Net Neutrality: Why FCC Should Vacate the Premises

When it comes to current Net neutrality issues, the public debate swings predominantly between two different regulatory strategies (known as, Title II and Section 706), both to be administered by the Federal Communications Commission (FCC). Yet, as much as we concern ourselves with better definitions and the right regulations, we should be more concerned with getting the right regulator. Amongst those in technology policy, many highlight the benefits of Federal Trade Commission’s (FTC) antitrust regulation as the better means to address Net neutrality concerns.

The FCC has spent more than a decade grabbing for authority to claim jurisdiction over Internet service providers (ISPs), yet the U.S. Court of Appeals for the D.C. Circuit continues to rule against such attempts. Earlier this year on January 14th in Verizon v. FCC, D.C. Circuit vacated two-thirds of the FCC’s 2010 Open Internet Order. While upholding the “transparency” rule as within the FCC’s current authority, the “no blocking” and “no unreasonable discrimination” rules were found to only apply to “common carriers.” Since the FCC had previously classified broadband providers as “information services,” many proponents of Net neutrality are prompting the FCC to simply reclassify these providers as “common carriers,” so these rules, if not stricter ones, can apply.

Once a “common carrier,” the FCC could regulate under Title II of the Communications Act of 1934, which brings about a host of antiquated legal unpleasantries. Yet, some suggest that the FCC could rather regulate the Internet as a “common carrier” under Section 706 of the Telecommunications Act of 1996 instead, while avoiding 80 years regulatory and judiciary baggage.

Either way, more litigation will be the storied future of the Internet. Under Title II, the courts will decide what outmoded rules and regulations the FCC can forbear and which ones they cannot. And under Section 706, the courts will establish the boundaries to the currently board and ill-defined regulatory language.

Some argue the Internet was never neutral, so to now forcibly try to create that which never was seems futile at best and damning at worst. Nevertheless, in his book, The Dynamic Internet: How Technology, Users, and Businesses are Transforming the Network, Christopher S. Yoo, a University of Pennsylvania Law Professor, writes,

Setting aside whether the above accurately describes the Internet when it first emerged as a mass-market phenomenon, the policy debate has largely overlooked the extent to which the technological and economic environments surrounding the Internet have changed since the mid-1990s.

The Internet is a dynamic ecosystem, evolving, expanding, and diversifying as it develops. And herein lies the problem: FCC’s regulations are designed for a static, mature network, and the Internet is all but.

The myriad downsides of the FCC reclassifying ISPs as “common carriers” can be avoided by better understanding the earnest concerns people have. Most prevalent is the fear of monopoly power being exercised and therefore distorting the freedom inborn in cyberspace.

As FTC Commissioner Joshua D. Wright explains,

At its heart, the net neutrality debate concerns the competitive effects of vertical contractual arrangements between broadband providers and content providers. Put another way, net neutrality is about the fear that broadband providers will enter into business arrangements that disadvantage certain content providers, harm competition, and thereby leave consumers worse off.

With the FTC’s unique history and set of tools to handle anticompetitive behavior and practices, consumers and innovation can be protected from harmful abuses. The FTC’s “rule of reason” analytical framework evaluates individually each case of potential abuse to gauge the costs and benefits to consumer welfare. Moreover, from this “error-cost” approach, FTC acts accordingly.

Wright argues,

The Net Neutrality Order clearly does consumers a disservice by employing an overly rigid, one size fits all, categorical ban on broadband providers’ ability to enter into vertical contractual arrangements that are potentially — if not probably — efficiency enhancing.

“Indeed, the economic literature,” Wright continues, “is replete with procompetitive explanations for vertical contracts.”

The FCC’s practice of harmonizing content and generalizing rules and regulations does not fit with the rapidly evolving ecology of the Internet. The “one-size-fits-all approach,” writes Yoo, “that dominates the current debate misses the mark. On the contrary, the architecture of the future is likely to be more dynamic and heterogeneous.”

With its highly industry-specific analyses, FTC can tackle more efficiently and more effectively any harmful anticompetitive practices when they occur, while allowing for an innovative environment for both individuals and businesses to flourish.

With the public debate over Net neutrality constricted to only a few rules and regulations by the mainstream media pundits, viral YouTube videos, and late night comedians, we need to broaden the scope of the debate, as to discuss, not only the regulations, but who regulates.

This is an essay posted on my website, Parsons’ Pulpit, on June 6th, 2014.