by Mark Jamison
Now that the DC Circuit Court of Appeals decided that it is okay to have economics-free regulations for the Internet, leadership from Congress may be the only way we can achieve an economics-grounded and technology-grounded policy for the Internet.
What we need is a regulatory framework that is consistent with a constantly improving tech ecosystem of networks, edge providers, customers, and others yet to be discovered. There are two key elements to this framework: a multistakeholder process for most situations and a regulatory approach when there is enduring monopoly.
The benefits of a multistakeholder process
Given the dynamic and competitive nature of the tech ecosystem, a multistakeholder process should be used for creating the guidelines Internet Service Providers (ISPs) and edge providers operate within. According to research by Roslyn Layton, countries using this approach have more edge provider innovation on average than do other nations.
A multistakeholder approach brings interested parties together to discuss and craft solutions to inter-industry conflicts. This is the way that the Internet is governed and it seems to work well when businesses in complex systems need to coevolve.
A multistakeholder approach is superior to the FCC’s regulatory-rules based approach for many reasons, one being that the multistakeholder approach is more information rich: Industry experts are directly engaged rather than serving as advisors to lawyers who then influence the FCC, or maybe just lobby the White House. It also allows innovation in all parts of the Internet ecosystem — networks, customers, and edge providers — because none are bound by rigid regulatory rules that require long and costly processes. Issues are limited to actual problems, as opposed to problems imagined or embraced in acts of regulatory rent seeking.
Adopt FCC-style regulations only if there is actual evidence of monopoly
What if competition isn’t sustained in some Internet markets? In order to preserve the innovative powers of the Internet ecosystem, ex ante regulations would be justified only if studies demonstrate that there is actual, enduring monopoly and that regulation is expected to perform better than no regulation. Because ensuring that such studies rely upon the proper economic analysis and technology assumptions, it would be appropriate for the FCC’s chief economist and chief technologist to sign off on the studies.
The Department of Justice and Federal Trade Commission Merger Guidelines are good guidelines for purposes of defining markets. Relying on the Merger Guideline framework would prevent the commission from doing what it has done in the recent past, namely arbitrarily defining what it believes customers should buy and then reaching conclusions based on this made-up market.
Evidence-based and appealable regulatory impact analyses that demonstrate that regulation would indeed improve market outcomes ensures that, to the extent practicable, that the FCC is rigorous in its analysis and tracks actual results once regulations are in place.
Why this matters
Net neutrality in the US is backfiring. There are two basic reasons for the failure. One is that net neutrality policy has lost its focus and is now a growing miscellany of ex ante regulations that frequently work against the entrepreneurs and consumers the rules are intended to help. The second reason is that the net neutrality mindset is locked into a fading paradigm in which networks are distinct from computing and content. Facebook, Netflix, and Google are investing in customized networks and, in doing so, demonstrating that next-generation breakthroughs will leap beyond the old mindset.
If the US is to continue to be a place where consumers, entrepreneurs, and other enterprises can develop the next generation of information technologies, the country must move beyond net neutrality controversies to a policy framework that enables our industries to be world leaders. This means letting the industry make business decisions and regulating only when monopolies take over.
Published first at TechPolicyDaily.com on June 15, 2016.