Unscrambling the FCC's Net Neutrality Order: Preserving the Open Internet, but Which One?

Abstract

This article offers a critical reading of the Federal Communications Commission’s December 23, 2010 Report and Order entitled “Preserving the Open Internet.”

In the end, the agency failed to produce any evidence of a need for regulatory intervention to “preserve” this robust ecosystem. Nor could it overcome a chorus of criticism from Congress and legal academics, who continued to remind the FCC that it had no authority from Congress to manage engineering practices of broadband access providers. The likelihood is very high that legal challenges will result in a ruling that the rulemaking was beyond the agency’s limited jurisdiction.

As with any lawmaking involving disruptive technologies, moreover, the risk of unintended consequences is high. In its haste to pass rules before the opening of a new Congress with a Republican-controlled House, the Commission’s Democratic majority interfered with the continued evolution of this vital technology.

This article dissects several key aspects of the Open Internet Order, including the evolution of what the agency terms its “prophylactic” rules, the perceived market failures that led the agency to issue them, and a number of approved exceptions, caveats, and exemptions that reveal a fundamental misunderstanding by the agency of the meaning of “the Open Internet” in the first place. Additionally, it includes a discussion of the largely unexamined costs of enforcing the rules, as well as the most significant holes in the agency’s legal justification for issuing them.

Keywords: FCC, net neutrality, open Internet, administrative law, broadband, Internet

JEL Classification: D82, K23, L51, L96, O33, O34