Opinion: The FCC's Net Neutrality Victory Is Anything But

Did we really just enact 300 pages of legally questionable, enormously costly, transformative rules just to help Netflix in a trivial commercial spat?
A net neutrality advocate demonstrates across the street from the Comcast Center in Philadelphia on Sept. 15 2014.
A net neutrality advocate demonstrates across the street from the Comcast Center in Philadelphia, on Sept. 15, 2014.Matt Rourke/AP

The day after the FCC's net neutrality vote, Washington was downright frigid. I'd spoken at three events about the ruling, mentioning at each that the order could be overturned in court. I was tired and ready to go home.

I could see my Uber at the corner when I felt a hand on my arm. The woman’s face was anxious. “I heard your talk,” she said.“If net neutrality is overturned, will I still be able to Skype with my son in Turkey?”

The question reveals the problem with the supposed four million comments submitted in support of net neutrality. *Almost no one really gets it. *Fewer still understand Title II, the regulatory tool the FCC just invoked to impose its conception of net neutrality on the Internet.

Some internet engineers and innovators do get it. Mark Cuban rightly calls the uncertainty created by Title II a “Whac-a-Mole environment,” driven by political whims. And telecom lawyers? They love it: whatever happens, the inevitable litigation will mean a decade’s worth of job security.

As I've said in technically detailed comments, academic coalition letters, papers, and even here at Wired, while "net neutrality" sounds like a good idea, it isn't. And reclassifying the internet under Title II, an antiquated set of laws repurposed in the 1930s for Ma Bell, is the worst way to regulate dynamic digital services.

On February 26, self-styled “consumer advocates” and a few self-interested corporate behemothswon the day with clever branding and passionate rhetoric. But as FCC Commissioner Ajit Pai warned in his dissent, net neutrality regulation enacted under Title II doesn’t deliver.

"Instead," he wrote, "the order imposes intrusive government regulations that won’t work to solve a problem that doesn’t exist using legal authority the FCC doesn’t have."

Let’s take a look at those charges.

"Intrusive Government Regulations"

Driven almost entirely by private enterprise, the internet has become, in the FCC’s own words, “the preeminent 21st century engine for innovation.” So why is that immensely successful engine suddenly in need of a new regulatory regime that Congress never authorized?

When it amended the Communications Act in 1996, Congress included the clear admonition that “[i]t is the policy of the United States…to preserve the vibrant and competitive free market that presently exists for the internet…, unfettered by Federal or State regulation.” The FCC has followed this deregulatory approach since the Clinton administration, and Congress hasn’t seen fit to change it over the past 20 years.

But last week, three FCC Commissioners voted to saddle the internet with a new set of constraints so complex, vague and problematic that it took over 300 pages of explanation to justify eight pages of rules. While we haven’t seen the full text yet, we do know a lot about what’s inside.

First, the FCC claims authority under both Title I of the Communications Act, as well as under several cherry-picked provisions of the Act’s Title II common-carrier law, to outlaw certain conduct (blocking, throttling and paid prioritization). The fact that these practices rarely occur (and may be beneficial when they do) is overlooked.

Title II reclassification also allows the FCC to impose a “general conduct” or “catch-all” provision. Under this standard, the FCC asserts its authority over literally anything else that, in the eyes of three commissioners, seems “unreasonable.” As former Commissioner Robert McDowell has pointed out, “‘reasonable’ is perhaps the most litigated word in American history.”

The rules also subject interconnection agreements---the private business arrangements that govern the exchange of traffic between networks---to FCC scrutiny for the first time. This is despite the fact that the cost of interconnection has fallen 99 percent since 1998, and that interconnection has rarely presented any problems.

Internet Service Providers (ISPs) will now have to jump through a host of new legal hoops. Smaller ISPs and wireless ISPs struggling to provide service to the remotest (and poorest) parts of the country will have to hire telecom lawyers to ensure that they conform to industry-wide, arbitrary standards of conduct. Many have already said this will threaten their continued viability.

"That Won’t Work"

Will the new order affect the woman’s ability to Skype with her son in Turkey? No. Will it affect her broadband bill? Yes.

Unfortunately, regulating net neutrality under Title II will almost certainly raise your broadband bill. A range of state and local fees apply only to common-carrier telecommunications services—which is what the FCC just made your broadband internet service.

Wheeler’s approach creates a host of other problems. Most important, it allows the FCC to regulate not just your (hated) broadband provider, but also your favorite internet services.

You were sold a bill of goods when activists told you net neutrality was all about protecting “the next Facebook” from evil ISPs. Think about it: If you’re “the next Facebook,” who do you think is more worried about you? Your ISP, or Facebook itself? If the problem is between Facebook and its potential challengers, hamstringing ISPs is an awfully roundabout way of dealing with it. Especially because we already have a regulatory apparatus to deal with issues related to competition: antitrust laws.

But consider this irony: Now that ISPs are regulated under Title II as common carriers, the Federal Trade Commission can’t enforce its consumer protection laws against them anymore.

That doesn’t mean there won’t be antitrust enforcement, but we did just hobble our most significant and experienced consumer protection authority. That seems like a mistake if we’re enacting rules that purport to protect consumers.

"To Solve a Problem That Doesn’t Exist"

One would think that after a decade of debate there would be a strong economic case for net neutrality. But there isn’t. According to Commissioner O’Rielly---one of the few people who’s actually read the order---“[t]here is not a shred of evidence [in the order] that any aspect of this structure is necessary.” The record leading up to last week’s vote contained evidence of only five instances in the history of the internet where ISPs may have thwarted content providers’ access to end-users, none of which required heavy-handed net neutrality rules to address.

The world in which internet innovators have to ask permission to operate is imaginary. Or it was, until Wheeler regulated it into existence.

The new catch-all provision may well apply to internet companies that now think they’re not subject to the rules. Title II (which, recall, is the basis for the catch-all) applies to all “telecommunications services”—not just ISPs. Now, every time an internet service might be deemed to transmit a communication (think WhatsApp, Snapchat, Twitter…), it either has to take its chances or ask the FCC in advance to advise it on its likely regulatory treatment.

That’s right—this new regime, which credits itself with preserving “permissionless innovation,” just put a bullet in its head. It puts innovators on notice, and ensures that the FCC has the authority (if it holds up in court) to enforce its vague rule against whatever it finds objectionable.

And no matter how many times this Chairman tells you that for now the rules won’t apply to internet service X, he can’t guarantee that they won’t next year (or next month). And he certainly can’t make that guarantee for the FCC’s next chairman.

One of life’s unfortunate certainties, as predictable as death and taxes, is this: regulators regulate. It would be crazy to think the FCC adopted these rules and will just to let them lie fallow if tomorrow’s internet boogeyman is a non-ISP company.

Even staunch net neutrality supporters like EFF worry about the breadth of the FCC’s new “general conduct” standard. Couple that with language that invites complaints and class action lawsuits, and suddenly a regulation claimed to ensure “just and reasonable” conduct becomes a rent-seeking free-for-all.

But surely ISPs have it in for Netflix, right? Actually, Comcast is the only ISP (out of the literally thousands that are now regulated under Title II) that competes with Netflix. And
the evidence shows that the problems allegedly arising from that competition were caused by
Netflix, not Comcast. Did we really just enact 300 pages of legally questionable, enormously costly, transformative rules just to help Netflix in a trivial commercial spat?

"Using Legal Authority the FCC Doesn’t Have"

For last week’s “victory” to stand, the FCC must win in court on all (or nearly all) of a host of difficult legal questions.

Most obviously, the rules will be challenged as “arbitrary and capricious” under Supreme Court precedent that makes clear that agencies may not adopt rules that “run[] counter to the evidence before the agency,” or are simply implausible.

Last year, the Supreme Court took the EPA to task for “tailoring” provisions from the Environmental Protection Act to rewrite an outdated statute. The FCC’s effort to do the same thing with Title II will likely fall prey to the same result.

Better Call Saul!

Competition on the internet is constantly evolving and poorly understood. AOL was a has-been before the ink was dry on the relentless complaints about its unassailable monopoly; cable content is suddenly challenged by streaming video; DSL, once thought dead, now offers 25-75 Mbps service. Yet the FCC’s rules ignore this complexity, insisting on a one-dimensional conception of internet competition that’s never actually existed.

So where does this leave entrepreneurs? As telecom attorney Barbara Esbin quipped at an event last week when asked for guidance on business models that might steer clear of Title II regulation: “Better Call Saul.”

FCC Commissioner Mike O’Rielly added: “If you’re looking for a lucrative business, you should be a telecom lawyer.”

Sadly, that’s the real legacy of Chairman Wheeler’s new rules.