Policy Documents

Research & Commentary: The FCC’s Title II Proposal

May 29, 2014

The Federal Communications Commission in May voted 3-2 to advance new Internet rules addressing two major policies: The first bans broadband providers from blocking or slowing down Web sites, but allows them to strike deals with content companies for preferential treatment in “commercially reasonable” ways; the second would reclassify broadband as a Title II common-carrier telecommunications service, not an information service. 

Net neutrality is a set of federal rules requiring Internet service providers to allow equal access to all online content and applications regardless of the source. Providers may not favor or block any particular product, service, or Web site. Net neutrality has been controversial ever since it was first proposed. Proponents favor the Title II reclassification approach because it gives the FCC new muscle to control Internet management and pricing while giving the new rules a firmer legal footing. Opponents of net neutrality and Title II reclassification—including carriers, Internet service providers, and free market groups—argue treating the Internet as a utility would give far too much power to the FCC and suppress innovation and broadband investment. 

In a letter to the FCC, 28 CEOs representing Internet service companies argued Title II regulations would allow the FCC to micromanage the Internet economy: “It is a vision under which the FCC has plenary authority to regulate rates, terms and conditions, mandate wholesale access to broadband networks and intrude into the business of content delivery networks, transit providers, and connected devices.”

Bret Swanson of the American Enterprise Institute concludes Title II common carrier regulation would devastate the Internet economy: “Title II means price regulation. It means asking Washington and the state utility commissions for permission to launch new products, change existing ones, or deploy new technology, and to approve marketing and advertising programs. It means hundreds of other rules that were written for the monopoly telephone network 80 years ago but that would now apply to the vastly different Internet environment.” 

Net neutrality strongly suppresses broadband development, blocking Internet service providers from managing the networks they spent billions of dollars to develop. When the profit incentive to build new networks is blunted by burdensome regulations, regulators should not be surprised that providers are reluctant to expand and consumers lose out on new products and services. 

According to The Heartland Institute, broadband prices have remained stable even as the average speed of Internet connections has continued to increase. Any company that offers its customers reduced speeds will likely lose them to more reasonable competitors. 

Title II regulations are a throwback to a system that no longer exists and is ill-suited to today’s dynamic Internet and broadband markets. The Internet has never really been neutral, and the best way to ensure fair service is to promote competition by reducing, not increasing, the amount of regulation. 

The following articles examine broadband reclassification and the FCC’s new net neutrality proposal from multiple perspectives. 


FCC Tries (Again) to Be Lord of the Internet
http://news.heartland.org/newspaper-article/2014/05/18/fcc-tries-again-be-lord-internet
In this Heartlander article, S. T. Karnick discusses the Federal Communications Commission vote to establish new net neutrality rules. These rules would prevent broadband networks from selectively blocking traffic, but allow those companies to enter into deals with content providers for preferred access to their networks in “commercially reasonable” ways. 

Title II Communications IS the ‘Slow Lane’
http://www.techpolicydaily.com/communications/title-ii-communications-slow-lane/
Bret Swanson of the American Enterprise Institute argues Title II common carrier regulation would devastate the Internet economy, representing the real “slow lane” that net neutrality supporters oppose: “In a decade’s worth of debate over Net Neutrality, with a long string of poor arguments in its favor, the retrograde push for reclassification of the broadband Internet as a Title II telecommunications service is among the worst. Title II won’t get rid of the slow lane. It is the communications slow lane.”

The Legally Problematic Nature of a Title II Reclassification of Internet Services
http://news.heartland.org/editorial/2014/05/13/legally-problematic-nature-title-ii-reclassification-internet-services
Randolph J. May, president of the Free State Foundation, examines the FCC’s efforts to reclassify broadband as a Title II common-carrier telecommunications service and concludes the FCC's legal case would be fairly problematic. 

Restoring Limits on the FCC's Ancillary Authority
http://heartland.org/policy-documents/restoring-limits-fccs-ancillary-authority
Daniel A. Lyons of the Free State Foundation examines the FCC’s efforts to expand its regulatory role over the Internet and argues, “Going forward, the basic policies of American communications law must be set by Congress, not the agency. In its current form, the Communications Act offers only thin reeds, reeds that cannot support the weight of an agency-manufactured ‘law of the Internet.’”

The Net Neutrality End-Game
http://www.rstreet.org/2014/05/13/the-net-neutrality-end-game/
Steven Titch of the R Street Institute argues net neutrality laws are unnecessary, as the current Internet is not neutral and is already running quite well: “After all, large corporations long have been able to afford local caching, higher-end servers and other means to provide users with a better, faster Web experience without controversy. While in terms of the basic end-to-end protocol, the Internet is nominally neutral, it hasn’t been functionally neutral for years. There’s nothing about network neutrality to ‘preserve.’”

The Constructive Alternative to Net Neutrality Regulation and Title II Reclassification Wars
http://heartland.org/policy-documents/constructive-alternative-net-neutrality-regulation-and-title-ii-reclassification-wa
Writing for the Progress and Freedom Foundation, Adam Thierer and Mike Wendy discuss the FCC's efforts to “pigeonhole the Internet and broadband networks into the regulatory regime of a bygone era. Specifically, the agency's recent efforts to impose ‘Net neutrality’ regulations on broadband networks, or reclassify them as Title II services under the Communications Act, raises the likelihood of delayed or foregone investment, will discourage innovation at both the core and edge of networks, and increases the likely politicization and bureaucratization of high-technology policy more generally.” 

Title II for Broadband Is Desperate and Ill-Conceived
http://techliberation.com/2010/07/16/title-ii-for-broadband-is-desperate-and-ill-conceived/ 
Writing at Technology Liberation Front, Hance Haney, director and senior fellow of the Technology & Democracy Project at the Discovery Institute, argues reclassifying broadband services as a telecommunications service is both outdated and heavy-handed. 

Decline of Title II Common-Carrier Regulations in the Wake of Brand X: Long-Run Success for Consumers, Competition, and the Broadband Internet Market
http://heartland.org/policy-documents/decline-title-ii-common-carrier-regulations-wake-brand-x-long-run-success-consumers
Justin Hedge comments on Title II and the broadband market, noting consumers stand to benefit from the FCC’s previous decision not to include broadband under Title II.

The FCC’s Title II ‘Lite’ (as a Lead Balloon!) & the Looming Broadband Tax
http://heartland.org/policy-documents/fcc%E2%80%99s-title-ii-%E2%80%9Clite%E2%80%9D-lead-balloon-looming-broadband-tax
Writing for the Progress and Freedom Foundation, James E. Dunstan examines what he calls the FCC’s Title II “Lite” proposal and argues it will lead to higher costs for consumers. 

FCC Should Not Grab ‘Title II’ Authority over Internet
http://news.heartland.org/newspaper-article/2010/04/08/analysis-fcc-should-not-grab-%E2%80%98title-ii%E2%80%99-authority-over-internet
Writing in the Heartlander magazine, Larry Downes, a fellow with the Stanford Law School Center for Internet & Society, argues Title II is a relic of ancient communications history and cannot and should not be used to regulate modern Internet communications.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit The Heartlander’s Tech News Web site at http://news.heartland.org/tech, The Heartland Institute’s Web site at www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org. 

If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Senior Policy Analyst Matthew Glans at 312/377-4000 or mglans@heartland.org.