The FCC's Net Neutrality Proposal: The Wrong Way to Use Regulatory Presumptions
In April 2011, I proposed something along these lines in my piece, “A Modest Proposal for FCC Regulatory Reform.” There I suggested that Congress revise the Communications Act’s Section 10 forbearance and Section 11 periodic review provisions to incorporate a rebuttable presumption to the effect that, absent clear and convincing evidence to the contrary, the FCC must deem the consumer protection and public interest criteria for granting regulatory relief satisfied. In my July 2013 testimony before the House Commerce Committee at the Subcommittee on Communications and Technology’s hearing on “Improving FCC Process,” I urged that, absent clear and convincing evidence that regulation is needed, the Communications Act be amended to incorporate a rebuttable presumption requiring the FCC to grant regulatory relief. I am pleased that Rep. Bob Latta, the Vice Chairman of the Communications Subcommittee, has introduced a bill, H.R. 2649, to establish just such a deregulatory rebuttable presumption consistent with my proposal.
And last November, once again before the House Subcommittee on Communications and Technology, I urged in my testimony that, in the new digital environment in which consumers generally have choices among alternative providers, “the FCC's future regulatory activity should be tied closely to findings of demonstrable market failure and actual consumer harm.” I testified that the FCC should be required, much more than it is today, “to engage in rigorous economic analysis that focuses on whether there is a demonstrated market failure causing actual consumer harm.”
Now, back to the Commission’s proposed new net neutrality regulations. Not only is there not any showing of a present market failure in the broadband marketplace, but in paragraph 49 the Commission largely dismisses any need to perform a meaningful market power analysis. It says that its “open Internet concerns” are not limited to markets in which broadband providers may have market power.
Assuming for present purposes that the majority decision in the D.C. Circuit’s Verizon v. FCC case remains the controlling precedent, it may be that the FCC, subject to compliance with various other legal constraints, has the authority to readopt some form of net neutrality regulations in the absence of a showing that Internet providers possess market power. But this is in no way means that it is a sound approach for the agency to follow. Indeed, it would be unwise for the Commission to embark on implementing a new regulatory regime for the Internet while disclaiming the need, first, to find a market failure.
I will admit that the Telecommunications Act of 1996 may not directly require the FCC to adopt the presumptively deregulatory approach that I advocate. That is why I have urged that the Communications Act be revised in a way that explicitly employs rebuttable presumptions to prevent the FCC from imposing regulation in the absence of convincing evidence of market failure and consumer harm. But while the 1996 Act may not explicitly require the Commission to employ deregulatory presumptions, Congress did state at the beginning of the key conference report that the legislation was intended to create a “pro-competitive, deregulatory national policy framework.”
And of central relevance here, Congress also stated in the 1996 Act that it is the policy of the United States “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulations.”
I have said many times in the past few months that the wisest course at this time would be for the FCC to refrain from readopting net neutrality regulations, while giving Congress a chance to work its will. But assuming the FCC does move forward, it should not be so presumptuous as to presume the need for regulation of Internet providers’ practices. This is the wrong way to employ rebuttable presumptions.
The proper approach, given what Congress said when it adopted the Telecom Act of 1996, and given the current dynamism and competitiveness in the broadband Internet marketplace, is to presume, absent clear and convincing evidence of a market failure and consumer harm, that regulation is not needed.
This would be the right way for the Commission to use rebuttable presumptions.