Net Neutrality Takes A Hit As FCC Chairman Steps Down

The net neutrality world is all-abuzz with the announcement that Federal Communications Chairman (FCC) Julius Genachowski is retiring.  According to The Hill, “The net neutrality rules were one of the defining achievements of the tenure of Chairman Julius Genachowski,…”  That is not a good legacy and should not be considered an “achievement.”

“Net neutrality,” which is loosely defined as a system that allows information on the Internet to move freely without regard to content, is in reality a not so subtle attempt to regulate the Internet and the next Chairman will determine the fate of net neutrality.   The Hill also noted that, “Berin Szoka, the president of libertarian think tank TechFreedom, said he hopes the next chairman abandons the fight over net neutrality.  ‘I am mystified why we have spent the last seven years arguing about net neutrality,’ Szoka said.  He argued that the Federal Trade Commission’s existing authority to police anti-competitive and deceptive business practices is sufficient to address potential net neutrality abuses.”

On December 21, 2010, the FCC released three rules for an open Internet, which includes:  transparency, no blocking, and no unreasonable discrimination. Even though the three rules seem innocuous there are concerns.

According to the FCC, “The Open Internet R&O provides that consumers and edge providers may file a complaint regarding any perceived violation of the open Internet rules pursuant to Section 1.41 of the Commission’s Rules.”  First, the term “perceived violation” should alarm anybody who is afraid of regulatory overreach since this would create a situation where anybody could report a company that they think is violating open internet rules.  Imagine the bureaucracy that will have to be built, and paid for, to enforce this.  And, if certain groups have influenced the creation of the rule (see previous blog posting here) it is logical to think that they will be the ones reporting the perceived abuses and potentially influence the decision makers on punishments.

Any new regulations will expand the existing bureaucracy at the FCC and the folks at the FCC haven’t been that accurate (or truthful) in compliance costs.  According to a July, 2011 article in the National Journal, “The FCC estimated in its submission to OMB that complying with the disclosure mandates will take the average phone or cable company 32 hours per year.  That is triple the FCC’s previous estimate of 10 hours, which broadband providers said was too low…”  There is no telling what the cost to taxpayers will be and how much those 32 hours per year will increase.

The biggest (and probably the most important) question is the FCC’s jurisdiction and legal authority to regulate the Internet.  According to an April 6, 2010 article on MSNBC.com, “The U.S. Court of Appeals for the District of Columbia ruled that the FCC lacks authority to require broadband providers to give equal treatment to all Internet traffic flowing over their networks. That was a big victory for Comcast Corp., the nation’s largest cable company, which had challenged the FCC’s authority to impose such ‘network neutrality’ obligations on broadband providers.”

The truth is that the Internet has thrived because government has, up until now, kept a light regulatory touch on the Internet.  Quick reacting business and free market forces will keep the Internet thriving, not slow unresponsive government bureaucracies.  A new regulatory regime for the Internet will stifle innovation and cost taxpayers millions of dollars in a newly created bureaucracy.

The timing of Genachowski’s announcement is curious considering a pending lawsuit by Verizon claiming that the FCC exceeded its authority with their net neutrality rules.  There is a real possibility that the net neutrality regulations could be scrapped if the court rules in favor of Verizon.  If the new rules are scrapped, that could mean a whole new challenge to the FCC’s power to regulate the Internet.  In irony not lost on free market folks, the word of Genachowski’s retirement spread like wildfire via the Internet to all reaches of the globe without net neutrality rules.