Today, the D.C. Federal Appeals Court struck down the FCC’s “net neutrality” regulations, arguing the agency cannot regulate the Internet as a “common carrier” (that is, the way we used to regulate telephones). Here, from a pre-briefing I and several AEI colleagues did for reporters yesterday, is a summary of my statement:
Chairman Wheeler has emphasized importance of Open Internet. We agree. The Internet is more open than ever — we’ve got more people, connected via more channels and more devices, to more content and more services than ever. And we will continue to enjoy an Open Internet because it benefits all involved — consumers, BSPs, content companies, software and device makers.
Chairman Wheeler has also emphasized recently that he believes innovation in multi-sided markets is important. At his Ohio State speech, he said we should allow experimentation, and when pressed on this apparent endorsement of multi-sided market innovation, he did not back down.
The AT&T “sponsored data” is a good example of such multi-sided market innovation, but one that many Net Neutrality supporters say violates NN. Sponsored Data, in which a content firm might pay for a portion of the data used by a consumer, increases total capacity, expands consumer choice, and would help keep prices lower than they would otherwise be. It also offers content firms a way to reach consumers. And it helps pay for cost of expensive broadband infrastructure. It is win-win-win.
Firms have already used this method — Amazon, for example, pays for the data downloads of Kindle ebooks.
Across the landscape, allowing technical and business model innovation is important to keep delivering diverse products to consumers at the best prices. Prohibiting “sponsored data” or tiered data plans or content partnerships or quality-of service based networking will reduce the flexibility of networks, reduce product differentiation, and reduce consumer choice. A rule that requires only one product or only one price level for a range of products could artificially inflate the price that many consumers pay. Low-level users may end up paying for high-end users. Entire classes of products might not come into being because a rule bans a crucial partnership that would have helped the product at its inception. Network architectures that can deliver better performance at lower prices might not arise.
Common carriage style regulation is not appropriate for the Internet. The Internet is a fast changing, multipurpose network, built and operated by numerous firms, with many types of data, content, products, and services flowing over it, all competing and cooperating in a healthy and dynamic environment. Old telephone style regulation, meant to regulate a monopoly utility that used a single purpose network to deliver one type of service, would be a huge (and possibly catastrophic) step backward for what is today a vibrant Internet economy.
The Court, though not ruling on the wisdom of Net Neutrality, essentially agreed and vacated the old-style common carriage rules. It’s a near-term win for the Internet. The court’s grant to the FCC of regulatory authority over the Internet, save common carriage, is, however, potentially problematic. We don’t know how broad this grant is or what the FCC might do with it. A fundamental rethink of our communications laws and regulations may thus be in order.
