When Should a Statute's Meaning Be Determined by a Commission (and not the Courts)?

National Cable & Telecommunications Assn. v. Brand X Internet Services

This case considers the question as to the extent to which the FCC has jurisdiction to interpret a statute of Congress that left its enactment to the Commission. In this case, the statute that must be interpreted deals with the distinction between internet service providers (ISPs) and “telecommunication carriers,” which are cable companies in this case. For public policy reasons the FCC requires that the latter share their lines with competitors, but not the former. To distinguish the classes the FCC uses the terms “basic service” and “enhanced service.” Basic service is defined as a “pure transmission,” or “transparent transmission” meaning that the only processing done to the transmission is the processing required to convert the message between ordinary language and its electronic form (i.e., Fax). Enhanced service uses “computer processing applications … to act on the content, code, protocol…” etc. The Commission also decided not to classify “non-facilities-based ISPs” any differently than the cable companies.

The 9th Circuit decided that a previous ruling that cable modem service was a “telecommunication service” prohibited it from allowing the ambiguity in the statute to be interpreted by the FCC. The Court here held that the 9th circuit should have applied the standard in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. which held that where a statute is has more than one reasonable reading, and the statute was meant to be enforced by a commission, and that commission applies a reasonable reading, the courts should defer to the commission for reasons of public policy creation. The biggest question here was whether the fact that the cable companies used “basic service” to deliver internet service (including things like DNS, email, News Servers, etc) meant that they were (unambiguously) “offering” a “basic service.” Because the use of the word “offering” can be construed from the perspective of the consumer, to whom the offered service is more than the necessary “transparent transmission,” the Court found that this was one of a few reasonable interpretations of the statute, and the decision should therefore be left to the FCC. In regards to the disparate treatment of cable companies providing internet service, and telephone companies providing internet service, the Court found that because this disparate treatment was not logically mandated by the terms of the statute, the decision should be left to the FCC to change the practice or not. Presumably, if the statute had mandated by its terms that the two be treaded differently the Court would have had to determine if this was valid.

Justice Stevens and Justice Breyer concur with the majority, with Justice Breyer arguing that Justice Scalia’s dissent “has correctly characterized the way in which he, in dissent, characterized the Court’s Mead opinion.”

The dissent disagrees that the cable companies are not internet service providers under the meaning set forth by the FCC, while acknowledging that the meaning of the word “offering” is ambiguous. Using the analogy of a pizza being offered with delivery service, or dogs being offered with a leash, Justice Scalia argues that by providing a “basic service” as part of the ISP package, the cable companies should be treated as any other company offering “basic service.” The dissent also argues that because a physical connection is necessary to use the services of the ISP, it is “inevitable that customers will regard the competing cable-modem service as giving them both computing functionality and the physical pipe.” Going back to the pizzeria example, an in regards to the “non-facilities-based ISPs,” the dissent states that just because some ISPs provide the basic service, it is not necessarily true that all ISPs provide the basic service, just as not all restaurants provide delivery even though all of the components of their food are delivered from out of state though this delivery is a necessary part of the service/product. The dissent also suggests that the precedent under which the majority rules (Mead) was poorly decided, and resulted in, as here, “judicial decisions subject to reversal by Executive officers). The majority earlier responded to this claim by suggesting that worse consequences follow from an alternate ruling (first come, first opportunity creation of law between the courts and the commissions) (see footnote 12; 13 in the dissent). The dissent closes with “It is a sadness that the Court should go so far out of its way to make bad law.”