September 30, 2009
New FCC Chairman Targets internet
New Federal Communications Commission Chairman Julius Genachowski could have used a few more dollops of genuine humility in his Monday speech advocating enforceable "network neutrality" rules for the Internet. Despite declaring "we cannot know what tomorrow holds on the Internet," he showed he intends to lead the FCC as if it were all-knowing. That will only end up choking the greatest engine of innovation in modern times.
Genachowski laid out his plans in a highly anticipated speech at the Brookings Institution in Washington, DC. The mostly voluntary concept of net neutrality -- which encourages the free flow of content across the Internet -- would be transformed into formal rules Internet service providers (ISPs) would violate at their peril.
Instead of managing traffic in response to market forces, ISPs would be forced to cede such decisions to the FCC, which would decide which practices are "fair" and "reasonable" on a "case-by-case basis." But it would be foolish to replace the swift judgment of millions of consumers with the dictates of a handful of slow-footed, uninformed, unaccountable bureaucrats.
For one thing, the FCC has proven either unwilling or unable to competently regulate its current spheres of influence. The United States Court of Appeals for the DC Circuit provided Exhibit A in an August decision that can be described only as a public embarrassment.
The court vacated the FCC's longstanding rule limiting a single cable company to no more than 30 percent of the market's overall premium television service. The judges -- who recognized the rise of satellite and fiber-optic TV delivery into the market, even if the commission remained willingly blind -- called the rule "arbitrary and capricious."
To drive the point home, the opinion noted the FCC's "dereliction in this case is particularly egregious" because it ignored previous court orders to reconsider the rule in light of how market competition made it obsolete.
It takes quite a dose of hubris to propose micromanaging an even more vibrant Internet industry in the wake of that humiliation. Undeterred, however, Genachowski said Monday it is incumbent upon the FCC to impose "fair rules of the road for companies that control access to the Internet."
Ask the cable companies who have lived under the thumb of a long-obsolete rule how "fair" the FCC can be on such matters. Such policies make it clear the commission, like the great majority of regulatory agencies, is chiefly interested in retaining and exercising power and will not let go unless courts forcibly wrench its hands off people's necks.
By grabbing power over the broadband and wireless industries, the FCC would set itself up for more lawsuits and more humiliation. The costs of those lawsuits will be borne by taxpayers and consumers, who also will see less innovation because of the senseless diversion of investment capital.
Genachowski is attempting to solve a problem that doesn't exist, which he plainly admitted by stating his goal is to "preserve" the freedom and openness of today's Internet.
Rare instances of unfair discrimination -- such as ISPs favoring certain content because of joint business ventures -- are sufficiently addressed by market forces. Customers who are dissatisfied with their service can freely choose a competitor. The financial incentive to please the maximum number of people is how markets enforce best practices, and that principle applies to ISPs as well.
The new chairman said, "this is not about government regulation of the Internet," and he did it with a straight face. But this is all about government regulation of the Internet, coming from an agency with a proven record of regulatory failure and abuse of power.
Americans should have little faith in Genachowski's pledge the FCC "will do as much as we need to do, and no more" when regulating the Internet. When you don't "know what tomorrow holds on the Internet," how can you be sure the regulatory lines will be drawn so perfectly?
Answer: You can't. But it's clear what awaits us if the FCC moves forward with the chairman's plans: less freedom, less investment, less innovation.
James G. Lakely (firstname.lastname@example.org) is co-director of the Chicago-based Heartland Institute's Center on the Digital Economy and managing editor of InfoTech & Telecom News.