The Federal Communications Commission’s decision Thursday to regulate the Internet as a public utility is a depressing moment for American innovation and economic liberty. The FCC is grabbing political control over a vibrant market that until now has been driven by inventors and consumers. Welcome to the Obamanet.
President Obama demanded this result in a November speech, and FCC Chairman Tom Wheeler and Democrats Mignon Clyburn and Jessica Rosenworcel have now dutifully voted to apply last century’s monopoly telephone rules to Internet service providers. They have in the process made a mockery of the agency’s supposed independence.
The rules are ostensibly to prevent Internet companies from blocking customer access to particular websites or slowing down service. But the FCC has presented no evidence that this is occurring, so the power grab is being justified by some theoretical future harm.
By the way, the FCC hasn’t released the text it has now approved as a final rule, which according to dissenting Republican Commissioner Ajit Pai runs to more than 300 pages. It’s not clear when the public will be permitted to see what Washington has done, and the normal comment period has been bypassed on a plan that is vastly different than what Mr. Wheeler has previously proposed.
Meantime, Mr. Wheeler will exercise what FCC lawyers call “editorial privileges,” allowing him to craft his arguments after reading the two dissents. Taxpayers might prefer that regulators analyze the pros and cons beforevoting to impose something on the whole country, and we hope judges feel the same way when the rules are challenged in court.
But based on an FCC summary, it’s clear that the agency has done administratively what Congress has always refused to do: make the old telephone and broadcasting overseer the general regulator of the Internet. Providers of broadband services will be barred from employing any “unjust or unreasonable practices,” whatever FCC bureaucrats decide those words mean. The FCC release also makes clear that government attorneys—not engineers—will decide what “reasonable network management” is.
And while “net neutrality,” the fuzzy concept used to justify these rules, was originally sold as a way to ensure that consumers are treated well, the rules will go well beyond those customers. Digital communications networks that exchange Internet traffic will also have to be “just and reasonable” with each other. The bureaucrats will exercise their discretion to define those words case-by-case, always listening to the best-paid lobbyists.
It’s hard to imagine a more just and reasonable market than today’s Internet. According to the website DrPeering, which tracks the agreements among communications companies to move information, the price of moving data across the Internet has been falling roughly 30% a year since the late 1990s. That collapsing cost per bit is a big reason Internet usage has skyrocketed. Consumers downloading huge volumes of video are paying bills not much different than when they were mainly visiting static websites.
That isn’t good enough for the likes of Netflix , which now generates more than a third of all Internet traffic, and other major bandwidth users that are the chief lobbyists for the new FCC rules. Netflix doesn’t detail its spending on Internet transport, though a telecom source estimates Netflix spends less than a penny for every movie it sends to a customer. But now CEO Reed Hastings has succeeded in subjecting the entire Internet economy to regulations that will be far more expensive.
The FCC’s Democrats promise—for now—to “forbear” from enforcing 700 of the most onerous and unnecessary of the old telephone regulations. But dissenting GOP Commissioner Mike O’Rielly calls it “fauxbearance” because the authorities the FCC is assuming are so broad it can still dictate conditions and practices that were subject to the old rules. And even if they do forbear, activists will sue to force the FCC to regulate under the “just and reasonable” standard.
Under the new rules, an Internet company must be sure that its innovations and actions don’t “unreasonably disadvantage” others. Would Apple even exist if the government had forced Steve Jobs to be “reasonable” with all of his competitors?
The FCC’s power grab is so comprehensive that Google and the other Silicon Valley grandees who promoted regulation may soon come to regret it. Mr. O’Rielly says the agency could enforce the rules against website operators like Google or Facebook . The new rules will also unleash a torrent of lawsuits, and nobody is better at maneuvering through the bureaucracy than giant companies like AT&T and Verizon . The losers will be the smaller companies that can’t afford a lobbying machine.
Congress likely won’t be able to stop the FCC, so the best near-term response will have to come in the courts. In the best case, the lawsuits will delay the new rules until after the 2016 election. Then a new President less set on political control can appoint a new FCC and rewrite this effort to subject this great engine of American innovation to the untender clutches of the same folks who brought you ObamaCare.