March 9, 2016

Internet Freedom, Not Neutrality


  • A year ago, the FCC passed new regulations that depart from the bipartisan consensus that the Internet should be lightly regulated.

  • FCC Chairman Wheeler’s Open Internet Order will stifle innovation and investment in Internet infrastructure and jobs; create uncertainty; and lead to years of litigation.

  • Republicans have offered bipartisan proposals to achieve net neutrality without the heavy-handed approach favored by the Obama administration


For years, the Internet has thrived while being lightly regulated by Washington. Then, in February 2015, the Federal Communication Commission voted 3-2 along party-lines to implement new “net neutrality” rules. This “Open Internet Order” would dramatically alter the course of the Internet.

“If it ain't broke, don't fix it ... There is no better platform in the world to start a new business than the Internet in the United States.”Mark Cuban, 11-24-2014

The Internet economy has driven incredible innovation and job growth. Inventive companies such as Twitter, Amazon, and Netflix have reimagined the way Americans learn, communicate, and consume. That growth has come from a “hands-off approach,” that included classifying broadband providers as “information services.” This allowed them to be lightly regulated by Title I of the 1996 Telecommunications Act. The FCC Open Internet Order would reclassify these companies as “telecommunications services” and cover them more stringently under Title II of the act. It would treat Internet service providers as if they were public utilities from the era of telephone companies.

COURTS TAKE UP THE ORDER

Since their introduction a year ago, the FCC’s new rules have been challenged in court. The regulations raise significant legal questions.

  • First, the courts will have to decide whether the FCC has the legal authority to reclassify Internet service providers under Title II of Telecommunications Act.
  • Second, the agency said that it would not apply all of the regulations in Title II, just select parts. This is meant to reassure consumers, but it makes the government’s case far shakier. Regulators don’t get to choose which regulations they will enforce and which they will ignore.
  • Third, the courts will need to address whether the FCC followed procedure and rules for releasing information about the vote and text of the rules. The D.C. Circuit Court may also evaluate whether certain statements by President Obama exerted undue influence over an independent agency.

The D.C. Circuit Court of Appeals had struck down the commission’s previous attempts to regulate how ISPs treat Internet traffic – in 2010 and 2014. The current net neutrality rules come in direct response to the decision in the 2014 case, Verizon v. FCC. In that case, the court rejected the FCC’s attempts to give itself new authority by applying Title II-like rules to ISPs.

At the same time, it also decided that the FCC had some general power to regulate broadband Internet service under section 706 of the Telecommunications Act of 1996. The new interpretation of Section 706 places all lightly regulated “information services” at risk of being subject to heavy FCC oversight. The Verizon decision invited the FCC to propose net neutrality rules on this new legal footing. 

On December 4, 2015, U.S. Court of Appeals for the District of Columbia Circuit heard arguments over the new FCC order. The telecommunications industry argued that the FCC lacks the authority to reclassify the internet as a “common carrier.” Many of the questions from the judges revolved around whether wireless and broadband services are functionally equivalent.

NET NEUTRALITY STIFLES INNOVATION

Congress never intended to give the FCC comprehensive regulatory authority over the Internet. In fact, in 1934 it established as the policy of the United States “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.” By creating net neutrality regulations or reclassifying broadband under Title II, the government would abandon this policy. The new rules will stifle innovation by content – or “edge” – providers, such as Facebook and ESPN, and deter investment in new broadband technologies.

Additionally, the cost of implementing Title II regulations could be dramatic. The Progressive Policy Institute recently found that that Title II regulation “could trigger state and local regulations, taxes and fees costing consumers $15 billion” annually.

POLICY SOLUTIONS TO ACHIEVING THE RIGHT BALANCE

The net neutrality rules raise concerns that the FCC will seek a greater expansion of its power over this integral part of the U.S. economy. In addition to broadband providers, edge providers may be affected by the court’s interpretation of Section 706 of the Telecommunications Act as a newly created authority to govern the Internet. The FCC may use this power to impose nondiscrimination regulations on Google searches or on Apple’s operating system. It is foreseeable that the FCC will interpret Section 706 to regulate other areas where it does not have clear statutory authority, such as cybersecurity.

Instead of mandating ill-advised regulations, the FCC should work with Congress to develop clear, statutory authority. Congress could look at potential options to reform the Telecommunications Act to adapt to the quickly evolving technology sector. Earlier this year, Commerce Committee Chairman Thune released a bicameral, bipartisan set of 11 principles for Open Internet rules and draft legislation to ensure “open and unfettered access to the Internet.”

Issue Tag: Technology