FCC Holds Kangaroo Court at Stanford

Though commissioner (and net neutrality opponent) Robert McDowell expressed disappointment over Comcast’s absence, the company understandably kept its distance from what quickly deteriorated into a kangaroo court. With 70 percent of the panelists, and 100 percent of the public comments supporting strict regulations and penalties, it appears that the verdict was a foregone conclusion.

In the words of the “Raging Grannies” who distributed literature at the event:


COMCAST has no a-li-bi

They’re guilty, they’re guilty

Big telecom is guilty!”

The absence of opposing viewpoints denied the commissioners and audience members an opportunity to question their preconceived opinions about “net neutrality.” For instance, the Christian Coalition of America’s Michele Combs received thunderous applause for her assertion that without enforceable FCC mandates, network operators will “block political speech.”

Despite the fact that Comcast has not been accused of blocking speech for political purposes, most attendees accepted this as an inevitable consequence of FCC inaction. Is this a reasonable assumption? As Stanford Law Professor Lawrence Lessig explained, corporations are motivated by one driving goal: maximize profit. Not one panelist, however, asked the obvious question: how does a company profit from censoring political speech?

How could Comcast’s CEO possibly justify to his shareholders alienating a swatch of his customer base to satisfy a personal political bias? If these questions lack a reasonable answer, there exists no basis for much of the impassioned yet hysterical political rhetoric which contaminates the “net neutrality” debate.

This does not mean that a company would never block speech, but only that the decision must be based on profit, not politics. Therefore, any true violation of “net neutrality” also restricts competition. Not one panelist pointed out, however, that there already exists a vast and redundant set of laws for investigating and punishing anticompetitive conduct. For nearly 120 years, the Department of Justice has been empowered to prosecute any company that behaves “in restraint of trade” or attempts to “conspire with any other person or persons to monopolize.” For over 90 years, an entire regulatory agency (the Federal Trade Commission) has existed to “prevent unfair methods of competition, and unfair or deceptive acts or practices in or affecting commerce.” For the past 30 years, the Attorney General of any state can also sue to enforce these laws on behalf of its citizens.

If none of these enforcement agencies will act on complaints from the public, any affected consumer can file suit against the offending company and recover court costs, attorneys’ fees, and three times the actual damages. In other words, if hearing attendees and panelists truly believed that Comcast violated “net neutrality” (as opposed to engaging in legitimate network management), every single BitTorrent user in the room could sue Comcast in civil court. Because Comcast would be liable for court costs and attorneys’ fees, taking this action would not cost the plaintiffs a penny.

Panelists and commissioners alike lamented that many of the facts surrounding Comcast’s practices remain unclear. The existing legal and regulatory framework provides a mechanism to uncover the facts and reach rational conclusions about Comcast’s motives and intentions. If, after due process, evidence demonstrates that Comcast abused network management practices to sabotage competitors, the law provides for harsh punishment.

Rather than rely on these powerful legal remedies, however, hearing participants argued vehemently that the government should reflexively enact sweeping regulations to put Comcast under the FCC’s control. The most disturbing element of this hearing was the nearly unanimous view that Comcast restricted “free speech,” and the government should restore it. The ACLU’s Nicole Ozer even submitted comments asserting that network operators are a threat to “speakers making use of their First Amendment rights.” Ironically, this dangerous argument threatens to create serious First Amendment issues where none previously existed. As Ms. Ozer must be aware, the First Amendment states that “Congress shall make no law…abridging the freedom of speech” (not “Comcast shall make no policy”). In other words, the First Amendment protects us from the government, not private corporations. Why is it dangerous to hand over our ISPs to the government?

Just as Prof. Lessig pointed out, corporations possess an inherent drive to maximize profits. The government also possesses an inborn nature: maximize power. It is precisely for this reason that the First Amendment exists. The hearing was packed with Bay Area activists who understand the threat to our freedoms posed by warrantless wiretaps, national security letters, and “enhanced” interrogation. Not one public comment, however, recognized that the FCC is part of the federal government. If ISPs become highly regulated public utilities, they are no longer accountable to consumers. Instead, their primary allegiance shifts to the regulators who ensure their continued existence. As a result, any future administration could easily use these utilities to spy on citizens’ Internet activities and censor political speech. Suddenly, what started as a textbook antitrust complaint could quickly evolve into a serious erosion of our civil liberties.

Considering the extensive and redundant legal authorities which already exist to evaluate antitrust complaints, the FCC’s involvement is unnecessary and counterproductive. Not only does this agency lack expertise in these matters, but its previous forays into competition law have proven disastrous. For example, when AOL and Time Warner merged in 2001, the Commission imposed “net neutrality” regulations on AOL’s instant messaging (IM) networks to help offset AOL’s dominance over this technology. Within two years, AOL’s market share in IM services had spontaneously eroded, and the FCC recognized that its regulations had harmed consumers, limited choice, and reduced competition. After quietly rescinding the neutrality rules in 2003, former FCC Chairman Michael Powell (who also crafted the “four freedoms” often cited by net neutrality proponents) concluded that the entire case amounted to “regulation for the sake of regulation with no clear purpose or public interest value.”

As demonstrated by the AOL/Time Warner case, the FCC’s brand of “net neutrality” extends far beyond ISPs. If these regulators rush to impose a broad “net neutrality” mandate, any Internet business could soon be subjected to government control (note that the FCC’s broadband policy statement specifically includes “content providers”).

Consider the following example:

Google operates a “network” for placing advertisements on web pages. Because 70 percent of all advertisements are placed by Google, many advertisers lack a competitive alternative to this dominant network. This network is not neutral: Google reserves the right to block “any ads or terminate ad campaigns at any time, for any reason.” In October 2007, Google removed from its network a political advertisement placed by a U.S. Senator. The advertisement was critical of MoveOn.org, a grassroots organization which Google previously paid more than $1 million to help advance the company’s political objectives. This non-neutral behavior creates considerable suspicion that Google blocked political speech on its network for financial gain (to protect a business partner).

Just as with the Comcast situation, Google has offered conflicting and confusing explanations for its discrimination, and there remains considerable cause for concern. Both of these cases center on the suspected manipulation of free Internet expression for financial gain. In both of these cases, significant questions remain unanswered.

If the FCC rushes to supersede the due process of existing laws and preemptively regulate the Internet, any business in the digital economy could find itself subjected to “trial by commission.” Before embracing this vast new regulatory authority, we should consider one critical question: Is it wise to put the future of the Internet in the hands of five political appointees, controlled by political interests and driven by political motives?

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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