A good whack to the net

Ajit Pai, chairman of the U.S. Federal Communications Commission, recently caused quite a stir when he announced his intention to repeal “net neutrality” rules introduced in 2015 by the Obama administration. The FCC is expected to approve his proposal in a December 14th vote. These rules, which classified high-speed internet as a public utility, put in place intrusive regulations for internet service providers that apply to no other internet company.

Pai’s announcement was met with outrage by supporters of the command-and-control approach to internet regulation. Prophets of doom warn that returning to the regulatory framework that governed the internet during the Clinton and Bush administrations, and the first six years of the Obama administration, would lead to a stifling of free speech and innovation, and the end of the internet as we know it.

The debate has even spilled over into Canada, with Innovation Minister Navdeep Bains stating that “Canada will continue to stand for diversity and freedom of expression” and “remains committed to the principles of net neutrality.” Former CRTC chair Konrad von Finckenstein and former vice-chair Peter Menzies took to the pages of The Globe and Mail recently to urge millennials to fight for net neutrality and warned of the dire impact on Canada’s broadband landscape if Pai’s proposal prevailed.

The fears are overblown. Unwinding the 2015 “open internet” order will be good for the American economy and consumers, while allowing the U.S. to remain a global broadband leader.

While current net-neutrality regulations have only been on the books for two years, they have already negatively impacted the U.S. broadband market by creating regulatory uncertainty and reducing incentives to invest in next-generation broadband infrastructure. Broadband network investment has fallen more than 5.6 per cent since the FCC’s 2015 net-neutrality decision, the first such decline outside of a recessionary period.

Notably, Pai’s proposal would remove the vaguely worded “general conduct standard” rule. The FCC had previously deployed this rule, without clear evidence of consumer or competitive harm, to clamp down on offerings such as “zero-rating,” where internet providers do not charge for data used by specific applications or services.

Also gone would be the ban on paid-prioritization, freeing broadband providers to enter into agreements with content providers to speed up content delivery. Many economists have pointed out that a blanket ban of paid-prioritization makes no economic sense, and its removal may allow for the emergence of innovative business arrangements between broadband and content providers. Many smaller content providers could actually benefit from prioritization as a means of getting a leg up and gaining market entry. All of today’s giants — Google, Amazon and Facebook — were themselves once small players facing dominant incumbents. Prioritizing the delivery of certain types of data will also be necessary for such services as telemedicine and smart-car navigation systems.

Most importantly, ending public-utility regulation of the internet will not spell the end of basic net-neutrality rules, contrary to some strident reactions from advocacy groups. Indeed, every major U.S. internet provider already supports prohibitions against blocking, throttling and unfair discrimination, and the FCC will still require them to publicly disclose their neutrality practices. They have no interest in angering their clients, and there have only been a handful of cases of unfair discrimination over the past two decades, and all were resolved quickly following public outcry. Also, should anti-competitive broadband practices occur again, antitrust enforcement by the Federal Trade Commission will remain available to protect consumer interests.

Rather than denouncing the deregulatory trend, Canadians should emulate it. The American experience over the past two decades shows that light-touch regulation has allowed for unprecedented innovation, infrastructure growth and freedom of expression online. Although Canada has generally followed a path similar to that of the U.S., some of our more interventionist policies, such as the mandated sharing of broadband networks with resellers, could hurt our broadband ecosystem and slow down growth.

Shortly before he assumed the chairmanship of the FCC, Pai promised to “fire up the weed whacker” and get rid of rules that impede investment, innovation and job creation. If Pai is successful in reinstating a light-touch regulatory framework for broadband, he will have kept his word. Ottawa should ask to borrow that weed whacker to clear regulatory brush this side of the border.

Paul Beaudry is Associate Researcher at the MEI, Martin Masse is Senior Writer and Editor at the MEI. The views reflected in this op-ed are their own.

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