SPIWAK: Congressional Democrats Make A Cynical Play To Revive Net Neutrality

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Lawrence Spiwak The Phoenix Center
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Last week, surrounded by a phalanx of leading Democratic senators and House members, House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer held a press conference to announce that they intend to introduce the “Save the Internet Act of 2019,” a one-page bill designed to revive the Obama-era 2015 net neutrality rules that imposed on the internet common carrier regulations designed in 1934 for the old Ma Bell telephone monopoly.

But codifying rules which the Federal Communications Commission’s own chief economist described as an “economic free zone” is hardly an example of legislative leadership. Indeed, as firms are not passive recipients of regulation, there are significant consequences of turning the internet into a public utility.

For example, the Obama-era’s common carrier approach to net neutrality reduced infrastructure investment by the regulated companies, an expected and near unavoidable consequence of choosing to pursue the “nuclear option” of reclassification. Peer-reviewed economic research reveals that between 2011 (the year common carrier regulation was first threatened by then-FCC Chairman Julius Genachowski) and 2015 (the last year data were available), infrastructure investment in internet networks was off by between 20 percent and 30 percent. Thus, the expected investment boom in telecommunications following the recession of 2008 was foreclosed by the mere threat of imposing the heavy-handed common carrier regulation of Title II of the Communications Act.

Faced with this evidence, after the Republicans recaptured the White House, the FCC hastily reversed the Obama-era rules and returned the internet to the (previously) bipartisan “light-touch” regulatory approach grounded in Title I of the Communications Act — an approach which had been in place for most of the current century. This order is now on appeal to the D.C. Circuit in the case of Mozilla v. FCC.

The return to light-touch regulation might be working to restore investment incentives. Last fall, USTelecom, a trade association made up of broadband service providers, released an update to its U.S. broadband industry capital spending series. In this update, USTelecom reported that sector investment rose $1.5 billion (or 2 percent) between 2016 and 2017 — a reversal of a two-year decline following the FCC’s 2015 Open Internet Order. Still, economic research reveals that capital spending in the telecommunications sector remains materially compressed, being about $10-to-$13 billion (or 12-to-15 percent) below expectations in 2017, perhaps due to the Democrats continued efforts to restore the disastrous Obama-era policies.

So why the continued push for onerous common carrier price regulation for the internet? The answer seems cynically obvious. As a Washington Post headline recently proclaimed, “Democrats hope ‘Save the Internet’ will reap political dividends.” Among other goals, the Post reports that Democrats are “betting the issue of fairness on the web could resonate with millennials — a key demographic the party needs to mobilize in 2020.”

Wooing America’s younger voters is not what is needed to maintain freedom and equality on the internet. Instead, members of Congress should work across the aisle to develop a carefully crafted (and much needed) bipartisan piece of legislation that would end the contentious net neutrality debate once and for all. For years, Republicans have offered to work with Democrats to write net neutrality legislation that addresses their concerns but does not turn the internet into a public utility. Democrats have steadfastly refused to engage.

Moreover, it is unclear that proponents of restoring the 2015 Open Internet Order have accurately assessed the long-term effects of replacement of the light-touch regulatory regime with a common carrier regulatory structure. Indeed, as a recent law review explains, common carrier regulation under Title II of the Communications Act — properly applied — means that (1) Broadband Service Providers (“BSPs”) get to charge “edge” providers, such as Google and Netflix (and everyone else) a positive price for terminating their bits to broadband users; (2) BSPs are permitted to engage in reasonable discrimination (that is, fast lanes), provided that customers are not “similarly situated”; and (3) because the Obama FCC viewed BSPs as “gatekeepers,” under the plain terms of the statute, BSPs would be forced to file tariffs with the FCC detailing their the rates, terms, and conditions of service. If Democrats really want to go back to the future, then perhaps they should actually read Title II of the Communications Act and adhere to its prescriptions and the decades of case law on what is and is not sound regulatory practice.

Now that Democrats are in power, at least in the House, they have the obligation to lead and approach complex issues with the seriousness they deserve. But knowing what we know now, it is difficult to see how the introduction of the Save the Internet Act reflects a serious commitment to arriving, finally, at a bipartisan statutory scheme that both protects consumers from anticompetitive conduct but at the same time does not establish an onerous “Mother may I” regulatory regime that deters investment and innovation.

Instead, all we unfortunately observe is the pursuit of a cynical increase in power in the 2020 election cycle and the threat of more regulatory mayhem.

Lawrence J. Spiwak (@Lawrence_Spiwak) is the president of the Phoenix Center for Advanced Legal & Economic Public Policy Studies, a nonprofit 501(c)(3) research organization that studies broad public-policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of the digital age.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.