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Federal Judge Rejects Verizon's Challenge to New FCC Data Roaming Rule

Cellco P'ship v. FCC By Kathleen McGuinness – Edited by Charlie Stiernberg Cellco P'ship v. FCC, No. 11-1135, 2012 WL 6013416 (D.C. Cir. Dec. 4, 2012) Slip Opinion (hosted by Public Knowledge) [caption id="attachment_3022" align="alignleft" width="150"]Photo By: Milica Sekulic - CC BY 2.0 Photo By: Milica Sekulic - CC BY 2.0[/caption] The Court of Appeals for the District of Columbia Circuit rejected a facial challenge to the Federal Communications Commission's (“FCC”) new rule requiring “providers of commercial mobile-data services to offer data roaming agreements to other such providers on commercially reasonable terms.”  Cellco P’ship v. FCC, No. 11-1135, slip op. at 8.Noting the differences between the existing voice roaming requirement and the new data rule, the court held that the FCC had statutory authority to regulate data roaming, and that the flexibility of the new requirement does not amount to the imposition of common carrier requirements. However, the court left open the possibility for future as-applied challenges if the policy becomes a de facto common carrier rule. Ars Technica provides a brief discussion of the case. Public Knowledge discusses the court's reasoning and the implications for future litigation over the FCC’s Open Internet rules. Bloomberg lists many of the affected carriers. Cellco Partnership, doing business as Verizon Wireless, first argued that the FCC lacked the statutory authority to impose the new rule. Title III, section 303(b) of the Communications Act of 1924, 47 U.S.C. § 303(b), authorizes the FCC to “[p]rescribe the nature of the service to be rendered” by licensees. Verizon argued that a mandate to provide service exceeded the bounds of “prescribing the nature of a service.” Id. at 13. The court rejected this argument, noting that because Verizon was free to stop providing mobile Internet service, the data roaming rule was a permissible licensing requirement. Noting also that § 303(r) and § 316 grant expansive rulemaking authority to the FCC to implement its statutory mandates, the court ruled that Title III allowed the new requirement. The court also rejected three of Verizon’s arguments based on limitations on the Commission’s regulatory power. First, it rejected the argument that the FCC cannot legitimately regulate the business affairs of licensees, holding that FCC v. Sanders Bros. Radio Station, 309 U.S.  470, 475 (1940), only bars the FCC from claiming a general mandate beyond its conferred authority, rather than imposing any new limits. Second, the court held that Regents of Univ. Sys. of Ga. v. Carroll, 338 U.S. 586, 602 (1950), was irrelevant, because Verizon had not alleged that the new rule would void third-party contracts. Finally, the court held that the data roaming rule was not a “fundamental change” to the terms of Verizon's license prohibited by MCI Telecomm. Corp. v. AT&T, 512 U.S. 218, 228  (1994), because of the rule's limited and “commercially reasonable” requirements. Verizon argued next that the new rule impermissibly imposed a common carrier requirement. Both parties and the court agreed that common carrier obligations would be forbidden by FCC v. Midwest Video Corp. (Midwest Video II), 440 U.S. 689 (1979). The court concluded that the new data roaming rule does not treat Verizon as a common carrier, however, because the new rule requires Verizon to make individualized agreements with specific parties rather than indiscriminately offer service on identical terms to the general public. Additionally, the court noted the flexibility of the FCC's definition of the new rule's “commercially reasonable” requirement, which includes various factors that allow variation based on competitive market forces, compared to the broader voice roaming standard (which does impose common carrier obligations). The court also concluded that in the “gray area” between per se common carriage and per se private carriage the FCC should be granted substantial deference in determining whether a regulation confers common carrier status. Cellco P’ship v. FCC, No. 11-1135, slip op. at 22. However, in response to Verizon's concerns that the “commercially reasonable” standard would become a de facto inflexible common carrier standard, the court indicated a hypothetical willingness to consider an as-applied challenge in the future. Verizon made three additional minor arguments, which the court rejected. First, the court denied a regulatory-taking claim, because Verizon did not allege any physical taking uncompensated by a commercially reasonable payment. Second, pointing to the distinctions discussed earlier, the court disagreed with Verizon’s argument that the FCC acted arbitrarily and capriciously in finding that the new data roaming rule did not impose common carrier obligations, given its similarity to the common carriage voice roaming rule. Finally, the court rejected claims of arbitrary and capricious agency action, finding that the FCC acted on the basis of evidence in the record and reasonably weighed the costs and benefits of the new policy. As Public Knowledge discusses, this result may become relevant in challenges to the FCC's Open Internet rules, in which Verizon is advancing similar legal theories. The court's definition of common carriage obligation and its deference to the FCC's determinations may limit the force of similar arguments in the Open Internet rule challenges. Kathleen McGuinness is a 1L at Harvard Law School.