In comments filed July 16 with the FCC, ITIF urged the Commission to refrain from invoking the "nuclear option" of Title II regulation on the fast-growing market for broadband Internet services. The Internet is a rapidly evolving system built on different technology and driven by different economic circumstances than the telephone network for which Title II was drafted. Network operators need the freedom to develop novel responses to the Internet's constantly-changing conditions, which is problematic under a Title II framework with a telephony-oriented anti-discrimination rule. Congress is already at work revising the law that gives the FCC its authority, and there is no compelling reason to short-circuit the policy development process.
Move the Broadband Policy Debate to Congress
The FCC will discuss Chairman Genachowski's proposal to create a "Third-Way Legal Framework" for Internet regulation in its June 17th open meeting. This "third way" regulates the portion of the Internet that runs over broadband networks according to some, but not all, provisions of Title II of the Communications Act. The proposed legal framework seeks to address the perceived shortcomings in the FCC's current approach to Internet regulation, which is based on Title I of the Act with ancillary authority drawn from Title II and other portions. If this seems like an exercise in re-arranging the chairs on the ocean liner, that's because it is.
The legal wrangling over the correct means of stretching the Communications Act from its apparent purposes – the regulation of narrowband communication, radio, and cable television services – to cover the broadband Internet is a fascinating exercise for legal scholars. The legal problem is a diversion, however, from the FCC's major dilemma with respect to Internet regulation: Congress has never issued a clear directive to the FCC regarding Internet policy that the agency can enforce without legal uncertainty.
The FCC's enabling legislation, the Communications Act of 1934, is essentially silent regarding broadband, Digital Subscriber Line (DSL,) cable modem, Fiber to the Premise (FTTP,) and the Internet. In the absence of a clear statement of policy from the Congress, the FCC has been forced to improvise a broadband Internet regulatory framework in response to a series of court decisions going back as at least as far as AT&T v. City of Portland in 1999. If the FCC hadn't created its regulatory framework, jurisdiction over the Internet's edge networks might well have devolved to cities and counties by now.
It's reasonably clear that Congress deliberately chose to omit the broadband Internet from its most recent update to the Communications Act, the Telecommunications Act of 1996. The 1996 Act took some five years to develop; at the outset, the Internet was still off-limits to the general public and the DSL and cable modem broadband technologies we take for granted today were still experimental. By the time the Act was passed, Congress was committed to deregulatory alternatives to traditional monopoly regulation. The 1996 Act was an attempt to replace regulated monopolies with competitive markets for cable TV, wireline telephony, and mobile phones, after all.
Largely, the pro-competition strategy has been a success: television viewers now divide their subscription dollars between satellite services such as DirecTV and Dish networks and telco-based services such as Verizon FiOS and AT&T U-verse in addition to traditional cable TV. Similarly, telephone services provided by cable companies and mobile networks (and not to mention Internet Telephony services like Vonage and Skype) take subscribers away from traditional telephone companies. Both of these markets illustrate the fact that consumers benefit when network operators compete on the basis of investment in diverse services.
While Congressional intent with respect to cable and telephone in 1996 is reasonably clear, it is less certain how this generally deregulatory policy approach applies to the broadband Internet. Some advocates insist that Congress meant for independent ISPs to enjoy a status with respect to the broadband Internet resembling the relationship of Competitive Local Exchange Carriers (CLECs) with traditional telephone networks, wholesale access to a static infrastructure at regulated prices. Others see the emphasis on competition satisfied by intermodal competition between vertically integrated networks without price regulation. The first approach, intramodal competition, reduces incentives for needed investment in next-generation networks, and like the intermodal approach, it fails to deliver advanced services to fringe areas where the business case for investment can't be made without direct subsidies. There is a policy choice to be made between these two approaches, and Congress didn't make it in 1996.
Several attempts have been made to amend the Telecom Act since 1996, the most ambitious of which was a nationwide video franchising measure in 2006, but these efforts have not been successful. The video franchising bill, by Representative Barton (R - Texas), was stalemated by the emergence of the network neutrality debate; instead of a uniform system of nationwide video franchising, we got an ongoing debate over network discrimination that's failed to converge on a consensus.
The FCC now proposes to answer the overall Internet policy question on its own, but Congress is not well disposed to accept its solution. While some influential members of the Congress have apparently endorsed the FCC's plan, a majority of members of the House have signed letters to the effect that the FCC should not enact its “Third Way” proposal. It's reasonably clear that the FCC will be challenged in court if it does embark on its “Third Way”, so there is little certainty to be gained by enacting a broadband Internet policy that's unlikely to survive very long.
Chairman Genachowski insists that the Commission must take immediate action - according to a shortened timeline that circumvents the usual "Notice of Proposed Rulemaking" that normally follows the "Notice of Inquiry" the FCC intends to enact on June 17th - in order to protect consumers from harm. This is the same story that network neutrality proponents have told since the 1990s, but we've yet to see evidence that the broadband Internet teeters on the brink of collapse. Yes, Madison River did block access to Vonage in 2004, but that problem was quickly corrected and we've moved on. Comcast installed a system that limited the number of TCP connections its customers could use for bartering movies over peer-to-peer networks in 2007, but began phasing-out that stopgap technology before the FCC completed its dramatic investigation in 2008. The evidence that Internet users face an imminent problem unless the FCC takes expedited action is lacking. Moreover, Internet users have a number of protections against network operator abuse apart from the FCC. The Federal Trade Commission has the power to sanction false and misleading advertising of services the operators can't deliver, as well as the power to sanction anti-competitive practices. Finally, the ancillary authority doctrine is not dead, as the FCC relies on it to regulate broadband under any classification: the Telecommunications Act didn't give the FCC explicit authority to regulate broadband, so the Commission's assumption of that power is an exercise of ancillary authority in its own right.
The bottom line is simple: Congress failed to articulate a clear policy toward the Internet in particular and broadband networks in general in its 1996 amendment of the FCC's marching orders. In the absence of a clear directive, the FCC has been forced, by a series of court cases, to improvise an Internet policy. Congress was right to refrain from broadband Internet regulation in 1996 because the technologies were too new to regulate in any sensible way. With the passage of time and the accumulation of experience and knowledge, the time has come to move the policy discussion from the regulatory agencies to the nation's pre-eminent policy body, Congress. The broadband Internet is a major stimulus for economic growth and innovation, so our nation's policy needs to emphasize goals and aspirations over the legal complications that have arisen from the myriad court decisions that have shaped our present Internet policy. A pro-active, visionary policy approach is better than a reactive legalistic one. We appreciate the FCC's heroic efforts to devise a United States policy for the broadband Internet in the absence of a clear framework, but the time has come for Congress to articulate America's policy vision.
 Austin Schlick, “A Third-Way Legal Framework for Addressing the Comcast Dilemma” (Federal Communications Commission, May 6, 2010), http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-297945A1.pdf.
 The brief mention of the Internet in Section 230 of the Act consists of statements of support for a deregulatory policy toward the Internet and an affirmation of the right of service providers to filter objectionable content. See: "The Internet and other interactive computer services have flourished, to the benefit of all Americans, with a minimum of government regulation." p. 89, and "No provider or user of an interactive computer service shall be held liable on account of-- (A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected." p. 89-90, Communications Act of 1934, as amended by the Telecommunications Act of 1996, 1996, http://www.fcc.gov/Reports/1934new.pdf. "Broadband" is mentioned only in passing in the radio section and in terms of something called "advanced telecommunications" systems.
 Portland, Oregon sought to impose an open access requirement on the @Home cable network as a condition of approving its sale from TCI to AT&T Broadband; a rough version of the order is found at: “District Court Decision in AT&T v. City of Portland. Re: mandating that AT&T open its cable network to ISPs,” Tech Law Journal (June 4, 1999), CV 99-65-PA, http://www.techlawjournal.com/courts/portland/19990604op.htm.
 See our report on the effects of regulation on investment in broadband networks: Rob Atkinson, Daniel K. Correa, and Julie A. Hedlund, Explaining International Broadband Leadership (Washington, DC: Information Technology and Innovation Foundation, May 1, 2008), http://www.itif.org/index.php?id=226.
 Representative Joe Barton, Advanced Telecommunications and Opportunities Reform Act, 2006, http://ecip.loc.gov/cgi-bin/bdquery/z?d109:HR05252:
The Truth, and Nothing But the Truth about U.S. International Broadband Rankings
FCC Filing on Recent Comcast Case
Following a U.S. Circuit Court ruling on the FCC’s regulatory authority in a case involving Comcast, Richard Bennett filed additional reply comments on the FCC’s Notice of Proposed Rulemaking, “In the Matter of Preserving the Open Internet,” GN Docket No. 09-191, and “Broadband Industry Practices,” WC Docket No. 07-52. ITIF previously offered comments and reply comments prior to the D. C. Circuit Court ruling, and offers these as a reaction to current events. In this additional filing, Bennett urged the FCC to proceed carefully and work with Congress and various stakeholders to find the balance between too little and too much regulation.
FCC Goes Too Far (Once Again)
The Federal Communications Commission, the government agency charged by Congress with regulating communications by air and wire, announced today a sweeping new program that goes far beyond its mandate. The FCC’s move is likely to lead to a lengthy and unnecessary legal battle, create needless uncertainty in the market, and detract from the FCC’s important work in implementing the recently unveiled national Broadband Plan. While the FCC is attempting to create a regulatory framework suitable for the ever changing Internet ecosystem, its proposal is tantamount to going duck hunting with a cannon.
This is a story that has become all too familiar. In the recent past, the courts have struck down punitive FCC orders against the Super Bowl "wardrobe malfunction" and on, April 6, an overwrought ruling against cable operator Comcast, who sought to preserve good Internet performance for those of its customers who use Voice over Internet Protocol (VoIP) services such as Skype and Vonage. This most recent example of FCC over-reach is a proposal that would take broadband Internet services out of their present status as lightly-regulated "information services" (Title I) and plunk them into a regulatory system devised for the monopoly telephone networks of the 1930s (Title II).
The regulatory system the FCC now seeks to abandon was not established in a reckless or ill-conceived manner. The selection of the "information services" classification came from a sober reading of the applicable law that has been upheld by the U.S. Supreme Court. Reclassification is certain to bring about a protracted legal battle that the FCC is unlikely to win. In addition, that battle will create confusion for stakeholders and introduce needless and damaging uncertainty into the market. The Commission is, by its own admission, reacting to its most recent defeat (in the Comcast case) with what amounts to an attempt to change the law under which it operates. This is going too far.
The FCC represents this action as an attempt to find a moderate "Third Way" to regulate Internet services that is neither as loose as the information services defined by Title I of the Communications Act nor as tight as the telephone services defined by Title II. ITIF supports Third Way regulations for the Internet and a revision to the Communications Act that would create a new framework appropriate not just for broadband services, but for Internet-enabled innovations such as VoIP. It has long been evident that Vonage is overburdened by telephone regulations, and competitive services such as Skype are forced to pretend they aren't offering telephone services at all in order to escape the taxes, fees, and other requirements of traditional telephony.
Talking the “Third Way” talk is not the same as walking the walk, however. Whatever the details of a “Third Way,” it cannot be created by the FCC. Putting the Internet in a regulatory straightjacket of Title II and then not enforcing much of it is not the path to a “Third Way.” Only Congress can create a new chapter in the library of communications law. The best the FCC can do to facilitate the exercise is propose a framework. That is the only way new law can be created for a system as novel and innovative as the Internet. ITIF appreciates the FCC's use of the “Third Way” concept we have embraced. However, “third way” is not simply an elegant and highly-nuanced phrase. Rather, the light-touch Third Way is meant to be a serious effort to craft new law appropriate to the needs of innovators and users of new technologies.
In addition, the FCC argues that the Internet is in imminent danger of multiple theoretical harms without "reclassification." The facts suggest otherwise. The FCC's action in the Comcast case was gratuitous since Comcast had already decided to replace the system the FCC didn't like with a new one long before the FCC issued its punishment. One after one, the alleged examples of Internet abuse by ISPs have proved to have been built on hot air or corrected without Commission action. If a serious abuse of consumer trust were to take place in the future, the Federal Trade Commission has authority independent of communications law to take corrective action, and the FCC still has ancillary authority that can be used more judiciously than in the past. Indeed, the DC Circuit gave the FCC guidance in the Comcast order about how this may be done.
The Internet has its own self-regulatory systems to protect users from harm and abuse by other players in the ecosystem. Rather than engage in protracted battle over the extension of its regulatory powers, the FCC should direct its limited time and energy to implementing the well-crafted national Broadband plan. This would better serve the public interest. To the extent the FCC feels compelled to address issues such as net neutrality, transparency for consumers, and other related matters, it can and should work with industry and public interest stakeholders to expand cooperative arrangements for co-regulatory systems, including a technical advisory board of experts and other stakeholders advice the FCC.
When the power of Internet stakeholders is combined with that of responsible regulators, a new system of co-regulation will emerge. Given the global nature of the Internet, co-regulation is the only practical and effective way to ensure that the Internet continues to thrive, prosper, and grow.