February 10, 2015

Obama FCC Overreaches: More Onerous Internet Regulations

  • The FCC chairman has proposed burdensome regulations that depart from the bipartisan consensus that the Internet should be lightly regulated.

  • His proposal to reclassify Internet service providers as common carriers would stifle innovation, chill investment in Internet infrastructure and jobs, create uncertainty for businesses, and likely lead to years of litigation.

  • Commerce Committee Chairman Thune has offered bipartisan proposals to achieve an open Internet without the heavy-handed approach favored by the Obama administration.

The Internet has thrived while being lightly regulated by Washington. Now FCC Chairman Tom Wheeler is proposing tough new “net neutrality” rules that would dramatically alter the course of the Internet. Net neutrality is the idea that Internet service providers, such as Verizon and Comcast, should treat all internet traffic equally. They should not be able to give preference to their own content – in the form of faster or better service – over content people want to get from another company, such as Netflix.


For years, the principle flourished under market forces and the light-touch regulatory approach of Democrat and Republican administrations. Last week, Wheeler proposed a new approach that Politico noted will “mark the most significant rewrite of the rules of the road for the Internet in more than a dozen years.” 

Innovation and Job Growth from a Light Regulatory Touch

The Internet economy has driven incredible innovation and job growth. Inventive companies such as Twitter, Amazon, and Netflix have reimagined the way Americans learn, speak, and shop. Their growth has come from a “hands-off approach” by Washington that included classifying broadband providers as “information services,” which meant they were lightly regulated by Title I of the 1996 Telecommunications Act. The new FCC plan would reclassify these companies as “telecommunications services” and cover them more stringently under Title II of the act. It would essentially treat ISPs as if they were public utilities from the era when phone companies had monopolies.

Wheeler had initially presented his plan for net neutrality regulations in May 2014, and he did not include using Title II. A few months later, in November 2014, President Obama called for a more heavy-handed approach. While the FCC is ostensibly independent, Wheeler quickly changed his tune and offered a plan similar to what the president had proposed. The FCC is scheduled to vote on Wheeler’s new proposal on February 26. This new plan shows that the FCC harbors ambitions to be the gatekeeper of the Internet, a power Congress never intended for it to have.

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

Questionable Legal Footing for the FCC’s Plan

The FCC’s new plan raises several legal questions that would need to be figured out by the courts. First, it is not entirely clear that the FCC would have the legal authority to reclassify ISPs under Title II at all. Second, the agency has 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. The D.C. Circuit Court of Appeals already struck down the commission’s previous attempt to regulate how ISPs treat Internet traffic in January 2014.  

The new attempt would almost certainly lead to more litigation, potentially adding years of uncertainty for companies and consumers. AT&T has already stated its position: “those who oppose efforts at compromise because they assume Title II rests on bulletproof legal theories are only deceiving themselves.”

The Best Policy for a Thriving, Open Internet

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 Communications Act to adapt to a quickly evolving and robust technology sector. Chairman Thune recently released a bicameral, bipartisan set of 11 principles for open Internet rules and has proposed draft legislation to ensure “open and unfettered access to the Internet.” The FCC should delay a vote on its plan and work with Congress to find a bipartisan solution.

Issue Tag: Technology