2019: Case No. 18-1051: Mozilla et al. v FCC

The Oct 1, 2019 Mozilla V. FCC Ruling is a very important one upon which we can all rely; I have attempted to explain the Ruling multiple times:

  1. Link to Nov 2019, Hawaii (4,500 views)
  2. Link to Jan, 2020 South Lake Tahoe, CA (?? views) — Scrub forward to 1:21:45
  3. Link to July, 2020, New York (110 views)
  4. Link to Aug 2020, Easton, CT (210 views)
  5. Link to Sept 2020, New York (only 80 views)
  6. Link to Dec 2020, Santa Barbara, CA (only 30 views — but perhaps the best)
  7. Link to Jan 2021, Petaluma, CA (1,150 views)

Original Ruling — the following excerpt is pages 121-146; about 7,000 words and well worth reading)

Steven C. WuDeputy Solicitor General, Office of the Attorney General for New York State
Successfully Argued the Case for State Government petitioners against the FCC’s Attempted Overreach into States’ Rights.

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§ VI. Preemption

We vacate the portion of the 2018 Order that expressly preempts “any state or local requirements that are inconsistent with [its] deregulatory approach.” 2018 Order ¶ 194; see id. ¶¶ 194–204 (“Preemption Directive”). The Commission ignored binding precedent by failing to ground its sweeping Preemption Directive — which goes far beyond conflict preemption — in a lawful source of statutory authority. That failure is fatal.

The relevant portion of the Order provides that “regulation of broadband Internet access service should be governed principally by a uniform set of federal regulations,” and not “by a patchwork that includes separate state and local requirements.” 2018 Order ¶ 194. In service of that goal, the 2018 Order expressly “preempt[s] any state or local measures that would effectively impose rules or requirements that we have repealed or decided to refrain from imposing in this order or that would impose more stringent requirements for any aspect of broadband service that we address in this order.” Id. ¶ 195. In other words, the Preemption Directive invalidates all state and local laws that the Commission deems to “interfere with federal regulatory objectives” or that involve “any aspect of broadband service * * * address[ed]” in the Order. Id. ¶¶ 195–196.

The Preemption Directive conveys more than a mere intent for the agency to preempt state laws in the future if they conflict with the 2018 Order. As the Commission confirmed at oral argument, it is not just a “heads up that ordinary conflict preemption principles are going to apply.” Oral Arg. Tr. 171. The Order was meant to have independent and far-reaching preemptive effect from the moment it issued. Id.; see also 2018 Order ¶¶ 195–197. And the Commission meant for that preemptive effect to wipe out a broader array of state and local laws than traditional conflict preemption principles would allow. Oral Arg. Tr. 171 (Q: “It’s broader than ordinary conflict preemption?” A: “That’s correct.”).

The Governmental Petitioners challenge the Preemption Directive on the ground that it exceeds the Commission’s statutory authority. They are right.

A. Express and Ancillary Authority

“The [Commission], like other federal agencies, literally has no power to act unless and until Congress confers power upon it.” American Library Ass’n v. FCC., 406 F.3d 689, 698 (D.C. Cir. 2005) (formatting modified). That means that the Commission “may preempt state law only when and if it is acting within the scope of its congressionally delegated authority.” Louisiana Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 374 (1986) (“Louisiana PSC”); see also Comcast, 600 F.3d at 654 (applying the “axiomatic principle that administrative agencies may act only pursuant to authority delegated to them by Congress”) (formatting modified). Of course, if a federal law expressly confers upon the agency the authority to preempt, that legislative delegation creates and defines the agency’s power to displace state laws. FERC v. Mississippi, 456 U.S. 742, 759 (1982) (“Insofar as [the statute] authorizes FERC to exempt qualified power facilities from ‘State laws and regulations,’ it does nothing more than preempt conflicting state enactments in the traditional way.”); cf. Wyeth v. Levine, 555 U.S. 555, 576–577 & n.9 (2009) (declining to “defer[] to an agency’s conclusion that state law is pre-empted” where “Congress ha[d] not authorized [the agency] to pre-empt state law directly,” and collecting examples of statutes in which Congress had done so) (emphasis omitted).

By the same token, in any area where the Commission lacks the authority to regulate, it equally lacks the power to preempt state law. After all, an “agency may not confer power on itself,” and “[t]o permit an agency to expand its power in the face of a congressional limitation on its jurisdiction would be to grant to the agency power to override Congress.” Louisiana PSC, 476 U.S at 374–375; see Public Serv. Comm’n of Md. v. FCC, 909 F.2d 1510, 1515 n.6 (D.C. Cir. 1990) (“Maryland PSC”) (recognizing that the Commission may not “regulate (let alone preempt regulation of) any service that does not fall within its * * * jurisdiction”). In other words, even “the allowance of ‘wide latitude’ in the exercise of delegated powers is not the equivalent of untrammeled freedom to regulate activities over which the statute fails to confer, or explicitly denies, Commission authority.” National Ass’n of Regulatory Util. Comm’rs v. FCC, 533 F.2d 601, 618 (D.C. Cir. 1976) (“NARUC II”) (quoting United States v. Midwest Video Corp., 406 U.S. 649, 676 (1972) (Burger, C.J., concurring)).

The Commission’s regulatory jurisdiction falls into two categories.

The first is the “express and expansive authority” Congress delegated in the Act to regulate certain technologies. Comcast, 600 F.3d at 645. This authority extends to

“common carrier services, including

  • landline telephony (Title II of the Act);
  • radio transmissions, including broadcast television, radio, and cellular telephony (Title III); and
  • ‘cable services,’ including cable television (Title VI).”

Id. (internal citations omitted).

The second is the Commission’s “ancillary authority.” Comcast, 600 F.3d at 650. The Commission’s ancillary authority derives from a provision within Title I of the Act that empowers the Commission to

“perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions.” 47 U.S.C. § 154(i).

That provision enables the Commission to regulate on matters “reasonably ancillary to the * * * effective performance of its statutorily mandated responsibilities.” American Library, 406 F.3d at 692.

For the Preemption Directive to stand, then, the Commission must have had express or ancillary authority to issue it. It had neither.

The Preemption Directive could not possibly be an exercise of the Commission’s express statutory authority.

By reclassifying broadband as an information service, the Commission placed broadband outside of its Title II jurisdiction. And broadband is not a “radio transmission” under Title III or a “cable service” under Title VI. So the Commission’s express authority under Titles III or VI does not come into play either. Nor did Congress statutorily grant the Commission freestanding preemption authority to displace state laws even in areas in which it does not otherwise have regulatory power.

Neither can the Commission house the Preemption Directive in its ancillary authority under Title I. “Title I is not an independent source of regulatory authority.” People of State of Cal. v. FCC, 905 F.2d 1217, 1240 n.35 (9th Cir. 1990) (citing United States v. Southwestern Cable Co., 392 U.S. 157, 178 (1968)). As a result, ancillary jurisdiction exists only when

“(1) the Commission’s general jurisdictional grant under Title I of the Communications Act covers the regulated subject and

(2) the regulations are reasonably ancillary to the Commission’s effective performance of its statutorily mandated responsibilities.” American Library, 406 F.3d at 691–692 (formatting modified).

Under binding circuit precedent, those “statutorily mandated responsibilities” must themselves be dictated by Title II, III, or VI of the Act — none of which apply since the Commission took broadband out of Title II. See Comcast, 600 F.3d at 654 (“[I]t is Title II, III, or VI to which the authority must ultimately be ancillary.”); see also, e.g., National Ass’n of Regulatory Util. Comm’rs v. FCC, 880 F.2d 422, 429–431 (D.C. Cir. 1989) (“NARUC-III”) (upholding the Commission’s preemption of state “inside wiring” regulation as ancillary to its Title II authority over interstate telephone services); Computer & Commc’ns Indus. Ass’n v. FCC, 693 F.2d 198, 207, 218 (D.C. Cir. 1982) (upholding the Commission’s preemption of certain state tariff regulations as ancillary to its Title II ratemaking power).

The Commission seemingly agrees because nowhere in the 2018 Order or its briefing does it claim ancillary authority for the Preemption Directive. See 2018 Order ¶¶ 194–204; Commission Br. 121 (acknowledging that the Order “makes no mention of either Title II or ancillary authority”) (emphasis in original).

B. The Commission’s Asserted Sources of Authority

With express and ancillary preemption authority off the table, the Commission was explicit that it was grounding its Preemption Directive in

(i) the “impossibility exception” to state jurisdiction, and

(ii) the “federal policy of nonregulation for information services.” 2018 Order ¶¶ 198, 202.

Neither theory holds up.

1. Impossibility Exception:

Section 152 of the Communications Act provides, as relevant here, that “nothing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to * * * regulations for or in connection with intrastate communication service by wire or radio of any carrier.” 47 U.S.C. § 152(b). That provision divides regulatory authority “into two separate components: interstate communications, which can be regulated by the [Commission]; and intrastate communications, which cannot.” Maryland PSC, 909 F.2d at 1514 (internal quotation marks omitted). In doing so, Section 152 “severely circumscribes” the Commission’s “power by ‘fencing off from [its] reach or regulation intrastate matters,’” including “matters in connection with intrastate service.” Public Util. Comm’n of Tx. v. FCC, 886 F.2d 1325, 1331 (D.C. Cir. 1989) (quoting Louisiana PSC, 476 U.S. at 370) (formatting modified).

Needless to say, “the realities of technology and economics” sometimes obscure the statute’s “parceling of responsibility.” Louisiana PSC, 476 U.S. at 360. The “impossibility exception” is a judicial gloss on Section 152 that attempts to help navigate the Act’s sometimes complicated division of regulatory power.

The impossibility exception started with the Supreme Court’s decision in Louisiana PSC. There, the Supreme Court rejected the Commission’s attempt to preempt States from applying their own depreciation rules in setting intrastate telephone rates. The Commission had argued that the state rules impermissibly “frustrate[d]” the “federal policy of increasing competition in the industry.” Louisiana PSC, 476 U.S. at 368, 369. The Supreme Court rejected that argument as driving outside the Commission’s statutory lane. Id. at 369– 370. But the Court also candidly acknowledged that “jurisdictional tensions may arise as a result of the fact that interstate and intrastate [telephone] service are provided by a single integrated system.” Id. at 375. Because “Section 152(b) “constitutes * * * a congressional denial of power to the [Commission],” the Supreme Court explained, “we simply cannot accept an argument that the [Commission] may nevertheless take action which it thinks will best effectuate a federal policy.” Id. at 374; see also id. at 370 (“We might be inclined to accept [the Commission’s argument] were it not for the express jurisdictional limitations on [Commission] power contained in § 152(b).”); id. at 376 (“As we so often admonish, only Congress can rewrite this statute.”).

Having rejected the Commission’s preemption effort, the Supreme Court added a footnote distinguishing cases where lower courts had found it “not possible to separate the interstate and the intrastate components of the asserted [Commission] regulation.” Louisiana PSC, 476 U.S. at 375 n.4 (citing North Carolina Utils. Comm’n v. FCC, 537 F.2d 787 (4th Cir. 1976), and North Carolina Utils. Comm’n v. FCC, 552 F.3d 1036 (4th Cir. 1977)). And with that, the impossibility exception was born.

This court has applied the impossibility exception just once, in Maryland PSC, 909 F.2d at 1515. Drawing from Louisiana PSC, we held that the express denial of Commission authority codified in Section 152(b) does not apply where

(i) “the matter to be regulated has both interstate and intrastate aspects”;

(ii) “preemption is necessary to protect a valid federal regulatory objective”; and

(iii) “state regulation would negate the exercise by the [Commission] of its own lawful authority because regulation of the interstate aspects of the matter cannot be ‘unbundled’ from regulation of the intrastate aspects.” Maryland PSC, 909 F.2d at 1515 (formatting modified).

But Maryland PSC and the impossibility exception are of no help to the Commission. In applying the impossibility exception, Maryland PSC did not vitiate the need for either an express delegation of regulatory authority or ancillary authority. All the impossibility exception does is help police the line between those communications matters falling under the Commission’s authority (Section 152(a)) and those remaining within the States’ wheelhouse (Section 152(b)). Specifically, if the matter involves interstate communications or a mix of state and federal matters and it falls within the impossibility exception, then the Commission may regulate to the extent of its statutory authority. See Louisiana PSC, 476 U.S. at 374; Maryland PSC, 909 F.2d at 1513–1515. If not, the matter falls within the States’ jurisdiction. Maryland PSC, 909 F.2d at 1514. In other words, the impossibility exception presupposes the existence of statutory authority to regulate; it does not serve as a substitute for that necessary delegation of power from Congress.

Nor can 47 U.S.C. § 152 — the statutory hook for the impossibility exception — by itself provide a source of preemption authority. We have rejected that precise argument before. In NARUC II, supra, the Commission asserted that Section 152 authorized it to preempt state regulation of two-way communications over cable systems’ leased access channels.1 That argument failed, we explained, because “each and every assertion of jurisdiction over cable television must be independently justified as reasonably ancillary to the Commission’s power over broadcasting.” NARUC II, 533 F.2d at 612.

So the Commission cannot bootstrap itself into preemption authority just by pointing to Section 152. It has to identify an independent source of regulatory authority to which the preemption action would be “reasonably ancillary.” Id. (explaining that prior Supreme Court opinions “compel[] the conclusion that cable jurisdiction, which [the Court has] located primarily in § 152(a), is really incidental to, and contingent upon, specifically delegated powers under the Act”) (citing Southwestern Cable, 392 U.S. at 178; and Midwest Video, 406 U.S. at 662–663); see also Comcast, 600 F.3d at 654 (“[I]t is Titles II, III, and VI that do the delegating.”); People of State of Cal., 905 F.2d at 1240 n.35 (recognizing that “Title I is not a source of regulatory authority”).

All that is a long way of saying that, contrary to the Commission’s argument, the “impossibility exception” does not create preemption authority out of thin air.

2. Federal Policy of Nonregulation

What the Commission calls the “federal policy of nonregulation for information services,” Commission Br. 123, cannot sustain the Preemption Directive either.

First, as a matter of both basic agency law and federalism, the power to preempt the States’ laws must be conferred by Congress. It cannot be a mere byproduct of self-made agency policy. Doubly so here where preemption treads into an area — State regulation of intrastate communications — over which Congress expressly “deni[ed]” the Commission regulatory authority, Louisiana PSC, 476 U.S. at 374. Presumably recognizing as much, the Commission attempts to house its preemption authority in 47 U.S.C. § 230(b)(2). That provision says that “the policy of the United States [is] * * * to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.” Id.

No dice. As the Commission has itself acknowledged, this is a “statement[] of policy,” not a delegation of regulatory authority. Comcast, 600 F.3d at 652 (“The Commission acknowledges that section 230(b) * * * [contains] statements of policy that themselves delegate no regulatory authority.”); see also 2018 Order ¶ 284 (characterizing Section 230(b) as merely “hortatory, directing the Commission to adhere to the policies specified in that provision when otherwise exercising our authority”) (emphasis added); id. ¶ 267 (“We also are not persuaded that section 230 of the Communications Act is a grant of regulatory authority.”). To put it even more simply, “[p]olicy statements are just that—statements of policy. They are not delegations of regulatory authority.” Comcast, 600 F.3d at 654.

Policy statements do not convey “statutorily mandated responsibilities” that the Commission may use to support an exercise of ancillary authority. Comcast, 600 F.3d at 644, 654 (“Although policy statements may illuminate [delegated] authority, it is Title II, III, or VI to which the authority must ultimately be ancillary.”); see also Motion Picture Ass’n of America v. FCC, 309 F.3d 796, 806–807 (D.C. Cir. 2002) (rejecting the Commission’s “argument that [its] video description rules are obviously a valid communications policy goal and in the public interest” because the Commission “can point to no statutory provision that gives the agency authority” to issue those rules).

Second, the Commission points to 47 U.S.C. § 153(51), which defines “telecommunications carrier,” and provides that

“[a] telecommunications carrier shall be treated as a common carrier under this chapter only to the extent that it is engaged in providing telecommunications services.”

That does not work either. Section 153(51) is a definitional provision in Title I, and so is “not an independent source of regulatory authority.” People of State of Cal., 905 F.2d at 1240 n.35. Quite the opposite. As the parties agree, that provision is a limitation on the Commission’s authority. See Governmental Pet’rs’ Br. 43 (characterizing it as “limit[ing] only the agency’s authority”); Commission Br. 128 n.38 (characterizing it as “a substantive limitation on government authority”) (citing Verizon, 740 F.3d at 650).

It also would make no sense for Congress to bury the enormously far-reaching and consequential authority to override every single State’s statutorily conferred power to regulate intrastate communications deep within a list of fifty-nine definitions in a non-regulatory portion of the statute, and then articulate the relevant definition as a restriction of the Commission’s power.

Third, the Commission points to 47 U.S.C. § 160(e). That provision says that “[a] State commission may not continue to apply or enforce any provision of [the Act] that the Commission has determined to forbear from applying under subsection (a).” Subsection (a), in turn, gives the Commission some flexibility to forbear from regulating technologies classified under Title II. Id. § 160(a).

That Title II provision has no work to do here because the 2018 Order took broadband out of Title II. So the Commission is not “forbear[ing] from applying any provision” of the Act to a Title-II technology. 47 U.S.C. § 160(e). On top of that, Section 160(e) — as a part of Title I — does not itself delegate any preemption authority to the Commission. People of State of Cal., 905 F.2d at 1240 n.35.

The best the Commission can do is try to argue by analogy. It claims that it would be “incongruous” not to extend preemption authority under Title I, given that Section 160(e) prohibits States from regulating a service classified under Title II in instances of federal forbearance. Commission Br. 115– 116.

That is a complaint that the Commission is free to take up with Congress. Until then, preemption authority depends on the Commission identifying an applicable statutory delegation of regulatory authority, and Section 160(e) does not provide it. The Commission’s “own bruised sense of symmetry” is irrelevant. NARUC II, 533 F.2d at 614. Anyhow, there is no such incongruity.

By expressly requiring that communications services under Title II be regulated as common carriers, the Federal Communications Act grants the Commission broad authority over services classified under Title II, unlike those classified under Title I. See 47 U.S.C. § 153(51); Brand X, 545 U.S. at 976; Verizon, 740 F.3d at 630; Comcast, 600 F.3d at 645. Which is also why the Act carves out more space for federal objectives to displace those of the States in the Title II context. See 47 U.S.C. § 253(a), (d) (expressly authorizing the Commission to preempt state or local regulations that “may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service[]”).

The dissenting opinion calls this “a complete non sequitur,” arguing that it “assumes an asymmetry in preemption implications” in which preemption protects “heavy-handed regulation” more than “light-touch regulation.” Dissenting Op. 10 (emphasis omitted).

Not so. The Commission could choose to enact heavier or lighter regulation under Title II by exercising less or more of its Title II forbearance authority, with symmetrical “preemption implications,” id. It just cannot completely disavow Title II with one hand while still clinging to Title II forbearance authority with the other.

3. Case Precedent

Governing precedent nails the coffin shut on the Preemption Directive.

In Louisiana PSC, the Supreme Court squarely rejected the Commission’s argument that it “is entitled to preempt inconsistent state regulation” just because it “frustrates federal policy.” 476 U.S. at 368. In doing so, the Court was explicit that, if the Commission cannot tether a rule of preemption to a relevant source of statutory authority, courts “simply cannot accept [the] argument that the [Commission] may nevertheless take action which it thinks will best effectuate a federal policy.” Id. at 374. That fits this case to a T.

Likewise, in City of New York v. FCC, on which the Commission and their amici heavily rely, the Supreme Court repeated that “an agency literally has no power to act, let alone preempt the validly enacted legislation of a sovereign State, unless and until Congress confers power upon it.” 486 U.S. 57, 66 (1988). The Court then added that “the best way of determining whether Congress intended the regulations of an administrative agency to displace state law is to examine the nature and scope of the authority granted by Congress to the agency.” Id. (quoting Louisiana PSC, 476 U.S. at 374). Needless to say, no such examination can occur if there is no legislative grant of authority against which to evaluate the preemptive rule, and certainly not when, as here, Congress expressly withheld regulatory authority over the matter. 47 U.S.C. § 152(b).

To be sure, in City of New York, the Supreme Court referenced the “background of federal preemption on this particular issue” as weighing in favor of preemption. 486 U.S. at 66–67. But the Court said so only after the threshold requirement of statutory authority had been satisfied. Specifically, the Court “conclude[d] that the Commission is authorized under § 624(e) of the Cable Act”—authority expressly delegated in Title VI—“to preempt technical standards imposed by state and local authorities.” Id. at 70 n.6.

That statutory authority is the fatal gap in the Commission’s argument here. Not only is the Commission lacking in its own statutory authority to preempt, but its effort to kick the States out of intrastate broadband regulation also overlooks the Communications Act’s vision of dual federal-state authority and cooperation in this area specifically. See, e.g., 47 U.S.C. § 1301(4) (“The Federal Government should also recognize and encourage complementary State efforts to improve the quality and usefulness of broadband data.”); id. § 1302(a) (referring to “[t]he Commission and each State Commission with regulatory jurisdiction” in a chapter titled “Broadband”); id. § 1304 (“[e]ncouraging State initiatives to improve broadband”); cf. id. § 253(b) (“Nothing in this section shall affect the ability of a State to impose * * * requirements necessary to * * * protect the public safety and welfare, * * * and safeguard the rights of consumers.”); id. § 254(i) (“The Commission and the States should ensure that universal service is available at rates that are just, reasonable, and affordable.”).

Even the 2018 Order itself acknowledges the States’ central role in “policing such matters as fraud, taxation, and general commercial dealings,” 2018 Order ¶ 196, “remedying violations of a wide variety of general state laws,” id. ¶ 196 n.732, and “enforcing fair business practices,” id. ¶ 196— categories to which broadband regulation is inextricably connected.

C. Conflict Preemption

Finally, the Commission argues that we should leave the Preemption Directive undisturbed because principles of conflict preemption would lead to the same result. See Commission Br. 130–133.

Any intuitive appeal this argument might have offered evaporated at oral argument when the Commission confirmed what the Preemption Directive’s plain language bespeaks: It sweeps “broader than ordinary conflict preemption.” Oral Arg. Tr. 171; see 2018 Order ¶ 195 (preempting “any state or local measures that would effectively impose rules or requirements that we have repealed or decided to refrain from imposing in this order or that would impose more stringent requirements for any aspect of broadband service that we address in this order”). The necessary consequence of this position is that ordinary conflict preemption principles cannot salvage the Preemption Directive. Cf. City of New York, 486 U.S. at 65–66 (“Since the Commission has explicitly stated its intent to * * * pre-empt state and local regulation, this case does not turn on whether there is an actual conflict between federal and state law.”).

The Commission’s conflict-preemption argument tries to force a square peg into a round hole. Conflict preemption applies to “state law that under the circumstances of the particular case stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress — whether that ‘obstacle’ goes by the name of conflicting; contrary to; repugnance; difference; irreconcilability; inconsistency; violation; curtailment; interference, or the like.” Geier v. American Honda Motor Co., Inc., 529 U.S. 861, 873 (2000) (formatting modified). We have long recognized that “whether a state regulation unavoidably conflicts with national interests is an issue incapable of resolution in the abstract,” let alone in gross. Alascom, Inc. v. FCC, 727 F.2d 1212, 1220 (D.C. Cir. 1984); see also Time Warner Entertainment Co. v. FCC, 56 F.3d 151, 195 (D.C. Cir. 1995) (“[T]he issue of whether the 1992 Cable Act preempts state negative option billing laws involves a host of factual questions peculiar to the state law at issue in each case.”).

Because a conflict-preemption analysis “involves fact-intensive inquiries,” it “mandates deferral of review until an actual preemption of a specific state regulation occurs.” Alascom, 727 F.2d at 1220. Without the facts of any alleged conflict before us, we cannot begin to make a conflict preemption assessment in this case, let alone a categorical determination that any and all forms of state regulation of intrastate broadband would inevitably conflict with the 2018 Order.

The dissenting opinion, for its part, invents a brand new source of preemptive power that not even the Commission claims. Dissenting Op. 5–6, 9. The power to preempt is said to derive from Chevron deference and the “definitional ambiguity” that permits the Commission to classify broadband under Title I. Id. at 9; see Chevron, 467 U.S. 837. In the dissenting opinion’s view, that interpretive ambiguity alone spawns a power to preempt with all the might of an express statutory grant of authority, and is single-handedly capable of investing the Commission with the very state-law-displacing authority that the statute withheld in Section 152(b).

This theory in the dissenting opinion fails for four reasons.

First, this asserted legal basis for preemption is not before us. The 2018 Order offered two, and only two, sources of authority for the Preemption Directive:

  • the impossibility exception and
  • the federal policy of nonregulation for information services. 2018 Order ¶¶ 197–204 (discussing these sources under the heading “Legal Authority”).

It did not advance Chevron Step Two as a source of preemption authority, so it cannot do so here for the first time. See Chenery, 318 U.S. at 87 (“The grounds upon which an administrative order must be judged are those upon which the record discloses that its action was based.”); Clean Air Council v. Pruitt, 862 F.3d 1, 4, 9 (D.C. Cir. 2017) (per curiam) (holding that an agency could not invoke on appeal a source of authority for its action that it “did not rely on” when it acted); Business Roundtable v. SEC, 905 F.2d 406, 407–408, 417 (D.C. Cir. 1990) (holding that an agency’s regulation exceeded its authority under the statutory provisions it invoked, and under Chenery “we cannot supply grounds to sustain the regulations that were not invoked by the [agency] below”)

The Commission’s brief here hewed to the 2018 Order, advancing the same “two independent bases of authority[,]” plus “ordinary principles of conflict preemption.” Commisssion Br. 116–133 (asserting these bases under the heading “The Order’s Preemption Of Inconsistent State And Local Regulation Is Lawful”). Once again, the dissenting opinion’s Chevron Step Two theory is not there. So it is forfeited. See In re U.S. Office of Personnel Mgmt. Data Sec. Breach Litig., 928 F.3d 42, 71 (D.C. Cir. 2019) (“And KeyPoint has not raised a preemption argument in this court, so any argument to that effect is forfeited for purposes of this appeal.”); United States v. Gewin, 759 F.3d 72, 87 n.2 (D.C. Cir. 2014) (“Gewin * * * forfeited that argument, however, by failing to discuss it in his briefing.”).

Of course, the Commission alluded to its Chevron Step Two interpretation in explaining its policy reasons for desiring categorical preemption. See 2018 Order ¶ 194; Commission Br. 115. But nowhere does it argue what the dissenting opinion does: that Chevron interpretive ambiguity provides an affirmative source of legal authority to preempt state laws.

Second, the dissenting opinion fails to explain how the Commission’s interpretive authority under Chevron to classify broadband as a Title I information service could do away with the sine qua non for agency preemption: a congressional delegation of authority either to preempt or to regulate. Congress expressly “fenc[ed] off from [the Commission’s] reach or regulation intrastate matters, * * * including matters in connection with intrastate service.” Louisiana PSC, 476 U.S. 370 (internal quotation marks omitted). It is also Congress that chose to house affirmative regulatory authority in Titles II, III, and VI, and not in Title I. And it is Congress to which the Constitution assigns the power to set the metes and bounds of agency authority, especially when agency authority would otherwise tramp on the power of States to act within their own borders. So to work here, the agency’s interpretive authority would have to trump Congress’s calibrated assignment of regulatory authority in the Communications Act.

But that cannot be right. No matter how desirous of protecting their policy judgments, agency officials cannot invest themselves with power that Congress has not conferred. Louisiana PSC, 476 U.S. at 374; American Library, 406 F.3d at 698. And nothing in Chevron rewrites or erases plain statutory text. See Chevron, 467 U.S. at 842–843 (“First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.”).

The dissenting opinion invokes two cases discussing implied preemption arising from different agencies’ decisions to forgo regulation under different statutory schemes. See Dissenting Op. 14–15. It first cites Arkansas Electric Cooperative Corp. v. Arkansas Public Service Commission, in which the Supreme Court observed that “a federal decision to forgo regulation in a given area may imply an authoritative federal determination that the area is best left unregulated.” 461 U.S. 375, 384 (1983) (formatting modified). The Court went on to conclude that the relevant statute did not in fact imply such a determination, and so the state regulation at issue was not preempted. Id.

At best, Arkansas Electric sets up one version of the question. But it gets the dissent no closer to its preferred answer: that here, Congress delegated to the Commission the authority to give sweeping preemptive effect to whatever policy determination underlay its Chevron Step Two interpretation of “offer,” Dissenting Op. 5.

In the second case, Ray v. Atlantic Richfield Co., the Supreme Court described the “preemptive impact” implied by the “failure of federal officials affirmatively to exercise their full authority” under a statute that the Court had already recognized as delegating regulatory power to the agency. 435 U.S. 151, 174, 177–178 (1978) (formatting modified) (“We begin with the premise that the Secretary has the authority to establish ‘vessel size and speed limitations.’”) (cited at Dissenting Op. 14–15).

Those cases do nothing to empower the Commission to engage in express preemption in the 2018 Order. See Oral Arg. Tr. 171 (Commission: “No, Your Honor, it’s express preemption.”). In neither case was the source or existence of statutory authority for the agency to preempt state regulation at issue. Nor do those cases speak to a statutory scheme in which Congress expressly marked out a regulatory role for States that the federal agency has attempted to supplant. If Congress wanted Title I to vest the Commission with some form of Dormant-Commerce-Clause-like power to negate States’ statutory (and sovereign) authority just by washing its hands of its own regulatory authority, Congress could have said so.

Third, the dissenting opinion’s effort to discern Congress’s delegation of preemption authority in Chevron and Brand X does not work either. The dissenting opinion acknowledges that its theory of Chevron preemption authority derives entirely from the “ambiguity in the word ‘offer,’” Dissenting Op. 5, a word that is buried in a definitional section in a non-regulatory part of the statute, 47 U.S.C. § 153(53).

To be sure, Chevron and Brand X together confirm that the Commission has interpretive “discretion” to classify broadband as either an information service or a telecommunications service. Brand X, 545 U.S. at 996–997; see Chevron, 467 U.S. at 860–862 (reading a statutory gap as indicating a congressional delegation of power to an agency to fill it). Congress, in other words, created an interpretive statutory fork in the road and gave the Commission the authority to choose the path.

But the Commission’s power to choose one regulatory destination or another does not give it the option to mix and match its favorite parts of both. The dissenting opinion’s defense of the Preemption Directive makes the mistake of collapsing the distinction between

(i) the Commission’s authority to make a threshold classification decision, and

(ii) the authority to issue affirmative and State-displacing legal commands within the bounds of the classification scheme the Commission has selected (here, Title I).

The agency’s power to do the former says nothing about its authority to do the latter. Chevron, after all, is not a magic wand that invests agencies with regulatory power beyond what their authorizing statutes provide. Instead, the point of Chevron was simply to draw lines between the courts’ and administrative agencies’ respective roles in interpreting ambiguous statutes. See Chevron, 467 U.S. at 842–844.

The dissenting opinion’s theory of Chevron preemption, in other words, takes the discretion to decide which definition best fits a real-world communications service and attempts to turn that subsidiary judgment into a license to reorder the entire statutory scheme to enforce an overarching “nationwide regime” that enforces the policy preference underlying the definitional choice. Dissenting Op. 6. Nothing in Chevron goes that far. And doing so here would turn every exercise of Chevron Step-Two interpretation into a bureaucratic blunderbuss capable of demolishing state laws across the Nation any time the agency fears that state regulation might intrude on its regulatory or deregulatory ethos.

The Supreme Court has made very clear that Chevron does not have that much muscle. Congress, the Court has explained, “does not alter the fundamental details of a regulatory scheme,” let alone step so heavily on the balance of power between the federal government and the States, “in vague terms or ancillary provisions — it does not, one might say, hide elephants in mouseholes.” Whitman v. American Trucking Ass’ns, 531 U.S. 457, 468 (2001).

And that principle is a well-settled limitation on Chevron. See, e.g., King v. Burwell, 135 S. Ct. 2480, 2495 (2015) (quoting Whitman, 531 U.S. at 468); Gonzales v. Oregon, 546 U.S. 243, 267 (2006) (same); see also Natural Res. Def. Council v. EPA, 661 F.3d 662, 664–665 (D.C. Cir. 2011); American Chemistry Council v. Johnson, 406 F.3d 738, 743 (D.C. Cir. 2005) (“Congress does not generally hide elephants in mouseholes, and we think it utterly improbable that [Congress intended to authorize the EPA’s interpretation] by creating a list of several hundred toxic chemicals.”) (internal citation omitted). The mousehole, in short, cannot be the wellspring of preemption authority that the Commission needs. Doubly so here, where the Supreme Court has specifically held that the Commission’s desire to “best effectuate a federal policy” must take a back seat to Section 152(b)’s assignment of regulatory authority to the States. Louisiana PSC, 476 U.S. at 374.

Anyhow, the argument that the Commission needs to save its classification decision from becoming “meaningless,” Dissenting Op. 23, still does not work. If the Commission can explain how a state practice actually undermines the 2018 Order, then it can invoke conflict preemption.2 If it cannot make that showing, then presumably the two regulations can co-exist as the Federal Communications Act envisions, 47 U.S.C. § 152(b). What matters for present purposes is that, on this record, the Commission has made no showing that wiping out all “state or local requirements that are inconsistent with the [Order’s] federal deregulatory approach” is necessary to give its reclassification effect. 2018 Order ¶ 194. And binding Supreme Court precedent says that mere worries that a policy will be “frustrate[d]” by “jurisdictional tensions” inherent in the Federal Communications Act’s division of regulatory power between the federal government and the States does not create preemption authority. Louisiana PSC, 476 U.S. at 370, 375.

For those same reasons, the dissenting opinion’s concern that “the most draconian state policy trumps all else,” Dissenting Op. 1, is a straw man. In vacating the Preemption Directive, we do not consider whether the remaining portions of the 2018 Order have preemptive effect under principles of conflict preemption or any other implied-preemption doctrine. Much like the dissenting opinion’s effort to wring out of Arkansas Electric and Ray a source of preemption authority, the dissenting opinion’s suggestion that the court’s decision leaves no room for implied preemption confuses (i) the scope of the Commission’s authority to expressly preempt, with (ii) the (potential) implied preemptive effect of the regulatory choices the Commission makes that are within its authority.

Fourth, the dissenting opinion’s reliance on the Eighth Circuit’s opinion in Minnesota Public Utilities Commission v. FCC (“Minnesota PUC”), 483 F.3d 570 (8th Cir. 2007), is misplaced. That opinion enumerated the discrete questions it purported to answer — none of which was whether Congress delegated to the Commission the authority to preempt. Id. at 577. The Eighth Circuit decided only whether the Commission’s order was “arbitrary and capricious because it * * * determined it was impractical or impossible to separate the intrastate components of VoIP service from its interstate components,” or because it “determined state regulation of VoIP service conflicts with federal regulatory policies.” Id. This set of inquiries does not resolve the purely legal question of the source of the Commission’s asserted preemption authority here.

The dissenting opinion concedes that point. Dissenting Op. 18 (acknowledging that “legal authority * * * was not formally at issue”). The dissent nevertheless suggests that the Eighth Circuit’s decision upholding as neither arbitrary nor capricious the Commission’s finding of “the facts essential for application of the impossibility exception” implies that, had that court actually considered the question whether the Commission had the legal authority to preempt, it would have disagreed with us. Id. at 17–18. But the Eighth Circuit’s silence on that question leaves us with nothing to answer.

At bottom, the Commission lacked the legal authority to categorically abolish all fifty States’ statutorily conferred authority to regulate intrastate communications. For that reason, we vacate the Preemption Directive, 2018 Order ¶¶ 194–204. And because no particular state law is at issue in this case and the Commission makes no provision-specific arguments, it would be wholly premature to pass on the preemptive effect, under conflict or other recognized preemption principles, of the remaining portions of the 2018 Order.

VII. Conclusion

Despite the Commission’s failure to adequately consider the 2018 Order’s impact on public safety, pole-attachment regulation, and the Lifeline Program and despite our vacatur of the Preemption Directive, we decline to vacate the 2018 Order in its entirety.

When deciding whether to vacate an order, courts are to consider the “the seriousness of [its] deficiencies (and thus the extent of doubt whether the agency chose correctly) and the disruptive consequences of an interim change that may itself be changed.” Allied-Signal, Inc. v. United States Nuclear Regulatory Comm’n, 988 F.2d 146, 150–151 (D.C. Cir. 1993); see also Heartland Regional Med. Ctr. v. Sebellius, 566 F.3d 193 (D.C. Cir. 2009) (analyzing the Allied-Signal factors).

Here, those factors weigh in favor of remand without vacatur. First, the Commission may well be able to address on remand the issues it failed to adequately consider in the 2018 Order. See Susquehanna Int’l Grp., LLC v. SEC, 866 F.3d 442, 451 (D.C. Cir. 2017) (“[T]he SEC may be able to approve the Plan once again, after conducting a proper analysis on remand.”); see also Black Oak Energy, LCC v. FERC., 725 F.3d 230, 244 (D.C. Cir. 2013) (remanding without vacatur where it was “plausible that FERC can redress its failure of explanation on remand while reaching the same result”). Second, the burdens of vacatur on both the regulated parties (or non-regulated parties as it may be) and the Commission counsel in favor of providing the Commission with an opportunity to rectify its errors. Regulation of broadband Internet has been the subject of protracted litigation, with broadband providers subjected to and then released from common carrier regulation over the previous decade. We decline to yet again flick the on-off switch of common-carrier regulation under these circumstances.

But because the Commission’s Preemption Directive, see 2018 Order ¶¶ 194–204, lies beyond its authority, we vacate the portion of the 2018 Order purporting to preempt “any state or local requirements that are inconsistent with [the Commission’s] deregulatory approach[,]” see id. ¶ 194.

For the foregoing reasons, the petitions for review are granted in part and denied in part.

So ordered.

  1. This was before the Cable Communications Policy Act of 1984, Pub. L. No. 98–549, 98 Stat. 2279, established a national policy governing cable television.  
  2. See Williamson v. Mazda Motor of America, Inc., 562 U.S. 323, 330 (2011) (conflict preemption wipes out “state law that stands as an obstacle to the accomplishment and execution of the [federal law’s] full purposes and objectives”) (internal quotation marks omitted).