Broadband Internet Is Not a Natural Monopoly – Shouldn’t Be Regulated Like a Public Utility

By Randolph May | December 8, 2017 | 3:27pm EST
FCC Chairman Ajit Pai dsicusses net neutrality. (Screenshot)

The date for the FCC's consideration of the draft Restoring Internet Freedom order is fast approaching. It is fair to say that there has not been a more momentous vote since the Wheeler Commission voted to impose the Internet regulations that are now proposed to be undone.

While there are obviously important underlying legal and policy issues, at bottom, what is at stake can be simply stated: Should broadband Internet access service be regulated like a public utility?

Based on my experience in the communications law and policy field going back forty years, I agree completely with former Clinton Administration FCC Chairman Bill Kennard when he said, in 1999, that it would be a mistake to "go to the telephone world" and "pick up this whole morass of regulation" and dump it on broadband. That is essentially what the 2015 Open Internet Order did. And that is what the leading advocates of new Internet regulation asked the FCC to do.

Susan Crawford, one of the leading pro-regulatory advocates, argued explicitly in her book “Captive Audience” that, for broadband, "America needs to move to a utility model." No bones about it. Ms. Crawford stated, "like water and electricity," broadband is a natural monopoly that must be subject to utility regulation.

As I and other Free State Foundation scholars have explained for many years, broadband is not a natural monopoly. Absent a demonstrable market failure and evidence of consumer harm, it should not be regulated like a public utility.

I was very pleased that on December 4, the Free State Foundation published "Reactions to the FCC's Restoring Internet Freedom Draft Order" from ten members of our Board of Academic Advisors. These prominent scholars make a convincing case for changing course – for reversing the 2015 order's imposition of public utility regulation.

I urge you to read their entire statements. But here I want to highlight a very brief excerpt from each one that is useful in helping to appreciate what's at stake – and that, hopefully, spurs you to read them all.

Babette Boliek

The second serious problem created the 2015 Order was the FCC's creation of the Internet General Conduct Rule. By the FCC's own edict, the FCC can (i) articulate new, unpermitted business practices, (ii) judge when these previously unarticulated violations of the rule have occurred and (iii) punish violators. The FCC is lawmaker, judge, and executioner - a tri-partite government buried deep in the bowels of the FCC.

Timothy Brennan

The previous FCC should never have gone down the 2015 OIO path. Simply, and with modesty, it should have proposed that, because of the general importance of the Internet as a communications medium, it would codify established industry practices regarding delivery of standard quality content, and leave the rest to the market - including paid prioritization to foster innovations requiring higher quality service.

Michelle Connolly

The current FCC intends to reverse an order imposed in 2015. I do not see how anyone can argue that the Internet, content, and services on the Internet, and freedom of speech were not flourishing before 2015.

Robert Crandall

Supporters of the FCC's decision to repeal Title II ("public utility") regulation of broadband carriers applaud the decision in large part because they believe that such regulation suppresses capital investment. Recent studies show a substantial slowdown in capital expenditures by broadband carriers since 2014 when the FCC began considering some form of public-utility regulation of broadband.

Richard Epstein

All network industries are difficult to organize and regulate. The Wheeler rules underestimated the complexity of the broadband market that the Pai order fully acknowledges, Professor Wu's overwrought critique notwithstanding.

Justin (Gus) Hurwitz

The new Order, however, is better - factually better, legally better, and better reasoned - than the previous one. It is sufficient on its own terms to survive judicial review - and it is more sufficient than the previous Order to survive review on the terms the D.C. Circuit applied to that Order.

Daniel Lyons

I also applaud the Commission's focus on transparency. For competition to work, consumers must make informed choices between providers, which means understanding what each provider offers. Through this order, the FCC can improve the quality of broadband markets by assuring consumers get the information they need to make an informed choice among providers.

James Prieger

Those who foresee dire consequences for the future of the American Internet from rolling back the 2015 Title II regulation ignore the great success and continued growth of the Internet over the past two decades - growth that occurred (until 2015) in the absence of net neutrality regulation. I look forward to the lighter-touch regulation of ISPs to, as the draft order states, "advance our critical work to promote broadband deployment in rural America and infrastructure investment throughout the nation, brighten the future of innovation both within networks and at their edge, and move closer to the goal of eliminating the digital divide."

Christopher Walker

Last week Chairman Ajit Pai announced his intention to roll back the FCC's 2015 Open Internet Order. I leave it to experts in the telecommunications field to debate the legal and policy merits of the proposed order. As a scholar of administrative law, however, I applaud Chairman Pai's decision to make public the draft text of the Restoring Internet Freedom Order in advance of the FCC's consideration at its next public meeting.

Christopher Yoo

The Federal Communications Commission is poised to adopt the proposed order on Restoring Internet Freedom. The network neutrality debate has always struck me as having a backward-looking quality, calling for preservation of certain features that are claimed to have been critical to the Internet's past success. As the FCC's proposed order discusses at length, the record before the agency tells a different story. The existing rules have deterred investment and innovation and worsened the digital divide by making service in rural and low-income areas and service by small ISPs more costly.

So, there is much at stake when the Commission votes on December 14. Here, I'll let Christopher Yoo have the last word, not only because he fell last in alphabetical order, but because in this, as in so much else, he is profoundly correct:

"Returning to the light-touch policy that has served the Internet so well represents the best way to foster innovation in a changing environment. If not, the U.S. risks remaining stuck on the innovation-stifling path that has served other countries so poorly."

Randolph May is President of the Free State Foundation, a nonpartisan, independent free market-oriented think tank.

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