TPA Continues to Urge FCC Against Net Neutrality Push

FCC Chairman Tom Wheeler with President Obama (courtesy WhiteHouse.gov)

The Taxpayers Protection Alliance (TPA) continues to warn against ‘net neutrality’ and increased regulatory initiatives on the Internet stressing the belief that a light regulatory footprint by the government is what has allowed for such innovation and expansive commerce and economic output by way of the Internet. Today, TPA President David Williams submitted another public comment (view here) regarding a draft proposal for new rules on open Internet policy from the Federal Communications Commission (FCC) including the possibility of a reclassification of Internet Service Providers (ISPs) under Title II, which would most certainly result in more regulation and more government control over the Internet.

Here is the full comment submission to the FCC from TPA:

September 15, 2014

The Honorable Thomas Wheeler, Chairman
The Honorable Mignon Clyburn, Commissioner
The Honorable Ajit Pai, Commissioner
The Honorable Jessica Rosenworcel, Commissioner
The Honorable Michael O’Rielly, Commissioner

Federal Communications Commission
445 12th Street, SW
Washington, DC 20554

In the Matter of
Protecting and Promoting the Open Internet
GN Docket No. 14-28

The Taxpayers Protection Alliance (TPA), representing concerned citizens all across the country, submitted comments two months ago regarding the new draft proposal put out by the Federal Communications Commission (FCC) on May the 15th of this year. The proposal was in response to the FCC moving forward with new rule making regarding Net Neutrality rules following a ruling from the U.S. District Court of Appeals for the District of Columbia on January in which the court afforded the FCC to redraft their original proposal. TPA would like to reiterate our position on the matter and include some additional perspective on this issue.

First, the debate over the new proposed rules will turn on the fundamental question of “What is the right public policy to ensure that the Internet remains open?” Regarding the Notice of Proposed Rulemaking (NPRM) for GN Docket No. 14-28 it is important to reinforce the fact that the best public policy approach is a light regulatory touch. The creation of new and burdensome regulations for the Internet will cause problems for all consumers.  With the capital that the private sector has been investing in the internet for years, there’s absolutely zero justification for moving away from the kind of minimal regulatory approach that has already seen beneficial results for the marketplace. A report out early last year by Charles Davidson and Michael Santorelli at the New York University Law School noted that, “Broadband providers have invested more than $1 trillion in broadband between 1996 and 2010, and $66 billion in 2011.“ The United States Telecom Association estimated that private sector investment in broadband was $68 billion.  This type of private sector investment is what has allowed the Internet to flourish exponentially.  The FCC’s new rule proposals would be nothing more than a hindrance to private sector investment that will harm both consumers and businesses and in turn have a negative impact on taxpayers and the overall economy.

Second, it should be repeated that the respective roles of both the FCC and the Congress are extremely important when considering how to proceed with the NPRM.  When it comes to the FCC’s stated intentions to “seriously consider the use of Title II of the Communications Act as the basis for legal authority,” it is TPA’s position that Congress must assert its authority concerning the FCC’s role, and ask the FCC to await further action from Congress.  This principle was stated in a May 15, 2014 coalition letter sent to the FCC and House and Senate leaders on the Commerce Committee:

In consideration of the vibrant Internet market of both service providers and over-the-top services, we submit that no market failure or real harm to consumers has been adequately demonstrated to support any expansion of FCC authority over the Internet. We urge Congress to act expeditiously in expressing its understanding of the proper role of the FCC in regard to regulating the Internet, and urge the FCC to wait for Congressional direction.

It is equally important to lay out that in addition to the roles that Congress and the FCC should play in this process, we continue to be concerned about reclassifying broadband under Title II.  As stated in the May 15, 2014 coalition letter:

The primary problem with Title II regulation of the competitive broadband industry is that it would abruptly decelerate the speed of Internet innovation to the speed of government – a regulatory regime that is as slow as the slowest part of the FCC’s filing and public comment process.

Title II of the Communications Act is meant to deal with government-granted, government- regulated monopolies. The old bargain for what were once thought to be “natural monopolies” was that in order to encourage large, capital-intensive investments in utilities such as water, electric, or old-fashioned telephone infrastructure, government would grant a monopoly to a single provider who agreed to build very expensive infrastructure. Once built, these government-protected, government-regulated monopolies would be granted a guaranteed “rate of return” on their investments, but be forbidden from charging their customers monopoly prices.

Now, regarding the finding by the FCC regarding broadband providers state that “In its 2010 Order, the Commission found that providers of broadband Internet access service had three types of incentives to limit Internet openness. First, broadband providers may have economic incentives to block or disadvantage a particular edge provider or class of edge.” This is simply a false premise, the idea that there would be some type of market advantage or interest in blocking service just doesn’t hold up. According to data found in the annual survey from CTIA, the Wireless Association, U.S. wireless providers handled more than 3.2 trillion megabytes (MB) of data in 2013, which amounted to a 120 percent increase over the year prior. It is almost unimaginable to think that any provider of broadband Internet access in today’s market would look to make it more difficult for their customers to able to attain and utilize their service. The fact that consumers have competition for service with so many platforms with which to access the Internet makes the case for providers to ensure the best customer experience. In fact, this data also makes the case more clear for the release of more government-owned spectrum into the marketplace to keep up with the ever-increasing demand of service and is a continued testament to the success of private sector investment into this industry.

Finally, the proposed rule making that would enable a reclassification of the Internet under Title II as a utility could have a very negative impact on the upcoming Spectrum Incentive Auction that the FCC has set for 2015. The economic benefits that can be achieved through the government allowing more spectrum into the market for wireless carriers will reach providers, consumers, businesses, and taxpayers. However should the regulatory approach of the FCC become a reality under the new proposed rule making that we are faced with, many of those benefits may not be there for any stakeholders once the auction actually takes place. The value of the spectrum is the most important aspect when looking at the auction process.  Accordiing to George S. Ford, chief economist of the Phoenix Center for Advanced Legal & Economic Public Policy Studies (a non-profit 501(c)(3) research organization that studies broad public-policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of the digital age) described in a recent piece for The Hill exactly how a reclassification of the Internet under Title II as a utility could be disastrous for the value of spectrum in an incentive auction.

There’s a good argument to be made that the network neutrality rules being considered by the agency today are more onerous than those imposed on the C-Block. Certainly, reclassifying all broadband modalities, including mobile broadband, as a Title II common carrier telecommunications service would be a significant expansion of regulation in the sector. With more onerous regulations, a bigger reduction in auction revenues than that seen in the first broadcast spectrum auction should be expected. Such a massive loss in auction revenues would, no doubt, have a huge impact on the supply of spectrum to the auction. Broadcasters are only in it for the money, and if the money isn’t so good or isn’t expected to be so good, then I suspect many of the license holders will simply stay home.

The release of government owned spectrum is one of the most important aspects to encouraging greater consumer satisfaction and more broadband expansion in the wireless marketplace. Currently, the government owns about 60 percent of the best quality spectrum. TPA applauds the FCC’s decision to allow for the auction process to move forward, but there should be great concern not only for the rules that are being applied to this upcoming auction already but also new rules that may impact the value of the high quality spectrum that will be offered for release. The FCC should make sure that the value of the spectrum is such that when the auction does take place, taxpayers can receive the maximum benefit of the revenue raised

The Taxpayers Protection Alliance has continued to warn against “net neutrality” and increased regulatory measures on the Internet, stressing the point that the Internet has continued to thrive as government has kept a light regulatory touch. Quick reacting business and free market forces have continued to keep the Internet thriving, while slow unresponsive government bureaucracies are most certainly not the way forward as innovation continues to be a key hallmark.

A new regulatory regime for the Internet would without a doubt stifle that very innovation and cost taxpayers millions of dollars funding a newly created bureaucracy and result in a great number of unintended consequences that the government not only won’t be able to handle but also may not likely have no recourse for going forward. The Internet currently contains more than 800 million websites and new rules creating more regulation would be antithetical in encouraging innovation and expanding the commerce that has been a hallmark of the progress we’ve seen in recent decades. The best way to continue the thriving nature that has made the Internet the engine of success that it is would be to keep net neutrality and it’s harmful regulatory reach as far away from the web as possible, and to ensure that Congress and the FCC play their proper roles in this debate.

Regards,

David Williams
President
Taxpayers Protection Alliance