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Verizon Goes for FCC's Jugular in Net Neutrality War

By Mike Martin
Jan 21, 2011 12:07 PM PT

Verizon Communications Thursday picked a legal fight with the Federal Communications Commission over its recently announced Net neutrality rules.

Verizon Goes for FCC's Jugular in Net Neutrality War

"We are deeply concerned by the FCC's assertion of broad authority for sweeping new regulation," said Michael Glover, Verizon senior vice president and deputy general counsel. "We believe this assertion of authority goes well beyond any authority provided by Congress, and creates uncertainty for the communications industry, innovators, investors and consumers."

The FCC's official response: "We are confident our Open Internet Order is legally sound," FCC spokesperson Mark Wigfield told the E-Commerce Times.

The Verizon move shouldn't be a surprise. Industry watchers earlier predicted as much.

"There will likely be litigation over the FCC's authority to enact the rules in the first place," Alston Bird telecommunications attorney Mark McCarty told the E-Commerce Times after the agency issued the rules last December. "There will also likely be parallel litigation over how the new rules should be interpreted and applied."

Noble Word$

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Language Glover released in a statement about the lawsuit sounds noble, but Verizon may have a more pragmatic angle.

"Verizon is filing suit over simple economics," Frost & Sullivan telecommunications analyst Michael Jude told the E-Commerce Times. "It probably will cost Verizon far less to challenge this in court and potentially get a restraining order than to try and figure out how to implement the new FCC regulatory thinking."

The battle's first salvo, a formal appeal to the United States Court of Appeals for the District of Columbia Circuit, may be a pre-emptive strike. The FCC, Jude explained, "hasn't actually issued any rules yet."

And it won't have any enforceable regulations until the Net neutrality rules are published in the Federal Register, said Dan Brenner, former regulatory and legal affairs head of the National Cable and Telecommunications Association and currently a partner at Hogan Lovells.

Nonetheless, Verizon's counsel still believed the firm needed to appeal now, and for an economic reason: The FCC order currently affects its radio licenses, Brenner told the E-Commerce Times.

Verizon's Venue

In choosingWashington, D.C., Verizon may be venue shopping, based on past litigation.

Company attorneys may view the D.C. appellate court as a sympathetic audience. In Comcast v. FCC, its judges found that FCC commissioners had overstepped when they sanctioned Comcast over network traffic discrimination.

Then too, Verizon's attorneys could be wrong. A repeat of Comcast under current FCC chairman Julius Genachowski is unlikely, said Wharton professor Kevin Werbach, former FCC counsel for new technology policy and co-chair of President Obama's FCC transition team.

"The FCC picked the wrong statutory provision in Comcast," Werbach told the E-Commerce Times. "Prior chairman Kevin Martin undermined its legal case. The current chairman won't make those mistakes."

Frost & Sullivan's Jude disagrees. The current Net neutrality rules "are even more egregious" from the denial of process perspective that cost the FCC over Comcast, he explained. "I suspect Verizon will simply tell the court, 'They're doing it again -- make them stop!'"

Turn of the Screws

Few industry observers would dispute that the telecom giant has timing on its side.

"Verizon probably waited until the new Congress was seated and firmly positioned before it filed the appeal," Jude said.

Established by the 1934 Communications Act, the FCC regulates radio, television, wire, satellite and cable communications nationwide -- but under the auspices of Congress, not the president.

Congress, said Jude, "is ready to take on the regulatory agencies. In this kind of an environment, Verizon probably feels it has the wind at its back, since it expects Congress is going to turn the screws to the FCC over the Net neutrality issue."

As for where the case goes next, an FCC official said the federal regulator is "prepared to defend its Open Internet Order in any forum," according to spokesperson Wigfield.

That's no comfort to the wary.

"I believe Net neutrality will be a disaster for network operators," Jude explained. "I suspect Verizon read the tea leaves and decided that this is the last chance they will have to get the FCC out of the business of broadband."

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