It's not often that a regulatory policy analyst correctly predicts a pop culture development a decade out, so...
Back in the spring of 2005, law professor Christopher Yoo (then at Vanderbilt, now at Penn) argued in Regulation that the Federal Communications Commission should liberalize its "structural regulations"—controls on such things as how the broadcast spectrum can be used, cable TV rates, ownership of different media outlets in a geograpic market, etc. He explained that those controls limit the diversity of voices and programming in mass media, making it mainstream-directed, because such programming is most profitable under those rules.
About the time his article appeared, the now-defunct UPN Network announced its cancellation of the series Star Trek: Enterprise, the most recent TV installment of the Star Trek franchise. The reason was low ratings; Trek fans are fervant and typically middle to upper class, but they were not a big enough market segment for UPN and its desired advertisers. However, those characteristics made the fans an ideal market for a paying-subscriber-supported Star Trek—something that Yoo's reforms would have allowed, but FCC regulations prohibit.
Seeing the news hook, Yoo and I wrote an op-ed for the San Francisco Examiner explaining all this and concluding
Hopefully, if the “Star Trek” series gets yet another revival, it will be in a mass communications environment where niche shows have a better chance to live long and prosper.
Unfortunately, the FCC hasn't adopted the reforms we envisioned (if anything, going in the opposite direction). But human innovation—both in technology and business—often finds ways around government barriers.
This week, the CBS Network announced that a new Star Trek series will launch in January 2017, exclusively on CBS's Internet-delivered subscriber service All Access. The move will attempt to do exactly what Yoo and I foresaw: tap the Trek fanbase to see if it is a viable market for the show.
It can't be said that CBS is boldly going where no one has gone before. Cable and satellite services, premium channels like HBO and Starz, and streaming services like Hulu and Netflix have already entered the final frontier of subscriber-supported content, delivering high-quality but niche-audience new programming such as original series Game of Thrones and House of Cards, reboots like Battlestar Galactica, and network-cancelled series like The Mindy Project. They can do this, in part, because they can escape many of the FCC's diversity-dampening regulations—for now at least.
Unfortunately, the FCC hovers as menacingly as a Romulan starship, as evidenced by the recently adopted net neutrality regulations. Still, let's hope that CBS's new venture lives long and prospers.
Do you want your Internet service provider to operate like the water company or the electric company? Internet access services will be more like these leaden public utilities if the Federal Communications Commission tries one of the more likely workarounds to a D.C. Circuit Court decision today that restricts its authority to regulate.
The story is long and involved---read it in the court's opinion if you like---but the FCC has sought for years now to regulate broadband Internet service providers something like it used to regulate AT&T, with government mandated terms of service if not tarriffs and price controls. This doesn't fit the technical environment of the Internet, which allows for diverse business models. Companies that experiment with network management, pricing, internal subsidy, and so on can find the configurations that serve widely varying consumers and their differing Internet needs the best. If government believes in fast lanes and slow lanes, surely Internet service providers could optimize service for movie delivery, video calling, and such, while email arrives a little less speedily.
The court found that the FCC's plans don't fit with its classification some years ago of broadband as an "information service," subject to the light-touch regulation under Title I of the Communications Act. Title II, which applies to "telecommunications carriers," allows common carrier regulation of the type the FCC is trying to impose. So watch for the FCC to conveniently change its mind and begin pushing for treatment of broadband once again as a "telecommunications service." This is so it can have more control over the business decisions made by Internet service providers.
We made the case more than five years ago that "'Net neutrality" is a good engineering principle, but it shouldn't be a legal mandate. Technology and markets surpassed any need for command-and-control regulation in this area long ago. But regulators don't give up power without a fight. To maintain power, the FCC may try to make Internet service a public utility.
Douglas Walburg faces potential liability of $16-48 million. What heinous acts caused such astronomical damages? A violation of 47 C.F.R. § 16.1200(a)(3)(iv), an FCC regulation that enables lawsuits against senders of unsolicited faxes.
Walburg, however, never sent any unsolicited faxes; he was sued under the regulation by a class of plaintiffs for failing to include opt-out language in faxes sent to those who expressly authorized Walburg to send them the faxes.
The district court ruled for Walburg, holding that the regulation should be narrowly interpreted so as to require opt-out notices only for unsolicited faxes. But on appeal, the Federal Communications Commission, not previously party to the case, filed an amicus brief explaining that its regulation applies to previously authorized faxes too. Walburg argued that the FCC lacked statutory authority to regulate authorized advertisements. In response, the FCC filed another brief, arguing that the Hobbs Act prevents federal courts from considering challenges to the validity of FCC regulations when raised as a defense in a private lawsuit. Although the U.S. Court of Appeals for the Eighth Circuit recognized that Walburg’s argument may have merit, it declined to hear it and ruled that the Hobbs Act indeed prevents judicial review of administrative regulations except on appeal from prior agency review.
In this case, however, Walburg couldn’t have raised his challenge in an administrative setting because the regulation at issue outsources enforcement to private parties in civil suits! Moreover, having not been charged until the period for agency review lapsed, he has no plausible way to defend himself from the ruinous liability he will be subject to if not permitted to challenge the regulation’s validity. Rather than face those odds, Walburg has petitioned the Supreme Court to hear his case, arguing that the Eighth Circuit was wrong to deny him the right to judicial review without having to initiate a separate (and impossible) administrative review.
Cato agrees, and has joined the National Federation of Independent Business on an amicus brief supporting Walburg’s petition. We argue that the Supreme Court should hear the case because the Eighth Circuit’s ruling permits administrative agencies to insulate themselves from judicial review while denying those harmed by their regulations the basic due-process right to meaningfully defend themselves. The Court should hear the case because it offers the opportunity to resolve lower-court disputes about when the right to judicial review arises and whether a defendant can be forced to bear the burden of establishing a court’s jurisdiction.
These are important due-process implications raised in this case, and the Court would do well to adopt a rule consistent with the Eleventh Circuit’s holding on this issue—one that protects the right to immediately and meaningfully defend oneself from unlawful regulations. Otherwise, more and more Americans will end up finding themselves at the bad end of obscene regulatory penalties by unaccountable government agencies, with no real means to defend themselves.
The Court will decide whether to take Walburg v. Nack early in the new year.
Although it did good by taxpayers today, the Supreme Court also issued a divided ruling that unfortunately expands the power of administrative agencies generally. In City of Arlington v. FCC, six justices gave agencies discretion to decide when they have the power to regulate in a given area -- which expands on the broad discretion they already have to regulate within the areas in which Congress granted them authority.
But why should courts defer to agency determinations regarding their own authority? Courts review congressional action, so why should theoretically subservient bureaucrats -- appointed by the executive branch and empowered by Congress -- escape such checks and balances?
Underneath the legal jargon and competing precedent regarding the line between actions that are "jurisdictional" (assertion of authority) versus "nonjurisdictional" (use of authority) is a very basic question: whether a government body uses its power wisely or not, it cannot possibly be the judge of whether it has that power to begin with. Yet Justice Scalia, writing for the majority, essentially says that there's no such thing as a dispute over whether an agency has power to regulate in a given area, just clear congressional lines of authority and ambiguous ones, with agencies having free rein in the latter circumstance unless their actions are "arbitrary and capricious" (what lawyers call Chevron deference, after a foundational 1984 case involving the oil company).
That makes no sense. As Cato explained in our brief, since the theory of deference is based on Congress’s affirmative grant of power to an agency over a defined jurisdiction, it's incoherent to say that the failure to provide such power is an equal justification for deference. Furthermore, granting an agency deference over its own jurisdiction is an open invitation for agencies to aggrandize power that Congress never intended them to have. One doesn't need a doctorate in public choice economics to recognize that we need checks on those who wield power because it's in their nature to husband and grow that power.
More broadly, this case should make us question the whole doctrine of Chevron deference: Yes, decisions about the scope of agency power should be made by elected officials, not by bureaucrats insulated from political accountability, but courts should also review with a more skeptical eye agency decisions about the use of power even within the proper scope.
I'm perplexed by the challenge of referring neutrally to legislation moving through Congress dealing with whether or not the government should regulate Internet service. Work with me as I untangle the Standard Federal Obfuscation™ involved here.
The White House has issued a "Statement of Administration Policy" that deals with S.J. Res. 6 (House companion H.J. Res. 37 passed in April.) The bill is a "resolution of disapproval" under the Congressional Review Act. The CRA allows Congress to reject federal regulations for a period of time after they have been finalized. Resolutions like this enjoy expedited procedures in the Senate, making it harder for Senate leadership to stop them moving.
The Federal Communications Commission voted in December to apply public-utility-style regulation to the provision of Internet service. Congress is moving to reject the FCC's claim of authority using the CRA, and the president has now said he will veto Congress' resolution that does that.
Well---the obfuscation continues---actually, the Statement of Administration Policy says "[t]he administration" opposes S.J. Res. 6, and, "If the President is presented with S.J. Res. 6, which would not safeguard the free and open Internet, his senior advisers would recommend that he veto the Resolution."
At some point, it may be an important detail that the president hasn't promised a veto yet. His advisers have promised to advise him to veto. OK. Whatever. They work for him. It's a veto threat.
But, but,... Would these regulations safeguard a "free and open Internet"? The statement says, "Federal policy has consistently promoted an Internet that is open and facilitates innovation and investment, protects consumer choice, and enables free speech." In a sense, that's true: When the engineers at the Defense Advanced Research Projects Agency created the Internet protocol and when federal policy opened the Internet to commercial use, this made for the open Internet we enjoy today.
But it's not federal policy driving these values today. It's the Internet itself---all of us. Tim Lee ably pointed this out some years ago in his paper, "The Durable Internet: Preserving Network Neutrality without Regulation." The marketplace demands an open Internet. If there are deviations from the "end-to-end principle" that serve the public better, the market will permit them. The Internet is not the government's to regulate.
Now, some news reporting has things a little backward. Wired's Threat Level blog, for example, carries the headline, "Obama Pledges to Veto Anti-Net Neutrality Legislation." Headlines need to be short, but it could just as easily and accurately read "Obama Pledges to Veto Anti-Regulation Legislation" because the question is not whether the Internet should be open and neutral, but who should ensure that openness and neutrality. Should neutrality be ensured by market forces---ISPs responding to their customers---or by lawyers and bureaucrats in Washington, D.C.?
S.J. Res. 6 would reject the FCC's claim to regulate the Internet in the name of neutrality. It says nothing about whether or not the Internet should neutral, open, and free. Again, that's not the government's call.
Did you follow all that? If you didn't, you don't need to. Here's the summary: President Obama has gone on the record: He supports Internet regulation.
It might be tempting to laugh at France's ban on words like "Facebook" and Twitter" in the media. France’s Conseil Supérieur de l'Audiovisuel recently ruled that specific references to these sites (in stories not about them) would violate a 1992 law banning "secret" advertising. The council was created in 1989 to ensure fairness in French audiovisual communications, such as in allocation of television time to political candidates, and to protect children from some types of programming.
Sure, laugh at the French. But not for too long. The United States has similarly busy-bodied regulators, who, for example, have primly regulated such advertising themselves. American regulators carefully oversee non-secret advertising, too. Our government nannies equal the French in usurping parents' decisions about children's access to media. And the Federal Communications Commission endlessly plays footsie with speech regulation.
In the United States, banning words seems too blatant an affront to our First Amendment, but the United States has a fairly lively "English only" movement. Somehow, regulating an entire communications protocol doesn't have the same censorious stink.
So it is that our Federal Communications Commission asserts a right to regulate the delivery of Internet service. The protocols on which the Internet runs are communications protocols, remember. Withdraw private control of them and you've got a more thoroughgoing and insidious form of speech control: it may look like speech rights remain with the people, but government controls the medium over which the speech travels.
The government has sought to control protocols in the past and will continue to do so in the future. The "crypto wars," in which government tried to control secure communications protocols, merely presage struggles of the future. Perhaps the next battle will be over BitCoin, an online currency that is resistant to surveillance and confiscation. In BitCoin, communications and value transfer are melded together. To protect us from the scourge of illegal drugs and the recently manufactured crime of "money laundering," governments will almost certainly seek to bar us from trading with one another and transferring our wealth securely and privately.
So laugh at France. But don't laugh too hard. Leave the smugness to them.
Randy May of the Free State Foundation has a characteristically good post about the AT&T/T-Mobile merger entitled: "The AT&T and T-Mobile Merger: Thinking Things Through." Among other smart ideas, Randy highlights the competitive game-playing that goes on in the merger review arena:
When considering competitive and market impacts for purposes of merger reviews, observe the extent to which various competitors, often many competitors, mount vigorous campaigns designed to convince the antitrust authorities and the regulators that if the merger is approved there will be an absence of competition. Note the incongruity.
There's level-headed thinking aplenty in this post from a long-time Federal Communications Commission and telecom-industry watcher. Check it out.