As usual, it looks like my friends at IPI have a good communications conference in the works. It is next week on Wednesday, October 6, in DC. There is a good line-up of speakers on the important communications topics of the day. Get the details here. As you’ll see, there is a free reception the night before to boot.
If you’re free, it should be worth your while to attend.
Free Press lately has taken to attacking FCC Chairman Julius Genachowski for not yet adopting net neutrality mandates to regulate Internet service providers. The most recent attacks, increasingly personal, are ill-conceived. And, joined as they are by acts of street theatre, they do not contribute constructively or in a serious way to the regulatory debate.
For example, last week Free Press and other pro-net neutrality advocates protested in front of the FCC's headquarters by handing out waffles as they trumpeted their “Don't Waffle on Net Neutrality Campaign!" In a press release, Free Press admonished Chairman Genachowski to "stop waffling and get to work."
There is no need to say much about the street theatre other than to make the obvious point that, while Free Press has every right to protest outside the FCC's headquarters with waffles and signs, the FCC commissioners should not be influenced by such antics. Their decisions must be governed by the facts, by the law, and by sound regulatory principles and policy perspectives.
With this in mind, this statement in the Free Press release particularly struck me: "The public can’t afford to wait much longer for the FCC to stop waffling and move forward on enacting real Net Neutrality rules to ensure that the Internet remains open for everyone.” This claim immediately raises the question: Why the need for any administrative action, much less the need for quick action, especially as Congress is actively considering broadband legislation.
Free Press says the public "can't afford to wait much longer." Why? There is no evidence that the Internet services market suffers from a market failure or that consumers are experiencing any demonstrable harm as a result of the absence of Internet regulation. There is no evidence, in Free Press's words, that the Internet presently is not "open for everyone." And there is no reason to believe, consistent with the workings of the marketplace, that the Internet will not remain open.
Indeed, surveys indicate that consumers generally are satisfied with their Internet service. A poll released last week by Broadband for America, a group supported by major Internet service providers, indicates 75 percent of the survey respondents said that "the Internet is currently working well." And 55 percent responded that "the federal government should not regulate the Internet at all." The FCC's own survey released last June showed that 91 percent of broadband users are either "very" or "somewhat" satisfied with the speed of their Internet service at home.
Amidst this sea of reported consumer satisfaction, it makes no sense for Free Press to lambast Chairman Genachowski for failing to adopt a new regulatory regime for the Internet, especially one akin to the rigid common carrier regulation traditionally applied in a monopoly environment or in cases of market failure. If anything, Genachowski should be commended for now recognizing the virtue of proceeding cautiously – if indeed he truly has recognized such virtue – in light of the risks to continued infrastructure investment and innovation that his Internet regulation proposals entail.
Over the weekend, in rummaging about old papers, I came across this statement from the landmark 1978 "Study on Federal Regulation" prepared by the Senate Committee on Governmental Affairs: "Simply because a problem exists and, in theory is remedial, does not mean that regulation or other government intervention is desirable. Controls should only be undertaken where there is a clearly identified problem that cannot otherwise be solved, and where the anticipated achievements are significant and not vitiated by projected adverse consequences." While there are various formulations of the cost-benefit analysis that should be an integral part of an agency's decision regarding whether or not to adopt any new significant regulation, the statement above is surely a good one.
But please note the requisite predicate for proceeding with any agency regulation at all: that "a problem exists" or "there is a clearly identified problem." With respect to the proposals for government imposition of net neutrality mandates, absent a clearly identified problem, the case for regulation fails at the outset. And, thus, so does the unwarranted charge of waffling.
There is vice in rushing to regulate absent a clearly identified problem. And there is virtue in proceeding cautiously when considering intervention in a marketplace that is working well.
Consumers should be able to take control of their own consumption of broadband just as they have for other electronic commodities, and in some cases, they could reduce their monthly broadband service. At least consumers should have the option to utilize a metered approach if they want. This type of transparency in billing, along with providing education and outreach to consumers, should be the goal of policymakers and providers alike.But consider what should be a basic implication of the Commission's acknowledgment of the benefits of usage-based pricing models in the wireless context. Namely: those same benefits from usage-based pricing for addressing network scarcity, consumer preferences, and "reduc[ing] mobile broadband providers' incentives to employ more restrictive network management practices" should apply to broadband networks generally. But has the FCC faced up to the fact that once it recognizes the benefits of usage-based pricing for wireless broadband, it follows that similar benefits should obtain in the case of wireline broadband? A reading of the Notice suggests not.
…
Broadband providers -- just like wireless providers -- should be allowed to use a consumption model without government interference as long as consumers know and understand what they are paying for.
Today we celebrate Constitution Day. On September 17, 1787, thirty-nine delegates to the Constitutional Convention, after meeting in Philadelphia through a long hot summer, signed the new Constitution. Just 223 short years ago.
It is well to have the Constitution in mind every day, of course. But on Constitution Day it is especially appropriate. Here at the Free State Foundation, we have always considered education concerning a proper understanding of the Constitution an important part of our work on communications policy issues. Even more than with respect to most other federal agencies, the Federal Communications Commission's regulatory activities implicate constitutional concerns, such as proper regard for property rights, adherence to due process, and, especially, the protection of free speech.
Indeed, historically, there has been an inherent tension between FCC regulation of communications and the First Amendment rights of regulated entities. So, on this Constitution Day, I would like to call to your attention my latest article on the subject, "Time for the FCC to Respect the First Amendment," which appears in the new edition of the Heritage Foundation's The Insider magazine.
The article's title is a deliberate giveaway of my perspective that, all too often, the FCC's actions impinge directly on First Amendment rights, or at least chill their exercise. Here are a few excerpts from the article, which I hope many of you will read in full:
"With the transition from the analog to the digital age, and the proliferation of new media outlets, you might expect that the FCC would eliminate many of its outdated forms of regulation, including those that threaten free speech rights. You would be wrong. Indeed, in several respects, the FCC is acting, or proposing to act, in ways that would enhance its regulatory oversight of speech. The agency wants, for instance, to impose network neutrality restrictions on Internet providers – sort of like a digital must-carry mandate. Meanwhile, the agency's 'Future of Media' project appears ready to provide justification for more government control of private media and more government funding for public media. And don't forget the agency's maintenance of outmoded speech regulations such as cable must-carry rules."
"While President Obama's FCC Chairman Julius Genachowski and other net neutrality advocates claim the regulations would promote free speech values, in fact they turn the free speech guarantee of the First Amendment on its head. Government-enforced neutrality mandates likely will violate the Internet providers' First Amendment rights. Like newspapers, magazines, movie and CD producers, or the man speaking on a soapbox, Internet service providers possess First Amendment rights."
"In today's environment, we do not need, and should not want, government-supported or government-controlled media acting as a 'filter' or a 'megaphone,' or deciding what programming is in the 'public interest.' Such 'filtering' or 'megaphoning' necessarily involves the government in making decisions based on content. How else to decide what information should be filtered or amplified to meet some 'public interest' objective? This government involvement in content selection runs against the grain of our First Amendment values."
In all their actions, and in conformance with their constitutional oath of office, the FCC commissioners should square their decisions with the First Amendment's intent to protect the speech of private citizens from government interference. In today's digital environment, with the proliferation of media sources, this means the FCC needs to shed its ingrained analog-era mentality that has led to an understanding of its role as enforcing "fairness" or "balance," or achievement of ill-defined and questionable "public interest" objectives.
In a law review article, "Charting a New Constitutional Jurisprudence for the Digital Age," published in 2009, and cited shortly thereafter by Justice Clarence Thomas at page 5 in his concurring opinion in the Supreme Court's Fox Television case, I concluded:
"Perhaps it was predictable, maybe even likely, that the First Amendment’s protections would be limited substantially during the twentieth century’s Analog Age that tended towards a monopolistic or oligopolistic communications marketplace. But now, in the face of proliferating competitive alternatives attributable to profound marketplace and technological changes, it ought to be considered predictable and yes, even likely, for the
Court to establish a new First Amendment jurisprudence befitting the media abundance of the twenty-first century’s Digital Age."
I leave you with thoughts of the First Amendment on Constitution Day – and wish you a reflective one!
Scott Cleland has another in his series of papers exploring how, in his view, Google is monopolizing the consumer Internet media. As usual, it is full of facts and figures.
Scott knows about as much about what Google is up to as anyone who is not not on the inside – and, I’m sure more than many who are.
His “Googleopoly IV” may be found on his blog here. If you are interested in following Google’s exploits, it is must reading.
The core of a legislative framework should be a provision granting the Commission authority, upon a complaint filed and after an on-the-record adjudication, to act to prohibit broadband ISPs from engaging in practices determined to constitute an abuse of substantial, non-transitory market power and that cause demonstrable harm to consumers. Such a circumscribed market-oriented rule would provide the Commission with a principled basis for adjudicating fact-based complaints alleging that ISPs are acting anticompetitively and, at the same time, causing consumer harm.FSF's Randolph May even suggested legislative language to achieve those objectives. (See also the FSF blog post "Broadband Internet Regulatory Authority: Some Suggested Legislative Language.")
FCC Chairman Julius Genachowski deserves kudos for stopping in its tracks a disaster-in-the-making spectrum giveaway. He pulled the plug on a draft order that would have established rules for auctioning spectrum in the 2GHz band, also known as the AWS-3 (Advanced Wireless Services) band.
The problem with the draft order is that it would have sanctioned an auction tailored specifically to the unique business model of one company, M2Z Networks, which proposed to provide a "free" nationwide broadband service over part of the spectrum to be auctioned under the rules M2Z proposed.
Calling M2Z's plan to offer free broadband service a "business model" is being charitable. More realistically, M2Z's designer auction plan, which it has pursued for years here in Washington, should be called a "spectrum speculation" model. Indeed, the plan's chief backer is John Doerr, vaunted venture capitalist with the firm of Kleiner Perkins Caufield & Byers. We would all be better off if Mr. Doerr would devote his considerable talents to finding and funding promising Silicon Valley start-ups with innovative ideas and new technologies – companies that are not pleading for special government hand-outs.
M2Z's designer auction plan with its special conditions would have devalued the spectrum and reduced the auction proceeds. The reduced proceeds to the U.S. Treasury would be paid by American taxpayers. The FCC should not be in the business of tailoring auction rules to particular business models. Instead, it should always opt for clean, unconditioned auctions so that the spectrum will be awarded to the bidders who value it highest. They are in the best position to determine what services consumers value most in the marketplace, and at what price.
It is a valid public policy objective to make broadband service as ubiquitously available as feasible, and the government has a limited role to play in achieving this objective in proper ways. There is no need to rehearse here again all the progress that has been made in this regard in the past decade. Broadband service is now available to over 95% of American households. According to the latest Pew Internet & American Life Project report, over 65% of U.S. households subscribe. And the Pew reports consistently show that, for a significant number of non-subscribers, the cost of broadband service is not the reason they do not subscribe.
To the extent that the government wishes to further spur broadband availability and adoption, there are measures that it can take that do not involve the pitfalls and pratfalls of the M2Z plan. For example, I have supported circumscribed measures to target government financial support for new broadband infrastructure to geographic areas without any service at all. And, I – along with my colleague Deborah Taylor Tate, FSF Distinguished Adjunct Senior Fellow – have long supported directing LifeLine-Linkup support for broadband to low-income persons who demonstrate the need for financial support.
In other words, there are appropriate means for the government to employ to achieve the public policy objective that M2Z claimed to embrace with its plan. But adopting designer spectrum giveaway auctions, as M2Z urged, is certainly not one of them. The reason I referred above to M2Z's plan as a "spectrum speculation" model is this: A model based on "free" service, with all the service specifications – speed, quality, build-out, and upgrade requirements, and the like – designed and refined by the FCC likely would fail, if it ever got off the ground at all. Even if conditioning auctions were otherwise advisable, the broadband Internet market is too dynamic and innovative, and consumer demand changes too fast, for the government to set in stone specifications for service. Indeed, I suspect that "failure" of its free government-specified service is a key element of its business plan. Had M2Z gotten its way, and then faced financial difficulties as a result of its faulty business model, the company surely would have come forward with its ready-made alternative plan for using the spectrum, asking to be relieved of the conditions it originally embraced. You can bet that M2Z would have resisted mightily any attempts by the FCC to then reclaim "its" spectrum. Hence, the "spectrum speculation" model.
So, again, Chairman Genachowski deserves praise for putting the kibosh on M2Z's spectrum giveaway proposal. Hopefully, having now gone through this exercise, his commitment to unconditioned auctions will be strengthened going forward.
In an excellent editorial last week, the Washington Post argued that the FCC should not go forward with its proposal to classify broadband Internet service providers as common carriers subject to the same type of public utility-like regulatory regime that was applied to Ma Bell back when…back when there was a Ma Bell a quarter century ago. Instead, the Post called for Congress to establish "a clearly limited power to take action against anti-competitive violations, rather than encumbering this vital sector with detailed and prescriptive regulation, is the sensible approach."
Not surprisingly, now comes pro-regulation FCC Commissioner Michael Copps taking exception in a response published in today's Post. This is old ground. But two aspects of Mr. Copps' brief response are worthy of comment. He says the Verizon-Google proposal, which the Post commended as a basis for a potential legislative solution, would come "at the expense of the open Internet we now have."
Commissioner Copps regularly bemoans, as he does in his Post rebuttal, the action of the Bush Administration's FCC which adopted policies to ensure that Internet providers would be only lightly regulated, not subject to traditional public utility-like regulation normally reserved for monopolies. But he doesn't seem to recognize the fundamental contradiction between acknowledging the existence of the "open Internet we now have" and criticizing the lightly regulated environment that has allowed such open Internet to flourish. Instead, reflexively, Mr. Copps calls for more Internet regulation.
Now, Mr. Copps also repeats in his Post piece the line that this is not a debate "about regulating the Internet." To him, it is instead all about regulating "Internet service providers." Whoa! Bring in the Jesuits to resolve the metaphysical distinction between "regulating the Internet" and regulating the "Internet service providers." (Actually, it doesn't require bringing in the Jesuits to resolve this one. As I – and many others – have explained many times, it is wrong as a matter of law and policy to suggest that Internet service providers do not comprise an important component of "the Internet.")
There may be certain segments of our market economy where additional regulation and oversight may be justified, or even advisable. Think, perhaps, government inspection of egg production facilities, or mine safety, or oil rig safety. But, given that Commissioner Copps and other proponents of new Internet regulation acknowledge that we presently enjoy an open Internet, the case for new prescriptive government regulation in the dynamic and competitive Internet market segment – a segment in which there is presently no consumer harm - is extremely weak. As the Post put it, it simply doesn't make sense to risk "stifling innovation with unwieldy preemptive regulations."
Scott Cleland, Washington’s most perceptive and persistent Google-watcher, has a good piece on his blog concerning the implications of Google getting a no-bid spy contract from the U.S. government. Read it here.
It’s a pity Scott is often a lonesome voice raising questions like the one’s in his blog. But we can be grateful he is doing so.
The Washington Post has an excellent editorial in today's paper on net neutrality. The Post's editorials have been consistently good on the net neutrality issue since the paper first echoed my sentiment last September in an editorial entitled, "The FCC's Heavy Hand." There the paper concluded that FCC Chairman Julius Genachowski's ideas for new net neutrality regulation constituted "an immodest proposal." Since then, with his latest proposal now on the table to classify broadband Internet providers as common carriers, Mr. Genachowski's regulatory proposals have become even more immodest.
While I certainly do not agree with all aspects of the Google-Verizon proposal, the Post is correct in urging that the agreement provides a good starting point for pursuing legislation that provides the FCC with delimited authority over Internet providers.
Please read the entire editorial. But here are two key excerpts:
"And the proposal includes many good elements -- especially its designation of the FCC as an adjudicatory body such as the Federal Trade Commission rather than one with intrusive regulatory authority. In a realm as complex and evolving as the Internet, where the challenges vary from year to year and it is impossible to predict the direction of innovation, this is essential. Allowing the FCC to enforce on a case-by-case basis can leverage expertise and create a body of useful precedent, rather than stifling innovation with unwieldy preemptive regulations."
"The FCC stands poised to reclassify broadband service providers as content carriers, a category that would subject them to the same sort of regulation that telephone companies are saddled with, even giving the FCC the ability to set rates. The agency's chairman says that the FCC won't use this power -- but this could change in another administration. Such a move would be a serious step backward. A better route would be legislative enactment of something like the Google-Verizon plan, with an emphasis on transparency about decisions that providers are making. Giving the FCC the authority to nudge things in the right direction will be a good first step. As the Internet evolves, the nature of needed oversight will evolve as well. Establishing a clearly limited power to take action against anti-competitive violations, rather than encumbering this vital sector with detailed and prescriptive regulation, is the sensible approach."
This emphasis on adoption of an adjudicatory case-by-case approach, rather than one permitting the FCC to exercise intrusive regulatory authority, is very important. And the notion that Congress should delineate the FCC's "clearly limited power" to focus on anti-competitive actions, rather than allowing the agency free rein to adopt detailed prescriptive regulations, is key to maintaining an environment that does not discourage the innovation and investment that is much needed for continued Internet progress.
Shortly after last Spring's D.C. Circuit's Comcast decision, I offered in this piece some legislative language for consideration. It contains many of the same elements endorsed by the Post. I still commend it to you as an approach worthy of Congress's consideration as a way forward.
Obviously, there will be differences of opinion as to legislative language. Ultimately, unlike in the process of writing think tank pieces, there will be compromises made in the process of writing legislation that reflect the realities of the political process. But there should be widespread agreement now, in line with the Post editorial, that Congress should be given time to work its will.
As I pointed out here a few days ago, one of the most vociferous advocates of hard-line Internet regulation is urging Mr. Genachowski to act now in order "to fire up the base in time for election." This is decidedly not a reason for acting. Rhetoric of this kind only serves to compromise and denigrate the idea that the FCC is an independent regulatory agency, and that its actions are based primarily on its collective institutional expertise and experience, not on campaign promises or partisan considerations. Such partisan rhetoric ill-serves the agency, and the public interest.
It's time for Chairman Genachowski to pull his Internet regulation proposal off the FCC's table.
In an August 20 blog posting with the subtitle, "What Democrats Need to Understand," Public Knowledge's Harold Feld argues that one reason FCC Chairman Julius Genachowski should reject any forthcoming "industry consensus" on net neutrality and act quickly to adopt new neutrality mandates is that this "would fire up the base in time for election."
Of course, this is decidedly not a proper reason for the FCC to scuttle or short-circuit the negotiations that are now taking place among a broad and diverse segment of the market participants who comprise what we have come to call the Internet ecosystem.
And the mere fact that one of the chief and most vociferous advocates of new Net regulations suggests that the FCC should act to "fire up the base" is indicative of what is wrong with so much of the pro-regulation advocacy of Public Knowledge, Free Press, and their allies. These groups continually try to politicize an issue, which, most of all, needs to be decided based on technical, economic, and marketplace expertise. Witness the blog attack earlier this year by Mr. Feld on Philip Verveer, the Obama Administration's State Department Coordinator for International Communications and Information Policy and stellar public servant, for venturing to say that if the U.S. were to move to regulate Internet providers, this could have the unfortunate effect of causing foreign countries to see such action as a justification for exerting more control over the Internet in their own countries. Ambassador Verveer's offense in Mr. Feld's eyes: Getting "so off message" from what Feld views as President Obama's and Democrats' talking points.
It is true that President Obama campaigned in favor of net neutrality regulation and promised that "as president I'm going to make sure that my FCC commissioners are applying as we move forward." And since assuming office, he has reiterated that he would like to see new net neutrality regulations adopted.
It is perhaps in this context of President Obama's campaign promises about making sure what "his FCC commissioners" are doing that Feld misunderstands – or abuses -the FCC's proper role. The FCC is an independent regulatory agency, not an executive branch agency. The president cannot dictate the actions of the commissioners. With the advice and consent of the Senate, he gets to appoint the commissioners. But they are not "his commissioners," in the same way, say, that the Secretary of Commerce is "his Secretary," or the EPA Administrator is "his Administrator." And it is wrong to think of the commissioners this way, for it changes the way that the public thinks about the FCC and what it is doing.
There is no gainsaying that the FCC, even as one of the independent agencies, sometimes responds to political forces. As I have said before, this is not unexpected, or entirely wrong. But at least in theory, and certainly under the Progressive-era and New Deal vision, the FCC (along with its sister independents such as the FTC and SEC) were created (with requirements for bipartisan memberships, and staggered and fixed terms) in a way to establish their independence from presidential direction and control. This has been understood to be the way of thinking about these independents since the Supreme Court's famous 1935 decision in Humphrey's Executor v. United States.
With their presumed insulation from presidential control and ordinary politics, the congressional framers of the FCC and other independent agencies emphasized that these agencies' actions would be guided primarily by the specialized expertise and the institutional knowledge of their commissioners.
So it is sad to see Mr. Feld suggest that the FCC Chairman should act on net neutrality in order to "fire up the base in time for election." Such talk, much less actions based on such talk, only serves to diminish the FCC in the eyes of the courts, where its record on review historically has been less than sparkling. And, more importantly, in the eyes of the public, which already casts a skeptical eye at the motives underlying the actions of many government officials.
Richard Bennett, a very knowledgeable technologist and a good writer to boot, has started a new blog, High Technology Forum.
Richard says that, rather than taking positions on particular issues, the new site “is all about explaining the technical issues around networks in general and the Internet in particular.”
Richard has been involved with the Internet since shortly before Genesis, that is to say before Al Gore. I commend to you his new blog.
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