Balancing the Scales: FCC Will Not Actually Eliminate Net Neutrality

[Note: It’s always seemed to me that the argument for net neutrality regulation contradicts itself. If it’s as amazingly wonderful and popular as advocates claim, consumers will demand it and ISPs will offer it voluntarily. So any regulatory action that moves it from the mandatory to the optional column doesn’t make much difference. That’s the point of my crazy headline.]

FCC Chairman Ajit Pai has released a statement outlining his approach to net neutrality in broad terms; the plan is explained in more detail in a Wall Street Journal op-ed, “How the FCC Can Save the Open Internet:”

This is why I’m proposing today that my colleagues at the Federal Communications Commission repeal President Obama’s heavy-handed internet regulations. Instead the FCC simply would require internet service providers to be transparent so that consumers can buy the plan that’s best for them. And entrepreneurs and other small businesses would have the technical information they need to innovate. The Federal Trade Commission would police ISPs, protect consumers and promote competition, just as it did before 2015. Instead of being flyspecked by lawyers and bureaucrats, the internet would once again thrive under engineers and entrepreneurs.

What his means in plain English is that ISPs will be required to disclose any non-neutral behavior on their part. If they fail to disclose, they’ll be subject to penalties imposed by the FCC. If their disclosures are false or misleading, the FTC will be able to go after them for deceptive advertising. And if their practices are well disclosed but harmful to competition, the FTC will be able to go after the ISPs for violating antitrust laws.

What’s the Big Deal?

On its face, this is simply moving the chairs in Enforcementville. Net neutrality is an economic issue that seeks to curtail ISP market power with a behavioral remedy that that bans some good behavior along with some bad behavior. It’s perfectly logical for an economics-oriented agency to take the lead on it.

Given that there hasn’t been a genuine net neutrality violation in the US since 2004 that didn’t take care of itself, the case for any kind of ex ante ban on network differentiation is weak at best.

Under this scheme, we’ll know what the ISPs are doing to the traffic they handle, which is more than we know today. The dirty little secret of net neutrality is that violations are generally not visible because they have so little impact.

The exception is the outright blocking of access to particular parts of the Internet is the exception, but that can happen for perfectly good reasons if the blocked site or service is criminal.

So this new approach to net neutrality – a more clever form of the old approach that worked for twenty years – will not change the way any of us experiences the Internet.

Isn’t this the End of the Internet As We Know It?

Contrary to popular belief, the FCC’s Restoring Internet Freedom order will not put an end to net neutrality. This has to be said because of articles like this one from Politico:

Federal Communications Commission Chairman Ajit Pai will reveal plans to his fellow commissioners on Tuesday to fully dismantle the agency’s Obama-era net neutrality regulations, people familiar with the plans said, in a major victory for the telecom industry in the long-running policy debate.

What it will do is revise the net neutrality enforcement mechanism. The Commission will do away with unenforceable provisions, and it will place the others on a less discriminatory legal foundation. This is a good thing.

Why Revise the Enforcement?

The main reason for doing this is to heal the enforcement rift created by the 2015’s unnecessary use of Title II authority. Before the 2015 Open Internet Order, the Federal Trade Commission had jurisdiction over all the things that ISPs do that are also done by  content and communication platforms such as Netflix and Facebook.

The communication platforms – the old FCC called them “edge services” – collect personal information and use it to place and sell ads. Networking platforms (ISPs) would like to sell ads too, but the regulations the FCC placed on them are so discriminatory as to effectively prevent this.

That’s an unreasonable restriction on commerce. Now that a Google/Facebook duopoly has emerged in the Internet ad market, the only realistic hope for competition in this space comes from the networking platforms.

It’s better to have four competitors going after this business – the current duopoly plus your wired and wireless ISPs – than to leave this market as it is. The current Internet advertising market is downright unsavory.

Helping the Scrappy Startups

The essence of net neutrality is the claim that networking platforms are the primary threat to Internet freedom. When the idea was created in the 1990s, ISPs were large, established companies in the telecom and cable TV markets.

But the content and communication platforms were fledgling startups whose futures seemed so many as very cloudy. In the early days of the public Internet, it wasn’t at all clear that ISPs would even allow the scrappy startups to make their mark on the world.

So it was reasonable to bend over backwards to give the new platforms the best possible chance of surviving, growing, and thriving. Net neutrality was part of this formula and Section 230 of the Communications Decency Act was the other part.

Toward a Uniform Policy Framework

But the tables have turned. Nowadays, the platforms are larger, more profitable, and more intrusive than the ISPs. The largest ISPs (Comcast and Charter) have ~25 million subscribers while Facebook and Google number their users in the billions.

Facebook and Google don’t just track their users when they’re on facebook.com and google.com, they track us all over the web with trackers they’re convinced websites to install in their pages.

So how can we ignore the fact that the Internet of today is nothing like the Internet of the mid ’90s, freshly opened to the public before the web was a cash cow for advertisers?

If the federal government is going to police the Internet to prevent potential harms to innovation from gigantic monopolies, it needs to adopt an approach that doesn’t over-regulate a less powerful sector while under-regulating the one with the greatest potential to do harm.

UPDATE: So we’ll have a “neutral” Internet where consumers really want it and also where a regulatory case can be made for it. But we’ll have a smart Internet where customers want it, where it works better, attracts more customers, or makes more money. Considering all the non-neutral management exceptions in use today, that’s not that much different from the status quo.

The new status quo allows more room for innovation. That’s better than the old one because innovation produces the long-term benefit.