Tuesday, July 18, 2017

FSF Files Comments to Restore Internet Freedom

Yesterday, the Free State Foundation filed comments regarding the FCC's proposal to restore Internet freedom and remove the Title II classification of broadband Internet access services. At 90 pages, these are the longest comments ever filed by FSF. If you do not have time to read every word, please refer to the introduction and summary on the first nine pages. Thank you!

T-Mobile's Voluntary Payments Speed Wireless Broadband Deployment

Broadcasting & Cable's John Eggerton reports that T-Mobile has made a voluntary commitment to pay for affected low-power stations to move to temporary channels in order to clear broadcast spectrum as quickly and equitably as possible following the incentive auction. While it is true that providing compensation to the low-power stations will help expedite clearing the spectrum that T-Mobile secured in the 600 MHz auction, it is also true that T-Mobile is under no obligation to make the payments to which it has volunteered. Instead, it could look to Congress or elsewhere for the additional relocation funds.

T-Mobile's voluntary commitment should help put it in a position to start expanding its advanced wireless network sooner than otherwise might be possible. That's not just good for T-Mobile, it's good for all Americans as the demand for high-speed wireless services increases exponentially.

And note that T-Mobile's new commitment is on top of the one made to cover certain costs incurred by public TV stations in relocating as a result of the 600 MHz auction. I wrote about that commitment in this post, "T-Mobile-PBS Agreement Is a Win-Win."

Monday, July 10, 2017

Strengthen NAFTA's IP Chapter



President Trump has been critical of the North American Free Trade Agreement (NAFTA), a trilateral free trade agreement involving the United States, Canada, and Mexico, stating that he would withdraw the U.S. from the 23-year-old agreement. He even drafted an executive order that would have removed the United States, but he ultimately decided not to issue it.

Still, President Trump apparently remains concerned about NAFTA, and this is a concern to hundreds of millions of North American consumers and entrepreneurs who benefit from the economic prosperity that NAFTA has fostered. Instead of contemplating withdrawing the U.S. from NAFTA, President Trump should focus his attention on modernizing NAFTA. In this regard, he should focus special attention on strengthening NAFTA’s IP Chapter in order to better protect creators and inventors throughout North America.

Withdrawal from NAFTA would have detrimental economic effects on the North American economy. The daily volume of economic trade among the three member countries is over $3.5 billion. From the United States’ perspective, about $1.3 trillion in annual economic activity crosses U.S. borders with Canada and Mexico. There are also 14 million U.S. jobs that directly depend on trade with Canada and Mexico. In other words, hundreds of millions of consumers and entrepreneurs throughout North America value the economic benefits of NAFTA, including access to inexpensive goods and services, low barriers to entry for entrepreneurs, and of course, the enjoyment of artistic creations that protections of intellectual property rights enable.

Modernizing NAFTA by strengthening IP rights protections, especially to take account of the digital economy that was almost non-existent when NAFTA was negotiated, would be helpful. In a recent blog post, John Murphy, the U.S. Chamber of Commerce’s Senior Vice President for International Policy, discusses some key areas where NAFTA could be modernized to benefit consumers and entrepreneurs in all three member countries. In recent comments submitted to the Office of the U.S. Trade Representative and the Trade Policy Staff Committee, Mr. Murphy specifically addresses aspects of NAFTA’s IP Chapter that could be better enforced and some that should be updated.

Some parts of Canadian and Mexican IP laws, along with enforcement practices, do not protect U.S. interests. For example, the position of both Canada and Mexico with regard to the transshipment of counterfeit and pirated goods into the United States is too relaxed. This places a high burden on U.S. border officials to police illicit trade. Pirated and counterfeit digital goods have become increasingly available since NAFTA was implemented in 1994, just before the digital economy started to grow. The distribution of pirated and counterfeit goods was listed as a key area of weakness for both Canada and Mexico in the Global IP Center’s (GIPC) 2017 International IP Index.

Also, with respect to pharmaceutical patents, Mexico has not fully implemented the regulatory data protection provisions of NAFTA and neither Mexico nor Canada meets the standard in U.S. law of twelve years of regulatory data protection for biologic products. The U.S. Chamber of Commerce suggests that both countries provide at least five years of patent term restoration that grants full rights to compensate for the patent life lost to patent office and regulatory approval delays. Also, the judicial systems in both countries should provide effective enforcement of patents and compensation for patent infringement. Needless to say, Canada and Mexico scored relatively low on the patents category of GIPC’s International IP Index.

The U.S. Chamber of Commerce listed a number of recommendations that should be part of an updated IP Chapter in NAFTA:

  • Commitment to full national treatment without carve outs.
  • Re-commitment to strong base terms of protection for patents, copyrights and related rights, trademarks, and designs, and establishment of a statutory commitment to protect trade secrets.
  • Exclusive rights for all forms of IP regardless of business models.
  • Guarantee of technology-neutral patent eligibility for all industry sectors strictly based on the international norm of novelty, usefulness, and non-obviousness.
  • Clear and carefully-defined rules for exceptions to rights across all forms of IP.
  • Rule of law mechanisms that enable IP owners to maintain, commercialize, and defend their rights, including, for example:

o   Prohibition of forced transfer of IP rights and government interference in commercial technology agreements;
o   Strong legal protections against circumvention of technological protection measures for the digital marketplace, with appropriate exceptions;
o   Patent linkage rules that enable pharmaceutical innovators to resolve patent disputes before potentially infringing products enter the market; and,
o   Patent term extension and restoration to address bureaucratic delays.

  • Statutory protection for proprietary information, including trade secrets as well as regulatory test data submitted to governments, and establishment of criminal penalties for trade secrets theft, including by means of a computer system.
  • Deterrent-level civil and criminal remedies in law, backed up by effective enforcement efforts, to combat trade in counterfeit goods, among other goals, and halt damage to iconic U.S. brands and the jobs that depend upon them.
  • Appropriate and effective safe harbor mechanisms for intermediary liability.
  • Ensure NAFTA partners implement relevant international IP agreements in domestic law.
  • Participation in partnership with the United States in a forward-looking norm-setting agenda through multilateral treaties and trade agreements to ensure that U.S., Canadian, and Mexican IP interests are promoted around the world.

The U.S. Chamber’s comments regarding modernizing NAFTA’s IP Chapter conclude this way:

Ensuring full implementation of existing NAFTA rules and upgrading Canadian and Mexican IP laws would give American creators and innovators an expanded regional platform to launch new products and services with the assurance that their IP is protected. In turn, Canada and Mexico would be better able to enjoy the benefits of the research and development investments and creative work taking place in their own markets, which due to a weak IP environment too often are lost to foreign competitors. Likewise, modernizing NAFTA’s IP provisions would strengthen the digital economy throughout North American by powering the knowledge sector, which is critical to driving digital growth.

Stronger IP rights protections will incentivize more innovation and investment. This will benefit consumers, entrepreneurs, artists, and inventors in all three member countries. With $1.3 trillion in annual economy activity and 14 million U.S. jobs on the line, President Trump should be focusing not on withdrawing from NAFTA but rather on updating it in a way that strengthens the IP Chapter.

Wednesday, July 05, 2017

Jerry Ellig named FCC Chief Economist

Today, FCC Chairman Ajit Pai announced the appointment of Jerry Ellig as FCC chief economist. Dr. Ellig currently serves as a senior research fellow at the Mercatus Center at George Mason University (GMU). Dr. Ellig was a professor and colleague of mine while I was a student at GMU and a graduate fellow at the Mercatus Center. Together, we coauthored a paper entitled "Preventing a Regulatory Train Wreck: Mandating Regulation and the Cautionary Tale of Positive Train Control."

Dr. Ellig is an expert on cost-benefit and regulatory impact analyses. His expertise will go a long way towards achieving Chairman Pai's goal of implementing stringent economic analyses into the FCC's rulemaking proceedings.

Great choice by Chairman Pai and congratulations to Dr. Jerry Ellig!

Monday, July 03, 2017

U.S. Should Continue Leading in Promoting Global Broadband Access

Cisco recently released its Visual Networking Index: Forecast and Methodology, 2016-2021, not to be confused with Cisco’s mobile forecast, which I discussed in a February 2017 blog. This valuable index presents global and regional trends regarding Internet access, usage, and network speeds. The most interesting finding might be that 58% of the world’s population will be using the Internet by 2021.
As a global leader in broadband investment, innovation, access, and adoption, the United States should adopt policies that will promote growth in broadband deployment, access, and devices. Not only will this create jobs and economic activity within the United States, but it could encourage similar policies in other countries.
Another interesting finding in the new report is the proliferation of smartphone use. Consumers are beginning to use smartphones as their primary device. The report finds that global smartphone traffic will exceed personal computer (PC) traffic by 2021. In 2016, PCs accounted for 46% of total Internet traffic, but by 2021 PCs will account for only 25% of the total traffic. Smartphones will account for 33% of total Internet traffic in 2021, up from 13% in 2016.
Here are some more of the key findings regarding global Internet access, usage, and network speeds:
  • By 2021, 58% of the population will be using the Internet, up from 44% in 2016.
  • By 2021, 80% of all Internet traffic will be video, up from 67% in 2016.
  • By 2021, there will be 3.5 networked devices and connections per person, up from 2.3 in 2016.
  • By 2021, there will be 61 GB of Internet traffic per month, per user, up from 24 GB in 2016.
  • By 2021, the average broadband speed will be 53 Mbps, up from 27.5 Mbps in 2016.
  • By 2021, the average mobile speed will be 20 Mbps, up from 6.8 Mbps in 2016.

Here are some of the same key findings with respect to North America:
  • By 2021, 89% of the population will be using the Internet, up from 88% in 2016.
  • By 2021, 78% of all Internet traffic will be video, up from 74% in 2016.
  • By 2021, there will be 12.9 networked devices and connections per person, up from 7.7 in 2016.
  • By 2021, there will be 181 GB of Internet traffic per month, per user, up from 68 GB in 2016.
  • By 2021, the average broadband speed will be 74.2 Mbps, up from 32.9 Mbps in 2016.
  • By 2021, the average mobile speed will be 25 Mbps, up from 13.7 Mbps in 2016.

As you can see, North America is well ahead of the rest of the world in terms of Internet usage and network speeds, with the United States the leader of North America. Until February 2015, U.S. consumers benefited from a relatively light-touch regulatory regime that did not discourage investment and innovation. The regulatory uncertainty and burdensome costs imposed by the FCC’s 2015 Open Internet Order have slowed investment by about $5.6 billion. In order to continue a rapid increase in output of investment in broadband networks and devices, the FCC should reclassify broadband as a Title I “information service” and implement a light-touch regulatory framework that promotes competition and protects consumers from potential harms.
Moreover, as Free State Foundation Senior Fellow Ted Bolema and I suggested in a new Perspectives from FSF Scholars, there are steps that Congress, the FCC, and state and local governments should take to promote private broadband investment and increase access in underserved areas. So, although the United States, for now, is a world leader in broadband investment, innovation, access, and adoption, encouraging additional network investment and innovation within the U.S. could incentivize foreign governments to embrace similar policies.
By 2021, more than half of the world’s population will be using the Internet. If the U.S. adopts policies that promote broadband investment and access within the United States, the positive impact on job creation and economic activity may encourage foreign governments to adopt similar polices. In other words, the U.S. leadership through example could help increase global Internet access, pushing adoption well beyond 58% of the world’s population.


Again, Cisco’s index is valuable in providing policymakers with a forecast of the exponential Internet growth just over the horizon. 

Saturday, July 01, 2017

T-Mobile-PBS Agreement Is a Win-Win

The newly announced agreement between PBS and T-Mobile is worth taking note of because it will speed the deployment of new advanced wireless networks while, at the same time, ensuring that certain public television stations can maintain their broadcasts for public television views. T-Mobile has agreed to cover the costs for low-power public TV translator stations that are required to be relocated in connection with the FCC's recent spectrum auctions. The sooner the frequencies can be cleared, the sooner T-Mobile will be in a position to expand its wireless network facilities.

T-Mobile's agreement to cover the costs of the relocation of the public TV facilities looks to be a win-win situation for all.

Here is PBS's news release on the agreement.

Washington, D.C.— June 29, 2017 — PBS, in coordination with America’s Public Television Stations (APTS), today announced an agreement with T-Mobile to deliver on the promise of universal service of both broadcast and wireless service to millions of Americans living in rural areas. T-Mobile has committed to covering the costs for local public television low-power facilities that are required to relocate to new broadcasting frequencies following the government’s recent spectrum incentive auction. The project will also result in increased wireless choice in these underserved areas as T-Mobile leverages the new spectrum that the company acquired in the auction to expand its wireless network.

“Public broadcasting has been one of America’s greatest and most enduring public-private partnerships,” said PBS President and CEO Paula Kerger. “We are thrilled that T-Mobile sees the value that public broadcasting brings to the American people and is helping to ensure that everyone—regardless of income or zip code—continues to have access to PBS, including vital emergency alerts and programs that help prepare children for success in school.”

“As the post-auction repacking process moves forward, local public television stations are committed to ensuring that all Americans continue to have free over-the-air access to the local content and services on which our viewers and their communities depend,” said APTS President and CEO Patrick Butler. “America’s Public Television Stations are very pleased that this initiative with T-Mobile will help address one of the most significant repacking challenges that local public television stations face by providing needed funding to relocate translator facilities that enable us to provide essential services in education, public safety and civic leadership to the most rural and remote parts of the country.”

The federal legislation establishing the spectrum incentive auction did not provide funding for low-power broadcast facilities (also called translators), displaced by the auction, to move to new frequencies. This critical local broadcast infrastructure is essential for extending the reach of TV broadcast signals deep into rural America. As a result, as many as 38 million Americans in rural communities nationwide are at risk of losing free over-the-air access to public television’s essential education, public safety and civic leadership programming and services.

With T-Mobile helping fund the move to operate on new frequencies, millions of families in rural America will now continue to receive uninterrupted access to trusted and beloved PBS programming—from “Daniel Tiger’s Neighborhood” to “Masterpiece,” from “Nature” to “PBS NewsHour.” They will also continue to benefit from local programming and information uniquely available through local public television stations, which serve as the nationwide back-up path for the Warning Alert and Response Network, known as PBS WARN, which delivers life-saving emergency messaging to communities across the country.

“We’re proud to collaborate with broadcasters across the country as they transition to other channels, and doubly proud to support local public television’s public service mission and help ensure millions of kids in rural America continue to have access to public television’s high-quality, educational programming,” said Neville Ray, chief technology officer of T-Mobile. “Moves like this will help us expand our network into these underserved areas and give consumers a new level of wireless coverage and choice.”
 

Thursday, June 29, 2017

Independence Day 2017



Lincoln’s Gettysburg Address, without question one of the most powerful, eloquent speeches in the American canon, consists of only 272 words and was delivered in less than three minutes.
Compare Lincoln’s far less well known, but nevertheless eloquent address in Peoria, Illinois, on October 16, 1854. The Peoria Address, as it came to be known, consists of over 17,000 words and took Lincoln three hours and ten minutes to deliver. 

The Peoria Address was a response to passage of the Kansas-Nebraska Act, which voided a restriction on the extension of slavery that had been part of the Missouri Compromise of 1820. The speech marked Lincoln’s reentry into politics and thrust him into the national debate over slavery.
For present purposes, the Peoria Address is relevant to understanding the meaning of Independence Day. Indeed, Lincoln grounded his extended argument against slavery firmly in the philosophy and principles expounded in the Founders’ Declaration of 1776, not the Constitution of 1787.
While Lincoln referred to the Declaration throughout his Peoria Address, not surprisingly, he made the true core of the Declaration the heart of his own argument:

What I do say is, that no man is good enough to govern another man, without that other's consent. I say this is the leading principle---the sheet anchor of American republicanism. Our Declaration of Independence says:

"We hold these truths to be self evident: that all men are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, DERIVING THEIR JUST POWERS FROM THE CONSENT OF THE GOVERNED." [The italics and ALL CAPS are in Lincoln’s original draft of the speech.]

Thus, in his opposition to slavery, Lincoln held fast to the Founders’ appeal to natural rights, or what sometimes is referred to as “higher law.” When Jefferson invoked the “Laws of Nature and Nature’s God” and “self-evident” truths at the Declaration’s beginning, this was simply another way of declaring that the right to “Life, Liberty, and the Pursuit of Happiness” is grounded in natural rights or natural law, not dependent upon grants of positive law conferred by government.

To be sure, it was necessary to form a government to secure those rights through positive law. And that is what the Founders did in 1787 when they drafted our Constitution creating our government with limited, enumerated, and separated powers. And when they ratified the Ninth Amendment in 1791, which provides: “The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people.”

Lincoln began the Gettysburg Address in November 1863 with this unforgettable invocation: “Four score and seven years ago our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.” It is easy to forget – unless the mathematical calculation is ingrained in memory – that Lincoln’s “four score and seven years” harkens back to 1776, not 1787. To the Declaration, not the Constitution, for the conception of the central ideals embodying the new nation.

In his Peoria Address and many other times, especially in the 1858 debates with Stephen Douglas, Lincoln rested his antislavery arguments on an appeal to the Declaration’s ideals, an appeal to a “higher law” than that embodied in positive law.
Notably, at Independence Hall in Philadelphia on the eve of his Inauguration, Lincoln once again invoked 1776, exclaiming that the Revolution was “not a mere matter of separation . . . from the motherland, but that something in the Declaration giving liberty, not alone to the people of this country, but hope to the world for all future time. It was that which gave promise that in due time the weights should be lifted from the shoulders of all men, and that all should have an equal chance.”

I do not maintain that the Declaration of Independence itself is law. But I do say that the ideals found in the Declaration - the invocation of those self-evident truths that all men and women are endowed with certain inalienable rights, including the right to life, liberty, and the pursuit of happiness - were an inspiration in 1776 and should be on this Independence Day in 2017. Indeed, as "We the People" strive for what the Constitution of 1787 calls a "more perfect Union" we should never forget the Declaration's ideals that Lincoln called "the sheet anchor of American republicanism."

All that said, my best wishes for a perfect Independence Day weekend, whether at the beach or backyard barbecue, or wherever you might be enjoying your liberty and pursuing your happiness!

My previous Independence Day messages are here: 2007, 2008, 2009, 2010, 2011, 2012, 20132014, 2015, and 2016.

Tuesday, June 27, 2017

FCC Proposes $120 Million Fine for Illegal Robocalls

Last week, the FCC issued a Citation and Order which proposed a $120 million fine for Adrian Abramovich, the originator of nearly 100 million illegal robocalls. Illegal robocalls are an example of consumer harm that can be reduced with FCC consumer protections and enforcement. Since becoming FCC Chairman earlier this year, Ajit Pai has made it a top priority to combat this illegal activity that harms consumers.

Wednesday, June 21, 2017

More Data on Mobile Broadband Growth

Here is a new report by Ericsson with projections for continued very strong growth for mobile broadband. Worth a look.

Tuesday, June 20, 2017

Online Advertising May Be Annoying to Some, But Life-Changing to Others

There are two main business models that edge providers, like Google and Netflix, use to enable consumers to access information online. The first is through use of paywalls or a subscription-based model. For example, consumers pay a monthly or annual fee to a media outlet, like a The New York Times, or a video content provider, like Netflix, and receive unlimited access to that website’s content. The other more prevalent business model is through use of advertising. Edge providers will sell advertising space on their website, allowing consumers to access the content without paying a monetary fee. Edge providers need to generate revenue in order to have the incentive to create more content or, for example, report on important current events. Some people may find online advertising to be annoying, but others may see it as the only way to access information online.
In an August 2016 Perspectives from FSF Scholars, I discussed the importance of the advertising business model and showed how it benefits all consumers because they can access information without having to pay a subscription fee. For low-income consumers who cannot afford subscriptions, the advertising business model creates an opportunity for upward mobility by increasing their access to human capital and entertainment and raising their standard of living. For middle and high-income consumers who can afford subscriptions, advertising frees up income that would have been spent on subscriptions but now can be spent on other goods and services.
However, some consumers may find advertisements to be inconvenient or just simply annoying. Some websites have the option where consumers can choose the business model they prefer. Giving consumers a choice is the ideal scenario because consumers have different preferences toward advertising and subscriptions. There is nothing wrong with preferring one option over the other, but to say that consumers should be forced to use one option over the other ignores the fundamentals of economics.
Advertising often has been criticized for attempting to manipulate consumers into buying certain products, believe certain information, or vote for certain politicians. Vance Packard made this argument in his 1957 book The Hidden Persuaders. I might argue that “manipulate” is a harsh word, but I cannot argue that advertising does not influence consumer behavior. After all, companies would not advertise if it did not have an impact on consumer behavior and studies have shown that advertising works. But even though advertising influences consumers, it also creates an opportunity for consumers to access information without having to pay a subscription fee, freeing up money that would have been spent on subscriptions and encouraging additional economic activity.
In October 2016, Columbia Law School Professor Tim Wu published a book called The Attention Merchants, which discusses the history of advertising. The book also attempts to influence consumers into adopting subscription-based models to slow the wave of advertising throughout the Internet. In an interview entitled “Does Advertising Ruin Everything?” Tim Wu said:
We have to get over our addiction to free stuff. Suck it up and pay. A lot of people say, “I hate ads, I’m sick of ads, I’m sick of clickbait, I’m sick of this race to the bottom.” If you say that, you have to put your money where your mouth is. We have to get over our addiction to free if we’re going to save the web. That’s us, the users. We can’t expect everything to be free and to be good.
But oftentimes, consumers might think they have their preference sorted out in their head, but as soon as they are confronted with an economic choice, their decision does not represent their perceived preference. This too is not a bad thing; it is just the reality of consumers having imperfect information. A consumer may not enjoy ads and may complain about ads, but when confronted with the option to pay $10 a month, for example, advertising might be the preferred option.
As a consumer, Tim Wu may prefer subscriptions over advertisements, but his preferences should not dictate the preferences of other consumers. For example, it will be difficult for low-income consumers to simply “suck it up and pay” for subscriptions to online content. And while Tim Wu acknowledges that advertising enables many consumers to access online information who otherwise would not be able to, that point bears much more emphasis. Many consumers would not have access to the vast economic benefits of the Internet if not for the advertising business model. And for the consumers who can afford to use the subscription-based model but instead choose advertising, this action creates a consumer surplus that frees up money that can now be spent on other goods and services.
In other words, the advertising business model has created access to information for low-income consumers and has created additional economic activity for middle and high-income consumers who can afford but choose not to pay for subscriptions. Advertising may be annoying to some, but considering the vast economic benefits the business model brings to consumers around the globe, it’s actually life-changing.

Friday, June 16, 2017

New Bill Would Accelerate Broadband Deployment in Rural Areas

On June 15, 2017, Senators Dean Heller (R-NV) and Joe Manchin (D-WV) introduced legislation that would expand rural broadband access by streamlining the application process required for deploying broadband infrastructure on federal lands. The "Rural Broadband Deployment Streamlining Act" (S.1363) would set a 270-day shot clock for the Department of Interior (DOI) and the United States Forrest Service (USFS) to respond to all applications regarding broadband easement and rights-of-way. If the agencies do not act before the deadline, the application will be deemed approved.

The proposed legislation would require the DOI and USFS to establish a streamlined, consistent, and standardized application review process. The bill also would require the Government Accountability Office to analyze the accuracy and usefulness of the National Broadband Map with regard to expanding broadband in rural areas.

If enacted, this legislation will spur the deployment of next-generation 5G networks, which will create $275 billion in investment, 3 million jobs, and $500 billion in economic activity, and it will deliver broadband access to Americans who live in rural and remote areas.

Thursday, June 15, 2017

President Trump Nominates Jessica Rosenworcel as FCC Commissioner

Earlier this week, President Trump nominated former FCC Commissioner Jessica Rosenworcel to return to the Commission to fill an open Democratic seat. Having served as a Commissioner from 2012 to January 2017, it is likely she will be confirmed.

With a current 2-1 Republican majority at the Commission, it is important that there be a full cohort of Commissioners to satisfy the 3-2 majority. Ms. Rosenworcel's nomination is a step in that direction, but President Trump should soon nominate a Republican Commissioner to fill the last open seat, assuming Ms. Rosenworcel is confirmed.

Friday, June 09, 2017

Why the FTC Should Oversee Broadband Internet Service Providers

The Free State Foundation hosted its Ninth Annual Telecom Policy Conference on May 31. Knowledgeable speakers offered policymakers forward-looking insights befitting the Conference’s title: “A New Direction in Communications Policy: Less Regulation, More Investment and Innovation.”

As explained below, insights offered by Conference speakers reinforce two critical ways that communications policy ought to be made more conducive to fostering innovation and investment by Internet service providers. First, the Federal Communications Commission should cede jurisdiction over broadband privacy practices back to the Federal Trade Commission because the FTC is better suited to the task. Second, to the extent the FCC retains any regulatory authority at all over Internet service providers, the agency generally should adopt only the fact-specific, complaint-based ex post approach of the FTC. Public utility-like regulation of Internet service providers should be repealed. To the extent that the FCC retains any regulatory authority at all over Internet providers, which we do not here concede, any replacement regulatory framework adopted should be tied to market power analysis and target specific instances of claimed consumer harm or anticompetitive conduct.

The remarks of the panelists at the Conference session, “The View from the FTC: Overseeing Internet Practices in the Digital Age,” as detailed below, are very instructive, as well as very timely.

Return Oversight of Broadband Privacy to the FTC

The FCC’s Title II Order (2015) declared broadband Internet access services to be a “telecommunications service” subject to public utility regulation. The Title II Order thereby effectively stripped the FTC of jurisdiction over broadband Internet access service providers’ (ISP) privacy practices. Onerous, one-sided privacy regulation adopted in the FCC’s Broadband Privacy Order (2016) was repealed by Congress in March 2017. Now the FCC’s proposed Restoring Internet Freedom rulemaking would declare broadband Internet access services to be a Title I “information service.” In effect, this would repeal public utility regulation and return broadband privacy jurisdiction to the FTC.

The FTC’s expertise and analytical approach toward privacy issues were discussed during the Conference’s panel: “The View from the FTC: Overseeing Internet Practices in the Digital Age.” Thomas Pahl, Acting Director of the FTC’s Bureau of Consumer Protection, critiqued the FCC’s Broadband Privacy Order and contrasted it with his agency’s privacy policy:
[T]he FCC chose a more rigid and prescriptive approach to broadband data security and privacy issues than the FTC’s traditional case-by-case approach to these topics. The FCC’s rules also set standards for broadband providers separate and apart from standards applicable to others in the online space, eschewing the FTC’s more comprehensive approach. 
Mr. Pahl described what the public could expect if the FCC adopts its Restoring Internet Freedom proposal and thereby returns jurisdiction over broadband ISP privacy practices to the FTC:
The FTC is ready, willing, and able to protect the data security and privacy of broadband subscribers . . . .  We have a wealth of consumer protection and competition experience and expertise, which we will bring to bear on online data security and privacy laws. We will apply data security and privacy standards to all companies that compete in the online space regardless of whether the companies provide broadband services, data analysis, social media, or other services. Our approach would ensure the standards the government applies are comprehensive, consistent, and pro-competitive. 
The FTC’s Case-by-Case Approach Is Preferred for ISP Oversight

Tad Lipsky, Acting Director of the FTC’s Bureau of Competition, also participated on the panel. Drawing on his expertise in antitrust and competition law and policy, he described case-by-case enforcement by the FTC and private litigation as ready means to address any anticompetitive practices that might arise in the broadband Internet access services market. Mr. Lipsky rejected “the idea that a lessening of the regulatory burden on the FCC side would lead to a situation in which anticompetitive conduct was free to occur without fear of further consequence.” According to Mr. Lipsky: “That is demonstrably false. The FTC is waiting” and able to address anticompetitive concerns that might arise.

Characterizing himself as a “light touch regulator” and as “a fan of antitrust as the way of ensuring that dynamic free competition gives the consumer what he wants,” Mr. Lipsky also criticized the public utility model of regulation embodied in the 1887 Interstate Commerce Act, stating: “[I]t is a fact that the FCC Title II regulation is a direct descendant of that form of regulation.” Mr. Lipsky added:
[T]he temptation to look at the problems of a dynamic and quickly developing industry and to immediately apply this structure of economic regulation as a way of anticipating and making sure that future problems don’t arise has largely been a failure. 
Of course, the FCC’s Title II Order succumbed to such temptation. The order imposed public utility regulation on broadband Internet access services with no evidentiary findings of market failure or consumer harm. Indeed, the Title II Order dismissed market power’s relevance.

Professor Daniel Lyons, a member of FSF’s Board of Academic Advisers, also characterized broadband Internet access service regulation as “an antitrust and a consumer protection issue.” Recounting the FTC’s antitrust analytical tools, including its test for market power, Professor Lyons stated:
The FTC is well equipped to evaluate on a case-by-case basis whether a particular agreement is one that might harm consumers. Using robust law that’s been developed from a number of different cases elsewhere in the economy… they have a broader scope informed by a lot more history than the Federal Communications Commission. I agree that the ex post review and flexibility the FTC brings is a lot better in a dynamic marketplace than the more rigid FCC ex ante rulemaking. 
Thus, the FTC’s institutional competencies and case-by-case approach to anticompetitive conduct – as attested by Messrs. Pahl and Lipsky and Professor Lyons – bolster the basic direction set out in the FCC’s Restoring Internet Freedom proposal. The FTC has wide-ranging experience in addressing privacy practices and should be empowered to apply that experience to all online services alike. The FCC should follow through on its proposal and return jurisdiction over broadband ISP privacy practices to the FTC.

Going forward, the FCC should repeal its Title II public utility regulation of broadband Internet access services. To the extent the FCC determines in its Restoring Internet Freedom proceeding that it retains any regulatory authority at all over Internet service providers, which we do not here concede, the agency should adopt only the fact-specific, complaint-based ex post approach of the FTC. To the extent any replacement regulatory framework is retained, it should be tied to market power analysis and target specific instances of claimed consumer harm or anticompetitive conduct.

The C-SPAN video of the conference session, “The View from the FTC: Overseeing Internet Practices in the Digital Age,” is here.

[Note: The quotations by the panel speakers included in this post were taken from the C-SPAN transcription of the Conference, with minor edits made for purposes of correcting obvious syntax, grammar, and punctuation errors. None of the meaning was changed.]