Wheeler Says FCC Will Regulate Internet Disputes, Perhaps Even Peering Problems

Some industry observers told us Wheeler’s comments indicate a willingness to wield the power given to the FCC by the recent net neutrality ruling. There, the U.S. Court of Appeals for the D.C. Circuit said common carrier restrictions were impermissible, but Section 706 of the Communications Act does give the FCC authority over the Internet (CD Jan 15 p1).

"Verizon went to the court and said, ‘Tell us the FCC does not have jurisdiction over the Internet.’ And the court said, ‘Not so fast.’ That’s a positive step,” Wheeler said. When the court looked at the structure of the commission’s antidiscrimination and blocking rules, its message to the agency was that the structure was too close “’to what you said this wasn’t -- a common carrier -- and we're not going to let you do it this way,'” Wheeler said. But the court did say, “'Let us tell you what does work, what would work.’ … I interpret what the court did as an invitation to us. I intend to accept that invitation."

General concepts, buoyed by a “dynamic” case-by-case approach, are the best way to handle Internet disputes, Wheeler said. “What we don’t want to do is say that somehow we're smarter than the net. Because I can stipulate to that: We aren’t.” A case-by-case analysis is preferable to the general idea that “everybody’s got to go through the eye of this needle,” he said.

Double-sided markets were always allowed in the wireless environment under FCC net neutrality rules, Wheeler said. At the same time, “we are not reticent to say, ‘Excuse me, that’s anticompetitive. Excuse me, that’s self-dealing. Excuse me, this is a consumer abuse,'” he said. “We want to encourage the dynamism, and we want to have the oversight” that enables a “broad canvas” of concepts, but also “gets really specific and says no, that’s anticompetitive,” said Wheeler. “I'm not smart enough to know what comes next. I think we are capable of saying, ‘That’s not right.’ And there is no hesitation to do that."

'Trying to Figure This Out’

"The FCC, like everyone else, is still trying to figure this out,” said Harold Feld, Public Knowledge senior vice president. “The problem for everyone is that no one knows either what Section 706 allows the FCC to do, or what the ‘common carrier prohibition’ actually prevents the FCC from doing,” he said. “There are very real problems with relying on an untested and poorly delineated Section 706 authority with an equally untested set of limitations. But it certainly seems from what Wheeler is saying that the FCC is likely to proceed under Section 706 rather than try Title II -- at least for now."

"I find it alarming that the FCC chairman thinks it’s ‘positive’ that the D.C. Circuit said Section 706 gives the FCC general jurisdiction over the Internet, not merely over net neutrality or even broadband providers,” said TechFreedom President Berin Szoka. He said he hopes Wheeler, or another chairman, doesn’t interpret the court decision as an “'invitation’ to regulate other aspects of the Internet.” Still, the court “certainly did lay out” a road map for the agency to regulate net neutrality either by formal rulemaking or in case-by-case enforcement, he said. “Groups like Free Press are simply wrong when they insist that the FCC’s only option is to reclassify broadband as a Title II service. The FCC has quite broad discretion."

Wheeler indicated an interest to at least monitor peering disputes. Peering is just interconnection by a “a new name,” Wheeler said. Engineers didn’t think about economics when they designed peering, he said; it was just about exchanging traffic efficiently. “When it moved from an engineering concept to an economic concept,” companies asked how to deal with this “as an economic gate point,” said Wheeler. The challenge facing the FCC, he said, is how to ensure innovation and experimentation while also being responsive and preventing abuses.

Peering and interconnection aren’t the same as net neutrality, but they're a “cousin” -- and the agency needs to stay on top of it, Wheeler said. The commission “invites comments” and “stories” on what people feel aren’t abuses, he said. “Our job is to make sure that whatever happens is not anticompetitive, is not favoring one party -- ‘I'm the ISP and I've got an investment in this and therefore these guys come through faster or whatever’ -- and that’s the challenge that we have to apply: To make sure that it is a competitive, vibrant, non-preferential market."

What it all boils down to is how one defines “competitive,” Szoka said. Will the FCC incorporate antitrust principles into its analysis? Or will it “try to create a separate body of competition law lacking the economic rigor of tradeoffs inherent in antitrust law?” he asked. Wheeler seems to be taking the position that Section 706 will enable net neutrality-like rules as long as the commission exercises its power on a case-by-case basis after the fact, as opposed to a prophylactic set of rules before the fact, Szoka said. “I see little reason to doubt that the FCC will resist efforts to meaningfully constrain its considerable discretion under Section 706."

'Confusion’ Exists

"The ‘confusion’ by some over how next to issue new regulations to ‘fix’ a problem that has never been proven to exist could be abated by a real market study and close consultation with Congress on a fundamental rewrite of the law,” said ex-Commissioner Robert McDowell, now a visiting fellow at the Hudson Institute. “The confusion is due, in part, to outdated regulatory silos."

Ex-Commissioner Michael Copps said he is “pleased” that “Wheeler is determined to act on net neutrality. I am also pleased the court has opened the door to strong action. I hope we walk through that door with reclassification -- the sooner the better. Lesser steps, like post-facto enforcement, pale in comparison to having strong prophylactic open Internet rules on the books. Such rules bring clarity and certainty to consumers, innovators, and businesses."

The court’s opinion shows that the FCC has jurisdiction to address net neutrality issues on a case-by-case basis, said Fred Campbell, executive director of the new Center for Boundless Innovation in Technology. That’s true “so long as the FCC finds that intervening would encourage the deployment of broadband and would not contravene an express provision in the Communications Act,” Campbell said by email. “This authority would appear to extend to devices and so-called edge providers as well to the extent they are engaged in interstate communication.” Campbell also said he doesn’t see “any reason why the court’s opinion regarding Section 706 would not apply to peering arrangements."

"Why regulate even if you can?” said New York University Law Professor Richard Epstein. “No one quite knows where the uncertainty should lie, with the carriers or with the content producers. There is enough movement that government regulation is likely to be both incorrect, and incorrectable,” he told us. “Generally speaking, as an industry gets more complicated, pricing structures often get more complicated as well. Just think of how airlines and hotels and apartment houses constantly reprice and price discriminate, which they do without having market power. The FCC seems to miss all this.” The best protection for consumers comes from choice, Epstein said: That “comes from free entry and exit that the FCC is expert at stifling.”