March 10 2011
There was an important hearing yesterday on the GOP bill filed under the congressional review act to disapprove the FCC's net neutrality rules, which were established in a move that is best characterized as a power grab. The FCC overreach on net neutrality would likely do more harm than good and would set a dangerous precedent for agency overreach to regulate the Internet. The good news is that the bill to nullify the rules will continue to make its way to the House floor.
Yesterday, the House Energy and Commerce Subcommittee on Communications and Technology held a second hearing on the Federal Communication Commission's net neutrality rules. After nearly 6 hours of intense debate and the introduction of a list of amendments- all deemed non-germane because they would significantly alter "H.J. Res 37, Disapproving the rule submitted by the Federal Communications Commission"- the final vote tallied at 15:8 in favor of the Congressional Review Act. The bill moves to the full House Energy and Commerce Committee, before hitting the House floor a few weeks down the road.
The mark-up process was quite a show as pro-net neutrality members sought to add amendments, when you can't in fact amend the congressional review act. It's a one sentence document, saying
Disapproving the rule submitted by the Federal Communications Commission with respect to regulating the Internet and broadband industry practices.
In plain English: FCC, you might as well run those net neutrality rules through the shredder.
Not surprisingly at all, Democrats began the hearing claiming that they had the industry, the same ISPs that would be affected by the net neutrality rules, on their side. Or at least most of them, since Verizon and Metro PCS made their opinions loud and clear when they filed lawsuits against the FCC's regulatory overreach earlier this year. So, Mr. James Cicconi, Senior Executive Vice President-External and Legislative Affairs at AT&T, presented his version of "being on board" with the rules.
Cicconi made it clear that AT&T was not pleased with the net neutrality rules, but was under the general impression that they could live with them, since there was no realistic scenario under which the FCC would back off. There is a clear need for regulatory certainty with respect to net neutrality, as Cicconi explained, because investments in broadband are in the multi-billion dollar range and are subject to multi-year bets. Cicconi also raised awareness for the negative investor reactions when the FCC suggested the imposition of more extreme net neutrality rules in October 09, and he also mentioned that AT&T was very concerned with the FCC attempting to regulate Internet networks as common carriers under Title II.
To sum it up, the FCC net neutrality rules as they stand now are bad enough, but as long as they are applied in good faith and in a reasonable manner (that's the washed-down part full-on net neutrality proponents really hate) they are better than the more intrusive regulations being threatened.
What the gentlemen seems to miss is that there is no good reason to believe that the FCC will be satisfied with the rules as they currently stand. As I pointed out in January, in my post "Net Neutrality is Just the Beginning:"
... it is important to understand that this version of net neutrality regulation is only the beginning of a likely litany of Internet regulation. This is what FCC chief of staff Ed Lazarus had to say:
"We addressed the problems we saw. We'll stop there for now. If other things come up that pose anticompetitive or consumer problems, then we'll revisit."
However, the FCC's net neutrality rules aren't a solution to existing "anticompetitive or consumer problems." The FCC voted to impose net neutrality rules preemptively, without evidence for systemic [anticompetitive] problems of blocking or discrimination.
In fact, because the rules outlaw charging application providers (e.g. Netflix, BitTorrent) to deliver their services, and openly discourage Internet providers from offering priority pricing for those who would like to pay for a special fast-lane on the Internet highway, costs to increase broadband capacity will have to be borne by consumers. Net neutrality rules, far from solving a consumer problem, created one by raising the costs for Internet access in the long-term.
Several of the witnesses at the hearing also mentioned this very important point: The net neutrality rules allow the FCC to pick winners and losers. The agency has decided to arrange a wealth transfer between network and application providers. App providers win, and network providers loose. The problem with this scenario is that app providers rely on network providers to deliver their content. Without the appropriate infrastructure to deliver higher quality and speed content, applications won't be going very far.
Furthermore, the assumption that seems to underlie the FCC rules that the edge (applications) is innovating at rapid speeds while the core (networks) of the Internet is fully developed and needs static preservation, could prove disastrous. As is so often the case, poor Americans living in rural communities will be hurt the most by this creation of disincentives for broadband providers to increase broadband availability. The costs to deploy to these areas are much higher, and by removing profit opportunities for network providers, these areas will likely be underserved.
The net neutrality rules should be fully scrapped. As I concluded this March:
The U.S. would be well served by following the UK and Europe in their hands-off approach to net neutrality. Why try to fix something that is not broken, only to potentially inflict more harm than good?