NSR Policy: Court Overturns FCC Title II Order

What’s New: As expected (LINK), the 6th Circuit overturned the 2024 FCC order classifying broadband providers as Title II common carriers, thereby eliminating various rules including those requiring “net neutrality.”  The court also set aside the FCC decision to apply similar rules to wireless.  In this note, we provide what we think are the key points for investors.

What the Court did. 

Relied on traditional tools of statutory construction to find no authority.  The court looked at the law and held that the 2024 FCC had misinterpreted the statute.[1]

Eliminated rules for mobile broadband.  In the same vein the court overturned the FCC rules requiring net neutrality for mobile broadband.[2]

Relied on new court power through Loper and the end of Chevron Deference. The court relied in part on the end of Chevron deference to say that “Applying Loper Bright means we can end the FCC’s vacillations” (on whether broadband is a Title I or Title II service.)[3]

Did not address the Major Question Doctrine. The court explicitly declined to address the ISP argument that the FCC rule violated the Major Question Doctrine. [4]

Implications for Investors

Decision was expected.

No change in how wired broadband providers operate or in their economics.

Some potential upsides for wireless carriers, though the election already provided those upsides.

By not addressing the Major Question Doctrine, creates a slightly bigger window for future FCC to revisit the issue but we highly doubt that will happen.

The court did nothing to undercut state rules regulating broadband.

The court did nothing to undercut the Second Circuit opinion upholding state mandates for broadband providers.

The decision also affects Rosenworcel’s (and any future FCC) efforts related to border gateway security

Calls by Chairwomen Rosenworcel and Commissioner Gomez for Congress to codify the net neutrality rules are highly unlikely to succeed.

Bottom Line: For more than 20 years, “net neutrality” has dominated headlines for political debates at the FCC.  We think that run is now at an end.[7]  There likely will be more debates at the state level, but such state laws on net neutrality are unlikely to materially change the economics of the ISPs, though state laws on pricing, such as New York low-income mandate, could affect the economics.


[1] The court wrote that “Using ‘the traditional tools of statutory construction,’, we hold that Broadband Internet Service Providers offer only an ‘information service’ under 47 U.S.C. § 153(24), and therefore, the FCC lacks the statutory authority to impose its desired net-neutrality policies through the “telecommunications service” provision of the Communications Act, id. § 153(51). 

[2] The court wrote, “Nor does the Act permit the FCC to classify mobile broadband—a subset of broadband Internet services—as a “commercial mobile service” under Title III of the Act (and then similarly impose net-neutrality restrictions on those services).

[3] Academics in law schools will argue about whether the decision is a direct consequence of the Loper decision or whether this court would have come to the same decision even if Chevron deference was still the law of the land.  Our read is that this panel would have overturned this FCC rule under any legal circumstance, relying on the analysis of Harvard Law Professor Cass Sunstein who wrote that as to Loper, “If the goal is to predict whether a court of appeals will strike down an agency's interpretation of law, it may be more important to know whether the panel consists of Republican or Democratic appointees, and whether the agency's interpretation leans left or right, than to know whether Chevron or Loper Bright is the governing law.” But investors should be indifferent as to the cause of the decision and focus on the implications of the decision on the wired and wireless ISPs.

[4] The court wrote, “Given our conclusion that the FCC’s reading is inconsistent with the plain language of the Communications Act, we see no need to address whether the major questions doctrine also bars the FCC’s action here.”

[5] While opinion writers (such as the Wall Street Journal) and Republican policy types (on the Hill and at the FCC) have predicted financial doom and gloom for the ISPs if the Title II rules go into effect, as far as we know, during the Biden Administration, the topic has never come up on a quarterly call and no ISP CFO talking to investors in a public forum has raised it has a material risk.  Meaning no disrespect to opinion writers and policy types, when it comes to gauging reality, we tend to give more weight to the clues provided by CFOs.

[6] In paragraphs 99 and 100 of the NPRM, the FCC cites Title II as its legal authority for the action.

[7] Blair wrote his first Wall Street note on the yet to be named net neutrality issue in December 2001.  In the spirit of the recent Dylan biopic “A Complete Unknown,” which begins and ends with the Woody Guthrie song “so long, its’s been good to know yuh,” Blair wishes to say that as to net neutrality, so long, it’s been good to know yuh.