The U.S. government is about to take its biggest step yet in handing control of the internet to giant corporations.
The Federal Communications Commission will release its plan on Wednesday to gut net neutrality rules put in place during the Barack Obama administration—a move cheered by nobody outside of major telecom companies and their trade groups.
FCC Chairman Ajit Pai made it official on Tuesday, announcing in a Wall Street Journal op-ed that this move—spearheaded by him—would herald a new era of innovation and investment.
Pai puts forward a variety of arguments to support this statement, and they’re worth considering. They’re the same arguments put forward by anti-net neutrality advocates for years, all of which have been roundly rejected by consumer advocates.
Still, it’s worth parsing through these arguments. So, we’ve taken the liberty of annotating Pai’s op-ed.
As millions flocked to the web for the first time in the 1990s, President Clinton and a Republican Congress decided “to preserve the vibrant and competitive free market that presently exists for the Internet.” In the Telecommunications Act of 1996, the government called for an internet “unfettered by Federal or State regulation.” The result of that fateful decision was the greatest free-market success story in history.
Everything in this paragraph is factually accurate. It’s also being used in a hilariously manipulative way to make the argument that because there were no net neutrality rules in the 1990s that we don’t need them now. The internet is a whole lot different now than it was then.
Encouraged by light-touch regulation, private companies invested over $1.5 trillion in nearly two decades to build out American communications networks. Without having to ask anyone’s permission, innovators everywhere used the internet’s open platform to start companies that have transformed how billions of people live and work.
This is a tremendously important point, and it will resonate throughout this piece. Again, the argument here is that things were great when the internet was first started and we should therefore keep the same rules in place. And all this happened because the internet was an even playing field.
But that changed in 2014. Just days after a poor midterm election result, President Obama publicly pressured the Federal Communications Commission to reject the longstanding consensus on a market-based approach to the internet. He instead urged the agency to impose upon internet service providers a creaky regulatory framework called “Title II,” which was designed in the 1930s to tame the Ma Bell telephone monopoly. A few months later, the FCC followed President Obama’s instructions on a party-line vote. I voted “no,” but the agency’s majority chose micromanagement over markets.
Skipped a step here. The FCC first adopted the Open Internet Order in 2010 to put in place the tenets of what would become known as net neutrality, including not blocking valid websites and not favoring network traffic from particular places, even if paid to do so. Even then the rules were controversial, and net neutrality advocates weren’t entirely pleased.
Pai is right that the FCC under Obama did turn to a nearly century-old rule to ensure strong net neutrality protection. The use of the word “micromanagement” bears scrutiny here because all it really means is that the FCC has the legal right to enforce the rules as needed. What scares telecom companies is that it also opens the door to price regulation.
This burdensome regulation has failed consumers and businesses alike. In the two years after the FCC’s decision, broadband network investment dropped more than 5.6%—the first time a decline has happened outside of a recession. If the current rules are left in place, millions of Americans who are on the wrong side of the digital divide would have to wait years to get more broadband.
The effect has been particularly serious for smaller internet service providers. They don’t have the time, money or lawyers to cut through a thicket of complex rules. The Wireless Internet Service Providers Association, which represents small fixed wireless companies that generally operate in rural America, found that more than 80% of its members “incurred additional expense in complying with the Title II rules, had delayed or reduced network expansion, had delayed or reduced services and had allocated budget to comply with the rules.” They aren’t alone. Other small companies have told the FCC that these regulations have forced them to cancel, delay or curtail upgrades to their fiber networks.
The uncertainty surrounding the FCC’s onerous rules has also slowed the introduction of new services. One major company reported that it put on hold a project to build out its out-of-home Wi-Fi network partly because it wasn’t sure if the FCC would approve of its business model. Nineteen municipal internet service providers—that is, city-owned nonprofits—told the [FCC] this past May that they “often delay or hold off from rolling out a new feature or service because we cannot afford to deal with a potential complaint and enforcement action.”
Telecom companies have cautioned (more realistically, threatened) that the net neutrality rules put in place would cause them to lower their investment in high-speed internet networks. Pai has some cherry-picked stats, but there’s plenty of studies out there showing that there’s little if any impact on investment.
The whole argument around small internet providers is similarly hard to swallow. Plenty of these business have told the FCC they want the rules as they are. And the supposedly stringent and costly reporting requirements were waived for providers with fewer than 100,000 customers, then boosted to 250,000 subscribers, as The Verge reported.
In other words, all these issues are either moot or have been addressed.
This is why I’m proposing today that my colleagues at the Federal Communications Commission repeal President Obama’s heavy-handed internet regulations. Instead the FCC simply would require internet service providers to be transparent so that consumers can buy the plan that’s best for them. And entrepreneurs and other small businesses would have the technical information they need to innovate. The Federal Trade Commission would police ISPs, protect consumers and promote competition, just as it did before 2015. Instead of being flyspecked by lawyers and bureaucrats, the internet would once again thrive under engineers and entrepreneurs.
Here’s the rub. What Pai is saying is that we need to trust internet service providers that they will follow the rules thanks to what is essentially a handshake agreement. These are companies that have already shown willing to block websites and to offer special mobile data deals for particular companies. There’s just too much money to be made for them to keep things as they are.
The FCC will vote on this proposal on Dec. 14. If it passes, Washington will return to the bipartisan approach that made the internet what it is today. Consumers will benefit from greater investment in digital infrastructure, which will create jobs, increase competition, and lead to better, faster, and cheaper internet access—especially in rural America.
In the next few weeks, anti-market ideologues are going to try to scare the American people. They’ll argue that government control is the only way to assure a free and open internet. They’ll assert that repealing utility-style regulation will destroy the internet as we know it and harm innovation. They’ll allege that free speech online is at risk. Don’t fall for the fearmongering.
Pai’s not wrong here. This is what advocates for government-enforced net neutrality have, are, and will argue. That is because there is decades of communications shenanigans to back up those concerns. It’s why Franklin D. Roosevelt helped create the FCC in 1934 just when electronic communications were taking off. It’s why any and every industry is regulated.
We have proof that markets work: For almost two decades, the U.S. had a free and open internet without these heavy-handed rules. There was no market failure before 2015. Americans weren’t living in a digital dystopia before the FCC seized power. To the contrary, millions enjoyed an online economy that was the envy of the world. They experienced the most powerful platform ever seen for permission-less innovation and expression. Next month, I hope the FCC will choose to return to the common-sense policies that helped the online world transform the physical one.
We’re back to the main issue here. The primary argument used against net neutrality is that we didn’t need it before, so we don’t need it now. This could not be farther from the reality in which the internet now operates, with increasingly powerful companies like Google and Facebook exerting their will over smaller competitors.
Meanwhile, the companies that provide internet service are looking for ways to make more money. The easiest way is to charge both companies and people for use of their network, just as cable companies do.
Sadly, it’s no longer the 1990s, and letting corporations manipulate the internet won’t create anything near a “digital dystopia.”
Mr. Pai is the chairman of the Federal Communications Commission.
Easily the truest part of the op-ed.