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Hearing of the Subcommittee on Communications of the House Energy and Commerce Committee - "Network Neutrality and Internet Regulation: Warranted or More Harm than Good?"


Location: Washington, DC

We all want an open and thriving Internet. That Internet exists today. Consumers can access anything they want with the click of a mouse thanks to our historical hands-off approach. Changing direction now will only harm innovation and the economy.

But before we even get into the harm the network neutrality rules will cause, it's important to realize that the FCC's underlying theory of authority would allow the commission to regulate any interstate communication service on barely more than a whim and without any additional input from Congress. In essence, the FCC argues it can regulate anything if, in its opinion, doing so would encourage broadband deployment. I am relieved, however, that the FCC declined under its new found authority to regulate coffee shops, bookstores, airlines and other entities. This of course means that the FCC believes if it had not so declined, these entities would have been dragged under these new rules.

If left unchallenged, this claim of authority would allow the FCC to regulate any matter it discussed in the national broadband plan. Recall that the FCC concluded that consumers' concerns over privacy are deterring broadband. Does that mean the FCC can regulate Internet privacy? The national broadband plan also addresses health IT, distance learning, smart grids, smart homes, and smart transportation. Can the FCC regulate all these matters, too, in the name of promoting broadband? Under the FCC's rationale its authority is bounded only by its imagination.

Former FCC Chairman Kevin Martin tried to go down a very similar path. In the wake of Hurricane Katrina, he claimed that his authority over wireless services allowed him to require backup power at cell sites. During oral argument, the courts questioned the FCC's logic, asking whether it would grant him seemingly endless authority over things like electric utilities and employees of wireless providers. The FCC eventually backed down. If this overreach was problematic with a real disaster like Hurricane Katrina, I don't see how it is justified here.

From the Internet's inception we have taken a hands-off approach. The internet did not become the explosive driver of communications and economic growth it is today until we turned it over to free enterprise. Dating as far back as the 1971 the FCC has consistently treated the internet as an unregulated information service and not as a regulated telecommunications service. Congress codified this distinction in the 1996 Telecommunications Act.

FCC Chairman William Kennard reaffirmed this approach. In rebuffing requests to regulate cable Internet access service, Chairman Kennard explained in a 1999 speech that "[t]he fertile fields of innovation across the communications sector and around the country are blooming because from the get-go we have taken a deregulatory, competitive approach to our communications structure--especially the Internet."

There is no crisis warranting departure from this approach. The FCC hangs almost its entire case for regulating the Internet on Comcast's past attempt to combat network congestion by managing peer-to-peer traffic. But Comcast and the peer-to-peer community resolved that issue by gathering their engineers and developing alternative solutions that advanced traffic management techniques to everyone's benefit. No network neutrality rules were in place, and the D.C. Circuit overturned the FCC's attempts to regulate Comcast's network management because the FCC failed to demonstrate it had any authority to do so. Most everything else the order discusses is either an unsubstantiated allegation or speculation of future harm.

The FCC even confesses in its order that it has done no market analysis. It just selectively applied the rules to broadband providers, shielding web companies. If the mere threat of Internet discrimination is such a concern, and if the FCC has done no analysis to demonstrate why one company has more market power than another, why would discrimination by companies like Google or Skype be any more acceptable than discrimination by companies like AT&T and Comcast? Instead of promoting competition, such picking of winners and losers will stifle the investment needed to perpetuate the Internet's phenomenal growth, hurting the economy.

Section 230 of the Communications Act makes it the policy of the United States "to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation." Statements of policy are not law but they can help delineate the contours of statutory authority. In light of Congress's statutory pronouncement that Internet regulation is disfavored, the FCC's theory of regulation by "bank shot" stretches too far.

At bottom this is little more than an end-run around the D.C. Circuit's April 2010 ruling in the Comcast case that the FCC failed to show it had ancillary authority to regulate network management.

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