Thursday, June 17, 2010 - The Progress & Freedom Foundation Blog

FCC Seeks to Regulate the Internet...Because It Can

As I touched on last night, I can't say as I was surprised by today's announcement by the FCC to move toward full-blown Internet regulation. Voting along party lines, the three Democratic FCC Commissioners expressed their wholehearted belief that their regulation of the Internet - not de facto marketplace regulation - was the only way to protect consumers and Americans.

The Comcast v. FCC decision should have rebooted the Commission's discredited Net Neutrality ambitions. Yet instead, the FCC appears moving closer toward questionable new rules, using specious authority to get there. Such an exercise in regulatory hubris is truly confounding, especially in light of the facts and a clear consensus that the Internet must remain free from stultifying regulation.

Make no bones about it, the FCC's NOI today will work to regulate the Internet, and poorly at that. It takes a yellowed, dog-eared page from a 19th Century industrial policy playbook, and seeks to graft that on to the rapidly evolving Internet. Ultimately, it will prove offensive to American consumers, as well as those innovating at the core and edge of America's broadband networks.

Internet regulation isn't warranted. It may never be. Though the Commission appears eager to impose Net Neutrality-looking rules, the irony here is this: We already have Net Neutrality today. The marketplace, technological innovation, industry best practices and investment, and consumer empowerment have created a de facto Net Neutrality regime well outside of FCC rule or regulation. For this particular FCC, and the underlying politics, such a fact is seemingly unacceptable.

For American consumers, our economy and society, it is, however.

Over the past five years - when the Internet was officially freed from the Commission's yoke - Americans have experience a virtually endless font of new services, applications, devices, content, and voices, all available via an ever-growing array of network providers. Whole new industries, wealth creation and legions of jobs have ensued. Further, American society has become more democratically engaged than at any time in our history.

The lack of formal regulation caused this explosive growth. It should militate strongly against heavy-handed government intervention "to make it better." Yet, sadly, the FCC's regulatory OCD has reared its ugly head again. One can only hope that the putative challenges the FCC seeks to prevent (whatever they are) will avoid preventing the ongoing growth and vitality of the Internet ecosystem.

Some analysts believe that's wishful thinking, though.

According to Charles Davidson and Bret Swanson, their research concludes that the new rules will harm network investment, with this in turn hindering "capital expenditures by others in the ecosystem, particularly those at the edge." In their estimation, just a "10 percent decrease in investment by wireline and wireless broadband service providers, coupled with likely spillover effects, could result in the loss of 502,000 jobs across the entire ecosystem and would have a negative impact on U.S. GDP on the order of approximately $62 billion per year."

Their reasoning makes intuitive sense. New rules where virtually none existed before will disrupt core investment. And this will spill over to the edge. It's not called the web for nothing - the ecosystem is connected to itself. Regulators can't be smug enough to think that costs imposed on one portion of the Net will be contained solely there.

You know, it doesn't need to be this way. As FCC Commissioner Robert McDowell thoughtfully lamented in his NOI statement today -

If my colleagues feel compelled to act...let us create a new role for the FCC to spotlight allegations of anti-competitive conduct while working with non-governmental Internet governance groups and consumer protection and antitrust agencies. In each of the small number of cases cited by proponents of network management rules, all were rectified quickly, without new rules. The recently announced technical advisory group [to deal with network management issues such as net neutrality] could serve as a component of such an endeavor.

Clearly, less regulatory alternatives abound. One of our favorites is PFF's Digital Age Communications Act (DACA), an idea similar to what Senator Jim DeMint will soon introduce with his reform-minded FCC Act. Briefly, DACA scrapes the old regulatory "silos" of the Communications Act (such as Title II for telecom, Title III for broadcast, Title VI for cable), and replaces them with a Federal Trade Commission-like "unfair competition" standard. Under DACA, the FCC would retain some baseline regulatory authority to oversee the marketplace, but this authority would be limited and based upon more settled principles of competition law and economics--essentially, streamlined antitrust regulation.

Will this happen? Probably not in this pro-regulatory environment. But I wouldn't mind the surprise.

Neither would the Internet ecosystem.

posted by Mike Wendy @ 4:54 PM | Broadband , Communications , DACA , Innovation , Internet , Net Neutrality , PFF , The FCC