Thursday, December 14, 2023

PRESS RELEASE: The FCC's Proposal to Convert Internet Providers Into Public utilities Should Be Stopped

Today, Free State Foundation President Randolph May and Senior Fellow and Director of Communications Policy Studies Seth Cooper filed comments in the FCC proceeding proposing to classify broadband Internet access service providers as common carriers. The FSF comments, which are available on FSF's website and which contain an Introduction and Summary, are 74 pages with 196 supporting footnotes. The comments demonstrate conclusively the Commission should not move forward with its proposal. 

Here are a few key excerpts from the Introduction and Summary of the comments:

The Commission’s proposal to convert broadband Internet networks into public utilities is legally unsupportable as well as unwise, unnecessary, and unjustified from a policy perspective. Stated bluntly, the Commission’s proposal, if adopted, by asserting stringent bureaucratic control over the practices and operations of private sector Internet service providers, would constitute one of the 21st century’s most flagrant government power grabs.


Supreme Court decisions such as West Virginia v. EPA (2022) have embedded the Major Questions Doctrine in the Court’s jurisprudence. And even if the Chevron doctrine is not directly overruled by the Court in the pending Loper Bright Enterprises v. Raimondo case, in effect its scope already has been meaningfully curtailed. As a result, the Commission cannot rely on the claimed ambiguity of Communications Act statutory terms as the basis for authority to reclassify Internet services under Title II. If adopted, the proposed reclassification decision undoubtedly would be a major rule falling within the Major Questions Doctrine. Transforming massive broadband Internet access networks built with over $2.1 trillion in private capital since 1996, and upon which so much of our nation’s economy is now dependent to function, unmistakably involves issues of vast economic significance. Reclassification of broadband services away from a lightly regulated Title I “information service” into a heavily regulated Title II “telecommunications service” would impact all broadband Internet service providers (ISPs), online edge companies, and residential broadband subscribers – whether through the regulation of revenues, prices, or service offering terms and conditions. “Net neutrality” regulation also has been a matter of vast political significance and considerable public controversy for two decades, up to and including Chairwoman Rosenworcel’s recent call for the public to “make some noise” and “raise a ruckus” so as to influence the Commission’s decision. The Major Questions Doctrine requires a clear statement of authority from Congress authorizing a major rule such as one that would impose public utility regulation on Internet networks that have thrived in a primarily market-oriented environment. But the lack of any such clear statement in the Communications Act almost certainly would be legally fatal, as even two former Obama Administration Solicitors General have concluded.


Surely the case for Title II reclassification is far weaker in 2024 than it was in 2015 – and it was demonstrably weak then. Myriad gloom-and-doom predictions about the “end of the Internet as we know it” after repeal of the Commission’s short-lived public utility regulation were quicky proven false. That the Notice cannot point to any real-world instances of ISPs blocking, throttling, or otherwise harming consumers ability to access lawful Internet content is readily explainable by economic realities. Increases in broadband network availability, competing alternatives, and broadband speeds have followed in the wake of Title I reclassification. The competitiveness of the broadband Internet access services market has increased since early 2018 due to the expansion of fiber, the rapid nationwide deployment of 5G mobile and 5G fixed wireless access (FWA) services and new satellite services, as well as the launch of DOCSIS 4.0 cable broadband and hybrid cable mobile virtual network operator (cable MVNO) services. And, significantly, U.S. broadband networks passed the ultimate stress test by successfully accommodating dramatic spikes in Internet traffic and actually improving service during the lockdowns of 2020.


An additional problem is that the Commission’s proposal opens the Internet to rate regulation. Title II, at its core, is a rate regulation regime. The Notice does not propose to forbear from applying Sections 201(b) and 202(a); it suggests the agency will only refrain from ex ante rate regulation, not ex post. Those statutory provisions would impose on the Commission a positive duty to consider complaints that rates charged by broadband ISPs are unjust or unreasonably discriminatory. The Notice also suggests rate regulation with its proposed ban on paid prioritization; its assertion of agency authority over network interconnection agreements that set pricing for peering; and its possible ban on “free data” mobile plans. Rate regulation will defeat what should be the Commission’s priorities – promoting network investment and deployment, along with consumer choice and innovation.


In a surprise to many who have observed the two decades-long policy debate over “net neutrality” regulation and “Internet openness,” the Notice tries to reframe proposed Title II regulation of broadband services into a national security and public safety measure. But it is highly doubtful that regulating ISPs as public utilities will make the nation and its people more secure and safe. The Notice’s security and safety rationale for public utility regulation is a classic case of the tail wagging the dog.


The Commission also proposes to adopt an impermissibly vague “general conduct standard” as an admitted “catch-all backstop” that would restrict an unknown and unknowable number of network practices that the Commission believes might “unreasonably disadvantage” retail service end users or Internet edge providers like Google and Facebook. This proposed “catch-all backstop” consists of several unclear factors that are not tied to any safe harbors, ascertainable economic theory, or legal precedents that would provide predictable application. The elasticity of those factors would enable the Commission to restrict nearly any network practice it chooses. Also, it appears that the Commission’s enforcement rules, in many instances, would require ISPs to prove that they comply with the agency’s ad hocdeterminations regarding what technical network practices best promote Internet openness. The result would be a gross expansion of agency power over private networks and a negative impact on innovation and investment. The “general conduct” standard would be the Commission’s tool of choice to ban popular “free data” mobile plans and other innovative offerings.


Aside from the agency’s lack of legal authority already described above, the Commission’s proposal to regulate broadband ISPs like common carriers under Title II raises significant issues under the First Amendment. The proposed rulemaking would burden broadband ISPs’ First Amendment right to make editorial decisions involving paid priority arrangements as well as “free data” or “sponsored data” offerings. Although an ISP can claim no First Amendment right to hold itself out as a neutral and indiscriminate pathway but then conduct its operations differently, an ISP likely has a First Amendment right to qualify the meaning of that offering in its written terms of service to include certain traffic priority, speed, pricing, content, or other terms. Moreover, the Commission’s suggestion that its proposed regulation is likely to be upheld as content-neutral and subject to intermediate First Amendment scrutiny is questionable because the Commission is unconcerned with findings of market power.