Second Amendment Sit-Ins and Net Neutrality
Like most Americans, you probably had no idea that the Internet was somehow broken and in need of an Obama Administration “fix” via a Depression-era federal statute enacted for copper wire telephone technology.
And with good reason. For two decades, America’s tech and Internet sectors have remained among the depressingly few areas of our economy that continued to flourish amid an era characterized by stagnating growth, employment and incomes.
Throughout the Obama tenure, however, his Federal Communications Commission (FCC) has attempted over and over to upend the “light touch” regulatory approach of both Democratic (Clinton) and Republican (Bush) administrations that allowed the Internet to flourish as it has. Today, unfortunately, a sharply divided D.C. Circuit Court of Appeals finally affirmed the FCC’s most recent attempt to impose so-called “Net Neutrality” regulations that essentially equate to ObamaCare for the Internet.
As aptly summarized by Senior Circuit Judge Williams’s dissent, today’s decision allows FCC “use of an Act intended to ‘reduce regulation’ to instead increase regulation.”
Judge Williams cogently captured not only the legal illogic of the majority’s holding, but its real-world unintended consequences as well:
“The ultimate irony of the Commission’s unreasoned patchwork is that, refusing to inquire into competitive conditions, it shuns broadband service onto the legal track suited to natural monopolies. Because that track provides little economic space for new firms seeking market entry or relatively small firms seeking expansion through innovations in business models or in technology, the Commission’s decision has a decent chance of bringing about the conditions under which some (but by no means all) of its actions could be grounded – the prevalence of incurable monopoly.”
Fortunately, this doesn’t end the question. The ruling will likely be appealed, and the FCC’s mismanagement can be corrected via Congressional action or new FCC leadership in a future presidential administration.
But beyond the specific issue in question, today’s unfortunate ruling illustrates again the importance of judicial branch appointments and composition as we approach the election of a president who will make those appointments.
Surprise, surprise. So Google, perhaps the leading proponent of so-called “Net Neutrality,” predictably doesn’t consider itself constrained by the same rules of nondiscrimination from which it seeks to benefit via government intervention:
Progressives have long argued that the federal government must protect the Internet from discrimination by treating service providers like Comcast as public utilities. Now we learn that the Net doesn’t have to be neutral, as long as Google is the company targeting legal businesses that are politically unpopular. Google recently announced in a blog post that the search engine would no longer run advertisements for payday loans with high interest rates and a 60-day repayment period. ’Ads for financial services are a particular area of vigilance given how core they are to people’s livelihood and well being,’ the company wrote.”
Moreover, Google’s hypocrisy is compounded by its crony capitalist angle:
Google’s timing is also curious, given that the federal Consumer Financial Protection Bureau is finishing up a rule to wipe out the payday industry by cutting a lender’s ability to collect. This political assault includes Justice Department investigations into banks that do business with payday lenders, which are also lawful outfits. You don’t have to be a cynic to wonder if Google isn’t providing some cover for this political campaign: the Obama Administration has certainly done a lot for Google. The company’s top lobbyist visited the Obama White House 128 times as of October 2015 – more than counterparts at Comcast, Facebook, Amazon and Verizon combined.”
And then there’s its assault on intellectual property rights angle:
Last month the White House endorsed a Federal Communications Commission proposal that would allow Google to pirate television content, and last year the FCC exempted Google from its net-neutrality regulatory scheme.”
It’s just another illustration of the public policy, crony capitalist monstrosity that Net “Neutrality” is. Whether by the judicial system or the political system, it must be put to an end.
On this day in 1876, twenty-nine-year-old Alexander Graham Bell received a patent for inventing the telephone.
Now 140 years later, the Obama Administration continues its counterproductive and legally dubious effort to regulate the Internet as if it were little more than an old-fashioned telephone service of the Bell variety. CFIF and other free-market groups have consistently opposed that effort, and courts have repeatedly rebuked the Obama’s Federal Communications Commission (FCC) various schemes to impose it.
Today, The Wall Street Journal’s “Information Age” columnist Gordon Crovitz details how a Senate committee has discovered evidence that the Obama Administration’s behavior in attempting to regulate the Internet as an old-fashioned utility violated the law. In fact, even FCC regulators expressed shock at the degree to which their administrative independence was disregarded:
FCC staffers cited nine areas in which the last-minute change violated the Administrative Procedure Act, which requires advance public notice of significant regulatory changes. Agency staffers noted ’substantial litigation risk.’ A media aide warned: ’Need more on why we no longer think record is thin in some places.’ These emails are a step-by-step display of the destruction of the independence of a regulatory agency… Mr. Obama’s edict resulted in 400 pages of slapdash regulations the agency’s own chief economist dismissed as an ‘economics-free zone.’”
Here’s why it matters in the real world, in terms of economics and innovation: Crovitz notes that in just one year since Obama’s edict was imposed, “regulatory uncertainty has led to a collapse in investment in broadband.” As CFIF has also detailed, he is correct in that unfortunate observation.
On a more encouraging note, however, Obama’s latest attempt to regulate the Internet in ObamaCare fashion is back before the same appellate court that has twice rebuked it on this issue. As Crovitz wryly observes, “The Senate report should make fascinating reading for the federal appellate judges considering whether to invalidate the regulations… The appeals court has plenty of evidence proving White House meddling with a supposedly independent agency.”
For the good of American consumers and continuing Internet innovation, we certainly hope so.
Today, the D.C. Circuit Court of Appeals, commonly known as the nation’s second-highest court, heard oral argument on the latest attempt by the Obama Administration to regulate Internet service. On two previous occasions, the same court rejected the administration’s efforts, so now we’re at Round Three. Lawrence Spiwak of the Phoenix Center offers a helpful summary of today’s hearing, and while it’s impossible to predict the ultimate outcome, early signs are encouraging:
While it is difficult to make accurate prognostications about how a court will ultimately rule based on the questions raised at oral argument, several key points dominated the discussion:
As an initial matter, Judge Tatel clearly took umbrage with the FCC’s rejection of the roadmap under Section 706 the DC Circuit set forth in Verizon v FCC (and initially adopted by the Commission in its May 2014 Notice of Proposed Rulemaking) as the result of direct pressure from the White House. As Judge Tatel observed, given such a short time frame, the Commission’s radical departure ‘could not have been changed facts.’
Notwithstanding this displeasure, the panel generally agreed that they are governed by the Supreme Court’s holding in Brand X which emphasizes a focus on how customers perceive the offer of service provided. However, as the court also recognized that the FCC has great latitude the interpret this offer for purposes of regulatory classification, predicting whether or not the court overturns the FCC on wireline reclassification is a close call.
That said, the court appeared skeptical of the FCC’s reclassification of wireless broadband as a Title II common carrier service due to FCC’s gerrymandering of the definition of the term ‘public switched telephone network.’ Moreover, the court seemed concerned over the lack of public notice of the legal theory the Commission used to reclassify mobile broadband. As such, there is a better chance of the court overturning FCC on this issue.
Finally, as assuming the court upholds the FCC’s decision to reclassify broadband as a Title II common carrier service, the court did not appear convinced that the FCC’s application of Title II was entirely legitimate. In particular, a good part of the oral argument focused heavily on the fact that the FCC — in apparent response to last minute lobbying by edge providers to counter the analysis made in our law law review Tariffing Internet Termination: Pricing Implications of Classifying Broadband as a Title II Telecommunications Service — included ‘terminating access’ (i.e., the relationship between edge providers and BSPs) into ‘broadband Internet access service’ (’BIAS’), even though they are distinctly different products serving entirely different markets.”
Hopefully, the judicial branch will once again reject this administration’s lawless and destructive overreach, and the light-touch federal regulatory approach to Internet service that existed through both the Clinton and Bush administrations will continue.
As we have consistently highlighted, overregulation by Obama’s Federal Communications Commission (FCC) poses a grave threat to private investment in Internet service, which has thrived over two decades during both Democratic (Clinton) and Republican (Bush) presidencies because of a deliberately light regulatory approach.
The Progressive Policy Institute (PPI), in a report released this week, agrees.
In its fourth annual report on investment by American companies entitled “U.S. Investment Heroes of 2015: Why Innovation Drives Investment,” PPI ranks the top 25 non-financial U.S. companies by their amount of domestic capital spending for 2014. Notably, the survey highlights the danger that overregulation poses to investment and innovation, particularly in the telecommunications sector:
In the telecom industry, pro-investment policy should support ‘light touch’ regulation. Here we have the makings of a natural experiment, since the FCC departed from this approach last February by imposing Title II regulations on broadband service. So far in the first half of 2015, the telecom companies on our list are spending at an 11% slower pace than a year earlier.”
This offers yet another ominous warning, one that cannot be dismissed by Obama or Title II apologists as some sort of right-wing hit job. The Clinton Administration commenced the regulatory “light touch” approach that PPI’s report references, which continued through the Bush Administration as the Internet remained one of the few bright spots in an otherwise troubled economy since 2008. The PPI survey shows who the real extremists are, and thankfully offers a bipartisan roadmap for continued Internet investment and innovation: less federal regulation, not more.
Throughout the “Net Neutrality” debate over whether the federal government should begin regulating Internet service under 1930s Depression-era laws intended for copper wire telephone service, we and others have warned that Obama Administration efforts to impose such regulation would dangerously stifle private investment and innovation in the telecommunications sector.
In his weekly “Information Age” column today, L. Gordon Crovitz highlights how quickly our somber prediction has proven true. In “Obamanet Is Hurting Broadband,” Crovitz summarizes how “The predictable effect of more regulation has arrived: Investment is plummeting”:
New data show the Obama Administration’s decision to regulate the Internet as a utility has already caused a steep drop in Internet Investment… [I]n the first half of 2015, as the new regulations were being crafted in Washington, major ISPs reduced capital expenditure by an average of 12%, while the overall industry average dropped 8%. Capital spending was down 29% at AT&T and Charter Communications, 10% at Cablevision, and 4% at Verizon. (Comcast increased capital spending, but on a new home-entertainment operating system, not broadband.) Until now, spending had fallen year-to-year only twice in the history of broadband: in 2001 after the dot-com bust, and in 2009 after the recession.” [emphasis added]
Since the 1996 Telecommunications Act, the Internet has thrived and played a central role in maintaining America’s status as the most prosperous, most entrepreneurial and most innovative nation in human history. That didn’t happen by accident, nor was it due to coincidence. Rather, it occurred precisely because the federal government during both the Clinton and Bush administrations refrained from suffocating it with destructive and politically-motivated overregulation. But Obama apparently thought he had a better idea. Unfortunately, we’re already witnessing the regrettable result.
Meanwhile, Gallup just released its annual survey of public approval of various sectors of American life. Standing at or near the top once again are the computer industry, the Internet industry and the telephone industry, all with high net positives. And at the bottom, once again, is the federal government, with an atrocious -29% net negative.
All of this suggests that we would likely be better off if the computer/Internet/telecom industries regulated the federal government, rather than vice-versa.
As we at CFIF have discussed on numerous occasions, the Federal Communications Commission (FCC) effort to reclassify Internet service under Depression-era Title II regulations meant for copper-wire telephone service is a toxic idea on legal, economic and technological grounds.
Now, a new study from Georgetown University’s McDonough School of Business Center for Business and Public Policy provides additional intellectual heft and confirmation. Entitled “Regulation and Investment: A Note on Policy Evaluation Under Uncertainty, with an Application to FCC Title II Regulation of the Internet,” authors Kevin A. Hassett of the American Enterprise Institute and Robert J. Shapiro of the Georgetown Center for Business and Public Policy find that the FCC’s destructive maneuver will reduce Internet investment and innovation by an alarming 5% to 20%:
First, we showed that Title II regulation should be expected to increase costs, and therefore is the type of policy that should be expected to reduce investment. Second, we reviewed the field-specific evidence that suggested that the scale of the negative effect would be quite large, from about 5.5 percent to as much as 20.8 percent. Next, we documented that the ratio of investment to the capital stock would be expected to decline to roughly that extent if Title II regulation in the United States would be comparable to the regulatory framework of the OECD continental European countries in the first decade of the 21st century. Next, we cited an analysis by a legal scholar that suggest that this analogy is reasonable. Finally, we found that the negative effects on investment may well be significantly understated by these factors because the new regulation’s threshold effect will maximize the negative effects of uncertainty.”
The Internet has flourished to date, and become perhaps the most rapidly and profoundly transformative innovation in human history precisely because the federal government regulated with a light touch. By reversing that regulatory stance that prevailed throughout both the Clinton and Bush Administrations, the Obama Administration FCC is placing continued innovation and investment at great risk. This new study provides just the latest confirmation, and offers additional reason for Congress, the courts or even a future presidential administration to put a stop to it.
Timothy Lee, CFIF’s Senior Vice President of Legal and Public Affairs, discusses why the fight to overturn the FCC’s so-called ”Net Neutrality” Order should continue, litigation surrounding he Order, and why this isn’t just an issue for the telecommunications industry.
Listen to the interview here.
In this week’s Freedom Minute video, CFIF’s Renee Giachino discusses the plan by President Obama and the FCC to seize unprecedented regulatory control over the Internet by reclassifying Internet service as a public utility.
The bad news as 2015 begins is that the Obama Administration’s Federal Communications Commission (FCC) appears set to vote next month to reclassify broadband service as some sort of public utility. You read that correctly. After twice having its so-called “Net Neutrality” efforts rejected by federal courts, Obama has called on the FCC to double down on that destructive campaign, hoping to subject one of the few sectors of our economy that has continued to thrive in recent years to more regulation.
The good news, however, is that the incoming Republican Congress appears committed to fight that effort:
Newly fortified Republicans in Congress are considering a number of ways to stymie the Obama Administration’s planned regulations on broadband Internet providers in 2015, making Capitol Hill a new front in the fight over ‘net neutrality.’ Concern about the rules is playing into Republican efforts to rein in what they say is regulatory overreach by the Federal Communications Commission.”
Senator John Thune (R – South Dakota), the new Senate Commerce Committee chairman, struck the right chord in announcing, “The regulatory tools at the FCC’s disposal are outdated, and its previous efforts to create rules to regulate the Internet were struck down by the courts. It’s hard to imagine that its new attempt will escape legal challenges and avoid the kind of regulatory uncertainty that harms Internet innovation and investment.” Meanwhile, opposition to Obama’s scheme continues on the House side, with one House Energy and Commerce Committee staffer saying that “all options are on the table.” That includes legislation to block reclassification as a public utility, cutting FCC budgetary funding and invoking the seldom-used Congressional Review Act to void federal administrative regulations of significant impact.
Word must obviously be met with substantive deed, but it’s nice to at least see 2015 begin with a commitment from both houses of the incoming GOP Congress to fight this ill-advised, illegal and stubborn effort from Obama’s FCC.
In an excellent commentary in today’s Wall Street Journal, AEI visiting fellow and Entropy Economics LLC president Bret Swanson debunks “the two central contentions of ‘net neutrality’ fans, including President Obama, who want the Federal Communications Commission to regulate the Internet as a public utility.” Specifically, the myths of “lagging U.S. broadband and the specter of content blocking.”
Swanson proceeds to demonstrate that neither of those rationalizations for net neutrality or regulation of Internet service under laws enacted in the 1930s is true:
…the U.S. generates far more traffic per capita and per Internet user than any other major nation save South Korea, which is a vertical metropolis and thus easy to wire with fiber optics. U.S. traffic per capita is 2.1 times that of Japan and 2.7 that of Western Europe. Several years ago, U.S. and Canadian traffic measures were similar, but today the U.S. has raced ahead by 25%. The U.S. lead is similar in traffic per Internet user, which tends to reflect how intensely people use broadband and mobile connections. The U.S. outdoes its closest European rival, the U.K. by 57%. The U.S. outdoes all of Western Europe – the best comparison in terms of geography, population and economic development – by a factor of 2.5.”
He also rebuts the claim that U.S. broadband is comparatively slow or more expensive, and concludes that there’s no “problem” demanding an Obama Administration “fix”:
The U.S., with 4% of the world’s population, has 10% of its Internet users, 25% of its broadband investment and 32% of its consumer Internet traffic. The U.S. policy of Internet freedom has worked. Why does Washington want to intervene in a thriving market?”
It’s a good question, and an excellent piece.
In this week’s Freedom Minute, CFIF’s Renee Giachino discusses Barack Obama’s misguided push to have the Federal Communications Commission regulate the Internet like a public utility under telephone and railroad laws drafted in the 1930s – long before the Internet (or computers, for that matter) was even invented.
In a recent interview with CFIF, Phil Kerpen, President of American Commitment, discusses the Supreme Court’s decision to grant cert in the ObamaCare subsidies case, how a key architect of ObamaCare made news recently by boasting about taking advantage of “the stupidity of the American voter,” and what’s wrong with President Obama’s intervention in the FCC’s plans to regulate the Internet.
Listen to the interview here.
Those of us who oppose the Obama Federal Communications Commission’s (FCC’s) effort to bridle the Internet with so-called “net neutrality” regulation have explained at length why reclassifying the Internet as some sort of 1930s-style public utility under Title II is a dangerous idea.
Perhaps we we haven’t devoted appropriate time, however, to explaining why it’s almost certainly illegal.
As a broader policy matter, the vague and muddled calls from the extremist left to reclassify broadband typically don’t extend beyond an emotional demand for federal bureaucrats at the FCC to “do something.” Or, as we often put it, they seek to impose a “fix” for an Internet that isn’t at all “broken.” Accordingly, they go about offering substantive policy proposals as if lunching at a salad bar stocked with bad ingredients. They pick and choose bad items, assembling what they consider a perfect combination.
But what they instead create is a Frankenstein-like monstrosity.
And in terms of legality more specifically, the FCC would be treading onto extremely unstable ground if it opts to follow the demands of far-left activists by rushing headlong into this dubious Title II reclassification proposal. The fact of the matter is that the FCC has long contended that the Internet is a Title I service. Therefore, in order to reclassify, the law requires it to meet a higher burden of proof as to why it got the initial classification wrong. Hysterical activism from the far left that has tended to characterize this debate won’t suffice, whether as a matter of law or a matter of logic. The FCC has already twice lost this legal battle in court (first in 2010, and again in 2014). Rather than stubbornly tempt a third judicial rebuke of its effort to impose “net neutrality,” it would be better to learn its lesson as it proceeds with its rulemaking effort.
And that’s only with regard to traditional wired networks. When it comes to wireless Internet (like the 4G/LTE smartphone technology), the law actually expressly prohibits the FCC from imposing Title II-type rules. That clarity may not discourage the net-roots fringe from demanding reclassification, but it most certainly should stop the FCC from exceeding its legal mandate and once again blatantly flouting both the letter and spirit of applicable law.
Despite six years of effort to the contrary from the Obama Administration, we remain a nation of laws, not men. That timeless principle does not yield to extremists’ pursuit of the “net neutrality” unicorn.
To date, and through previous administrations of both parties over the past two decades, the FCC has avoided attempting to classify Internet service under Title II for good reason: it is bad policy and bad law. Everyone except those clinging to an ideologically extreme position on the matter have recognized that reality. We therefore cannot allow such Title II extremists to suddenly divert us from the “light touch” regulatory course that has made the Internet one of the most beneficial and revolutionary innovations in human history. There’s too much to lose.
In an interview with CFIF, Mike Wendy, director of Media Freedom, discusses how so-called “Net Neutrality” is a solution in search of a problem and why heavy-handed government regulations are not good for consumers or investment.
Listen to the interview here.
Timothy Lee, CFIF’s Senior Vice President of Legal and Public Affairs, discusses net neutrality and the misguided push to have the federal government regulate the Internet.
Listen to the interview here.
President Obama’s Federal Communications Commission (FCC), bowing to the demands of liberal special interests, is actually considering a scheme to regulate the Internet like a public utility. And if they get their way, this egregious government overreach into the broadband economy will almost certainly kill job creation, harm consumers and bring a significant amount of investment and innovation to a screeching halt.
Simply put, the federal government micromanaging the Internet under Title II of the Telecommunications Act is a dangerous scheme, one that Congress must halt and the FCC must abandon. That’s why the Center for Individual Freedom this week activated StopNetRegulation.org, a project dedicated to ensuring the Internet remains free from heavy-handed government regulations and stopping this latest power grab by the Obama administration.
Join the fight by visiting StopNetRegulation.org. While there, use the web form to quickly and easily contact your Members of Congress and the FCC.
The tech policy arena in recent days has understandably been dominated by two issues in the news – the proposed Comcast/Time-Warner Cable merger and the refusal of Net “Neutrality” proponents to allow that pernicious campaign to finally die a justified death.
Regarding the Comcast/Time-Warner Cable merger, the Heritage Foundation’s James Gattuso offers one of the better primers. He rightly criticizes the anti-merger hyperbole, and notes that the agreement is actually a sign of increased competition, not diminishing competition:
To begin with, these companies do not compete with each other. Comcast and Time-Warner Cable (not to be confused with Time-Warner, the media firm from which TWC was hived off in 2009) operate in geographically distinct cable TV franchises around the country. They do not overlap.
Moreover, while they are the largest and second-largest cable TV firms nationally, that metric is largely meaningless. The paid television marketplace includes many other competitors, ranging from telecommunications firms such as Verizon and AT&T to satellite providers such as DIRECTV, to a growing band of Internet TV providers such as Netflix and Apple TV. It’s a diverse marketplace, in which Comcast and TWC together serve barely 30 percent of subscribers. (In fact, Comcast has pledged to divest cable systems to keep the share below that figure). “
The Wall Street Journal provided the same reassurance, confirming that “a merged Comcast and TWC still has plenty of competition”:
[U]nlike the markets for beer, air travel and wireless, cable companies don’t compete with each other. They have local franchises and compete against telephone, wireless and satellite companies. So there’s no market overlap between systems owned by Comcast and those of Time Warner Cable. Comcast, which is dominant in Philadelphia, will get millions of new customers in New York and Los Angeles. But how can dominance in one geographic region give Comcast new pricing power in a different area?”
And the following day, the Journal’s Holman Jenkins takes a nice swipe at the toxic un-dead specter of Net “Neutrality” as it relates to the proposed merger:
But standing in the way is the tired concept of ‘net neutrality,’ beloved by regulators and mau-mau groups but never enacted by Congress and frequently questioned by the courts. Yet now, thanks to America’s deranged merger approval process, Time Warner and Comcast risk having just such rules imposed on them (and no one else) as extortion for regulators approving their deal.”
With federal overregulation already exacerbating what has been the most sluggish economic recovery in recorded U.S. history, and with the American public listing big government as the nation’s foremost threat, the bottom line is that bureaucratic interference via Net “Neutrality” or in the private proposed merger of Comcast and Time-Warner remains a bad idea.
On a different and more optimistic note to end the week, however, Notre Dame philosophy professor Don Howard and the Manhattan Institute’s Mark Mills anticipate the upcoming arrival of self-driving automobiles, so long as overactive government regulators referenced above don’t spoil the party:
The self-driving-car solution is clear. Congress should pre-empt Nhtsa and the trial lawyers and pass a National Autonomous Vehicle Injury Act. The Fords and Nissans and Googles and Qualcomms should voluntarily create an Autonomous Vehicle Event Reporting System. And industry players should also create a National Autonomous Vehicle Compensation System. (Vaccine compensation is funded with a de minimis tax on each dose.) Last November, Nhtsa Administrator David Strickland told Congress that ‘in addition to the devastation” that “crashes cause to families, the economic costs to society reach into the hundreds of billions of dollars. Automated vehicles can potentially help reduce these numbers significantly.’
That potential has already been realized, whether regulators understand it or not. If the human toll from highway accidents were a disease and we knew there was a cure, it would be immoral not to marshal every corner of government and industry to deploy it.”
So allow the private sector to move forward, whether through voluntary mergers or technological innovation, beyond the interference of overzealous government regulators. What a novel concept.
In an interview with CFIF, Thomas W. Hazlett, professor of law and economics at George Mason University and former chief economist of the FCC, discusses the ramifications of the recent Senate vote to reject an attempt to overturn the FCC’s net neutrality rules and his recent Encounter Books Broadside titled, “The Fallacy of Net Neutrality.”
Listen to the interview here.