The Biggest Net Neutrality Lie of All

This week, filings are flooding into the FCC about its latest effort to pass “net neutrality” rules, the first phase of public comments on the proposal that will continue for the next several months. So many comments were submitted yesterday, the original deadline for this round, that the FCC’s antiquated website crashed, forcing the agency to extend the deadline until Friday. (Supply your own smarmy metaphor.)

Of nearly a million comments filed, most will unfortunately prove to be of little value to the agency’s staff as it proceeds with the carefully-proscribed process of federal rulemaking. Consider a few truly random examples: “I, a tax paying, employed, registered voter DEMANDS net neutrality.” “This horrid stance is leading this country into another civil war and it seems you people are too stubborn or dumb to see it.” “If you can't see your job as anything but a blowjob to Big Telecom then how about resigning?”

But there’s another reason most of the consumer comments, many of them admirably trying to defend the concept of the open Internet, are off the mark. Most of those commenting have been lured into participating by a series of carefully-orchestrated lies about what the FCC is actually proposing to do.

These include lies about what the new rules say, about the kinds of practices they will or will not cover, and about FCC Chairman Tom Wheeler’s reasons for proposing them. (A future post will go into more excruciating detail. Stay tuned.)

Each of these lies has been built on top of the others, and all in the service of the biggest lie of all—a recycled whopper that the Internet “as we know it” is at death’s door, and that the only way to save it is to transform it into a public utility.

Utility regulation—or perhaps outright nationalization of the largest ISPS—is once again being touted as the panacea for everything that currently (or, more often, in the future might) ails the Internet economy. Limited choice of broadband providers? Netflix streaming too slow? The failure of older Americans to see the value of using the Internet? Poor customer service? Turn the Internet into a public utility, and all of it goes away.

What’s more, the lie continues, the FCC can do it easily if only it had the political will, and then efficiently and surgically apply the same kind of oversight by federal and state agencies that has long been applied, with unquestioned success, to our electricity, water, power and telephone networks, as well as other national infrastructure including highways, bridges, and the post office. (What’s left of the old switched telephone network is regulated under Title II of the Communications Act, which the public utility enthusiasts want to resuscitate and apply to the Internet. Hence the battle cry for “Title II”.)

This public utility lie is an old chestnut, going back well over a decade. But this time around, its proponents have managed to convince earnest consumers, start-up executives, and much of the press that transforming Internet access into a utility is not only their one-stop cure, but also their only hope.

Yet instead of doing the right thing, the big lie now warns, Chairman Wheeler and his two Democratic colleagues, over the objections of the FCC’s two Republicans, voted to end net neutrality and “the Internet as we know it” by proposing new rules that would “authorize” ISPs to sell prioritized last-mile treatment (or “fast lanes”) to whichever content providers—Google, Amazon, Facebook—can be forced pay for it by “monopoly” broadband providers.

Entrepreneurs and start-ups who can’t afford paid priority would be left behind, unable to reach users who wanted to access their content and services and, therefore, unable to compete with the incumbents. The Open Internet would not be shored up by the proposed rules—it would be unceremoniously terminated.

What the Proposal Really Says

We need to work backwards to understand how we got into the mess we’re now in. Significantly, most of the outrage—much of it directed personally at Wheeler, who was only recently appointed FCC Chair by President Obama, who suspiciously remains committed both to net neutrality and to the Chairman--occurred before the FCC proposal was ever made public, after word that a draft was in the works was mysteriously leaked from inside the FCC.

Despite efforts by the Chairman to make clear his new rules would extend the FCC’s oversight over ISPs, rage continued to build, heading dangerously toward farce. The day the Commission voted to move forward with the rulemaking, for example, I appeared on Bloomberg TV, where a representative of Common Cause proudly proclaimed that “millions of people” had already condemned the proposal—a proposal not one of them had seen, let alone read.

For one thing, the proposed new rules are nearly identical to those the FCC proudly passed in 2010, but which a federal appellate court largely voided on procedural grounds. (Indeed, many, though not all, of the groups now fervently opposing the 2014 version supported the 2010 version.)

The 2010 rules, recall, were written in response to still another court ruling, which held that the agency’s informal Open Internet policy statement (the FCC never uses the phrase “net neutrality”) was not enforceable.

After a year of what at the time seemed like rancorous debate but which now seems positively parliamentarian compared to the free-for-all of the last few months, the agency passed rules that outlawed ISPs, with important exceptions, from intentionally blocking user’s access to legal Internet content, and from practicing “unreasonable discrimination” in traffic management technologies. (A third rule, requiring more detailed disclosures of traffic management practices, survived the challenge.)

The only difference between the 2010 and 2014 rules is a single change in language made to comply with the court’s decision. Where the 2010 version states that ISPs “shall not unreasonably discriminate in transmitting lawful network traffic over a consumer’s broadband Internet access service,” the 2014 rule says that ISPs “shall not engage in commercially unreasonable practices.”

To the extent there is a debate about the merits of Wheeler’s proposal, that’s the only difference. A prohibition on “unreasonable discrimination” becomes a prohibition on “commercially unreasonable practices.” The changed wording was necessitated by the court’s admittedly confusing rejection of the 2010 rules. But in practice (that is to say, in terms of how the FCC can enforce the rules) there is no significant business difference between practices that constitute “unreasonable discrimination” and those that are “commercially unreasonable.”

(The new wording comes from rules requiring mobile networks to offer data roaming to each other’s customers on “commercially reasonable” terms, which the same court held in a different case was acceptable language.)

Even if there does turn out in practice to be a difference between the two prohibitions, the new rules clearly do not “authorize” anything, nor do they “undo” any net neutrality rules or laws already in place. Congress has never passed any of several proposed net neutrality bills. And after successive court losses on the previous efforts, there have never been enforceable net neutrality regulations at the FCC to begin with.

In short, there is nothing explicit or implied about “fast lanes” and “slow lanes”—whether to ban them or to allow them. (The FCC acknowledges that even without a ban no ISP has yet to offer paid prioritization.) There is, in short, no great conspiracy to undo the Internet that requires consumers to rise up and save it.

Still, opponents of the new rules continue to claim they put an end rather than a beginning to net neutrality. When pressed to engage the actual proposal, they argue vaguely that somehow the slight difference in wording changes everything. What, after all, is a practice that the FCC would find to be “commercially unreasonable”? (What, for that matter, is a practice that would constitute “unreasonable discrimination”? The 2010 rules explicitly refused to define the term, except to say it meant something different that it does under longstanding antitrust laws, which, in the absence of FCC rules, still apply in full force to ISPs.)

Could an ISP offer Google priority delivery for its packets over those of Yahoo, so long as it makes the same offer to Yahoo and anyone else similarly situated? The doomsayers, predictably, say yes.

For its part, the FCC’s proposal simply asks (repeatedly) for comment on whether or not such a practice should be pre-emptively barred or reviewed on a case-by-case basis for anti-consumer effects. The Chairman, for one, seems to be leaning toward an outright ban.

So is that the big betrayal hidden in Wheeler’s proposal? Well, no. Contrary to another oft-repeated lie, the 2010 version of the same rule rejected an outright ban on paid prioritization, noting instead that depending on how, if ever, such a service was offered, it would “raise significant cause for concern.”

In reality, the final order for the 2014 rules, may wind up being more explicit about prohibiting paid prioritization than the rejected 2010 rules. If so, the 2014 version will not only enforce a stronger version of net neutrality than the supposedly better 2010 rules, but will, for the first time ever, provide the FCC with legally-enforceable net neutrality rules of any kind.

But to tilt once again at windmills, the proposed rules don’t “authorize” paid prioritization, or, for that matter, any other network management practice, whether one that complies or not with the nebulous neutrality principle.

Why the Big Lie?

Even since the proposal was published for public comment, almost none of the ardent commentary and media coverage of the 2014 proposal ever mentions the actual text or its modest variation from the far less controversial 2010 version.

Opponents instead continue to repeat the inflammatory rhetoric crafted before the proposed rules were published—and surely they knew all along the gist of Wheeler’s plans to protect, not destroy, the Open Internet by limiting, not extending, ISP practices, as the court invited him to do in January.

One of the groups leading the campaign to demonize Wheeler, for example, continues to describe the “commercially unreasonable” rule as a “the proposal [that] authorizes Internet service providers (ISPs) to discriminate against content and create slow lanes for all those who don’t pay special fees.”

Notably, they never quote the actual language of the proposed rule, or compare it to the 2010 version. But why engage reality when the fiction seems to be getting you so much farther?

The leaders of the Potemkin-like opposition to the proposed rules know that the FCC is proposing nothing that would “end” net neutrality, but rather to codify a potent version of it in a legally-enforceable form

But that is simply an inconvenient truth. Chairman Wheeler and his fellow Democratic Commissioners must be burned at the stake for a higher cause. Not because their proposed rules “authorize” anything good or bad, in other words, but because without an apocalyptic straw man to beat, there’s no crisis that requires the drastic response of the public utility “alternative.” The new rules must be aimed at “ending” net neutrality, because without that there’s no reason, urgent or otherwise, to save the Internet now, before the FCC acts and it’s too late.

And make no mistake. Transforming the Internet into a public utility is a drastic and dangerous idea. Even if the FCC can navigate the treacherous legal waters necessary to “reclassify” Internet access without authority from Congress to do so (and an unchallenged Supreme Court case validating the FCC’s long-argued view that Congress never intended otherwise), transforming private ISPs into quasi-governmental utilities would dramatically change the Internet ecosystem, projecting negative unintended consequences up and down the food chain.

As a public utility, every aspect of a company’s business is subject to the review and approval of possibly several regulators—federal, state, and local. Prices and price changes must be approved in advance, following lengthy proceedings. Infrastructure of equal quality must be available to every household in the regulated area. Starting, changing, or retiring a service requires permission.

Worst of all, improvements in technology (even simply replacing meters, in the case of electric utilities) must be justified in often politically-poisoned environments that invite graft and corruption.

And everything takes months if not years to work its way through the system—a system that in California alone costs billions in taxpayer dollars to operate.

That’s why, as I have noted before, regulating an industry as a public utility has always been understood by economists of every political persuasion to be a correction of last resort, to be imposed only when a market is so broken that no less invasive form of regulation can correct it.

To see what Internet access might actually look like if regulated as a utility, look no farther than the pitiful state of infrastructure that is still public or regulated as a utility, which consistently receives failing grades from consumers and engineers alike. Our roads, bridges, power and water systems are crumbling. And these are mature infrastructures, whose basic technologies haven’t changed in decades.

In the last twenty years, meanwhile, Internet access has cycled through several dizzying improvements, going from slow and expensive dial-up to DSL and then to cable and now to fiber and high-speed mobile networks. That level of innovation—and certainly that speed—would have been impossible had Congress not wisely chosen to leave the commercial Internet largely alone from its beginnings.

Elsewhere, the lingering side-effects of inefficient utility regulation are increasingly being exposed by better and cheaper technology alternatives. The semi-private U.S. Postal Service, which has been legally hamstrung in adapting to the sudden disruption of electronic communications, is now losing over $10 billion every year; desperate to offer less, not more, service to its customers.

Uber, Airbnb and other “sharing” economy services are fighting for their very survival against heavily-regulated incumbents, who have become complacent with legal protection from new, technology-savvy competitors, leaving them no incentive to innovate at all.

The Regulator of my Competitor is my Ally

So why, in the face of at the very best a highly uncertain future for broadband under a utility model, are those agitating for it whipping Internet users into a frenzy, and doing so using demonstrably false claims about the FCC’s actual proposal?

There are, it seems, several reasons. Some are explicit in a sincere but naïve belief that a government owned-and-operated Internet would be better and cheaper than the private one.

Others recognize the costs and risks of injecting government deep into the Internet’s core architecture, but imagine (with more wishful thinking than evidence) that powerful governments would be more friendly to consumers than powerful corporations. (They have no patience for any middle ground, such as giving Wheeler’s rules a chance to work or not.)

Some of the activists are funded by large incumbent content providers, who believe that throwing the ISPs off-balance will improve their own bargaining position but who almost certainly underestimate the risk of being caught up in the same whirlpool.

Many are just going along for the ride. As I’ve noted before, there’s always a risk that Internet freedom fighters can turn unexpectedly into an Internet mob, especially when the information they’re provided is incomplete or, as here, wildly inaccurate.

Which makes the continued repetition of the big lie all the more dangerous. Because in the end, even if FCC Chairman Tom Wheeler was truly about to destroy the Internet with new rules restricting ISPS, the public utility alternative is no alternative at all. It is truly the nuclear option.

A cursory look at the sad history of a hundred and fifty years of public utility regulation makes clear that it also no panacea. Indeed, as two former Obama administration experts have pointed out, a hypothetical ISP would find it easier, not harder, to offer last mile prioritization under Title II than under the proposed rules. (They were accused of being traitors to the cause, and their reasonable voices drowned out in the circus-like atmosphere of Wheeler’s public execution.)

Whatever the motives of its proponents, the public utility panacea remains the biggest of all net neutrality lies. As it has been all along, it is a solution in search of a problem.

That’s no surprise. Panaceas have always been myths. And where the ancient Greeks once sought a universal remedy for all ailments that would prolong life indefinitely, modern medicine no longer imagines such a possibility.

Indeed, doctors confronted with patients who cling to misguided hope from fake cure-alls for all manner of real or psychosomatic conditions have another word for supposed panaceas. They call them placebos.

Project Director, Georgetown Center for Business and Public Policy. My new book, "Big Bang Disruption," co-authored with Paul F. Nunes, is now a bestseller. My earlier books include the New York Times bestseller, “Unleashing the Killer App" and "The Laws of Disruption."