Some Truths About Net Neutrality

The headline Bloomberg published on Wednesday was “FCC Chief Sets Up Clash With Call to Repeal Net Neutrality”, certainly one to generate clicks.  Most of the TV and online coverage of the current FCC action followed the same path.  But is it the right path?  You have to do a little history-dipping to decide.

The FCC, now under Chairman Pai since the change in administration, has struggled with Internet regulation for literally decades.  As an FCC watcher for even longer, I’ve seen two basic issues come to the fore.  First, how do you regulate consumer data services, meaning the Internet?  Second, how do you secure fair regulatory treatment (meaning equivalent treatment) for the same service (the Internet) when multiple communications delivery options (wireline telco, cable, wireless) exist?

The logical answer to these questions should never have been left to the FCC to start with.  Telecom regulations fall under the Communications Act of 1934 as revised by the Telecommunications Act of 1996.  Neither of these pieces of legislation even mentions the Internet.  Thus, the FCC has been trying to regulate what has become the most important network service of all time, using legislative standards that were devised without giving that service a thought.  You have to keep this in mind as we assess what the “new” FCC might now do.

A fundamental principle of law is jurisdiction.  Federal commissions like the FCC are essentially courts.  Federal law classifies them as “quasi-judicial agencies” because they are charged by law with the court-of-fact responsibility for a specialized area—communications, in the FCC’s case.  What jurisdiction means to the whole question of Internet regulation is simple.  In order for the FCC to do anything with respect to the Internet, it must establish jurisdiction.

The long, frustrating, argumentative, contradictive, and downright ugly history of what we call “net neutrality” today arises from false starts created by the jurisdiction issue.  Specifically, where we are and what Chairman Pai proposes to do both relate to the question.

Every neutrality order the FCC passed up to the most recent was overturned by the courts because the FCC failed to establish it had jurisdiction to issue the order.  Thus, we’ve operated as an industry with no effective order at all, until the Wheeler FCC finally took the step that the courts had suggested they might have to take.  They declared that Internet services were telecommunications services and thus regulated under Title II of the Communications Act, which established FCC jurisdiction over virtually all aspects of the services.  Absent Title II, there was no jurisdiction, no order, no neutrality.

Title II, of course, would let the FCC do all manner of things.  Many people objected to the classification for that reason, which was a bit unfair given that absent the classification the courts were saying there was no authority to regulate neutrality at all.  However, while all the jurisdictional jostling was going on, the FCC was adding things to “neutrality” (which legally didn’t amount to much up to the last order).  In addition to the necessary ruling that ISPs couldn’t block sites or throttle competitors, the final Wheeler order added a prohibition against paid prioritization of traffic or settlement among ISPs for carriage.  That’s what’s in force today.

The Pai position from the first was that Title II should not have been used because the Internet wasn’t the kind of monopoly industry that the Bell System was back in 1934.  What Pai proposes to do now is to withdraw the Title II classification (the FCC is not bound by its own precedents so it can change its position pretty much at will).  That would effectively make it impossible for the FCC to regulate the Internet in the traditional sense.  Would that kill neutrality?  Let’s see.

The Republican commissioners on the FCC have taken the position that no ISP would dare to throttle traffic of a competitor or block access to a website.  Public pressure alone would prevent it.  Comcast actually did interfere with some site traffic and was ordered to cease, but the courts overturned the ruling.  However, Comcast did cease the practices because of bad publicity, which could argue in favor of the public-pressure-works position.  I don’t think that “basic” neutrality would be impacted with or without a Title II ruling.

Where public pressure almost certainly would not work is in the paid-prioritization or settlement side, and I think this is what Pai has in mind.  The notion of “neutrality” has broadened significantly over the last decade, from protecting access to sites to protecting the current Internet business model.  You might have argued (I would, for example) that the FCC could have achieved basic neutrality regulation even with the Internet declared an “information service”.  I think there is no question that extending the neutrality notion to prioritization and settlement payments can’t be done except through common-carrier (Title II) regulation.

What I believe Pai wants is for the Internet to be able to experiment with a more varied model for financing than the current bill-and-keep, and a broader model than best-efforts services.  That was something that Genachowski, the Chairman of the FCC prior to Wheeler and still a Democratic choice, was willing to consider—his neutrality order would not have foreclosed paid prioritization or settlement.  Those of you who read my blog regularly know that I’ve favored both paid prioritization and settlement all along.

If you believe, as I do, that we should let the prioritization and settlement issues at least attempt to resolve themselves in the open market before we close off the options, then what’s going to happen in the next neutrality order shouldn’t bother you.  If you think there’s a problem here, then you have to accept something that this industry seems unable to accept—it’s not the FCC’s problem to solve.  This whole, frankly stupid, debate is coming because people want the FCC to do something it is not legally empowered to do, something it’s been told it can’t do without taking the step of Title II.  And while the courts have said that the FCC can declare the Internet to be regulated under Title II, it probably shouldn’t be because it clearly is not a “communications service”, it’s an information service.

Everyone wants to believe, or at least to say, that without neutrality regulations the Internet as we know it will die.  The Internet as we know it has operated without regulations longer, far longer, than with them because none of the orders but the most recent was ever upheld on appeal.  Do we need to talk about Internet regulatory policy?  Surely, but with Congress.  We should have regulations that at least mention what we’re regulating, right?  Only Congress can do that.  What we should not have is debates on what the FCC should do instead of Title II, which has been answered already by the courts.  Nothing.