The FCC and the Future of the Internet:

Free Market Innovation or Government Control? 

 

by

 

Randolph J. May   

 

 

When I selected a theme - "The Future of the Internet: Free Market Innovation or Government Control" - several months ago for this year's Free State Foundation annual telecom conference, little did I know that it would now be even more apt than I then imagined.

If you don't think the direction of the Internet's future is implicated by the choice between two very different paths - free market innovation on the one hand or government control on the other - I invite you to read the Federal Communications Commission's just-released "Open Internet" order. All 300+ pages and 1777 footnotes worth of it!

The 1777 footnotes caught my eye. Before turning the last page, to the "Ordering Clauses," I thought there were only 1776 footnotes. This would have been fitting because, in my view, the Commission's action represents the antithesis of the "spirit of '76." I wonder what our Founders would think about an unelected body of government administrators reaching out to seize control, absent clear statutory direction, of the most vibrant, open communications medium the world has ever known - and absent evidence of a present market failure or consumer harm.

Two quotations from Thomas Jefferson, both pertinent to the FCC's aggrandizing action, leave little doubt:

"Were we directed from Washington when to sow, and when to reap, we should soon want bread."

"Laws are made for men of understanding and should, therefore, be construed by the ordinary rules of common sense. Their meaning is not to be sought in metaphysical subtleties which may make anything mean everything or nothing at pleasure."

There are very many problematic aspects to the Commission's action, but here I want to focus on only one - a crucial one nonetheless that goes to the very heart of the question concerning whether the future of the Internet is to be guided by free market innovation or government control.

The new regulations inevitably will lead to more government control at the expense of innovation because the FCC has arrogated unto itself such open-ended power to decide which Internet practices it will allow or disallow. In other words, the agency deliberately has created a large realm of uncertainty that gives it free rein, in its discretion, to shape the future of the Internet as it goes about deciding, far into the future, what is permissible or not.

I understand that the FCC is claiming that its new rules will create more certainty. Indeed, in a story in today's Communications Daily [subscription required], an unnamed Commission spokesperson is quoted to this effect: "The Open Internet Order provides clear rules of the road that will enable the Enforcement Bureau to carry out the Commission's policies ensuring that consumers and innovators have access to an open Internet."

This "clear rules of the road" line from agency officials is belied at many turns in the Commission's order. To take a notable example, the agency adopts a general conduct rule that prohibits Internet providers from 'unreasonably interfering' or 'unreasonably disadvantaging' others in the Internet ecosystem. You don't need to be a lawyer - or a metaphysician - to understand that these terms don't establish clear rules of the road. They are so standardless they necessarily will lead to an ongoing exercise of power akin to the 'dispensing power' that I wrote about in my essay, "Is the FCC Lawless," published in The Hill.

In addition to other forms of administrative diktats likely to be utilized, the Commission is establishing a whole set of new regulations governing the issuance of "Advisory Opinions." If the rules of the road were clear, it would not be necessary to "use advisory opinions to explain how it will evaluate certain types of behavior and the factors that will be considered in determining whether open Internet violations have occurred." [Para. 229] Entities may request advisory opinions regarding prospective practices they fear may run afoul of the Commission's enforcement officials, but only if they "certify that factual representations made to the Enforcement Bureau are truthful and accurate, and that they have not intentionally omitted any material information from the request." The enforcement officials are not required to respond to such requests, but, if they do, the advisory opinions will expressly state "that they are premised on specific facts and representations in the request and any supplemental submissions." [Para. 233]

The way the Commission's new regulations will discourage innovation is obvious. Under a relatively light touch regulatory regime, the Internet continued to evolve in response to consumer demand without the need to seek a priori bureaucratic permission. Going forward this is most unlikely to be the case. When the engineers, marketers, businesswomen, and other innovators get together to discuss a new product and service, inevitably the question will be asked: "Before moving ahead, in order to protect ourselves and avoid trouble, shouldn't we get an Advisory Opinion from the FCC's enforcement folks." The answer from the lawyers most often will be "yes."

Unless, of course, the decision is made from the get-go not to seek an a priori opinion, but instead simply to reduce the extent to which the new product or service differs from the existing one - or to simply abandon the idea. And, make no mistake, we will never know - and this won't trouble the Commission - how much innovation has been foregone and left on the drawing boards. Because you can't really measure foregone innovation.

In the same Communications Daily story cited above, Christopher Yoo, University of Pennsylvania law professor and a member of FSF's Board of Academic Advisors, put it this way: "The enforcement provisions conflict with the spirit of permissionless innovation that has long been the foundation of the Internet's success. The Internet has long been based on the principle that innovators should not have to ask approval from anyone before deploying a new business model."

In the next several weeks, Free State Foundation scholars will be addressing various other aspects of the FCC's order. So stay tuned for that.

But, more immediately, I certainly hope you will attend FSF's Seventh Annual Telecom Policy Conference this Thursday at the National Press Club. I'm sure the FCC's Internet regulation order - and what comes next in Congress and the courts - will be a prime topic of discussion, along with other hot communications policy issues. As you will see from the sidebar immediately to the right, we have an outstanding lineup of top-flight speakers. The agenda is here. Greg Walden, Chairman of the House Subcommittee on Communications and Technology, will deliver the Opening Keynote Address and the action will be non-stop from there until FCC Commissioner Clyburn offers some "Final Thoughts."

Registration is complimentary, but you must register in order to attend. Register here.