Monday, March 30, 2015

Watch What We Do, Not What We Say

"Watch what we do, not what we say.” This was the advice President Richard Nixon’s first Attorney General, John Mitchell, gave the press early in Nixon’s presidency in 1969.
It turned out that it was worth watching what those in the Nixon Administration did as well as what they said.
The same is true with respect to FCC Chairman Tom Wheeler over at the Federal Communications Commission, especially with regard to the FCC’s recent decision to impose Title II public utility regulation on Internet providers. Watching what Chairman Wheeler has now done does not always square with what he previously said.
Here are a few examples:
  • In 2011, Mr. Wheeler wrote in his blog that “the regulatory oversight of wireless carriers will continue to atrophy as the digital nature of the wireless business separates it from the legal nexus with traditional analog telecom regulation.” [The link is to a New York Times article quoting Mr. Wheeler’s blog posting, which has been removed.]
Under the FCC’s March 12, 2015 Internet Regulation order, instead of regulatory oversight atrophying, as it should given the competitive environment in the wireless marketplace, wireless broadband will be subject to much stricter regulation. Rather than acknowledging that the “legal nexus” does not exist to impose Title II regulation on wireless broadband providers, Mr. Wheeler resorts to a contorted legal analysis in an attempt to apply the “traditional analog telecom regulation” regime to wireless digital broadband services.
  • In December 2013, The Verge reported that Mr. Wheeler said this:    "I think that we're seeing the market evolve in such a way that there will be variations in pricing, there will be variations in service…Netflix might say, 'I'll pay in order to make sure that my subscriber might receive the best possible transmission of this movie.'"
In the March 2015 order, Mr. Wheeler insisted on an absolute ban on so-called “paid prioritization,” preventing the evolution of Internet services in a way that might allow the development of – or even the experimentation with – two-sided market models involving “variations in pricing” and “variations in service.” This despite widespread agreement among economists that such two-sided market models might well benefit consumers by reducing end-user prices and improving service quality. As prominent regulatory economist Robert Crandall, a member of FSF’s Board of Academic Advisors, explained in his recent Perspectives: “Collecting fees from content providers for better, more reliable connections is likely to induce the ISPs to compete more aggressively for customers, thereby reducing consumer subscriber fees. As a result, it is difficult to demonstrate that ISPs would profit materially from collecting interconnection fees from content networks or that such a practice in two-sided markets is economically less efficient than having ISPs rely solely on subscriber fees for their revenues.”
  • In May 2014, at the time the agency issued its rulemaking proposal, Mr. Wheeler assured the public that the Commission’s proposal did not cover interconnection arrangements between Internet transit networks and the Internet providers that provide Internet services to consumers. He said: “This is a different matter that is better addressed separately.”
In the March 2015 order, the FCC subjects interconnection arrangements to Sections 201 and 202 of the Communications Act, the core provisions of public utility regulation. Although the Commission doesn’t apply the full panoply of Title II rules, it invites complaints to be filed under Sections 201 and 202 which it will adjudicate on a case-by-case basis, almost certainly resulting in rate regulation (which the Commission simply will call by another name.)

My purpose here is not to make a legal argument concerning the sufficiency of the FCC’s May 2015 rulemaking notice under the Administrative Procedure Act requirements, although there are certainly several credible grounds for making such an argument. My purpose instead, to put it gently in terms that John Mitchell may have understood, is simply to show the extent to which it would be a mistake to rely on what Mr. Wheeler earlier said as opposed to what he ultimately did.
I think the foregoing also serves to demonstrate why it would not be wise for all those entities which comprise what we now often call the Internet ecosystem – in other words, including those “edge providers” and others thought not to be immediately subject to the FCC’s new mandates – not to put too much stock in whatever Mr. Wheeler or his fellow commissioners say at the moment about not regulating this or that business in this or that way.
And, of course, no one in the Internet ecosystem should put much stock in the notion that future commissioners will be bound by whatever present commissioners now say about their intentions.
We will surely need to watch what they do and not just what they say.