http://www.nationalreview.com/article/447854/fcc-open-internet-rules-make-internet-less-open
The FCC’s ‘Open Internet Rules’ Make the Internet Less Open
May 23, 2017 4:00 AM
As usual, John Oliver is not helping.
Earlier this month, the HBO funnyman revived his crusade for “net neutrality,”
taking a segment of his show to scold and mock newly appointed Federal
Communications Commission chairman Ajit Pai, who is aiming to roll back
regulations on Internet Service Providers (ISPs) established by the Obama
administration. “Every internet group needs to come together like you
successfully did three years ago,” declared Oliver. “We need all of you.”
Three years ago is when Oliver made his first push for “net neutrality” rules,
backing a call from President Obama to impose on ISPs the “strongest possible
regulation” to prevent monopolistic behavior. Since Columbia Law School
professor Tim Wu coined the term “net neutrality” in 2003 to describe the
principle that ISPs should not be allowed to discriminate among Internet
traffic — i.e., that Comcast, Verizon, and other companies that provide
Internet access to consumers should not be allowed to, say, prevent users from
watching YouTube while letting Netflix play, or cause CNN’s website to load
slower than Politico’s — activists have maintained that the Internet faces a
dire threat to the principles of openness and transparency that have long
governed its use. They are desperate to, in their words, “save the Internet.”
In 2014, after the D.C. Circuit Court reined in a second attempt by the FCC to
regulate broadband beyond its legal ambit, Oliver and thousands upon thousands
of activists pressured then-chairman Tom Wheeler to reject a compromise plan
and do what he had previously deemed unacceptable: buck longstanding precedent
and reclassify broadband as a “telecommunications service,” bringing it under
the purview of Title II of the 1934 Communications Act. In the spring of 2015,
that is what he did, ramming the scheme through on a party-line vote, and
making ISPs subject to a statute written to defang the Bell System telephone
company.
Net neutrality was always a solution looking for a problem. When, in 2010, the
FCC announced its first extensive regulations on ISPs (what would become the
core of the 2015 rules), it could cite just four examples of anticompetitive
behavior, all relatively minor. In 2005, for example, a North Carolina
telephone company blocked the Internet phone service Vonage. In 2007, Comcast
slowed down (“throttled”) the operations of file-sharing service BitTorrent.
To prevent this kind of anticompetitive activity, the FCC instituted its own
anticompetitive regulatory scheme, the so-called Open Internet rules. Under
Title II, the FCC can regulate the rates that ISPs charge, using its
supervisory mandate to dismiss as “unreasonable” or “unjust” any business
models of which it disapproves; it can partially regulate the capital
investment of existing companies, and regulate which companies (if any) can
enter the ISP market; and it can impose taxes on Internet use, such as those
long imposed on telephone service (the “Universal Service Fee”). What’s more,
the nebulous “Internet Conduct” standard that the FCC applies as its metric for
assessing abuse is subject to amendment at any time, for any reason; there is
no certainty that today’s decisions will also be tomorrow’s.
As it is, telecommunications companies are generally subject to higher state
and municipal taxes than other businesses, meaning that more capital will be
diverted into government coffers, and smaller ISPs, already straining under the
new regulatory burden, will have even more trouble getting off the ground. The
result is likely to entrench already-existing players, making ISP markets less
competitive. That will disproportionately harm rural and low-income Americans,
often underserved by major industry players not willing to invest the time or
resources to expand into less-profitable areas.
It’s Economics 101 that this type of onerous regulation will affect long-term
capital investment, and while there is significant debate about the precise
impact the rules have had so far, USTelecom — whose numbers former chairman
Wheeler regularly cited as authoritative — reports that broadband capital
expenditures among the dozen largest ISPs fell 5.6 percent from 2014 to 2016.
None of this was necessary. There was very little evidence that ISPs were
engaging in the sorts of malpractice that net neutrality was designed to
prevent — and even if they had been, it would not have followed that
reclassification was the proper remedy. In fact, a more honest appraisal of the
sequence of events is that the Obama administration and left-wing activists
succeeded in pressuring the FCC into a maximal power-grab that is likely to do
much more damage to Internet freedom than Comcast was doing. Why is the FCC’s
monopoly not as concerning as that of any given ISP?
The regulatory hustle that the Obama-era FCC worked was based on a myth:
namely, that the Internet circa 2015 was in imminent danger, or “broken,” and
needed to be “saved.” That was, and is, nonsense. Insofar as regulation may be
required to sustain the Internet’s longtime dynamism, a much simpler
alternative is available.
First, oversight of anticompetitive activity among ISPs should be transferred
to the Federal Trade Commission. The FTC’s express purpose is to monitor and
intervene to stop anticompetitive business practices and fraud, and it has a
credible track record on both counts. Allowing the FTC to intervene on a
case-by-case basis would be a much less disruptive remedy than the FCC’s
sweeping rule change, especially given that there have been very few documented
instances of such anticompetitive behavior up to now. The FCC is simply not
well-equipped to conduct this type of oversight, and the legal machinations
that it has had to perform to give itself the authority to do so suggests that
it was never intended to have that kind of latitude.
However, the FCC can play an important part in encouraging competition among
ISPs by working with Congress and other federal agencies to free up wireless
broadband spectrum for commercial use. With more and more Americans consuming
large quantities of data via cell phone and tablet, the available quantity of
spectrum has diminished, driving up prices and retarding investment. But the
federal government, which allocates spectrum, has been slow to release more for
commercial use, despite the obvious need. Incentivizing federal agencies to
relinquish spectrum for commercial use should be a congressional priority.
House members Brett Guthrie (R., Ky.) and Doris Matsui (D., Calif.) recently
reintroduced the Federal Spectrum Incentive Act, which would allow federal
agencies to auction off spectrum holdings to private companies.
Finally, municipal governments should look for ways to encourage, rather than
discourage, broadband investment. Local governments and their public utilities
are notorious for charging broadband companies exorbitant prices for access to
publicly owned “rights of way,” without which they cannot erect the
infrastructure necessary for Internet service. These municipal monopolies are
among the chief reasons that many places have little or no competition among
ISPs. But it doesn’t have to be this way. Kansas City, Austin, and Provo all
hammered out favorable agreements with Google Fiber, the Internet giant’s
ultra-high-speed broadband project, and several other cities have followed
suit. Kansas City officials partially credit the arrangement for the city’s
ascendancy as a tech hub. Meanwhile, other ISPs have increased their offerings
to compete: Verizon and AT&T both recently announced plans to offer
higher-speed Internet hookups for customers in select areas.
Last week, the FCC voted (2–1, along party lines) to begin a review of the 2015
regulations, launching the process by which the current rules could be
overturned. Predictions of apocalypse have ensued: Democratic senator Brian
Schatz of Hawaii accused Republicans of trying to “end the Internet.” In
reality, it is more nearly the opposite. The “Open Internet” regulations
promulgated in 2015 threaten to turn the Internet into one more fiefdom of the
federal government, and thereby to strangle the impulse toward innovation and
improvement. A smarter regulatory framework would make the government a partner
to a dynamic, competitive Internet, not an enemy.
— Ian Tuttle is the Thomas L. Rhodes Fellow at the National Review Institute.
