Competition

The FCC's Open Internet order should be ripe for review and "fixing" given President Obama's pledge in his SOTU speech last night:

• "To reduce barriers to growth and investment, I've ordered a review of government regulations. When we find rules that put an unnecessary burden on business, we will fix them."

Clearly the FCC's preemptive bans, restrictions and economic/price regulation of competitive broadband providers based on scant and weak evidence of any real problem to solve, obviously place "an unnecessary burden on business" and the Administration should "fix them."

As I explained in my previous detailed post: "Why FCC's Net Regs Need Administration/Congressional Regulatory Review," the FCC's Open Internet order violates the President's pledge for regulations to:

Welcome to the FCC-centric Internet, where all those with Internet disputes and problems go for resolution and justice.

Today the Washington Post heralds the FCC's New Internet Order in its article: "Net Neutrality Complaints Pile Up."

• Tellingly, after six years of the FCC handling only two formal net neutrality complaints, now that the FCC has unilaterally asserted sweeping authority to regulate the Internet in its Open Internet order, "net neutrality complaints pile up."
• What has changed?
  • After six years of near universal perfect behavior respecting the FCC's broadband policy statement, has the industry decided to go rogue right when the FCC has installed itself as King over the Internet realm?
  • Or are opportunists coming out of the woodwork recognizing that the FCC's rules assume broadband providers are guilty of whatever charge they trump up, until they prove themselves innocent to the FCC?

Make no mistake, the Internet is changing before our eyes.

The FCC's Internet regulation has short-circuited all three of the core and long-proven Internet mechanisms for resolving disputes and problems: competition, negotiation, and collaboration.

Verizon is highly likely to win its appeal of the FCC's December Open Internet order, because the FCC's order is likely to deeply and broadly offend the legal sensibilities of the Appeals Court, just like the FCC offended the DC Appeals Court's sensibilities when it punished Comcast for violating a regulation that did not exist.

• The Court responded to that FCC injustice last April by ruling in its Comcast vs. the FCC decision that the FCC had no authority to regulate broadband or the Internet.

To understand the most likely outcome here, it is critical to cut through the FCC's claims, assertions, and arguments, and focus on the big picture context of what the FCC is actually doing in this Open Internet Order, i.e. what is the effect of the FCC's decision and process on the rule of law. That is what matters most to the Court.

A helpful way to understand and put in perspective Google's proposed purchase of ITA Software, the dominant provider of flight search technology, is to identify Google-ITA's best historical and logical analog. That would be Microsoft's 1995 proposed purchase of Intuit-Quicken, the then dominant provider of financial software technology. That transaction was blocked by the DOJ as anti-competitive and was a key precursor decision to the DOJ's ultimate decision to sue Microsoft in 1998 for monopolization under the Sherman Act.

The reason so many people ask: "Is Google the next Microsoft?" is because the analogy is so apt.

First, in over thirty years, Microsoft is the only major company other than Google to establish a national monopoly via technology, generate broad serious antitrust complaints, and attract a Sherman Act anti-monopolization case from the DOJ.

Second, Google-ITA is very similar to Microsoft-Intuit as both attempted to leverage their horizontal industry dominance vertically into a non-tech market vertical of the economy, i.e. Microsoft into personal finance software and Google into travel search software.

To promote "America's free market," President Obama today ordered a government-wide review of regulations that "make our economy less competitive," in order to take us "toward a 21st century regulatory system."

Here is the case for why the FCC's December Open Internet order deserves to be atop of the Administration's regulations to review for abolition.

• (This regulatory review analysis is also highly relevant and applicable to Congress' review of the FCC order under the Congressional Review Act.)

First, the FCC's new Internet regulations violate the President's goal of a "21st century regulatory system" by applying "outdated" 19th century common carrier regulatory thinking and approaches to the previously un-regulated, and flourishing 21st century Internet. (Para 68)

Second, the FCC rules violate the President's goal of avoiding "excessive, inconsistent, and redundant regulation."

In our acronym-driven society, the FCC in its News Release on its Open Internet Order, does fairness and broadband providers a great disservice in creating a new definition for broadband service as "Broadband Internet Access Service" -- or the acronym "BIAS."

Given that the FCC has not proven its allegation with facts or analysis that broadband providers operate in a non-neutral or discriminatory way after eight years of looking for it, it is particularly unfair, discriminatory, and prejudicial for the adjudicative FCC to literally define the service that it is alleging to be non-neutral as "BIAS."

With all the other potential permutations of words to define broadband service in a new way in order to impose net neutrality rules, it is an unfortunate and unlikely coincidental acronym.

Would it not raise the question that a judge was not impartial, if the judge created a term to classify a group of defendants that had the acronym "GUILTY?" or SCOFFLAW?

Does it not raise the question that the FCC is not an impartial arbiter of net neutrality disputes, if the FCC effectively re-classified broadband service as inherently "BIAS"-ed?

Does it not create the appearance that the FCC has made up its mind in pre-judging that a broadband provider's service offering is "BIAS"-ed and inherently guilty-until-proven-innocent of alleged violations of net neutrality and openness?

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.

In requesting the FCC and DOJ condition the Comcast-NBCU merger with Title II telephone regulation of Comcast's Internet backbone, Level 3 seeks to achieve through the back door of the FCC what they could not achieve through the front door.

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.

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 Policy" here.

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.