For the last several decades, the U.S. has conducted a kind of natural experiment in communications regulation. Traditional telephony was subject to detailed public utility style regulation under Title II of the Communications Act. Newer information services like broadband and the Internet, meanwhile, fell mostly under the far less intrusive Title I. Question: In which realm has more innovation occurred – the Title II telecom world or the non-Title II Internet world?
If you said the non-Title II Internet, you are right. But not just right by a slim margin. No, for at least three decades, nearly all innovation in communications technologies and services has taken place in the Internet world. On the other hand, almost no innovation has occurred in the telecom world. While the Internet booms, old telecom rapidly shrinks. While the number of Internet distribution channels, access devices, content choices, and dollars invested in broadband infrastructure explodes, the single-device single-service telephone network withers away. (The telephone network doesn’t even lead in telephony! Just a quarter of U.S. households use it as their primary line. (0)) As the mostly unregulated Internet piles success upon success, boosting bandwidth and transforming each industry it touches, with no end in sight, the old, heavily regulated, Title II network is barely an afterthought and is rapidly approaching full retirement.
So what’s up with those angry crowds camped outside Federal Communications Commission headquarters? Why are they protesting? Are they, in a reprise of the effective SOPA/PIPA backlash, trying to stop a supposed cyberspace takeover by an overbearing government? Are they worried the FCC, in a fit of madness, might subject their beloved Internet to the innovation killer known as Title II? Hardly. The mob at Chairman Wheeler’s doorstep is demanding he drop the heavy boot of Title II on the Internet. Please, Mr. Chairman, take our wildly inventive, creative, free, and open platform, and subject it to bureaucratic rule. Save the Internet!
The fact that crowds are banging pots and pans in support of an arcane and increasingly obsolete piece of telecom law, born in the Communications Act of 1934, is a sort of accident of recent political and jurisprudential history. In the middle of last decade, Congress repeatedly turned down efforts to regulate the Internet known as Net Neutrality. But President Obama, in an effort to get to the left of his opponents and corner the youth vote, vowed no one would surpass his support for Net Neutrality. Net Neutrality was transformed from a technical debate into a political cause, no matter that few voters had not the first clue what it meant.
The FCC tried several times to impose Net Neutrality regulation on the Internet without legislative authority, but courts twice rejected the agency’s overreach. (Earlier last decade, courts had three times rejected FCC efforts to impose other forms of open access regulation.) After the most recent court loss, FCC Chairman Tom Wheeler said he would follow the blueprint the court laid out to oversee the Internet within his statutory authority. He was working toward a May 15 notice of proposed rulemaking (NPRM), a document that would lay out a rough plan and solicit comments, leading toward a final regulation months from now. It was thought Wheeler would seek far more regulation than the industry wanted but would advocate a case-by-case review of alleged infractions while avoiding a more pre- and proscriptive hyper-regulatory approach. A few weeks ago, however, someone inside the agency who thought Wheeler’s forthcoming plan too lenient leaked the plan, along with a call to arms, asking the party to oppose its own FCC chairman. And now political activists are camped out on the street insisting on “reclassification of the Internet as a common carrier.”
Columbia law professor Tim Wu writes that (1) Wheeler “could well end up being known widely (even if unfairly) as the telecom lobbyist who broke Obama’s promises and killed the open Internet, which is rather an unpleasant thing to count as your legacy, and which is what everyone is calling him today.”
The great irony is that the Internet, in its mostly unregulated state, is prospering (see Digital Dynamism (2); The New Network Map (3); How the Net Works (4); and metrics on U.S broadband speeds (5) and network usage (6)). The protests are one of the weirdest cases of substance-free advocacy we can remember.
The substance of Title II common carrier regulation, however, is very real, and it could deal a huge blow to 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.
Title II would threaten the healthy system of Internet interconnection and peering that evolved without government oversight. Title II would bring back tariffs, intercarrier compensation, and a host of other bureaucratic do’s and don’ts.
Meanwhile, because heavily regulated companies tend to be experts at operating in such a confusing environment, competition from new entrants would falter. Or as Berin Szoka put it in a Wall Street Journal debate (7) with Tim Wu: “Public-utility regulation is a self-fulfilling prophecy: It assumes competition is impossible – and keeps it that way.”
The FCC may try to confine Title II to regulation of the telecom and cable firms’ last mile broadband networks (itself a problematical targeting of some companies, and not others, for regulation). But these efforts would likely fail, as the very nature of the hyper-connected Internet would expose every firm that touches the Net to the new Title II regime. Search engines, content delivery networks (CDNs), Amazon Kindles, cloud-based applications and services – all of them could be subsumed under rules meant for the old telephone monopoly.
Quarantining the Internet from Title II was one of the best economic policies of the last generation. Unleashing Title II on the Internet could spread an epidemic of confusion and litigation across an Internet environment that over decades has developed millions of fruitful technical and commercial connections outside (and often oblivious to) the old Title II regime. In short, Title II would threaten Internet innovation at its very foundation.
Title II advocates say not to worry. “Title II,” Tim Wu writes, “was used, in the late nineteen-nineties, to regulate both wireless and broadband carriers. That means the Commission is returning to a previous approach, as opposed to breaking new ground.” Yes, we tried it before, and it was a disaster. Remember UNE-P and Telric and the open access wars. These regulatory mistakes were one cause of the tech meltdown of 2000-01. When, in the late-90s, the FCC declared cable modems were information services, cable broadband soundly defeated the more heavily regulated Title II DSL telecom services. When DSL was relieved of its Title II burdens in the early 2000s, it made a comeback. In short, when the FCC and Supreme Court freed broadband from Title II’s stranglehold, the Internet blossomed.
An additional irony, as many have mentioned, is that Title II wouldn’t even disallow the eighth deadly sin of “paid prioritization,” the supposed vice slated for banishment under Net Neutrality. Title II only bans “unreasonable or unjust” discrimination and explicitly allows paid priority products and services. It simply would not solve the so-called fast-lane/slow-lane complaint, as wrong as that analogy is.
In a decade’s worth of debate (8) 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.