Congress Should Strip the FCC of the Power to Regulate Broadband Prices

The U.S. House of Representatives will soon vote on a bill known as the “No Rate Regulation of Broadband Internet Access Act.” Just as the title suggests, the legislation would deny the Federal Communications Commission (FCC) of the power to dictate to Internet service providers how they price broadband access. Critics of the bill say it would strip the FCC of powerful tools it needs to “protect” consumers. To the extent this is accurate, however, it’s a feature, not a bug. The House should approve the bill and, hopefully, the Senate will follow suit.

By way of background, when the FCC voted on party lines to begin regulating Internet providers like public utilities in February 2015 in the name of “net neutrality,” the agency gained wide-ranging authority to make rules governing ISPs. Although FCC Chairman Tom Wheeler has told several Congressional committees that the agency does not, on his watch, plan to use this new power to dictate broadband prices, he cannot bind the agency to this promise. And, of course, Mr. Wheeler might change his mind in the future.

Therefore, several members of the House Committee on Energy and Commerce—which oversees the FCC and the telecommunications sector—drafted a short bill to ensure that the FCC does not abandon Wheeler’s pledge and start regulating the prices charged by broadband providers. The merits of such legislation should be obvious to anyone familiar with the pitfalls of price controls, which extensive economic literature has shown to be a recipe for hurting consumers by causing a mismatch of supply and demand. 

Yet the bill has its share of critics, who argue that stripping the FCC of authority to regulate broadband prices would deprive the agency of its power to impose conditions on telecom mergers and stop ISPs from price gouging. The FCC’s repeated insistence that merging parties agree to “voluntary” conditions is an affront to the rule of law, given that Congress has never authorized the agency to micromanage mergers and acquisitions. And although the bill may indeed implicate the FCC’s authority beyond ex ante price regulation, why must we rely on the agency to prevent ISPs from “price gouging”? ISPs are already obligated under the common law to meet their contractual obligations, and are barred from engaging in fraudulent misrepresentation.

In short, consumers face a real danger that the FCC might begin regulating broadband prices, whether before the fact—in the form of “tariffing”—or after the fact, by deeming certain pricing practices unjust or unreasonable. The agency has already begun expanding its rules to go beyond net neutrality, including the FCC’s sweeping proposed rules to regulate how ISPs can use information that transits their network. Meanwhile, if the FCC ends up with less authority that it would prefer to possess, consumers will only benefit.