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Penn Law Professor Christopher Yoo discusses D.C. Circuit’s net neutrality decision

February 24, 2014

In an important ruling last month, a federal appeals court struck down “net neutrality” regulations that prohibited phone and cable companies from blocking certain content or charging different rates for delivering different types of content to consumers.  In the case of Verizon v. the Federal Communications Commission, the U.S. Court of Appeals for the D.C. Circuit ruled that the FCC exceeded its authority when it issued its net neutrality order in 2011.

Christopher S. Yoo, the John H. Chestnut Professor Law and Professor of Communication and Computer and Information Science at Penn, is the founding director of the Center for Technology, Innovation & Competition and one of the nation’s leading authorities on law and technology.  We asked him to share his take on the federal court’s decision and what it means for the future of the Internet. An edited transcript of the conversation follows.

Penn Law Communications: What’s at issue in the net neutrality debate?

Christopher Yoo: Net neutrality advocates are concerned that broadband network providers like Comcast and Verizon will be able to block consumers’ access to certain websites or applications or give certain websites and applications preferential treatment in exchange for a fee.  They believe that permitting network providers to do so would change the fundamental character of the Internet in ways that would harm consumers.  But there is another way to the view the debate:  Should we take rules developed under a statute written in 1934 for the old telephone network and apply them lock, stock and barrel to the Internet? Many people, including me, believe that would be a mistake.  The 1934 statute was written for a different economic, technological and social context, when the telecommunications industry was much less competitive, much more uniform, and much slower moving than it is today.  In addition, people depended almost exclusively on voice calls to stay connected, in contrast to today, when we enjoy a huge variety of services through the Internet.

PLC: So the fundamental issue is devising new regulations for a new day?

CY: In short, yes.  The era of one-size-fits-all regulation of the Internet is over.  The technologies used to provide broadband service and the ways people are using the Internet have become much more diverse.  The idea that we could meet all of those needs with a single system optimized in a single way actually denies people the potential benefits from having different services.  If you designed the network to run one way, the people who like that particular form of connectivity the most are very happy, but by the same token those people who want something else are necessarily left out.

PLC: Who wins and who loses as a result of the court’s decision?

CY: Like many decisions, the court of appeals’ decision gave both sides something to be happy about as well as something they wish had come out differently.  The bottom line is that with respect to the issues on which most people were focusing, the FCC lost and Verizon won.  The heart of the order that the FCC issued and that Verizon challenged was struck down.

PLC: So was this a total defeat for the FCC?

CY: No.  The DC Circuit’s opinion affirmed that the FCC had authority to regulate broadband providers such as Verizon and Comcast.  It only overturned the order because the particular way they exercised that authority in this case exceeded their statutory jurisdiction.  That means that the FCC may have lost the battle, but it may have won the larger war.  The court affirmed that the FCC has the authority to impose other regulations.  So long as it  passes regulations that are more consistent with the statute, they should withstand scrutiny.

In addition, there is another part of the decision that is potentially very expansive.  Traditionally, the FCC has had regulatory authority only over companies who actually provide the wires that connect end users to the Internet, such as Verizon and Comcast.  In general, the FCC has not exercised jurisdiction over content and application providers, such as Google and Netflix.  The DC Circuit’s decision arguably suggests that the FCC could have jurisdiction over them as well.

PLC: What impact will the decision have on consumers?

CY: One of the projects I’m working on right now is a comparison of EU and US Internet policy. There is a fundamental disconnect in the rhetoric you hear on both sides of the Atlantic.  In the US, you often hear that we are behind Europe.  But if you go to Europe, the mantra you hear is that they are behind the US.  Both statements can’t be true.  And one of the things we discover is that prices are much lower in Europe, investment is much lower, and high-speed service is much harder to come by.  Europeans can get cheap service at old DSL speeds.  But the US is actually doing much, much better in terms of high speed service.  Basically, if you’re going to get investment, companies have to have a decent probability of earning back the money needed to pay for it.  It’s gotten to the point in Europe where they realize that unless they start paying more, they are never going to see higher-speed service.

PLC: At the end of the day, was this a good decision or not?

CY: I think it was a good decision on balance.  If the DC Circuit had ruled that the FCC had no jurisdiction, we would have seen a political free-for-all over who has jurisdiction, and there is a decent argument that it would belong to the states.  That would have led to, at a minimum, a period of uncertainty where we would have spent a lot of time and resources figuring out who was really in charge. 

With regard to the ultimate outcome, I think that striking down the FCC’s network neutrality order will allow a much wider variety of business models to emerge.   If you have a one-size-fits-all Internet subscription plan and you are, let’s say, an avid online gamer and you want really high speed service for one particular application, you could not get it under the order no matter how much you might be willing to pay for it.  Think about what would have happened to the mail system if the government had insisted that all letters and packages had to travel at the same speed.  In the days before FedEx revolutionized overnight mail, the fastest service was first-class mail and the stamps were pretty cheap.  You could get something from here to California for 40 cents, and it would take three days.  But what happens if you have a document that needs to get to California in one day? If you have only first-class mail, you cannot get faster service no matter how important it is for you and no matter how much more you might be willing to pay for better service.  And in my opinion, forcing everything into a single class of service would be very bad for consumers because some of us really need faster service.  Say we have this innovative business that depends on us being able to get something to the West Coast in a day.  I would prefer not having to pay $10 or $20 to do it, but it beats the alternative of having no way to get it there at any price.  And in that sense, allowing companies to offer different classes of service and different levels of priority for different customers is a tremendously beneficial thing for all of society.

PLC: Is that the outcome of the DC Circuit’s decision?

CY: I think so.  Many network neutrality proponents claim that allowing people to pay for prioritized delivery would mean that only the rich would get fast service, and the poor would be relegated to the dirt road.  I think that’s just simply wrong.  It is not true that wealthy people don’t use regular first-class mail and poor people never use express mail.  In fact, both use both services when it’s worth it to them.  And giving both the choice is both good for consumers and can allow people to find entirely new ways to solve problems and to conduct business.