December 8 2010

All Your Internets Are Belong To Us

Net neutrality, an issue that's been floating around for several years, will be voted on in the FCC on December 21st. What's at stake is a re-classification of broadband from an "information" service under Title I of the 1996 Communications Act to a "telecommunications" service under Title II.

Designating broadband internet service as "telecommunications" would allow the FCC to extend its current regulatory authority over radio, telephone, and television broadcasting, to include the internet as well. Skeptics of big government are rightly concerned about the implications FCC regulation would have for the future development and accessibility of the internet. It's unclear that the FCC even has the authority to follow its aspirations.

The Examiner has a good article today, explaining what the proposed FCC net neutrality regulation sets out to accomplish:

Genachowski recently unveiled a revised draft of his 2009 "net neutrality" proposal that would put the Internet under a New Deal-era communications bureaucracy. Under the guise of protecting consumers from being forced to pay for varying levels of delivery access and speed, Genachowski proposes to drag the Internet under the same regulatory authority that puts the FCC in charge of radio, telephone and television broadcasting.

Internet Service Providers would be barred from charging multiple rates to different customers, as well as from denying selected applications and services access to their networks. The proposal also contains vague mentions of new "incentives" to ISPs to expand their networks to insure equal access to the Internet.


Michael Powell had some insightful remarks on the question of regulating the internet, as keynote speaker to the Implications of Washington Telecom Policy on Jobs, Investment and Economic Recovery panel discussion at the Newseum this Tuesday morning in Washington, DC.  As the former FCC chairman put it:

Net neutrality is really about appropriate scope, depth, and authority of government in that space.

Powell urged the FCC to refrain from regulating broadband internet service because we lack the knowledge to do so effectively without causing unnecessary barriers to innovation, job creation, and economic growth.

Seeking to preserve the innovative power of the internet, Powell asserted that the internet is exemplifying Schumpeter's theory of creative destruction.  Attempts to regulate broadband internet service would likely cause more harm than good, because government is unable to effectively integrate the important variables affecting this sector in order to draft regulation that would create better outcomes than the market currently produces.

Regulation would most likely make us worse off, stifling innovation and economic growth and leading to fewer jobs being created. Citing Hayek, Powell declared:

It is high time that we take our ignorance more seriously.

Don't get your hopes up though. We're unlikely to see the FCC admit its ignorance and back down from its ambitious aspirations on its own. On the bright side, it's questionable whether the FCC has the authority to regulate the internet.

The biggest barrier to the FCC's aspirations is the absence of explicit congressional authority to institute net neutrality. In fact, in 2006, the U.S. House of Representatives rejected an amendment proposal for net neutrality as part of telecommunications legislation considered at the time. An April court case confirmed that lack of authority, ruling that current law gives the FCC very limited powers over regulating internet traffic.

Although we can expect the FCC to move forward with its aspirations to institute net neutrality, all may not be lost. The regulation might not stand up in court, after all.

Update: The title "All Your Internets Are Belong To Us" is a reference to the "All Your Base Are Belong to Us" internet meme. The Mercatus Center used it in a 2010 publication on making government data more transparent, stating All Your Data Are Belong To Us.

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