The Third Way’s Fundamental Disconnect

The FCC's Third Way Notice of Inquiry ("NOI") is problematic in a number of ways. But I want to focus here on a fundamental disconnect in the NOI presented right in Paragraph 1. The disconnect is not resolved, or even openly acknowledged, in the remaining 110 paragraphs.

Paragraph 1 states: "Until a recent decision of the United States Court of Appeals for the District of Columbia Circuit, there was a settled approach to facilities-based broadband Internet services, which combined minimal regulation with meaningful Commission oversight." The Commission is referring, of course, to the Comcast v. FCC decision handed down on April 6. The emphasis on "there was a settled approach" is mine.

Hence the disconnect. If there was a satisfactory settled approach on April 5 – the day before the Comcast decision -- as the Commission now suggests, what was all the sturm and drang about last fall? In other words, what did the FCC have in mind in October 2009 when it issued the Open Internet Notice of Proposed Rulemaking ("Open Internet NPRM") proposing a set of new net neutrality regulations?

I understand that post-Comcast, the NOI's Third Way proposal to reclassify broadband Internet providers as common carriers is premised on the claimed need for the FCC to be certain it has the legal authority to carry out proposed policies relating to matters other than net neutrality regulation. Indeed, the Commission now emphasizes matters such as universal service and privacy. I do not want to discuss here whether or not common carrier reclassification really is necessary to ensure that the agency possesses authority to address these various non-neutrality matters, or whether the proposed means of proceeding to accomplish this objective is legally sustainable. (I have grave doubts.)

What I want to highlight, if you haven't already noticed yourself, is that the Open Internet NPRM is barely mentioned in the Third Way NOI. There are only five very tangential references, all but one in footnotes. Under the Commission majority's new mantra that "there was a settled approach" before the Comcast decision, the NOI's silence in this regard is more than passing strange.

Before proceeding any further, shouldn't the Commission explain why it proposed new net neutrality regulations in the Open Internet NPRM if a settled approach, now represented to be the consensus broadband approach, already existed? And, significantly, recall from the NOI's Paragraph 1 that this settled approach is described as combining "minimal regulation with meaningful Commission oversight."

Here's the rub, and it is an important one: There was, indeed, a fairly widespread consensus in favor of a policy of minimal broadband regulation (but not unanimity, of course) before the new Obama Administration-FCC initiated last fall's net neutrality rulemaking. But the Open Internet NPRM, despite any latter-day disclaimers to the contrary, disrupted this settled approach in a significant way. (If you don't believe the October 2009 NPRM disrupted the consensus in a significant way, just count the trees that were sacrificed to provide the paper to file the comments to try to persuade the FCC not to adopt new Internet regulations!)

Why was the issuance of the NPRM so disruptive? Because adding a new nondiscrimination prohibition to the four "openness" principles made the proposed regime significantly more susceptible to investment-stifling and innovation-inhibiting regulatory overreach. More than anything else, the proposed new nondiscrimination prohibition – one of the core obligations of common carrier regimes generally applicable only in monopolistic situations -- upset the applecart. Even putting aside the NPRM's other proposed regulations, the new nondiscrimination mandate necessarily would convert an existing minimally regulatory Internet environment into a considerably more regulatory regime.

I suppose the reason why the NOI so completely downplays the Open Internet NPRM is that the Commission majority now understands the NPRM's disruption of the settled consensus met with much more widespread disfavor than it anticipated. There was a broad understanding, among the public, that the NPRM's proposals, especially the nondiscrimination prohibition, would create a heavy-handed regulatory environment for Internet providers.

Thus, it is factually inaccurate to now place the disruption of the "settled approach" of minimal Internet regulation on the Comcast decision. One way to look at the Comcast decision – the way I look at it -- is that, by calling into question the FCC's jurisdiction to impose net neutrality regulation on Internet providers, the decision disrupted the Commission majority's plans to impose a considerably more regulatory Internet environment than that which existed before the agency's current Democratic majority assumed power. This particular "disruption" was positive, not negative.

In short, the FCC's majority bears significant responsibility for whatever disruption that is now claimed to exist. And until the Commission's majority acknowledges this responsibility forthrightly, and suspends its effort to implement its ill-conceived reclassification/forbearance scheme, it will be more difficult for all parties to move forward in a constructive way that best serves the public.

So, it's time for some straight talk from the FCC. The Commission needs to admit that the minimal regulatory regime that existed before issuance of the October 2009 NPRM served the public well. If it does so, the agency could more readily work constructively with Congress and others to fashion narrowly drawn legislation granting it circumscribed authority over Internet providers. And to the extent that such legislation truly is narrowly drawn, along the lines of the proposal I have suggested, its chances of passage ought to be good.