Network Nanny?

Analyses of the D.C. Federal Court of Appeals’ decision in Comcast v. FCC [Download Here] have focused on who won and who lost. And for good reason: the judgment imposes significant limits on the FCC’s ill-defined authority to have its way with the trillion-dollar telecommunications industry. But the particulars of the case also offer some common-sense insight into why the political vogue for “network neutrality” is myopic.

Comcast, America’s largest cable company, ran afoul of the FCC in 2007 when it chose to discriminate among Internet users by providing slower service for peer-to-peer networking, which was hogging disproportionate amounts of bandwidth. In disciplining Comcast, the FCC both asserted jurisdiction over the Internet and its right to adjudicate the issue without a formal rulemaking.

The court, for its part, decided that the FCC overreached its statutory authority. But that begs the more fundamental question: should there be rules prohibiting discrimination of this sort by Internet service providers? One could imagine other ways in which Comcast could have discouraged excessive use of bandwidth by peer-to-peer users. It might, for example, have charged everybody by the byte rather than by the month. But for competitive reasons, Internet service providers have thus far been reluctant to go this route. Do we really want the government rather than the marketplace to make this call?

It may, in the end, serve the public interest to bar some forms of discrimination by Internet providers. But the Comcast case illustrates how problematic it will be to draw hard and fast lines. The antitrust agencies already have authority to regulate the competitive practices of the industry. Congress should think long and hard before delegating power to the FCC in the Internet arena – and, if it does, should insist that the agency use its new authority solely to advance consumer welfare and efficiency, not as a catch-all rationale for enforcing the agency’s views on net neutrality.