What Wheeler said

The most encouraging thing in FCC chairman Tom Wheeler’s blog post in response to this week’s court ruling striking down the agency’s net neutrality rules was his emphasis on the role that economic incentives play in driving companies’ and industries’ behavior and the need for regulators to take account of those incentives in devising policies.

One of the complaints you heard a lot from critics of the FCC’s net neutrality rules was that they were a solution in search of a problem. At the time the rules were being drafted, critics argued, there was little evidence of abusive behavior by ISPs on any widespread scale and that the government should not go looking to remedy non-existent harms. You still hear it today, in fact, as in the op-ed published Wednesday in the Wall Street Journal by former FCC commissioner Robert McDowell, who voted against enacting the rules in 2010.

According to McDowell, nothing needs fixing:

The Internet has remained open and accessible without FCC micromanagement since it entered public life in the 1990s. And more regulation could produce harmful results, such as reduced infrastructure investment, stunted innovation, slower speeds and higher prices for consumers.

Now, McDowell is a very smart guy, who raised a number of legitimate criticisms of how the majority of the FCC went about devising and issuing its Open Internet Order. I’ve expressed doubts about it myself. But his argument is a common one among industries trying to avoid regulation and among those ideologically opposed to government regulation as such: Don’t try to anticipate harms that may never arise; market forces will keep everyone in check; yada, yada.

And it requires a willing suspension of disbelief — in the face of all that we know about human nature and the operation of markets — that corporations will not respond to obvious economic incentives.

Here’s Wheeler, not suspending disbelief:

[T]he FCC also is not going to abandon its responsibility to oversee that broadband networks operate in the public interest. It is not going to ignore the historic reality that when a new network transitions to become an economic force that economic incentives begin to affect the public interest. This means that we will not disregard the possibility that exercises of economic power or of ideological preference by dominant network firms will diminish the value of the Internet to some or all segments of our society.

There is nothing about the foregoing that should cause serious anxiety, either to those watching out for the interests of internet users, or of those building and operating the facilities that make up the Internet. The key message is that the FCC has the authority – and has the responsibility – to regulate the activities of broadband networks. We will have ample opportunity to debate ways and means, to consider specifics in specific cases as they arise. But, there is no justification, and no serious basis, for doubt about the fundamentals [snip].

The absolute necessity that there be government oversight of broadband networks stems from two facts. The networks support essential—in fact, increasingly essential—services for our society (and for everyone in the world, for that matter). And, there are not and are not likely to be many such networks. As with many of the communications networks of the past, broadband networks involve very high fixed costs and very large minimum efficient scale. So, to say it a little more abruptly, broadband networks are essential and they are likely in their relative scarcity, especially at the local level, to enable exercises of market power.