|NATIONAL CABLE & TELECOMMUNICATIONS ASSN. V.BRAND X INTERNET SERVICES (04-277) 545 U.S. 967 (2005)
345 F.3d 1120, reversed and remanded.
[ Thomas ]
[ Stevens ]
[ Breyer ]
[ Scalia ]
ON WRITS OF CERTIORARI TO THE UNITED STATES
APPEALS FOR THE NINTH CIRCUIT
[June 27, 2005]
Justice Scalia, with whom Justice Souter and Justice Ginsburg join as to Part I, dissenting.
The Federal Communications Commission (FCC or Commission) has once again attempted to concoct a whole new regime of regulation (or of free-market competition) under the guise of statutory construction. MCI Telecommunications Corp. v. American Telephone & Telegraph Co., 512 U.S. 218, 234 (1994). Actually, in these cases, it might be more accurate to say the Commission has attempted to establish a whole new regime of non-regulation, which will make for more or less free-market competition, depending upon whose experts are believed. The important fact, however, is that the Commission has chosen to achieve this through an implausible reading of the statute, and has thus exceeded the authority given it by Congress.
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.
It happens that cable-modem service is popular precisely because of the high-speed access it provides, and that, once connected with the Internet, cable-modem subscribers often use Internet applications and functions from providers other than the cable company. Nevertheless, for purposes of classifying what the cable company does, the Commission (with the Courts approval) puts all the emphasis on the rest of the package (the additional applications or functions). It does so by claiming that the cable company does not offe[r] its customers high-speed Internet access because it offers that access only in conjunction with particular applications and functions, rather than separate[ly], as a stand-alone offering. Id., at 4802, ¶7, 4823, ¶40.
The focus on the term
offer appropriately derives from the statutory
definitions at issue in these cases. Under the
Telecommunications Act of 1996, 110 Stat. 56,
The Court concludes that the word
offer is ambiguous in the sense that it has
Thus, I agree (to adapt the
Courts example, ante, at 18) that it would be odd
to say that a car dealer is in the business of selling steel or
carpets because the cars he sells include both steel frames and
carpeting. Nor does the water company sell hydrogen, nor the
pet store water (though dogs and cats are largely water at the
molecular level). But what is sometimes true is not, as the
Court seems to assume, always true. There are instances
in which it is ridiculous to deny that one part of a joint
offering is being offered merely because it is not offered on a
If, for example, I call up a pizzeria
and ask whether they offer delivery, both common sense and
common usage, ante, at 18, would prevent
them from answering: No, we do not offer
deliverybut if you order a pizza from us, well bake
it for you and then bring it to your house. The logical
response to this would be something on the order of, so,
you do offer delivery. But our pizza-man may
continue to deny the obvious and explain, paraphrasing the FCC
and the Court: No, even though we bring the pizza to your
house, we are not actually offering you delivery,
because the delivery that we provide to our end users is
part and parcel of our pizzeria-pizza-at-home
service and is integral to its other
In short, for the inputs of a finished service to qualify as the objects of an offer (as that term is reasonably understood), it is perhaps a sufficient, but surely not a necessary, condition that the seller offer separately each discrete input that is necessary to providing a finished service, ante, at 19. The pet store may have a policy of selling puppies only with leashes, but any customer will say that it does offer puppiesbecause a leashed puppy is still a puppy, even though it is not offered on a stand-alone basis.
Despite the Courts mighty labors to prove otherwise, ante, at 1729, the telecommunications component of cable-modem service retains such ample independent identity that it must be regarded as being on offerespecially when seen from the perspective of the consumer or the end user, which the Court purports to find determinative, ante, at 18, 22, 27, 28. The Commissions ruling began by noting that cable-modem service provides both high-speed access to the Internet and other applications and functions, Declaratory Ruling 4799, ¶1, because that is exactly how any reasonable consumer would perceive it: as consisting of two separate things.
The consumers 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 23. In each of the other two, the physical transmission pathway to the Internet is soldindeed, is legally required to be soldseparately 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
Bureaus/OPP/working_papers/oppwp31.pdf (as visited June 24, 2005, and available in the Clerk of Courts case file).2
As the Court acknowledges, ante, at 29, DSL service has been similar to dial-up service in the respect that the physical connection to the Internet must be offered separately from Internet functionality.3 Thus, customers shopping for dial-up or DSL service will not be able to use the Internet unless they get both someone to provide them with a physical connection and someone to provide them with applications and functions such as e-mail and Web access. It is therefore inevitable that customers will regard the competing cable-modem service as giving them both computing functionality and the physical pipe by which that functionality comes to their computerboth the pizza and the delivery service that nondelivery pizzerias require to be purchased from the cab company.4
Since the delivery service provided by cable (the broad-band connection between the customers computer and the cable companys computer-processing facilities) is downstream from the computer-processing facilities, there is no question that it merely serves as a conduit for the information services that have already been assembled by the cable company in its capacity as ISP. This is relevant because of the statutory distinction between an information service and telecommunications. The former involves the capability of getting, processing, and manipulating information. §153(20). The latter, by contrast, involves no change in the form or content of the information as sent and received. §153(43). When cable-company-assembled information enters the cable for delivery to the subscriber, the information service is already complete. The information has been (as the statute requires) generated, acquired, stored, transformed, processed, retrieved, utilized, or made available. All that remains is for the information in its final, unaltered form, to be delivered (via telecommunications) to the subscriber.
This reveals the insubstantiality of
the fear invoked by both the Commission and the Court: the fear
of what will happen to ISPs that do not provide the physical
pathway to Internet access, yet still use telecommunications to
acquire the pieces necessary to assemble the information that
they pass back to their customers. According to this
reductio, ante, at 2224, if cable-modem-service
providers are deemed to provide telecommunications
service, then so must all ISPs because they all
use telecommunications in providing Internet
functionality (by connecting to other parts of the Internet,
including Internet backbone providers, for example). In terms
of the pizzeria analogy, this is equivalent to saying that, if
the pizzeria offers delivery, all
restaurants offer delivery, because the ingredients
of the food they serve their customers have come from other
places; no matter how their customers get the food (whether by
eating it at the restaurant, or by coming to pick it up
themselves), they still consume a product for which delivery
was a necessary input. This is nonsense.
Concluding that delivery of the finished pizza constitutes an
offer of delivery does not require the conclusion
that the serving of prepared food includes an offer
of delivery. And that analogy does not even do the point
The regulatory history on which the Court depends so much, ante, at 2125, provides another reason why common-carrier regulation of all ISPs is not a worry. Under its Computer Inquiry rules, which foreshadowed the definitions of information and telecommunications services, ante, at 45, the Commission forbore from regulating as common carriers value-added networksnon-facilities-based providers who leased basic services from common carriers and bundled them with enhanced services; it said that they, unlike facilities-based providers, would be deemed to provide only enhanced services, ante, at 22.5 That same result can be achieved today under the Commissions statutory authority to forbear from imposing most Title II regulations. 47 U.S.C. § 160. In fact, the statutory criteria for forbearancewhich include what is just and reasonable, necessary for the protection of consumers, and consistent with the public interest, §§160(a)(1), (2), (3)correspond well with the kinds of policy reasons the Commission has invoked to justify its peculiar construction of telecommunications service to exclude cable-modem service.
The Court also puts great stock in its conclusion that cable-modem subscribers cannot avoid using information services provided by the cable company in its ISP capacity, even when they only click-through to other ISPs. Ante, at 2729. For, even if a cable-modem subscriber uses e-mail from another ISP, designates some page not provided by the cable company as his home page, and takes advantage of none of the other standard applications and functions provided by the cable company, he will still be using the cable companys Domain Name System (DNS) server and, when he goes to popular Web pages, perhaps versions of them that are stored in the cable companys cache. This argument suffers from at least two problems. First, in the context of telephone services, the Court recognizes a de minimis exception to contamination of a telecommunications service by an information service. Ante, at 2627. A similar exception would seem to apply to the functions in question here. DNS, in particular, is scarcely more than routing information, which is expressly excluded from the definition of information service. 47 U.S.C. § 153(20).6 Second, it is apparently possible to sell a telecommunications service separately from, although in conjunction with, ISP-like services; that is precisely what happens in the DSL context, and the Commission does not contest that it could be done in the context of cable. The only impediment appears to be the Commissions failure to require from cable companies the unbundling that it required of facilities-based providers under its Computer Inquiry.
Finally, I must note that, notwithstanding the Commissions self-congratulatory paean to its deregulatory largesse, e.g., Brief for Federal Petitioners 2932, it concluded the Declaratory Ruling by asking, as the Court paraphrases, whether under its Title I jurisdiction [the Commission] should require cable companies to offer other ISPs access to their facilities on common-carrier terms. Ante, at 7; see also Reply Brief for Federal Petitioners 9; Tr. of Oral Arg. 17. In other words, what the Commission hath given, the Commission may well take awayunless it doesnt. This is a wonderful illustration of how an experienced agency can (with some assistance from credulous courts) turn statutory constraints into bureaucratic discretions. The main source of the Commissions regulatory authority over common carriers is Title II, but the Commission has rendered that inapplicable in this instance by concluding that the definition of telecommunications service is ambiguous and does not (in its current view) apply to cable-modem service. It contemplates, however, altering that (unnecessary) outcome, not by changing the law (i.e., its construction of the Title II definitions), but by reserving the right to change the facts. Under its undefined and sparingly used ancillary powers, the Commission might conclude that it can order cable companies to unbundle the telecommunications component of cable-modem service.7 And presto, Title II will then apply to them, because they will finally be offering telecommunications service! Of course, the Commission will still have the statutory power to forbear from regulating them under §160 (which it has already tentatively concluded it would do, Declaratory Ruling 48474848, ¶¶9495). Such Möbius-strip reasoning mocks the principle that the statute constrains the agency in any meaningful way.
After all is said and done, after all the regulatory cant has been translated, and the smoke of agency expertise blown away, it remains perfectly clear that someone who sells cable-modem service is offering telecommunications. For that simple reason set forth in the statute, I would affirm the Court of Appeals.
In Part IIIB of its opinion, the Court continues the administrative-law improvisation project it began four years ago in United States v. Mead Corp., 533 U.S. 218 (2001). To the extent it set forth a comprehensible rule,8 Mead drastically limited the categories of agency action that would qualify for deference under Chevron U.S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). For example, the position taken by an agency before the Supreme Court, with full approval of the agency head, would not qualify. Rather, some unspecified degree of formal process was requiredor was at least the only safe harbor. See Mead, supra, at 245246 (Scalia, J., dissenting).9
This meant that many more issues appropriate for agency determination would reach the courts without benefit of an agency position entitled to Chevron deference, requiring the courts to rule on these issues de novo.10 As I pointed out in dissent, this in turn meant (under the law as it was understood until today)11 that many statutory ambiguities that might be resolved in varying fashions by successive agency administrations, would be resolved finally, conclusively, and forever, by federal judgesproducing an ossification of large portions of our statutory law, 533 U.S., at 247. The Court today moves to solve this problem of its own creation by inventing yet another breathtaking novelty: judicial decisions subject to reversal by Executive officers.
Imagine the following sequence of events: FCC action is challenged as ultra vires under the governing statute; the litigation reaches all the way to the Supreme Court of the United States. The Solicitor General sets forth the FCCs official position (approved by the Commission) regarding interpretation of the statute. Applying Mead, however, the Court denies the agency position Chevron deference, finds that the best interpretation of the statute contradicts the agencys position, and holds the challenged agency action unlawful. The agency promptly conducts a rulemaking, and adopts a rule that comports with its earlier positionin effect disagreeing with the Supreme Court concerning the best interpretation of the statute. According to todays opinion, the agency is thereupon free to take the action that the Supreme Court found unlawful.
This is not only bizarre. It is probably unconstitutional. As we held in Chicago & Southern Air Lines, Inc. v. Waterman S. S. Corp., 333 U.S. 103 (1948), Article III courts do not sit to render decisions that can be reversed or ignored by Executive officers. In that case, the Court of Appeals had determined it had jurisdiction to review an order of the Civil Aeronautics Board awarding an overseas air route. By statute such orders were subject to Presidential approval and the order in question had in fact been approved by the President. Id., at 110111. In order to avoid any conflict with the Presidents foreign-affairs powers, the Court of Appeals concluded that it would review the boards action as a regulatory agent of Congress, and the results of that review would remain subject to approval or disapproval by the President. Id., at 112113. As I noted in my Mead dissent, 533 U.S., at 248, the Court bristled at the suggestion: Judgments within the powers vested in courts by the Judiciary Article of the Constitution may not lawfully be revised, overturned or refused faith and credit by another Department of Government. Waterman, supra, at 113. That is what todays decision effectively allows. Even when the agency itself is party to the case in which the Court construes a statute, the agency will be able to disregard that construction and seek Chevron deference for its contrary construction the next time around.12
Of course, like Mead itself, todays novelty in belated remediation of Mead creates many uncertainties to bedevil the lower courts. A courts 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 dictums requirement was established? Apparently, silence on the point means that the courts decision is subject to agency reversal: Before a judicial construction of a statute, whether contained in a precedent or not, may trump an agencys, the court must hold that the statute unambiguously requires the courts 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 Courts 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 actionso 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?
It is indeed a wonderful new world that the Court creates, one full of promise for administrative-law professors in need of tenure articles and, of course, for litigators.14 I would adhere to what has been the rule in the past: When a court interprets a statute without Chevron deference to agency views, its interpretation (whether or not asserted to rest upon an unambiguous text) is the law. I might add that it is a great mystery why any of this is relevant here. Whatever the stare decisis effect of AT&T Corp. v. Portland, 216 F.3d 871 (CA9 2000), in the Ninth Circuit, it surely does not govern this Courts decision. Anddespite the Courts peculiar, self-abnegating suggestion to the contrary, ante, at 14the Ninth Circuit would already be obliged to abandon Portlands holding in the face of this Courts decision that the Commissions construction of telecommunications service is entitled to deference and is reasonable. It is a sadness that the Court should go so far out of its way to make bad law.
I respectfully dissent.
1. The myth that the pizzeria does not offer delivery becomes even more difficult to maintain when the pizzeria advertises quick delivery as one of its advantages over competitors. That, of course, is the case with cable broadband.
2. See also In re Federal-State Joint Board on Universal Service, 13 FCC Rcd. 11501, 1157111572, ¶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]).
3. In the DSL context, the physical connection is generally resold to the consumer by an ISP that has taken advantage of the telephone companys offer. The consumer knows very well, however, that the physical connection is a necessary component for Internet access which, just as in the dial-up context, is not provided by the ISP.
4. 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 cables ISP functions. But the ISP functions provided by the cable company can be used without cable deliveryby accessing them from an Internet connection other than cable. The merger of the physical connection and Internet functions in cables 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 companys 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.
5. 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 34, n. 1. It is true that when the Commission ruled on value-added networks, the statute did not explicitly provide for forbearanceany 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 Commissions discretionary power to forbear from Title II regulation. Computer & Communications Industry Assn. v. FCC, 693 F.2d 198, 212 (1982). The Commission also says its Computer Inquiry rules should not apply to cable because they were developed in the context of telephone lines. Brief for Federal Petitioners 3536; see also ante, at 2425. But to the extent that the statute imported the Computer Inquiry approach, there is no basis for applying it differently to cable than to telephone lines, since the definition of telecommunications service applies regardless of the facilities used. 47 U.S.C. § 153(46).
6. 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.
7. Under the Commissions 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.
8. 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-mans land).
9. 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 agencys process. Surprising those who thought the Courts 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 deferenceone 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.
10. 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, 256257 (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 levelat 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.
11. The Courts 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 statutes meaning, we adhere to our ruling under the doctrine of stare decisis, and we assess an agencys 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 statutes 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 todays 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 130131. When Maislin Industries referred to the Courts prior determination of a statutes 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.
12. The Court contends that no reversal of judicial holdings is involved, because a courts 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 agencys 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 courts holding, ante, at 11, and available for adoption by the agency.
13. Suggestive of the same chaotic undermining of all prior judicial decisions that do not explicitly renounce ambiguity is the Courts explanation of why agency departure from a prior judicial decision does not amount to overruling: [T]he agency may, consistent with the courts 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.
14. 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 Commissions rule was the position we would adopt even if we were interpreting the statute from scratch. It nevertheless refused to say whether the agencys position was the only one permissible. Id., at 114, n. 8 (quotation marks omitted). Justice OConnor 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.