Wednesday, July 28, 2010

The FCC: "We Do Not Regulate the Internet"

The FCC issued a news release yesterday announcing it has launched a new easy-to-use Consumer Help Center. It says the new portal "will allow consumers to learn about different issues in telecommunications."

If you click on "Fact Sheet Library" and scroll down towards the bottom to "Internet", you'll find this interesting statement: "The FCC does not regulate the Internet or Internet Service Providers (ISP). You may contact your state consumer protection office or if there is possible fraud involved, you may contact the Federal Trade Commission."

I wrote about this identical statement on the FCC's website almost two years ago in this short piece, "The FCC's Misleading Disclosure Statement." I said then that, in light of the FCC's action sanctioning Comcast in the BitTorrent affair, that the no-Internet-regulation statement was certainly "inoperative." I suggested: "In the interest of accurate disclosure, I assume the FCC fairly promptly will correct the website statement."

No such luck.

It is true that, after April's Comcast decision in the D.C. Circuit, the FCC's authority to regulate Internet service providers in most regards is highly questionable. This is good. But at the time the agency sanctioned Comcast two years ago, despite the directly contradictory statement on its website, the FCC must have assumed it had authority to receive complaints regarding the practices of Internet providers and to regulate the ISPs.

Now that its legal authority to regulate the Internet and Internet service providers under ancillary jurisdiction has been cast in substantial doubt, the very same no-Internet-regulation statement remains posted on the FCC's consumer website. And the agency continues to direct consumers to state consumer protection offices and the FTC if they have complaints.

I do not believe, nor do I believe the FCC believes, that post-Comcast, the agency is entirely devoid of all ancillary authority to regulate the practices of Internet providers in all respects. Nevertheless, after the Comcast decision, the FCC surely is aware that it possesses much less authority to regulate Internet providers than it previously assumed it possessed when it sanctioned Comcast. So, in this sense, the FCC's posted no-Internet- regulation statement – which has remained unchanged throughout -- is considerably more accurate now then when I characterized it as misleading back in August 2008.

Of course, it is important to note that, especially since last October, the FCC has been doing whatever it can to find a way to impose net neutrality regulations on Internet providers, even to the point of proposing that they be classified as common carriers. All the while advising consumers it lacks authority to regulate the Internet or Internet providers. And, all the while, advising consumers, if they have a problem, to go to their state consumer protection office or the FTC.

Confused? Me too.

Someone needs to ask a good state consumer protection office, or perhaps the FTC, to sort this all out before the FCC gets itself in trouble for making false or misleading statements.

Or better yet: If the FCC were to abandon its efforts to regulate the Internet and Internet providers, at least until Congress grants it authority to do so, by bringing its actions into line with its web posting, the Commission would not risk getting into trouble for making misleading statements. And, in the bargain, the agency would be committing an act of extreme sound policy.

Wednesday, July 21, 2010

The “FCC Act” – A Welcome Addition


Senator Jim DeMint, joined by cosponsors Senators Ensign, Thune, Hatch, Cornyn, Coburn, and Sessions, has introduced the “Freedom for Consumer Choice Act” (or aptly acronym-ed “FCC Act”). Like Senator DeMint’s proposed Digital Act Communications Act of 2005, this bill is a welcome addition to the current discussions concerning the need to update the Communications Act. Senator DeMint’s 2005 DACA bill was based, in large part, on work performed by a diverse group of prominent law and economics scholars on a Digital Age Communications Act project which I had the privilege of leading at the time. So it won’t surprise you that I remain partial to the market-oriented principles embodied in the “FCC Act”.

Without elaborating too much here, the FCC Act has obvious virtues. Foremost, it would require the FCC, before taking regulatory action, to focus, much more than it regularly does now, on whether communications providers possess market power that actually harms consumers. The agency’s regulatory actions would be guided by “jurisprudential principles grounded in market-oriented competition analysis” such as that commonly employed by the FTC or DOJ in enforcing the antitrust laws.

And another principal virtue of the FCC Act is that it would circumscribe the FCC’s rulemaking authority. Rulemaking would be tied tightly to showings, supported by convincing evidence, that a market failure has occurred which harms consumers.

In my view, given the development of competition in almost all communications markets, and the profound changes in the marketplace that the digital revolution already has wrought, the FCC Act points in the right direction for the overhaul the Communications Act desperately needs. Senator DeMint, and his cosponsors, deserve credit for offering a forward-looking approach.

Having said that, it may be that such a bold departure from the existing regime won’t win widespread approval in the near-term. If so, and if it is necessary for Congress to act to prevent the FCC from adopting harmful net neutrality regulations, there are narrower, market-oriented approaches that perhaps could be adopted more readily. These more targeted approaches could give the FCC authority to regulate broadband Internet providers based on showings of the exercise of significant market power coupled with proven consumer harm. I have suggested legislative language embodying one such approach here.

A final word on the legislative activity. On the day after the Comcast decision, I filed comments at the FCC outlining a suggested legislative approach for moving forward in light of the D.C. Circuit’s decision casting doubt on the FCC’s authority to impose net neutrality mandates on broadband ISPs. I urged the Commission to “immediately suspend its efforts to adopt net neutrality regulations and, instead, begin preparations to work with Congress to develop appropriate amendments to the Communications Act.”

Unfortunately Chairman Genachowski hasn’t suspended his efforts to adopt a new regulatory regime for Internet providers. But, to his credit, Genachowski, under the leadership of his able chief of staff, Edward Lazarus, has been facilitating discussions by some of the leading interested parties, including AT&T, Verizon, NCTA, Google, the Open Internet Coalition, and others, to determine whether common ground can be reached on a legislative approach. I see nothing wrong with Chairman Genachowski’s efforts in this regard. Indeed, I think it is right that he should focus the agency’s attention on facilitating a legislative solution.

On this score, it has been disturbing to witness the vitriol with which Genachowski has been attacked by Free Press, Public Knowledge, and the Media Access Project and others for facilitating discussions that possibly might lead to a satisfactory legislative solution. It is somewhat incongruous, and wrong, for the entities to be attacking Genachowski so vehemently for conducting so-called “secret” negotiations when, at the same time, Free Press, Public Knowledge, and the Media Access Project are all members of the Open Internet Coalition which has been participating actively in the discussions. And, of course, Google, the staunch pro-net neutrality advocate, is participating in the discussions.

It makes you wonder whether Free Press and its allies really will not be satisfied with anything short of a full government takeover of the Internet, perhaps placed under the control of the Post Office, or a revived Interstate Commerce Commission, which regulated the railroads until they were deregulated thirty years ago. 

Actually, rather than entertaining that scary thought, I would rather give a shout-out to Senator DeMint’s “FCC Act.” It is a welcome addition to the legislative debate. If nothing else, it is a model pointing the way towards a market-oriented communications policy framework fit for the dynamism of the digital age revolution.

Come to think of it, I am still partial to “Digital Age Communications Act” for the bill’s title.      

Tuesday, July 20, 2010

Constitutional Reckoning Draws Closer for Digital Age Free Speech

The next term of the U.S. Supreme Court could finally give rise to a new free speech jurisprudence for digital age communications. Just last week the U.S. Court of Appeals for the Second Circuit ruled in Fox v. FCC that the agency's indecency policy violates the First Amendment. The appeals court concluded that the FCC's policy prohibiting "fleeting expletives" on the broadcast airwaves was unconstitutionally vague and created a chilling effect on speech.

Regardless of one's views on indecency regulation, the case has important implications for a variety of media speech regulations. An FCC appeal of the Second Circuit's ruling could pave the way for a Supreme Court reexamination of existing – and now outdated – doctrine that gives less speech protection to certain broadcast, cable, or other media than print publications.

The Fox v. FCC case has a lengthy history. To quickly recap: back in April, 2009, the U.S. Supreme Court ruled that the FCC's "fleeting expletives" policy was not "arbitrary" or "capricious" under the Administrative Procedure Act. However, the Court's majority declined to decide the First Amendment issue in the case. Instead, it sent the case back to the Second Circuit to decide the constitutional question. Notwithstanding this, Justice Antonin Scalia's 2009 opinion for the Court called it "conceivable" that the FCC's policy might chill some protected speech, hinting "[w]hether that is so, and, if so, whether it is unconstitutional, will be determined soon enough, perhaps in this very case." And in a concurring opinion, Justice Clarence Thomas forthrightly insisted that "[t]he extant facts that drove this Court to subject broadcasters to unique disfavor under the First Amendment simply does not exist today." Justice Thomas's opinion cited FSF President Randolph May's 2007 Charleston Law Review article, "Charting a New Constitutional Jurisprudence for the Digital Age."

Essentially answering the question posed by Justice Scalia, the Second Circuit has now ruled that the FCC's "fleeting expletives" policy does, in fact, chill protected speech because it gives no fair notice to broadcasters about what language is permissible speech and what language is impermissible, indecent speech. More importantly, the Second Circuit's new ruling in Fox v. FCC reiterates Justice Thomas's observation about technological innovation's evisceration of Pacifica's rationale for a lower standard of free speech protection for broadcast speech. As the Second Circuit observed:

[W]e face a media landscape that would have been almost unrecognizable in 1978. Cable television was still in its infancy. The Internet was a project run out of the Department of Defense with several hundred users. Not only did Youtube, Facebook, and Twitter not exist, but their founders were either still in diapers or not yet conceived. In this environment, broadcast television undoubtedly possessed a 'uniquely pervasive presence in the lives of all Americans.' …

The same cannot be said today. The past thirty years has seen an explosion of media sources, and broadcast television has become only one voice in the chorus. Cable television is almost as pervasive as broadcast -- almost 87 percent of households subscribe to a cable or satellite service -- and most viewers can alternate between broadcast and non-broadcast channels with a click of their remote control… The internet, too, has become omnipresent, offering access to everything from viral videos to feature films and, yes, even broadcast television programs.

The Second Circuit cited the FCC's own 2009 Video Competition Report as well as other FCC reports in support of its contentions about the modern media landscape. However, the Second Circuit considered itself "bound by Supreme Court precedent, regardless of whether it reflects today's realities," acknowledging that "[t]he Supreme Court may decide in due course to overrule Pacifica and subject speech restrictions in the broadcast context to strict scrutiny."

The FCC has not yet indicated whether or not it will appeal the ruling to the Supreme Court. But in the event FCC does appeal, we may finally witness a moment of constitutional reckoning. As Randolph May's law review article explained, a Supreme Court revisiting of its free speech jurisprudence under Red Lion, Pacifica and Turner could lead to "a new First Amendment paradigm for the electronic media, one that is much more in keeping with the Founders' First Amendment." This would mean that the Court will begin to subject all government regulation of speech, regardless of the media used, to strict scrutiny in order to ensure free speech is protected.

The point isn't that the Court needs to somehow bring the Constitution "up to date." Rather, the point here is that the Court should restore cogency and even-handedness to its constitutional doctrine. Simply put, no good reason exists to give greater deference to government regulation of broadcast or cable than to government regulation of Internet-delivered video or print newspapers. The Court should recognize that the analog-era rationale behinds its existing First Amendment jurisprudence that gives lesser constitutional protection to certain forms of media speech cannot be plausibly relied upon for denying digital-age equal treatment to alternative technologies.

A second round of Fox v. FCC at the Supreme Court would also give the justices a chance to make good on the Court's recent observation in Citizens United v. FEC (2010) that it "must decline to draw, and then redraw, constitutional lines based on particular media or technology used to disseminate political speech from a particular speaker," since "[t]he interpretive process itself would create an inevitable, pervasive, and serious risk of chilling protected speech pending the drawing of fine distinctions that, in the end, would themselves be questionable." As Justice Anthony Kennedy went on to write in Citizens United: "The Framers may have been unaware of certain types of speakers or forms of communication, but that does not mean that those speakers and media are entitled to less First Amendment protection than those types of speakers and media that provided the means of communicating political ideas when the Bill of Rights was adopted."

The Second Circuit's commonsense reflection on the mismatch between Pacifica's rationale and today's media marketplace should cause the Supreme Court, if presented again with the opportunity, to undertake a serious reevaluation of its First Amendment jurisprudence. So should the importance of technological neutrality in constitutional free speech cases.

A future Fox v. FCC ruling by the Supreme Court could be the occasion for restoring constitutional principle while, at the same time, jettisoning doctrinal deviations that are tied to outdated apprehensions that prevailed in the analog era.

Monday, July 19, 2010

Phantom Pension Payments

Recall the brouhaha concerning Montgomery County’s payment of pension contributions to county workers based on cost-of-living adjustments that the employees did not actually receive. The Washington Post story here recounts the controversy regarding payment of these so-called “phantom” pensions.

According to the Post, Montgomery Council Council member Phil Andrews said at the time: "It's bad practice to tie pensions to salaries that aren't provided, and this is the year to change it, before it gets established and when there's a very clear rationale because of the extremely difficult fiscal year," Andrews said. "The county needs the money." This proposition seems sensible enough –more than sensible enough, really – even if the county wasn’t facing such severe budgetary constraints.

I was reminded of the Montgomery County phantom pension controversy when I came across a page on the Maryland State Retirement and Pension System website which states: “The fiscal year 2010 Furlough and Temporary Salary Reduction Plan for State of Maryland employees does not impact retirement benefits. Furlough time is included in the calculation of earnable compensation and service credit. Similarly, the temporary salary reduction does not impact retirement benefits.”

I may be missing something. But this policy of calculating retirement benefits for state employees based not on the actual time worked or the actual salary earned, but rather based on time and salary as if the furloughs are not real, seems akin to Montgomery County’s policy of paying phantom pensions.

I understand that everyone, including state and county employees, wants to have the government contribute as much as possible to his or her pension. But in today’s very challenging fiscal environment, it simply may not make sense for the government to continue to pay pension benefits based on hours not worked or raises not received.

It seems like, when it comes to calculating retirement benefits for government employees, both the state and Montgomery County are haunted – quite deliberately so – by phantoms.

Thursday, July 08, 2010

Why You Don’t Want Government Enforcing Net Neutrality

Did you see the article in yesterday’s Washington Times reporting that, after protest from conservative bloggers and free speech activists, the Transportation Security Administration rescinded a new policy that would have prevented employees from accessing websites with “controversial opinions.” (If you didn’t see it there or on Drudge, you may not have seen it. I didn’t see it covered in other mainstream news sites.)

Now TSA is perfectly within its rights, perhaps even its responsibilities, to block employee access to certain websites, such as gambling and chat sites that TSA said it blocks. After all, these folks have important work to do to keep us secure. But the idea that TSA was going to block access to sites with “controversial opinions” raises concerns. It is only human nature that government officials charged with deciding which sites with controversial opinions to block might decide to deny access to ones critical of the TSA itself, or perhaps the incumbent Administration.

The Times report says: “A number of conservative bloggers suggested the TSA policy change was an attempt by the Obama administration to target opposing viewpoints or criticism.” I don’t know whether this is true or not, and I don’t want to presume bad intent. But I do know that TSA’s action – now retracted – is a reason to be very wary of allowing the government to get into the business of enforcing “net neutrality” and deciding whether Internet providers have “discriminated” in their treatment of content or applications.

We have far more, ultimately, to fear from government regulating speech on the Internet by deciding what content should be blocked than we do from private Internet providers retaining the freedom and flexibility to respond to the demands of the competitive media marketplace. If you don’t believe me, just consult your Constitution. There is a reason it is the First Amendment.

Tuesday, July 06, 2010

Broadband – The Oklahoma Way


The op-ed below, by Oklahoma governor, Brad Henry is a powerful testament to the benefits reaped by keeping broadband Internet services “unfettered from government regulation.”

Read on!

FCC broadband plan sets us on the wrong path

Gov. Brad Henry: Let's keep the Internet free, open and unfettered.

By Gov. Brad Henry

Published: 7/3/2010  2:20 AM

We stand at the proverbial fork in the road. When it comes to the Internet and broadband regulation, the path Washington chooses will have some profound effects on Americans' ability to connect, compete and innovate. Like many of my fellow governors — both Democrats and Republicans — I have serious reservations about the Federal Communications Commission's proposal to apply 1934-style government regulations to the Internet.

Bringing broadband to more Americans, especially those in rural and underserved communities, is a good and noble goal. That is why I have long supported the Obama administration's national broadband plan. To achieve the vision and goals of that plan will require unprecedented levels of private investment. It is estimated that $350 billion in new private investment will be necessary to fully implement the broadband plan.

However, the path the FCC proposes — reclassifying broadband under an arcane section of the Federal Communications Act of 1934 — will make it very difficult, if not impossible, to achieve the lofty goal of universal broadband access across the U.S. If the FCC continues on its present course, there is a real threat to rural communities and populations which are underserved by broadband access today.

The chilling effect such a move will have on private investment and job creation is real and is already being felt from Wall Street to Main Street, as Washington moves ever closer to more onerous regulation of the Internet. We cannot afford to stifle private investment, job creation and economic recovery, especially now.

Placing new burdensome regulations on the Internet, for example, will hamper our ability to provide quality online education to more students. In Oklahoma, our universities have made great strides through innovations in this field. Limiting investment in broadband deployment and development will also negatively impact our ability to deliver health care and essential services to rural and urban communities alike.

But, there is a better way.

In 2002, our state stood at the fork in the road, too. The path we chose was one of less regulation for broadband service, not more, and the results could not be more definitive and clear. A hands-off approach delivered real results.

Since the passage of our broadband parity legislation, we have seen expanded access into the most rural parts of our state. Families in Bessie (population 190) and Rattan (population 241) are beginning to compete with the larger urban areas when it comes to broadband access, choice and price. Prices, too, have dropped by 50 percent, and broadband subscribers have grown by more than 1,000 percent since 2001.

The Oklahoma experience in broadband regulation demonstrates a better way to ensure access to all the rich resources of the Internet. At the fork in the road, we chose the path to eliminate regulation of broadband service, and we have no regrets.

America is at a fork in the road. The path the FCC chooses will have a profound impact on all Americans and American businesses.

There is a better way, and it's the best and most proven way to connect all Americans with broadband. Let's keep the Internet free, open and unfettered from government regulation.