Rep. Cantor's Report Cites Net Neutrality as Government Overreach: Supreme Court Likely to Agree

The technology sector is one of our nation’s greatest engines for economic growth.  The Federal Communications Commission has consistently overstepped its bounds with regard to regulation of the Internet.  Without Congressional consent, it has attempted to expand its own jurisdiction to regulate Internet traffic.  For a federal agency of unelected bureaucrats to attempt to control this amount of economic activity without the consent of Congress is more than disconcerting.  Thankfully, there are many elected officials who agree.

The Network Neutrality rule would give the federal government, through the FCC, the power to regulate how Internet service providers manage data traveling across their networks. While proponents claim this would ensure the equal treatment of online data, in reality it would result in slower Internet speeds, network congestion, and the creation of a legal foundation for further government regulation of the Internet.

These rules have been on trial in federal courts, the subject of committee hearing, and are now cited in a report from the office of majority leader Eric Cantor.  The report released yesterday, October 23, 2012, entitled The Imperial Presidency, draws attention to the Obama Administration’s disregard for the legislative process resulting in a breakdown of the rule of law. Without firm, clear laws to guide businesses and consumers, both economic growth and individual prosperity have declined.  The report cites the FCC’s attempted network neutrality rules as one of the many regulatory failures.

Net Neutrality rules first faced a court challenge in 2010. The D.C. Court of Appeals struck down the FCC's Net Neutrality enforcement regime in Comcast vs. the FCC.  The Federal court found that the FCC was self-asserting "boundless authority" to regulate despite having no direct statutory authority from Congress.  Even though Representative Markey’s legislation H.R.3458 -- Internet Freedom Preservation Act of 2009 to provide the FCC with this authority failed to pass, the FCC has pushed forward with Net Neutrality rules.  However, in the FCC’s Net Neutrality rules will face a new challenge, this time in the Supreme Court. 

In the upcoming Supreme Court session, the high court will decide whether a Federal Court must give Chevron Deference to an administrative agency when the agency interprets a law that could determine its own jurisdiction.  "Chevron deference" is a 1984 Supreme Court administrative law precedent directing courts to defer to a regulatory agency's expertise in interpreting statutes directing regulatory action unless their interpretation is unreasonable.  The agency would require substantial Chevron deference for its FCC's Open Internet Order and Net Neutrality regulations to survive the pending legal challenge. It would rely even more so on Chevron Deference considering the scope and impact of the FCC”s expansion of authority, as it attempts to move from telephone based regulations to internet based regulatory authority.  Thankfully, it is unlikely that the court will rule favorably for the FCC in this matter.

The unregulated Internet has evolved to manage massive amounts of data without the need for FCC interference – Today, twenty households with average broadband usage generate as much traffic as the entire Internet carried in 1995. The FCC has closely regulated network switched traffic exchanges, or telephone networks, to achieve policy goals such as universal connectivity and competition.  Meanwhile, the Internet market attained the same goals with little regulatory intervention, and displayed superior performance over older markets in terms of prices, efficiency, and innovation. As Internet traffic continues to grow, and traffic on other platforms declines (i.e. voice only networks), the Internet model for traffic exchange is the global norm.

As the Internet is a collection of separate and distinct networks, networks must work together to build efficiencies. According to the OECD’s Internet Traffic Exchange:  Market Developments and Policy Challenges report, market models of Internet traffic exchange, based on voluntary commercial agreements for peering and transit, continue to thrive.  Peering is a voluntary interconnection among Internet networks for the purpose of exchanging traffic between the customers of each network. According to the OECD, A survey of peering agreements conducted found that of 142,210 peering agreements 99.51%, were agreements in which the parties agreed to commonly understood terms without creating a written document.

The risk of government intervention in these networks and network agreements is especially precarious.  In the market for Internet traffic exchange the market has produced exceptional results with little regulation; hence, the potential for regulatory intervention to damage the market is considerably strong; intervention could, in fact interfere with successful network management and inadvertently bestow market power to those who did not initial have it.

“The invisible hand of the market always moves faster and better than the heavy hand of the government” ~ Mitt Romney

blog comments powered by Disqus