Deregulatory Efforts at the FCC Will Fuel Innovation

By Joel Thayer and Garrett Johnson

Shelter-in-place America depends on an internet economy powered by tech company innovations. However, digital innovation relies on the existence of strong broadband networks. With the adoption of 5G, tech companies need priority access arrangements for essential services such as autonomous vehicles and telemedicine to operate successfully. That said, if overeager regulators compromise their relationship with Internet Service Providers (ISPs), tech companies will be unable to fulfill the promise of 5G-driven innovation. Therefore, it is not in the best interests of consumers or technological innovation for the Federal Communications Commission (FCC) or other state agencies to overregulate what internet services tech companies engage in.

The FCC prevented the overregulation of innovation when it reverted broadband back to its traditional light-touch regulatory framework under its Restoring Internet Freedom Order (RIF Order). The internet is rooted in an inextricable relationship between the public and private sectors since its inception. The precursor to the modern internet began as a government asset (i.e., the Advanced Research Projects Agency Network or ARPANET) in 1969. The Department of Defense administered the ARPANET, which only performed primary internet functions such as sending and receiving short messages. The ARPANET’s intended use was almost exclusively defined by the DoD. Unsurprisingly, finding new, innovative consumer uses for the proto-internet was not the highest priority for the public sector. It is easy to imagine a world where if solely left up to the DoD, the internet would still be what Senator Ted Stevens famously described as “a series of tubes,” conditioned to push codes and require users to have varying levels of security clearances to access the closed network.

Fortunately, the next decades of the internet’s development featured a straightforward interplay between government and commercializing market forces, culminating in its widespread adoption by consumers via browsers such as Netscape. Today, the digital economy is flush with internet-powered tech companies, particularly in the software development space, independently able to drive progress. These companies are a central pillar of America’s economic dynamism and strength. Thousands of companies in the U.S. mobile app market alone use broadband connectivity to provide a myriad of interconnected services such as telemedicine and health, networked classrooms, and precision agriculture. This competitive market emerged largely in part due to the government’s light-touch regulatory approach to ISPs and tech companies. One need only look at the lack of technological innovation in Europe to see the harmful effects of an overly burdensome regulatory state.

To celebrate the light-touch regulatory approach is not a call to reject all forms of public sector involvement in the internet. The tech industry rightfully praises the liability protections for user-generated content laws like Section 230 of the Communications Decency Act and Section 512 of the Digital Millennium Copyright Act, which allows companies to efficiently use data to create innovative services without the fear of a court appearance.

Under its Title II Order, the FCC tasked itself with determining what priority access arrangements were appropriate for tech companies (entities traditionally outside the FCC’s regulatory purview) to engage with ISPs. This action stunted many pro-competition agreements, such as zero-rating data plans, and significantly slowed investment in broadband infrastructure. Fortunately, the RIF Order repositioned the FCC away from hampering innovation and growth. Moreover, it empowered tech companies to listen to their customers and execute the necessary arrangements with ISPs to provide their services without FCC intervention.

However, the RIF Order does not turn the internet into the Wild West. Priority access agreements are now, and always have been, a question of consumer protection and competition where the Federal Trade Commission (FTC) has domain. Under the FTC’s watch, ISPs cannot make priority access agreements that stifle competition or harms consumers. Instead of the FCC’s overzealous Title II approach, the FTC serves more like an umpire calling balls and strikes on a case-by-case basis. Under Title II, the FCC assumes competitive harm and acts more like an ISP’s parole officer. Thus, under the FTC’s jurisdiction, consumers and tech companies are effectively protected from having to rely on rules that assume harm without evidence, while tech companies are free to work out specific deals with ISPs.

With its RIF Order, the FCC continues the light-touch regulatory approach that built the digital infrastructure and platforms that the internet economy depends on. During the economic uncertainty of the COVID-19 outbreak, consumers and tech companies should celebrate.

Joel Thayer is an Attorney at Phillips Lytle, LLP and previously worked as a law clerk at the FCC under then commissioner Ajit Pai. The views Mr. Thayer expresses are his own and not of any clients of Phillips Lytle, LLP.

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