The world is changing for operators of physical communications networks, and a host of regulatory issues are literally “on the docket.” And, while the intricacies of policy-making and legal maneuvering in Washington, D.C. tend to be an insiders’ game, some issues are so impactful on the future of how all of us receive and ultimately pay for services that they command attention. Such is the case with the issue of network neutrality, which goes to the heart of who controls the content that goes on a service providers’ network. 

A simplified way of understanding all of this is that the Federal Communications Commission (FCC) believes it has the authority, and has implemented rules, to foster an environment where network operators have to treat everyone’s content, meaning that of the Internet Service Providers (ISPs), equally, i.e. in a neutral manner. The owners of physical networks have argued that their networks are their property and they should be able to use it, and charge for it, as they see fit. The FCC sees this position as discriminatory and stifling innovation, while the operators see it as the vehicle to assure their financial vitality and not enable virtual competitors to in essence get a free ride. The idea is that the cost causers should be cost bearers.

As noted, the FCC has promulgated rules and, as is customary of most FCC decisions, they have been taken to court. In this instance it is the United States Court of Appeals for the DC Circuit, and Verizon has just filed an interesting argument to gut the FCC’s authority and thereby have the rules vacated.

The Verizon perspective

 What makes all of this interesting, particularly to legal experts, is the approach Verizon took in its 116-page filing with the court. The company argued the FCC's rules not only exceeded the agency's regulatory authority, but also violated network owners' constitutional rights. Indeed, it has picked two of the most fundamental rights as the basis of its argument saying the FCC is threatening its First Amendment right to freedom of speech and its property rights under the Fifth Amendment.

The FCC exceeds its regulatory authority

In its filing, Verizon stated that it believes Congress has not given the FCC the power to impose network neutrality regulations on the nation's ISP, which occasioned the suit now before the court to stop the implementation of the FCC’s rules. It contends: "The Commission points to a hodgepodge of provisions to support its claim of 'broad authority.'" They go on to state that the FCC "does not and could not suggest that any of these provisions expressly authorizes these rules."  They cite as evidence the fact that, "since 2006, at least 11 pieces of 'net neutrality' legislation were introduced and debated in Congress. None were enacted."

With ownership comes property rights

The Verizon legal team did not stop there. They further contend that even if Congress had authorized network neutrality regulations they would be unconstitutional under the First Amendment. "Broadband networks are the modern-day microphone by which their owners [e.g. Verizon] engage in First Amendment speech," Verizon states.

Without going into all of the legal niceties put forth at the end of the day, Verizon is saying that with ownership comes the rights that other media companies have over their mediums for content delivery including the right to prioritize their content, or those of its partners, and to do so in a manner that is advantageous to that of others using their facilities to provide services over the Internet. They say that the FCC is operating under a presumption that companies like Verizon will exercise editorial discretion over content when reality is this is about bandwidth allocation and not an attempt to stifle speech. Indeed, they believe it is their ability to speak that is being impinged. 

That brings us to their last item about the FCC's rules violating the Fifth Amendment's protections for private property rights. To put all of the Verizon points succinctly, they feel government compulsion to make them carry in a neutral manner the traffic of others without compensation is an unconstitutional “taking of property.”

This is all a bit of a risky stance by Verizon. After all, around the world net neutrality is being positioned as the way for countries in the developed and developing worlds to spur innovation and create competition and jobs. What this means is that even if the courts were to agree with Verizon on the authority question, a Congress that is not unmindful of the powerful interests in Silicon Valley who might look askance at this could make net neutrality the law. 

History not on Verizon’s side

Finally, when it comes to such issues it must be noted that history is not on the side of Verizon. The regulation of common communications carriage has been viewed historically as a public good and a responsibility for having a franchise and that the free speech arguments for a corporation when it comes to communications are trumped by the public interest of access and the ability to have their speech heard. This has been vetted with the cable industry regarding the must-carry rules many years ago, and it is in many ways settled law and hence a large mountain to climb.

Are the owner/operators of physical networks entitled to compensation from those who increasingly are using much of those networks for competitive advantage without some kind of compensation? Logic says that there needs to be a way for cost-causers to be cost bearers. Is the Verizon path to make this point by calling into question the FCC’s authority and the entire net neutrality regime the path to achieve this end? History says no. However, you have to give Verizon credit for persistence and creativity.