New Congress May Change Course on Net Neutrality

Published December 22, 2010

In the wake of the 3-2 vote by the Federal Communications Commission to impose network neutrality regulations on the Internet this past December, the new Republican majority in the House of Representatives may change the terms of the debate significantly.

Members of the incoming congressional leadership expressed displeasure with FCC Chairman Julius Genachowski’s regulatory agenda even before the December 21 meeting at which the commission voted to impose the policy. They vow to fight what they have labeled a breach of the FCC’s statutory authority.

“Federal bureaucrats should not be in the business of regulating the Internet, and the new House majority will work to reverse this unnecessary and harmful federal government power grab next year,” said Representative John Boehner (R-OH), designated Speaker of the House, in a press statement.

‘Illegal Power Grab’
Net neutrality rules were part of President Obama’s technology policy list. In response, Rep. Joe Barton (R-TX), ranking member of the House Energy and Commerce Committee, stated he will “require the Obama administration Federal Communications Commission to explain why it thinks the Internet needs federal government regulation for the first time.”

Rumblings of a more stringent form of net neutrality regulation have been circulating since the U.S. Circuit Court of Appeals for the District of Columbia unanimously ruled against the FCC in April 2010, stating that the FCC’s “ancillary authority” over the broadcast and cable industries “is not the equivalent of untrammeled freedom to regulate activities” on the Internet, too. The court determined the FCC must first get Congress to approve such a sweeping expansion of its regulatory power.

Genachowski subsequently announced plans to reclassify the Internet from its current Title I information service status to a Title II communications entity—an approach he abandoned prior to the FCC’s December vote. Title II reclassification would have granted the FCC regulatory authority over the Internet under the 1934 Telecommunications Act, allowing the agency to circumvent the U.S. Appeals Court.

“The FCC’s ruling is good news for attorneys, who will bill countless hours to fight this illegal power-grab in court,” said Jim Lakely, co-director of the Center on the Digital Economy at The Heartland Institute, which publishes Infotech & Telecom News. “For everyone else, especially those who have enjoyed the wonders of the digital age, this is bad news.

‘Rushing Toward Policy’
Nick Brown, a research associate and content manager for Digital Society, a nonprofit think tank, said, “There is no evidence that the Internet as we know it is in any kind of danger..However, what we do know is that the implementation of net neutrality regulation or law will be the cause of a reduction in investment, which ultimately will result in a degradation of innovation and the reduction of jobs in this sector.”

Agreeing with Brown, Lakely explained: “The modern Internet exists because market forces drove investment and innovation. The only regret the average consumer experienced under such freedom was not upgrading faster to the latest version of the coolest new device or service. It is this ‘flawed’ market three members of the FCC were determined to ‘fix.'”

Lakely says the FCC “will only succeed in stifling it by declaring itself the sole gatekeeper to the future of the digital economy. And instead of working to meet the demands of consumers, technology companies will turn their attention to Washington and spend resources convincing the FCC to rig the market in their favor. Only a bureaucrat could think that’s an improvement over the status quo.”

Pushing Hard for Regulation
Brown cites economic research from Dr. George S. Ford of the Phoenix Center, which found more stringent regulation of the Internet will result in a proportional decrease in investment.

“If we are considering policy that may be detrimental to investment and may induce more job loss in this economy, then it is definitely appropriate for Rep. Barton to be asking why the administration is pushing hard for regulation,” Brown said.

“We have not really ever seen problems in this sector,” he added. “We’ve seen a violation of the four principles in the FCC’s 2005 Net Neutrality Policy Statement only a handful of times. And realistically it seems that this policy statement and the sector’s willingness to cooperate without regulation have been enough to this point. Regulation is only endorsed by ‘what-if’ scenarios, not actual violations that indicate the Internet is in danger.”

“Self-regulation in the technology sector of the economy has proven to work,” said Marc Oestreich, legislative analyst for technology policy for The Heartland Institute. “The FCC’s proposed policy will be bad for consumers.”

Increased Uncertainty, Decreased Investment
If the Internet is regulated in a way that makes things difficult for internet service providers, it could create a situation of uncertainty similar to what is happening in the medical sector right now, said Brown.

“Because of the impending health care bill, you’ve seen a reduction in investment, a reduction in new job hires, increases in pricing of certain types of care, and in some areas a lot of people losing their jobs because both the small practices and large businesses in this area are scared of what is going to come, and they are being more careful with how they spend their money,” Brown said.

“One might suppose it’s difficult to know exactly what sort of effect the new net neutrality rules will have on the economy, but the subject has already been studied by researchers at New York University,” said Oestreich. “They concluded earlier this year the U.S. economy will lose nearly 500,000 jobs in the next 20 years as a result of this big-government intrusion by the FCC.”

Sarah McIntosh, Esq. ([email protected]) is a constitutional scholar writing from Lawrence, Kansas.