Telecommunications & Electronic Media Net Neutrality vs. Net Reality: Why an Evidence-Based Approach to Enforcement, And Not More Regulation, Could Protect Innovation on the Web By Hon. Maureen K. Ohlhausen* Related Links: • Senate Committee on Commerce, Science, and Transportation, Hearing on “Network Neutrality” (testimony of Vinton G. Cerf ), 109th Cong., 1st sess., 2006: http://commerce.senate.gov/pdf/cerf-020706.pdf •Angele A. Gilroy, Congressional Research Service, R40616, Access to Broadband Networks: The Net Neutrality Debate (2013): http://www.fas.org/sgp/crs/misc/R40616.pdf eople have discussed the purpose, structure, and gov- I. Framing The Net Neutrality Debate ernance of the Internet since its earliest days. More recently, this discussion has sharpened into a debate about A. Design Characteristics Shaping The Debate Pwhether and how to enforce network neutrality—i.e., access Like many of our modern technologies, the Internet be- to the Internet on equal terms for all content providers and gan as a Department of Defense research project.2 Three core consumers. Some content providers want the government to design principles from those days are still relevant for today’s adopt regulations to guarantee them fair access to the Internet. policy decisions: first, the Internet is intentionally decentralized Some network owners, like Verizon or Comcast, disagree and and redundant; second, communications over the Internet are think such regulations are unnecessary and could stifle inno- packet-switched, meaning each message is broken apart and vation on the Internet. This debate is taking place at a time its many pieces travel separately across the web before being of radical change in how we access and use the Internet. The re-assembled at the message’s final destination; and, third, the convergence of telecommunications technologies means that Internet uses “end-to-end architecture” that carries content from today we listen to the radio, watch television, and talk with servers at the “edge” of the Internet on a “first-in, first-out” or friends and family on the Internet. This new reality stands in “best efforts” basis.3 stark contrast to the archaic regulatory framework under the B. Proponents of Net Neutrality Regulation Communications Act of 1934, as amended,1 which treats each form of communication separately. Network neutrality advocates see the success of content With the Federal Communications Commission’s (FCC) and applications providers like Google, Yelp, or Facebook regulatory approach to network neutrality again being chal- arising from the core design principles, especially end-to-end lenged by network owners in the U.S. Court of Appeals for the architecture. As Professors Mark Lemley and Lawrence Lessig D.C. Circuit, I think now is the right time for us to seriously have explained: “While the e2e [end-to-end] design principle consider alternatives. From my perspective, we do not need was first adopted for technical reasons, it has important social another layer of regulations issued under the Communications and competitive features as well. e2e expands the competitive Act. Doing this in the face of a dynamic and robust online horizon by enabling a wider variety of applications to connect to 4 environment would contradict my understanding of good and to use the network.” They think “[the] strong presumption government and could impede development of the Internet. [should be] in favor of preserving the architectural features that 5 We should instead focus on informed, flexible, and fact-based have produced this extraordinary innovation.” Net neutrality enforcement of our existing competition and consumer protec- proponents want rules that protect these core design attributes tion norms by expert government agencies, supplemented with by proscribing certain types of behavior by network owners. private self-regulation of technical standards through consensus- Many successful “edge” providers are concerned that based multi-stakeholder organizations of engineers, consumers, owners of the underlying infrastructure could engage in an- and businesspeople. To the extent the government is involved, ticompetitive hold-up, either by cutting off access to users or the Federal Trade Commission (FTC) model of enforcement, to other networks, by charging high prices for transport or by advocacy, and industry education is the better model that will providing better services to one content provider instead of its 6 allow free markets the breathing room they need to prosper. competitor either for a fee or because of a financial affiliation. As explained at an FTC-sponsored conference several years ago, ..................................................................... content providers worry about “(1) blockage, degradation, and *Maureen K. Ohlhausen has served on the Federal Trade Commission prioritization of content or applications; (2) vertical integration since 2012. She would like to thank Alexander Okuliar for his assistance by ISPs [internet service providers] and other network provid- in preparing this article. The views expressed in this article are solely those ers into content and applications; . and [3] the diminution of the author and are not meant to reflect the views of the Commission or of political and other free expression on the Internet.”7 This any other Commissioner. February 2013 81 philosophy of rule-based prohibitions to address mainly verti- only to Title I.18 The FCC then extended similar treatment cal concerns is the main force propelling the FCC’s efforts on to broadband access over telephone-based digital subscriber or net neutrality.8 “DSL” lines.19 These reclassifications permitted the FCC to deregulate C. Opponents of Net Neutrality Regulation Internet access while asserting ancillary jurisdiction over broad- Opponents of net neutrality rules are concerned that regu- band providers under provisions like section 4(i) of the Act, lation, by its nature, is inflexible and would penalize innovation 47 U.S.C. § 154(i). In 2005, the FCC acted on this putative in an attempt to maintain the original design principles of the authority and issued an Internet Policy Statement outlining 9 Internet. They argue that among the core engines of growth certain Internet freedoms “to ensure that broadband networks on the Internet has been the latitude to experiment with new are widely deployed, open, affordable, and accessible to all 10 and different business models. They point out that many consumers.”20 In 2008, the FCC alleged Comcast violated this once-successful Internet businesses were vertically-integrated policy by slowing customers’ use of peer-to-peer networking and arguably would violate modern network neutrality regula- applications and then ordered it to cease and desist.21 Comcast tions were they still in business today. Adopting rigid network complied with the order, but challenged the FCC’s exercise of neutrality rules would freeze the existing business environment authority over network management practices.22 The D.C. into place and potentially prevent experimentation with differ- Circuit sided with Comcast, concluding the FCC’s actions ent technologies and types of vertically-integrated businesses or were “flatly inconsistent” with the law, in large part because the business practices. It also could derogate many of the efficiencies agency had tied its ancillary jurisdiction over Comcast’s actions of vertical integration (like eliminating double marginalization mainly to policy statements in the Act rather than to sections problems) and skew investment incentives. Instead of allowing with express statutory delegations of authority.23 the free market to guide investment dollars where needed and With its authority over broadband providers called into businesses to charge based on the best use of potentially dear re- question, Chairman Genachowski proposed a “Third Way” to sources, like bandwidth, the government would dictate many of shore up the FCC’s position. This would require the agency to these decisions. Network operators and ISPs advocate for more reclassify the transmission component of “broadband services” fact-intensive and flexible enforcement of widely-acknowledged as “telecommunications services,” which in theory would allow legal and economic norms. They question whether a systemic it to exercise direct jurisdiction over network management 11 problem requiring expansive solutions even exists. under Title II.24 The Third Way proposal was met with wide- II. Competing Regulatory Solutions spread concern from Congress, which led the FCC to point to yet other bases for its network neutrality jurisdiction—Section A. The FCC Approach To Net Neutrality 706 of the Telecommunications Act of 1996 and ancillary ju- risdiction related to additional specific sections of Titles II, III, The FCC historically has taken a segmented approach to and VI.25 The agency then adopted an Open Internet Order in regulating different communications media, as contemplated December 2010 with new network neutrality rules. Generally, by the Communications Act.12 Title I of the Act gives the FCC those rules provide: (1) ISPs must be transparent and disclose general jurisdiction over certain communications, but offers their network management practices; (2) both wireless and fixed little specific jurisdictional guidance for the FCC.13 The other network owners may not block lawful applications or services, titles of the Act spell out more clearly the agency’s authority except for purposes of reasonable network management;