House Hearing on FCC’s Net Neutrality Proposal Should Investigate “Agency Neutrality”

Washington, D.C., February 16, 2011—The following is a statement from CEI’s Director of Technology Studies, Wayne Crews:

All five Federal Communications Commission (FCC) commissioners are appearing at a hearing today in the House Energy and Commerce Committee. The topic is Network Neutrality and Internet Regulation: Warranted or More Economic Harm than Good?

While creating massive regulatory uncertainty for industry and infrastructure wealth creation, net neutrality’s one certainty is giving the FCC lots to do as an end in itself unrelated to consumer protection.

When businesses in high tech and communications industries misbehave, consumers react rapidly as do investors. Competitors take advantage of one another’s errors and hubris and step in on behalf of consumer welfare. You don’t whine about a company that is unfairly non-net-neutral; customers complain, you short its stock or buy that of its rivals, and it changes behavior or a competitor moves in. But when a net neutrality regime gums things up, it’ll be tough to extricate a self-serving FCC.

Some members have sought to block FCC action via the Congressional Review Act or by denying the use of funding for neutrality ventures. If legislation like the REINS Act (“Regulations from the Executive In Need of Scrutiny”) were to pass, that would be another avenue to put a brake on activism by the unelected of which the FCC is one example.

The debate needs a philosophical turn that doesn’t reflexively accept the premise that the agency necessarily serves the public interest. Genuine public interest would involve, along with praising openness, explaining and legitimizing network (and content) property rights, special agreements and novel contracts; and articulating how these also advance the Internet’s “background hum” of even greater openness that we enjoy.

So a new set of questions from Congress for the FCC is imperative:

• Explain why compulsory net neutrality is the enemy of openness and what FCC is doing to combat it.

• In what sense does FCC recognize that the relevant competitive challenge is not merely the “neutral” transfer of information across today’s existing networks, but the creation of networks as such?

• How does FCC intend to clarify to a confused policy environment that “neutrality” or “openness” represent one of many variable features of many types of networks that potentially can co-exist, than the defining characteristic?

• How is FCC leading efforts to discredit infrastructure socialism and avoid fostering a federally managed communications industry riven with lobbying rent-seeking behavior?

• How is the FCC net neutrality order consistent with reducing the near-term likelihood of lawsuits and unproductive lobbying?

• What is FCC doing to reject the overly negative connotation of “discrimination,” and to articulate its role in expanding infrastructure and bandwidth creation, consumer welfare, child safety, homeland security, network and information security, privacy and other desirable features of content and service, as well as reducing the vulnerability of intellectual property to piracy?

• Describe the proliferation of overlapping networks at the dawn of the communications age, and how, if America could achieve that with 1907’s GDP level, it undermines the case for compulsory net neutrality in 2011.

• Describe FCC’s recent actions to promote alternatives to neutrality regulation such as promoting cross-industry partnerships by dismantling the regulatory silos that artificially separate infrastructure like electricity, water, rail, sewer, telecommunications and transportation.

• Describe results of FCC’s investigations into other alternatives to neutrality, such as reducing franchise, zoning, and environmental barriers.

• Describe how FCC pledges to foreswear price and entry regulations in the wake of any neutrality mandates.

• Describe how net neutrality will lessen future FCC authority and reduce its budget.

• Describe FCC’s research into how innovation in user ownership (real estate developers, content companies, etc.) of portions of communications infrastructures offset market power and relax calls for neutrality?

• What is the agency doing to halt and discourage antitrust interference with communications ventures (like the delayed XM-Sirius and Comcast NBC mergers) in order to foster the kind of massive-scale infrastructure competition and rivalrous response that would otherwise achieve the alleged ends of neutrality.