July 14, 2014
Wayne Winegarden, Ph.D.
933 N. Kenmore Street
Arlington, VA 22201
Members of the Panel,
Thank you for the opportunity to submit comments regarding the possible reclassification of broadband services as Title II telecommunications services. As I argued in a recent editorial on Inside Sources, the FCC should not reclassify broadband services under Title II.
It is the role of Congress to establish the regulatory parameters for all Executive Branch regulatory agencies. And, Congress has explicitly rejected classifying broadband services under Title II.
In a letter to the FCC, only 9 percent of Congressmen stated they were in favor of a reclassifying broadband Internet access services, whereas a bipartisan group of Congressmen, representing a majority (56 percent), wrote to the agency stating that they oppose classifying broadband services as telecommunications services. In fact, Congressman Bob Latta (R-OH) has introduced legislation that would prohibit the Federal Communications Commission’s (FCC) from regulating the Internet without Congressional authority to do so.
An Executive branch agency should not pursue regulations that it has not been authorized to promulgate – particularly when bi-partisan Congressional skepticism is so widely held.
The Congressional skepticism is justified because reclassifying broadband services under Title II would create adverse economic consequences. If the FCC reclassifies broadband services, the new regulations will severely restrict how broadband providers can deliver high speed Internet services to their customers. Proponents argue the restrictions are necessary to ensure that everyone is treated fairly. Such arguments are ill-founded. These regulations are nothing more than solutions looking for a problem – a hammer in search of a nail.
While reclassification under Title II is supposed to address customer access problems, there is simply no evidence that the broadband industry is arbitrarily restricting customer’s access to the Internet in order to increase their revenues. In fact, the U.S. broadband industry is providing more people faster and more dependable Internet services at competitive prices.
Furthermore, the Internet is rife with gatekeepers. Apple chooses which apps are available in the iTunes Store and takes a 30 percent fee from the developer on all sales. Apple’s “gatekeeper” model – that the advocates of net neutrality greatly fear – hasn’t slowed innovation; in fact, it has helped create the App economy. When advocating for net neutrality rules, proponents of these regulations ignore the Apple example and fail to recognize the innovation, and benefits for small businesses and consumers, which has been created by the iTunes business model.
If Title II reclassification occurs, then the operations and innovations of the broadband industry will be severely restricted. The decree transforms the oversight of the broadband industry, based on fears of a hypothetical market power, failing to recognize the fluidity of the dynamic broadband industry. Worse, these justifications are eerily similar to the justifications for the Communications Act of 1934, which created Ma Bell as a regulated monopoly.
Erroneously linking the operations of the 21st century broadband industry to the 1934 telephone industry creates a great deal of regulatory uncertainty regarding how, and when, the government will change what the broadband industry can do, and what it cannot do. Uncertainty is antithetical to investment and innovation – as L. Gordon Crovitz of the Wall Street Journal noted in reference to the railroad and telephone industries, “…the heavy hand of regulation was the beginning of the end for what had been highly innovative industries”.
Since 1996, private sector firms have invested $1.2 trillion into the U.S. broadband wired and wireless infrastructure – $68 billion in 2012 alone. The broadband industry contributes $146.2 billion to our nation’s economy. Perhaps even more importantly, the services provided by the broadband industry make many other industries even more productive – and it also makes life a lot more fun for millions of Americans.
If past is prologue, then the broadband industry is poised to create even more benefits for the average American; benefits that we can scarcely imagine today. That is, so long as the FCC does not stifle the industry with an inappropriate and unnecessary regulatory structure.
The regulatory uncertainty that would accompany a reclassification of the broadband industry jeopardizes continued growth in this vibrant industry. In 2010 the FCC rejected the reclassification of the broadband industry in light of its inapplicability and the problems that would likely occur. It should do so again in 2014.
Thank you for your time and consideration of my comments.
Wayne Winegarden, Ph.D.
Contributing Editor, EconoSTATS at George Mason University
Sr. Fellow in Business and Economics, Pacific Research Institute