Summer Reading- Freeing the Internet from Government Regulation

Ross Marchand

August 24, 2018

This late in the summer, most lawmakers will soon begin the process of packing up their FDA-approved sunscreen and heading back to Washington, DC, burying their noses in proposed legislation and avoiding a government shutdown at the end of September. But with flight delays aplenty and chronic traffic surrounding the capital, members of Congress better hope they have internet access while sitting idly by. Fortunately, regulatory reform at the Federal Communications Commission (FCC) over the past year ensures that even the people living in the boonies or by the beach will soon have the lightning-fast internet access currently enjoyed in cities across America. But not all lawmakers have gotten the memo, criticizing the FCC’s moves and defending the status-quo of onerous broadband and internet access regulations. For the lawmakers holding on for dear life to their temperamental internet connections, the Taxpayers Protection Alliance suggests ditching the smartphone and picking up our Summer Reading instead. 

Our story begins with the Obama Administration, when former FCC chairman Tom Wheeler crafted “Title II” internet rules that required internet service providers (ISPs) to treat all data equally. The rules were grounded on accusations that leading ISPs were “throttling” data, or slowing down internet services for some users in order to clear the way for other users. Citing a handful of minor “throttling” cases, Wheeler’s FCC imposed onerous rules that impacted activities across the world wide web. Writing for National Review, Ian Tuttle described how wide-ranging the rules were:

“Under Title II, the FCC can regulate the rates that ISPs charge, using its supervisory mandate to dismiss as ‘unreasonable’ or ‘unjust’ any business models of which it disapproves; it can partially regulate the capital investment of existing companies, and regulate which companies (if any) can enter the ISP market; and it can impose taxes on Internet use, such as those long imposed on telephone service (the ‘Universal Service Fee’). What’s more, the nebulous ‘Internet Conduct’ standard that the FCC applies as its metric for assessing abuse is subject to amendment at any time, for any reason; there is no certainty that today’s decisions will also be tomorrow’s.”

By putting any and all ISP actions under federal purview, these actions predictably made companies far more reluctant to invest in the internet. Innovative offerings, such as offering free access to certain applications, were suddenly fineable offenses. Even tepid data management actions, such as prioritizing telemedicine videos over, say, cute cat videos, could incur the FCC’s wrath. Dr. George Ford of the Phoenix Center empirically documented how the mere threat of these rules was enough to dissuade ISPs from making critical investments into internet infrastructure: 

“Using government-supplied investment data and econometric methods, I find sizable negative investment effects beginning in 2010. Between 2011 and 2015, the threat of reclassification reduced telecommunications investment by 20% (or more), or about $32 to $40 billion annually; that’s about $160-$200 billion in total over the five-year period. In effect, reclassification has cost the U.S. an entire year’s worth of telecommunications investment (averaging $126 billion annually since 2011).”

Fortunately, current FCC Chairman Ajit Pai (and millions of grassroots comments thanks to TPA) led the charge to nix these Title II rules, with a successful repeal vote in December of 2017. Six months later, new light-touch regulations were officially published in the Federal Register, spelling the end of a disastrous (thankfully short-lived) era of strict internet regulation in America. TPA marked the occasion by way of an Internet Reverse Doomsday Clock, showing that the internet is alive and well, even after the repeal would supposedly bring about Mad Max style anarchy. 

In the Washington Post, FCC commissioner Brendan Carr further undercut the “Mad Max” narrative by pointing out all of the consumer protections that would continue to exist- and be enhanced- under the new framework:

Since the FCC’s Title II decision, the FTC — which is also the nation’s most experienced privacy enforcement agency — has been prohibited from taking any action regarding the privacy or data security practices of ISPs. Consumers will benefit greatly from a return to these protections. Indeed, before the FCC stripped it of jurisdiction in 2015, the FTC brought more than 500 privacy enforcement actions, including against ISPs.

Third, federal antitrust laws will apply. Section 1 of the Sherman Act renders anticompetitive agreements illegal. So, if ISPs reached agreements to act in a non-neutral manner by unfairly blocking, throttling or discriminating against traffic, those agreements would be per se unlawful. Moreover, Section 2 of the Sherman Act makes it illegal for a vertically integrated ISP to anti- competitively favor its content or services over that of an unaffiliated business.”

While the return to light-touch regulation will bolster internet investments and beef up consumer protections, there’s more to the story of internet access than Title II. Across the country, internet providers are planning for the latest generation of speed/connectivity standards (“known as 5G”), poised to become the standard-setter across the world by 2030. In March, Markman Capital Insight president

Forbes contributor Jon Markman described the tremendous promise of widespread 5G adaption: 

“Next-generation networks promise data download speeds of 20 GB per second. Today’s LTE networks, as great as they are, pull speeds of just 1 GB per second…With 3G, it took about a day to download an HD movie. LTE networks, available now, slashed the time to minutes. A 5G network would reduce the wait time to seconds. That kind of speed changes everything. Latency would disappear…Telemedicine would become viable. Imagine a world where doctors in Boston use cutting-edge robotics to perform delicate surgeries in Mumbai. Drones and self-driving cars would be able to build real-time 3D maps to operate more efficiently.”

Most importantly, 5G carries the potential to close the “digital divide” between rural and urban areas, since the small-cell batteries required by the technology have low deployment costs. 5G will accomplish this without taxpayer funding, a true “win-win” scenario.  Suddenly, extending internet access out to sparsely populated areas will become doable, whereas the high fixed costs of lying cable made previous investments impossible. But that’s only if regulatory agencies make it possible and practical to make large scale investments in 5G infrastructure. TPA policy director Ross Marchand describes the stakes involved: 

“Fees associated with legacy environmental and historic review procedures have climbed precipitously in recent years, with providers operating in certain areas of the country experiencing 2,500 percent increases since the beginning of the decade.

And thanks to the Section 106 “tribal review” process, wireless facilities must undergo an expensive, lengthy review even if they are outside of a reservation. These restrictions, coupled with “right of way” tomfoolery by municipalities across the United States, discourage 5G deployment and keep customers captive to slow speeds and uneven access….

By continuing to free up spectrum and loosening permitting restrictions, government officials can ensure that a $12 trillion hypothetical market becomes a reality over the next two decades. And, by allowing a low-cost technology to service 1 million devices per square kilometer, expensive government broadband programs can finally be scrapped.”

To the FCC’s credit, successive Open Meetings have resulted in reforms lowering barriers to deployment and the expansion of “shot clocks” to expedite decision-making. But more work is sorely needed to ensure that 5G quickly and efficiently becomes the prevailing standard for rural and urban areas alike. Lawmakers hoping that their internet connection holds up while on vacation are briefly experiencing what millions of Americans in unserved areas face everyday. By being well-informed on the issue and supporting further regulatory reform, members of Congress can do their part to turbocharge the digital domain.