ICLE advises FCC to reject economically insupportable 2015 Open Internet Order

The International Center for Law & Economics (ICLE) filed two sets of comments with the Federal Communications Commission supporting the reversal of former Chairman Wheeler’s controversial 2015 Open Internet Order (OIO). One set of comments addresses the economic and policy problems with the Order, the other focuses particularly on privacy issues.

“The 2015 Order, with its reclassification of broadband providers under Title II, is a towering manifestation of the delusion of technocrats everywhere: that government can surely “design” a better future if only it pulls the right levers.”

Geoffrey A. Manne, ICLE Executive Director

Federal administrative agencies are required to engage in “reasoned decision-making” based on a thorough review and accurate characterization of the record. Their analysis must be based on facts and reasoned predictions; it must be rooted in sound economic reasoning; it must be logically coherent; it must not entail subterfuge or misleading statements. But on even these most basic grounds the 2015 OIO falls short.

Only through gross oversimplification and neglect of economics could the Commission assert the confidence in its position sufficient to saddle the Internet with such an invasive regulatory regime. The economic literature ignored by the Commission calls into question fundamental assertions in the Order, including the existence of a “virtuous cycle” of broadband deployment, the effect of reclassification on ISPs’ investment incentives, and the ability of ISPs without market power to act as “gatekeepers.”

In particular, the Commission offered no economic support for its outright ban on paid prioritization. Scarcity on the Internet (as everywhere else) is a fact of life, and if rationing isn’t performed by a price mechanism, it will be performed by something else.

Prioritization facilitates the optimal use of scarce data, enables network management practices that alleviate congestion overall, and allows ISPs to reduce the risk of infrastructure investment by speeding up the rate at which they realize returns. Deterring or prohibiting innovative broadband business models that seek to offer content via programs like zero rating and sponsored data undermines not only optimal policy making, but also net neutrality proponents’ own stated aim to enhance “the value of [] broadband to consumers.”

As we have noted previously, the Communications Act does not actually authorize the FCC to adopt net neutrality rules; such are the realities of interpreting and enforcing laws written to govern telegraphs in 1934 (and amended in 1996, but not to address the Internet) to govern 21st century communications networks. Of course, there’s a simple solution to that problem: Congress can amend the Act or pass a new law if it decides it wants the FCC to have the authority to implement net neutrality rules.

The full text of ICLE’s economic and policy comments can be found here. ICLE’s privacy comments can be found here.
Selected ICLE work on this issue: