fptelecoms: Telecoms Ready Fight Against Net Neutrality Challenge could start by focusing on how much notice industry got

RYAN KNUTSON and

THOMAS GRYTA

April 2, 2015 7:23 p.m. ET

The telecommunications industry has myriad objections to the government’s new net-neutrality rules, but its legal challenge could start with a procedural point: whether the Federal Communications Commission provided adequate notice.

Groups representing wireless carriers, cable firms and Internet providers are expected to file lawsuits seeking to overturn the new rules as soon as they land in the official record of government actions, which is imminent. On Wednesday, the FCC sent the net-neutrality rules, which it passed in February, to the Federal Register for publication.

The industry groups—CTIA, the National Cable & Telecommunications Association and the United States Telecom Association—are likely to file lawsuits against the rules and plan to attack on three fronts, people familiar with the plans said.

First, the groups are expected to take issue on the procedural ground that the FCC didn’t provide proper notice to the industry for various parts of the new rules. Second, they will argue the agency doesn’t have the authority to reclassify broadband services for regulation under the same utility-like rules used on the phone network. Lastly, the trade groups may take aim at specific provisions such as the ban on paid prioritization.

The procedural argument stems from abrupt changes to the rules after President Barack Obama’s November proclamation that he wanted tougher rules to protect an open Internet and, specifically, that he wanted the Internet reclassified as a Title II Telecommunications Service.

The FCC followed typical procedure by issuing a Notice of Proposed Rulemaking last May outlining the rules. But after it changed its proposed rules, it didn’t issue a new notice despite what the industry argues were meaningful changes, such as altering the definition of what constitutes commercial mobile service and expanding the rules to cover interconnection agreements. Federal laws require adequate notice.

A senior FCC official said the original proposal in May provided more than ample notice that the agency was considering reclassification of broadband service as a Title II Telecommunications Service because it laid out detailed questions about such a route. The public comment and other commissioners’ statements also gave notice to the public that the FCC was considering using Title II, the official said.

In a speech at Ohio State University last Friday, FCC Chairman Tom Wheeler said the new rules would withstand a court challenge. When the court tossed out the majority of the rules in early 2014, it did so because they treated Internet providers as common carriers even though the FCC hadn’t formally classified them as such.

“We have addressed that issue, which is the underlying issue in all of the debates we’ve had so far,” he said. in prepared remarks. “That gives me great confidence going forward that we will prevail.”

In the past, opponents of FCC rules have pursued legal challenges over failures to follow procedure with some success. In 2011, an FCC media ownership rule was tossed out by the Third Circuit Court of Appeals because of procedural missteps. In 2010, the agency lost a court challenge because it failed to provide adequate notice.

“This is a very common argument,” said Donald Evans, a telecom attorney at Fletcher, Heald & Hildreth who has made the argument himself in past cases against the FCC. The opposition will have to show that a reasonable person wouldn’t have known that the agency’s ultimate decision was under consideration. But the argument often doesn’t work, he said.

If the procedural grounds fail, the meat of the challenger’s case will hang on whether the FCC has the authority to reclassify the Internet as a Title II Telecommunications Service. In the late 1990s, the FCC classified DSL Internet sent over phone lines as a Telecommunication Service, but in 2002, it classified high-speed Internet provided by cable companies as an Information Service. A legal challenge to that decision went all the way to the U.S. Supreme Court, which ruled that the decision was up to the FCC’s discretion.

Since then, wireless and cable companies have spent billions of dollars investing in broadband networks, and they claim that a policy reversal will damage planned businesses that rely on the existing rules.

If a court found violations in procedure, the rules would be sent back to the FCC, which could then go through the proper process and pass them again. But a delay could buy the industry time in the hope of changes to the FCC if a different party got control of the White House.

Write to Ryan Knutson at ryan.knutson@wsj.com and Thomas Gryta at thomas.gryta@wsj.com