FTC Chief: Net Neutrality Arguable, But We'll Examine

Telecom Policy Report, August 28, 2006

Deborah Platt Majoras, the head of the Federal Trade Commission (FTC), this past week disclosed the agency has formed a task force to look into network neutrality and other hot topics. However, she personally feels whether new laws are really needed on the net-neutrality issue is highly arguable and enacting new bills probably is ill-advised at this time (Telecom Policy Report, Aug. 10).

Chairman Majoras told an audience at the Progress & Freedom Foundation (PFF)'s annual Aspen Summit in Colorado that an Internet Access Task Force will examine multiple issues and enforcement matters stemming from converging technologies. The task force is headed by Maureen Ohlhausen, director of the FTC's Office of Policy Planning, and it consists of economists and attorneys from throughout the agency. "The purpose of the Internet Access Task Force is to educate the commission on the relevant issues and to inform our enforcement, advocacy, and education initiatives," Majoras said. The first project is drafting an issues paper - due in the fall - about municipalities offering wireless Internet services.

Majoras, meanwhile, questioned the pressure for legislation on net neutrality. Like the Federal Communications Commission (FCC) and extensive congressional reticence about the need for further statutory action, Majoras said net-neutrality proponents still haven't explained to the FTC where the market is failing or what anti-competitive conduct should be challenged. "We are open to hearing from them," she said, adding the issue itself is somewhat clouded and intermingled with broader business, technology and regulatory developments.

Nevertheless, she also expects the new task force to evaluate net- neutrality proposals in detail and to produce a report with conclusions and recommendations (if any). "I also have asked the Internet Access Task Force to address what is likely the most hotly debated issue in communications, so-called 'network neutrality,'" she said. "The FTC's Internet Access Task Force is looking carefully at the issues raised by calls for network neutrality laws, and I look forward to reviewing their findings. In the first instance, however, I urge caution in proceeding on this issue."

Search Engines Take A Hit

Like telco and cableco critics of the pro-net neutrality forces, Majoras appeared to take a slap at the likes of Amazon.com, eBay, Google, Microsoft, Yahoo! and other Internet proponents that are seeking government interference. "I start by admitting my surprise at how quickly so many of our nation's successful firms have jumped in to urge the government to regulate," she said. "I rarely meet a person in business who does not profess support for a free market, who does not long for the government to keep its nose out of the business. But nonetheless, when fear of marketplace disadvantage arises, there is a tendency to quickly turn to government to seek protection or help. I do not dispute the sincerity of the concerns here. I, too, support a highly competitive Internet environment. I just question the starting assumption that government regulation, rather than the market itself under existing laws, will provide the best solution to a problem.

In view of both House and Senate committees turning back strong net- neutrality provisos in proposed communications-reform bills, Majoras indicated there are numerous economic and legal points that should be considered before enactment of any measures to regulate the Internet because regulation can impact the online business "for years to come." In her mind, no industry-wide regulatory scheme should be imposed without a cost-benefit analysis and consideration of whether another, less broad approach could be a better way to address potential harm.

"The FTC frequently is asked to weigh in on proposed legislation and policies, and we virtually always assert the principle that, absent clear evidence of market failure or consumer harm, policymakers should not enact blanket prohibitions of particular forms of business conduct or business models or place requirements on how business is conducted," she added. "Broad regulatory mandates that employ a 'one size fits all' philosophy, without regard to specific facts, always have unintended consequences, some of which may be harmful and some of which may not be known until far into the future."

Majoras maintained dangers typically lie in legislating without clear evidence that demonstrates the problems to be solved, and while legislating precisely is tough enough, it is even more difficult without specific factual scenarios as anchors. "Even the most thoughtful drafters of legislation cannot foresee all of its effects," she said. "Consequently, we should look at whether any net-neutrality or similar legislation could have the effect of entrenching existing broadband platforms and market positions as well as adversely affecting the levels and areas of future innovation and investment in this industry. The end result could be a diminution, rather than an increase, in competition, to the detriment of consumers."