Delivering Pizza Without Offering Pizza Delivery

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December 4th, 2015

Having appreciated my colleague Aleks’ Yankelevich’s creative use of a “food” metaphor to explain an important aspect of economic analysis, I thought it fitting, on the day of oral arguments in the legal challenge to the FCC’s Open Internet Order, to consider another effective use of such a metaphor:  Supreme Court Justice Antonin Scalia’s dissent in the Brand X case.  Whereas the majority opinion in that case deferred to an earlier FCC ruling that Internet access was an “information” rather than a “telecommunication” service, Scalia–joined by two liberal justices, Ruth Bader Ginsburg and David Souter–argued that the majority’s view was akin to accepting a claim by the owner of a pizzeria that it delivered pizza, but didn’t “offer pizza delivery service.”

Below are some excerpts from Scalia’s dissent that I find most significant in terms of how the DC Circuit (and perhaps later, the Supreme Court) should and will rule in the latest challenge to the FCC’s Open Internet Order, which is the first in which the Commission has treated Internet access as a Title II “telecommunication” service rather than an “information” service.

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”…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 Court’s 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…”

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 “stand-alone” basis…If, for example, I call up a pizzeria and ask whether they offer delivery, both common sense and common “usage”…would prevent them from answering: “No, we do not offer delivery–but if you order a pizza from us, we’ll 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 capabilities.’”… Any reasonable customer would conclude at that point that his interlocutor was either crazy or following some too-clever-by-half legal advice.

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…”

Shifting his analogy from pizza to puppies, Justice Scalia adds:

The pet store may have a policy of selling puppies only with leashes, but any customer will say that it does offer puppies because a leashed puppy is still a puppy, even though it is not offered on a “stand-alone” basis.

Despite the Court’s mighty labors to prove otherwise, …the telecommunications component of cable-modem service retains such ample independent identity that it must be regarded as being on offer–especially when seen from the perspective of the consumer or the end user, which the Court purports to find determinative.

Since the majority opinion in Brand X was based primarily on the doctrine of “administrative deference” derived from the 1984 Supreme Court case Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., one would hope and expect that the DC Circuit Court judges hearing today’s oral arguments would remember what Justice Thomas wrote in that majority opinion: “If a statute is ambiguous, and if the implementing agency’s construction is reasonable, Chevron requires a federal court to accept the agency’s construction of the statute, even if the agency’s reading differs from what the court believes is the best statutory interpretation.”

When the majority’s Chevron-base deference is coupled with Justice Scalia’s simple but clear and commonsensical analogies to pizza and puppies, it’s hard for me to imagine a strong legal basis for the Circuit Court (or the Supreme Court if it ends up ruling on the case) to rule against the FCC’s Title II-based Open Internet Order. Perhaps today’s oral arguments will provide some additional clues as to whether I’m right or wrong about that (Update: downloadable audio of the oral arguments is here (wireline) and here (wireless, First Amendment, Forbearance). h/t @haroldfeld, whose initial response to today’s arguments is here.

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