FCC Chairman Wheeler Shows Uncommon Wisdom, Chooses Common Law Approach to Internet Oversight

Posted by | January 30, 2014 | Broadband Internet | 2 Comments

The Internet is abuzz with news that Federal Communications Commission Chairman Tom Wheeler favors a case-by-case approach to addressing Internet competition issues. It is the wisest course, and perhaps the most courageous. Some on the right will say he is going too far, and some on the left will say he isn’t going far enough. That is one reason Wheeler’s approach should be commended. Staunch disagreements about net neutrality and other Internet governance issues reflect the uncertainty inherent in a dynamic market.

Chairman Wheeler’s comments this week echoed Socrates (“I’m not smart enough to know what comes next [in innovation]”) and, to my surprise, Virginia Postrel (the Chairman favors addressing Internet issues “in a dynamic rather than a static way”). He recognizes that, in a two-sided market, there is no reason to assume that ISPs will necessarily have the ability to charge content providers rather than the other way around. The potential for strategic behavior on the Internet today is radically different than in the dial-up Internet era, and the Chairman appears prepared to consider those differences in his approach to communications regulation.

The Chairman also noted that section 706 gives the FCC authority over the entire Internet. Though my friends at TechFreedom have expressed alarm that the Chairman thinks this is positive, an approach that recognizes the potential for strategic behavior by so-called edge providers is preferable to the one-sided approach embodied in net neutrality. The FCC’s decision to impose strict limitations on only one side of the two-sided Internet marketplace was bound to create market distortions and always smacked of cronyism. A broader approach, fairly applied, is more likely to discourage strategic behavior and protect consumers than the FCC’s previous net neutrality rules, which were designed to protect the commercial interests of edge providers.

To be clear, I remain unconvinced that intervention is necessary. But that is the virtue of the common law approach. If anticompetitive behavior occurs, the FCC would have the ability to take action. If not, the market would have the freedom to experiment with new business models and service arrangements. In comparison, a per se rule “will almost always favor one group over another.”

There is another reason the Chairman should be commended for not rushing to reinstate the invalidated net neutrality rules – respect for the role of Congress. As Commissioner Pai noted in his statement on the DC Circuit’s decision striking down the rules, it was “the second time in four years” that the court had ruled that the agency exceeded its authority in attempting to regulate the Internet. In the meantime, Congress has begun a #CommActUpdate process to modernize the statute for the Internet era. In these circumstances, comity counsels that the FCC defer to Congress on Internet rules. A case-by-case approach would give the FCC flexibility to address any serious anti-competitive or consumer issues that might arise while avoiding the issuance of comprehensive rules in the face of a Congressional rewrite. That is indeed wise.

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