Court decision, like the FCC, overreaches

net neutrality

I'm not sure why some "net neutrality" advocates are so upset about the D.C. Circuit Court of Appeals decision in Verizon vs FCC. But I'm quite sure that the vast majority of American broadband users are going to keep texting, Skyping, surfing, streaming, tweeting and Facebooking without a qualm for the future.

The two-judge majority gave netneuts the most important thing of all: authority. All three judges agreed that the broadband providers could not, based on existing law (specifically Chapter 706 of the Telecommunications Act of 1996), be regulated as “common carriers.” But the majority went on to elaborate a not-very-well-thought-out rationale by which, apparently, the FCC can retool its Open Internet Order rules and impose them anyway, all on its own. Netneuts should be celebrating: the majority’s reading gives the FCC virtually unlimited power to write almost any rules it wants for the Internet.

That’s not my opinion (although I agree with it). It’s the opinion of the third judge, Senior Circuit Judge Silberman, whose comments near the end of the opinion (in a partial concurrence and partial dissent) are a succinct and lucid critique not only of the FCC’s argument, at once contorted and hollow, but also of the assumptions underlying “net neutrality.”

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The chief problem with the FCC’s order is that there is no such thing as net neutrality. As Silberman concludes: “This regulation essentially provides an economic preference to a politically powerful constituency, a constituency that, as is true of typical rent seekers, wishes protection against market forces. The Commission does not have authority to grant such a favor.”

Exactly so. In being “neutral,” net neutrality in fact grants preference to a favored few, who happen to have very deep pockets. The history of capitalism in America is the history of capitalists trying to avoid real capitalism -- with its “creative destruction” and possibility of, you know, failure --  by conspiring with oh-so-willing politicians to create something like mercantilism: a bunch of rent seekers who rely on favors, and the politicians who grant them.

net neutrality

Silberman agrees that 706 grants positive regulatory authority to the FCC, but “it doesn’t come close to sanctioning the Commission’s [Open Internet] regulation.”

Silberman: The statute directs the Commission to “encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans…by utilizing…price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment."

The words that actually grant the authority, he says, are “measures that promote competition in the local telecommunications market or other regulating methods that remove barriers to infrastructure investment.”

“Yet the Commission does not ground its regulation on this language,” Silberman writes. “Indeed, both the Commission and the majority conflate these two clauses, though they have distinct functions.” The FCC, contrary to what the majority believes, never states nor argues that the “triple cushion shot” which in the Order is “the means by which the Commission hopes to stimulate demand for better broadband – is designed to increase competition in the broadband market.”

The FCC “claims it must regulate broadly, so as to ‘protect consumer choice, free expression, end-user control, and the ability to innovate without permission,’ which certainly indicates a Commission objective that exceeds the statutory authority granted in 706,” Silberman writes. The court’s majority goes even further, creating a rationale for further FCC action that, in practical terms, is almost unlimited. In the majority’s reading, 706 becomes “carte blanche to issue any regulation that the Commission might believe to be in the public interest.”

By contrast, Silberman argues, 706 actually requires the FCC “to identify a ‘barrier to infrastructure investment’ or a measure that ‘promote[s] competition’ in the broadband market – which it has not.” In other words, the Open Internet Order doesn’t have an intellectual leg to stand on.

Silberman notes the FCC’s purported fear, one might almost say panic, that broadband providers might discriminate against or even block various “edge providers” (companies that offer an array of Internet-based services to consumers) because they want to favor their own, competing services. The majority went further: it asserts that the FCC “found that broadband providers have the technical and economic ability to impose restrictions.”

There is one problem with this assertion, says Silberman. The FCC “never actually made such a finding. Its conclusion are littered with “may,” “if,” and “might,” he says. He agrees that the court should defer to the agency’s “predictive judgments” in such instances “but deference to such a judgment must be based on some logic and evidence, not sheer speculation.”

In short, there is no real evidence (at least as presented by the FCC in this case) that shows broadband providers actually restricting edge providers or, if they are, whether the providers “are economically capable of restricting consumer choice.” As the FCC itself noted in its presentation, Silberman writes, “there are potentially efficient, pro-consumer reasons that an individual broadband provider might wish to restrict access to some edge providers.”

“The Commission’s anecdotes [of alleged restrictions imposed] then do not show that any broadband providers are capable of actually causing the harm about which the Commission is concerned,” Silberman writes.

Silberman’s opinion, at least, is indeed a wake-up call. It’s a wake-up to the FCC to do its homework and begin a disciplined study of the still-evolving broadband market, and to have a bit more humility about the deleterious effects of poorly thought-out policies. The effects of the hubris of good intentions are plain to see in the attempted rollout of the Affordable Care Act.

But on behalf of President Obama, I would like to assure the millions of American Internet users that if you like the broadband plan you have, you can keep it.

You can read the full decision online or just skip to the good part, the partial concurrence, partial dissent by Judge Silberman.

John Cox covers wireless networking and mobile computing for Network World.



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