In this opinion piece, Wharton professor of legal studies and business ethics Kevin Werbach looks at how the Federal Communications Commission (FCC) will be impacted by the Trump administration — and what that means for internet regulation. Werbach served as co-lead of the FCC review for the Obama-Biden Transition Project, and an outside advisor on technology and innovation policy to the Hillary Clinton presidential campaign. This article is based on an essay, “Requiem for an Agency,” which he published on Medium.com.
The mantra that regulation stifles innovation is so ingrained these days that we ignore examples which don’t fit the script. That includes the biggest one: the growth and development of the internet. The Federal Communications Commission played an important role over the past 20 years, under Democrats and Republicans alike, in making the digital economy what it is today. Now, under a new president and chairman, it’s making an abrupt U-turn. The Trump FCC may become at best insignificant, and at worst, a tool for mischief and dirty tricks that will weaken the foundations of our democracy.
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The FCC wasn’t the source of the internet’s entrepreneurial ideas, technical innovations and massive investments, of course. All that took place predominantly in the private sector. Yet without the FCC, the internet ecosystem today would be different, and in most ways worse: less vibrant, less advanced, less competitive, less open and less reflective of American leadership and values. Along the way, this tiny agency — a tenth the size of the EPA — became a highly visible and important player in critical public policy debates.
Had the FCC not put in place rules ensuring network access for new devices and applications, and opened the unlicensed wireless capacity for WiFi, the internet would never have taken off so robustly in the U.S. In the late 1990s, had it accepted the arguments of industry groups who wanted to impose per-minute charges on internet access, ban internet telephony and subjected small software companies to legacy regulations and fees, the internet as we know it could have been stopped in its tracks. Had the FCC agreed to hold evidentiary hearings to back up Congress’s 1996 decision to restrict “indecent” speech online, the courts may not have been so willing to overturn it.
The FCC has been equally important in the internet’s second act, fueled by broadband and wireless. Despite a late start relative to other countries, the FCC’s National Broadband Plan set forth a detailed and powerful vision. The FCC engaged in the hard work of eliminating economic and technical barriers to broadband deployment and adoption. Most prominently, it wrestled for over a decade with how to ensure the internet remained an open platform for innovation of all sorts. A court decision in June 2016 seemed to finally establish network neutrality as the law of the land, and the FCC as the “cop on the beat” to address discriminatory practices of broadband providers.
“The Trump FCC may become at best insignificant, and at worst, a tool for mischief and dirty tricks that will weaken the foundations of our democracy.”
The New FCC
Five months later, everything changed.
President Trump’s FCC Chairman, Ajit Pai, is smart, savvy and knowledgeable about the agency and Congress. He talks a great deal about his commitment to rural broadband access. Like virtually all Republicans, however, he wants to scale back the network neutrality rules. The FCC’s first actions on the issue came under two Bush-era chairmen, but most Republicans have always been skeptical of the need for formal broadband non-discrimination rules. Ironically, that now puts them out of step with the industry. Though still opposing classification as a regulated common carrier and some of the FCC’s specific requirements, virtually every major broadband operator is on record endorsing what would have been considered strong net neutrality rules in 2004 or even 2008. They’ve lived with net neutrality requirements for the better part of four years now, and the sky hasn’t fallen.
Pai and his compatriots, however, believe that today’s rules need to go. They say they’re returning to the internet policies of the Clinton administration, when regulatory humility held sway. They suggest that in walking away from network neutrality, privacy, security, consumer protection and broadband adoption programs, they’re following a similarly enlightened “light touch” path. They’re wrong.
Regulatory humility in 1997 would have meant letting telephone companies impose usage-based charges on internet access; keeping voice over the internet under the requirements for traditional phone service; letting the International Telecommunication Union take over global internet governance; and standing by as influential countries adopted internet content restrictions, and registration requirements for access providers as well as other burdensome requirements. It took guts and confidence for the FCC to stand up against all those interests on behalf of a few million geeks, because it believed in the internet’s potential.
Similarly, Chairman Pai’s swift action in ending the FCC’s investigation into potentially discriminatory “zero rating” practices, disqualifying providers in the Lifeline low-income broadband program, withdrawing reports on successful efforts to promote internet services in schools, and freezing pending security and privacy requirements for broadband providers shows anything but humility. Pai is signaling he’ll do everything he can to change the longstanding course of FCC internet policy.
What Comes Next
So will the FCC now just reverse the decision to classify broadband as a regulated telecommunications service? It doesn’t work that way. An administrative agency cannot act in an “arbitrary and capricious” manner. That includes changing its position 180 degrees when a new party captures the White House. It’s the whole point of having independent administrative agencies, and the courts take this principle very seriously. The FCC went to great lengths to convince the court that circumstances had changed in the decade since it first classified broadband access; the new FCC won’t be able to show they changed back overnight. Given the tenor of this administration, that might not stop Pai from trying, but the changes of success are low.
Nor could the FCC simply declare its unwillingness to enforce the prior decision. The FCC’s jurisdictional finding in the 2015 order was that broadband fundamentally is a telecommunications service under the Communications Act. An agency can’t refuse to follow its authorizing statute. The new commission could limit the scope of net neutrality, by expanding its zone of “forbearance” and refusing to enforce the rules when there is any wiggle room. But that would leave the basic regulatory framework intact.
On the other hand, Congress can change the classification of broadband at the stroke of a pen. And it can do so for no reason other than its ability to marshal enough votes and avoid a presidential veto. There were, in fact, several Republican congressional efforts to prevent or reverse the FCC’s broadband reclassification. They all failed to muster sufficient support in the face of a certain veto by President Obama. That’s no longer a factor.
At the outset of the Trump administration, congressional reversal of the FCC’s signature internet policy looked like an easy lift. There was no need to come up with a replacement a la Obamacare, or to herd factions of the fractured Republican coalition. While net neutrality advocacy drew a surprisingly strong popular movement, it’s still not an emotional or personal issue for most Americans. The Republican legislation would almost certainly endorse limited net neutrality principles banning blocking and blatant discrimination against competing services. Remember, industry has no problem with this. The Republicans will claim –truthfully — that they are for the first time formally enshrining net neutrality in U.S. law. Democrats friendly to the telecommunications industry seem likely to vote in favor, giving the majority a rare opportunity to crow about bipartisanship. And Republicans could declare that they reversed President Obama’s rash action to “regulate the internet.”
“It took guts and confidence for the FCC to stand up against all those interests on behalf of a few million geeks, because it believed in the internet’s potential.”
The biggest impact of such legislation, however, would be from what else it included. It would doubtless remove the FCC’s jurisdiction to regulate broadband access providers further, and limit its ability to enforce the new net neutrality rules. That much was in the previous Republican bills. A new one could well cut down the agency’s legal authority further. It will also include procedural changes that could hamstring the FCC’s ability to act, such as requirements of detailed economic findings before adopting any rules. Such requirements may sound reasonable, but in practice are often nothing more than ways to throw sand in the gears of policy. Budget cuts will go along with the reduced responsibilities. “Starve the beast” is a particularly effective technique against a small agency where many functions have already been cut to the bone.
So far, though, things haven’t gone according to script. The intensity of opposition to President Trump’s immigration policies and Congress’s Obamacare repeal efforts has weakened Republican resolve and strengthened Democratic opposition. Key Congressional leaders such as John Thune in the Senate and Marsha Blackburn in the House are now calling for FCC Chairman Pai to move first on net neutrality. They’re trying to execute a two-step on moderate Democrats and corporate supporters of non-discrimination rules: Cut a deal with us, or you’ll get something worse. The longer the impasse remains, though, the more likely the issue gets rolled into a broader re-write of the creaky and outdated Communications Act. Such an initiative has bipartisan support, but it’s a Pandora’s Box. Reaching consensus among all the industry and ideological groups involved, as electoral dynamics shift, could take five years or more.
In the meantime, though, Pai will continue to scale back the FCC’s involvement in issues like privacy, security, consumer protection and antitrust, on the grounds that these issues are best handled elsewhere. The expert regulator whose predecessor was created over 100 years ago because of the complexity and distinctiveness of communications technology, even then, will continue to walk away from its special role.
It Could Get Worse
Frighteningly, an ineffectual FCC may be the best case scenario for a Trump administration. For there is another, darker history at the agency. Before the FCC was a bureaucratic backwater, it was at times a cudgel against free speech. Richard Nixon sought to use FCC licensing of TV stations as leverage against the meddlesome Washington Post, for example. And the radio station airing George Carlin’s famous “Seven Deadly Words” routine was fined for violating indecency rules. The FCC wields more potential power to constrain free speech than perhaps any other organ of government, through its ability to sanction broadcasters and impose ownership restrictions on other media outlets. The Janet Jackson “wardrobe malfunction” aside, it has rarely used that power in recent decades, and generally only grudgingly.
“The expert regulator whose predecessor was created over 100 years ago because of the complexity and distinctiveness of communications technology … will continue to walk away from its special role.”
Enter Donald Trump: A man who relentlessly denigrated and threatened the media throughout his campaign. A man singularly passionate about settling scores and punishing enemies. One of Trump’s first acts as President-elect was to summon the leaders of major media outlets to an off-the-record meeting, where he reportedly screamed at them for publishing unflattering stories. His prominent supporter Peter Thiel, the PayPal cofounder, secretly funded a lawsuit to put an online media company out of existence. At some point, Trump and those around him will see the potential in the FCC as a means to harass and muzzle the free press. The White House is supposed to respect the FCC’s independence, but it’s hard to see this team honoring that rule (or this Congress launching an investigation if it didn’t).
The FCC’s visibility and industry oversight role makes it a perfect bully pulpit. Even when it can’t directly force companies to act, its chairman can threaten and cajole them, publicly and privately, in ways that are difficult to refuse. I’ve sat in the chairman’s office and watched a prominent CEO receive a dressing-down. And in some areas such as merger review, the FCC’s power to extract concessions seemingly unrelated to the deal is broad. Used wisely, this can be a flexible tool to promote the public interest. In the hands of those who hope to muzzle unfiltered information and dissent, it’s a weapon. Expect a further wave of communications and media mergers in the new deregulatory environment. Trump’s throwaway comment on the proposed AT&T/Time-Warner combination wasn’t hostility to big media, it was hostility to media he doesn’t control. What better tool for control, leaving few fingerprints, than the FCC?
Attacks on the media could easily morph into attacks on the internet. President Trump railed against Apple for refusing demands from the FBI during the campaign, and he clearly noticed that virtually all of Silicon Valley lined up squarely with Hillary Clinton. He benefitted spectacularly from his campaign’s use of Facebook and his use of Twitter, but if those companies clamp down on the fake news and harassment from his supporters, he’ll turn on them in a heartbeat. In theory, the First Amendment remains a bulwark against government repression of free speech. Can we count on the courts, though, especially if Trump’s appointments shift the balance of power?
And then there’s the religious angle. Vice President Mike Pence hails from the Christian right, where indecency remains a far greater concern than among the general population. Complaints continue to pour into the FCC about inappropriate content on local stations. The agency has had little stomach to pursue them aggressively, but a Pence protege might feel differently. Certainly it’s important for the FCC to enforce its legal obligations. And certainly there is a place for protecting children from pornography and obscenity. In today’s pervasive digital media environment, however, a more aggressive FCC on indecency enforcement will do far more to chill legitimate speech than to shield anyone.
“At some point, Trump and those around him will see the potential in the FCC as a means to harass and muzzle the free press.”
The Road Not Taken
It doesn’t have to be this way. There is an honorable, and defensible, conservative position on communications policy. Perhaps market forces will always bring better results with less government engagement. That’s not my view, or that of a great many economists and scholars who study the past, present, and future of the internet. But it’s the other side of a well-formed debate. Even the question of whether we need an FCC as currently constituted is fair game for discussion. A careful dismantling of the FCC and reassignment of its essential functions, destructive as it might be, would be better than the hollowing out or corruption that might occur instead.
What seems hard to imagine is that a Trump FCC will have the authority, desire and capability to tackle the important challenges of the next stage of the internet. Too many Americans still aren’t online, or don’t have affordable competitive broadband options. We’re behind the rest of the world in leveraging digital connectivity to provide public services, and supercharge our transportation and health care sectors. The revolutionary technologies of 5G wireless, augmented reality and the Internet of Things will benefit from significant government engagement around standards, deployment and security. Demand for bandwidth won’t abate. And the dynamism of the internet will still require an open environment where innovators have room to roam. Some influential country needs to push back on China, Iran and other governments promoting a neutered and heavily surveilled alternative. So much important work remains to be done.
The FCC didn’t build the internet. Its senescence won’t kill it. But neither is the internet a self-driving car that proceeds unerringly to its destination. Essential questions will have to be addressed somewhere. If not at the FCC, just where will that be?
Article by Knowledge@Wharton