Observations of the FCC’s Attempt Regulate Broadband Providers as Common Carriers

In Fall 2023, the Federal Communications Commission (FCC) released a Notice of Proposed Rulemaking, “Safeguarding and Securing the Open Internet” (SSOI), to classify broadband as a common carrier service under Title II of the Communications Act. This represents the 9th iteration of US “open internet” policy over some two decades. Note that term associated terms “net neutrality” only appears in footnotes in the NRPM and remains an uncodified legal concept in the US and EU. I earned my doctorate measuring such broadband regulation and its impact to ecosystem innovation across 53 countries over 5 years. Here are observations of the most recent effort.

1. The FCC’s SSOI is unlawful.
   • If a nation wants to impose “open internet” rules on broadband, it must do so through legislation which defines the objective and the means. This could be done in the US with a stand-alone law (like the EU) and/or an update to the Communications Act. However, the US has chosen not to do this, opting instead for a competition law approach delivered by the Federal Trade Commission (FTC). Similar policies are employed by Australia and New Zealand.
   • The FCC’s SSOI violate the US Communications Act on its face. The Act has clear, distinct titles or sections for specific services, which Congress defined. The FCC in taking items from Titles I (general provisions, information services) and V (cable) and then dropping them into Title II (common carriers) is tantamount to rewriting the law. As such, cable providers, mobile provides, and other broadband providers covered under different titles, rightly sue the FCC for its illegal, arbitrary, and capricious actions.
   • Title II contains some 275 provisions designed to regulate a national telephone monopoly from over a century ago. It allows the FCC to set prices, tax, raise levies, impose merger conditions, and other powers. This is not the appropriate instrument to regulate modern broadband networks of multiple technologies and services.
   • Nations can achieve “open internet” policies through soft law and non-punitive guidelines. These are successfully practiced today in South Korea and Japan with significant success as correlated to broadband outcomes.
   • Self-regulatory net neutrality regimes practiced in Denmark were correlated with positive broadband outcomes.
   • The United Kingdom’s Ofcom updated its open internet rules, finding that the EU model reduced consumer welfare and innovation in broadband networks.
2. Hard “Open Internet” rules are not associated with greater innovation in the countries in which they are adopted.
   • The FCC’s argumentation that “open internet” rules are needed for innovation has been discredited. Read my pro bono amicus brief in Mozilla v. FCC.
   • The European Union has not experienced an increase in internet innovation from its rules adopted in 2015.
3. Hard “Open Internet” Rules are associated with reduced network investment, show the definitive econometric studies across OECD nations for some 20 years.
   • US broadband networks have been lightly regulated through competition law, contrasting with the strict “open internet” controls imposed by the European Parliament in 2015.
   • Analysis of comprehensive broadband data over 20 years in 30 OECD countries indicates the superiority of a light-touch approach to drive connectivity.
   • Empirical evidence suggests that “open internet” regulations negatively impact fiber investments and may slow the deployment of new broadband technologies like 5G.
   • The US has a higher annual capital expenditure on broadband infrastructure compared to the EU, and 5G adoption rates are significantly higher in the US, indicating the potential drawbacks of heavy-handed regulation.
4. There is no evidence, official testimony, or academic theory that the FCC’s SSOI will improve National Security.
   • In 2023, the FCC proposed a new argumentation for its Title II classification, national security. However, it provides no such evidence or testimony from national security authorities to support this conclusion. Read my comments submitted to the FCC and  subsequent reply comments.
   • If FCC believes that Title II is necessary for national security, it should ask Congress for the authority. The Secure Equipment Act conferred need authority to the FCC in a matter of weeks.
5. The FCC’s “open internet” orders unwittingly strengthens market power of large edge providers.
   • The FCC’s open internet rules effectively made free and sponsored broadband access illegal. New business models which could have  competed with established platforms for advertising dollars were arbitrarily deemed illegal. Moreover, the largest platforms today enjoy de facto must-carry obligations, meaning that they can deliver as much data as they want to broadband networks regardless of the cost or impact. For a summary of the data, see my article in ProMarket of the Stigler Center at the University of Chicago.
   • In The paradox of (Inter) net neutrality: An experiment on ex-ante antitrust regulation antitrust researchers test net neutrality in dictator game theory and conclude, “Big Tech companies, sheltered by the net neutrality policy, have flourished. They now have the power to exclude minor companies, and therefore their contents, from the Internet market in de facto defiance of the net neutrality principle.” Antitrust scholar Oles Andriychuk suggests that soft net neutrality rules can deliver positive outcomes without causing hard rule problems, noting EU broadband providers are prevented from disruptive innovations.
6. The FCC’s SSOI, however well-intentioned, contradicts bi-partisan broadband affordability goals.
   • The FCC runs the Affordable Connectivity Program (ACP), the most successful broadband adoption program to date in the USA. It offers a monthly voucher of $30 to support their choice of broadband internet service which some 23 million US seniors, veterans, students, and others have used. ACP enables broadband choice in that teople use the voucher to select their preferred broadband provider and technology, creating competition in the broadband market.
   • The FCC proposes a vast new licensing regime on 3500 US broadband providers. This would require that they apply for FCC licenses before they offer broadband and that they obtain permission before adding or removing any wires or lines. Such a cumbersome, bureaucratic policy is untenable and will makes broadband more expensive and less accessible.