WEBVTT - Net Neutrality Gets Another Day in Court

0:00:13.800 --> 0:00:17.279
<v Speaker 1>That neutrality is the issue that won't go away. What

0:00:17.440 --> 0:00:20.120
<v Speaker 1>is this legal fight about? Who is likely to win?

0:00:20.360 --> 0:00:22.599
<v Speaker 1>And when will it all play out? This is a

0:00:22.680 --> 0:00:23.960
<v Speaker 1>Votes in Verdicts Brief.

0:00:24.880 --> 0:00:28.560
<v Speaker 2>Welcome to this Votes and Verdicts podcast hosted by Bloomberg Intelligence,

0:00:28.920 --> 0:00:32.280
<v Speaker 2>part of Bloomberg's Research department, comprised of five hundred analysts

0:00:32.320 --> 0:00:36.680
<v Speaker 2>and strategists working across all major world markets. Our coverage

0:00:36.680 --> 0:00:39.800
<v Speaker 2>includes over two thousand equities and credits, as well as

0:00:39.840 --> 0:00:44.200
<v Speaker 2>outlooks on more than ninety industries and one hundred market indices, currencies,

0:00:44.200 --> 0:00:47.760
<v Speaker 2>and commodities. In this podcast series, we talk about the

0:00:47.800 --> 0:00:52.080
<v Speaker 2>intersection of business policy and law. My name is Jenniferree,

0:00:52.120 --> 0:00:56.160
<v Speaker 2>and I'm a senior litigation analyst with Bloomberg Intelligence covering antitrust.

0:00:56.680 --> 0:00:59.520
<v Speaker 1>And I'm Matt Schuttenhelm, an analyst covering US litigation and

0:00:59.560 --> 0:01:01.360
<v Speaker 1>policy in the TMT space.

0:01:02.360 --> 0:01:05.640
<v Speaker 2>Our Votes and Verdicts Brief series highlights one of our

0:01:05.680 --> 0:01:09.119
<v Speaker 2>research reports on the Bloomberg terminal, giving listeners a quick

0:01:09.200 --> 0:01:12.479
<v Speaker 2>takeaway to help grasp the key litigation or policy topic

0:01:12.560 --> 0:01:15.640
<v Speaker 2>covered in that research. Today is our first one, and

0:01:15.720 --> 0:01:18.520
<v Speaker 2>my colleague Matt is going to talk about net neutrality

0:01:18.640 --> 0:01:23.480
<v Speaker 2>and broadband regulation. So, Matt, let's start. The FCC adopted

0:01:23.520 --> 0:01:26.759
<v Speaker 2>in order to restore net neutrality rules on April twenty fifth.

0:01:27.280 --> 0:01:29.440
<v Speaker 2>So let's start this votes and verdicts brief by just

0:01:29.520 --> 0:01:32.360
<v Speaker 2>having you remind us what net neutrality is and what

0:01:32.400 --> 0:01:33.559
<v Speaker 2>the fight here is all about.

0:01:34.160 --> 0:01:37.479
<v Speaker 1>Yeah, thanks, Jen. So, net neutrality is the idea that

0:01:37.560 --> 0:01:41.560
<v Speaker 1>the broadmand companies who own the pipes that deliver you

0:01:41.680 --> 0:01:45.520
<v Speaker 1>the Internet should be neutral with respect to the Internet

0:01:45.560 --> 0:01:48.520
<v Speaker 1>traffic that they carry. And by pipes, I mean that

0:01:48.600 --> 0:01:51.880
<v Speaker 1>figuratively here we mean both the wired Internet and the

0:01:51.880 --> 0:01:56.000
<v Speaker 1>wireless Internet that delivers to your home, to your mobile phone,

0:01:56.200 --> 0:01:59.960
<v Speaker 1>and effectively, net neutrality means that your Internet service provider

0:02:00.080 --> 0:02:04.320
<v Speaker 1>shouldn't be able to block or discriminate against some Internet

0:02:04.360 --> 0:02:08.040
<v Speaker 1>traffic to make some parts of the Internet work better

0:02:08.120 --> 0:02:11.399
<v Speaker 1>than others. They should be neutral. But really, this fight

0:02:11.480 --> 0:02:14.760
<v Speaker 1>at the FCC is about more than just net neutrality.

0:02:14.760 --> 0:02:18.280
<v Speaker 1>It's really about jurisdiction. The fundamental question is whether the

0:02:18.280 --> 0:02:22.880
<v Speaker 1>Federal Communications Commission should have the power to regulate broadband

0:02:23.000 --> 0:02:26.520
<v Speaker 1>service at all. Because while it's clear that the FCC

0:02:26.639 --> 0:02:31.440
<v Speaker 1>has jurisdiction over phone service and cable service and broadcast television.

0:02:32.160 --> 0:02:35.320
<v Speaker 1>The Communications Act was written in nineteen thirty four and

0:02:35.400 --> 0:02:39.320
<v Speaker 1>updated in nineteen ninety six before Broadman really took off.

0:02:39.360 --> 0:02:41.880
<v Speaker 1>So this whole fight is really not so much about

0:02:41.919 --> 0:02:45.160
<v Speaker 1>net neutrality as it is about whether an old law

0:02:45.480 --> 0:02:49.440
<v Speaker 1>can reach a new service, whether the FCC has the

0:02:49.480 --> 0:02:53.440
<v Speaker 1>broad power to regulate what is the most important communications

0:02:53.480 --> 0:02:55.640
<v Speaker 1>service that these companies sell today.

0:02:56.560 --> 0:02:59.359
<v Speaker 2>So I understand this isn't the first time the FCC

0:02:59.400 --> 0:03:02.720
<v Speaker 2>has adopted net neutrality rules like this, and I believe

0:03:02.800 --> 0:03:04.680
<v Speaker 2>the last time it did there was a challenge to

0:03:04.720 --> 0:03:07.359
<v Speaker 2>the rules and the agency won in court. But this

0:03:07.440 --> 0:03:10.240
<v Speaker 2>time you see an eighty percent chance that the FCC loses.

0:03:10.280 --> 0:03:11.760
<v Speaker 2>Why is that?

0:03:11.760 --> 0:03:14.200
<v Speaker 1>That's right? So there have been multiple rounds of net

0:03:14.200 --> 0:03:18.840
<v Speaker 1>neutrality litigation, and one of the most important ones involved

0:03:18.840 --> 0:03:22.919
<v Speaker 1>the Obama administrations in Net Neutrality Order in twenty fifteen.

0:03:23.919 --> 0:03:28.040
<v Speaker 1>In that decision, the FCC said broadband qualifies as as

0:03:28.080 --> 0:03:31.360
<v Speaker 1>a telecommunications service under what's known as Title two of

0:03:31.400 --> 0:03:35.160
<v Speaker 1>the Communications Act, and that section of the nineteen thirty

0:03:35.200 --> 0:03:39.120
<v Speaker 1>four log gives the FCC very broad regulatory powers over

0:03:39.160 --> 0:03:42.680
<v Speaker 1>the service. The case was litigated at the d C

0:03:42.840 --> 0:03:46.200
<v Speaker 1>Circuit here in Washington and in a two to one decision,

0:03:46.360 --> 0:03:49.560
<v Speaker 1>the d C Circuit ruled the FCC had that power

0:03:49.680 --> 0:03:53.560
<v Speaker 1>to bring broadband under the Communications Act under Title II.

0:03:54.520 --> 0:03:57.080
<v Speaker 1>But while that was a huge win for the FCC,

0:03:57.440 --> 0:04:00.720
<v Speaker 1>there was a very ominous sign that that also came

0:04:00.760 --> 0:04:04.480
<v Speaker 1>out of that case. The DC Circuit refused to revisit

0:04:04.560 --> 0:04:09.040
<v Speaker 1>that decision on bank. But when it refused to do so,

0:04:09.840 --> 0:04:14.320
<v Speaker 1>now Supreme Court Justice Brett Cavanaugh wrote a dissenting opinion,

0:04:14.920 --> 0:04:18.760
<v Speaker 1>and in that opinion he said, for major agency rules

0:04:18.839 --> 0:04:23.320
<v Speaker 1>like this, agencies like the SCC shouldn't get deference. Congress

0:04:23.400 --> 0:04:27.599
<v Speaker 1>must clearly grant them power to act. And five years

0:04:27.680 --> 0:04:33.400
<v Speaker 1>later after that decision, Justice Judge Kavanaugh had become Justice

0:04:33.480 --> 0:04:37.479
<v Speaker 1>Cavanaugh and the US Supreme Court, in a separate opinion

0:04:37.520 --> 0:04:42.479
<v Speaker 1>involving the EPA, wrote an opinion solidifying what's now known

0:04:42.480 --> 0:04:46.520
<v Speaker 1>as the major questions doctrine, and it cited Kavanaugh's opinion

0:04:46.600 --> 0:04:49.159
<v Speaker 1>at the d C Circuit in this net neutrality case.

0:04:49.960 --> 0:04:53.920
<v Speaker 1>So it's for that reason that I don't think the FCC,

0:04:54.040 --> 0:04:56.520
<v Speaker 1>even though it won a big victory last time, I

0:04:56.560 --> 0:05:00.000
<v Speaker 1>don't think it can win anymore. It won before because

0:05:00.720 --> 0:05:03.520
<v Speaker 1>the courts were forced to give deference to agencies on

0:05:03.560 --> 0:05:07.520
<v Speaker 1>these questions, and now that doctrine's in serious trouble in

0:05:07.600 --> 0:05:12.440
<v Speaker 1>part because of Judge and now Justice Kavanaugh's major questions doctrine.

0:05:14.120 --> 0:05:16.720
<v Speaker 2>So along those lines, another thing you wrote in your

0:05:16.720 --> 0:05:19.320
<v Speaker 2>research was that the first development in the legal case

0:05:19.400 --> 0:05:21.719
<v Speaker 2>didn't go well for the FCC. And I think you

0:05:21.800 --> 0:05:24.320
<v Speaker 2>were referring to a lottery to decide which court would

0:05:24.320 --> 0:05:26.680
<v Speaker 2>get the case first. Why didn't this go well for

0:05:26.720 --> 0:05:27.360
<v Speaker 2>the FCC.

0:05:27.520 --> 0:05:31.120
<v Speaker 1>Yeah, that's right. So for certain orders from administrative agencies

0:05:31.240 --> 0:05:34.479
<v Speaker 1>that apply nationwide like this, Congress created a process for

0:05:34.600 --> 0:05:38.400
<v Speaker 1>a judicial lottery to determine which federal courts of appeal

0:05:38.480 --> 0:05:41.960
<v Speaker 1>should hear the challenge. Basically, any court in which a

0:05:42.080 --> 0:05:44.839
<v Speaker 1>suit is filed in the first ten days after this

0:05:44.960 --> 0:05:47.200
<v Speaker 1>is published in the Federal Register gets a ticket in

0:05:47.240 --> 0:05:50.239
<v Speaker 1>the lottery. That leads to a lot of strategic filing

0:05:50.279 --> 0:05:53.000
<v Speaker 1>by parties to try to get a ticket for the

0:05:53.040 --> 0:05:56.520
<v Speaker 1>court that they prefer. And after that process played out here,

0:05:56.720 --> 0:06:00.880
<v Speaker 1>the Sixth Circuit Court of Appeals in Cincinnati was selected

0:06:00.920 --> 0:06:03.479
<v Speaker 1>to hear this case. And the reason I view that

0:06:03.800 --> 0:06:06.640
<v Speaker 1>as sort of bad news for the FCC is that

0:06:07.080 --> 0:06:10.520
<v Speaker 1>of the active judges on the Sixth Circuit. Six were

0:06:10.560 --> 0:06:14.400
<v Speaker 1>selected by Democrats, ten were selected by Republicans, and this

0:06:14.480 --> 0:06:18.120
<v Speaker 1>is an issue where Republican appointed judges tend to be

0:06:18.200 --> 0:06:21.680
<v Speaker 1>tougher on the agencies. Democrat appointed judges tend to be

0:06:21.720 --> 0:06:26.200
<v Speaker 1>more sympathetic to regulation. So the FCC, aware of that,

0:06:26.440 --> 0:06:28.760
<v Speaker 1>is now trying to ask the Sixth Circuit to send

0:06:28.839 --> 0:06:31.279
<v Speaker 1>this case back to the DC Circuit where it won

0:06:31.360 --> 0:06:35.200
<v Speaker 1>in twenty sixteen. And maybe that's possible, but I don't

0:06:35.200 --> 0:06:37.400
<v Speaker 1>think the Sixth Circuit has to do that if it

0:06:37.400 --> 0:06:40.600
<v Speaker 1>doesn't want to. It's purely a discretionary call. So this

0:06:40.640 --> 0:06:43.400
<v Speaker 1>is a tough place to start the case for the FCC.

0:06:44.279 --> 0:06:46.840
<v Speaker 2>Okay, but the rules are supposed to go into effect

0:06:46.839 --> 0:06:50.240
<v Speaker 2>on July twenty two, so I understand the companies are

0:06:50.279 --> 0:06:52.240
<v Speaker 2>asking a stay of the rules before then. Do you

0:06:52.240 --> 0:06:53.640
<v Speaker 2>think that request has a chance?

0:06:54.279 --> 0:06:57.200
<v Speaker 1>Yeah, So that's exactly right. On June tenth, the industry

0:06:57.240 --> 0:07:00.360
<v Speaker 1>filed this motion with the Sixth Circuit asking them to

0:07:00.440 --> 0:07:03.919
<v Speaker 1>hit pause on these rules, and they asked the court

0:07:03.960 --> 0:07:06.520
<v Speaker 1>to rule on that by the middle of July, to

0:07:06.560 --> 0:07:09.040
<v Speaker 1>give them time to go to the Supreme Court before

0:07:09.040 --> 0:07:13.200
<v Speaker 1>that July twenty second date if they need to, and Ordinarily,

0:07:13.200 --> 0:07:16.480
<v Speaker 1>I would say, look, this probably won't work. Most stay

0:07:16.560 --> 0:07:19.440
<v Speaker 1>requests are denied. If you look at the history of

0:07:19.520 --> 0:07:23.000
<v Speaker 1>net neutrality litigation, when parties tried to get stays, the

0:07:23.040 --> 0:07:26.239
<v Speaker 1>courts have denied them. So that's where you start. What's

0:07:26.360 --> 0:07:28.760
<v Speaker 1>new is what I talked about earlier, and this Major

0:07:28.920 --> 0:07:33.200
<v Speaker 1>Questions doctrine, which sort of kind of you know, really

0:07:33.600 --> 0:07:37.600
<v Speaker 1>adds fire to the company's case here, and I think

0:07:38.560 --> 0:07:43.080
<v Speaker 1>that could change the analysis. There's a real possibility that

0:07:43.760 --> 0:07:47.480
<v Speaker 1>the court will hit to issue a stay before these

0:07:47.560 --> 0:07:50.960
<v Speaker 1>rules can take effect. No matter what happens on the stay,

0:07:51.000 --> 0:07:55.040
<v Speaker 1>though longer term, I think the FCC is in serious trouble.

0:07:56.080 --> 0:07:58.720
<v Speaker 2>Matt. Last question, and this is something that comes up

0:07:58.840 --> 0:08:01.600
<v Speaker 2>with respect to everything in the legal and policy world

0:08:01.600 --> 0:08:05.120
<v Speaker 2>these days. How will the November election impact this issue?

0:08:05.600 --> 0:08:08.320
<v Speaker 1>Yeah, So in this case, it's pretty easy to answer

0:08:08.360 --> 0:08:12.880
<v Speaker 1>that question. When President Trump won in twenty sixteen, his

0:08:13.280 --> 0:08:17.800
<v Speaker 1>FCC chairman, a Jeet Pie undid everything that the Obama

0:08:18.640 --> 0:08:21.720
<v Speaker 1>FCC did on this totally reverse that the Tom Wheeler

0:08:21.880 --> 0:08:25.440
<v Speaker 1>FCC order. So if President Trump wins again, expect that

0:08:25.480 --> 0:08:29.680
<v Speaker 1>same process to play out. If President Biden wins, his

0:08:29.800 --> 0:08:32.400
<v Speaker 1>FCC is going to keep these rules in place, and

0:08:32.440 --> 0:08:35.160
<v Speaker 1>it will be entirely up to the courts. If the

0:08:35.160 --> 0:08:38.160
<v Speaker 1>courts strike the rules down, as I think is likely,

0:08:38.880 --> 0:08:42.600
<v Speaker 1>then the hard question will be whether Democrats will support

0:08:42.640 --> 0:08:46.200
<v Speaker 1>some sort of middle ground in Congress. For years, Congress

0:08:46.200 --> 0:08:48.920
<v Speaker 1>has been unable to reach a consensus on how to

0:08:48.960 --> 0:08:52.760
<v Speaker 1>resolve this issue. But if the FCC suffers the big

0:08:52.800 --> 0:08:55.840
<v Speaker 1>defeat in court that we expect, that could be the

0:08:55.840 --> 0:09:00.200
<v Speaker 1>catalyst to find some sort of middle ground to to

0:09:00.320 --> 0:09:02.840
<v Speaker 1>settle this long running issue. And I think it would

0:09:02.840 --> 0:09:05.600
<v Speaker 1>be good news for the broadband providers because I don't

0:09:05.640 --> 0:09:08.680
<v Speaker 1>think Congress would adopt a measure that is very disruptive

0:09:08.720 --> 0:09:09.760
<v Speaker 1>to their business.

0:09:10.200 --> 0:09:12.839
<v Speaker 2>Matt, thank you for that excellent quick overview of your

0:09:12.880 --> 0:09:16.960
<v Speaker 2>legal research on net neutrality and broadband regulation. That's today's

0:09:17.040 --> 0:09:19.640
<v Speaker 2>Votes and Verdicts brief. For Matt's full report on the

0:09:19.679 --> 0:09:23.160
<v Speaker 2>topic and all of our research, please visit bilaws on

0:09:23.200 --> 0:09:26.439
<v Speaker 2>the Bloomberg terminal. Thanks for tuning in to Votes and Verdicts,

0:09:26.480 --> 0:09:35.079
<v Speaker 2>and enjoy the rest of your day or evening.