FCC Net Neutrality Rules Will Require Highly Specific Factual Analysis in Many Cases, Verveer Says

“It’s going to depend on the circumstances,” Verveer said. Many forms of price discrimination are “efficient” and don’t necessarily violate rules, he said. In some cases, companies can use “the pricing apparatus in ways that thwart competition,” he said. Any investigation has to be “highly fact-specific,” he said. "One wants to try to understand the facts.” In infrastructure industries, usage-based pricing is most commonly found where there's less rather than more competition, Verveer said.

The FCC is unlikely to look favorably at data caps if they're used in an anticompetitive way, Verveer said. Here, too, it will have to take “a fairly close [look] at the specifics,” he said. “The FCC is prepared to look at those specifics.”

Wilson Sonsini's Jamillia Ferris agreed about the importance of the facts. Ferris was a lead FCC lawyer when the agency took up AT&T's since-completed buy of DirecTV. The net neutrality rules offer the FCC the ability to look closely at the facts when complaints arise, she said. Ferris said the FCC imposed conditions on AT&T/DirecTV because of very specific threats to competition.

The FCC net neutrality order bans vertical contracts between market players, per se, based on flimsy economic evidence, former FTC Commissioner Joshua Wright said. Wright, a lawyer and an economist, is now a professor at George Mason University Law School. “The fundamental failure of the open Internet order … is that it creates a categorical prohibition, a per se prohibition if you will, against vertical contracts” without citing the evidence that vertical contracts “aren’t just sometimes procompetitive, they’re usually procompetitive,” Wright said.

“It has been well expressed” by the FCC that vertical contracts “involve an incentive to disadvantage rivals and ultimately harm competition,” Wright said. But the theoretical literature on vertical restraints is 40 years old, Wright said. In the net neutrality order, the FCC cites a single economic study to justify its findings on the risks of vertical foreclosure in broadband markets, he said. “That was a study not about broadband services but about cable/video.”

There's no doubt the FTC was a “net loser” in the “net neutrality wars,” Wright said. In reclassifying broadband under Title II of the Communications Act, the FCC took the FTC’s “jurisdictional lunch money,” he said. Wright said he continues to believe the FTC “fought too little, too late” to preserve its jurisdiction. “That was something I tried to get my colleagues to agree with me [on] when I was at the commission,” he said. “I lost that one.” The FTC will find itself in a position where it has to fight for its consumer protection jurisdiction if it intends to keep it,” he said.

Industry officials discussed transactions policy also at the event. Markham Erickson, communications lawyer at Steptoe Johnson, said the failed Comcast/Time Warner Cable was unique. It was the first proposed deal between high-speed broadband providers, he said. “It was the first cable merger to be disapproved.”

Erickson said he raised objections to the deal on behalf of a client, arguing the companies failed in their public interest statement to address a key market -- the national market for high-speed distribution of edge provider content. An edge provider trying to reach a national audience could “cobble together” enough customers without Comcast or TWC, but not without both, he said. Erickson said that in arguing for broadband deals, applicants allot much more of their argumentation to a look at the effect on the Internet “ecosystem” versus the programming system or the cable system.

Comcast/TWC raised interesting questions about market power, said Nicholas Hill, assistant chief of the Competition Policy Section at the Department of Justice. “The question is how are the ISPs and content providers negotiating and how does the national scope and scale play into it.” The question is whether national scope gives a provider more clout, he said. “One way to address that question is to ask competitors and ask customers and look at the evidence produced by the parties.”

DOJ has to look at several issues, Hill said. “Is it likely that this transaction will change the bargaining dynamic between content providers and ISPs?” If the dynamic does change, “how is it going to change and how might that power be used by the ISPs?” he asked. The questions raised are complex, he said.

Another panel discussed when FCC regulation really becomes rate regulation. This agency isn't going to regulate retail rates, said Jennifer Schneider, Frontier Communications vice president-legislative affairs. “I don’t see that happening in this FCC,” she said. “The FCC has forborne from the existing regulations on things like that.” The order for the first time treats all ISPs the same, Schneider said. “We’ll see how that’s implemented.”

Rising prices don’t point to a market failure, as is evidenced by other industries where prices naturally rise over time, said Roslyn Layton, fellow at Aalborg University. Title II “opens the door” to new regulation, she said “Things aren’t moving in the right direction."