Improving America’s Broadband through Competition, Not Regulation

Should the government regulate the Internet like a public utility? This policy question has vexed U.S. lawmakers and agency officials in recent years, as the Federal Communications Commission (FCC) has worked to cement itself as the nation’s Internet regulator. The FCC’s “multiyear voyage of discovery” may soon come to an end, however, as new leadership at the agency has started the process of undoing its 2015 decision to regulate Internet service providers as common carriers. But the debate over the proper role of government when it comes to the Internet remains as contentious as ever. Efforts in Congress to explicitly grant or deny the FCC the power to regulate broadband providers have failed to gain traction, leaving the matter in the hands of the agency and the federal courts, which review the legality of its decisions.

Millions of Americans appear to believe the FCC should craft and enforce strict rules governing Internet service providers. For those consumers, the perceived absence of meaningful choices among these providers may be the most compelling justification for treating Internet communications differently than other sectors of the economy. For instance, the Electronic Frontier Foundation, a prominent activist organization that supports common carriage regulation of ISPs, contends that “most customers aren’t able to switch to another [Internet service] provider,” and are thus “stuck with government-backed monopolistic ISPs that can get away with anti-consumer business practices.” This claim overstates the paucity of choices that the typical U.S. household enjoys among Internet providers; still, for many Americans, changing broadband providers entails choosing from a decidedly narrow set of options.

Contrary to pro-net neutrality regulation activists’ premises, the state of broadband competition is not an unchangeable given. Public policy decisions are responsible for the current state of the U.S. broadband market. Changing such policies would change the level of competition. A laundry list of acts and omissions by government officials at the federal, state, and local levels have discouraged companies from entering the broadband market. If lawmakers embraced a less restrictive, more open approach to private-sector deployment of wireline and wireless broadband infrastructure, many Americans might enjoy a more compelling array of choices among Internet service providers. In turn, greater competition among ISPs would obviate the perceived need for federal regulation of the Internet, reducing pressure on Congress and the FCC to dictate how broadband companies run their networks.

Internet Regulation from 2005 to the Present. As the Internet has grown ubiquitous in American society over the past quarter-century, the Federal Communications Commission has issued a series of policies, orders, and regulations that prescribe how broadband providers should handle the traffic that traverses their networks. For over a decade, the FCC has been issuing ever-stricter regulations on broadband companies. In 2005, it issued a policy statement that set forth four principles aimed at guiding the agency’s “ongoing policymaking activities.”

In 2008, relying on this policy statement, the agency ordered Comcast, a major cable broadband provider, to stop interfering with certain peer-to-peer file sharing traffic. In 2010, after a federal appeals court invalidated this order, the FCC issued a regulation that sought to codify a set of rules governing ISPs’ network management practices. Yet again, a federal appeals court invalidated the FCC’s rules, so the agency went back to drawing board for a third time.

In 2015, the agency issued new regulations that reinterpreted the Communications Act to treat Internet service providers as common carrier telecommunications services subject to public utility-style regulation. The 2015 rule was affirmed by the D.C. Circuit in 2016, and the matter is pending before the Supreme Court at the time of this publication.

The election of a Republican president in 2016 brought new leadership to the FCC. Ajit Pai, who served as one of the agency’s two Republican commissioners during the second term of the Obama administration, was named FCC Chairman in January 2017. In May 2017, Pai announced that the FCC would propose undoing its 2015 order. It would restore its pre-2015 interpretation of the Communications Act, freeing broadband providers from common carriage regulation. The decision will undoubtedly spur new litigation, with federal courts asked yet again to determine whether the agency has adopted a permissible construction of the Communications Act.

Meanwhile, it appears unlikely that Congress will pass any legislation that addresses the scope of the FCC’s authority over the Internet, as neither the proponents nor opponents of the agency’s 2015 rules have enough votes to send a bill to the president’s desk.