Is the FCC Unlawful? – A Reprise

This Thursday, February 26, will be a fateful day for the future of the Internet. As I wrote recently in a Washington Times op-ed, “The FCC’s Coming Internet Regulations,” “in the nearly 40 years that I have been involved in communications law and policy, including serving as FCC Associate General Counsel, this action, without doubt, is one of the agency’s most misguided.”

As the vote approaches, I don’t have any second thoughts regarding that statement. Reduced to its essence, the way I put it at the beginning of the Washington Times piece gets to the nub of the matter: “Regulating Internet providers as public utilities in order to enforce net neutrality mandates will discourage private sector investment and innovation – and lead to even more special interest pleading at the FCC for favored treatment, and heightened litigation for years to come.”

For those interested in learning more about the forthcoming decision of the FCC’s Democrat majority to regulate Internet providers, even wireless companies, there are literally dozens, if not hundreds, of publications on the Free State Foundation’s website and its blog. And in a moment, I want to call your attention especially to three pieces published just within the past two weeks that are worthy of your attention.

But first this: The initial essay I published this year, on January 2, was titled, “A Question for 2015: Is the FCC Unlawful?” The piece bears revisiting as the FCC is poised to expand its control over the Internet in ways that threaten its future without any present justification – that is, without a justification that is not trumped up. The reality is that there is no evidence of present market failure and consumer harm that justifies the Commission asserting more control over the Internet – regardless of which theory of law the Commission relies upon.

But here’s an important point I wish to make regarding the FCC “lawfulness” in advance of Thursday’s vote. As Philip Hamburger discusses in his new book, “Is Administrative Law Unlawful?”, one of the objectives of our Founders was to control, if not eliminate, what in England was known as the “dispensing” power. Simply put, the “dispensing” power – and this power is much discussed in English constitutional history – was a form of exercise of royal prerogative under which the King could avoid, or dispense with, complying with particular laws, including those enacted by Parliament. As Professor Hamburger discusses at some length, today’s administrative agencies, in essence, have resurrected the “dispensing” power by the way they often use waivers to award favored treatment.

Here is the way Professor Hamburger puts it:

“After administrators adopt a burdensome rule, they sometimes write letters to favored persons telling them that, notwithstanding the rule, they need not comply. In other words, the return of extralegal legislation has been accompanied by the return of the dispensing power, this time under the rubric of ‘waivers.’”

And then he goes to the heart of the matter:

“Like dispensations, waivers go far beyond the usual administrative usurpation of legislative or judicial power, for they do not involve lawmaking or adjudication, let alone executive force. On the contrary, they are a fourth power – one carefully not recognized by the Constitution.”

Now, I understand that seeking and receiving “waivers” of the FCC’s rules (regardless of the precise name applied to such dispensations) is an established part of FCC practice. And in some instances, such waivers, in light of unique circumstances or hardships, are no doubt justified. But I am convinced that under the new set of Internet regulations about to be adopted by the Commission, we are likely to witness the exercise of the agency’s “dispensing” power – this power which the Founders wished to eliminate – in ways, and to such an extent, that rule of law norms at the FCC will be called into further question.

This is what I meant when I said above that the new regulations are likely to raise pleading for special treatment and favors to new heights at the FCC. As the agency gains even more control over various participants in the Internet and communications marketplace, it will be subject to increasing pressures to use its dispensing power to grant this or that company (or market segment) favored treatment. For example, despite FCC protestations to the contrary, which protestations, by the way, do violence to the ordinary usage of the English language, the FCC will regulate the rates of some firms but not others, by holding unlawful the usage plans, sponsored data, or zero-rating plans, of some firms and not others. Or, to be sure, under its new inherently vague “good conduct” rule, the agency will be granting dispensations to some firms and not others, based on the exercise of discretion untethered to any standard in any law duly enacted by Congress.

This is part of what I mean by asking the question: “Is the FCC Unlawful?”

Now, for further readings in advance of the FCC’s February 26 vote (if you haven’t had a chance to read them already, I commend to you these excellent Perspectives from FSF Scholars published in the past two weeks: 

• Dennis L. Weisman, “Regulating Under the Influence: The FCC’s Title II Initiative for Broadband,” February 13, 2015.

• Justin (Gus) Hurwitz, “Regulating the Most Powerful Network Ever,” February 19, 2015.

• Robert W. Crandall, “Regulation Won’t Preserve a Dynamic and ‘Open’ Internet,” February 20, 2015.

Each of them alone makes a convincing case that the course upon which the agency is about to embark – imposing Title II public utility regulation on Internet providers – will be harmful to consumers and to the future development of the Internet by thwarting investment, innovation, and consumer choice. Taken together, the case is devastating.

Now the act of imposing public utility regulation on Internet providers that I decried this past September in “Thinking the Unthinkable” is about to become reality. In the aftermath of the significant extension of government control over the Internet that, absent intervention by the courts or Congress, will ensue, I am convinced the question I posed at the beginning of the year – “Is the FCC Unlawful?” – will be asked with increasing frequency and seriousness of purpose.