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Net Neutrality: So Where Do We Go From Here?

Everyone seems to think we need a new Internet neutrality policy, but nobody agrees on what it should be or how to get there. The seminal reference for regulatory policy reform in the US, the Telecom Act of 1996, never mentions the Internet. The FCC has broad authority to regulate communications services, but not unlimited authority. This the DC Court of Appeals illustrated when it set aside the FCC's Neutrality Order, a topic I covered last month (read "Net Neutrality: Which of Many?"). Thus, we're left with the "what now?" question.

The first possibility is that the FCC does nothing, essentially blowing a kiss at non-discrimination by ISPs. That would leave Internet settlement and paying for delivery or QoS as things the market would work out for itself. The option would dodge any significant legal challenges but would displease everyone a little, which is the oft-used test for impartiality. Since this course would ratify the status quo, including Netflix paying for video delivery, it would create little risk of disrupting capital plans for any party. But since everyone would likely find fault with it, there's always the chance that something else will be done.

The next-easiest option would be to appeal the DC Court of Appeals ruling to the Supreme Court. This might seem to be "easier" than my first choice, but in order for the FCC to appeal it would have to redo the arguments in the Neutrality Order to respond to the court's criticism. Only the FCC can appeal the decision, and comments by the current FCC Chairman suggest this choice is unlikely.

I think the FCC Chairman would indeed be wise not to challenge the decision, for two reasons. First, it could take a long time for an appeal to be heard, and during that period the industry would be essentially without a neutrality policy at all. That could seriously impact investment in broadband and even hamper investment in the cloud and in content services. Second, in the end, it probably wouldn't work so all this would be for nothing. The Supreme Court doesn't have a history of deciding communications issues against the DC Court of Appeals.

That leaves option three, which is to do what the DC Court of Appeals says and declare that the Internet is not an Information Service under the Act, but a common-carrier or Title II service. That would give the FCC the right to do what the Neutrality Order proposed -- discourage all forms of settlement among providers and provider-pays QoS -- but also make ISPs subject to common-carrier regulation, including sharing of infrastructure. However, the FCC could then forbear from applying those requirements, which it has the right to do under the law; this is what Rep. Henry Waxman has proposed in his approach to neutrality. This option could be seen as a kind of "legal sidestep" that would accomplish what the original Neutrality Order did, but within the scope of the FCC's authority. The DC Court of Appeals has already said this course would pass legal muster at a high level.

The problem is that the devil is in the details. How the FCC would navigate the delicate process of declaring the ISPs to be common carriers and then exempting them from onerous regulations associated with the classification is hard to say, particularly when any decision to reclassify the ISPs would raise the ire of every party involved in the neutrality debate. Politically this option is likely a non-starter -- unless, that is, we consider what some call the "nuclear option"of asking for legislation. Congress has the right to set policy in law and to amend the Telecom Act to impose whatever neutrality measures it might like. Some argue that we need this sort of thing because the Internet is too important to be regulated by slip-sliding through legal terms never explicitly aimed at the Internet Age.

But Congress doesn't seem able to do this, and there's more than the current puritanism at work. We've had similar logjams of policy since 1996, and in these cases at least some in Congress proposed to step in, as some are doing now. Nothing ever worked; no amendments ever even came to a vote. And if there is an attempt to rewrite telecom policy, it would almost certainly take years to do and then result in years of appeals, during which time industry confidence is shaken. Carrier capital expenditure already seems to be slipping globally, and regulatory uncertainty could deal it a death blow.

Arguably, Congress makes things worse by even pretending to consider action. Right now, we're absorbing the DC Court of Appeals decision and the Netflix pay-for-delivery flap, and the world isn't ending. If Congress steps up and starts considering alternatives it'll give voice to every extreme position, make realistic compromise more difficult, and do nothing in the end anyway. Better to just get on with it.

Aggressive action is a risk. Everyone went through deregulation/privatization in the '90s, everyone pretty much messed it up, and those who tried (like Australia) to somehow recapture the notion of telecom and networking as a public utility have failed to make their new models work. We may be in a situation where the "right" answer is to let the markets hash out the situation, intervening only when and if there's an egregious breach of public interest. That would be great, because that's the default path and the path I think we're most likely to take.

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