, e.g., Verizon Br. 51 – is not a fundamental change.2 2 . C o m m o n Carria g e Consistent with our arguments (Br. 61 & n.12), Cellco holds that “the Commission’s interpretation and application of the term ‘common carrier’ warrants Chevron deference.” Slip op. 17. As Cellco made clear, “there is room for permissible regulation of private carriers that shares some aspects of traditional common carrier obligations.” Slip op. 23. Thus, a rule does not impose common carriage obligations simply because, as here, it limits providers’ discretion in some manner. Id. 22-23. As the Court explained, “common carriage is not all or nothing – there is a gray area in which although a given regulation might be applied to common carriers, the obligations imposed are not common carriage per se.” Id. 21-22. And within that “gray area,” “the Commission’s determination that a regulation does or does not confer common carrier status warrants deference.” Id. 22. 2 Because the rules for wireless and fixed providers operate independently, differ in scope, and rely in part on distinct authority, the rules for wireless service would be lawful regardless of the Court’s determination regarding the fixed rules (which are also lawful). Contra Verizon Reply 21-22. USCA Case #11-1355 Document #1415570 Filed: 01/16/2013 Page 7 of 15 5 Cellco further held that core common carriage exists when a carrier “is forced to offer service indiscriminately and on general terms.” Slip op. 21. Here, the Order leaves a broadband provider free to offer (or decline) to serve any end user – the only “customer” here – on any price and terms it chooses. Br. 66. Because there is no obligation to “offer service indiscriminately and on general terms,” there is no common carriage. Verizon nevertheless argues (Reply 5-7) that the Order creates “per se” common carriage because an access provider “provi[des]… service” to edge providers. But under the Communications Act (and consistent with Cellco), a common carriage relationship is defined in relation to an entity that “request[s]” “service.” 47 U.S.C. § 201(a); see Br. 61-62. Edge providers do not request service from an end user’s Internet access provider. Indeed, they generally have no technological or commercial relationship with that access provider. Br. 62. Instead, edge providers typically pay their own access providers to connect to the Internet. See Internet Eng’rs Amicus Br. 11. Thus, as in Cellco, the FCC acted within its discretion in determining that there is no common carriage where a rule preserves a provider’s right to serve (or not serve) the person requesting service – i.e., any end user. Once a service provider has opted to serve a customer, service is not turned into USCA Case #11-1355 Document #1415570 Filed: 01/16/2013 Page 8 of 15 6 common carriage by a rule that protects the customer’s ability to receive Internet content of his choice. To be sure, common carriage may be provided on a wholesale basis, Verizon Reply 6-7, but still the relevant entity is the customer who “request[s]” service. Thus, Verizon’s analogy to access charges (Reply 7) is inapt. In the telephone context, the long-distance carrier requests service (usually defined by tariff) from the local carrier. See Access Charge Reform, 14 FCC Rcd 14221, 14318 ¶188 (1999). The long-distance carrier and the local provider also have a direct technical relationship, as the long-distance provider delivers traffic to (or accepts traffic from) the local provider. In the case of the Internet, by contrast, edge providers do not request service from the end user’s access provider, and that access provider is not required to deliver content based on the demand of edge providers. Instead, it is only the request of an end user – the access provider’s customer – that triggers service. In this context, the FCC had discretion to conclude that a no-blocking rule does not create a common carriage relationship between edge providers and an end user’s access provider. Indeed, any other result would have sharply expanded traditional notions of common carriage. USCA Case #11-1355 Document #1415570 Filed: 01/16/2013 Page 9 of 15 7 3 . F i f t h Amend m e n t As the Cellco Court held, “a justl y comp e n s a t e d takin g is not uncon s t it u t i o n a l.” Slip op. 26. Because broad b a n d provid e r s are co mpen s a t ed by their custom e r s, there is no color a b le takin g s claim here. Br. 76-77. 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 denied. 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 MATTHEW J. DUNNE COUNSEL FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 (202) 418-1740 January 16, 2013 USCA Case #11-1355 Document #1415570 Filed: 01/16/2013 Page 10 of 15 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 requirements of Fed. R. App. P. 32(a)(7), I hereby certify that the accompanying Surreply Brief for Respondents in the captioned case contains 1,349 words. /s/ Joel Marcus Joel Marcus Counsel Federal Communications Commission Washington, D.C. 20554 (202) 418-1745 (Telephone) (202) 418-2819 (Fax) January 16, 2013 USCA Case #11-1355 Document #1415570 Filed: 01/16/2013 Page 11 of 15 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 Surreply 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 #1415570 Filed: 01/16/2013 Page 12 of 15 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 #1415570 Filed: 01/16/2013 Page 13 of 15 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 #1415570 Filed: 01/16/2013 Page 14 of 15 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 #1415570 Filed: 01/16/2013 Page 15 of 15