Whether you are an entrepreneur, a venture
capitalist, or an economist, it is almost impossible to envision with any certainty
what a given market will look like one, five, or ten years down the road. And
it is especially difficult to do so for a highly innovative and dynamic market
such as broadband. Successful entrepreneurs need to have vision and alertness
about consumer demands, but it is fair to say that even successful entrepreneurs
cannot predict the future. But more importantly for my purposes, regulators and
politicians cannot predict the future either.
In a recent Perspectives from FSF Scholars, Gus Hurwitz wrote a piece entitled
“Open Internet
and the Law, or Removing the Cart from Afore the Horse.” He makes the
point that ex ante rules which will
“protect the Open Internet” are a solution in search of a problem. He says that
whether the appropriate legal framework for regulating the broadband market is
Section 706, Title II, neither, both, or something else, “until we know the
rules’ purpose, we cannot speak to the appropriate authority.”
Professor Hurwitz emphasizes that ex ante bright-line rules, or rules that
would prohibit specific conduct that has yet to occur, are not needed because
they do not consider that such conduct may not be problematic for consumers in some
circumstances. In other words, if it is unknown how the broadband market will
look in one, five, or ten years, how can the Federal Communications Commission
(FCC) definitively say that specific conduct from Internet Service Providers
(ISPs) is wrong if such conduct has yet to occur in a manner that is
detrimental to consumers? And even if such conduct would be foreseeably problematic
in most circumstances, it does not mean it would be problematic in all
circumstances.
For that reason, Professor Hurwitz suggests
that the FCC issue guidelines with flexible standards rather than mandatory
rules:
These guidelines
should reiterate what the D.C. Circuit in Verizon made clear, that the
Commission has substantial authority in this area under Section 706. And the Commission
should say that, if Section 706 proves insufficient to curtail problematic
conduct, it will explore other tools for protecting consumers from harmful
conduct – including Title II or seeking greater Congressional involvement. And
it should say what everyone knows -- that the world is watching – that the
Commission, aided by a concerned Congress and an army of public interest
lawyers and an agitated Silicon Valley, is watching, and that it won’t hesitate
to bring swift action against any firm that engages in problematic conduct.
The guidelines would act as market
norms. So while disregarding the guidelines may not get an ISP in trouble with
the law, per se, the firm could lose out on consumers and/or market share. But
guidelines, as opposed to rules, allow for case-by-case interpretation of situations
where the market norms are broken. Of course, the FCC could have the authority
to “bring swift action against any firm that engages in problematic conduct.” But
a competitive market should need an overseeing enforcer of market norms only
infrequently. Competitive markets allow for consumers
to choose if an ISP’s disregard for market norms is warranted or not.
In other words, increasing competition
is almost always the best market regulator because ISPs are motivated to
satisfy consumer demands. So while ISPs do not have the incentive to engage in
conduct detrimental to consumers, if an ISP does engage in such conduct
consumers can choose to subscribe to a different ISP.
So, ultimately,
regulators at the FCC should spend much less time trying to predict market
outcomes or attempting to predict how they think
ISPs might act in the future. Regulatory
costs create barriers to entry into the market and likely lead to less
competition, lower levels of investment and deployment, and higher prices for
consumers. Instead, regulators should spend time paving the way for even more
competition by reducing regulatory impediments. This would put more of the “regulating
power” in the hands of consumers.
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