FCC imposes net neutrality, again

It was Throwback Thursday at the FCC on Feb. 26, as the Federal Communications Commission voted to impose 1930s-era regulations on Internet providers.

Under the agency's new rules, Internet service providers such as Verizon and Comcast are to be treated as "common carriers" under the 1934 Communications Act, subjecting them to detailed oversight of what they offer to consumers - and how they offer it.

The decision was a bit of a trip down regulatory memory lane for the FCC, harking back to the days when telephones looked like black candlesticks and all important decisions were made by regulators. Emphasizing the "retro" nature of the day, Verizon's official response to the decision was issued entirely in Morse code, the language of the telegraph.

What was the FCC thinking when it imposed these antiquated rules on the 21st century Internet? For it, common-carrier rules were a means to an end: network neutrality, the idea that Internet service providers should treat every bit of content travelling over their networks exactly the same way. Never mind that cat videos and 911 calls ought to be treated differently, or that premiums and value discounts are a key part of every well-functioning marketplace.

The FCC has pursued the goal of forced neutrality relentlessly for over a decade. Twice during this time, the agency tried to impose net neutrality - in 2005 and again in 2010 - and twice it was rebuffed by the courts, which found the FCC lacked authority to act.

Hoping that the third time is the charm, the FCC, led by Chairman Tom Wheeler, proposed yet another set of rules last May. Initially, Wheeler intended to more or less re-adopt the 2010 rules, with minor changes intended to address the problems identified in court.

However, President Barack Obama upped the ante in November intervening with the normally independent FCC, urging it to turn Internet access providers into public utilities subject to comprehensive regulation. After a brief and cursory defense of his agency's autonomy, Wheeler changed his plan to match the president's. The revised proposal was adopted by the full commission on a strict party-line vote.

Devised for the static monopolies, public-utility regulation will be corrosive to today's dynamic Internet. There's a reason the phrase "innovative public utility" doesn't flows easily from the tongue. The hundreds of rules that come with public utility status are geared to keeping monopolies in line, not encouraging new or innovative ways of doing things. (The FCC has indicated it will refrain from enforcing the bulk of these rules, but if you believe that, I have a water-front property in Wyoming to sell you.)

Even worse, by imposing burdens on big and small carriers alike, the new rules may actually stifle chances of increasing competition among broadband providers.

With the FCC's vote, the battle over how (and whether) the Internet will be regulated by Washington moves to two new but familiar venues. The first is Congress, where members will want to - and arguably have a duty to - have a say. Congressional leaders have already begun a broad effort to update the Communications Act, and the FCC's neutrality decision will no doubt become a prime target of that reform.

Congress's short-term options, however, are limited, given the likelihood of a White House veto of any bill that overturns the FCC's ruling. There are approaches worth exploring, however, such as attaching a rider to the FCC appropriations bill prohibiting the FCC from spending taxpayer dollars to enforce the new rules. Short of that, look for Congress to express its views through nonbinding resolutions of disapproval and oversight hearings.

The second venue is the courts, where opponents of regulation may have their best chance of success. The courts normally defer to the expertise of independent agencies, but after two prior decisions, this will be put more to the test. To pass muster, the FCC needs to convince judges that it acted for more reasons than being told to do so by President Obama. Regulation of wireless service faces even bigger hurdles, including a statutory provision limiting the FCC's power to regulate wireless phone data services as common carriers.

Throwback Thursday was clearly not the end of this long-running debate.

 - James L. Gattuso is senior research fellow in regulatory policy in the Roe Institute for Economic Policy Studies.

About the Author

James L. Gattuso Senior Research Fellow in Regulatory Policy
Thomas A. Roe Institute for Economic Policy Studies

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