Politics & Policy

A Closer Look at Net Neutrality

The FCC’s net-neutrality rules need a thorough cost-benefit analysis.

The Federal Communications Commission has become famous — or infamous — for its recent proposal to adopt “net neutrality” rules. Lost in the debate is the lack of a demonstrable need for such rules, as validated by a rigorous and factually sound cost-benefit analysis.

Consumers can already access whatever Internet content, applications, and services they desire. When traffic is treated differently, such as prioritizing a voice call or video stream over an e-mail, it is part of sensible network management. And if you talk to broadband providers, they’ll tell you that this isn’t going to change. The Internet has flourished because of the government’s hands-off approach.

All regulations carry costs, which are inevitably passed on to consumers in one form or another. We should therefore be very concerned when an agency plans to enact new rules, especially unnecessary ones. Presidents Clinton and Obama both recognized this problem and issued executive orders requiring agencies to conduct comprehensive cost-benefit analyses to ensure that rules are warranted and narrowly tailored to address the problem at hand. In Executive Order 13563, President Obama reaffirmed that executive agencies should “propose or adopt a regulation only upon a reasoned determination that its benefits justify its cost” and must “use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” He also called upon independent agencies like the FCC to follow the same principles.

If the Commission fully adheres to this directive, it should refrain from imposing net-neutrality regulations unless there’s evidence of an actual problem it would address, and unless the benefits of the regulations would clearly outweigh the costs. But on the issue of net neutrality, the agency has already conceded that there is no current harm to consumers. It has even bragged that the rules would be “prophylactic.”

The FCC not only insists upon being involved in the terms and conditions offered by Internet providers, which is problematic in and of itself, it also recommends an extensive list of disclosures, reports, and certifications for providers to make. While these proposed disclosures are intended to show whether and how providers are complying with the anticipatory rules, some of them go much further. For example, broadband providers would be expected to report on every aspect of their practices and services, including metrics like jitter and packet corruption, which are unlikely to be meaningful to the average consumer. Expensive and burdensome reports that add no measurable consumer benefit are exactly the type of regulatory overreach that cost-benefit analysis is meant to prevent.

While other agencies seem to take seriously their obligation to evaluate objectively the consequences of their actions, the FCC consistently falls short. Information from the Office of Management and Budget, summarized in a 2013 report by the Administrative Conference of the United States, showed that out of 38 major rules issued by the Securities and Exchange Commission (SEC) from 2007 to 2011, 37 contained some information on benefits and costs. Of these, three included monetized benefits and 19 included monetized costs. On the other hand, during that same period, the FCC issued six major rules. None included information on benefits or costs, much less monetized benefits or costs. The FCC has recently pointed to the SEC as a role model to justify certain broadcast regulations, but cost-benefit disclosure is an area where the FCC should actually follow the SEC’s lead (even as legitimate debate remains over the sufficiency of SEC’s analyses).

In its most recent Notice of Proposed Rulemaking on net neutrality, the FCC shirked its responsibility again. The commission’s woefully inadequate “analysis” started with an unfounded assumption that the rules would be beneficial, then proposed several pages of onerous requirements, and concluded with one meager paragraph seeking comment on how to minimize the unquantified burdens. Seeking comment on burdens is no substitute for performing an actual cost-benefit analysis, and doing so as an afterthought shows a disregard for the president’s directives.

If the FCC had actually followed Executive Order 13563, it would have found that there is no rational justification for the proposed rules, and the inquiry would have ended there. That’s because the compliance costs for ISPs would certainly outweigh the hypothetical benefits for consumers, who are not experiencing any concrete harm today. Instead, the FCC made a groundless, impassioned decision to press forward without doing the necessary work.

Fortunately, there is still time to undertake the requisite analysis. At a recent congressional hearing, commitments were finally made that the commission would comply with Executive Order 13563 in its net-neutrality rulemaking. As we move forward with this limited opportunity to give the agency comments and data on these proposals, we reiterate our call for the FCC to conduct full and proper cost-benefit analysis before adopting any final rules. The Internet is far too important to our economy and our way of life to consider any government intervention based on emotion rather than facts.

— Marsha Blackburn represents Tennessee’s seventh district in the House of Representatives. Michael O’Rielly is a commissioner at the FCC.


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