All three judges in Verizon v. FCC agreed that the net neutrality order regulating the Internet was, as I’ve said all along, illegal. The heart of the rule, a requirement (contrary to the history and structure of the Internet) that all bits be treated equally, was a bar on diverse business models and a de facto subsidy to big content companies that wanted regulators to guarantee the full costs of broadband deployment would fall on consumers and taxpayers – not on them.
Politically, this is a huge setback for the Obama administration’s anti-democratic penchant for sidestepping Congress and ruling by regulatory and executive decree. It’s also a blow to Senate Democrats, who unanimously voted not to overturn this rule, despite the fact that it was widely acknowledged to be illegal – which has now been confirmed in court.
Judge David Tatel’s majority opinion, joined by Judith Rogers (both Clinton appointees), goes to great lengths to defer to the FCC’s dubious effort to discover affirmative regulatory authority in a provision that was intended to be deregulatory. But even Tatel then concludes that even if general authority to regulate broadband Internet providers exists, the FCC cannot (having already correctly determined that broadband Internet is an information service, not an old-fashioned telephone monopoly) proceed to regulate as if broadband providers were old-time common carriers.
Reagan-appointee Judge Laurence Silberman’s stinging dissent goes much further, rejecting the FCC’s jurisdictional claim and mocking its rationale for the rule. In the last paragraph in particular is a brilliant dig at the big content companies that have pushed for this rule:
“This regulation essentially provides an economic preference to a politically powerful constituency, a constituency that, as is true of typical rent seekers, wishes protection against market forces.”
Indeed. But content companies that see government regulation as a good way to ensure a free ride should think twice about the ultraliberal advocacy groups they are funding and making common cause with, because they may end up destroying the free-market Internet that has served them so well.
It’s always worth remembering that Robert McChesney, founder of Free Press, a group with deep ties to the Obama administration and the FCC, once explained this to a socialist website:
“At the moment, the battle over network neutrality is not to completely eliminate the telephone and cable companies. We are not at that point yet. But the ultimate goal is to get rid of the media capitalists in the phone and cable companies and to divest them from control.”
The illegal net neutrality order being struck down is a setback for McChesney and his allies (Free Press sent out an email with the subject line: “Net Neutrality Is Dead”), but it also risks emboldening them and giving them renewed momentum for a more direct assault on the free-market Internet. In reaction to the court’s decision, advocates of regulation are already upping the ante and calling for the nuclear option of outright reclassifying broadband Internet as an old-time telephone monopoly and imposing pervasive, crippling regulation.
And that of course is the real danger; that the remarkable free market success story of broadband infrastructure will be overrun by government regulation and ultimately become a regulated utility in as poor a shape as the country’s roads, bridges, and water infrastructure.
Notwithstanding Silberman’s brilliant dissent, the majority in Verizon v. FCC staked out a middle ground providing a clear path forward. The court upheld the disclosure rules, which will ensure consumers know how broadband providers manage their networks; they can vote with their wallets.
The court also found the FCC now has authority to “promulgate rules governing broadband providers’ treatment of Internet traffic,” without resorting to heavy-handed utility-style regulation.I’m not convinced any such regulation is needed, but those who think otherwise should pursue modest rules-of-the-road that still allow a diversity of business models to be developed and innovation to proceed without permission from regulators.