Industry comments on the FCC’s latest net neutrality proposal (Docket 14-28) continued to pour in through July 18. The volume of comments was so large (more than one million) that the FCC’s website broke down and the Commission extended the comment due date for three days.

Almost all of the comments were from consumers reflecting the overwhelming public opinion that the FCC must “save the Internet,” and the only way to do so is to reclassify broadband Internet service as a Title II telecommunications service. Never mind that virtually none of these consumers could define Title II regulation or explain precisely how it will “save the Internet.” Therefore, in terms of specific policy prescriptions, these comments are utterly useless. 

Nevertheless, these comments are important because they demonstrate the pressure the FCC finds itself under in deciding future Internet regulation. The comments also clearly demonstrate that the FCC Chairman Tom Wheeler and parties advocating against reclassification such as Verizon, AT&T, and the National Cable and Telecommunications Association (NCTA) have lost the public relations battle in a landslide. 

This is remarkable, considering how successful the Internet has been and how successful the rollout of broadband Internet access in the US has been with comparatively few complaints. Just compare the never-ending complaints filed with the FCC regarding claims of discrimination involving Title II telecommunications services versus the number of discrimination claims regarding lightly regulated broadband Internet access. They are not even remotely close!      

And yet, consumer groups, as well as some members of Congress have successfully portrayed the Commission’s proposal to allow commercially reasonable broadband Internet agreements as leading to a two-tiered Internet with the “haves” paying more to receive superior service and the rest relegated to inferior service. For these advocates, such as the Attorney Generals of New York and Illinois, reclassification is the only hope for the Internet:

Once broadband Internet access is correctly classified as a “telecommunications service,” appropriate Open Internet rules will be fully consistent with the essential obligations at the heart of common carrier status, i.e., that service be provided with no unjust or unreasonable discrimination in charges or practices and no undue or unreasonable preferences or advantage, or prejudice or disadvantage to any particular person or class of persons. (The People of the State of Illinois by Attorney General Lisa Madigan and the People of the State of New York by Attorney General Eric T. Schneiderman comments at pp 17-18).

However, as we have stated many times and Verizon correctly notes, reclassification would not provide solace to these anti-discrimination concerns:

[R]reclassification would not even preclude the differentiation of service that its proponents seek to ban, because Title II expressly recognizes that reasonable discrimination is lawful and has long permitted many of the practices that Title II proponents criticize. Thus, the application of Title II requirements to broadband providers would amount to regulation for the sake of regulation, strapping a straightjacket onto this competitive and dynamic sector (Verizon comments, p.16).

Thus, the FCC faces an almost impossible dilemma: It can yield to public pressure and attempt to reclassify broadband Internet access as a telecommunications service, even while knowing this will lead to years of litigation, industry uncertainty and possible congressional action to limit FCC power, or it can strand strong with its original proposal.

We believe the best way to proceed is with commercially reasonable agreements reviewed on a case-by-case when challenged.  To limit the number of challenges we support the Verizon proposal to provide a safe harbor for agreements that are available to all parties and not provided to an affiliate:

One such area where a safe harbor or presumption of reasonableness is appropriate is in the case of non-exclusive arrangements with unaffiliated third parties. As a general matter, such arrangements are unlikely to harm consumers or competition, and the Commission should presume that such arm’s length arrangements are reasonable (Id, p. 33).

When appropriate challenges are made, the onus must fall on parties providing differential pricing or differential bandwidth to economically justify their actions. In other words they must demonstrate that such discrimination is reasonable. Failure to provide economic justification should invalidate these agreements.  Moreover, when unreasonable discrimination is found to exist, the Commission must have the enforcement power to meaningfully penalize the parties involved. If the Commission were to adopt these principles, it would go a long way toward regulating the Internet without the chaos that reclassification will surely bring.

At this point industry comments serve only to delay the FCC’s day of reckoning on Internet regulation. The issues are clear, and uninformed public sentiment should not pressure the Commission into actions it would quickly regret.

By Andrew Regitsky, President, Regitsky & Associates