The repeal of FCC net neutrality regulations will restore a free market for internet service

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece John Strand of Strand Consult argues that the US telecoms regulator’s move to repeal its previous is actually a positive step, in spite of widespread reporting to the contrary.

The Federal Communication Commission (FCC) announced today a clean break from heavy-handed regulation of the Internet and restoration of a competition-oriented framework under the Federal Trade Commission (FTC). In contrast to 2015 when the Obama FCC hid its heavy-handed Internet regulation plan from the public until two weeks AFTER the vote. Everyone will be able to read Chairman Pai’s plan to restore Internet freedom more than three weeks BEFORE the vote on December 14. Pai is the first FCC Chairman to make such proposals public.

After a decade of unprecedented capture of regulators by internet activists, the move by the FCC signals the restoration of the rule of law, freedom of choice for consumers, and return to permission-less innovation for all internet actors. If approved the proposal restores the framework that made the US the global leader in the Internet.

Europe, on the other hand, is going the other way. It makes its net neutrality rules and guidelines behind closed doors. The Body of European Regulators for Electronic Communication (BEREC) has secret meetings with industry-funded “experts” of its own choosing. Unlike the USA, these experts are not required to post public “ex partes” to inform other stakeholders of the efforts to influence policy. Strand Consult has tried incessantly for BEREC to create transparency, but BEREC and the Norwegian Regulator Nkom which hosts the head of the Expert Working Group for Net Neutrality refuses to make the details of these secret meetings public.

Not only are telecom operators not privy to BEREC’s Expert Working Group, many of the EU regulators are not informed either.  BEREC will have yet another closed door meeting in Copenhagen in December where the net neutrality working group will discuss how to push the EU net neutrality legislation even further.

Repeal of the 2015 Open Internet Order by FCC

The FCC will vote on whether to make a clean break from the 2015 order. This means removal of the three bright line rules: no blocking, no throttling, and no paid prioritization and vacating the general conduct standard. These rules are effectively price controls, making the consumers bear the full cost of broadband while third party content providers enjoy artificially subsidized transit.

Many probably believed the 2015 Open Internet Order was a gold standard of net neutrality regulation. That illusion is now utterly destroyed. The 2015 Order proved to be vulnerable legally and politically. The earlier FCC claimed that heavy handed regulation would be beneficial. Instead as the FCC now reports, investment fell 5.6% and 75,000 jobs were lost. The current FCC expects that removal of the regulation will have a beneficial impact. They refer to many academic and empirical reports to prove their claim.

Reclassification of broadband as an information service

The item will reclassify broadband as an information service under Title I of the Communication Act. This removes broadband from the wrongly-imposed status of common carriage and is consistent with the US Supreme Court decisions finding that broadband is an “information service” under Title I, not a “telecommunications service” under Title II. Moreover this is consistent with Congressional intent that the Internet should be free and “unfettered from Federal and state regulation.” This also restores mobile broadband to a private mobile service.

Importantly this move will restore Federal Trade Commission (FTC) jurisdiction to police broadband under Section 5 of the FTC Act, a broader, more intuitive framework which conceptualizes anticompetitive practices across the entire Internet ecosystem, rather than focus only a single actor in an interconnected system. This also reinvests the FTC’s authority to protect online privacy, which the 2015 Order ripped away, leaving consumers without any online broadband privacy protections.

Transparency Notification – great for consumers

The FCC’s authority allows it to police transparency, so that authority will remain in a transparency notification.  Broadband providers can manage their traffic in efficient ways provided they include disclosures in about their practices. This is a common feature in regulation by both the FTC and FCC. Read FCC Chair Ajit Pai’s explanation.

The FTC takes a holistic, competition-based approach to the entire Internet ecosystem with a goal to deter unfair and deceptive practices which harm consumers. In practice the FCC’s rules created a perverse form of asymmetric regulation, allowing some industries a tougher or different standard than other. Under the FTC, there is a level playing field for all digital players.

What it means for Europe and the rest of the world

The FCC’s reversal comes at a time when the EU has enshrined net neutrality in law and through the BEREC guidelines. Many in the European Union are likely furious with the events in the US. After all it was the US that invented the concept, and its richly-funded internet activists convinced EU policy makers to adopt the policy in law. Many EU officials wanting to save face will likely dismiss the FCC effort and double-down on EU regulation.  All the while investment and innovation will continue to exit the EU and flow to the US and other regions which support private investment and enterprise. The EU will fall further behind on broadband and 5G.

At the beginning of the millennium the EU accounted for one-third of the world’s investment in broadband networks, had 6 large manufactures of mobile phones, and a robust environment for research and development in mobile communications. Today EU’s network investment is less than 20 percent of the world’s total and the EU’s research and manufacturing base has withered away. Historically telecom industry fertilizes the rest of the ecosystem but overregulation disrupted that virtuous circle.

Now that the FCC has checked the evidence and reversed course, will the EU do the same? The European Commission will review the status of the net neutrality law in 2019. In the meantime, it can remind BEREC not over-interpret the law and instead enforce a neutral implementation.

John has for more than 22 years advised the C-suite of major telecoms players around the world. Anyone who has met John Strand knows that he always speaks his opinion. Being honest – and giving his honest opinion on current issues in the mobile industry has become John’s trademark – even when it means being controversial or treading on a toe or two.The fact that John works in an industry that loves to hype new products and services is no secret, on the other hand John is the first to object. Hype simply does not work on John. He is quick to cut through the BS and use facts to specify the difference between hype and what will happen in the real world.Many people are naturally skeptical about fortune-tellers – John Strand’s attitude is that people should not judge him on what he is predicting about the future, but rather on what he previously predicted would happen today. Read more here.