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Regulatory Comments In order to maximize the benefits of broadband to society, including through the provision of public safety communications and services, public policy must promote the . . .
In order to maximize the benefits of broadband to society, including through the provision of public safety communications and services, public policy must promote the proper incentives for broadband buildout. Both the 2015 Title II Open Internet Order (the “OIO”) and the 2017 Restoring Internet Freedom Order (the “RIFO”) were premised on this. But each adopted a different approach to accomplishing this objective.
The OIO premised its rules on the theory that ISPs are “gatekeepers,” poised to kill the golden goose of demand for broadband by adopting business practices that could reduce edge innovation.
The key insight of the virtuous cycle is that broadband providers have both the incentive and the ability to act as gatekeepers standing between edge providers and consumers. As gatekeepers, they can block access altogether; they can target competitors, including competitors to their own video services; and they can extract unfair tolls. Such conductwould, as the Commission concluded in 2010, “reduce the rate of innovation at the edge and, in turn, the likely rate of improvements to network infrastructure.” In other words, when a broadband provider acts as a gatekeeper, it actually chokes consumer demand for the very broadband product it can supply.
The RIFO, on the other hand, properly conceives of ISPs as intermediaries in a two-sided market that aim to maximize the value of the market by adopting practices, like pricing structures and infrastructure investment, that increase the value for both sides of the market.
We find it essential to take a holistic view of the market(s) supplied by ISPs. ISPs, as well as edge providers, are important drivers of the virtuous cycle, and regulation must be evaluated accounting for its impact on ISPs’ capacity to drive that cycle, as well as that of edge providers. The underlying economic model of the virtuous cycle is that of a two- sided market. In a two-sided market, intermediaries—ISPs in our case—act as platforms facilitating interactions between two different customer groups, or sides of the market— edge providers and end users. . . . The key characteristic of a two-sided market, however, is that participants on each side of the market value a platform service more as the number and/or quality of participants on the platform’s other side increases. (The benefits subscribers on one side of the market bring to the subscribers on the other, and vice versa, are called positive externalities.) Thus, rather than a single side driving the market, both sides generate network externalities, and the platform provider profits by inducing both sides of the market to use its platform. In maximizing profit, a platform provider sets prices and invests in network extension and innovation, subject to costs and competitive conditions, to maximize the gain both sides of the market obtain from interacting across the platform. The more competitive the market, the larger the net gains to subscribers and edge providers. Any analysis of such a market must account for each side of the market and the platform provider.
In other words, the fundamental difference of approach between the two Orders turns on whether it is edge innovation, pushing against ISP incentives to expropriate value from edge providers, that primarily drives network demand and thus encourages investment, or whether optimization decisions by both ISPs and the edge are drivers of network value. The RIFO rightly understands that ISPs have sharp incentives both to innovate as platforms (and thus continue to attract and retain end users), as well as to continue to make their services useful to edge providers (and, by extension, the consumers of those edge providers’ services).
The D.C. Circuit upheld RIFO’s fundamental rationale as a supportable basis for the FCC’s rules in Mozilla v. FCC. But it also accepted that three specific concerns were insufficiently examined in the RIFO, and remanded the case to the FCC to address them. Among these was the question of the RIFO’s implications for public safety. In its Public Notice seeking to refresh the record on the remanded issues, the Wireline Competition Bureau asks (among other things):
These are the questions to which this comment is primarily addressed.
In Part I, we discuss how the RIFO fosters investment in broadband buildout, in particular by enabling prioritization and by reducing the effects of policy uncertainty. In Part II, we describe how that network investment benefits public safety both in both direct and indirect ways. In Part III, we highlight the benefits to public safety from prioritization, in particular, which is facilitated by the RIFO.
Read the full comments here.
TOTM In a remarkable ruling issued earlier this month, the Third Circuit Court of Appeals held in Oberdorf v. Amazon that, under Pennsylvania products liability law, Amazon could be found liable for a third party vendor’s sale of a defective product via Amazon Marketplace.
In a remarkable ruling issued earlier this month, the Third Circuit Court of Appeals held in Oberdorf v. Amazon that, under Pennsylvania products liability law, Amazon could be found liable for a third party vendor’s sale of a defective product via Amazon Marketplace. This ruling comes in the context of Section 230 of the Communications Decency Act, which is broadly understood as immunizing platforms against liability for harmful conduct posted to their platforms by third parties (Section 230 purists may object to myu use of “platform” as approximation for the statute’s term of “interactive computer services”; I address this concern by acknowledging it with this parenthetical). This immunity has long been a bedrock principle of Internet law; it has also long been controversial; and those controversies are very much at the fore of discussion today.
Read the full piece here.
TOTM This morning a diverse group of more than 75 academics, scholars, and civil society organizations — including ICLE and several of its academic affiliates — published a set of seven “Principles for Lawmakers” on liability for user-generated content online, aimed at guiding discussions around potential amendments to Section 230 of the Communications Decency Act of 1996.
This morning a diverse group of more than 75 academics, scholars, and civil society organizations — including ICLE and several of its academic affiliates — published a set of seven “Principles for Lawmakers” on liability for user-generated content online, aimed at guiding discussions around potential amendments to Section 230 of the Communications Decency Act of 1996.
Written Testimonies & Filings FTC Hearings on Competition & Consumer Protection in the 21st Century. Comments of the International Center for Law & Economics: Properly Balancing Consumer Protection and Innovation in Broadband Markets: The Competition Law and Economics of Vertical Restraints in Broadband. Hearing #10 (Mar. 20, 2019). Submitted May 31, 2019.
The necessity of the FTC’s involvement in regulating broadband competition arises most recently from the Federal Communication Commission’s (“FCC”) 2018 Restoring Internet Freedom Order (“2018 RIFO”). In the 2018 RIFO, the FCC adopted a competition-oriented approach to preventing what are otherwise violations of so-called “net neutrality” principles. This approach, consistent with the FCC’s historical deregulatory approach to information services, directly implicates the FTC as an important part of preventing competitive injuries that harm downstream consumers.
Rather than simply presuming harm, the FCC undertook an extensive, thorough, and fact-based analysis to first assess the likely risk of competitive harms that could arise in the broadband market. Based on this analysis, it concluded that the risk of harmful conduct is low, in terms of both the likelihood that ISPs will engage in such conduct and its potential adverse effects on consumers. Because this risk is low, the FCC determined that a “light-touch,” competition-oriented regulatory approach was appropriate for regulation of broadband.
This conclusion also followed from the FCC’s review of the Communications Act. As the FCC observed, “[t]he Communications Act includes an antitrust savings clause, so the antitrust laws apply with equal vigor to entities regulated by the Commission.” Recognizing this, the Commission carefully structured the 2018 RIFO so that consumers would be protected under existing consumer protection and antitrust laws, while still leaving room for the historically applied light-touch regime for information services under Title I of the Communications Act.
In so doing, the FCC struck the proper balance between indirect antitrust enforcement and direct regulation under the Communications Act, which incorporates competition policy as the generally applicable regulatory “default” in the absence of specific statutory mandates.
Click here to read full comments.
TOTM In the opening seconds of what was surely one of the worst oral arguments in a high-profile case that I have ever heard, Pantelis Michalopoulos, . . .
In the opening seconds of what was surely one of the worst oral arguments in a high-profile case that I have ever heard, Pantelis Michalopoulos, arguing for petitioners against the FCC’s 2018 Restoring Internet Freedom Order (RIFO) expertly captured both why the side he was representing should lose and the overall absurdity of the entire net neutrality debate: “This order is a stab in the heart of the Communications Act. It would literally write ‘telecommunications’ out of the law. It would end the communications agency’s oversight over the main communications service of our time.”
Amicus Brief ICLE filed a brief in support of Petitioners in the D.C. Circuit case, Mozilla v. FCC, a case that challenged the FCC's authority to issue the Restoring Internet Freedom Order ("RIFO").
ICLE filed a brief in support of Petitioners in the D.C. Circuit case, Mozilla v. FCC, a case that challenged the FCC’s authority to issue the Restoring Internet Freedom Order (“RIFO”). In RIFO, the FCC repealed the Title II classification on ISPs, preempted conflicting state laws, and applied a transparency rule against ISPs, among other provisions. In our brief, we argue that:
Contrary to the claims of Petitioners, the Commission acted well within its authority in adopting the Order. The Commission developed a comprehensive regulatory scheme for ISPs that includes both obligations imposed under the Communications Act, as well as complementary regulation and potential enforcement under antitrust law by the Commission’s sister agencies. As we show below, this competition-oriented, light touch regulatory regime comports with the relevant provisions and stated goals of the Communications Act far better than the ex ante rules adopted in the Title II Order. In adopting this competition-oriented regulatory regime, the Commission also acted within its authority to preempt contradictory state laws under well- established precedent. The Commission did so while properly allowing for states to continue to regulate under other laws of general applicability that do not conflict with or frustrate the federal policies underlying the Order. Accordingly, the Order should be upheld and the petitions for review should be denied.
Contrary to the claims of Petitioners, the Commission acted well within its authority in adopting the Order. The Commission developed a comprehensive regulatory scheme for ISPs that includes both obligations imposed under the Communications Act, as well as complementary regulation and potential enforcement under antitrust law by the Commission’s sister agencies. As we show below, this competition-oriented, light touch regulatory regime comports with the relevant provisions and stated goals of the Communications Act far better than the ex ante rules adopted in the Title II Order.
In adopting this competition-oriented regulatory regime, the Commission also acted within its authority to preempt contradictory state laws under well- established precedent. The Commission did so while properly allowing for states to continue to regulate under other laws of general applicability that do not conflict with or frustrate the federal policies underlying the Order.
Accordingly, the Order should be upheld and the petitions for review should be denied.
Presentations & Interviews Despite the Federal Communication Commission’s decision in December 2017 to eliminate the common carrier regulations for Internet services — the so-called net neutrality rules the FCC created in 2015 — the net neutrality debate rages on. Gus Hurwitz, Brent Skorup, and Geoffrey Manne discuss this new front in regulation, federalism, and grassroots activism.
Despite the Federal Communication Commission’s decision in December 2017 to eliminate the common carrier regulations for Internet services — the so-called net neutrality rules the FCC created in 2015 — the net neutrality debate rages on. The Trump FCC preempted states’ authority to regulate the Internet, yet governors in six states have attempted to enforce net neutrality principles via executive order and three states have passed “baby net neutrality bills.” Several more state bills are pending. Can state agencies regulate Internet services? What are the legal and practical impediments? What are the consequences of businesses operating under inconsistent regulations amongst the states and at the federal level? Gus Hurwitz, Brent Skorup, and Geoffrey Manne discuss this new front in regulation, federalism, and grassroots activism.
The full episode is embedded below.
TOTM At this point, only the most masochistic and cynical among DC’s policy elite actually desire for the net neutrality conflict to continue. And yet, despite claims that . . .
At this point, only the most masochistic and cynical among DC’s policy elite actually desire for the net neutrality conflict to continue. And yet, despite claims that net neutrality principles are critical to protecting consumers, passage of the current Congressional Review Act (“CRA”) disapproval resolution in Congress would undermine consumer protection and promise only to drag out the fight even longer.
TOTM I had the pleasure last month of hosting the first of a new annual roundtable discussion series on closing the rural digital divide through the University of Nebraska’s Space, Cyber, and Telecom Law Program. The purpose of the roundtable was to convene a diverse group of stakeholders for a discussion of the on-the-ground reality of closing the rural digital divide.
I had the pleasure last month of hosting the first of a new annual roundtable discussion series on closing the rural digital divide through the University of Nebraska’s Space, Cyber, and Telecom Law Program. The purpose of the roundtable was to convene a diverse group of stakeholders — from farmers to federal regulators; from small municipal ISPs to billion dollar app developers — for a discussion of the on-the-ground reality of closing the rural digital divide.
