Court Ruling Threatens FCC's Net Neutrality Scheme

A federal court on Tuesday struck down a Federal Communcations Commission (FCC) order which required Comcast to cease blocking “peer to peer” (P2P) file sharing software.

P2P applications such as BitTorrent allow users to transfer large files, frequently music and movies, between computers.  But they are, to use Internet vernacular, bandwidth pigs.  When enough people are running these programs, they take up so much of the available space in the “pipe” that other users of Comcast’s Internet service saw or were expected to see degradations in the speed and quality of their connections.

In a unanimous ruling, a three-judge panel on the U.S. Circuit Court of Appeals for the District of Columbia overturned a 2008 FCC order saying that Comcast could not block P2P applications, essentially the first step in the FCC’s plan to implement the Orwellian-named scheme called Net Neutrality, based on an argument that Internet Service Providers must treat all content “equally.”

The court’s opinion boils down to several principles:

·         The FCC does not have the authority to regulate the Internet under its existing authority.

·         Statements of policy by Congress do not have the force of legislation authorizing “a specifically delegated power.”

·         If the FCC had the authority that it claimed in this case for the reasons it claimed, then it would essentially have unlimited authority and “virtually free the commission from its congressional tether.”

In 2005 during the Bush Administration, the Supreme Court, on a 6-3 vote, allowed the FCC to classify broadband Internet as an “Information Service” to be regulated under Title I of the FCC code rather than the much more restrictive Title II which covers telephony.

Effectively, this means the FCC can only attempt to regulate the Internet if it can make a compelling case that its “ancillary responsibilities” would convey such authority based on the action being “reasonably ancillary to the . . . effective performance of its statutorily mandated responsibilities.”  The court put it plainly: “The commission has failed to make that showing.”

The ruling is a major victory for Comcast, Verizon, AT&T, and other ISPs who have spent billions of dollars building network infrastructure only to have content providers, most notably Google, but also including, eBay, and others try to use the power of government to determine how those networks are to be operated. That stance has been adopted by political "progressives” who simply don’t believe the ISPs have any rights.

Think of the network operator, such as Comcast, as a toll-road builder.  They spent billions of dollars building a road with an understanding that they will be able to determine the tolls for driving on the road and plan a toll schedule that charges more for large, heavy vehicles who do more damage to the road and cost the road builder more in ongoing maintenance than passenger cars do.  Suddenly, a large trucking company which has donated millions of dollars to politicians of one political party argues that the road should be operated “to treat all traffic equally.”  Sounds so “fair”, doesn’t it?  That political party then tries to pass regulations barring the road builder from charging more for the big trucks than for passenger cars.

The illogic of the argument is plain, as are the raft of potential consequences, all of which are negative for everyone but the big trucking company – and probably even for them in the long run.  Few people would call a rule barring the road from charging big trucks more than cars anything but the theft of the road builder’s property rights, and most people would recognize it as a transparently political ploy and a bad business decision despite the clever language of “fairness.”

That’s precisely the situation the ISPs are in. Google and its employees have donated millions of dollars to Democrats in the past couple of electoral cycles.  Google’s CEO was an informal adviser to Barack Obama and worked for his presidential campaign.  Google, which has several “bandwidth pig” applications, not the least YouTube, is pushing to steal Comcast’s right to make sure that their customers all get good service.

The entire argument for Net Neutrality rests on confusing people between the meanings of the words “equally” and “fairly.”  The fairest or best system is not one which treats everyone equally.  It is amusing to see the party that believes in preferential hiring based on race, i.e. treating people unequally in the interest of fairness, argue that all Internet content must be treated the same regardless of the actual impact on users of the Internet.

Supporters of Net Neutrality (including Al Gore – isn’t that all you need to know?) can only make hypothetical arguments about the danger to the Internet if the ISPs’ property rights aren’t stolen.  They say that companies which also have media divisions will slow downloads of media produced by other companies.  They say that your “ability to download information from the Internet will be severely compromised.”

They claim that draconian regulation is needed to prevent the Internet from becoming a place that it has shown no inclination to become in the absence of regulation.  It’s the Internet equivalent of claiming that Obamacare will bring down healthcare costs.  All the big players behind the scenes know it’s not true, but they believe that if you tell a big enough lie often enough, people will come to believe it.

Given that in a Net Neutrality world, the FCC would dominate, regulate, and micro-manage the Internet, perhaps the best argument against Net Neutrality comes from Reason Magazine’s Peter Suderman: “ISPs aren’t perfect, but at least they’re subject to market pressures.  The government on the other hand is subject primarily to political pressures.  Most of the impetus for Net Neutrality is a result of political pressure – big influential actors pushing the government to do what they want, to protect their business models.”

The court decision also calls into question the FCC’s National Broadband Plan, another stimulus-related boondoggle estimated to cost as much as $350 billion and which will include provisions for new taxes on digital products and services.

 FCC Chairman Julius Genachowski has already suggested that he might try to get broadband service reclassified under Title II, thus giving the FCC far more power to regulate the Internet.  Even if that doesn’t happen, Tuesday’s ruling will likely embolden members of Congress who want to mandate Net Neutrality by legislation.  However, many Democrats in Congress will not relish being put in a position to explicitly say that the Internet – one of the all-time great success stories of an unregulated environment – should be placed under the thumb of FCC bureaucrats or techno-crippled congressmen.

The court decision puts a major roadblock in the FCC’s path toward implementing the deceptively named Net Neutrality But given the aggressive mood of liberals to enact every “progressive” plan by any means possible, it is too early to celebrate for supporters of property rights, freedom and the entrepreneurial spirit which has characterized the Internet.