What You Should Be Reading: April 2024

Welcome back to “What You Should Be Reading,” a monthly blog series in preparation for which the Taxpayers Protection Alliance (TPA) stops doom-scrolling X – the social media app formerly known as Twitter –  long enough to read some serious works of public policy and encourages you to do the same.

April’s edition features data debunking the “net neutrality” canard, the unseen costs of radical “competition” policy, and the statutory and constitutional arguments that could, in the very near future, gut the Federal Communication Commission’s (FCC) digital discrimination order in court.

So, without further ado…

Committee to Unleash Prosperity: “Keep the Government’s Hands Off the Internet”

Following a six-year interregnum of freedom, the Federal Communications Commission (FCC) voted last week to reinstate Title II regulation of broadband services – a particularly destructive policy given the misleadingly benign label, “net neutrality.”  This move will allow the agency to micromanage – safeguard and secure, in FCC’s self-congratulatory verbiage – the free and open internet.

When former FCC chair Ajit Pai repealed the FCC’s original Obama-era Title II order, fearmongers prophesied “the end of the internet as we know it” and other such hyperbole. Repealing the burdensome Title II rules yielded results quite the opposite of the doomers’ forecasts. Today, service providers’ footprints have expanded greatly and network performance has exploded upwards. Many more Americans can access far better service – all at a lower cost.

The Committee to Unleash Prosperity details these gains in a new paper by Phil Kerpen and Casey B. Mulligan. The report demonstrates that consumer prices dropped faster once the FCC deregulated. From 2010 to 2016, inflation-adjusted prices for internet service decreased 9 percent for wired, and 22 percent for wireless, service. But, from 2016 to 2022, deflation accelerated: prices decreased 15 percent and 28 percent, respectively.

During the latter period, Kerpen and Mulligan report, median download speeds more than quadrupled. “[I]t is worth noting that when the public-utility regulation ended in 2017, the speedtest.net data showed U.S. ranked 45th in the world in terms of average mobile-internet download speeds,” they write. “By 2022, which is the most recent year that average speeds are reported, the U.S. had climbed to 16th. Between 2022 and 2023, the U.S. gained another 7 ranks (from 22nd to 15th) on the median speed metric.”

Only rarely in public-policy debates does empirical evidence provide such an emphatic I-told-you-so moment. Nonetheless, the Biden administration FCC’s commitment to Title II remains dogged. This, Kerpen and Mulligan argue, will hamstring Washington’s current bid to universalize internet access, a $42.45 billion deployment initiative known as the Broadband Equity, Access, and Deployment (BEAD) program. And besides Title II, the FCC has pursued profoundly ill-considered rules concerning digital discrimination (see this blog’s “Amici in Brief” section). These regulatory expansions will “more than reverse the Trump-era deregulation, suggesting that no deregulatory success, no matter how obvious, discourages a Biden administration agency from re-regulating,” the authors write.

Read the full piece here.

CCIA: “The Cost of Various Antitrust and DMA-Related Litigation to State and Local Pension Plans”

Free marketeers often warn of economic regulation’s tradeoffs and costs. Quantifying these costs presents significant difficulties, especially when examining regulation done via enforcement action. Doing so requires assessing the expense of vast amounts of litigation and compliance burdens. It also requires an attempt to consider the unseen economic costs incurred by risk-averse companies that voluntarily eschew otherwise-profitable business ventures to avoid regulatory scrutiny.

These costs accrue not only to targeted companies but to their shareholders. The Computer & Communications Industry Association (CCIA) has released a helpful report that estimates recent competition policy’s costs to state and local government employee public pension plans. Specifically, CCIA examines the costs that the European Union’s Digital Markets Act (DMA) and other antitrust litigation would, if successful, impose on Google, Amazon, Meta, Microsoft, and Apple (GAMMA).

“State and local government employee pension plans, as leading investors in GAMMA, would suffer at least $86.1 billion in losses in public sector pensions upon successful litigation, eliminating at least 1.6% of the value of pension plan holdings,” CCIA found. “On a per-plan-member basis, successful antitrust and DMA-related litigation against GAMMA collectively would cost the average state and local government employee pension plan member at least $3,015,” the report adds.

CCIA provides an interactive state-by-state map illustrating its findings.

Too often, politicians and pundits fail to appreciate even the immediate costs that overzealous regulation and enforcement create. They almost invariably overlook the more attenuated costs entirely. CCIA’s report serves as an important reminder that the Forgotten Man – the Forgotten Shareholder, in this case – pays the price of bad policy.

Read the full piece here.

Amici in Brief: The FCC’s Lawless Digital Discrimination Order

Almost immediately upon its finalization, the FCC’s digital discrimination order drew legal challenges. At the U.S. Court of Appeals for the 8th Circuit, in Minnesota Telecom Alliance v. FCC, think tank TechFreedom has filed an amicus brief arguing that the agency has wildly exceeded its statutory authority and likely violated the Constitution’s Equal Protection Clause.

With scant statutory authorization, the FCC has arrogated to itself staggeringly broad powers. “The relevant provision directs the FCC to adopt rules to prevent ‘digital discrimination of [broadband] access based on income level, race, ethnicity, color, religion, or national origin,’” TechFreeom writes. “Note the phrase ‘based on’: the Supreme Court has held that similar language…refers to intentional discrimination–also known as disparate treatment.”

Nonetheless, the agency adopted a “disparate impact” standard, allowing regulators to initiate invasive regulation based on statistical disparities whose causes have nothing to do with overt discrimination. Moreover, the FCC-claimed authorities go far beyond regulating broadband services – they extend to “entities that otherwise affect consumer access to broadband.”

From its modest mandate, the FCC claims unprecedentedly granular power to micromanage the broadband industry. The digital discrimination order authorizes rate regulation, buildout mandates, and more. As TechFreedom notes, “it asserts the power to close disparities in (among other things) network reliability, network upgrades and maintenance, installation, customer service, marketing or advertising, account termination, and service suspension.”

All of this implicates the major-questions doctrine (MQD), TechFreedom argues. This doctrine holds that agency must, when regulating on a matter of great political or economic significance, have clear congressional authorization to do so. The digital discrimination order’s far-reaching economic impacts, and virtually nonexistent statutory basis, cannot satisfy the MQD’s requirements.

To make matters worse, the order likely mandates what it purports to ban – digital discrimination. The inconvenient fact is that, in practice, leveling statistical disparities often requires intentional, disparate treatment on the basis of protected characteristics. The order’s disparate-impact liability standard “lacks the [ordinary] guardrails,” TechFreedom writes, which “could push private entities to adopt racial quotas, in violation of the Equal Protection Clause.”

Read the full brief here.

Note: TPA highlights research projects that contribute meaningfully to important public-policy discussions. TPA does not necessarily endorse the policy recommendations the featured authors make.