With the official publication of the FCC's Open Internet Order, opponents in Congress will commence their efforts to repeal the Order under the Congressional Review Act. John Kneuer and Paul Larkin joined us for a Teleforum on March 5th at 2:00 pm as they discussed the likelihood of a successful repeal of the FCC's decision and the political and policy implications of continued uncertainty in Internet regulations.
Hon. John Kneuer, President and Founder, JKC Consulting LLC and Senior Partner, Fairfax Media Partners
Paul Larkin, Senior Legal Research Fellow, the Center for Legal and Judicial Studies, The Heritage Foundation
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Announcer: Welcome to the Federalist Society's Practice Group Podcast. The following podcast, hosted by the Federalist Society's Telecommunications and Electronic Media Practice Group, was recorded on Monday, March 5, 2018 during a live teleforum conference call held exclusively for Federalist Society members.
Dean Reuter: Welcome to the Practice Group's Teleforum Conference Call as today we discuss Net Neutrality and the Congressional Review Act. I am Dean Reuter, vice president, general counsel and director of practice groups here at the Federalist Society. Please note that all expressions of opinion are those of the experts on today's call. Also, this call is being recorded for use as a podcast in the future and will likely be transcribed.
We’re very pleased to welcome two return guests to Teleforum today, the Honorable John Kneuer. He's the president and founder of JKC Consulting, LLC., and a senior partner at the Fairfax Media Partners. He'll be joined by Paul Larkin. He's a senior legal research fellow at the Center for Legal and Judicial Studies at the Heritage Foundation here in Washington, D.C. We’re going to get opening remarks from each of some 10 to 15 minutes but as always, we'll be looking to the audience for questions so please have those in mind for when we get to that portion of the program. Let me apologize for our slightly delayed start, but we'll have plenty of time for discussion. With that, John Kneuer, the floor is yours.
John Kneuer: Thanks very much, thanks to the Federalist Society for putting this on and thanks for everyone who is dialed in and their expressions of interest on this topic. I thought I would go back and try and lay the regulatory history of how we've gotten to where we are on Net Neutrality. Net Neutrality as an economic market concept around broadband networks has lots of different beginning points that one could point to either in the scholarship literature, in discussions over different mergers.
I look back at a lot of these issues being raised in the AOL - Time Warner merger where it was the first real concept of the potential anti-competitive possibilities around the combination of what that at the time called "Content and conduit" and that if a single entity controlled both the delivery mechanism and popular content that they would have incentives and means to act in an anti-competitive way.
I think I'll start from a regulatory standpoint. As I said, these concepts were in the literature and in the public domain, but they really got their first life as a regulatory concept in 2004 when then FCC Chairman Powell articulated at the time what he called "The four Internet freedoms," which he laid out as consumers should have access to lawful content of their choice. They should have freedom to use whatever apps they desired. That they were free to attach whatever devices to the broadband network that fit within the terms of service of their broadband provider and that there would be transparency on the part of the broadband provider on their terms of service and limitations that there might be.
These were non-binding and they were essentially a statement of objectives that the FCC wanted to put in place. They were really never tested until 2008 at which point the FCC was made aware of complaints that Comcast at the time was slowing down BitTorrent and other peer to peer providers. Comcast argued that it was simply network management practices to balance out the network when individual users were consuming huge portions of the overall network capacity.
The more suspicious and the opponents of it saw it as a clear indication of the dangers of this combination of content and conduit. That Comcast with being in the business of selling video content, viewed BitTorrent and peer to peer delivering of movies back and across the network as competitive and they were interfering with that delivery.
The FCC ordered Comcast to stop interfering with peer to peer networks. Comcast appealed that order and the court overturned the FCC and said that they did not have a statutory basis upon which they could enforce that order against Comcast. With that being overturned, later in 2010 under Chairman Jankowski, they adopted a more narrowly tailored standard for "No unreasonable discrimination against unaffiliated content" and it explicitly excluded wireless networks because the belief was that the wireless networks were both more competitive and required different sorts of network management practices given the limits on their capacity. That case itself was appealed and again, it was overturned in 2014.
In the 2014 case, however, the court again said that the FCC did not have authority, statutory authority, but it gave the FCC a window of opportunity in that the court made it clear that the reason the FCC did not have authority to regulate in the space is because broadband services had been identified as "information services" and therefore subject to a light touch regulatory framework, as articulated in the 1996 Act.
That gave the FCC and it gave opponents of Net Neutrality landed on the legal mechanism of saying, "Well, if you reclassify broadband services as communication services, then they can be regulated under Title II and that is ultimately what the FCC decided to do in 2015. That is the decision that the Pai administration or the Pai FCC has just overturned, bringing us to this process that is currently underway on Capitol Hill of the Congressional Review Act in an attempt to have the Congress overturn the Pie decision.
The upshot of all of this, however, irrespective of one's views on the technical merits of Net Neutrality has been considerably more than a decade of regulatory and certainty and a whip sawing back-and-forth that has made it very difficult for investors anywhere in the ecosystem to have certainty. Whether it's on the carrier perspective, whether it is of the application layer there remains macro-uncertainty given how the Net Neutrality has had a history in the courts of uncertainty and even to the extent that it has left in the direct purview of the FCC, it's subject to the changing of administration and new chairman.
I'm going to turn it over to Paul to talk a little bit about the Congressional Review Act and that process that is underway, but I think we can then collectively speak a little bit more about what the macroenvironment is like and how to bring certainty to this segment of the economy around all issues though not just Net Neutrality but of investment and business plans. Paul, if you want to talk a little bit about the CRA?
Paul Larkin: My pleasure, historically once a rulemaking had been completed the next step was essentially litigation. If someone thought that the rule was arbitrary and capricious or that it lacked substantial evidence or there was some other defect in the notice and comment process. But in 1996, Congress added an additional type of review if you will. The Congressional Review Act is a statute that provides for expedited review by each house of Congress and presentation to the president if a bill is passed by each house of Congress on a particular rule that an agency has adopted.
Now, if you read the text of it, it's quite clear that it was designed to make sure that Congress could overturn any agency rule and the term "rule" is a very broadly written term that would certainly include the order that the FCC adopted here. In order to really understand how this Congressional Review Act works however, it's helpful to keep in mind an old aphorism of Oliver Wendell Holmes. He once said, "A page of history is worth a volume of logic.”
That certainly applies here because for a long period beginning in the New Deal era, Congress decided that the best way to reign in agency rulemaking was not simply to rely on the traditional methods of jawboning or restricting their use of appropriations or holding up appointments and the like. For a very long time Congress added to hundreds of different statutes a provision called the Legislative Veto Provision that allowed either or both houses of Congress to nullify an agency rule if the majority, any of the House or both, decided it didn't like it or that it was unconstitutional or that it was unwise for some other reason.
This went along for quite some time. The executive branch always thought this was an intrusion into the president's authority, even though Congress certainly thought this was a rather reasonable limitation on what agencies were allowed to do. After all, there's no requirement that agencies be allowed to exist or even to adopt any legislative rules. Nonetheless, for a long time it simply was an academic discussion.
In 1983 however, the Supreme Court in a case called INS Vs. Chadha held that the legislative veto was unconstitutional because it violated the Article I procedures by which only Congress can make law. “The problem was it was a bicameral requirement,” the Supreme Court said, and it also involved presentment to the president for his signature or if he vetoed it, and override. The Legislative Veto violated that because it allowed in some cases a majority in either house of Congress to nullify what an agency had lawfully adopted as law pursuant to whatever delegated authority an agency had.
Congress wanted to be able to reign in agencies, however, and so it decided that what it needed to do, and perhaps what he could only do, was to come up with something that was as close to legislative veto as possible but that satisfied the bicameralism and presentment requirements in Article I. The Congressional Review Act was that answer.
Under the act, every time an agency adopts a rule, it's supposed to publish it not only in the Federal Register but submit it to Congress. It then goes to the relevant committee where it will work its way up to the floor so that there can be a debate for a limited amount of time and then a vote on the rule in each chamber. If either chamber fails to pass a resolution of disapproval, that is essentially a bill that will disapprove the agency rule, then the rule stands. If however, both chambers pass it, it then gets sent to the president like any other piece of legislation and the president can veto it.
As a practical matter, this didn't happen very frequently. In fact, until 2017 it had happened only once in the entire 20 plus year history of the statute. Nonetheless, last year Congress made frequent use of the Congressional Review Act, nullifying 15 different rules, most of which had been adopted during the final days of the Obama administration.
What happens now is this. People who are opposed to what the FCC did, that is people in Congress such as Senator Marky, can bring a bill up for a vote on whether or not to hold invalid the agency or in this case the Internet Regulatory Order. If a majority passes it in the Senate and a majority passes it in the House, then it goes to the president where it will be up to the president to decide whether to veto or sign the bill that is a disapproval resolution. If it were to become law, then what would happen is that would have this effect. It would mean that the FCC could not re-issue a substantially similar rule unless and until Congress had passed new authorizing legislation.
Now the meaning of what is "substantially similar" has never been actually litigated in court and there are at least two different ways of looking at it. One is, essentially, similar to selecting paint. It's essentially a color matching test. That is how different is the new rule from the old rule? There are different ways of measuring the difference. For example, did the old rule use a top-down approach with penalties and does the new rule instead allow for more de-centralized disposition of a matter with incentives rather than penalties? That might be one way an agency could try to come up with something that is substantially different, but it's unclear. Different people have offered different interpretations of that term and as yet, no court has really certainly at the Circuit Court or Supreme Court level adopted one or the other.
Another approach is just to look at it from essentially what Congress was probably trying to do. It was probably trying to prevent an agency from engaging in shenanigans by essentially re-adopting the same rules just to put Congress in the position of having to nullify it over and over again until finally Congress got tired of it. If so, then you take a look at the new rule and try to figure out is this an attempt to circumvent what Congress had done? If it is not, then it is not substantially similar. The problem with that approach however is that it focuses more on the intent of the agency than on the rule and the statutes say the rule can't be re-adopted unless there is intervening legislation or the rule is substantially different.
That's where we have it now. Senator Marky has indicated that he wants to bring this up probably for a vote in the Senate and then the House, hopefully, in the position of getting both of them to pass it. But even if it doesn't wind up getting past by either or both of the chambers, and if it doesn't wind up getting signed by the president into law, we still have the traditional sort of vehicle that will come into play. That is litigation and my colleague is far more skilled at interpreting that part of this whole problem than I am, so I'm going to turn it back to him and to Dean.
Dean Reuter: Very good, let's open the floor to questions. This is Dean by the way. In a moment, we'll all hear an announcement that will say, "The floor mode is on." After you hear that announcement, if you have a question for either of our guests push the star button and then the pound button on your telephone. Once again, if you have a question for either of our experts, push the star button and then the pound button. Our lines are wide open. Before we turn to the audience, let me turn back to John Kneuer and see if he has further remarks or comments or something to add to what he said earlier in response perhaps to what Paul Larkin has just said, John?
John Kneuer: Sure, the impact of the CRA in the ways that Paul was describing are really twofold. It is the legal mechanism in the off chance weren't to be successful that the FCC could not pass a substantially similar rule and so the proponents of this solution see it not just as a way to restore the Title II framework that was adopted by the Obama administration, but it will become essentially impossible for the FCC to bring it back again without there being intervening legislation in between. I think that is sort of the key dynamic of what's going on now with the CRA.
The general underlying principles of Net Neutrality, and I've talked about some of the Internet freedoms that Powell had adopted and some of the things that Chairman Jankowski tried to articulate, but basically the general concepts are that a network operator cannot act in an anti-competitive fashion to interfere with the delivery of content and services across its network to the end user/consumer and that's typically been captured with three general principles: no blocking, which is precisely what it sounds like. An Internet service provider cannot block consumers from access to legal content; no throttling, which is a variation thereof. You can't interfere with the delivery in such a way as to cause a competitive disadvantage to the content that is being interfered with and the third concept being what is referred to as no paid prioritization or no fast lanes and no slow lanes. This is sort of a variation of the throttling concept, but it tends to have much more far-reaching implications.
At its most benign, the sense is that carriers don't get in the business of having tiered access so that they offer a substandard baseline service, but a consumer grade service, the only available consumer grade service is one that the carrier gets to charge the content provider more for. The carrier, to use a simple example, could go to a content provider like Hulu or Netflix and say, "Sure, our baseline service for consumers is 500 kb per second and it will take you four hours or four days to download a movie, but we can provide you something else, which will allow you to get your content directly to the consumer in exchange for rents paid to us, the carrier."
The problem with that easy articulation is that at its most fundamental, a concept of “no paid prioritization" winds up with a one-size-fits-all service offering that may not be in consumers' interest in a world where specialized services require specialized quality of service. For example, the things like telemedicine and autonomous vehicles and other sort of Internet of Things applications where a degree of bit error rate or latency, which would be immaterial in the delivery of a high definition movie might be completely incompatible with a high-end service.
There should be a reasonable consensus on a bipartisan basis that the broad strokes of Net Neutrality could be captured in legislation. There would be some debate and detail over paid prioritization, but the industry does not object to bright line rules that say, "No blocking, no throttling." There is broad consensus across party lines on those concepts.
Like I said, there is some disagreement or concern for careful drafting if we were to address issues of paid prioritization, but there is a fairly broad consensus. The problem is a breakdown in the politics of it and I think the proponents of the Congressional Review Act believe that Title II is sort of a no compromise solution for Net Neutrality and that to give up on Title II would be somehow offensive to their political base and so I believe they have an incentive to fight the Congressional Review Act to the end of its statutory availability and Paul can correct me on any details on the time limits on those sorts of things.
At the same time, the very existence of the Congressional Review Act argument creates a dis-incentive for the majority of the Hill, particularly in the Senate, to propose compromise bipartisan legislation. While there is a bill in the House sponsored by Congressman Blackburn, the Open Internet Preservation Act, which essentially captures no blocking, no throttling. It has features to preempt state laws, so we don't have a patchwork of 50 Net Neutrality frameworks. It skips over paid prioritization.
But like I said, I think there would be some discussion around limiting anti-competitive action around prioritization but allows for innovation and investment and a diversity of services for a diversity of needs. But it's that dynamic of having so long as the CRA process is out there, it's going to be used as a cudgel in the midterm elections and I think the CRA proponents are very transparent that they view this as a political exercise and that they think it's better to have the issue than the solution. I think once that runs its course there will be an incentive to bring parties together to bring some certainty to the Net Neutrality issue. Paul, do you have any comments on that or do we have any questions from the audience?
Dean Reuter: Paul, this is Dean. We do have one audience question, but I'm going to give you a chance to extend your remarks.
Paul Larkin: No, no, I'm glad to respond. I mean I don't really disagree with anything that John said, but let's give the listener a chance to ask a question, so that's fine by me. I'm glad to listen.
Dean Reuter: Very good, once again if you have a question, if you'd like to join the queue, push the star button and then the pound button on your telephone. Let's take our first call of the day.
Professor Lyons: Hi, this is Professor Daniel Lyons of Boston College Law School. A question about the CRA procedure, do you have any sense of what flexibility the Senate leadership might have to delay a vote on Marky’s CRA Resolution? I remember when we were focused on the privacy CRA last year, there was some concern that although it was obvious it had the votes, it wasn't clear that there would be enough time on the legislative calendar before the 60 days ran out. Is there a procedural mechanism that the leadership may be able to use here?
Paul Larkin: Well, I think the statute contemplates that there will be a vote in the Senate. The subsection 801-B3, for example, says the following "In the Senate, immediately following the conclusion of the debate on a joint resolution described elsewhere in the statute and a single quarum call at the conclusion of the debate if requested in accordance with the rules of the Senate," and here's the relevant part. "The vote on final passage of the joint resolution shall occur." It seems to me the statute contemplates that there will be a vote in the Senate and if that means the Senate has to stay a little late in order to make sure there's a vote, well, that means they have to stay a little late to make sure there's a vote.
The statute seems to set out a procedure that is designed to make sure that the Senate votes on this and so I don't think that if there was an effort by the majority leader of party whenever this arose to not have a vote that it would work. It seems to me the statute speaks right to the issue.
Dean Reuter: Very good, we do have another question. If you'd like to join the queue, push the star button, then the pound button on your telephone. For now, let's move to our second caller.
Kurt Leavy: Hi, this is Kurt Leavy with the Committee for Justice. I guess we’re all assuming that the CRA challenge won't work and at that point there will be some sort of compromise legislation. Can you make any predictions about what you think the compromise legislation would look like and whether it will pass?
Dean Reuter: John, I think that's in your ballpark?
John Kneuer: Sure, sure, what has been most troublesome about Title II and the way that Title II was particularly adopted under the Wheeler Commission was that it really in effect ... There's two important parts that I think are crying out for remedy. One was the Wheeler decision in addition to reclassifying under Title II, it found a new authority that they articulated as "The General Conduct Rule," which was essentially as described by Chairman Wheeler a catch-all that made the FCC the "Ref on the field who could blow a whistle on basically any course of conduct that they found objectionable."
What that really achieved was it put the FCC in the very center of the Internet for all questions of innovation and new product service offerings. Rather than consumers making choices based on technology and price and features and competitors innovating around price and functionality and innovation, the FCC was the ultimate arbiter of market access rather than the market being the ultimate arbiter of commercial success.
Eliminating that and making it clear and getting back to the concept enshrined in the 1996 Act, which is that we should have a policy objective of abundance in these networks and the best way to get that would be to subject them to the lightest possible regulatory framework, but I think that was very successful up until 2015 where we had over $1 trillion in investment, etc. I think in ultimate statutory remedy is going to I think return to that core concept of these markets don't require a lot of ex/anti regulation.
Another artifact of Title II however, which is less commented on, but I also think important is that it took the authority from the FTC with regards to privacy and enshrined it with the FCC. I think there is a ... I'm not sure how broad the consensus is, but there's certainly a desire to make sure that to return that authority to the FTC and have issues of anti-competitive behavior by market participants in this space handled through law enforcement at the FTC.
I think that ultimately, we will have legislation. I think it will pass. I think it's general framework will be clarity on privacy, very bright lines on throttling and blocking and a more nuanced view on paid prioritization that limits the carriers from seeking rents in anti-competitive ways, but also leaves space for product differentiation and innovation.
I think in particular one hears there's a lot of discussion in the market around the wireless part of this industry and their deployment of fifth-generation technology and fifth-generation networks. Those fifth-generation networks sort of by definition are a specialized tier of service that will be more reliable, faster, less latency, less error than their 4G service counterparts.
Unlike the evolution of the wireless network where we went from analog wireless phones, as called that first generation, to digital, which is the second generation and the CDMA and the long-term evolution as the fourth generation, each one of those successive deployments replaced the one before, 5G is likely to exist alongside of 4G as a differentiated product-service offering and I don't know how that is compatible with a bright line prohibition on paid prioritization. I think that is the one place where you’re going to see some discussion and nuance, but the general issues of blocking, throttling, giving consumers access to legal content is really non-controversial at this point.
Dean Reuter: Okay, to make sure I understand you, you think we will have a statute that covers privacy, throttling, blocking, to some extent paid prioritization and the FCC will be running the show, except on privacy, but the statute will specify that it can't be done under Title II/has to have a lighter touch?
John Kneuer: Right, I think it will ultimately cure the defect that the courts kept on ... The reason the courts would continually overturn the FCC and the reason the carriers ... Even though the carriers weren’t concerned about the prohibitions that the FCC were trying to articulate in the case against Comcast and the Verizon lawsuit of the Jankowski order, it was more that the FCC was articulating an authority that the carriers did not believe they had and if it wasn't challenge, it would leave the FCC with sort of an unbounded authority to regulate in whatever manner they saw fit. It's getting back to this general concept or policy objective that new broadband networks not be regulated as natural monopolies the way that communication services are regulated, which was an artifact of the monopoly network.
Dean Reuter: Thank you.
Paul Larkin: Hey, Kurt, this is Paul Larkin. Let me try to answer your question in a slightly different way. I think the debate has been basically very well laid out by my colleague, but I would say essentially the concern is if you allow different charges to be made, then there will be people that will be driving a Mercedes and that will mean the people who are driving VWs don't have the same nice car.
The Net Neutrality ruled that the Obama administration adopted forced everybody to drive a VW to avoid any of the risk that the people who couldn't afford the Mercedes wouldn't be able to buy one, so now what they will do is they'll have different types of cars that will be driven. The people that build the Mercedes are certainly not going to be able to keep the VWs off the road. That's the blocking and weakening or whatever, but you'll have different types of vehicles that can be driven, you’ll have different types of service.
The question is are we going to see legislation that tries to close the gap between the Mercedes and the VWs or to legislation that will somehow subsidize the people that can only afford VWs or that will make it look like a VW really is a Mercedes? That's the way the political process works.
Kurt Leavy: Well, what do you predict in that regard? Let's assume we don't have a complete ban on paid prioritization. Will it be something very light or will it to be more of you’re describing something more along the lines of for lack of a better word I'm just going to say a socialism type approach?
Paul Larkin: In terms of making a political prediction, I don't have any idea. I don't pay much attention to politics. I care more about the policies involved, so other people who are more interested in the politics and pay more attention to that would be in a much better position than I to make that call.
Kurt Leavy: Fair enough.
Dean Reuter: Once again, our minds are wide open. If you have a question, now is the time to push the star button and then the pound button on your telephone. While we wait to see if somebody rings in, I'll ask maybe a Congressional Review Act question, if you want to say more about this Paul or John and that's whether the FCC when it finally went forward on Net Neutrality did it notify Congress as we've heard that some agencies failed to in the past before the Congressional Review Act became a big issue in recent months.
I wonder if you could say more about the legislative prospects and the prohibition on an agency regulating, passing the same regulation again or a substantially similar regulation under the Congressional Review Act if that's used successfully and what that looks like with her without subsequent legislation?
Paul Larkin: Sure, let me go to that first and then John, of course, can answer. Whether or not the FCC notified Congress in compliance with the Congressional Review Act is simply a pure factual question. The agency should know the answer to that as well as the parliamentarian or secretary of the respective chambers.
The irony is if the agency did not notify Congress back when it came out with the order that was just repealed, then that order was not in effect, which means that the only order that would have been effect is the one that came out now or whatever predecessor order there was dealing with this issue, which I imagine did not impose a Net Neutrality requirement. If Congress didn't receive the FCC's order of adopting the Net Neutrality rules in the Obama administration, then that order is not yet in effect and so it's as if it has not been adopted at all.
As to what will happen if Congress were to nullify this particular order that's now out there, again, that will turn on what if anything that was in place before. If there was no submission of the old rule to Congress, then even if Congress and the president nullified this one that would mean it would go back to whatever pre-Obama rule was in place. If the FCC did notify Congress of this, the Obama rule is valid until this one is upheld or overturned. I don't know what the factual answer is to the question you mentioned and I'm sure somebody right now is probably feverishly trying to answer it because there's a whole lot on stake on that, but my guess is we'll find that out in the near future.
Dean Reuter: Good, John Kneuer, anything on this point?
John Kneuer: Not on the particular mechanisms but like I said back to I guess it was apparent to your early questioner on the politics of it and the likelihood of there being a legislative solution. I think this is going to have to run its course one way or another. My expectation is that whether they get the votes in the Senate, they’re unlikely to get the votes in the House and beyond that they’re exceedingly unlikely to have the president sign it, so this is a bit of a theatrical exercise as much as it is a legal exercise. But I also think it is going to be necessary as a political matter before the parties can come back to the table and say, "Okay, it is time for us to have a final answer to this question."
The uncertainty and the changing of the regulatory regime every six to 18 months for the past 15 years is no way to do business and I think there's a growing consensus, certainly among the carriers that they would not be in opposition to Net Neutrality legislation. They would, in fact, would be supporters of it.
Then I think there's also likely to be a growing desire to find legislative solutions to some of the issues that are not focused on carriers so much but are focused on the application layer and the tech community, where I think they’re raising concerns about the competitive practices of big tech and they are explicitly not included in Title II so to the extent that there is a desire to have a comprehensive approach for guarding against anti-competitive behavior in the broadband space, you may have a broader consensus of market participants who want to see it solved once and for all.
Dean Reuter: Very good, once again, we've got about 15 minutes left. If you have a question, push the star button and then the pound button on your telephone. We've got just one question pending so let's take another call.
Chris Garvey: Hi, Chris Garvey from New York, a libertarian candidate. There are a couple of things which have been neglected in the public relations about this thing and the only place I ever see them is on these Federalist Society Teleforums. One is that the free market, that’s as free as the market was even under the duopolies and monopolies that the Internet service providers were in most of the country, Net Neutrality had always been practiced before the Obama regulations.
Secondly, that the Obama regulations were simply an end run around the fact that they had no authority and so they simply applied 3000 pages of regulations and Obama's administration said, "Well, if you want to be an Internet provider all you have to do is tell us what you think you’re going to do and we’ll give you a non-binding pass on this, except if we change our mind we can shut you down," which was really a discouraging thing to entry into the system.
Yeah, Google and Facebook are a monopolies at this point. They’re also state-sponsored monopolies and I think there's a pretty good argument that the First Amendment applies to these under the Civil Rights Act which says that if you are a corporation that was funded by the US government the Civil Rights Act applies to you and if you try to deny people the First Amendment rights and the rights to campaign and the rights to mention candidates, you’re violating the Civil Rights Act. I'll just throw that out to you to see if you have any thoughts on those points?
John Kneuer: This is newer. Aside from the civil rights issue, I do think you raised a point about the market-based solutions to the fears of Net Neutrality. The proponents of Net Neutrality hinge most of their arguments on defining scarcity and the way they do that is they continue to increase the speeds upon which they will hang a definition of broadband services and therefore, with the higher speeds you exclude many, many market participants who provide wholesome, counter incentives to the kind of misbehavior that lies at the heart of Net Neutrality.
In a world with one broadband provider or in a market place with one broadband provider that provider would in fact have strong market-based incentives to discriminate in favor of their own affiliated content and services. But in a marketplace where consumers have an ability to choose, then discriminating against what content and services consumers can acquire becomes a negative market differentiator. Consumers will always choose carriers and providers that don't limit their ability to access content and services over those that do.
In that regard, the wireless industry is increasingly providing direct one-to-one competition with fixed services but even to the extent that they’re not providing a one-to-one service replacement, they’re providing a very strong market-based disincentive to anti-competitive or anti-consumer behavior.
If I have a wireline provider that is put giving me 100 Mb per second, I can't get that from my wireless provider. But if that fixed provider that may be providing me 100 Mb per seconds starts to interfere with the content and services that I can access over their network, I am going to drop them in favor of what may be a service with less ultimate speed and through put capacity but that offers me a richer experience.
Carriers compete on all sorts of levels at this point. They compete on mobility, on speed, on price. In a competitive marketplace, most of the fears of Net Neutrality start to go away anyhow but if instead what we’re left with is something like a general conduct rule like you articulated, while the carriers don't have any incentive to act in anti-competitive or anti-consumer ways, the regulatory environment just throws up a huge barrier to innovation because nobody knows what they’re allowed to do.
I think you articulated the backdrop well and I think that is also something that that dynamic and we started talking about Net Neutrality 15 years ago where we didn't have anything like the abundance of networks that we have now. Every year that has gone by the incentives for carriers to act in ways that would be problematic becomes less and less.
Chris Garvey: I think one thing that is going on if you look at what Google and Facebook are doing right now with the Alex Jones Network is they are banning and removing YouTube channels, YouTube, of course, is owned by Google, banning anyone who has the wrong, the right wing, the conservative, the libertarian view, they’re being banned from these sites by specific ad hoc bans. An awful lot of them are being taken down right now, which I think is both an antitrust and a First Amendment problem. We'll see what happens from that, I guess.
Dean Reuter: Okay, well with that let me give each of our experts a chance to wrap up, express a final thought. Let's go in the order in which we started, John Kneuer, the final thought?
John Kneuer: Net Neutrality is a policy consideration or a policy objective that has gone through more than a decade of regulation, litigation, re-regulation with never a final answer in legislation and that I think the industry deserves and the industry and consumers would greatly benefit from certainty in this space. Hopefully, once this CRA process has run its course, we can get that certainty so that this is not something that is subject to revisiting every four to eight years with a new FCC.
Dean Reuter: Final thought from Paul Larkin.
Paul Larkin: Even ping-pong games have to come to an end some time. I don't think it's likely that this game will come to an end with an invalidation of the most recent FCC order under the Congressional Review Act. But hopefully it will if the whole Congress take this issue up. I agree with my colleague that this is the sort of matter that Congress should and must address and it’s probably better addressed in the context of the legislation than in the context of the Congressional Review Act. In any event, it's unlikely that even if both houses of Congress passed such an order to nullify the FCC rule that the president would sign it, so that forces the Congress to address this. Maybe it won't address it in '18, maybe it won't address it in '19, but eventually it’s going to have to address it.
Dean Reuter: Well, this is Dean Reuter thanking both our guests, John Kneuer and Paul Larkin. We certainly appreciate your time today and your insights. This has been very interesting. I want to thank the audience as well for dialing in and for your thoughtful questions, so a reminder to our audience to check your emails and monitor the Federalist Society Website for our next scheduled Teleforum Conference Call but until the next call we’re adjourned. Thank you very much everyone. Thank you for listening, we hope you enjoyed this Practice Group Podcast. For materials related to this podcast and other Federalist Society multimedia, please visit the Federal's Society's Website at Fedsoc.org/multimedia.