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Regulation

FCC Open Internet Decision Take-aways

The FCC's 3-2 vote on its Open Internet order produces several  big takeaways, despite there being no actual order to review.

Take-aways:

First, the controversy over net neutrality isn't going away; it is on path to get more controversial.

The FCC signaled this was only the beginning of a broader FCC net neutrality rule making process.

 

FCC Internet Price Regulation & Micro-management?

If David Hatch's National Journal "exclusive" report is accurate, that the FCC's proposed Open Internet order is being changed to become much more regulatory in: "addressing concerns about wireless carriers, limiting Internet toll lanes, and adding protections for a new online pricing model" -- the FCC would be hurtling itself headlong down the very slippery slope of highly-destructive FCC Internet price regulation and micro-management.

The huge folly of this trajectory is that its hard enough trying to write an enforcement solution to a non-existent problem, it is mind-numbingly difficult to imagine that the FCC can economically price regulate and micro-manage the international Internet ecosystem.

If this is the direction the FCC is headed, it is the ultimate in regulatory hubris. Not only does the FCC have no legitimate justification, rationale, authority, or consensus to micro-manage the Internet with unprecedented price regulation, the FCC has no proven regulatory competence, business expertise, or analysis on how to achieve this equivalent of doing brain surgery in mittens on a roller coaster in the dark.

Will FCC Preserve or Change the Internet?

The crux of the FCC's non-transparent proposed Open Internet Order will be whether it envisions: a very limited Internet enforcement role for the FCC, or an expansive economic regulation and Internet management role for the FCC.

 

  • The "Waxman Compromise" envisioned a very limited, two-year, enforcement-only role for the FCC that at core recognized the Constitutional authority of Congress to determine U.S. Internet policy.
  • FreePress and the Open Internet coalition envision a permanent, expansive, economic-regulation, and Internet-management role for the FCC that snubs Congress' authority, policy, and consensus.

 

The real test of whether the FCC is limited or expansive will be whether the word "preserve" is used forthrightly in the actual text of the FCC Open Internet order: i.e. will it respect or abandon Congress' meaning of "preserve" in section 230: "to preserve the... competitive free market... Internet... unfettered by Federal or State regulation."

 

  • A very-limited, Congress-deferring, true enforcement role for the FCC to address the potentiality of anti-competitive behavior,  could plausibly comport with the Congress' policy vision for a competitive, free-market Internet and also would have a better chance of surviving legal challenge.
  • On the other hand, an expansive, Congress-challenging, economic-regulation, Internet-management role for the FCC cannot plausibly comport with Congress' policy of a competitive free market Internet and would have little chance of surviving legal challenge.

 

The De-Competition Revolution

As an unapologetic proponent of competition over regulation, its disturbing to witness the de-facto de-competition revolution in Internet policy unfolding, where "net neutrality" and "openness" are overthrowing competition as both the central goal and primary means of implementing U.S. Internet policy.

 

  • At core, the FCC's proposed Open Internet Order to be approved December 21st, effectively unilaterally repurposes U.S. Internet policy and the FCC -- to promoting net neutrality and openness via FCC economic regulation -- from the purpose in law, which is promoting competition via de-regulation.
    • See "The Harms of a Potential New FCC De-Competition Policyhere.

     

    De-Competition Policy Developments

    First, reports indicate that the FCC plans to use 1992 monopoly Cable Act law for ancillary legal authority to justify regulating the Internet with Net neutrality. This is wrong-headed for many reasons.

    Paid Prioritization: The Demonization of Market Economics

    Now we know what "real net neutrality" and "openness" are, and that they are the antithesis of free market economics or competition.

    As the FreePress-led letter to the FCC made clear on Friday: "Paid prioritization is the antithesis of openness. Any framework that does not prohibit such economic discrimination arrangements is not real net neutrality."

    What is "paid prioritization?"

    • It is quality of service guarantees, market economics, supply and demand, market-based pricing, investment incentives, competitive differentiation, and reasonable network management.
    • Now we know "real network neutrality" and "openness" is more uneconomics from FreePress and the extreme left.

     

    Remember FreePress' last Uneconomics 101 lesson was that "above-cost pricing" was an "unfair business practice."

    Sinking Level 3 Seeking FCC Internet Regulation Bailout

    The extent to which Level 3's business is underwater is the untold story behind Level 3's regulatory "hail Mary" claim that its Internet peering dispute with Comcast is somehow a net neutrality violation.

    • Apparently Level 3 has concluded that since it hasn't found a straight-up way to compete successfully in the Internet marketplace on its own, it wants an Internet regulation bailout from the FCC, in which the FCC would: deem Level 3 a market winner; price regulate the Internet for the first time; and force its competitors to implicitly subsidize Level 3 with mandated Internet peering price subsidies.
      • (To appreciate how bogus Level 3's claims are, click here for a complete rebuttal.)

    Why is Level 3 seeking a de facto Internet regulation bailout from the FCC?

    First, Level 3 is a financially-sinking business with no legitimate growth prospects.

    FreePress to FCC: Ignore Congress/Courts, Use 1910 as Guide

    Only FreePress would hold a press conference to release essentially a longer-version of its previously-debunked legal analysis calling for the FCC to regulate competitive broadband providers as Title II telephone public utilities.

    The essence of the call, which made no news, was FreePress reiterated that the FCC should ignore:

     

    • The Appeals Court's decision that the FCC does not have direct authority to regulate the Internet;
    • Congress' constitutional authority and intent to address this issue; and
    • Basically everything that has happened in the last 100 years -- (because FreePress Chairman Wu says the answer to the FCC's policy conundrum can be found in the policy established in 1910 -- before the FCC, TV, computers or the Internet existed.)

    For anyone that wants to examine in depth why FreePress' legal and policy analysis remains fatally-flawed and would cause an unmitigated disaster click: HERE...

    The FCC's Positive Policy Pivot?

    FCC Chairman Julius Genachowski signaled a major FCC policy pivot Monday, from a fourteen-month focus on regulating net neutrality to apparently a new singular focus on "the economy and jobs" -- in his annual speech before NARUC, the association of state utility regulators.

     

    • (Kudos to Randy May of the Free State Foundation for flagging this very significant policy shift in his outstanding post.)

     

    Takeaways from the FCC Chairman's speech.

    First, this is a very significant speech to pay attention to, because the FCC is laying out what the states can expect from the FCC in the year ahead.

    Election Takeaways for the FCC

    What do the mid-term election results mean for the FCC?

    First, FreePress' version of net neutrality was completely repudiated in the election.

     

    • Every single one of the 95 House and Senate candidates that FreePress/PCCC got to publicly pledge support for net neutrality -- lost their election in the mid-terms. Yes, that is indeed a 0-for-95 record here.
    • The FCC should take note that the main "political" driver behind trying to make net neutrality into a national grass roots issue, FreePress/PCCC/Moveon.org, could not get the issue to register on the election radar screen, and where ever they did attract a candidate endorsement of their position, they failed 100% the time in having that candidate get elected.

     

    Second, most of the FCC's business is not political or partisan -- and it need not be. (The 1996 Telecom Act was almost unanimous. And the overwhelming majority of FCC decisions are 5-0.)

     

    Retransmission problem is regulatory failure not a free market problem

    The current harm to consumers from the latest unnecessary incident of retransmission brinksmanship is the clear result of FCC regulatory failure.

    Fellow ardent free marketer, Randy May of the Free State Foundation, has a dead on piece that I highly recommend that exposes that the current broadcast retransmission negotiating process -- as no "market" that a free marketer would recognize.

     

    • A set of FCC rules that still fantastically assumes a monopoly video market exists, when one clearly has not existed for well over a decade, creates a profound regulatory failure that distorts the market and harms consumers.

     

    The reason some consumers currently are blacked out from their favorite sports programming is because the FCC has known for a long time, that it has a broken, out-of-date, and counter-productive retransmission negotiation process, and that it has not done anything to bring the process into the 21st century or to correct the dysfunctional imbalance that causes predictable serial disputes that harm consumers.

    Simply, if the FCC spent less time on trying to fix potential unproven problems, like net neutrality and Title II regulation for which the FCC does not have legal authority, and more time on fixing actual problems harming consumers on their watch that they do have the authority to fix -- American consumers would be much better off.

    *****

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