Sometimes, the smartest way to protect consumers is to regulate in a focused and targeted way, especially when consumer preferences and options change very quickly. Consider the communications sector where digital technology, innovative new Internet-based services, and increasingly capable networks (wired and wireless) are continually reinventing the way we communicate. New FCC Chairman Tom Wheeler appears to get the joke, and should be applauded for his foresight and pragmatic approach to regulating what many consider the strongest growth engine in the U.S. economy.
Chairman Wheeler’s common sense vision is especially important as his agency responds to the recent Federal Court (Verizon v. FCC) ruling that tossed out so-called “net neutrality rules.” Net neutrality advocates want the FCC to immediately deploy a wide-ranging suite of new regulations to govern our online experiences. Foes of new regulation counter that the Internet is working just fine on its own without new government rules. In the middle stands the chairman, who is suggesting a more pragmatic approach to protecting consumers, preventing anticompetitive conduct among companies, and ensuring that all Americans have access to legal Internet content of their choice.
The FCC chairman seems to appreciate the fact that the market leverage previously held by Internet service providers (ISPs) such as AT&T, Comcast, and Verizon ain’t what it used to be. As more and more Americans use their Internet connections to download movies and watch videos, for example, companies that distribute that valuable content are often in a position to dictate business terms to the network operators, a stunning reversal of leverage. And Chairman Wheeler gets it. In the wake of the D.C. Circuit rejection of some of the agency’s broadband regulations, but that endorsed the agency’s broad authority to regulate in this area, the chairman is wisely pointing to case-by-case resolution of potentially problematic behavior as opposed to a sweeping regime of new rules and preemptive restrictions.
The chairman calls case-by-case adjudication “a dynamic approach that enables the agency to step in when it sees action that might undermine competition or hurt consumers.” It is no surprise that he would take this approach. He is, after all, a student of history, and case-by-case adjudication has a long, and successful track record at the agency. The FCC uses just such a process to resolve disputes over television programming — refereeing several disputes between cable TV providers and sports networks, including NFL Network and Tennis Channel. The Commission knows how to do this.
In keeping with the court’s ruling, adjudication would allow ISPs and innovators to negotiate business experiments and test them with consumers. But the FCC could quickly respond to complaints or intervene on its own if a deal appeared to violate certain red lines. Over time, individual rulings would grow into a body of common law and precedent that would make clear what type of arrangements are acceptable and what are not.
Nor would FCC adjudication stand alone in defending the Internet against abusive conduct. Anticompetitive practices such as a business deal that unreasonably favors one content provider or website over another could trigger action by the Justice Department or the Federal Trade Commission. Individual consumers and companies, too, could file their own private lawsuits against abusive behavior, and could potentially collect treble damages. (Such private actions were effectively limited by the discarded net neutrality rules, because companies could likely convince a court to quash a case covered by regulation.)
Combined, FCC adjudication, anticompetition enforcement and private lawsuits are a powerful triple play of deterrence that would stop most abuses before they happened. So long as the threat of enforcement is credible, ISPs and their content brethren would work hard to stay on the right side of the law.
Adjudication is not a perfect solution. It occurs after the fact, so harm is possible before authorities can intervene. But even broad preemptive rules ultimately require enforcement to have effect. Case-by-case adjudication provides the benefit of deterrent, while also giving Internet participants the right to test out service arrangements that can enable them to do more for their customers. The court didn’t strip the FCC of the ability to protect net neutrality, it just told the Commission how to do it legally.
David Balto is a former policy director of the Federal Trade Commission, attorney-adviser to Chairman Robert Pitofsky, and antitrust lawyer at the U.S. Department of Justice. He has been a senior fellow at the Center for American Progress, and has worked with the International Center on Law and Economics. He is currently a lawyer in private practice in Washington, D.C. Reach him @DavidABalto.