FCC Third-Way Cause of Regulatory Uncertainty

Published May 31, 2016

The Federal Communications Commission’s drive to impose network neutrality regulations on the Internet by applying rules adopted in 1934 for the telephone industry continues to draw fire from broadband companies such as Verizon. The company’s uncertainty over the future of Internet regulation led it to draft a proposed compromise with content provider and net neutrality proponent Google in early August.

The FCC agenda suffered its first significant legal setback in April when the U.S. Court of Appeals ruled the agency had no regulatory authority over the Internet, in the Comcast vs. FCC case. Genachowski subsequently announced plans to reclassify the Internet as a telecommunications medium, his “third way” proposal which further raised the ire of Verizon and other Internet service providers.

“The Federal Communications Commission’s so-called ‘third-way’ proposal to subject broadband Internet access services to old, monopoly-era telecommunications regulations is unnecessary, unworkable, and could harm consumers, the economy, and the future of the Internet ecosystem,” Verizon told the FCC in mid-July.

Return to Old Ways

In comments filed with the commission, Verizon said the FCC’s proposal faces  “insurmountable legal and factual obstacles” and “is in reality a return to the old way.”

The company suggested the FCC instead “pursue a genuine ‘third way’ built on the Internet’s successful model of self-governance based on technical standards and best practices, with the government serving as a backstop on a case-by-case basis in the event industry mechanisms prove unable to resolve the issue.”

Verizon said the proposed “reclassification”” of broadband Internet access is an effort to expand FCC authority and would be unlawful.  

“The commission has no legal or factual basis to reverse course and find that broadband Internet access service is (or contains) a Title II telecommunications service subject to common carrier regulation,” Verizon stated. “Reclassification would be contrary to the Communications Act and repeated commission precedents as affirmed by the Supreme Court.”

Fixing a Hole

Dan Brenner, a partner with Hogan Lovells, a corporate law firm in Washington, DC, says Congress should fix the hole in the Telecommunications Act of 1996 that has led to the FCC’s proposal.

“It’s bad for the economy to start letting the FCC regulate the Internet,” Brenner said. “Legally, how can a federal agency interepret its own act? That kind of decision should be left to Congress, not the FCC.”

The agency should not be seeking to create a heavy new regulatory regime as in the days of the old “Ma Bell,” he added, because there is plenty of competition in the market today. “It’s not a monopoly service any more,” Brenner said.

Institute for Policy Innovation president Tom Giovanetti and IPI Center for Technology Freedom director Bartlett Cleland both say the existing regulatory regime has been more than adequate to encourage investment, deployment, and innovation in broadband services, with no evidence of any compelling need for a change in the regulatory framework.

“There is no significant broadband market failure that implies a need for the Commission to assert sweeping new regulatory powers over the broadband market,” they said in a press statement responding to the FCC’s policies

Phil Britt ([email protected]) writes from South Holland, Illinois.