In a report based on the give-and-take at last week’s federal appeals court hearing regarding “net neutrality” and Internet regulation by the FCC, U.K.-based consulting firm Strand Consulting offers its analysis about where the issue stands.

“While the [EU] Body of European Regulators for Electronic Communications (BEREC) presses forward with its net neutrality framework to be presented in September 2016, it appears that the Federal Communication Commission’s plan for the “Open Internet” is unraveling,” Strand reports.

“A three panel court in Washington criticized the regulator for failing to follow instructions on how such rules should be created. Not only are its rules threatened to be disqualified for procedural reasons, much of the FCC’s Open Internet Order may be unlawful.”

Strand, which last week published a major report about the net neutrality debate unfolding around the globe, says the verdict about the FCC’s rules remains unclear.

“Net neutrality advocates worldwide were pleased when in November 2014 US President Barack Obama called on the FCC to adopt the toughest rules possible to ensure net neutrality. A few months later the FCC released its Open Internet Order which reclassified broadband under Title II of the US Communications Act, the same statutes that governed the telephone monopoly for 50 years,” Strand notes.

“This is a sharp reversal of the historical policy which endeavored to keep the Internet free from FCC oversight and as Congress declared in 1996, “unfettered from regulation.” The rules ban blocking, throttling and paid prioritization; require enhanced transparency; and allow the FCC a broad lens to review the “general conduct” of broadband providers.

“A year after the President’s announcement, the FCC’s rules are now on trial. The aggrieved parties include trade associations, large and small for cable, wireless, and telecomm; AT&T; a series of small broadband providers; and an entrepreneur who claims that the FCC’s ban on paid prioritization prohibits him from deploying a real time communication service. The nine lawsuits were bundled into a single case under US Telecom Association v. FCC. This is the FCC’s third time at bat to defend its net neutrality rules, having struck out on the two prior instances.  The many charges against the FCC were aggregated into four topics: reclassification of broadband; regulation of mobile broadband; the First Amendment; and ‘FSN Issues,’ a set of concerns related to regulatory forbearance and network access for resellers.”

Reading the tea leaves

Strand believes thejudges may believe the FCC has overstepped.

“Key for the FCC is whether its reclassification of broadband under Title II of the US Communication Act, the statutes that subject a provider to common carriage, is legal. While it appears that one of the judges may be sympathetic to the agency (courts frequently give expert agencies deference to interpret the statutes) in its reclassification of the last mile, the decision was marred with the inconsistent and incomplete thinking on interconnection as well as a number of procedural flaws, including failing to provide adequate notice before making rules. Rules could be disqualified on procedural grounds, necessitating the process once again, but it is doubtful that the FCC would have same the favorable conditions.

“The panel discussion suggests that the FCC acted outside its statutory authority; failed to follow the court’s earlier instructions on how to make rules; and denied parties the proper notice before rulemaking. Though the final court decision won’t come until next year, it is almost certain that the overzealous rules of the American regulator will be struck down in part, if not in all. “

Good news for mobile providers?

Not to be forgotten is mobile access.

“Net neutrality rules on mobile networks are likely unlawful,” Strand notes.

“The revelations of the oral arguments are good news for the world’s mobile providers. It appears that American mobile operators will succeed in their challenge to thwart inappropriate regulation. Documents submitted by petitioners recognize the necessity that mobile operators have the flexibility to manage their networks under a variety of constraints. Recognition of this very fact led the FCC to exempt mobile broadband from its 2010 rules.  At the time 4G/LTE had just been introduced, and there was a concern that regulation would kill the nascent technology in the cradle. To be sure, mobile is a continually evolving technology, especially with 5G, which turns the assumptions of a neutral network on its head. It is most probable that this part of the FCC’s rules will be struck down, making a substantive case that operators in other countries could roll back some of their net neutrality rules. “

Landline/wireline providers’ “more difficult burden”

So what are the prospects for landline – or wireline – providers?

“Wireline providers have a more difficult burden to convince the court, but even if just one judge dissents, likely the senior Judge Williams whose opinion carries great weight, the issue will be teed up for the Supreme Court. Indeed wireline petitioners have already indicated that they are ready to appeal. To be sure, should the FCC be overturned on their key argument, they too may appeal the decision. So the litigation is sure to continue, meaning the fate of net neutrality in the US will be uncertain for the time to come, pending a legislative solution by Congress.”

Part Two: More issues will be discussed in a second report later today.