This past week, Federal Communications Commission (FCC) Chairman Ajit Pai, along with Commissioner Michael O’Rielly, proposed to return the internet to the era of bipartisan regulatory review. The internet (and representative democracy (0)) took a hit in 2015 when policy-driven fervor (1) led the reluctant FCC Chairman Tom Wheeler to change course from his proposed net neutrality rules and instead impose the most draconian of price regulatory regimes on the innovative internet — Title II regulation. The general lack of analytic rigor (2) in the underlying analysis of that 2015 order was well documented at the time (here (3) and here (4), for example) and the “economic analyses” and predictions on which the order relied have already been proven false (5).
Given the fervor many advocates have around “Title II” as a talisman of their net neutrality ideology, what may be lost in Chairman Pai’s proposal are several other significant regulatory corrections.
Federal Trade Commission back on duty
One such correction is a corollary to the Title II rollback — the return of jurisdiction to the Federal Trade Commission (FTC) for privacy issues. As I and others have written previously (6), creating a seamless privacy regime that is technology and application neutral is essential to consumers. Consumers will receive more comprehensive protections, but a thoughtful balance can be struck between personal privacy expectations and the option to exchange personal data for use by innovative, desirable programs and platforms for e-commerce, social media, messaging, and other services that we have become accustomed to.
But the removal of Title II will do more than put the FTC on the privacy beat — it will permit the FTC to investigate problematic contracting, advertising, and other business activities that may unreasonably restrain competition. Ironically, bringing FTC jurisdiction back into the internet service provider industry provides a powerful guardrail (7) against many of the economic concerns that led people to call for Title II regulation in the first place.
Eliminating the General Conduct Rule
And finally, not to be overlooked is a proposed correction of particular import: Removing the General Conduct Rule from the Open Internet Order. For those unaware of the rule, it is a creature of the FCC’s own creation. No similar rule exists anywhere in the FCC’s governing statute — the law enacted by Congress. It is a regulatory steam valve where the FCC gives itself permission to regulate anything it can’t think of now that it might think of (or be convinced of) later, which may “unreasonably” interfere with the FCC’s ever expanding definition of “net neutrality.” That includes anything that may “unreasonably” disadvantage . . . well, anyone. This is frightening in two ways. First, such an ill-defined rule creates regulatory uncertainty in the industry, which is well-known to decrease investment and lower risk-taking innovations. Second, this creation of an insular, government kingmaker (8) that can pick winners and losers is an abomination to any reasonable interpretation of the FCC’s delegated rulemaking authority.
Think of it this way. What if you sell lemonade by subscription? For a monthly fee, you send your subscriber two gallons of any variety of lemonade the consumer selects from a list of 50 varieties (all the lemonade in the world). Several other lemonade subscription services are vying for your customers so you come upon a creative competitive idea — in addition to the two gallons of lemonade the consumer selects from the list of 50, the consumer may also select an unlimited amount of lemonade from a subset of the 50. Great idea! More for the consumer at the same price! Since the unlimited amount will come from a subset of the 50, the consumer who craves variety will likely use her two gallon allocation to pick a new type of lemonade — one not from the subset that she can get free. It’s a win for the consumer, a win for the less popular lemonade producer, and a win for you, the lemonade subscription seller.
But what if someone argues that this “unreasonably” disadvantages a lemonade producer? Is that really the most important takeaway (9) from this lemonade example? Shouldn’t we focus on how happy the consumer is? How is “disadvantage” even defined?
This is almost exactly the “unreasonable” behavior that the FCC was examining under its ill-defined General Conduct Rule. You may recognize the lemonade as free-streaming (10) programming offered by T-Mobile, Verizon, and others. Fortunately, the investigation was stopped, but it should never have been started. FCC policies that focus on the costs borne by corporations and businesses almost to the exclusion of actual benefits for consumers are just bad policy.
So hear, hear to the FCC! It’s time to make lemonade again.