Source: http://www.chanrobles.com/usa/us_supremecourt/545/04-277/case.php
Timestamp: 2017-11-22 16:49:29
Document Index: 180047457

Matched Legal Cases: ['§153', '§153', '§153', '§153', '§251', '§153', '§153', '§153']

Numerous parties petitioned for review. By judicial lottery, the Court of Appeals for the Ninth Circuit was selected as the venue for the challenge. That court granted the petitions in part, vacated the Declaratory Ruling in part, and remanded for further proceedings. In particular, the court held that the Commission could not permissibly construe the Communications Act to exempt cable companies providing cable modem service from mandatory Title II regulation. Rather than analyzing the permissibility of that construction under the deferential framework of Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, however, the court grounded that holding in the stare decisis effect of its decision in AT&T Corp. v. Portland, 216 F. 3d 871, which had held that cable modem service is a "telecommunications service."
Held: The Commission's conclusion that broadband cable modem companies are exempt from mandatory common-carrier regulation is a lawful construction of the Communications Act under Chevron and the Administrative Procedure Act. Pp. 8-32.
In particular, the Commission defined "basic service" as "a pure transmission capability over a communications path that is virtually transparent in terms of its interaction with customer supplied information." Id., at 420, ¶96. By "pure" or "transparent" transmission, the Commission meant a communications path that enabled the consumer to transmit an ordinary-language message to another point, with no computer processing or storage of the information, other than the processing or storage needed to convert the message into electronic form and then back into ordinary language for purposes of transmitting it
over the network--such as via a telephone or a facsimile. Id., at 419-420, ¶¶94-95. Basic service was subject to common-carrier regulation. Id., at 428, ¶114.
The Court of Appeals derived a contrary rule from a mistaken reading of this Court's decisions. It read Neal v. United States, 516 U. S. 284 (1996), to establish that a prior judicial construction of a statute categorically controls an agency's contrary construction. 345 F. 3d, at 1131-1132; see also post, at 12, n. 11 (Scalia, J., dissenting). Neal established no such proposition. Neal declined to defer to a construction adopted by the United States Sentencing Commission that conflicted with one the Court previously had adopted in Chapman v. United States, 500 U. S. 453 (1991). Neal, supra, at 290-295. Chapman, however, had held the relevant statute to be unambiguous. See 500 U. S., at 463 (declining to apply the rule of lenity given the statute's clear language). Thus, Neal established only that a precedent holding a statute to be unambiguous forecloses a contrary agency construction. That limited holding accorded with this Court's prior decisions, which had held that a court's interpretation of a statute trumps an agency's under the doctrine of stare decisis only if the prior court holding "determined a statute's clear meaning." Maislin Industries, U. S., Inc. v. Primary Steel, Inc., 497 U. S. 116, 131 (1990) (emphasis added); see also Lechmere, Inc. v. NLRB, 502 U. S. 527, 536-537 (1992). Those decisions allow a court's prior interpretation of a statute to override an agency's interpretation only if the relevant court decision held the statute unambiguous.
Cable companies in the broadband Internet service business "offe[r]" consumers an information service in the form of Internet access and they do so "via telecommunications," §153(20), but it does not inexorably follow as a matter of ordinary language that they also "offe[r]" consumers the high-speed data transmission (telecommunications) that is an input used to provide this service, §153(46). We have held that where a statute's plain terms admit of two or more reasonable ordinary usages, the Commission's choice of one of them is entitled to deference. See Verizon, 535 U. S., at 498 (deferring to the Commission's interpretation of the term "cost" by reference to an alternative linguistic usage defined by what "[a] merchant who is asked about 'the cost of providing the goods' " might "reasonably" say); National Railroad Passenger Corporation v. Boston & Maine Corp., 503 U. S. 407, 418 (1992) (agency construction entitled to deference where there were "alternative dictionary definitions of the word" at issue). The term "offe[r]" as used in the definition of telecommunications service, 47 U. S. C. §153(46), is ambiguous in this way.
In response, the dissent argues that the high-speed transmission component necessary to providing cable modem service is necessarily "offered" with Internet service because cable modem service is like the offering of pizza delivery service together with pizza, and the offering of puppies together with dog leashes. Post, at 3-4 (opinion of Scalia, J.). The dissent's appeal to these analogies only underscores that the term "offer" is ambiguous in the way that we have described. The entire question is whether the products here are functionally integrated (like the components of a car) or functionally separate (like pets and leashes). That question turns not on the language of the Act, but on the factual particulars of how Internet technology works and how it is provided, questions Chevron leaves to the Commission to resolve in the first instance. As the Commission has candidly recognized, "the question may not always be straightforward whether, on the one hand, an entity is providing a single information service with communications and computing components, or, on the other hand, is providing two distinct services, one of which is a telecommunications service." Universal Service Report 11530, ¶60. Because the term "offer" can sometimes refer to a single, finished product and sometimes to the "individual components in a package being offered" (depending on whether the components "still possess sufficient identity to be described as separate objects," post, at 3), the statute fails unambiguously to classify the telecommunications component of cable modem service as a distinct offering. This leaves federal telecommunications policy in this technical and complex area to be set by the Commission, not by warring
Respondents' statutory arguments conflict with this regulatory history. They claim that the Communications Act unambiguously classifies as telecommunications carriers all entities that use telecommunications inputs to provide information service. As respondent MCI concedes, this argument would subject to mandatory common-carrier regulation all information-service providers that use telecommunications as an input to provide information service to the public. Brief for Respondent MCI, Inc. 30. For example, it would subject to common-carrier regulation non-facilities-based ISPs that own no transmission facilities. See Universal Service Report 11532-11533, ¶66. Those ISPs provide consumers with transmission facilities used to connect to the Internet, see supra, at 2, and so, under respondents' argument, necessarily "offer" telecommunications to consumers. Respondents' position that all such entities are necessarily "offering telecommunications" therefore entails mandatory common-carrier regulation of entities that the Commission never classified as "offerors" of basic transmission service, and therefore common carriers, under the Computer II regime.2 See Universal Service Report 11540, ¶81 (noting past Commission policy); Computer and Communications Industry Assn. v. FCC, 693 F. 2d 198, 209 (CADC 1982) (noting and upholding Commission's Computer II "finding that enhanced services ... are not common carrier services within the scope of Title II"). We doubt that the parallel term "telecommunications service" unambiguously worked this abrupt shift in Commission policy.
Respondents' analogy between cable companies that provide cable modem service and facilities-based enhanced-service providers--that is, enhanced-service providers who own the transmission facilities used to provide those services--fares no better. Respondents stress that under the Computer II rules the Commission regulated such providers more heavily than non-facilities-based providers. The Commission required, for example, local telephone companies that provided enhanced services to offer their wires on a common-carrier basis to competing enhanced-service providers. See, e.g., In re Amendment of Sections 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry), 104 F. C. C. 2d 958, 964, ¶4 (1986) (hereinafter Computer III Order). Respondents argue that the Communications Act unambiguously requires the same treatment for cable companies because cable companies also own the facilities they use to provide cable modem service (and therefore information service).
We disagree. We think it improbable that the Communications Act unambiguously freezes in time the Computer II treatment of facilities-based information-service providers. The Act's definition of "telecommunications service" says nothing about imposing more stringent regulatory duties on facilities-based information-service providers. The definition hinges solely on whether the entity "offer[s] telecommunications for a fee directly to the public,"
47 U. S. C. §153(46), though the Act elsewhere subjects facilities-based carriers to stricter regulation, see §251(c) (imposing various duties on facilities-based local telephone companies). In the Computer II rules, the Commission subjected facilities-based providers to common-carrier duties not because of the nature of the "offering" made by those carriers, but rather because of the concern that local telephone companies would abuse the monopoly power they possessed by virtue of the "bottleneck" local telephone facilities they owned. See Computer II Order 474-475, ¶¶229, 231; Computer III Order 968-969, ¶12; Verizon, 535 U. S., at 489-490 (describing the naturally monopolistic physical structure of a local telephone exchange). The differential treatment of facilities-based carriers was therefore a function not of the definitions of "enhanced-service" and "basic service," but instead of a choice by the Commission to regulate more stringently, in its discretion, certain entities that provided enhanced service. The Act's definitions, however, parallel the definitions of enhanced and basic service, not the facilities-based grounds on which that policy choice was based, and the Commission remains free to impose special regulatory duties on facilities-based ISPs under its Title I ancillary jurisdiction. In fact, it has invited comment on whether it can and should do so. See supra, at 7.
I join the Court's opinion because I believe that the Federal Communications Commission's decision falls within the scope of its statutorily delegated authority--though perhaps just barely. I write separately because I believe it important to point out that Justice Scalia, in my view, has wrongly characterized the Court's opinion in United States v. Mead Corp., 533 U. S. 218 (2001). He states that the Court held in Mead that "some unspecified degree of formal process" before the agency "was required" for courts to accord the agency's decision deference under Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984). Post, at 12 (dissenting opinion); see also ibid. (formal process is "at least the only safe harbor").
Justice Scalia has correctly characterized the way in which he, in dissent, characterized the Court's Mead opinion. 533 U. S., at 245-246. But the Court said the opposite. An agency action qualifies for Chevron deference when Congress has explicitly or implicitly delegated to the agency the authority to "fill" a statutory "gap," including an interpretive gap created through an ambiguity in the language of a statute's provisions. Chevron, supra, at 843-844; Mead, supra, at 226-227. The Court said in Mead that such delegation "may be shown in a variety of ways, as by an agency's power to engage in adjudication or notice-and-comment rulemaking, or by some other indication of a comparable congressional intent." 533 U. S., at 227 (emphasis added). The Court explicitly stated that the absence of notice-and-comment rulemaking did "not decide the case," for the Court has "sometimes found reasons for Chevron deference even when no such administrative formality was required and none was afforded." Id., at 231. And the Court repeated that it "has recognized a variety of indicators that Congress would expect Chevron deference." Id., at 237 (emphasis added).
It is not surprising that the Court would hold that the existence of a formal rulemaking proceeding is neither a necessary nor a sufficient condition for according Chevron deference to an agency's interpretation of a statute. It is not a necessary condition because an agency might arrive at an authoritative interpretation of a congressional enactment in other ways, including ways that Justice Scalia mentions. See, e.g., Mead, supra, at 231. It is not a sufficient condition because Congress may have intended not to leave the matter of a particular interpretation up to the agency, irrespective of the procedure the agency uses to arrive at that interpretation, say, where an unusually basic legal question is at issue. Cf. General Dynamics Land Systems, Inc. v. Cline, 540 U. S. 581, 600 (2004) (rejecting agency's answer to question whether age discrimination law forbids discrimination against the relatively young).
The first sentence of the FCC ruling under review reads as follows: "Cable modem service provides high-speed access to the Internet, as well as many applications or functions that can be used with that access, over cable system facilities." In re Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities, 17 FCC Rcd. 4798, 4799, ¶1 (2002) (hereinafter Declaratory Ruling) (emphasis added, footnote omitted). Does this mean that cable companies "offer" high-speed access to the Internet&&& Surprisingly not, if the Commission and the Court are to be believed.
The consumer's view of the matter is best assessed by asking what other products cable-modem service substitutes for in the marketplace. Broadband Internet service provided by cable companies is one of the three most common forms of Internet service, the other two being dial-up access and broadband Digital Subscriber Line (DSL) service. Ante, at 2-3. In each of the other two, the physical transmission pathway to the Internet is sold--indeed, is legally required to be sold--separately from the Internet functionality. With dial-up access, the physical pathway comes from the telephone company and the Internet service provider (ISP) provides the functionality.
"In the case of Internet access, the end user utilizes two different and distinct services. One is the transmission pathway, a telecommunications service that the end user purchases from the telephone company. The second is the Internet access service, which is an enhanced service provided by an ISP... . Th[e] functions [provided by the ISP] are separate from the transmission pathway over which that data travels. The pathway is a regulated telecommunications service; the enhanced service offered over it is not." Oxman, The FCC and the Unregulation of the Internet, p. 13 (FCC, Office of Plans and Policy, Working Paper No. 31, July 1999), available at http://www.fcc.gov/
Bureaus/OPP/working_papers/oppwp31.pdf (as visited June 24, 2005, and available in the Clerk of Court's case file).2
Of course, like Mead itself, today's novelty in belated remediation of Mead creates many uncertainties to bedevil the lower courts. A court's interpretation is conclusive, the Court says, only if it holds that interpretation to be "the only permissible reading of the statute," and not if it merely holds it to be "the best reading." Ante, at 13. Does this mean that in future statutory-construction cases involving agency-administered statutes courts must specify (presumably in dictum) which of the two they are holding&&& And what of the many cases decided in the past, before this dictum's requirement was established&&& Apparently, silence on the point means that the court's decision is subject to agency reversal: "Before a judicial construction of a statute, whether contained in a precedent or not, may trump an agency's, the court must hold that the statute unambiguously requires the court's construction."13 Ibid. (I have not made, and as far as I know the Court has not made, any calculation of how many hundreds of past statutory decisions are now agency-reversible because of failure to include an "unambiguous" finding. I suspect the number is very large.) How much extra work will it entail for each court confronted with an agency-administered statute to determine whether it has reached, not only the right ("best") result, but "the only permissible" result&&& Is the standard for "unambiguous" under the Court's new agency-reversal rule the same as the standard for "unambiguous" under step one of Chevron&&& (If so, of course, every case that reaches step two of Chevron will be agency-reversible.) Does the "unambiguous" dictum produce stare decisis effect even when a court is affirming, rather than reversing, agency action--so that in the future the agency must adhere to that affirmed interpretation&&& If so, does the victorious agency have the right to appeal a Court of Appeals judgment in its favor, on the ground that the text in question is in fact not (as the Court of Appeals held) unambiguous, so the agency should be able to change its view in the future&&&
The dissent attempts to escape this consequence of respondents' position by way of an elaborate analogy between ISPs and pizzerias. Post, at 7-8 (opinion of Scalia, J.). This analogy is flawed. A pizzeria "delivers" nothing, but ISPs plainly provide transmission service directly to the public in connection with Internet service. For example, with dial-up service, ISPs process the electronic signal that travels over local telephone wires, and transmit it to the Internet. See supra, at 2; Huber 988. The dissent therefore cannot deny that its position logically would require applying presumptively mandatory Title II regulation to all ISPs.
The dissent claims that access to DNS does not count as use of the information-processing capabilities of Internet service because DNS is "scarcely more than routing information, which is expressly excluded from the definition of 'information service.' " Post, at 9, and n. 6 (opinion of Scalia, J.). But the definition of information service does not exclude "routing information." Instead, it excludes "any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service." 47 U. S. C. §153(20). The dissent's argument therefore begs the question because it assumes that Internet service is a "telecommunications system" or "service" that DNS manages (a point on which, contrary to the dissent's assertion, post, at 9, n. 6, we need take no view for purposes of this response).
See also In re Federal-State Joint Board on Universal Service, 13 FCC Rcd. 11501, 11571-11572, ¶145 (1998) (end users "obtain telecommunications service from local exchange carriers, and then use information services provided by their Internet service provider and [Web site operators] in order to access [the Web]").
The Court contends that this analogy is inapposite because one need not have a pizza delivered, ante, at 20, whereas one must purchase the cable connection in order to use cable's ISP functions. But the ISP functions provided by the cable company can be used without cable delivery--by accessing them from an Internet connection other than cable. The merger of the physical connection and Internet functions in cable's offerings has nothing to do with the " 'inextricably intertwined,' " ante, at 6, nature of the two (like a car and its carpet), but is an artificial product of the cable company's marketing decision not to offer the two separately, so that the Commission could (by the Declaratory Ruling under review here) exempt it from common-carrier status.
The Commission says forbearance cannot explain why value-added networks were not regulated as basic-service providers because it was not given the power to forbear until 1996. Reply Brief for Federal Petitioners 3-4, n. 1. It is true that when the Commission ruled on value-added networks, the statute did not explicitly provide for forbearance--any more than it provided for the categories of basic and enhanced services that the Computer Inquiry rules established, and through which the forbearance was applied. The D. C. Circuit, however, had long since recognized the Commission's discretionary power to "forbear from Title II regulation." Computer & Communications Industry Assn. v. FCC, 693 F. 2d 198, 212 (1982).
The Court says that invoking this explicit exception from the definition of information services, which applies only to the "management, control, or operation of a telecommunications system or the management of a telecommunications service," 47 U. S. C. §153(20), begs the question whether cable-modem service includes a telecommunications service, ante, at 28, n. 3. I think not, and cite the exception only to demonstrate that the incidental functions do not prevent cable from including a telecommunications service if it otherwise qualifies. It is rather the Court that begs the question, saying that the exception cannot apply because cable is not a telecommunications service.
Under the Commission's assumption that cable-modem-service providers are not providing "telecommunications services," there is reason to doubt whether it can use its Title I powers to impose common-carrier-like requirements, since 47 U. S. C. §153(44) specifically provides that a "telecommunications carrier shall be treated as a common carrier under this chapter only to the extent that it is engaged in providing telecommunications services" (emphasis added), and "this chapter" includes Titles I and II.
For a description of the confusion Mead has produced in the D. C. Circuit alone, see Vermeule, Mead in the Trenches, 71 Geo. Wash. L. Rev. 347, 361 (2003) (concluding that "the Court has inadvertently sent the lower courts stumbling into a no-man's land").
Justice Breyer attempts to clarify Mead by repeating its formulations that the Court has "sometimes found reasons" to give Chevron deference in a (still-unspecified) "variety of ways" or because of a (still-unspecified) "variety of indicators," ante, at 2 (concurring opinion) (internal quotation marks and emphasis omitted). He also notes that deference is sometimes inappropriate for reasons unrelated to the agency's process. Surprising those who thought the Court's decision not to defer to the agency in General Dynamics Land Systems, Inc. v. Cline, 540 U. S. 581 (2004), depended on its conclusion that there was "no serious question ... about purely textual ambiguity" in the statute, id., at 600, Justice Breyer seemingly attributes that decision to a still-underdeveloped exception to Chevron deference--one for "unusually basic legal question[s]," ante, at 2. The Court today (thankfully) does not follow this approach: It bases its decision on what it sees as statutory ambiguity, ante, at 25, without asking whether the classification of cable-modem service is an "unusually basic legal question."
It is true that, even under the broad basis for deference that I propose (viz., any agency position that plainly has the approval of the agency head, see United States v. Mead Corp., 533 U. S. 218, 256-257 (2001) (Scalia, J., dissenting)), some interpretive matters will be decided de novo, without deference to agency views. This would be a rare occurrence, however, at the Supreme Court level--at least with respect to matters of any significance to the agency. Seeking to achieve 100% agency control of ambiguous provisions through the complicated method the Court proposes is not worth the incremental benefit.
The Court's unanimous holding in Neal v. United States, 516 U. S. 284 (1996), plainly rejected the notion that any form of deference could cause the Court to revisit a prior statutory-construction holding: "Once we have determined a statute's meaning, we adhere to our ruling under the doctrine of stare decisis, and we assess an agency's later interpretation of the statute against that settled law." Id., at 295. The Court attempts to reinterpret this plain language by dissecting the cases Neal cited, noting that they referred to previous determinations of " 'a statute's clear meaning.' " Lechmere, Inc. v. NLRB, 502 U. S. 527, 537 (1992) (quoting Maislin Industries, U. S., Inc. v. Primary Steel, Inc., 497 U. S. 116, 131 (1990)). But those cases reveal that today's focus on the term "clear" is revisionist. The oldest case in the chain using that word, Maislin Industries, did not rely on a prior decision that held the statute to be clear, but on a run-of-the-mill statutory interpretation contained in a 1908 decision. Id., at 130-131. When Maislin Industries referred to the Court's prior determination of "a statute's clear meaning," it was referring to the fact that the prior decision had made the statute clear, and was not conducting a retrospective inquiry into whether the prior decision had declared the statute itself to be clear on its own terms.
The Court contends that no reversal of judicial holdings is involved, because "a court's opinion as to the best reading of an ambiguous statute ... is not authoritative," ante, at 11. That fails to appreciate the difference between a de novo construction of a statute and a decision whether to defer to an agency's position, which does not even "purport to give the statute a judicial interpretation." Mead, supra, at 248 (Scalia, J., dissenting). Once a court has decided upon its de novo construction of the statute, there no longer is a "different construction" that is "consistent with the court's holding," ante, at 11, and available for adoption by the agency.
Suggestive of the same chaotic undermining of all prior judicial decisions that do not explicitly renounce ambiguity is the Court's explanation of why agency departure from a prior judicial decision does not amount to overruling: "[T]he agency may, consistent with the court's holding, choose a different construction, since the agency remains the authoritative interpreter (within the limits of reason) of [ambiguous] statutes [it is charged with administering]." Ante, at 11.
Further de-ossification may already be on the way, as the Court has hinted that an agency construction unworthy of Chevron deference may be able to trump one of our statutory-construction holdings. In Edelman v. Lynchburg College, 535 U. S. 106, 114 (2002), the Court found "no need to resolve any question of deference" because the Equal Employment Opportunity Commission's rule was "the position we would adopt even if ... we were interpreting the statute from scratch." It nevertheless refused to say whether the agency's position was "the only one permissible." Id., at 114, n. 8 (quotation marks omitted). Justice O'Connor appropriately "doubt[ed] that it is possible to reserve" the question whether a regulation is entitled to Chevron deference "while simultaneously maintaining ... that the agency is free to change its interpretation" in the future. Id., at 122 (opinion concurring in judgment). In response, the Court cryptically said only that "not all deference is deference under Chevron." Id., at 114, n. 8.