Net Neutrality: Is Antitrust Law More Effective Than Regulation in Protecting Consumers and Innovation?
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NET NEUTRALITY: IS ANTITRUST LAW MORE EFFECTIVE THAN REGULATION IN PROTECTING CONSUMERS AND INNOVATION? HEARING BEFORE THE SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW OF THE COMMITTEE ON THE JUDICIARY HOUSE OF REPRESENTATIVES ONE HUNDRED THIRTEENTH CONGRESS SECOND SESSION JUNE 20, 2014 Serial No. 113–111 Printed for the use of the Committee on the Judiciary ( Available via the World Wide Web: http://judiciary.house.gov U.S. GOVERNMENT PRINTING OFFICE 88–377 PDF WASHINGTON : 2014 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 COMMITTEE ON THE JUDICIARY BOB GOODLATTE, Virginia, Chairman F. JAMES SENSENBRENNER, JR., JOHN CONYERS, JR., Michigan Wisconsin JERROLD NADLER, New York HOWARD COBLE, North Carolina ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia LAMAR SMITH, Texas ZOE LOFGREN, California STEVE CHABOT, Ohio SHEILA JACKSON LEE, Texas SPENCER BACHUS, Alabama STEVE COHEN, Tennessee DARRELL E. ISSA, California HENRY C. ‘‘HANK’’ JOHNSON, JR., J. RANDY FORBES, Virginia Georgia STEVE KING, Iowa PEDRO R. PIERLUISI, Puerto Rico TRENT FRANKS, Arizona JUDY CHU, California LOUIE GOHMERT, Texas TED DEUTCH, Florida JIM JORDAN, Ohio LUIS V. GUTIERREZ, Illinois TED POE, Texas KAREN BASS, California JASON CHAFFETZ, Utah CEDRIC RICHMOND, Louisiana TOM MARINO, Pennsylvania SUZAN DelBENE, Washington TREY GOWDY, South Carolina JOE GARCIA, Florida RAU´ L LABRADOR, Idaho HAKEEM JEFFRIES, New York BLAKE FARENTHOLD, Texas DAVID N. CICILLINE, Rhode Island GEORGE HOLDING, North Carolina DOUG COLLINS, Georgia RON DeSANTIS, Florida JASON T. SMITH, Missouri [Vacant] SHELLEY HUSBAND, Chief of Staff & General Counsel PERRY APELBAUM, Minority Staff Director & Chief Counsel SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW SPENCER BACHUS, Alabama, Chairman BLAKE FARENTHOLD, Texas, Vice-Chairman DARRELL E. ISSA, California HENRY C. ‘‘HANK’’ JOHNSON, JR., TOM MARINO, Pennsylvania Georgia GEORGE HOLDING, North Carolina SUZAN DelBENE, Washington DOUG COLLINS, Georgia JOE GARCIA, Florida JASON T. SMITH, Missouri HAKEEM JEFFRIES, New York DAVID N. CICILLINE, Rhode Island DANIEL FLORES, Chief Counsel (II) C O N T E N T S JUNE 20, 2014 Page OPENING STATEMENTS The Honorable Bob Goodlatte, a Representative in Congress from the State of Virginia, and Chairman, Committee on the Judiciary ................................. 1 The Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress from the State of Georgia, and Ranking Member, Subcommittee on Regu- latory Reform, Commercial and Antitrust Law ................................................. 2 The Honorable Spencer Bachus, a Representative in Congress from the State of Alabama, and Chairman, Subcommittee on Regulatory Reform, Commer- cial and Antitrust Law ........................................................................................ 4 The Honorable John Conyers, Jr., a Representative in Congress from the State of Michigan, and Ranking Member, Committee on the Judiciary ......... 5 WITNESSES The Honorable Joshua D. Wright, Commissioner, Federal Trade Commission Oral Testimony ..................................................................................................... 9 Prepared Statement ............................................................................................. 11 The Honorable Robert M. McDowell, former FCC Commissioner, and Visiting Fellow, Hudson Institute, Inc., Center for the Economics of the Internet Oral Testimony ..................................................................................................... 17 Prepared Statement ............................................................................................. 19 Bruce M. Owen, Morris M. Doyle Centennial Professor in Public Policy, and Director, Stanford Public Policy Program, Stanford University Oral Testimony ..................................................................................................... 42 Prepared Statement ............................................................................................. 44 Tim Wu, Professor of Law, Columbia Law School Oral Testimony ..................................................................................................... 70 Prepared Statement ............................................................................................. 72 LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING Material submitted by the Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Rep- resentative in Congress from the State of Georgia, and Ranking Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law .......... 78 Material submitted by the Honorable Suzan DelBene, a Representative in Congress from the State of Washington, and Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law ........................................ 90 APPENDIX MATERIAL SUBMITTED FOR THE HEARING RECORD Supplemental Material submitted by the Honorable Robert M. McDowell, former FCC Commissioner, and Visiting Fellow, Hudson Institute, Inc., Center for the Economics of the Internet ........................................................... 98 Supplemental Prepared Statement submitted by Bruce M. Owen, Morris M. Doyle Centennial Professor in Public Policy, and Director, Stanford Public Policy Program, Stanford University .................................................................. 141 Letter from The American Antitrust Institute (AAI) ........................................... 155 (III) NET NEUTRALITY: IS ANTITRUST LAW MORE EFFECTIVE THAN REGULATION IN PROTECTING CONSUMERS AND INNOVATION? FRIDAY, JUNE 20, 2014 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW COMMITTEE ON THE JUDICIARY, Washington, DC. The Subcommittee met, pursuant to call, at 9:03 a.m., in room 2141, Rayburn Office Building, the Honorable Spencer Bachus, (Chairman of the Subcommittee) presiding. Present: Representatives Bachus, Goodlatte, Farenthold, Issa, Marino, Collins, Smith, Johnson, Conyers, DelBene, Jeffries, and Cicilline. Staff Present: (Majority) Anthony Grossi, Counsel; Ashley Lewis, Clerk; Christine Bealer, Law Clerk; (Minority) Slade Bond, Coun- sel; James Park, Counsel; and Rosalind Jackson, Professional Staff Member. Mr. BACHUS. The Subcommittee on Regulatory Reform, Commer- cial and Antitrust Law hearing will come to order. Without objection, the Chair is authorized to declare a recess at any time. At this time, we will have our opening statements. Would the Chairman of the full Committee like to go first? Mr. GOODLATTE. If you like, Mr. Chairman, I would be happy to. Mr. Chairman, thank you for holding this hearing. Regulation and antitrust law have long had an uneasy relation- ship. Antitrust law serves to protect a competitive process by pros- ecuting anticompetitive conduct if and when it occurs. Regulation typically dilutes or casts aside reliance on antitrust enforcement and attempts to constrain or direct market forces by imposing new rules of conduct. These approaches generally are at odds with each other and a natural tension has arisen between the two. There are few more important issues that will impact the future of the Internet than the question of whether to apply antitrust law or regulation to protect the Internet from anticompetitive and dis- criminatory conduct. I want to thank Chairman Bachus for holding today’s hearing on this critical question. (1) 2 Proponents of imposing additional regulation on the Internet marketplace argue that it is needed to encourage competition and promote innovation. I am deeply skeptical of these claims. In my experience, regulation generally stifles rather than facili- tates competition and innovation. In fact, it is my belief that the Internet has flourished precisely because it is a deregulated mar- ket. That is not to say that we should stand by and allow companies to engage in discriminatory or anticompetitive activities. I believe that vigorous application of the antitrust laws can pre- vent dominant Internet service providers from discriminating against competitors’ content or engaging in anticompetitive pricing practices. Furthermore, antitrust laws can be applied uniformly to all mar- ket participants, not just to Internet service providers, to ensure that improper behavior is prevented and prosecuted. In 2007, the Department of Justice expressed its preference for antitrust enforcement over regulation when it warned that, ‘‘The FCC should be highly skeptical of calls to substitute special eco- nomic regulation of the Internet for free and open competition en- forced by the antitrust laws.’’ DOJ further stated that regulation ‘‘could in fact prevent, rather than promote, optimal investment and innovation in the Internet, with significant negative effects for the economy and consumers.’’ I understand that the nature of the Internet and the speed at which the market evolves could present challenges to enforcing the existing antitrust laws in the Internet context. We may need to consider amending the current antitrust laws to ensure that they can be applied promptly and effectively to protect the competitive nature of the Internet marketplace. The Judiciary Committee has long played a role in ensuring that antitrust laws are properly equipped and can be applied effectively in the telecommunications industry. This Committee will continue to play a key role advocating