Monday, May 19, 2014

OBAMACARE FOR THE INTERNET ... OR WHEELING AND DEALING

The Internet's 51 New Regulators
   

Federal Communications Commission Chairman Tom Wheeler went ahead with his proposal on Thursday to give his agency the power to decide whether the terms and prices of broadband Internet services are "reasonable." That's bad enough as political discretion, but according to dissenting Commissioner Ajit Pai, regulators from every state will also be able to get into the act.

Mr. Wheeler's goal is to satisfy the "net neutrality" supporters demanding that every broadband customer receive the same deal, no matter how much bandwidth they consume. Backed by two other Democrats, Mr. Wheeler said he prefers the "reasonable" pricing standard. But he also suggested another, even worse option to regulate broadband prices: reclassifying Internet connections as "telecommunications services."

For two decades Congress has wisely refused to give the FCC the same power over the Internet that it holds over the telephone system. And for two decades the Internet has enabled a gusher of creativity that was unimaginable over a century of regulated telephony. Mr. Wheeler's brainstorm to change all this is simply to pretend the Internet is a phone network.

This would apply to today's broadband networks common-carrier rules that were designed for monopoly telephone companies—and created decades before the inventors of smart phones and social media were even born. Since this designation would automatically impose myriad obligations that have nothing to do with current customer needs—and that many modern firms could not possibly fulfill—the commission would then have to issue a flurry of exemptions ("forbearance" in FCC parlance) to prevent chaos in the market for Internet connections.

Think of this as ObamaCare for the Web: enact an unworkable system and then get busy issuing waivers to prevent the new system from operating as designed.

GOP Commissioner Michael O'Rielly, who also dissented, notes that the FCC's net-neutrality campaign "rests on a faulty foundation of make-believe statutory authority." But even if the FCC can persuade federal courts to accept one of its methods to assert control over the Internet, that still doesn't mean the agency can satisfy the net-neutrality crowd.

That's because for all the complexity and lawyering the new regulations would bring, no law has ever said carriers can't charge different prices for different services. If Google and Netflix want to push a lot of content over the Internet and ensure its smooth delivery to customers, they will need to pay more than the start-up sending the occasional packet of data.

Yet net-neutrality supporters have cast their campaign as a cause on behalf of start-ups. The fear is that big broadband companies will block access to small websites. Mr. Wheeler's FCC claims "there are no rules on the books to prevent broadband providers from limiting Internet openness by blocking content or discriminating against consumers and entrepreneurs online." But this is false. As former FCC Commissioner Robert McDowell has noted, the Federal Trade Commission already has ample authority to go after businesses that mistreat customers, online or off.

The one sure result if telecom regulation is applied to the Internet is that fewer new networks will be built, and fewer start-ups will even try. The FCC will now await public comment on its two regulatory alternatives before it writes a final rule. As wireless Internet entrepreneur Brett Glass tweeted after the FCC vote: "May need to try selling my business before anything like this can be enacted."