US ISPs to Battle Obama Net Neutrality Plan in Courts, Congress

Obama on Monday stunned the telecom community by urging the Federal Communications Commission to reclassify ISPs so they could be regulated more like public utilities as a way to preserve "net neutrality."

The industry bristled at the threat of tight, utility-style regulations. "It's like trying to swat a fly with a hammer," said one cable lobbyist.

If lobbying the FCC fails, the telecoms industry could turn to a legal fight in a court that in the past has been favorable for the industry, as well as making an appeal to regulation-averse congressional Republicans to intervene.

"We want to convince the commission of having a legally sustainable option," said one telecom lobbyist, who spoke anonymously to discuss ongoing work. "But we'll be prepared to fight another day in courts and on the Hill."

Experts were split on whether the administration or the telecom industry would prevail in court. Much depends on the wording of the rules, which the FCC has not written.

Litigation seems certain if FCC Chairman Tom Wheeler proposes rules in line with Obama's request. However, Wheeler had favored a less aggressive approach as a way to stake out stronger legal ground.

(Also see: FCC May Propose a 'Hybrid' Net Neutrality Plan: Report)

A legal fight, already threatened by AT&T, would likely begin at the U.S. Court of Appeals for the D.C. Circuit, which rejected the FCC's earlier net neutrality rules in 2010 and 2014, and could land in the Supreme Court.

"Two things are likely to happen very quickly. There will be an appeal from the network owners. They will seek a stay from the D.C. circuit, which they will get," said Mark Cooper of the Consumer Federation of America.

The ISPs would likely argue the FCC was being arbitrary and capricious in its rules and that putting Internet providers under a more lenient regulatory regime has been and remains appropriate.

As consumer advocates argue that a stronger regulatory approach would give the FCC proper legal cover, some observers believe the ISPs could prevail.

"If we take a 'Moneyball' approach and say past performance predicts future results, we'd have to believe that the FCC will lose in the courts," said Richard Bennett, a telecommunications expert at the American Enterprise Institute.

In a related case in 2005, the Supreme Court ruled that the FCC had discretion to interpret what should be classified as a less-regulated "information" service versus more regulated "telecommunications" service. In that case, however, the FCC chose not to put stricter classification on Internet providers.

But lobbyists said Congress created the statute and a congressional effort to rewrite the Communications Act presented an opportunity.

"The right way to settle these questions is for the legislative branch to weigh in and tell us what the law should be," said the telecom lobbyist.

© Thomson Reuters 2014