Network Equality and the End of Innovation

September 23, 2015
Guest Post

by Olivier Sylvain, Associate Professor, Fordham University School of Law. Professor Sylvain’s post draws from arguments he makes in a law review article coming out in Hastings Law Journal early next year. See Olivier Sylvain, Network Equality, 67 Hastings L. J. __ (forthcoming 2016).

*This post is part of ACSblog’s symposium on the FCC’s net neutrality rules.

Two Cheers for the Open Internet

The FCC’s Open Internet Rules establish that users and application developers should be able to connect to all lawful Internet content, applications, and services of their choice without the permission of their broadband service providers.  The Rules do this by imposing bright-line rules on broadband providers against (a) blocking subscribers’ Internet connections, (b) throttling subscribers’ Internet connections, or (c) prioritizing their affiliated content, applications, or services over those of their rivals.  And, in a catch-all provision, the Rules also bar providers from otherwise unreasonably interfering with subscribers’ Internet connections.  This is to say that broadband providers now must have really good reasons to interfere with or disadvantage paying subscribers’ Internet connections. 

The Rules enshrine in public law the view that users and developers at “the edges of the network” should be the primary sources of innovation in our networked information economy.  Service providers should be little more than conduits or, in the parlance of public law, “common carriers” through which Internet communications should be able to travel freely.

This is not the first time that regulators have treated commercial gatekeepers like broadband service providers in this way.  This regulatory approach is very old, dating back to the old English common law treatment of ports, granaries, and other indispensable gateways of commerce. 

And, in the United States, the distinction between broadband providers as common carriers on the one hand and content, applications, and services on the other is at least four decades old.  In the late 60s and 70s, the agency’s concern was with protecting the nascent industry in networked computing against the predations of service providers.  Then, not unlike now, the FCC sought to ensure that service providers supplied network access to all comers – affiliates and competitors alike.    

That this regulatory approach is long in the teeth, however, is not to say that today’s Open Internet Rules were preordained.  Broadband providers have fought hard to keep FCC common carrier regulation of broadband network access and interconnection at bay.  The question of what to do in the “last mile” of the Internet’s physical infrastructure, where broadband providers have something close to monopoly franchises in most local areas, has been aggressively contested for nearly two decades.  Indeed, the agency has employed a “regulatory light touch” for much of this recent history on the assumption that innovation might be stifled if the government interfered.

The Open Internet Rules, as robust as they are, represent an important shift, at least because they wholeheartedly embrace the idea that the Internet is a general use technology best suited to common carrier regulation under Title II of the Communications Act.  The agency, moreover, has decided to forbear from enforcing all but several key provisions otherwise applicable to common carriers.  Now, the agency will focus only on promoting and protecting such important issues as consumer privacy, disabilities access, and universality.  In this way, the agency has articulated a targeted but flexible regulatory approach for the modern era.

The Innovation Rationale

To be clear, the Rules did not prevail in this way because somehow the argument for innovation won.  Both sides of the debate adverted to promoting innovation.  The Open Internet Rules prevailed because they vindicate far more important public law norms in this area: equality and universality.  I’ll return to this below.  First, however, I offer here a word or two about the regulatory proceeding that has brought us to where we are today.

The FCC and others have argued that the Internet’s relatively low entry costs and famously decentralized design have been an open invitation to investment and innovation in content, applications, and services.  In order to keep it that way, the agency explains, we must ensure that innovation by users and developers “on the edges of the network” can continue unabated. 

But, as effective as the appeal to innovation is, the concept is substantively indeterminate.  After all, no one can know the social value of any specific innovation as such without knowing who is doing the innovating or what purposes to which any given innovation are to be put or who the beneficiaries of innovation ought to be.  To put the point differently: innovation does not make any significant appearance in the Communications Act, the governing statute in the area.  Rather, Congress treats innovation as a third order priority that operates in service of other more enduring priorities like universality, competition, and diversity.

This is not a minor point.  Federal agencies have to premise their interventions on a delegated grant of authority from Congress.  They can’t just regulate whatever or however they want. In 2010, the U.S. Court of Appeals for the D.C. Circuit vacated the agency’s first iteration of the Rules exactly because the FCC failed to identify an operable provision to justify them.

The FCC took hints from the D.C. Circuit and, on remand, decided to base its authority on Section 706 of the Telecommunications Act (codified at Section 1302 of the Communications Act).  The provision asserts that the FCC: 

shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans . . . by utilizing . . . price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.

Anchored to this language, the FCC’s current argument in support of the Rules goes something like this: application innovation will generate user interest which, in turn, will induce investment in Internet infrastructure which, in turn, will deliver service to more Americans.  In this way, the agency continues its faithful commitment to innovation, but it is now grounded to its statutory command to encourage universality.  The D.C. Circuit affirmed this aspect of the agency’s reasoning earlier this year.

Distributional Justice: The True Ends of Innovation

The innovation theory has given shape to today’s rules against blocking, throttling, and paid prioritization.  Broadband providers have launched another series of arguments in litigation challenging the FCC’s decision to regulate providers under common carrier provisions of the Communications Act.  But, ever since the D.C. Circuit’s decision of earlier this year, the innovation theory has won the day.

But it probably isn’t quite right to say that the innovation theory compelled the FCC to act as boldly as it has.  If you take the agency’s decision to rely on Section 706 seriously, as the D.C. Court of Appeals rightfully has, universality and deployment are actually the driving concerns. 

The Open Internet proceeding itself underscores the point.  During the public comment period in summer 2014, when the agency was considering how to regulate local broadband networks, the FCC received nearly four million public comments, the vast majority of which supported robust restrictions on providers’ ability to control or ration paying subscribers’ access to the Internet content, applications, and services of their choice.  Most commenters focused above all on the rank unfairness of allowing some users and developers to have better service than others.  This was a claim about inequality and distributional fairness.  Comedian and talk show host John Oliver gloriously lambasted one serious FCC proposal that would allow broadband providers to offer tiered levels of service quality as long as the services were to be offered at commercially reasonable terms.  He likened this approach to airline travel (which is always a tough thing to be compared to), with most users getting something like the least comfortable seats and large Internet companies like Google and Amazon routinely getting first class treatment.  Former FCC Commissioner Michael Copps similarly asserted in testimony before the Senate Judiciary Committee that, without aggressive regulatory intervention, the Internet could “become the playground of the privileged few that only widens the many divides that are creating a stratified and unequal America.” 

The argument for equality (i.e., against disparity) seizes on a central, but all too easily forgotten feature of U.S. communications law policy.  That is, today, the FCC must ensure that the benefits of the newest communication technologies are “ma[d]e available, so far as possible, to all the people of the United States without discrimination on the basis of race, color, religion, national origin, or sex.”  This ambition is echoed in the broad mandate of Section 706, the provision on which the D.C. Circuit agreed justifies the current rules.  The statute, moreover, puts the level of broadband service that policymakers must make available to all users in relative terms; it requires that the access fees that providers charged must be “reasonably comparable” no matter whom or where users are. 

It especially makes sense to privilege universality and equality in the context of broadband access, if only because the Internet is today’s premier general use technology.  Like electricity, it suffuses every aspect of our daily lives.  To miss out on all of the Internet’s affordances is either an act of defiance, ignorance, or the consequence of material misfortune and disadvantage.   

More to the point, the Internet can be a great equalizer.  It has the potential to connect far flung and underserved communities with anyone around the world.  We have seen this happen everywhere, from Red Hook, Brooklyn in the wake of Hurricane Sandy to the homes of chronically ill elementary school students in Sumter, South Carolina.  The innovation theory promises that infrastructure investment will be the fortuitous by-products of formal neutrality and, accordingly, will help communities like these.  But policymakers must focus on far more than innovation to make that so.  Indeed, the focus on innovation for its own sake misses the point if it places at the center of the ecosystem the very elites who already have benefited from a range of structural advantages. 

Don’t forget that many Americans today have mediocre connections with only limited functionality.  Still others are relatively ignorant of or indifferent to the full range of the Internet’s affordances and constitutive applications.  And a notable number of Americans are completely shut out, with no serviceable connections in their local residential area.  Recent studies show that the “digital divide” remains a stubborn problem:  the familiar demographic fault lines of race, ethnicity, and income play a significant role in determining whether a user has access to the Internet.

Race, ethnicity, and income do not just influence whether users have access to the Internet.  It also affects how they use it, which, in turn, fundamentally shapes the nature of the online world.  For example, Blacks, Latinos, rural residents, and low income Americans are likelier to access the Internet through a smartphone or other mobile device than Whites.  And while this development has helped to close the availability and access gap, mobile devices have a narrower range of functionality.  Today, conventional mobile devices cannot do as much as personal computers; the latter are not as immersive because they do not have the same range of storage or processing capacity.  Users who can now go online because of mobile technology cannot do as much online as networked elites. 

The public comments and general reaction to the FCC’s network neutrality proceeding last year revealed that distributional equality concerns also required the restrictions on blocking, throttling, and paid prioritization.  The FCC acknowledged as much here and there (and probably more faintly than it should) in the Report and Order that explains the new Rules.  Consider, for example, that the agency recognized the landline/mobile divide when it chose to apply the new Rules to mobile service.  In light of the data about use patterns, this was an important intervention in furtherance of equality and universality.  This recognition also appears to be affecting the federal government’s increased funding for broadband deployment in schools, libraries, and communities, as well as support for programs that make broadband service affordable for low-income consumers (e.g., making Lifeline applicable to broadband in a meaningful way).  Disparity concerns also animate the agency’s interest in preempting state restrictions on local community efforts to own or operate municipal broadband networks.

Today and into the future, under the Rules, service providers must ensure that all members of the public who try to access the Internet have access to the Internet content, applications, and services of their choice no matter who or where they are.  Now, all users, at least theoretically, can innovate and communicate online freely, and on the same footing as large Internet companies.  In this way, the Open Internet Rules could reflect a renewed focus on enduring public law priorities in communications policy, and not just the happy and trendy cause of innovation for its own sake.