The Internet Showdown

Federal Communications Commission (FCC) Chairman Tom Wheeler has set February 26, 2015, as the date when the agency will meet and vote on President Obama’s plan to establish unprecedented and extraordinary parameters for government control over the Internet.  For much of 2014, it appeared that the Chairman would devise some sort of hybrid approach that would pull a few provisions out of Title II of the Telecommunications Act, which was written to govern “common carriers” in order to subject them to public utility-style regulation, and modify them for use under Section 706.  Instead, after President Obama intervened on November 10, 2014 and called for the FCC to use Title II in full force to regulate the Internet, Chairman Wheeler is now on board with this heavy-handed and unnecessary scheme. 

The FCC is supposed to be an independent agency, yet for some reason the chairman has been swayed by both special interests and the President that the Internet is “broken” and the federal government must intervene to “fix” it.  Of course, this is the very same government that deployed the crippled healthcare.gov website in 2013 and has wasted tens of billions of dollars on failed information technology projects. 

But beyond government failures in information technology and this latest example in a long series of efforts by the Obama administration to solve problems that don’t exist by creating new government programs and unnecessary regulations, there is also a hidden cost to consumers if the Internet is reclassified as a Title II telecommunications service.  According to the Progressive Policy Institute (PPI), under Title II, Internet access would be subject to all the same fees and taxes as telephone services.  PPI estimates that the average increase in state and local fees imposed on wireline and wireless subscribers will be between $67 and $72 per year, along with an increase of federal fees of $17 per year.  This constitutes a $15 billion increase in new user fees in addition to the planned $1.5 billion extra to fund the E-Rate.

Throughout this entire debate, the FCC has failed to show that there is any real harm requiring the agency to reclassify and take control of the Internet.  Indeed, many members of Congress, along with pro-taxpayer and free market groups including Citizens Against Government Waste believe that neither increased regulations nor legislation is needed because the marketplace will work out any real problems with Internet access and content.  However, the FCC’s impending rules changes have forced everyone’s hand.

In an effort to prevent the imposition of a draconian regulatory scheme that includes additional fees and taxes in order to access the Internet, a draft proposal by Senate Science, Commerce and Transportation Committee Chairman John Thune (R-S.D.) and House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) restructures and clarifies the FCC’s authority over the Internet, while maintaining the principles of an open Internet.  The proposed legislation would codify an open Internet structure by banning blocking, throttling, and paid prioritization; requiring increased transparency; applying rules to wireline and wireless providers; allowing for “reasonable network management” and specialized services; and, protecting consumer choice. 

The proposed Thune-Upton bill gives the President and the FCC much of what they want in terms of an “open Internet.”  However, House Democrats have already expressed opposition to one of the legislation’s most important provisions:  a prohibition against reclassifying the Internet under Title II.   The draft legislation also places the responsibility of codifying the Internet back to the people’s duly elected representatives, not with an unelected commission. 

When the FCC voted to approve the Open Internet Order in December 2010 (which was then overturned by the U.S. Court of Appeals), then-FCC Commissioner Robert McDowell stated the following in his dissent:

Today, the Commission is choosing to ignore the recent past as it attempts the same act. In so doing, the FCC is not only defying a court, but it is circumventing the will of a large, bipartisan majority of Congress as well.  More than 300 Members have warned the agency against exceeding its legal authority. The FCC is not Congress. We cannot make laws.

Legislating is the sole domain of the directly elected representatives of the American people. Yet the majority is determined to ignore the growing chorus of voices emanating from Capitol Hill in what appears to some as an obsessive quest to regulate at all costs. Some are saying that, instead of acting as a “cop on the beat,” the FCC looks more like a regulatory vigilante.

Moreover, the agency is further angering Congress by ignoring increasing calls for a cessation of its actions and choosing, instead, to move ahead just as Members leave town. As a result, the FCC has provocatively charted a collision course with the legislative branch.

Unfortunately, Chairman Wheeler appears to be bending under pressure from the White House and is refusing to wait until Congress has an opportunity to move through regular order to properly vet any legislative initiative.  There is no reason to rush to regulation other than some artificial deadline being set by the FCC.

In addition to objections on the merits of the President’s plan, Senate Homeland Security and Governmental Affairs Committee Chairman Ron Johnson (R-Wis.) and House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-Utah) wrote letters to express their concern over the possibility that President Obama improperly influenced the decision-making process of an independent agency.

Due in part to public demands that Chairman Wheeler break the (strange) tradition that the full details of his plan would only be provided to his fellow commissioners the night before the vote, he agreed to provide copies of the 332-page plan for regulating the Internet to his fellow commissioners on February 5, 2015. 

According to Commissioner Ajit Pai, the proposal provides discretionary authority for the FCC to regulate rates; calls for a determination of whether adequate competition exists based on the Commission’s newest definition of minimum service of 25 Mbps; ends user based pricing, meaning that some users may end up subsidizing the cost for others who use more data; provides the FCC with wide discretionary authority over the Internet, allowing the agency to tell ISPs how to deploy and manage their networks, from the last mile to the Internet backbone; provides an opportunity for class action lawsuits, providing even more business for trial lawyers; hints that even more utility style regulation is in store for the Internet; and only defers a decision on new broadband taxes but does not prohibit them.

The proposal is far more draconian and over-reaching than the prior efforts by the FCC to regulate the Internet that have been thrown out by the courts.  It is time for the FCC to pull back from legislating through regulation and give Congress the opportunity to develop meaningful and constitutionally valid guidelines for an “open” Internet.