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Today the Federal Communications Commission’s (FCC) Restoring Internet Freedom Order takes effect. If past is prologue, social media is likely to be inundated today with laments of the internet’s demise. But the reality is that, like the 2015 Open Internet Order that it repealed, today’s order is likely to be a non-issue for consumers. This blog post will discuss what is, and is not, likely to happen as a result of today’s order and explain why, on the whole, the Restoring Internet Freedom Order is likely to benefit consumers.
What the Restoring Internet Freedom Order does
The actual details of the Restoring Internet Freedom Order seem somewhat mundane. The order restores the traditional classification of broadband as an “information service” under Title I of the Communications Act, reversing the FCC’s 2015 decision to classify it instead as “telecommunications service” under Title II. In layman’s terms, this will restore the light-touch regulatory framework that historically governed most internet providers instead of trying to fit broadband into the more heavily regulated common carriage regime originally designed to discipline the old Bell Telephone monopoly. The order repeals the 2015 prohibitions on blocking, throttling, and paid prioritization, as well as the amorphous, awkwardly-titled “no unreasonable interference/disadvantage” standard that allowed the FCC to act as a roving authority to investigate broadband providers’ practices. At the same time, it retains important transparency rules requiring broadband providers to disclose their network management practices to consumers.
How the order benefits consumers
By reducing the regulatory burden on broadband providers, the order makes it easier for companies to invest in improving and expanding their broadband networks. This is especially likely to be true of the smaller ISPs that we count on to serve rural areas, many of which filed comments with the agency stressing the difficulties created by Title II obligations. In this sense, the order can help bring better service to more Americans and reduce the number of households that lack broadband access.
The order also promotes innovation. Net neutrality requires all broadband providers to behave the same way. But, as I have discussed before, this homogenous business model is inconsistent with an increasingly heterogeneous consumer base, particularly in a business environment as dynamic as the internet ecosystem. By allowing broadband providers to experiment with different business models, the order expands the planes of competition among providers and creates the possibility of finding new, more efficient ways to deliver the broadband service consumers want — which may differ among individuals. At the same time, the transparency rules assure that providers will disclose their network management practices, so customers can make informed decisions among providers.
Doom and gloom is overrated
For months, net neutrality advocates have circulated exaggerated scenarios of the harm consumers will suffer once the order takes effect. Senate Democrats tweeted that, without net neutrality, “you’ll get the internet one word at a time,” suggesting speeds are likely to fall dramatically. Others have argued that the internet will become more like cable, a balkanized universe in which consumers pay broadband providers for access to bundles of internet content.
These claims are overrated. In fact, consumers are unlikely to notice the effect of the order. All major broadband providers have terms of service prohibiting blocking, throttling, and unreasonable discrimination. And though advocates make much of paid prioritization — the ability to pay for priority delivery in the event of congestion — there isn’t much of a business case for prioritization at present because most networks are relatively congestion free. The Washington Post fact-checker gave “Three Pinocchios” to the claim that repealing net neutrality would reduce internet speeds.
The fear of internet balkanization is even more remote. The logic appears to be that broadband providers could extract more money from consumers by dividing the internet into service tiers. Of course, such behavior was perfectly legal before 2015, yet we saw no examples of it, which suggests that it is not a winning business strategy. Moreover, this hypothetical seems to assume that broadband providers have the market power to impose these additional charges on premium content tiers without suffering customer defections. But, of course, if broadband providers had this market power, they could simply raise prices on their traditional broadband service plans without going through the administrative smoke and mirrors of content segmentation.
What this concern really highlights is not a fear of segmentation but of market power. Consumers worry that, if a broadband provider behaves anticompetitively, they have limited ability to punish that conduct by taking their business elsewhere. This is, of course, a bigger concern in fixed broadband markets than in wireless markets, where competition is more robust. Nonetheless, it is a legitimate concern: Broadband providers have some incentives to engage in anticompetitive vertical foreclosure. But antitrust law protects consumers against this harm, just as it protects consumers elsewhere in the American economy. And in the long run, the solution is greater investment in networks to bring more competition, which is precisely what the FCC hopes to accomplish by reducing the regulatory burden on such networks.
Ultimately, consumers will hardly notice that the order has taken effect, just as they did not notice the 2015 Open Internet rules that the order replaces. And in the long run, they will celebrate the innovations brought by restoration of a lighter-touch regulatory environment. The Restoring Internet Freedom Order will be in the news today. But it’ll be pushed aside by tomorrow — especially if, as expected, Judge Leon issues his decision in the AT&T–Time Warner case.
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