Today the D.C. Circuit struck down most of the FCC’s 2010 Open Internet Order, rejecting rules that required broadband providers to carry all traffic for edge providers (“anti-blocking”) and prevented providers from negotiating deals for prioritized carriage. However, the appeals court did conclude that the FCC has statutory authority to issue “Net Neutrality” rules under Section 706(a) and let stand the FCC’s requirement that broadband providers clearly disclose their network management practices.

The following statement may be attributed to Geoffrey Manne and Berin Szoka:

The FCC may have lost today’s battle, but it just won the war over regulating the Internet. By recognizing Section 706 as an independent grant of statutory authority, the court has given the FCC near limitless power to regulate not just broadband, but the Internet itself, as Judge Silberman recognized in his dissent.

The court left the door open for the FCC to write new Net Neutrality rules, provided the Commission doesn’t treat broadband providers as common carriers. This means that, even without reclassifying broadband as a Title II service, the FCC could require that any deals between broadband and content providers be reasonable and non-discriminatory, just as it has required wireless carriers to provide data roaming services to their competitors’ customers on that basis. In principle, this might be a sound approach, if the rule resembles antitrust standards. But even that limitation could easily be evaded if the FCC regulates through case-by-case enforcement actions, as it tried to do before issuing the Open Internet Order. Either way, the FCC need only make a colorable argument under Section 706 that its actions are designed to “encourage the deployment… of advanced telecommunications services.” If the FCC’s tenuous “triple cushion shot” argument could satisfy that test, there is little limit to the deference the FCC will receive.

But that’s just for Net Neutrality. Section 706 covers “advanced telecommunications,” which seems to include any information service, from broadband to the interconnectivity of smart appliances like washing machines and home thermostats. If the court’s ruling on Section 706 is really as broad as it sounds, and as the dissent fears, the FCC just acquired wide authority over these, as well — in short, the entire Internet, including the “Internet of Things.” While the court’s “no common carrier rules” limitation is a real one, the FCC clearly just gained enormous power that it didn’t have before today’s ruling.

Today’s decision essentially rewrites the Communications Act in a way that will, ironically, do the opposite of what the FCC claims: hurt, not help, deployment of new Internet services. Whatever the FCC’s role ought to be, such decisions should be up to our elected representatives, not three unelected FCC Commissioners. So if there’s a silver lining in any of this, it may be that the true implications of today’s decision are so radical that Congress finally writes a new Communications Act — a long-overdue process Congressmen Fred Upton and Greg Walden have recently begun.

Szoka and Manne are available for comment at [email protected]. Find/share this release on Facebook or Twitter.

Filed under: federal communications commission, international center for law & economics, net neutrality, regulation, technology, telecommunications, wireless Tagged: Broadband, FCC, Federal Communications Commission, Internet of Things, net neutrality, Open Internet Order, Verizon v. FCC

Today the D.C. Circuit struck down most of the FCC’s 2010 Open Internet Order, rejecting rules that required broadband providers to carry all traffic for edge providers (“anti-blocking”) and prevented providers from negotiating deals for prioritized carriage. However, the appeals court did conclude that the FCC has statutory authority to issue “Net Neutrality” rules under Section 706(a) and let stand the FCC’s requirement that broadband providers clearly disclose their network management practices.

Read the full piece here.

Summary

“STELA (and its predecessors) as well as the Cable Act were written to promote competition and to protect consumers in nascent markets. But since their enactment the market has
fundamentally changed, becoming quite competitive. Rather than continuing to try to tweak the laws of a bygone era, Congress should abandon these disparately applied, technology specific regulations and embrace the default tool for dealing with market power across the economy: antitrust law. Antitrust is the best tool for policing market power in evolving (if not
perfectly competitive) markets, to ensure that distributors with market power do not use their power to harm consumers, while recognizing the benefits that come from experimentation in new technologies and business models for delivering video content to consumers…”

Summary

Armen Alchian was one of the great economists of the twentieth century, and his 1950 paper, Uncertainty, Evolution, and Economic Theory, one of the most important contributions to the economic literature. Anticipating modern behavioral economics, Alchian explains that firms most decidedly do not – cannot – actually operate as rational profit maximizers. Nevertheless, economists can make useful predictions even in a world of uncertainty and incomplete information because market environments “adopt” those firms that best fit their environments, permitting them to be modeled as if they behave rationally. This insight has important and under-appreciated implications for the debate today over the usefulness of behavioral economics.

Alchian’s explanation of the role of market forces in shaping outcomes poses a serious challenge to behavioralists’ claims. While Alchian’s (and our) conclusions are born out of the same realization that uncertainty pervades economic decision making that preoccupies the behavioralists, his work suggests a very different conclusion: The evolutionary pressures identified by Alchian may have led to seemingly inefficient firms and other institutions that, in actuality, constrain the effects of bias by market participants. In other words, the very “defects” of profitable firms – from conservatism to excessive bureaucracy to agency costs – may actually support their relative efficiency and effectiveness, even if they appear problematic, costly or inefficient. In fact, their very persistence argues strongly for that conclusion.

In Part I, we offer a short summary of Uncertainty, Evolution, and Economic Theory. In Part II, we explain the implications of Alchian’s paper for behavioral economics. Part III looks at some findings from experimental economics, and the banking industry in particular, to demonstrate how biases are constrained by firms and other institutions – in ways often misunderstood by behavioral economists. In Part IV, we consider what Alchian’s model means for government regulation (with special emphasis on antitrust and consumer protection regulation).

Summary

“The Telecommunications Act of 1996 has been outdated since the moment it was signed into law, and we applaud the Committee for taking up the task of bringing it up to date. The Act’s siloed approach reflects the assumptions of the pre-Internet era, and is completely out of sync with the market it now governs. The sooner it is replaced with a technologically neutral act focused on how regulated conduct affects consumer welfare, the better, as we argued in our earlier comments in this ongoing inquiry…”

Summary

“Twenty years ago, Democrats and Republicans agreed on the need to refocus communications competition policy on promoting competition in an era of convergence, focusing on effects rather than formalism. Unfortunately, that focus was lost in the sausage-making process of legislation – and the FCC has been increasingly adrift ever since. The FCC has not waited for Congress to act, and has instead found creative ways to sidestep the formalist structure of the Act. It is high time for Congress to reassert its authority and to craft a new act focused on the effects of competition as a durable basis for regulation.

The antitrust statutes have not been fundamentally modified in over a century because Congress has not needed to do so: antitrust law has evolved on top of them through a mix of court decisions and doctrinal development articulated by the antitrust agencies. At the heart of this evolution of common law has been one guiding concern: effects on consumer welfare, seen through the lens of law and economics. The same concern and same analytical lens should guide the re-write of the Communications Act that is, by now, two decades overdue.

While refocusing competition regulation on effects, Congress should give equal focus to minimizing remaining barriers to competition. In particular, that means minimizing regulatory uncertainty (and, in particular, avoiding any return to mostly archaic Title II regulations); maximizing the amount of spectrum available; simplifying the construction and upgrading of wireless towers to maximize the capacity of wireless broadband; and promoting infrastructure policy at all levels of government that makes deployment cost-effective…”

Federal Trade Commissioner Joshua Wright talked about the FTC Act dealing with “unfair or deceptive acts or practices” along with Geoffrey Manne and Berin Szoka.

“The Need for Limits on Agency Discretion and the Case for Section 5 UMC Guidelines” was the luncheon keynote address that opened “The FTC: Technology & Reform Conference” at the Willard Hotel.

Federal Trade Commission Structure and Regulatory Practices Panelists talked about the Federal Trade Commission’s (FTC) structure and regulatory practices.