American Innovation is the winner as the FCC tackles net neutrality

May 16, 2017

Tom Schatz

Citizens Against Government Waste

The Federal Communications Commission is about to take a huge chunk of government overreach out of the internet. On April 26, FCC Chairman Ajit Pai announced that the agenda for the agency’s May 18 meeting includes a notice of proposed rulemaking that would draw back the onerous Title II reclassification imposed by the 2015 Open Internet Order (OIO).

The OIO was approved on a party-line vote under former FCC Chairman Tom Wheeler, who followed President Obama’s instructions to saddle the internet with Depression-era rotary dial telephone regulations under Title II of the Communications Act of 1934. That law was intended to keep one company from becoming a monopoly in telecommunications, and clearly could not anticipate modern technology.

When Congress agreed to modernize the law in 1996, legislators were forward thinking enough to come to an agreement with President Bill Clinton to regulate the internet with a light-touch. Innovation and investment in the telecommunications industry grew dramatically, until the FCC decided to fix a problem that did not exist and imposed regulations that stifled innovation, killed jobs, and impeded investment.

But supporters of the OIO, including the New York Times in an April 30 editorial, claim that Chairman Pai’s proposal would undermine internet freedom, squelch competition, limit choice, and raise prices. They seem particularly concerned that giving something for free as an inducement to sell services is somehow bad for consumers and small businesses.

While a formal decision to take action was not made, Chairman Wheeler conducted a formal investigation into whether offering free data to consumers could “restrict consumer choice, distort competition, and hamper innovation.” The Times claims that if Chairman Pai allows this practice to continue, “broadband companies will probably use their gatekeeping position to give themselves a leg up.”

These contentions are absurd: free data is great for consumers. AT&T, T-Mobile, and Verizon all offer plans that include unlimited text, talk, and data. Every plan includes video; some also include music and mobile hotspots. Supporters of the OIO think that the broadband companies will give priority to subsidiaries, but there is no evidence to support such a claim.

For example, AT&T has owned DirecTV since July 2015, and the company’s unlimited data plan includes this service along with a $25 discount for DirecTV subscribers. But T-Mobile has a plan that includes DirecTV among its video offerings at a lower price even with the $25 discount, and Verizon’s plan also includes DirecTV.

In other words, competition is alive and quite well. Indeed, these deals will get better and more innovative once the FCC adopts Chairman Pai’s plan to stop regulating internet service providers (ISPs) as if they were common carrier rotary telephone companies. And if AT&T decides to prevent any competitor from offering DirecTV, the Federal Trade Commission is well-equipped to determine whether that violates antitrust laws.

Purported concerns about the impact on small businesses and startups are also overblown. When Chairman Pai announced his plans to overhaul the OIO, he stated, “Just this week, 22 small ISPs, each of which has about 1,000 broadband customers or fewer, told the FCC that the Title II order had affected their ability to obtain financing.” He further noted, “They said it had slowed, if not halted, the development and deployment of innovative new offerings which would benefit our customers.”

Drawing back the OIO will free, not kill, the internet. Once the FCC has completed its work on the proposed rulemaking, Congress must work in a bipartisan manner to modernize the telecommunications laws and provide consumers and providers the certainty of a truly open internet into the foreseeable future.

Thomas A. Schatz is president of Citizens Against Government Waste.

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