Industry hints at possible legal challenges to FCC's digital discrimination rules

The FCC is scheduled to vote next week on a draft order on preventing digital discrimination, but a new round of industry filings, plus commentary from FCC Commissioner Brendan Carr, suggests there may be legal challenges ahead to the new rules.

The digital discrimination action comes as the FCC faces a deadline this month, set in the 2021 Infrastructure Investment and Jobs Act (IIJA), to vote on rules to prevent digital discrimination within two years of that law's passing. A public draft of those new rules was published in late October, following nearly two years of comments from the industry and consumer advocates. One primary area of disagreement was whether to use a disparate impact standard (favored by consumer groups) or a disparate treatment standard (favored by the industry) in the definition of digital discrimination.

Ultimately, the FCC settled on a definition that includes both, specifically defining digital discrimination as: "Policies or practices, not justified by genuine issues of technical or economic feasibility, that (1) differentially impact consumers' access to broadband internet access service based on their income level, race, ethnicity, color, religion or national origin or (2) are intended to have such differential impact." 

Related:ISPs, consumer advocates disagree on 'digital discrimination'

The FCC added: "In adopting a definition of digital discrimination of access that encompasses both disparate treatment and disparate impact, we are guided primarily by the text of the statute, including its expressly stated goal of ensuring 'equal access' to broadband internet access service," referring to section 60506 of the IIJA that mandated the creation of rules banning digital discrimination.

Now, according to filings with the FCC, industry groups and service providers are taking issue with that definition, along with other aspects of the draft order. And the language of their filings suggests potential legal challenges ahead if the FCC votes on the current draft order without changes.

In a filing from NCTA–The Internet & Television Association, for example, the group summarized a recent meeting with Commissioner Carr, one of two Republicans on the Commission, in which it argued that adopting a discriminatory impact standard is out of step with the language of section 60506 of IIJA, and that the "major questions doctrine casts further doubt on the validity of the interpretation set forth in the draft order," hinting at a future court case.

Similarly, USTelecom submitted a filing, also summarizing a meeting with Carr, in which it said the FCC "may not adopt" a disparate impact standard "as a matter of law and sound policy." The group added that the draft order "departs from decades of civil rights law and policy in the disparate impact framework it adopts."

Related:Industry groups to FCC: Tread lightly on digital discrimination rules

Both groups also took issue with the FCC's inclusion of pricing as a "covered element of service," alongside deployment, network upgrades, network maintenance, marketing and customer service.

NCTA called out what it described as the FCC's "improper inclusion of price as a covered service element," noting that the IIJA "does not mention 'prices' or 'affordability' as a factor for assessing a provider’s equal access obligation—which was deliberate, given that Congress addressed affordability issues elsewhere in the statute."

In its draft order, however, the FCC spoke to its inclusion of pricing, saying: "we find that the statutory language encompasses discriminatory pricing. We emphasize that the rules we adopt today do not set rates for broadband internet access service and are not an attempt to institute rate regulation."

According to the draft order, the FCC plans to address potential violations to its digital discrimination rules by reviewing and investigating informal customer complaints that come in through a new portal.

Related:NTIA breaks with industry on FCC's digital discrimination rules

In comes Carr

Following his meetings with industry groups, Commissioner Carr this week released his own lengthy statement on the digital discrimination matter, in a memo entitled: "President Biden's plan to give the administrative state effective control of all Internet services and infrastructure in the U.S." In it, Carr blamed President Biden – by way of the NTIA's comments on the FCC's digital discrimination proceeding – for the text of the draft order that he argues "empowers the FCC to regulate every aspect of the Internet sector for the first time ever."

Carr, who also opposes the FCC's draft order on reinstating Title II, compared the draft order on digital discrimination to "a planning document drawn up in the faculty lounge of a university's Soviet Studies Department."

He also implied there will be legal challenges to the FCC's list of "covered entities" under the draft rules, which include "broadband internet access service providers and entities that provide services that facilitate and affect consumer access to broadband internet access service," such as contractors, as well as entities that manage network upgrades and service delivery.

"Landlords are now covered, construction crews are now covered, marketing agencies are now covered, banks are now covered, the government itself is now covered—all newly regulated by the FCC and liable for any act or omission that the agency determines has an impermissible impact on a consumer’s access to broadband," wrote Carr. "Congress never authorized the FCC to regulate these industries or entities. So, to all the businesses and individuals that will be subject to FCC regulation for the first time ever, welcome, I hope you have good lawyers."

A 'benign' draft order

Not everyone agrees that the digital discrimination rules will be burdensome for ISPs.

In an analyst note for New Street Research last week in response to the digital discrimination draft order, Blair Levin, who formerly served at the FCC, told ISPs "don't lose sleep" over the rules, saying it is "even more benign than we had anticipated."

Specifically, said Levin: "It refrains from making any accusations against any company and declines to consider any historic acts by ISPs as in violation of the digital discrimination rules. It also sets up an internal FCC process that will reduce public knowledge about allegations."

However, he also predicted there would be inevitable pushback.

"We don't doubt that the item will be criticized by some who allege that the item will result in setting up new barriers for deployments and create new rights for the FCC to micromanage broadband services, but considering what the item actually does, we think such predictions are wrong," said Levin.

The FCC will vote on its digital discrimination draft order at its monthly open meeting next week, on November 15.