A Tale of Two Commissions: Net Neutrality and Regulatory Analysis

The Issue

• The Federal Communications Commission (FCC) and Federal Trade Commission (FTC) have both investigated the need for "net neutrality" policies intended to prevent broadband providers from treating different types of traffic differently.  The FCC has issued an Internet Policy Statement, imposed net neutrality conditions in exchange for permitting telephone companies to merge, and attached some net neutrality rules to some of the spectrum it plans to offer for wireless services. It has also undertaken a broader inquiry to determine whether additional rules are necessary.  The FTC conducted a workshop and issued a 165-page staff report in June.

Our Findings

• The FCC has no authority to enforce the Internet Policy Statement as it currently exists. To make the Policy Statement enforceable, the Commission would first need to initiate a notice-and-comment rulemaking.
• Sound regulatory analysis defines specific outcomes that broadband policies are supposed to produce, assesses evidence of market failure, identifies the uniquely federal role, compares the effectiveness of alternative policies, examines the costs of alternative policies, and compares costs with outcomes.
• The FTC largely followed this framework in its staff report. The notice announcing the FCC's inquiry leaves the door open for the FCC to do likewise.
• Comments and other materials submitted to both agencies provide no evidence that there is currently a "market failure" that requires a regulatory remedy.  Commenters favoring regulation argued that market failure is possible in the future, without assessing its likelihood.

By the Numbers

• The FCC received about 10,000 comments in its net neutrality inquiry, but only 66 exceeded two pages.
• About 20 out of these 66 advocated net neutrality regulation.
• None of these presented evidence that there is currently a "market failure" that requires a regulatory remedy.

Recommendations

As it continues its inquiry, the FCC could significantly improve the quality of the net neutrality debate by conducting a thorough regulatory analysis that:

• defines specific outcomes that broadband policies are supposed to produce,
• assesses evidence of market failure,
• identifies the uniquely federal role,
• compares the effectiveness of alternative policies,
• examines the costs of alternative policies, and
• compares costs with outcomes.