The CEOs Behind the Obamanet

March 6, 2015

The Wall Street Journal

The Federal Communications Commission exists in theory to house experts who can make informed, independent decisions on how to govern the communications industry. But that isn’t how government works in practice, as we are learning from last week’s FCC decision to impose 1934 telephone rules on the Internet.

The Journal recently reported on the extraordinary pressure the White House applied to the FCC, a supposedly independent agency, abetted by a handful of tech firms that generate increasing amounts of Internet traffic and want to prevent companies like AT&T andComcast from charging market rates to carry that traffic.

To get their way, the techies relied on what the Journal described as a “secretive effort inside the White House” with aides “acting like a parallel version of the FCC itself.” At a meeting last summer in New York, website operators—including David Karp , CEO of Yahoo’s social-media service Tumblr—pressed White House aides for heavy regulation.

Assistant Editorial Page Editor James Freeman on how prominent backers of the FCC’s plan to regulate the Internet admit they don’t understand the issue. Photo credit: Associated Press.

Mr. Karp sat next to Mr. Obama at a fundraiser the next day and again pressed his case, according to the Journal account. Then in November, safely after the election, Mr. Obama publicly demanded that the FCC apply the old telephone rules to the Web. The FCC dutifully enacted the Obama plan on a partisan 3-2 vote.


Last week, before the FCC decision, Mr. Karp appeared on CNBC to promote the cause. That didn’t turn out too well. In a few awkward minutes the executive confessed that he didn’t “entirely understand” the Internet-service market and that it was not his “area of expertise.” We doubt that’s what he told the President at that fundraiser.

The point here is not to make fun of Mr. Karp, who was talking what he thinks is his book. The episode underlines that the process of enacting the new FCC rule has been the antithesis of the independent and open deliberation for which expert agencies were created.

Netflix also advocated aggressively for the new rules. And the company led by CEO Reed Hastings still officially endorses the FCC decision to impose Title II of the 1934 Communications Act on today’s Internet. But at a Wednesday investor conference Netflix CFO David Wells said, “Were we pleased it pushed to Title II? Probably not,” according to Variety. “We were hoping there would be a non-regulated solution,” he added.

Do the conflicting statements from Netflix mean they finally realize the destructive power of these rules? Or are Netflix executives just as confused as Mr. Karp about the agenda they just handed to a statist White House?

The most informed comment from a tech CEO came Tuesday when Sun Microsystems co-founder Scott McNealy said on CNBC that for political reasons the FCC created an “unneeded controversy” to address something that “wasn’t broken” and “didn’t need fixing.”

“Independent agency” may be an oxymoron, but the FCC is expected to craft its regulations according to minimum standards. Rules developed outside the agency—with no opportunity for public comment—by non-experts buying face time with the President fail to meet those standards.

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