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FCC Open Internet Decision Take-aways

The FCC's 3-2 vote on its Open Internet order produces several  big takeaways, despite there being no actual order to review.

Take-aways:

First, the controversy over net neutrality isn't going away; it is on path to get more controversial.

The FCC signaled this was only the beginning of a broader FCC net neutrality rule making process.

 

  • FCC: The ~100 page discussion of the order reportedly indicates the FCC intends to tighten, extend and expand the actual ~2 pages of rules significantly over time.
    • Specifically, the FCC could consider extending more wireline net neutrality restrictions to wireless in two years, a position strongly opposed by the wireless industry and the facts.
  • Congress has indicated it could actively try and thwart implementation of the FCC's order via a congressional resolution of disapproval, appropriations limits, and oversight.
    • See surprisingly strong warnings from: incoming House Speaker John Boehner; Senate Minority Leader Mitch McConnell; House Commerce Chairmen Upton and Walden; and Senate Commerce Ranking Member Hutchinson.
      • Note that the procedures of the Congressional Review Act create a relatively easy path for the full House and Senate to each have an up-or-down vote on these rules (subject to a Presidential veto), in the coming months.
  • Courts: Given that FCC rules are very often challenged in court, and given that at least one entity has publicly signaled it does "not support the final rule," USTelecom, this FCC Open Internet order is very likely to be challenged in court; and there could even be a request for a stay.

Second, this FCC Open Internet order is unlikely to survive legal challenge.

 

  • The DC Court of Appeals rejected similar FCC legal justifications last year in overturning the FCC in the Comcast vs. FCC decision.
  • Moreover, the compelling dissents of FCC Commissioners McDowell and Baker provide the courts a detailed legal roadmap of all the order's many serious legal vulnerabilities.
    • (For example, the FCC's reliance on Section 706 for authority relies on logic that is at war with itself, i.e. it assumes the FCC's previous interpretations of 706 were wrong and that the language says the opposite of what it plainly says.)

 

Third, this decision opens up more FCC regulatory cans of worms.

 

  • The FCC's Open Internet order and its justification for sweeping legal authority, suggest that the FCC intends to extend its interventionist net neutrality thinking to: re-visiting special access, refereeing backbone peering contracts for the first time, turbocharging the all-vid set-top box proceeding for over-the-top providers, "opening" up the new ~500 MHz of wireless spectrum, and intervening in cloud computing competition via paid prioritization restrictions.

 

Fourth, net neutrality will continue to be a controversial political issue.

The political forces behind the synthetic creation of the net neutrality as a political issue, continue to generously fund FreePress and Public Knowledge. Both criticized the FCC's Open Internet order for not going far enough. They want more regulation and they are not going away.

 

  • John Fund, the WSJ columnist, in "The Net Neutrality Coup," exposes how several foundations have funded the synthetic manufacture of net neutrality as a political issue.

 

Fifth, the FCC Order is an industrial policy picking market winners and losers.

 

  • When the actual order language comes out, I suspect it to be replete with corporate welfare goodies for Silicon Valley interests.
  • Commission Baker spotlighted that the order favored online companies over consumers in that it allowed usage based pricing for consumers, but prohibited it for online companies.
    • This means Silicon Valley companies could enjoy mandated implicit distribution subsidies potentially worth billions of dollars over time.
  • What many don't appreciate is that the fight over no paid prioritization is old-fashioned protectionism -- effectively protecting Silicon Valley cloud computing providers from broadband competition.
    • At core, the FCC has tilted the playing field to favor Open Internet Coalition "edge" members like Skype, Google, Amazon, IAC, Netflix etc.

 

Sixth, in this order the FCC is effectively declaring "open season" on the Internet around the world.

 

  • As Commissioner McDowell appropriately warned, the U.N. is already angling to use the uproar over Wikileaks to make a run at having the U.N. regulate the Internet globally.
  • This FCC Open Internet order adds fuel to that fire.

 

Moreover, the fact that the FCC is taking the lead in intervening in the Internet for the first time will provide political cover for every repressive regime to crack down on its populace's freedom, by just defining "openness" and "reasonableness" in their own  self-serving way.

 

  • The FCC's disrespect for the Constitution, the law and due process is a terrible example for the rest of the world to emulate.

 

In sum, this unnecessary and unwarranted FCC Open Internet order is, and will continue to be, a big deal for a long time.

 

  • It also can be expected to badly distort market decisions and outcomes until the courts and/or Congress effectively rein it in.

 

     

    Q&A One Pager Debunking Net Neutrality Myths