Bits Blog: A Ruling Could Support F.C.C.’s Net Neutrality Defense

Charles Rex Arbogast/Associated Press Justice Antonin Scalia

The Federal Communications Commission’s high-profile attempt to defend its net neutrality rules against a court challenge got major support on Monday from the Supreme Court, which ruled in a separate case that regulatory agencies should usually be granted deference in interpreting their own jurisdictions.

In a 6-to-3 decision, Justice Antonin Scalia wrote that in cases where Congress has left ambiguous the outlines of a regulatory agency’s jurisdiction, “the court must defer to the administering agency’s construction of the statute so long as it is permissible.”

That has big implications for Verizon v. F.C.C., in which Verizon challenged the F.C.C.’s Open Internet Order, its rules on net neutrality. Those rules said that an Internet service provider must treat all traffic on its system roughly equally, not giving priority to any one type of data or application as it moves through the provider’s Internet pipes.

The net neutrality case is pending before the United States Court of Appeals for the District of Columbia Circuit. The appeals court was expected to hear arguments in that case this spring, but deferred the case until next fall. Court watchers have speculated that the delay may have been spurred by anticipation of Monday’s decision in Arlington v. F.C.C., No. 11-1545.

“This case just gave the F.C.C.’s argument a lot more weight,” said David Kaut, a telecommunications regulatory analyst at Stifel, Nicolaus & Company in Washington. Mr. Kaut cautioned, however, that the differing facts of the two cases made it uncertain whether the precedent in the Arlington case was sufficient to validate the F.C.C.’s argument that it has authority to regulate Internet service providers.

Edward S. McFadden, a Verizon spokesman, said the company did not “anticipate that today’s decision in Arlington v. F.C.C. will have any effect on our appeal” in the net neutrality case.

That decision will be parsed for months, particularly because in explaining his reasoning, Justice Scalia constructed a hypothetical example that sounded very much like the Verizon net neutrality case.

Using two options of how Congress might have written a telecommunications law, Justice Scalia asked under which of those options the F.C.C. could legitimately claim jurisdiction over Internet service providers.

The answer, he said, was both.

“The question in every case is, simply, whether the statutory text forecloses the agency’s assertion of authority, or not,” he wrote.

The precedent applied by Justice Scalia in the Arlington case was Chevron U.S.A. v. Natural Resources Defense Council, in which the court held that courts must defer to an agency’s interpretation of its statutory jurisdiction unless it exceeds the specific bounds set by Congress.

How that applies to the Verizon case remains uncertain, however, because of a previous decision by the District of Columbia Circuit itself, in Comcast v. F.C.C. In that case, which involved a net neutrality enforcement proceeding, the circuit court said that the F.C.C. did not have authority over Comcast’s Internet service, because it was not ancillary to the authority laid out by Congress in the Communications Act.

Raw Data: Deutsche Telekom, Data Use and ‘Net Neutrality’

Deutsche Telekom, the former monopoly that controls 60 percent of broadband Internet connections in the country, said April 22 that it would impose hard-and-fast download limits on all customers of its home Internet service, starting in 2016.

Deutsche Telekom said that soaring data traffic, which is expected to quadruple by 2016, would force it to impose limits that had been applied only to mobile users.

Under a new pricing plan, Deutsche Telekom would slow landline Internet customers to a rate of 384 kilobits a second, once the download limit is reached, which for many consumers would be at 75 gigabytes of downloads per month — enough to send more than 15,000 e-mails or download and watch 100 movies. The operator said it planned to sell upgrades that would let consumers increase their limits.

The Deutsche Telekom proposal is controversial not only because it would impose the nation’s first comprehensive download limits on landline broadband service; Deutsche Telekom also plans to exempt from the limits the traffic generated by its own Internet television service, Entertain. At the same time, the operator does not plan to exempt the traffic of rival services, like YouTube, from Google; iTunes, from Apple; or Facebook.

“With Entertain, customers are paying for television, so we will make sure they aren’t sitting in front of a black screen,” said Michael Hagspihl, the Deutsche Telekom head of marketing.

In Germany, the announcement has provoked scrutiny. The country’s telecom regulator, the Bundesnetzagentur, said it would review the new tariff structure for potential violations of network neutrality principles, which generally hold that the government and Internet service providers should not discriminate or charge differently, based on the customer or the type of content.

Additionally, in the European Union, operators are barred from selectively blocking services of Web-based rivals for financial gain.

The German economics minister, Philipp Rösler, said his agency would scrutinize the legality of Deutsche Telekom’s plans. So did the German consumer protection minister, Ilse Aigner.

A group representing small and midsize businesses said the new broadband tariffs would lead to significant price increases for small businesses and the self-employed, who typically spend more time than most consumers surfing the Web.

“The massive restrictions planned by the leading provider of Internet in Germany would not only significantly affect consumers but especially freelancers and the self-employed, who would be thrown back to the 1990s in terms of Internet speeds,” said Oliver Grün, the president of Bundesverband IT Mittelstand, which represents 800 small and midsize businesses.

Deutsche Telekom has said that most German consumers average 20 gigabytes of data downloads a month and will not be affected by the new limits.

But consumer groups and government overseers are wary. In Germany, two rivals, 1&1, a reseller of Deutsche Telekom broadband service, and Kabel Deutschland, the country’s biggest cable television operator, have both introduced download limits on their Internet services, but only on the least expensive monthly packages.

Deutsche Telekom has so far not said what its new broadband fees will be. Christian Fronczak, a spokesman for Ms. Aigner, said the consumer protection agency was worried that Deutsche Telekom would create a class system in which surfing would be available only to those consumers who could afford it.

Philipp Blank, a Deutsche Telekom spokesman, said the operator did not plan to release the fees it intended to charge for broadband upgrades until the limits were implemented in 2016.

“It is very difficult in this dynamic industry to say where prices will be in 2016,” Mr. Blank said by telephone.

But the company’s current rates at its T-Mobile Germany wireless subsidiary, where mobile phone customers can double their monthly download allowances by purchasing an upgrade for €5, or $6.50, should serve as “an orientation point” for where the landline fees might eventually be set, Mr. Blank said.