Since the Federal Communications Commission (FCC) announced its intention to repeal the 2015 network neutrality rules, the debate has been intense, emotional, and ripe with accusations. FCC Chairman Ajit Pai engaged in a heated Twitter spat with Alyssa Milano, an outspoken supporter of network neutrality. When a recent poll by the University of Maryland’s Program for Public Consultation and Voice of the People found that 83% of Americans oppose the agency’s plans, the FCC quickly disputed the findings as biased. One of the most important policy debates affecting the digital economy would greatly benefit from less ideology and more nuanced analysis.
During the last decade, the growing importance of Content Delivery Networks (CDNs) has fundamentally reshaped the Internet. Many market segments in the advanced communications system are dominated by few players. The principles governing vertical and horizontal market relations in this ecosystem are tremendously important, with far-reaching consequences for innovation, investment, and user experiences. While easing some of the existing overly stringent common carrier regulations is desirable, the proposed rules fail to safeguard important goals of an open Internet.
Stakeholders bring diverse, often irreconcilable, objectives to the debate. This complicates finding a workable and effective policy approach. Network neutrality is embraced as an answer to protect free speech and human rights, control the abuse of market power, safeguard entrepreneurship and innovation, and promote broad public interest goals. No single policy can serve all these desirable objectives simultaneously. Addressing them requires a differentiated approach and possibly multiple complementary policies. The obsolete legal framework of U.S. communications policy and the polarized legislative landscape further muddle matters.
Free speech and human rights. Despite concerns about misleading information, fake news, and foreign intervention into domestic affairs, the open Internet is an indispensable platform for free speech and human rights. Unrestricted access to all legal content of a user’s choice and the ability to publish all legal content online are important preconditions to preserve them. While the proposed Order alludes to maintaining such openness, it does not provide legal safeguards or specific enforcement mechanisms to protect it. Blocking, throttling, and differentiated pricing of access and information bundles could be used in ways that harm free speech. The power of the Federal Trade Commission (FTC) to mitigate such undesirable effects and protect user interests is not fully tested and may be insufficient. Minimal and enforceable regulatory safeguards would be preferable.
Control of market power. Driven be a spirit of deregulation, U.S. telecommunications policy has curtailed regulatory tools that could mitigate potential market power abuses of Internet access providers. While the competitive market dynamics provide certain safeguards and the emergence of multi-sided platform markets further reduces the incentive to abuse control over essential access networks, opportunities to manipulate markets continue to exist. Network neutrality served as a substitute for earlier, imperfect, policies to control market power at the root (e.g. open access, unbundling). The proposed rules provide weak safeguards to mitigate potential abuses of vertical integration between network operators and content providers. Neither the existing nor the proposed regulatory rules address potential market power abuses of content providers such as Google or Facebook. Antitrust enforcement in digital platform markets remains feeble.
Entrepreneurship and innovation. Permission-free innovation by entrepreneurs at the edge of the Internet (e.g. Instagram, Spotify) has historically been a strong driver of digital innovation. On open and non-discriminatory Internet safeguards this vibrant innovation ecosystem. However, while the current network neutrality rules facilitate such innovation, they impede or even prohibit innovations that require differentiated network services. Emerging applications in the Internet of Things (IoT), such as microgrids or advanced tele-health, require higher-quality network support than can be provided by a strictly neutral best-effort Internet. The proposed relaxation of the existing rules will enable new forms of innovation. However, this must not be achieved at the expense of weakening the edge innovation system, which remains an important engine of the digital economy. A dual approach that supports non-discrimination while allowing market-based differentiation is required to support both types of innovation. The proposed Order does not do enough to establish such a model.
Public interest goals. In the U.S. legal framework important public interest goals, such as an obligation to provide Internet access service to anybody with a reasonable request and willing to pay a reasonable price, are tied to common carrier status. The 2015 Open Internet Order classified Internet Service Providers (ISPs) as common carriers. Nonetheless, it was a weak tool to achieve public interest goals as it created regulatory obligations without reasonable ways to fund them. Universal service policies, while afflicted with many challenges, remain in place to help reduce Internet access divides. Market forces and competition will go a long way to facilitating that goal, but the proposed Order will limit the ability of policy makers to safeguard broader public interest goals effectively.
Legal service classification. Much of the debate on how to protect the (legally non-binding) Principles of an Open Internet promulgated by the FCC in 2005 centered around the legal mechanism that could effectively implement them. U.S. communications law offers a choice between two obsolete legal models: largely unregulated information services and common carrier services that provide the FCC with better defined regulatory powers. In its Brand X decision, the U.S. Supreme Court affirmed the authority of the FCC to declare services as belonging to either category. Within the existing legal definitions, there are good reasons to classify Internet access services as common carrier services as the FCC did in 2015. The agency's reliance on forbearance avoided some of the rigidity of common carrier law. But the more important concern is that neither legal model meets the requirements of a forward-looking Internet policy. Legislative action and possibly new forms of self- and co-regulation are required to modernize communications law and create a governance model appropriate for the digital economy.
What can be done? U.S. communications law is in need of an overhaul. Oscillating between the straitjackets of common carrier and information services risks replacing one inadequate framework with another. In addition, prolonged legal challenges will generate increased regulatory uncertainty, which will slow innovation and entrepreneurial initiative. Short of legal reform, the most reasonable course forward would be for the FCC to safeguard principles of an open and non-discriminatory Internet reliably while allowing flexible market-based differentiation. Either an ultra-light common carrier solution with additional forbearance measures to allow innovative business models or an information services model with stronger non-discrimination safeguards would achieve this.
