TechFreedom and the International Center for Law and Economics (ICLE) submitted comments Friday in response to the House Energy and Commerce Committee’s fourth white paper, which asks what authority the FCC should have to regulate the interconnection among broadband providers, transit providers, and edge providers — an issue that Netflix has successfully conflated with net neutrality (i.e., what happens within a broadband network). The two think tanks called on Congress to address interconnection through the economics of consumer welfare as part of a larger rewrite of the 1996 Telecommunications Act.
“There’s no evidence of a problem in the interconnection market today,” said Geoffrey Manne, Executive Director of ICLE. “Unlike users of the analog phone network, content providers today have a wide variety of choices. Transit providers offer an alternative to direct interconnection — at a competitive price — that prevents ISPs from overcharging content providers. The transit market is incredibly competitive and prices have plunged dramatically since the 1996 Act was passed: transit that cost $1,300 in 1996 costs less than $1 today. Regulating interconnection, without first demonstrating a real problem, risks mucking up a market that’s working extremely well. If there were a problem, the right way to address it isn’t through inappropriate common carrier regulation, but laws that focus on clear harms to consumers that markets can’t fix.”
In 2005, a diverse, bipartisan group of telecom experts issued a compromise proposal for rewriting the 1996 Act to make the FCC work more like the Federal Trade Commission. Under the proposed Digital Age Communications Act (DACA), the FCC would have to show that a company had abused market power to harm consumers and, unlike antitrust law, could issue prophylactic regulations on that basis. But for interconnection, the FCC would have to show only that practices pose a substantial and non-transitory risk to consumer welfare.
“DACA remains the right way to address interconnection,” said Berin Szoka, president of TechFreedom. “If a failure to interconnect actually did harm consumers, DACA would give the FCC ample authority to address it. But otherwise, the FCC would maintain the hands-off-the-net approach championed by President Clinton and his FCC chairman, Bill Kennard.”
“Netflix has added little to the debate over interconnection except confusion,” argued Manne. “Netflix has attempted to get for free something it has always had to pay for: the capacity necessary to carry its streaming traffic, now one third of all peak U.S. traffic. Comcast, Verizon and other companies have offered Netflix a cheaper option than paying for transit, yet Netflix is still trying to pass ‘net capacity’ costs onto broadband companies, which means to all broadband consumers — even those who don’t use Netflix.”
“Netflix has led the push to impose Title II common carrier regulation, but Title II still wouldn’t get Netflix what it wants: free interconnection,” concluded Szoka. “Title II’s interconnection provisions apply only to negotiations between telecommunications services. So unless Netflix is proposing that all content companies be subject to 19th century common carriage regulations, which would be a disaster for everyone, Title II won’t even apply to interconnection disputes. And if it did, it’s not clear the FCC can, as a legal matter, order free interconnection anyway.”
- “Bipartisan Consensus: Rewrite of ‘96 Telecom Act is Long Overdue,” Berin Szoka
- “Congress, not FCC, should Decide Future of Internet Regulation,” Berin Szoka & Geoffrey Manne
- “Debunking Netflix’s attempt to rebrand interconnection negotiations as ‘Net neutrality,’” Berin Szoka
- “Understanding Net(flix) Neutrality,” Geoffrey Manne, The Detroit News
- “Killing Net Neutrality Helps Underdogs Succeed,” Berin Szoka, Wired