Opinion: 'Net Neutrality' Ruling Will Refocus Debate

(April 7) -- Tuesday's decision by the D.C. Circuit Court -- which found that the Federal Communications Commission had overstepped its bounds in trying to block Comcast from managing its network -- was widely described as a serious setback for "net neutrality."

But it was, in fact, just a prelude to the real action.

Judge David S. Tatel, a Clinton appointee writing for a unanimous three-judge panel of D.C. Court of Appeals, found that the FCC didn't have the authority to block Comcast's efforts to protect the majority of its broadband subscribers by restricting video file sharing activities of so-called "bandwidth hogs."

Few were genuinely surprised at the court's bottom line, and stocks of major broadband providers were unmoved by the news -- either because the result was anticipated and already factored in to their prices or, most likely, because traders knew this was just the beginning of a much longer "net neutrality" fight.

The Comcast case was a subset of the "net neutrality" debate over FCC regulation of broadband service providers -- basically the cable companies, the telcos and market advocates vs. Google and assorted advocacy groups that favor more regulation. The decision will not resolve that larger debate but simply refocus it.

So what comes next? For net neutrality advocates, two options stand out.

First, the FCC could reverse its early decision and declare that Internet services are subject to "Title II" or full-fledged, common carrier, old-style, telco monopoly regulations. Google supporters have already called for full-scale "reregulation," and three (out of five) votes on the FCC Commission would likely support doing so. One Wall Street security analyst dubbed that the "nuclear option," and another claimed that its exercise would send investors running for the hills. We agree.

An FCC armed with Title II would throw much management discretion into the maws of the agency's regulatory processes. And if history is a reliable guide, that means delay, uncertainty, loss of managerial discretion and lower returns on broadband network investment and lower stock values. Companies will take their cash and put it somewhere else.

Net neutrality advocates either ignore this fact or dispute it with sophomoric financial analysis, though they don't seriously contest the prospect that the nuclear option will unleash a long war of attrition, fought at the FCC and in the courts, in an environment with much less broadband availability than envisioned in the FCC's National Broadband Plan.

The second option, not mutually exclusive of the first, is to engage Congress in a review of the Communications Act. That law was debated and written well before the Internet explosion and was designed to address an entirely different set of issues growing out of the break-up of the Bell System. It contains no mention of key terms in the current debate like "net neutrality" or "openness" or "network management."

Legislation addressing the debate has been previously circulated and drawn both love and fire along predictable lines.

There is, however, a third possibility.

Major private-sector players have worked to find common ground as a reflection, no doubt, of fear that the FCC will adopt the nuclear option, slowing down investment in networks and reducing the value of the applications and the content that ride on them. Three things might help.

First, do away with the rhetoric about "neutrality," "openness" and other goals that can't be evaluated with facts and data, and focus instead on what is good for Americans in terms of innovation, jobs, investment, broadband network expansion and consumer welfare.

Second, search for alternative dispute resolution mechanisms to replace the highly contentious, uncertain and time-consuming processes traditionally used by the FCC. Indeed, important telecom issues over which the FCC has uncontested jurisdiction have languished without resolution for years. The new procedures might involve formation of technical and economic advisory groups where ideas truly could be debated and tested.

Finally, all rule changes should be required to pass the test of rigorous cost-benefit analyses of the sort that applies by Executive Order to regulatory bodies in the Executive Department.

There are of course other "middle" grounds, if we have the will and the openness to reach for them.

Larry Darby -- a former chief of the FCC Common Carrier Bureau -- is a senior fellow at The American Consumer Institute Center for Citizen Research (ACI), a nonprofit education and research institute. Stephen Pociask is president of the ACI and has extensive consumer research experience, having spent the past 10 years conducting numerous studies for government agencies and independent think tanks. Prior to that, Pociask worked for an economic consultancy and in the high-tech industry.