The Obama Era Rules the FCC Must Undo

Since Chairman Ajit Pai was named as Chairman of the Federal Communications Commission (FCC) in January, I’ve been encouraged by his moves to fix onerous regulations put in place by the Obama Administration and his advocacy for a new culture and procedures that will help the agency understand the impact of its proposed rulemakings on small business. There is still much work to be done, but Chairman Pai is on the smart regulatory path that will encourage more entrepreneurship, small-business growth, innovation, investment, and economic dynamism, both within and from the telecommunications industry.

Now that the Congressional Review Act has been used to return privacy regulation back to its most effective regulator and enforcer (the Federal Trade Commission), Chairman Pai must now turn his attention to Title II regulations—an unfortunate case of government overreach.

In 2015, by a three-to-two, party-line vote, the FCC voted to enforce one of the broadest possible definitions of so-called “net neutrality” by reclassifying broadband Internet as a “common carrier” telecommunications service—as opposed to information services, as they were classified in the 1996 Telecommunications Act. These “common carriers” can be regulated under the same old economy rules set out under Title II of the Communications Act of 1934, which were put in place for a completely different technology nearly a century ago.

The FCC’s 2015 Title II power grab was based on a highly flawed assumption—that Internet Service Providers (ISPs) will “close” the Internet by giving preferential treatment regarding speed, spectrum, and cost to some online entities and content over others. As predicted by many of us, not only was this incorrect, there were and are major issues created by this assumption, which have played out since the FCC’s Title II vote occurred.

The Internet has been built as a robust marketplace with little interference from government. Regulating these 21st Century technologies like early 20th Century utilities has done little to keep the Internet “open,” and a lot to undermine investment, innovation, and cost reduction for America’s small businesses. For example, according to economist Hal Singer, domestic broadband investment fell $3.6 billion in 2016, a 5.6 percent decline relative to 2014 levels.

By ignoring the realities of market forces, the Title II ruling failed to recognize how in a highly competitive sector, customer preferences would keep ISPs from giving some users preferential treatment. It would simply be bad for business. The FCC’s Title II ruling also ignored repeated congressional and judicial intent, which consistently finds such actions beyond the statutory authority of the FCC.

Of course, most directly, small businesses are being affected by higher costs and more regulations. And, again, the damage to investment hinders innovation and broadband access. By creating major uncertainty in the marketplace the FCC has diminished the incentives to invest, which are the life-blood of innovation and dynamic entrepreneurship.

It’s time to end this failed effort and return to a lighter regulatory framework for our Internet ecosystem. I strongly encourage Chairman Pai to take swift action to undo this onerous regulatory leftover from the Obama Administration. A modern and enlightened regulatory approach will help entrepreneurs and small businesses take full advantage of the opportunities afforded by the broadband Internet to help grow the economy, innovate and create jobs.