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Congress zeroes in on FCC's Net neutrality rules

Recent hearings on the FCC's controversial Net neutrality rules have led to considerable Congressional action aimed at undoing them. Whether these efforts succeed, the new Congress is clearly showing itself to be deeply partisan.

Larry Downes
Larry Downes is an author and project director at the Georgetown Center for Business and Public Policy. His new book, with Paul Nunes, is “Big Bang Disruption: Strategy in the Age of Devastating Innovation.” Previous books include the best-selling “Unleashing the Killer App: Digital Strategies for Market Dominance.”
Larry Downes
6 min read

The new Republican members of both the House and Senate wasted no time following up on promises to undo the Federal Communications Commission's December vote to apply new "Net neutrality" rules to some broadband Internet access providers.

The new "Open Internet" rules (PDF) would prohibit blocking of lawful content, Web sites, applications, and devices and ban "unreasonable discrimination" in the handling of specific data packets. ("Open Internet" is the FCC's preferred term for Net neutrality.) A new transparency requirement would mandate detailed disclosures of network management practices.

Last week, the House held two hearings on the new rules. Based in part on my analysis of the new rules for CNET, I was called to testify at the February 15 hearing before the Judiciary Committee. (My written testimony can be found here (PDF)). The following day, the Energy and Commerce Committee grilled all five FCC Commissioners for over four hours.

It was clear from the hearings that Republicans are determined to undo the new rules, which they believe are both unnecessary and outside the statutory authority of the FCC. Democrats, many of whom were also skeptical of Net neutrality regulations in the last Congress, now appear united in defending the agency.

As one of the first issues to be taken up by the new Congress, the starkly partisan tone of the hearings suggests there will be considerable gridlock between now and the 2012 elections, and not only on tech-related issues. The Net neutrality proceedings have set the tone for future proceedings on health care, debt, financial reform, climate change, and other hot-button issues.

Action follows hearings
The hearings weren't simply for show. Hours after the testimony on February 16, the House and Senate introduced a joint "Resolution of Disapproval," a streamlined mechanism for Congress to nullify agency rulemakings. Resolutions must be voted on within 60 days of publication of new rules. They require a simple majority to pass and are not subject to filibuster.

Energy and Commerce Committee Chairman Fred Upton (R-Mich.) introduced the resolution in the House. Upton issued a statement, saying in part, "We held a hearing today in which we gave the commissioners of the FCC one more opportunity to provide sufficient evidence of a crisis that warrants government intervention. They failed. The controversial Internet regulations stifle innovation, investment and jobs. A federal bureaucracy should not be picking winners and losers."

Passage in the House seems certain, and Republicans would have to find only a few Democrats in the Senate to secure a majority. President Obama, given his oft-stated support of the FCC's Open Internet proceedings, would likely veto the resolution, but it is also possible he would not do so in horse-trading for other legislation, in particular the federal budget.

Even if the resolutions don't pass, Republicans have other avenues for neutering the new rules. On Thursday, the House passed an amendment to the pending budget bill that would prohibit the FCC from spending any money to implement or enforce the new rules. Ten Democrats joined the Republicans in approving the amendment.

Obama may be forced to accept the funding amendment as part of ongoing budget talks, or face giving in on other priorities.

There's also targeted legislation introduced in the opening days of the new session by Rep. Marsha Blackburn (R-Tenn.), which would make clearer that Congress has never given the FCC authority to regulate the Internet, full stop. Blackburn's bill has at least some Democratic support in the House.

Meanwhile, Verizon and MetroPCS have each filed lawsuits in the Federal Court of Appeals for the D.C. Circuit challenging the FCC's legal authority to adopt the new rules. Other legal challenges are likely, and could take a year or more to work their way through the court.

Hearings focused on competition, market analysis
At the Judiciary Committee hearing February 15, Subcommittee Chairman Bob Goodlatte (R-Va.), who is also co-chair of the Congressional Internet Caucus, pressed me and two other witnesses--Public Knowledge President Gigi Sohn and Brett Glass, who runs fixed wireless broadband provider Lariat--on the failure of the FCC to provide evidence of significant market failures that would justify new regulations.

The hearing also explored why new regulations were needed given existing antitrust laws enforceable by the Department of Justice, the Federal Trade Commission, or by private lawsuits.

My testimony underscored my deep concern on this point with the FCC's Open Internet Report and Order, approved by a bare majority of three Commissioners, all Democrats. In explaining the new antidiscrimination rule, the majority explicitly rejected the idea that enforcement should be based on traditional antitrust principles, which require a showing of anticompetitive behavior and demonstrable harm to consumers.

The majority did not offer an alternative standard, however, saying only that they would enforce the rule to ensure "the general proposition that broadband providers should not pick winners and losers on the Internet--even for reasons that may be independent of providers' competitive interests or that may not immediately or demonstrably cause substantial consumer harm."

Yet the majority also noted 16 major exceptions to the discrimination rule, including carve-outs for caching, peering, content delivery networks, mobile broadband, virtual private networks, IP-based voice and video services, and other specialized applications, including telemedicine, that run on the ISPs broadband infrastructure.

It was not clear why these particular non-neutral practices, which the majority acknowledged are "inconsistent" with the new rules, had been excluded, and why the majority expressed skepticism that any future innovations would be tolerated.

That hearing also questioned the FCC's rationale for the new rules, which the majority characterized repeatedly as "prophylactic." The report's principle concerns seem to rest on the lack of robust broadband Internet access competition in much of the U.S. (On Friday, the Department of Commerce issued a long-awaited first draft of its national broadband map, showing where high-speed access is available.)

All three witnesses agreed that the best protection for consumers against abusive ISP practices would come from increased choices for broadband providers. To that end, I argued that the FCC would have better spent its time working to streamline the process of siting new cellular towers and working to free up underutilized radio spectrum, priorities the agency made little progress on during the withering Net neutrality debate.

I also noted the agency's heel-dragging over promising new broadband technologies, such as Broadband over Power Lines, which have yet to gain commercial footholds. BPL could prove an effective way of delivering broadband to rural consumers, many of whom have no service offerings today.

At the hearing February 16, Republicans hammered the commissioners on the lack of any market analysis in the nearly 200-page report that accompanied the new rules. FCC Chairman Julius Genachowski argued that the agency had performed the needed analysis, but could not confirm whether they had done so in conformance with White House rules published by the Office of Information and Regulatory Affairs.

Proceedings suggest gridlocked new Congress
While it's far from clear if any of the legislative or legal challenges to the Net neutrality rules will prove their undoing, there's little doubt that Republicans now see it as a test case for their new power following last fall's midterm elections. And that they see Net neutrality as a leading example of the kind of regulatory overreach and economic interference on which they campaigned.

Net neutrality didn't start out as partisan issue. Last year, a bipartisan majority of Congress urged the FCC not to pass new rules, at least not until Congress gave the agency authorization to do so.

It's also important to remember that as part of last month's 300-page Comcast-NBC Universal merger agreement (PDF), Comcast agreed to abide by the new rules for seven years, even if the regulations are overturned in court. It's possible that Comcast will challenge that part of the agreement if the rules are undone by Congress or the litigation.