Verizon Sues to Overturn FCC Net Neutrality Order

In a clever jurisdictional maneuver, Verizon seeks to bring its challenge in front of the same court that overturned the FCC's rebuke of Comcast.

By Kenneth Corbin | Posted Jan 21, 2011
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Verizon Communications has filed a lawsuit in a federal court seeking to overturn the recent order by the Federal Communications Commission to enact open Internet rules.

The FCC's net neutrality order, adopted Dec. 21, has not yet been published in the Federal Register, normally a requisite precondition for lawsuits challenging executive regulations.

But Verizon is arguing that the new rules alter the terms of its wireless license. By statute, the D.C. Circuit Court of Appeals hears all cases brought by parties contesting changes to FCC licenses.

The jurisdiction is significant. The D.C. Circuit was the same court that overturned the FCC's 2008 order punishing Comcast for secretly blocking peer-to-peer traffic on its network, ruling that the agency lacked the authority to enforce nondiscrimination principles included in an Internet policy statement. In response, and after months of negotiations among various stakeholders, including Verizon, the FCC enshrined the nondiscrimination requirement and other provisions as formal rules, claiming that it had formulated a new legal basis for its net neutrality authority apart from the argument the court rejected last April.

By pinning its case to the issue of license modification, Verizon is seeking to secure a sympathetic forum in the D.C. Circuit, and has requested the same panel of judges that ruled unanimously to vacate the Comcast order. Verizon is represented by Wiley Rein attorney Helgi Walker, who also represented Comcast in its case against the FCC.

Net neutrality supporters were quick to blast Verizon's lawsuit, claiming that it was a cynical legal contortion to secure a friendly jurisdiction that aimed to circumvent the normal lottery system that determines which court hears challenges to executive regulations.

"Under this bizarre legal theory, virtually every FCC decision would wind up in one court," said Andrew Jay Schwartzman, senior vice president of the Media Access Project. "Verizon has made a blatant attempt to locate its challenge in a favorable appeals court forum. The company's theory assumes that all agency actions changing rules are 'modifications' to hundreds of thousands of licenses. This would insure the case remains in the District of Columbia Circuit, and keeps others from seeking review in different courts."

A spokesman for the FCC did not immediately respond to a request for comment.

That Verizon was the first industry member to come forward with a lawsuit aimed at voiding the FCC's order is not altogether a surprise. Other historic foes of net neutrality rules, including AT&T and Comcast, responded to the agency's December vote with statements that weren't exactly ringing endorsements of the new rules, but that nonetheless lauded the FCC for not imposing more stringent regulations. Verizon took a more hostile tone, hinting at the prospect of a legal challenge in describing the new rules as an "assertion of authority without solid statutory underpinnings."

In announcing its lawsuit, Verizon reiterated its commitment to the open Internet, but explained that the lawsuit came in response to what it viewed as expansive regulatory overreach at the agency.

"We are deeply concerned by the FCC's assertion of broad authority for sweeping new regulation of broadband networks and the Internet itself," Michael Glover, senior vice president and deputy general counsel at Verizon, said in a statement. "We believe this assertion of authority goes well beyond any authority provided by Congress, and creates uncertainty for the communications industry, innovators, investors and consumers."

Reaction among lawmakers was mixed. House Republicans who have vowed to lead the effort to overturn the FCC's order and limit the agency's regulatory authority over broadband providers hailed the move, and encouraged other stakeholders to mount similar challenges.

"We welcome the decision by Verizon, and hopefully others, to demand their day in court to block the FCC's misguided attempt to regulate the Internet," Energy and Commerce Committee Chairman Fred Upton (R-Mich), said in a statement, joined by Greg Walden (R-Ore) and Lee Terry (R-Neb.), the chairman and vice chairman, respectively, of the panel's Internet subcommittee. "At stake is not just innovation and economic growth, although those concerns are vital. Equally important is putting a check on an FCC that is acting beyond the authority granted to it by Congress. Between our legislative efforts and this court action, we will put the FCC back on firmer ground."

On the other side of the aisle, Senate Commerce Chairman John Rockefeller (D-W.V.) and Rep. Henry Waxman (D-Calif.), the ranking member of the House Energy and Commerce Committee, criticized Verizon's move and reiterated their support for neutrality regulations.

"Verizon has the legal right to do this, but we are disappointed that they filed suit," they said in a statement. "We support the FCC's efforts because they will protect consumers and provide companies with the certainty they need to make investments in our growing digital economy."

The legal wrangling at the appeals court will likely stretch on for months, but with the FCC's broad authority over Internet service providers at stake, the ruling is unlikely to be the last word, according to Stifel Nicolaus analyst Rebecca Arbogast.

"Whatever happens at the circuit court level, we believe the losing side is likely to appeal to the Supreme Court, and there's some chance the court would take the case," Arbogast wrote in a research note.

Kenneth Corbin is an associate editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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