As an early opponent of network neutrality regulations, it’s tempting to characterize last week’s DC Circuit Court decision throwing out some of the FCC’s network neutrality rules as a victory, and indeed it was a victory of sorts. The court threw out the onerous anti-discrimination rule, while also tossing out a symbolic anti-blocking rule that was completely unnecessary.
But the court agreed with the FCC that it has authority to regulate broadband services in other ways, which means Verizon lost on its core assertion that the FCC had no statutory authority to regulate broadband networks. (Read new FCC Chairman Tom Wheeler’s reaction to the decision.)
At least for now, Internet service providers (ISPs) are free to experiment with new business models without fear of breaking the vacated anti-discrimination rule, and that’s a very good thing. For example, ISPs can introduce their own versions of AT&T’s announced Sponsored Data program. And the court has indicated that, so long as broadband networks are not classified as a telecommunications service, a rule or regulation that would depend on common-carrier regulation is outside the scope of the FCC's authority.
The anti-corporate net neutrality ideologues are now, predictably, calling for the FCC to trigger its own nuclear option and reclassify broadband networks under its Title 2 Telecommunications Services authority, which means ISPs would be regulated just as the old AT&T monopoly was regulated under laws that date back to 1936. Reclassification would be a worst case scenario for broadband investment and innovation. (Here's a detailed explanation of why [PDF].)
But there may be a silver lining to the fallout from the court’s decision. In his response, Chairman Wheeler elucidated a very appropriate standard for regulatory action: He says that the FCC will take action under its broadband regulatory authority only “if something appears to go wrong in a material, not a trivial, way. . . .“
This should be exactly the approach for government regulators in all areas. Don’t enact regulations designed in anticipation of problems. You don’t have perfect knowledge, so anticipatory regulations may do more harm than good because of the Law of Unintended Consequences. Don’t try to micromanage industries under the assumption that you know best what results a market should deliver. Trust markets, not experts. Only step in when there is evidence of demonstrable harm to consumers, and ignore complaints of harm from competitors.
Of course, there are problems even with this kind of forbearance. Who gets to decide what “harm” is? What does it mean for something to “go wrong in a material way?”
And even if Chairman Wheeler restrains his own agency’s instinct to intervene, how do we know that the next chairman will?
We’re in the habit of looking to courts for certainty, but this time we didn’t get much: We’re still to an uncomfortable degree subject to the discretion of the FCC on broadband regulation. And that’s even if it doesn’t push for reclassification under Title 2.
Most importantly, companies don't invest billions of dollars in new infrastructure based on hope that a regulator won't devalue their investment.
January 23, 2014