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Is Net Neutrality Dead? A calmer view of the recent ruling that hamstrings the FCC.


By Tim Wu
Posted Tuesday, April 13, 2010, at 1:03 PM ET
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When FCC Chairman Julius Genachowski took office last summer, he was probably hoping to have fun with things like broadband plans, spectrum reform, and other stuff that excites telecom geeks. But the Bush administration had left behind a surprise. Last week, the Court of Appeals for the D.C. Circuit declared that, thanks to Bush-era rulemakings, the FCC lacked many of the powers Genachowski needs to do his job. An alarmist, in fact, might see the decision as leveling the FCC almost as cleanly as an actual bomb would.

The calmer view, however, is that the ruling doesn't really mean the death of net neutrality, the National Broadband Plan, spectrum reform, or the FCC itself. It's a pain, but mostly it sends Genachowski on a cleanup mission. The FCC is a delayed victim of Bush's Grover Norquist program. (Remember "drown [government] in the bathtub"?) Yet by statute, the agency retains enormous powers over every form of communication by wire; it simply has to turn them back on.

Technically, it means declaring cable and DSL broadband the common carriers of our age (as Susan Crawford recently explained in a New York Times op-ed). What does that mean? To answer this, we need to go back to 1910, when, during the Taft administration, Congress passed a law declaring that the telegraph, telephone, and radio were to be treated just like the railroads, as "common carriers." The term is critical for understanding anything about what's going on today.

The idea of the common carrier stems from the premise that some businesses, by their very nature, are "public callings." Typically, such carriers of goods or people (taxicabs, railroads, ferries, bridges) and information (telegraph, telephone) have been charged with a duty not to discriminate among customers and not to charge exorbitant prices. You run into this all the time, even if you aren't aware of it: Consider that when you get in a New York taxi, the driver must charge you the posted rate and take you where you want to go. That's common carriage in action.

It's easy to understand why ancient courts thought such duties were important. Imagine yourself, late one stormy night, arriving at the sole inn in a remote town. At that point, the innkeeper has incredible power over you. He could extort whatever price you might pay. He could deny you service altogether. Or imagine a railroad that charged much less to John Rockefeller's Standard Oil than to any would-be rival in exchange for certain kickbacks. Or a telegraph owner who had a monopoly and refused to carry Democratic newswires.

Given these kinds of problems, from 1910 on, firms that offered communications services were declared common carriers and obligated, basically, to treat everyone the same and not to charge outrageous prices. But as the 21st century began, the Bush administration, in one of several experiments in neoclassical economics, decided to abandon the common carrier model for communications. Cheered on by economists, industry, and some technologists, the FCC, under Chairman Michael Powell, declared that both DSL service and cable broadband were no longer covered by the FCC's authority to regulate common carriers. Instead, they were "information services," a category over which the FCC had limited say (more limited than even Powell thought). That is why the D.C. Circuit said last week that the FCC lacked the authority to punish Comcast when it began to block the popular BitTorrent protocol. It isn't that the court hobbled the FCC; under Powell, the FCC, it turned out, had crippled itself.

A realist might say the whole effort to cripple the FCC was motivated by an ideological commitment to the principle that most laws ought not apply to corporations, which are, after all, people too. But for the less cynical, there is an underlying economic logic. Economists in the 1990s argued that competition had done away with the need for the old protections. Access to the broadband Internet, the FCC projected in the early 2000s, would soon be a "highly competitive market," making the old rules unnecessary.

Unfortunately, by 2006, it was obvious that things had gone horribly wrong. Instead of more competition in broadband, every year brought less. There are plenty of firms and individuals on the Internet—bloggers, Bing, Wikipedia, and the rest—but increasingly few firms carrying the information. The problem is that Powell's deregulation, meant to foster "competition," freed the Bell and cable companies to eliminate most of their actual competitors. AT&T, broken up in 1984, re-emerged. The cable industry integrated into just a few megafirms, like Comcast. Today, there is every sign of more consolidation, and even the re-emergence of an outright monopoly in high-speed broadband (more than 50 mbps) in many parts of the nation.

Even if the Bush FCC was wrong about the glory of competition, was it perhaps right to cripple the FCC? Might we be better off with a disabled agency, one limited, effectively, to licensing radio and TV stations? The idea may sound appealing, like kicking over your brother's sand castle, but you pretty quickly begin to see the problems. The truth is, we actually do rely on broadband as our common carrier, much as our ancestors relied on trains and the way we still rely on taxis and innkeepers. The problems and likely abuses in a system everyone depends on haven't really changed, and why should they? Technology changes, but human nature doesn't. Then as now, carriers have the means and reason to discriminate, charge exorbitant prices, and confuse customers with weird bills.

Over the summer, the FCC is likely to re-establish its common-carrier authority over broadband. It needs this to continue its pet project, the National Broadband Plan, a signature Obama administration effort to get fast Internet access to more Americans. It also needs the power to punish any knavish conduct that may arise. This will amount to reversing a short-lived experiment and returning to the policies that date from the Taft administration (and in a more fundamental sense, to far older common-law principles). Chairman Michael Powell was a thoughtful fellow, but he made a mistake. The premise for getting rid of common carriage—that rising competition is solving every problem—has proved both theoretically and factually wrong. To recognize this isn't politics; it's error correction.