The public debate over how best to keep the internet open and free – and what exactly that means – has dragged on for more than a decade. The principle that internet service providers should deliver all online content without favoritism carries with it complex economic, technological and legal questions.
In 2015, the Federal Communications Commission issued its Open Internet Order, requiring transparency and banning blocking, throttling of content and paid prioritization – that is, offering higher-quality service at a price. Under its current chairman, Ajit Pai, the FCC proposes to revise and reverse some or all of these rules. Both in the run-up to the 2015 order and since this current proposal for reconsideration, many have called for Congress to step in for the first time.
Without legislating specific net neutrality rules, Congress could take three important steps to clear away irrelevant legal impediments and make the debate more productive for regulators and the public alike.
Separate classification from regulation
Some of the problems of devising net neutrality rules come from the fact that Congress defined legislative categories that had more to do with the 1984 breakup of AT&T’s telephone monopoly than the still largely nascent internet. In the Telecommunications Act of 1996, Congress classified communications businesses as engaged in either “telecommunications” or “information” services – either operating the wires that the data flow through or providing the data. Congress decreed that only the former were subject to regulation of prices, access and services – under Title II of the Communications Act of 1934.
That congressional decision is why the debate is laced with contentions about whether ISPs should be classified as either telecommunications or information service providers. Those contentions aren’t new; 15 years ago a relatively deregulation-minded FCC classified broadband cable service as an information service, not subject to regulation. And in 2005, the Supreme Court ruled that the FCC could determine how to classify broadband internet. But Justice Antonin Scalia dissented, saying the Telecommunications Act of 1996 was clear that broadband internet was a telecommunications service – and that the FCC couldn’t decide otherwise.
The FCC’s 2015 Order “reclassified” broadband service as a telecommunications service, to give it the legal authority the D.C. Court of Appeals said the FCC needed to enact its net neutrality rules. The current FCC proposes, in effect, to “re-reclassify” broadband as an information service. The commission’s announcement of that move involves some excruciating legal contortions, not to oppose the economic substance of the FCC’s 2015 order but to come up with a convincing argument against Justice Scalia’s 2005 dissent.
Congress can fix this mess. The economic case for whether and how a firm should be regulated has nothing to do with what service it provides. Rather, the question should be about economic fundamentals: Is the company a monopoly? Or does competition from alternative suppliers impose reasonable market pressures on price and service quality? And can the regulator get demand, quality and cost information in a sufficiently timely manner to be able to set reasonable prices and terms of service?
Unfortunately, the Telecommunications Act of 1996 ignored economics and relied on service classifications instead, precluding findings that an information service should be regulated – or that a telecommunications service market is sufficiently competitive to render regulation unnecessary. Returning regulatory determinations to their economic foundations is the first order of legislative business.
Restore a focus on the ‘public interest’
But is net neutrality really about economic regulation? While thinking clearly about net neutrality rules requires eliminating classification, looking at the issue solely in terms of regulating monopolies may be looking in the wrong place. In recent years, during both Republican and Democratic administrations, the FCC has tended to assess all communications policy issues in terms of whether internet sector practices violate antitrust laws. By and large, the arguments based on competition, or economics more generally, are not all that compelling.
Regarding net neutrality, a much better role for the FCC would be to focus on the public interest. One example comes from the observation, by open-internet advocate Harold Feld at the communications policy nonprofit Public Knowledge, noting how important it was for Arab Spring protesters to communicate on social media. While the FCC’s jurisdiction does not extend to Egypt, the ability for the public to freely share news and ideas through the internet is no less important in the U.S.
In retrospect, the FCC made a mistake by treating net neutrality as a competition problem rather than as a tool to protect speech. Because speech rights were never central in the FCC’s net neutrality review, there is no record of what, if any, policies would be necessary or effective to protect people’s rights to communicate. The current regulations might be sufficient or excessive, but until evaluated under a “public interest” standard, we do not know.
Congress should remind the FCC of its obligations to evaluate the public interest consequences – not just the economics – of its regulations.
Restore the role of antitrust in telecommunications
Focusing the FCC on the public interest would be easier if the Department of Justice’s Antitrust Division or the Federal Trade Commission could guard against internet service providers engaging in monopolistic practices.
At present, the antitrust agencies may not have that authority. In 2004, the Supreme Court ruled that if a regulator has authority over a practice (in that case, the FCC’s authority over how telephone companies open their facilities to competitors, antitrust laws should not apply. That decision came despite an explicit clause in the Telecommunications Act of 1996 preserving an antitrust role for the FCC.
I do not expect that internet service providers following regulations grounded in the public’s rights to speak and be heard would violate antitrust laws. Congress should make it clear to the Supreme Court and the public that antitrust authorities do have the power to review the facts and remedy any competition problems or harm to consumers.
If Congress could enact legislation that removed the distinction between “telecommunication” and “information” services, reinforced the importance of the public interest in communications and restored antitrust enforcement power for regulators, the FCC would be better able to develop net neutrality regulations – whatever they may turn out to be – with solid substantive and legal foundations.