The Federal Communications Commission is sitting on a mess. This week the U.S. Court of Appeals for D.C. decided in Verizon Communications v. the FCC (pdf) that the commission didn’t have the authority to impose its open Internet order on Verizon (VZ) or anyone else. There is a simple fix for this mess. It does not require any new laws from Congress. It already has the support of the Supreme Court.
If the FCC actually wants to ensure net neutrality, it will have do something that every regulator in every other developed country did a long time ago. (It will also turn Verizon litigiously apoplectic.) It has to unmake the mistake it made in 2002, when it failed to classify cable Internet providers as telecommunications services. Doing so would solve everything.
The last major piece of internet law, the Telecommunications Act of 1996, gave the FCC the authority to regulate Internet service providers as either telecommunications services, which transmit data, or information services, which process data. Early in the 2000s, the cable industry argued that it not only transmitted Internet data to customers, it also provided e-mail addresses and Web pages—it processed data as well. Since cable companies were therefore both telecommunication and information services, the industry argued, it could only possibly be an information service.
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The FCC bought this argument. In 2002, it decided that since cable was both, it could only be one. The FCC still treats broadband Internet access as an information service. No one has ever done a better job of pointing out the absurdity of this decision than Antonin Scalia, who in a dissent in a Supreme Court case in 2005 pointed out that the cable industry was like a pet shop that sold a leash with every puppy, then decided that it was not in the puppy business but in the leash business.
The distinction matters because under the Telecommunications Act, a telecommunications service is automatically regulated as a common carrier—it cannot discriminate among the kinds of traffic that pass through it. In its statement after the decision, Verizon argued that the “the court found that the FCC could not impose last century’s common carriage requirements on the Internet.” Telecom companies like to use that phrase, “last century’s common carriage requirements,” to imply that the concept of common carriage is horribly outdated. But common carriage is not a last-century concept. It’s a legal necessity that goes back to Rome. Ferrymen in medieval England could not deny any man passage; the crossing was too vital to commerce.
Internet service providers have always been allergic to this possibility, because it inevitably means some kind of regulation will curb their market power. Sometimes this regulation is more drastic. The telecom regulator in the U.K. broke up British Telecom, the old monopoly, into two separate companies: a common carrier that maintained the backbone of actual wires as a heavily regulated utility and a customer-facing Internet service provider that competed with other ISPs on that same backbone. France took a similar step.
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Because of this, broadly in the developed world more ISPs are competing for each customer, which has driven prices down and speeds up. It has also turned net neutrality into a nonissue everywhere else. Net neutrality is far better for consumers, so in truly competitive markets for Internet access, no company dares annoy its customers by attempting to breach it.
Nothing this dramatic will ever happen in America. (It should, but it never will. We’ll leave that for another day.) There are two traditional monopolies in America, the cable provider and the phone carrier. Since they compete with each other (inadequately), all the FCC has ever even considered doing, should it decide that Verizon is a common carrier, is enforce net neutrality. Unlike the rest of the developed world, America’s two-player market lacks the competition to have consumers enforce net neutrality on their own.
This is all fixable. The court did not say that the FCC could not enforce net neutrality. It said only that if the commission wanted to enforce it—a measure the court broadly agreed with—it would need to decide, as every regulator in every other developed country has decided, that a company that owns the wires is a common-carrier telecommunication service. In its 2005 decision, the Supreme Court already confirmed that the FCC is within its rights to make this decision.
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The FCC just has to do it. The carriers will sue again. Let them. They will lose. And then we can all move on.