Thursday, February 05, 2015

Special Edition: The FCC's Plan to Regulate the Internet

I try hard not to overload our Free State Foundation readers with too many messages – and once the immediate rush surrounding the release of FCC Chairman Tom Wheeler’s plan to adopt the Title II utility model of regulation for Internet providers subsides, I pledge we’ll take somewhat of an enforced breather and give you one too. 
But, in the meantime, please indulge what I’ll call this “Special Edition” with a few quick reactions to Wheeler’s announcement of his plan in Wired and the release of an FCC Fact Sheet. It is important to respond to some points right now, if only briefly. After all, in a press statement yesterday I called Wheeler’s proposal “one of the most momentous decisions of the agency - and, undoubtedly, one of the most misguided and likely harmful ones.” 
First, Wheeler claims that the FCC will not engage in rate regulation. But of course the Title II classification is likely to lead to rate regulation. Understandably, Wheeler just doesn't want to utter the forbidden words because he wants to avoid conjuring up images of traditional public utility regulation like that which applied to last century’s Ma Bell or the nineteenth century’s railroads. So he's playing word games with the English language. 
I predict that either immediately, or in the not-too-distant future, the agency will regulate broadband usage tiers, ban or require modifications to so-called zero-rating plans, and control prices for interconnecting Internet facilities. If you think for a moment about each of these examples, you'll realize that the effect is the same: rate regulation. Indeed, what is banning 'paid prioritization' if not a form of rate regulation? Wheeler can accomplish such rate regulation without actually requiring the filing of “tariffs” or agency “rate approval” by barring any practices he considers “unjust or unreasonable” or “discriminatory.” 
If you don't want to regulate rates, why not forbear from Section 201? 
Second, Wheeler suggests that by establishing “bright line” rules – no blocking, no throttling, no paid prioritization – Internet providers will know what is expected from them by the regulatory agency. The suggestion is that these “bright line” rules will provide the certainty necessary for Internet providers to continue to invest in building out and expanding and to innovate. Of course, even concepts such as “throttling” and “prioritization,” in the context of what heretofore has been a dynamic and evolving Internet, necessarily will be subject to ambiguities leading to ongoing litigation. But putting that aside, the FCC’s Fact Sheet goes on to say this: “[T]here must be a known standard by which to determine whether new practices are appropriate or not. Thus, the proposal will create a general Open Internet conduct standard that ISPs cannot harm consumers or edge providers.” 
Of course, this open-ended “known” conduct standard, such as it is, merely is an invitation into the unknown, sure to be the source of much ongoing litigation in the future. When I was a Duke University undergraduate decades ago, the known conduct standard, to avoid run-ins with the Judicial Board, was “conduct unbecoming of a Duke gentleman.” Well, you get the picture. 
Third, there is what is not acknowledged, but what must be highlighted. President Obama’s highly visible, direct intervention in this matter, with his specific urging of the Title II utility route, looks to alter, perhaps forever, the way the FCC’s institutional status as a supposed independent agency has been viewed and the way the agency has operated. On this point, I commend to you a very well-done story on the course of this proceeding on the front page of today’s WSJ by Gautham Nagesh and Brody Mullins – How White House Thwarted FCC Chief on Net Rules.”  Perhaps the title says enough. But after detailing secret White House meetings and more, here is the end of the story,: “[The President’s intervention] essentially killed the compromise proposed by Mr. Wheeler, leaving him no choice but to follow the path outlined by the president.” 
In the context of the story, I assume that Messrs. Nagesh and Mullins mean to say that Wheeler felt he had no choice, as a matter of politics, but to follow the president’s direction. But, of course, he did have a choice as a matter of law – because the president, under the current understanding of the FCC’s independence from executive branch control, cannot direct Wheeler’s actions. 
I am not at all certain, but perhaps at the end of the day, in this important matter involving the future of the Internet, the law may prevail over politics. 
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Again, thanks for your indulgence of this “Special Edition.” I can assure you it will be a cold day in February before we again send you two Free State Foundation messages in one day!