FCC rules will erode light-touch approach to internet regulation
To say last year at the Federal Communications Commission was eventful would be an understatement. From releasing the third iteration of its National Broadband Map and establishing a Space Bureau to partnering with the Federal Trade Commission to launch inquiries into the AI’s impact robocalls and robotexts, the
FCC was remarkably busy. Unfortunately, it was not always busy for the right reasons.
In the last three months, the FCC has begun unraveling the light-touch approach to internet regulation that has served the nation well. Empowered by its newly acquired 3-2 majority of Democratic commissioners, the FCC has embarked on an aggressive campaign to regulate every corner of the internet.
The first significant step came in October when the FCC advanced its Notice of Proposed Rulemaking for Safeguarding and Securing the Open Internet. The notice reclassifies broadband internet access service as a telecommunications service under Title II of the Telecommunications Act and mobile broadband as a commercial mobile service. The commission has framed these efforts as ensuring the internet remains “fast, open and fair” to all.
However, the internet is already all these things and more, thanks to the absence of burdensome government regulations. Today, consumers have more options and faster and more affordable internet service. Consumers use online connectivity for everything from holiday shopping and telehealth visits to streaming their favorite TV shows. There is no evidence that internet service providers commit any abuses they are accused of committing.
Moreover, the FCC has already tried utility-style regulations before. In 2015, the commission famously passed its Open Internet Order, which adopted net neutrality rules for fixed and mobile broadband internet access services. Like the current Notice of Proposed Rulemaking, the Open Internet Order sought to crack down on practices the commission deemed anti-competitive and harmful to consumers. Yet, the order was not needed, leading to devastating consequences for internet service providers and consumers. Only after several years of declining industry investment did the commission repeal it.
It would be a tremendous step backward for the FCC to develop a standard based on 1930s government controls initially designed for the telephone market. With today’s vastly more competitive broadband market and innovations coming at lightning speed, it would be regulatory malpractice to treat the internet as a public utility.
More recently, the commission has taken another significant step toward over-regulating the internet. In October, the commission advanced a new Digital Discrimination Rule to protect consumers from discriminatory practices. Yet, this rule goes far beyond Congress’s original intent and is sure to produce unintended consequences.
In 2021, Congress passed the Infrastructure Investment and Jobs Act. This massive infrastructure package includes a small onepage provision — Section 60506 — that directs the commission to adopt rules that help facilitate “equal access to broadband internet access service.”
However, Section 60506 is intentionally limited in scope and advises the commission to balance its objective of protecting equal access with “issues of technical and economic feasibility.” In no way did Congress give the commission a blank check to micromanage every aspect of an internet service provider’s operations.
Yet, that is precisely what this order does. It allows the commission to intervene forcefully in the broadband market whenever it discovers evidence of discrimination. Traditionally, discrimination in the market has been understood to mean intentional discrimination by an internet service provider. The commission has acknowledged that “little to no evidence” exists that this discrimination occurs.
However, the commission’s new order attempts to sidestep this problem by adopting a new definition of digital discrimination encompassing a disparate treatment and impact standard.
Unlike a disparate treatment standard, which holds an internet service provider liable for intentional discrimination, a disparate impact standard holds it liable for unintentional discrimination. Under this standard, the FCC can falsely classify ordinary or even necessary business behavior as potentially discriminatory if it believes there is evidence of unequal access. For instance, a decision to invest in one census block before another could be considered discrimination if one census block looks statistically different. However, in many cases, census blocks are statistically different due to the tendency of people of the same age, race, income, and other characteristics to cluster together.
There are various social and economic reasons for this, but the commission chooses to ignore them. As a result, the FCC’s Digital Discrimination Order leaves the door open for enforcement action against a provider for virtually any reason. It also allows the commission to regulate entities outside the communications industry if it thinks those entities “provide services that facilitate and affect consumer access.” This means entities like banks, contractors and landlords are all also potentially liable for unequal access. That is a recipe for disaster that will harm industry investment and innovation as companies re-evaluate whether they want to do business online.
The FCC’s recent actions represent a significant departure from the agency’s statutory mission and a brazen attempt to regulate every facet of the broadband market. The American Consumer Institute has submitted comments on net neutrality and digital discrimination, urging the commission to reconsider these misguided actions.
Rather than involving itself in affairs that it has no business interfering with, the FCC should focus on matters Congress has tasked it with addressing. These include prioritizing broadband infrastructure deployment and operating existing programs, identifying new spectrum bands for commercial use, and distributing those licenses already bid on to the rightful auction winners.
Nate Scherer is a policy analyst with the American Consumer Institute.