What If We Want Net Neutrality But Reject Title II?

Economist Carolyn Gideon of Tufts posed a tough question in a tweet over the weekend at the annual TPRC conference at George Mason Law School:

Gideon pic v2

This one is impossible to answer in a 140-character reply tweet. So here is my 600-word response.

To paraphrase Bill Clinton, it depends on the meaning of “net neutrality.”

If net neutrality means barring any payments from edge providers to ISPs, then there may be no basis in law, including Title II. Check out the Phoenix Center’s amicus brief (pages 3 to 4) for a quick primer on why such ex ante prohibitions are not sustainable even under Title II.

In contrast, if net neutrality means preventing an ISP from discriminating on the basis of application or affiliation—a principle that some important players like Google appear to support—then we can design a remedy without relying on Title II. (I happen to support this principle too.)

The first remedy finds its basis in Section 706, and was telegraphed by the D.C. Circuit in its Verizon decision. Following the guidance of Cellco, the court signaled it would tolerate a case-by-case regime that grants room for “individualized bargaining” by the parties to a paid priority arrangement. (Alas, the FCC rejected this approach in its 2015 Open Internet Order.)

Such deals, if done in a discriminatory manner, could be challenged ex post by third parties or by the FCC, but—and this is key—the burden of proof would fall on the challenger. In particular, the paid priority arrangement would be presumed not to violate the non-discrimination standard, and the challenger would have to overcome that presumption.

What the court rejected was the opposite presumption. In particular, it ruled that the FCC’s 2010 OIO—which in footnote 229 rejected a “flat ban on discrimination” in favor of case-by-case adjudication—was tantamount to “per se common carriage” because any priority arrangement was presumed to be in violation of the OIO’s non-discrimination standard. This presumption placed the burden of proof on the parties to the agreement to prove that the arrangement was not in violation of the non-discrimination rule—a core aspect of common carriage.

This throwaway line in the 2010 OIO at paragraph 76 was the deal breaker for the D.C. Circuit: “In light of each of these concerns, as a general matter, is unlikely that pay for priority would satisfy the ‘no unreasonable discrimination’ standard.” The court replied: “If the Commission will likely bar broadband providers from charging edge providers for using their service, thus forcing them to sell this service to all who ask at a price of $0, we see no room at all for “individualized bargaining.” (citing Cellco) (emphasis added). It’s all about the presumption!

So where does that leave us?

If you want to go back to the case-by-case approach contained in the 2010 OIO—with a presumption against any priority deals—the best option is legislation that resembles the FCC’s 2010 rules. The downside of this option is that it involves Congress.

Alternatively, if you can tolerate a presumption in favor of any priority deal, then you can ground your case-by-case approach in Section 706 along the lines of what the D.C. Circuit telegraphed in its Verizon decision. (Some are uncomfortable with the breadth of the FCC’s reinterpretation of Section 706. On this, see the amicus brief filed on Friday by TechFreedom, CEI, ICLE and leading law and economics scholars in the Sixth Circuit’s case, about the FCC’s attempt to preempt state muni broadband laws.)

Of course, there are hybrid approaches that involve burden shifting, which could be lifted from antitrust, but that’s beyond the scope of this blog.

While most economists could live with the more permissive case-by-case regime, it seems the activists on the Left cannot. In hindsight, the compromise in the 2010 OIO was pretty “just and reasonable.”

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