[House Report 112-51]
[From the U.S. Government Publishing Office]
112th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 112-51
======================================================================
DISAPPROVING THE RULE SUBMITTED BY THE FEDERAL COMMUNICATIONS
COMMISSION WITH RESPECT TO REGULATING THE INTERNET AND BROADBAND
INDUSTRY PRACTICES
_______
April 1, 2011.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Upton, from the Committee on Energy and Commerce,
submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.J. Res. 37]
[Including cost estimate of the Congressional Budget Office]
The Committee on Energy and Commerce, to whom was referred
the joint resolution (H. J. Res. 37) disapproving the rule
submitted by the Federal Communications Commission with respect
to regulating the Internet and broadband industry practices,
having considered the same, report favorably thereon without
amendment and recommend that the joint resolution do pass.
CONTENTS
Page
Legislation...................................................... 2
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Hearings......................................................... 13
Committee Consideration.......................................... 13
Committee Votes.................................................. 13
Committee Oversight Findings..................................... 15
Statement of General Performance Goals and Objectives............ 15
New Budget Authority, Entitlement Authority, and Tax Expenditures 15
Earmarks......................................................... 15
Committee Cost Estimate.......................................... 15
Congressional Budget Office Estimate............................. 15
Federal Mandates Statement....................................... 16
Advisory Committee Statement..................................... 16
Applicability to Legislative Branch.............................. 16
Section-by-Section Analysis of the Legislation................... 16
Changes in Existing Law Made by the Bill, as Reported............ 17
Dissenting Views................................................. 18
LEGISLATION
Resolved by the Senate and House of Representatives of the
United States of America in Congress assembled, That Congress
disapproves the rule submitted by the Federal Communications
Commission relating to the matter of preserving the open
Internet and broadband industry practices (Report and Order FCC
10-201, adopted by the Commission on December 21, 2010), and
such rule shall have no force or effect.
PURPOSE AND SUMMARY
Resolution of disapproval H.J. Res. 37 nullifies the
``network neutrality'' rules regulating the Internet that the
Federal Communications Commission adopted Dec. 21, 2010. See In
re Broadband Industry Practices, WC Docket No. 07-52, Report
and Order, FCC 10-201 (rel. Dec. 23, 2010). The Committee also
intends the resolution to prevent the FCC from reimposing the
same or substantially similar rules through reclassification of
broadband under Title II of the Communications Act or through
any other claimed source of direct or ancillary authority. The
purpose of the resolution is to prevent the harm the rules
would cause to broadband deployment, innovation, competition,
and jobs, as well as to stop the FCC from asserting authority
over the Internet that Congress has not granted it.
Rep. Greg Walden, chairman of the House Energy and Commerce
Committee's Subcommittee on Communications and Technology,
introduced the resolution pursuant to the Congressional Review
Act, 5 U.S.C. Sec. Sec. 801-08. The CRA allows Congress to
nullify agency rules by enacting a joint resolution of
disapproval. See id. at Sec. 801(b)(1). Once Congress enacts
such a resolution, the agency may not impose the same or
substantially similar rules unless Congress enacts a new law
specifically authorizing the agency to do so. See id. at
Sec. 801(b)(2). Under the CRA, a disapproval resolution
requires only a simple majority in both chambers of Congress
and is filibuster-proof in the Senate. See id. at Sec. 802(d).
BACKGROUND AND NEED FOR LEGISLATION
The Internet is open and thriving today thanks to the
government's historical hands-off approach. As Democrat FCC
Chairman William Kennard stated in a 1999 speech rebuffing
calls to force open access, ``[t]he fertile fields of
innovation across the communications sector and around the
country are blooming because from the get-go we have taken a
deregulatory, competitive approach to our communications
structure--especially the Internet.'' FCC Chairman William
Kennard, Address at the Federal Communications Bar, Northern
California Chapter (July 20, 1999), available at http://
www.fcc.gov/Speeches/Kennard/spwek924.html. Indeed, Clinton-era
Solicitor General Seth Waxman explained in an April 2010 letter
that:
[b]roadband Internet access service has never been
regulated under Title II. From the advent of the
Internet, the Commission has instead treated broadband
Internet access as an `information service' without a
separate `telecommunications service' component,
subject only to the Commission's ancillary authority
under Title I.
Letter from Seth P. Waxman, Counsel for the U.S. Telecom Ass'n,
to FCC Chairman Julius Genachowski 6 (April 28, 2010).
The Internet started as a 1960s defense agency project
using phone lines to connect computers at several research
facilities. Not until the government turned the Internet over
to the private sector in the 1990s did it become the incredible
engine for communication and economic growth that it is today.
The FCC laid the foundation for that growth with its
Computer Inquiries, where the FCC chose to leave data
processing services unregulated in light of their widespread
availability and the lack of economic barriers to market entry.
The FCC distinguished ``basic services,'' which provide pure
``transmission capacity for the movement of Information,'' from
``enhanced services,'' which ``employ computer processing
applications that act on the format, content, code, protocol,
or similar aspects of the subscriber's transmitted
information.'' Basic services would be treated as
telecommunications services subject to Title II common carrier
requirements; enhanced services would not. See In re Regulatory
& Policy Problems Presented by the Interdependence of Computer
& Communication Services & Facilities (First Computer Inquiry),
Final Decision, 28 FCC 2d 267 (1971); Amendment of Section
64.702 of the Commission's Rules and Regulations (Second
Computer Inquiry), Final Decision, 77 FCC 2d 384 (1980);
Amendment of Sections 64.702 of the Commission's Rules and
Regulations (Third Computer Inquiry), Report & Order, 104 FCC
2d 958 (1986).
In the pre-broadband era of dial-up service, the FCC did
require phone companies that provided enhanced services over
their own telecommunications facilities to make basic
transmission service available on a nondiscriminatory basis to
competing enhanced services providers. The FCC did not,
however, regulate retail provision of enhanced services. Thus,
the FCC regulated the dial-up telecommunications service a
phone company provided to connect subscribers to an Internet
service provider. It did not regulate the Internet access
service that the phone company or a competing Internet service
provider offered to connect the subscriber to the Internet. Id.
Recognizing that this regime was responsible for the
accelerating growth of data services, Congress codified
``enhanced services'' as ``information services'' in the 1996
Telecommunications Act. See 47 U.S.C. 153(20); H.R. Conf. Rep.
No. 104-458, at 114-15 (1996). It also added section 230 to the
Communications Act, making it U.S. policy ``to preserve the
vibrant and competitive free market that presently exists for
the Internet and other interactive computer services,
unfettered by Federal or State regulation.'' 47 U.S.C.
Sec. 230(b)(2).
Chairman Kennard reaffirmed this approach. During his
chairmanship, the FCC stated in a 1998 universal service report
that Internet access service ``offers end users information-
service capabilities inextricably intertwined with data
transport,'' and so is ``appropriately classed as an
`information service.''' In re Federal-State Joint Board on
Universal Service, CC Docket No. 96-45, Report to Congress, FCC
98-67 at para.80 (rel. April 10, 1998). This culminated in the
FCC's 2002 ruling under Republican Chairman Michael Powell that
cable Internet access is an information service, a decision
upheld by the Supreme Court in 2005. See In re Inquiry
Concerning High-Speed Access to the Internet Over Cable and
Other Facilities, GN Docket No. 00-185, Declaratory Ruling, FCC
02-77 (rel. March 15, 2002), aff'd, Nat'l Cable and Telecom.
Ass'n v. Brand X Internet Servs., 545 U.S. 967 (2005).
Thus, despite claims to the contrary, the retail
availability of Internet access service was never regulated.
Nor was it ever reclassified from a telecommunications service
to an information service. It was an information service from
the start. In light of the Supreme Court ruling and the
recognition that broadband Internet access service is available
not just from phone companies but across multiple platforms, in
2005 FCC Chairman Kevin Martin eliminated the legacy
requirement that phone companies providing broadband Internet
access services over their own telecommunications facilities
make telecommunications transmission available on a
nondiscriminatory basis to competing Internet access providers.
See In re Appropriate Framework for Broadband Access to the
Internet over Wireline Facilities, CC Docket No. 02-33, Report
and Order, FCC 05-150 (rel. Sept. 23, 2005).
It is true that it was Chairman Powell, in a February 2004
speech, that first articulated ``four Internet freedoms''--the
freedoms of consumers: 1) to access legal content, subject to
reasonable network management; 2) to run applications that do
not exceed their service plan limits or harm the network; 3) to
attach devices that operate within their service plan limits,
do not harm the network, or enable theft of service; and 4) to
obtain meaningful information about their service plans. He
made clear, however, that they were just a ``road map,'' that
they should apply not just to Internet access providers but to
``all facets of the industry,'' and that they were meant in
lieu of regulations. ``[T]he case for government imposed
regulations regarding the use or provision of broadband
content, applications and devices is unconvincing
andspeculative,'' he said. ``Government regulation of the terms and
conditions of private contracts is the most fundamental intrusion on
free markets and potentially destructive, particularly where innovation
and experimentation are hallmarks of an emerging market,'' he
explained. ``Such interference should be undertaken only where there is
weighty and extensive evidence of abuse.'' FCC Chairman Michael K.
Powell, Address at Silicon Flatirons, Univ. of Colo. School of Law
(Feb. 8, 2004), available at http://hraunfoss.fcc.gov/edocs_public/
attachmatch/DOC-243556A1.pdf.
Notwithstanding a lack of the extensive evidence that
Chairman Powell had spoken of, Chairman Martin formally adopted
the freedoms as four ``principles'' in a September 2005 FCC
policy statement. See In re Inquiry Concerning High-Speed
Access to the Internet Over Cable and Other Facilities, GN
Docket No. 00-185, Policy Statement, FCC 05-151 (rel. Sept. 23,
2005). He emphasized in a news release when the FCC adopted the
statement, however, that policy statements ``do not establish
rules nor are they enforceable documents.'' News Release, FCC
Adopts Policy Statement (Aug. 5, 2005), available at http://
hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-260435A1.pdf.
Three years later, he nonetheless sought to enforce the
principles against Comcast. Comcast had begun noticing that
network demand by heavy users was impeding the ability of other
subscribers to use its broadband service. To address the issue,
Comcast engineers devised a way to intermittently hold traffic
from peer-to-peer applications so that performance did not
suffer for the majority of subscribers. Free Press and Public
Knowledge filed a complaint alleging that Comcast's network
management techniques were unreasonable and discriminatory. The
FCC ordered Comcast in August 2008 to cease the network
management practices. See In re Broadband Industry Practices,
WC Docket No. 07-52, Memorandum Opinion and Order, FCC 08-183
(rel. Aug. 20, 2008). Comcast appealed on the grounds that the
FCC had only issued a policy statement, rather than actually
adopted network management rules, and lacked the authority to
enforce such rules in any event.
By September 2009, Julius Genachowski was FCC chairman and
had announced plans to codify the principles as rules. See FCC
Chairman Julius Genachowski, Address at the Brookings
Institution (Sept. 21, 2009), available at http://
hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-293568A1.pdf.
The following month, the FCC proposed network neutrality rules,
alleging the commission had ancillary authority to regulate
broadband as an information service. See In Re Broadband
Industry Practices, WC Docket No. 07-52, Notice of Proposed
Rulemaking, FCC 09-93, at 83 (rel. Oct. 22, 2009).
In April 2010, however, the D.C. Circuit vacated Chairman
Martin's attempt to sanction Comcast, ruling that the FCC
failed to demonstrate it had ancillary authority under Title I
of the Communications Act to regulate network management. The
court explained that Title I would only allow such regulation
if doing so was reasonably ancillary to fulfilling an explicit
FCC responsibility codified in another section of the
Communications Act, and that the FCC had failed to show such a
connection. See Comcast Corp. v. FCC, 600 F.3d 642 (D.C. 2010).
This called into question the foundation of Chairman
Genachowski's proposed codification of network neutrality.
Chairman Genachowski next proposed reclassifying broadband
Internet access service as a common carrier service so the FCC
could regulate it under Title II. See FCC Chairman Julius
Genachowski, ``The Third Way: A Narrowly Tailored Broadband
Framework'' (May 6, 2010), available at http://
hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-297944A1.pdf.
The FCC pivoted again, backing away from its reclassification
approach, when approximately 275 members of the House and
Senate from both sides of the aisle objected. See, e.g., Letter
from Rep. Gene Green et al. to FCC Chairman Julius Genachowski
(May 24, 2010); Letter from Sen. Kay Bailey Hutchison et al. to
FCC Chairman Julius Genachowski (May 24, 2010); Letter from
Rep. Joe Barton et al. to FCC Chairman Julius Genachowski (May
28, 2010).
The FCC did, nonetheless, still adopt network neutrality
rules Dec. 21, 2010. The rules allow the FCC: 1) to regulate
how fixed and mobile broadband carriers disclose their network
management practices, performance characteristics, and terms of
service; 2) to regulate how fixed and mobile broadband carriers
provide access to content, applications, services, and devices;
3) to determine whether the way fixed broadband providers carry
network traffic is unreasonably discriminatory; 4) to regulate
how fixed and mobile broadband carriers charge for carriage of
traffic; and 5) to determine whether fixed and mobile
providers' network management techniques are reasonable. See In
re Broadband Industry Practices, WC Docket No. 07-52, Report
and Order, FCC 10-201 (rel. Dec. 23, 2010).
These rules will stifle broadband deployment, innovation,
and jobs. They ``will sweep broadband ISPs, and potentially the
entire Internet, into the Big Tent of Regulation,'' according
to an editorial by Dr. David J. Farber, grandfather of the
Internet and former FCC chief technologist, and Dr. Gerald R.
Faulhaber, Professor Emeritus at the University of
Pennsylvania's Wharton School and former FCC chief economist.
What does this mean? When the FCC asserts regulatory
jurisdiction over an area of telecommunications, the
dynamic of the industry changes. No longer are customer
needs and desires at the forefront of firms'
competitive strategies; rather firms take their
competitive battles to the FCC, hoping for a favorable
ruling that will translate into a marketplace
advantage. Customer needs take second place; regulatory
``rent-seeking'' becomes the rule of the day, and a
previously innovative and vibrant industry becomes a
creature of government rule-making. Advocates of
government-mandated network neutrality have argued this
is necessary to permit new and resource-poor innovators
to bring their products to market; in fact, it will
have exactly the opposite effect: innovators are better
at fighting it out in the market with better products
rather than fighting it out in front of the FCC with
high-priced lawyers; they will lose out.
Dr. David J. Farber & Dr. Gerald R. Faulhaber, Net
Neutrality: No One Will Be Satisfied, Everyone Will Complain,
The Atlantic, Dec. 21, 2010, available at http://
www.theatlantic.com/technology/archive/2010/12/net-neutrality-
no-one-will-be-satisfied-everyone-will-complain/68326/.
The rules will also threaten broadband deployment and the
very Internet itself. A bulletin by investment analyst Dr.
Anna-Maria Kovacs explains why. Under the order, broadband
providers' traffic management options are restricted, yet they
are still expected to meet the growing demand for capacity over
time. Moreover, the broadband companies are prohibited from
receiving payments from content, application, or service
providers for the added capacity needed to serve their traffic.
As a result, the broadband providers would be forced to make
substantial additional investments at the same time that their
avenues for recovering their costs are narrowed. This
jeopardizes the infrastructure upon which the Internet depends.
The prohibition on content, application, or service providers
paying broadband providers for priority also prevents new
entrants from entering into business arrangements that might
help them compete against web incumbents, which can afford to
buy or lease capacity from content delivery networks. See Dr.
Anna-Maria Kovacs, FCC's Open Internet Order--A Financial
Translation (Dec. 31, 2010). Dr. Kovacs concludes, therefore,
that:
[o]ver time, the order represents a direct transfer
of wealth from broadband access providers to those
whose content rides over the network. That means that
it provides those who ride the network with a
strategically vital financial weapon to use against
[broadband providers] who in many cases are their
competitors. To put it another way, it takes all the
bargaining power away from the [broadband provider]--
who is making a very large investment for low returns--
and giving it to the content provider who is making
relatively little or no investment to enable it to
access end-users and in some cases is already getting
very high returns.
Id. at 7. This is particularly significant, since ``network
providers make far greater capital investments in the Internet
ecosystem and create far more and better-paying jobs than
application and content providers.'' See In re Broadband
Industry Practices, WC Docket No. 07-52, Reply Comments of
Communications Workers of America, at ii (filed April 26,
2010). See also Dr. T. Randolph Beard et al., Phoenix Center
Policy Bulletin No. 25 (October 2010), available at http://
www.phoenix-center.org/PolicyBulletin/PCPB25Final.pdf.
The order will hurt smaller providers who can't ``absorb
the hit'' like the bigger players and send teams of lawyers to
camp out at the FCC. As BendBroadband CEO Amy Tykeson has
pointed out:
The cable industry has invested billions of dollars
of private capital to build broadband infrastructure to
cover 90% of American homes. Commissioners are looking
in the rearview mirror, attempting to regulate the
Internet of yesterday absent any market failure. How
will companies like BendBroadband be able to compete if
we bear the brunt of the regulations while the giants,
like Google, Amazon and Netflix, go free? . . . The
Chairman has picked winners and losers in this recent
effort to impose ``net neutrality'' regulations. These
efforts will cost jobs, stall innovation and dampen
investment.
Letter from Amy C. Tykeson, CEO, BendBroadband to Rep. Greg
Walden (Feb. 22, 2011). Dr. Kovacs has pointed out that the
order ironically will also hurt the very Internet users and web
companies the FCC claims it is trying to protect. ``More
universally damaging perhaps is the rules' potential to destroy
the ability of infrastructure providers to raise capital. That
would threaten the infrastructure on which both consumers and
content providers rely.'' Kovacs, FCC's Open Internet Order 3.
Even larger phone, cable, and wireless companies have
concerns, notwithstanding the claims of network neutrality
proponents that the companies support the order. Closer reading
indicates that the companies are actually damning the rules
with faint praise. What they are really saying is that bad is
better than worse, and they would rather live with the order as
adopted than reclassification under Title II.
For example, AT&T CEO Randall Stephenson did say at a Jan.
12, 2011, Brookings event that ``we've landed at a place where
we have line of sight. We know what we have. We can commit to
these 10-year and 15-year horizon investments.'' He also said,
however, that ``[r]egulation creates uncertainty,'' that ``I
would be lying if I said I was totally pleased with it,'' and
that ``we didn't get everything we'd like to have had. I'd like
to have had no regulation, to be candid, but that wasn't going
to happen, obviously.'' AT&T CEO Randall Stephenson, Address at
the Brookings Institute (Jan. 12, 2010), available at http://
www.c-spanvideo.org/program/297463-1.
A large cable association wrote in a letter to the House
Energy and Commerce Committee that while it agreed to the
order, these rules are ``a solution in search of a problem,''
that it ``would much rather see (and believe it would be more
equitable to have) a light regulatory touch for everyone in the
Internet ecosystem, than a heavy and counterproductive
regulatory regime on part or all of the Internet ecosystem,''
and that as a result of the order ``there could certainly be an
adverse economic impact by chilling the willing-
ness to deploy these new services.'' Letter from NCTA CEO
Kyle McSlarrow to Rep. Fred Upton et al. (March 7, 2011),
available at http://republicans.energycommerce.house.gov/Media/
file/
Letters/112th/030711McSlarrow.pdf.
A large wireless association wrote in a similar letter that
it does ``not believe that net neutrality rules are necessary
for the wireless industry,'' that by removing the ``specter''
of Title II regulation the order provides a level of certainty
but that some uncertainty over FCC implementation remains, that
none of its members have indicated they believe the order will
promote the economy or jobs, and that ``increased regulation
tends to depress rather than accelerateinvestment.'' Letter
from CTIA CEO Steve Largent to Rep. Fred Upton et al. (March 7, 2011),
available at http://republicans.energycommerce.house.gov/ Media/file/
Letters/ 112th/030711Largent.pdf.
Thus, none of these providers were saying the FCC's rules
would promote investment and deployment that would not
otherwise have occurred. What they said was that the FCC
minimized some of the uncertainty it had itself created by
threatening network neutrality rules in general, and Title II
reclassification in particular. This did not stop the FCC,
however, from selectively editing industry statements to leave
the impression they were pleased with the order. See Letter
from Rep. Joe Barton to FCC Chairman Julius Genachowski (Dec.
3, 2010, available at http://
republicans.energycommerce.house.gov/Media/file/Letters /
12.03.10%20; Letter%20to%20FCC%20Chairman% 20Genachowski.pdf.
If the Internet is to continue to flourish, especially in
the face of demands for ever more sophisticated content,
service, and applications, we must maintain the historical
hands-off approach. As Chairman Kennard explained in a June
1999 speech:
We have to get these pipes built. But how do we do it? We
let the marketplace do it. If we've learned anything about the
Internet in government over the last 15 years, it's that it
thrived quite nicely without the intervention of government. In
fact, the best decision government ever made with respect to
the Internet was the decision that the FCC made 15 years ago
NOT to impose regulation on it. This was not a dodge; it was a
decision NOT to act. It was intentional restraint born of
humility. Humility that we can't predict where this market is
going.
FCC Chairman William Kennard, Address before the NCTA (June
15, 1999), available at http://www.fcc.gov/Speeches/ Kennard/
spwek921.html.
There is no crisis warranting the FCC's departure from that
hands-off approach. Advocates argue that the FCC must adopt
network neutrality rules to keep the Internet open and
innovative. Yet the FCC has failed to demonstrate a market
failure or provide an economic analysis justifying
intervention. The FCC even confesses in the order--albeit in
the footnotes--that it conducted no examination of market
power. See In re Broadband Industry Practices, WC Docket No.
07-52, Report and Order, FCC 10-201, at n.49 (rel. Dec. 23,
2010). In response to a Committee letter asking the FCC to
identify any economic analysis in the order, the agency pointed
to paragraphs that do little more than summarize the comments
of parties and provide conclusory statements. See Letter from
FCC Chairman Julius Genachowski to Rep. Fred Upton (March 7,
2010), available at http://
republicans.energycommerce.house.gov/ Media/file/Letters/
112th/030711Genachowski.pdf. The order did not conduct the type
of cost-benefit analysis that President Obama's January 18,
2011, executive order now calls for and that Chairman
Genachowski endorsed in an email to his staff. There is no
serious quantification of an actual problem, let alone of the
costs the rules would have on the economy.
The FCC hangs almost its entire case for network neutrality
rules on Comcast's past attempt to combat network congestion by
managing peer-to-peer traffic. But Comcast and the peer-to-peer
community resolved that issue by gathering their engineers and
developing alternative solutions that advanced traffic
management techniques to everyone's benefit. No network
neutrality rules were in place, and the D.C. Circuit overturned
the FCC's enforcement action because the FCC failed to
demonstrate it had any authority in the matter. The FCC also
cites a 2005 case in which Madison River Telephone Company was
accused of blocking ports used for voice over Internet protocol
applications. But that case was settled by consent decree.
Everything else the order discusses is either an
unsubstantiated allegation or speculation of future harm.
Opponents of the disapproval resolution say the network
neutrality order does not regulate the Internet, but instead
creates minimally intrusive rules of the road that everyone
agrees with. But if the rules are nonintrusive and universally
accepted, why does the FCC need to force them on industry? Why
is the FCC shielding web companies and selectively enforcing
the rules only against broadband providers? Claims the rules
don't regulate the Internet also ring false. On-ramps are part
of the highway. The FCC is micromanaging how services and
applications flow and the business arrangements broadband
providers and web companies may enter.
Opponents of the resolution also claim the rules are needed
because broadband providers have the incentive and ability to
favor some Internet content, applications, and web sites. But
web companies also have an incentive and ability to
discriminate. Google can influence its search results. See
Barbara Ortutay and Michael Liedtke, Google Tweaks Search to
Punish ``Low-Quality'' Sites, Associated Press, available at
http://news.yahoo.com/s/ap/ 20110225/ap--on--hi--te/ us--tec--
google--search. Nothing prevents Google from favoring
affiliated or preferred entities. If the FCC has conducted no
market power analysis and relies on speculation of future harm,
there is no principled reason to treat companies operating at
the core of the Internet differently from companies at the
edge. Instead of promoting competition, such picking of winners
and losers will stifle the investment needed to perpetuate the
Internet's phenomenal growth, hurting the economy. We want
innovation at the edge and the core of the Internet. Engineers,
entrepreneurs and consumers acting in the marketplace should
determine how carriers manage their networks and business
arrangements, not as few as three unelected commissioners.
Even apart from the harm the network neutrality rules will
cause, the FCC's underlying theory of authority for the order
would allow the commission to regulate almost any interstate
communication service on barely more than a whim and without
any additional input from Congress. The FCC claims it has
authority to enact the rules under Section 706 of the 1996
Telecommunications Act relating to the promotion of advanced
telecommunications capability, and under Titles II, III, and VI
of the 1934 Communications Act relating to the promotionof
voice, audio, and video services. See In re Broadband Industry
Practices, WC Docket No. 07-52, Report and Order, FCC 10-201, at
para.para. 117-37 (rel. Dec. 23, 2010). Section 706(a) provides that
the FCC and state commissions: shall encourage the deployment on a
reasonable and timely basis of advanced telecommunications capability
to all Americans (including, in particular, elementary and secondary
schools and classrooms) by utilizing, in a manner consistent with the
public interest, convenience, and necessity, price cap regulation,
regulatory forbearance, measures that promote competition in the local
telecommunications market, or other regulating methods that remove
barriers to infrastructure investment.
47 U.S.C. Sec. 1302(a). Section 706(b) states that the FCC
``shall take immediate action to accelerate deployment of
[advanced telecommunications] capability by removing barriers
to infrastructure investment and by promoting competition in
the telecommunications market,'' if such capability is not
``being deployed to all Americans in a reasonable and timely
fashion.'' Id. at Sec. 1302(b). Title II governs the provision
of telecommunications services. See id. at 201-76. Title III
governs the provision of broadcast radio and television
services and wireless voice services. See id. at Sec. Sec. 301-
399B. Title VI governs the provision of subscription video
services. See id. at Sec. Sec. 601-653. None of these claims of
authority are persuasive.
The FCC's reliance on section 706 flies in the face of its
own precedent and the section's language. The FCC has held
``that in light of the statutory language, the framework of the
1996 Act, its legislative history, and Congress' policy
objectives, the most logical statutory interpretation is that
section 706 does not constitute an independent grant of
authority.'' See In re Deployment of Wireline Servs. Offering
Advanced Telecom. Capability, CC Docket No. 98-147, Memorandum
Opinion and Order, FCC 98-188, at para. 77 (rel. Aug. 7, 1998).
Instead, section 706 directs the FCC to use authority in other
provisions, including its deregulatory, section 10 forbearance
authority, to encourage deployment of advanced services. Id.
Subsections (a) and (b) also focus on ``removing barriers
to infrastructure investment'' and ``promoting competition in
the telecommunications market.'' 47 U.S.C. 1302(a), (b). By
contrast, the FCC's order creates obstacles to infrastructure
investment by regulating broadband providers, increasing their
costs, and restricting the ways they may do business, price
their services, and earn a return on their investments. The
order also does not focus on competition in the
telecommunications market. Rather, it tips the scales in favor
of web-based companies that exist on the edge of the Internet,
and that are far less involved in infrastructure investment
than the broadband providers at the core. See Dr. Anna-Maria
Kovacs, FCC's Open Internet Order--A Financial Translation
(Dec. 31, 2010).
Also problematic is the language in subsection (b) about
accelerating deployment of advanced telecommunications
capability if such capability is not ``being deployed to all
Americans in a reasonable and timely fashion.'' While the FCC
concluded in July 2010 that overall deployment is not occurring
in a reasonable and timely fashion, see In re Inquiry
Concerning the Deployment of Advanced Telecom. Capability, GN
Docket No. 09-137, Sixth Broadband Deployment Report, FCC 10-
129 at para. 2 (rel. July 20, 2010), that conclusion strains
credulity. Indeed, the FCC's National Broadband Plan reports
that approximately 95 percent of the country has access to
broadband, that two-thirds subscribe, and that the number of
users has skyrocketed to 200 million from 8 million in ten
years. See Connecting America: The National Broadband Plan, at
XI, 3, available at http://download.broadband.gov/plan/
national-broadband-plan.pdf.
The FCC's claim that Titles II, III, and VI authorize the
network neutrality rules also falls short. These titles allow
the FCC to regulate traditional voice, audio, and video
services, not data services. Rather than rely on these titles
as a direct source of authority, the FCC makes an indirect
argument. For example, the FCC argues that competition from
voice over Internet protocol service creates a check on the
rates, terms and conditions of telecommunications service, that
promoting VoIP with network neutrality rules therefore promotes
telecommunications services, and that its network neutrality
rules therefore fall within its Title II mandate. See In re
Broadband Industry Practices, WC Docket No. 07-52, Report and
Order, FCC 10-201, at para.para. 125-26 (rel. Dec. 23, 2010).
But as discussed above, section 230 makes it the policy of the
United States ``to preserve the vibrant and competitive free
market that presently exists for the Internet and other
interactive computer services, unfettered by Federal or State
regulation.'' 47 U.S.C. Sec. 230(b)(2). While statements of
policy do not create statutorily mandated responsibilities,
they can help delineate the contours of statutory authority.
Comcast Corp. v. FCC, 600 F.3d 642, 654 (D.C. 2010). In light
of Congress's statutory pronouncement that Internet regulation
is disfavored, the FCC's theory of regulation by ``bank shot''
under Titles II, III, and VI stretches too far.
The indirect argument the FCC makes is more akin to an
ancillary authority argument, even though the FCC's general
counsel, at a December 3, 2010, briefing for congressional
staff on the network neutrality order, twice insisted that the
FCC is making a direct authority argument. At bottom, this is
little more than an end-run around the D.C. Circuit's April
2010 ruling in the Comcast case that the FCC failed to show it
had ancillary authority to regulate network management.
Opponents of the disapproval resolution argue that it
strips the FCC of authority to address Internet-related issues,
including issues related to public safety and piracy. That is
incorrect. As Senate Majority leader Harry Reid said when the
Congressional Review Act was adopted, ``[i]f the law that
authorized the disapproved rule provides broad discretion to
the issuing agency regarding the substance of such rule, the
agency may exercise its broad discretion to issue a
substantially different rule.'' Joint Explanatory Statement of
House and Senate Sponsors, 142 Cong. Rec. S3683, at S3686
(daily ed. April 18, 1996). Thus, if the agency has broad
authority to adopt Internet-related regulations, as the FCC's
general counsel contends, it can still adopt such regulations.
It simply cannotreimpose these rules or substantially similar
ones, whether under its current claims of authority, through a Title II
reclassification approach, or under some other existing authority. See
5 U.S.C. Sec. Sec. 801(b)(2). And, of course, if Congress were later to
decide that the agency should have authority to adopt the same or
substantially similar rules, it can pass a law granting the FCC such
authority. Id. If, on the other hand, the FCC does not have broad
authority to adopt Internet-related regulations, as advocates of the
disapproval regulation believe, then the FCC never had the statutory
authority to adopt these rules in the first place. Seen in this
context, a vote against this disapproval resolution is simply a vote to
allow the FCC to try to reimpose these same or substantially similar
rules under a Title II reclassification approach should it lose in
court under its current claims of authority, as even network neutrality
advocates concede is likely.
Some argue that if supporters of the disapproval resolution
believe the FCC lacks authority to adopt these rules, they
should have supported Mr. Waxman's attempt last Congress to
explicitly grant the agency that authority. That draft
legislation, however, suffered from some of the same flaws as
the FCC's current rules: it required no finding of market
failure or market power and selectively targeted broadband
providers to the exclusion of web companies. See Letter from
Rep. Henry Waxman to FCC Chairman Julius Genachowski (Dec. 1,
2010) (attaching copy of draft bill), available at http://
democrats.energycommerce.house.gov/documents/20101201/
Genachowski.FCC.2010.12.1.pdf. It also came so late in the
Congress as to prevent any realistic debate or consideration,
and the FCC adopted its rules just weeks later.
Opponents of the disapproval resolution suggest puzzlement
over supporters' objection to the rules, pointing to the fact
that some voted for H.R. 5252 in the 109th Congress, which
contained network neutrality provisions. Those provisions,
however, would only have codified the FCC's 2005 policy
statement, would not have allowed the FCC to adopt these or any
other substantive network neutrality rules or regulations,
would have applied to web companies as well as broadband
providers, and was part of much broader legislation on video
franchise reform. Moreover, an amendment to that bill by Mr.
Markey that would have authorized regulations akin to the
onerous ones at issue here was defeated on the House floor in a
bipartisan 269-152 vote, with a number of opponents of this
disapproval resolution voting against the amendment. See Roll
Call 239 (June 8, 2006), http://clerk.house.gov/evs/2006/
roll239.xml.
Some opponents of the disapproval resolution also try to
argue that relying on the expedited process of a resolution of
disapproval is somehow something other than ``regular order.''
This ignores the fact that the disapproval process was created
through congressional passage of the Congressional Review Act
and was described at the time by now-Senate Majority Leader
Harry Reid, one of its authors, as a ``reasonable, sensible
approach to regulatory reform.'' 141 Cong. Rec. S9644, at S9645
(daily ed. July 10, 1995). It also ignores the fact that some
of the critics of this resolution have themselves co-sponsored
resolutions of disapproval of other FCC regulations. For
example, Mr. Waxman, Ms. Eshoo, Mr. Markey, Ms. Schakowsky, and
Mr. Dingell co-sponsored H.J. Res. 72 in 2003 and Mr. Waxman,
Ms. Eshoo, Mr. Doyle, Ms. Schakowsky, and Ms. Baldwin co-
sponsored H.J. Res. 79 in 2008. Both were resolutions
disapproving FCC media ownership rules.
HEARINGS
Reps. Henry Waxman and Rick Boucher, then chairmen of the
House Energy and Commerce Committee and its Subcommittee on
Communications, Technology and the Internet, respectively, held
no hearings on network neutrality in the 111th Congress despite
repeated requests, including at least one formal letter. See
Letter from Reps. Joe Barton and Cliff Stearns to Reps. Henry
Waxman and Rick Boucher (June 17, 2010).
Following the change in majority resulting from the 2010
midterm elections, the renamed Subcommittee on Communications
and Technology held two hearings in the 112th Congress on the
FCC's network neutrality rules regulating the Internet. The
subcommittee held a hearing Feb. 16, 2011, entitled ``Network
Neutrality and Internet Regulation: Warranted or More Economic
Harm than Good?'' The subcommittee received testimony from FCC
Chairman Julius Genachowski and commissioners Michael J. Copps,
Robert M. McDowell, Mignon Clyburn, and Meredith Attwell Baker.
At the request of the minority, the subcommittee postponed a
markup of the resolution and held a second hearing March 9,
2011, on H.J. Res. 37. The subcommittee received testimony from
Robin Chase, CEO, Buzzcar; Tom DeReggi, President, RapidDSL &
Wireless; Derek Turner, Research Director, Free Press; Jim
Cicconi, Sr. Exec. Vice President, External and Legislative
Affairs, AT&T; Prof. Shane Mitchell Greenstein, Kellogg School
of Management, Northwestern University; and Dr. Anna-Maria
Kovacs, Strategic Choices.
COMMITTEE CONSIDERATION
On Wednesday, March 9, 2011, the Subcommittee on
Communications and Technology met in open markup session and
approved H.J. Res. 37, disapproving the rule submitted by the
Federal Communications Commission with respect to regulating
the Internet and broadband industry practices, without
amendment, by a record vote of 15 yeas and 8 nays. The Full
Committee met in open markup session on Monday, March 14, 2011,
and Tuesday, March 15, 2011, and ordered H.J. Res. 37 reported,
without amendment, by a record vote of 30 yeas and 23 nays.
COMMITTEE VOTES
Clause 3(b) of Rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Upton to order H.J. Res. 37 reported to the
House, without amendment, was agreed to by a record vote of 30
yeas and 23 nays.
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee held legislative and
oversight hearings and made findings that are reflected in this
report.
STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES
The goals of H.J. Res. 37 are to nullify the ``network
neutrality'' rules regulating the Internet that the FCC adopted
Dec. 21, 2010. See In re Broadband Industry Practices, WC
Docket No. 07-52, Report and Order, FCC 10-201 (rel. Dec. 23,
2010). The Committee also intends the resolution to prevent the
FCC from reimposing the same or substantially similar rules
through reclassification of broadband under Title II of the
Communications Act or any other claimed source of direct or
ancillary authority. The purpose of the resolution is to
prevent the harm the rules would cause to broadband deployment,
innovation, competition, and jobs, as well as to stop the FCC
from asserting authority over the Internet that Congress has
not granted it.
NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee finds that H.J.
Res. 37 would result in no new or increased budget authority,
entitlement authority, or tax expenditures or revenues.
EARMARKS
In compliance with clause 9(e), 9(f), and 9(g) of rule XXI,
the Committee finds that H.J. Res 37 contains no earmarks,
limited tax benefits, or limited tariff benefits.
COMMITTEE COST ESTIMATE
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
CONGRESSIONAL BUDGET OFFICE ESTIMATE
Pursuant to clause 3(c)(3) of Rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
March 30, 2011.
Hon. Fred Upton,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.J. Res. 37, a joint
resolution disapproving the rule submitted by the Federal
Communications Commission with respect to regulating the
Internet and broadband industry practices.
If you wish further details on this estimate, we will be
pleased to provide them. the CBO staff contact is Susan Willie.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.J. Res. 37--A joint resolution disapproving the rule submitted by the
Federal Communications Commission with respect to regulating
the Internet and broadband industry practices
H.J. Res. 37 would disapprove the rule adopted by the
Federal Communications Commission (FCC) on December 21, 2010,
that is intended to preserve the Internet as an open network.
Report and Order FCC 10-201 establishes rules that would bar
broadband providers from blocking lawful content and
discriminating in transmitting lawful traffic on the network.
The rule also would require broadband providers to disclose to
the public information about network management practices,
performance, and terms of service.
H.J. Res. 37 would invoke a legislative process established
by the Congressional Review Act (Public Law 104-121) to
disapprove the open Internet rule. If H.J. Res is enacted, the
published rule would have no force or effect. Based on
information from the FCC, CBO estimates that voiding this rule
would have no effect on the budget. Enacting H.J. Res. 37 would
not affect direct spending or revenues; therefore, pay-as-you-
go procedures do not apply.
H.J. Res. 37 contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act
and would improve no costs on state, local, or tribal
governments.
The CBO staff contact for this estimate is Susan Willie.
The estimate was approved by Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
FEDERAL MANDATES STATEMENT
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
ADVISORY COMMITTEE STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
APPLICABILITY TO LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
The resolution states ``[t]hat Congress disapproves the
rule submitted by the Federal Communications Commission
relating to the matter of preserving the open Internet and
broadband industry practices (Report and Order FCC 10-201,
adopted by the Commission on December 21, 2010), and such rule
shall have no force or effect.''
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
This legislation does not amend any existing Federal
statute.
DISSENTING VIEWS
We oppose H.J. Res. 37, a resolution disapproving the rules
submitted by the Federal Communications Commission (FCC)
relating to the matter of preserving the open Internet and
broadband industry practices, as reported. We oppose this
misguided legislation because it will limit access and
innovation, undermine job creation, and ultimately harm the
Internet ecosystem.
The FCC's Light Regulatory Touch to Preserve and Promote an Open
Internet
The FCC has always played a critical role in our nation's
development and deployment of broadband Internet services. When
incumbent phone companies began to offer broadband digital
subscriber line (DSL) services in the late 1990s, it was
regulated as a ``telecommunications service'' under the
Telecommunications Act of 1996 (the 1996 Act) subject to Title
II of the Communications Act of 1934 (the Act), including
provisions to ensure that those that offer such services do so
on reasonable and nondiscriminatory terms.
Proponents of H.J. Res. 37 point to a 1998 FCC report to
Congress widely known as the ``Stevens Report'' to justify
their claim that retail availability of Internet access service
was never regulated. But while the Report stated that Internet
access service as it was then being offered was an
``information service,'' this distinction was premised on the
fact that at the time, 98 percent of all households with
Internet connections used traditional telephone service to
``dial-up'' their Internet access service provider. The Report
thus treated Internet access service as ``information service''
because these providers owned no telecommunications facilities.
When telecommunications companies began to offer their own DSL
services, the transmission component of their Internet access
service remained under Title II regulation.
When the FCC elected to treat cable modem service as an
``information service'' under Title I of the Act in 2002, then-
FCC Chairman Michael Powell stated that the FCC is ``not left
powerless to protect the public interest by classifying cable
modem service as an information service. Congress invested the
Commission with ample authority under Title I. That provision
has been invoked consistently by the Commission to guard
against public interest harms and anti-competitive
results.''\1\
---------------------------------------------------------------------------
\1\Statement of Chairman Michael Powell, Inquiry Concerning High-
Speed Access on the Internet Over Cable and Other Facilities; Internet
Over Cable Declaratory Ruling; Appropriate Regulatory Treatment for
Broadband Access to the Internet over Cable Facilities, FCC 02-77
(March 15, 2002).
---------------------------------------------------------------------------
On December 21, 2010, the FCC issued its Open Internet
Order incorporating open Internet principles and building upon
the existing record at the Commission to identify ``the best
means to achieve our goal of preserving and promoting the open
Internet.''\2\ It also represented the first attempt by the
Commission to address the legal authority issues raised by the
D.C. Circuit in Comcast.
---------------------------------------------------------------------------
\2\See Federal Communications Commission, Preserving the Open
Internet, Broadband Industry Practices, Notice of Proposed Rulemaking
p. 4 (Oct. 22, 2009) (online at http://hraunfoss.fcc.gov/edocs_public/
attachmatch/FCC-09-93A1.pdf).
---------------------------------------------------------------------------
The FCC's Open Internet Order included a two-page rule that
imposes limited obligations on broadband Internet service
providers. The Commission based its authority to promulgate the
rule on Section 706(a) and (b) of the 1996 Act as well as its
Title I authority ancillary to explicit authorities granted
under Titles II, III and VI of the Communications Act.
First, it imposes a transparency obligation requiring both
fixed and mobile broadband Internet access service providers to
``publicly disclose accurate information regarding the network
management practices, performance, and commercial terms of its
broadband Internet access services sufficient for consumers to
make informed choices regarding use of such services'' and for
content, application, service, and device providers to
``develop, market, and maintain Internet offerings.''\3\
Second, it prohibits fixed broadband providers from blocking
lawful content, applications, services and devices to ensure
consumers and innovators continue to have the right to send and
receive lawful Internet traffic, with mobile broadband service
providers subjected to a more limited set of prohibitions.\4\
Third, the rules ensure the Internet remains a level playing
field by prohibiting fixed broadband providers from
unreasonably discriminating in transmitting lawful network
traffic.\5\ Finally, the framework recognizes the right of
broadband providers to meaningfully and legitimately manage
their network and provides flexibility to network providers to
address congestion or traffic that's harmful to the network.\6\
---------------------------------------------------------------------------
\3\Id., at 65.
\4\Id., at 65.
\5\Id.,
\6\Id.,
---------------------------------------------------------------------------
The majority claims that the FCC conducted no market
analysis and failed to consider the cost-benefit of the rules.
But the record shows that the FCC reviewed the broadband retail
market and found that as of December 2009, nearly 70 percent of
households lived in areas where only one or two wireline or
fixed wireless firms provided broadband and that about 20
percent of households are in areas with only one broadband
provider, making the ability to switch broadband providers
difficult.\7\ The FCC also pointed to the Department of Justice
observations that: (1) the wireline broadband market is highly
concentrated; (2) the prospects for additional wireline
competition are dim; and (3) extent to which mobile wireless
offerings will compete with wireline offerings is unknown.\8\
Finally, the FCC based its analysis on the existence of a
``terminating access monopoly,'' finding that a broadband
provider could force other content or ``edge'' providers to
``pay inefficiently high fees because that broadband provider
is typically an edge provider's only option for reaching a
particular end user,''\9\ thereby acting as a gatekeeper.
---------------------------------------------------------------------------
\7\Id., at 19.
\8\Id., at 27.
\9\Id., at 15.
---------------------------------------------------------------------------
In considering the cost-benefit of the rules, the FCC found
that ``we expect the cost of compliance with our prophylactic
rules to be small, as they incorporate longstanding openness
principles that are generally in line with current practices
and with norms endorsed by many broadband providers.
Conversely, the harm of open Internet violations may be
substantial, costly, and in some cases potentially
irreversible.''\10\ Furthermore, the FCC concluded that ``the
benefits of ensuring Internet openness through enforceable,
high-level, prophylactic rules outweigh the costs'' because the
rules are ``carefully calibrated to preserve the benefits of
the open Internet and increase certainty for all Internet
stakeholders, with minimum burden on broadband providers.''\11\
---------------------------------------------------------------------------
\10\Id., at 3.
\11\Id., at 5.
---------------------------------------------------------------------------
Consistent with the FCC's ``hands-off' approach to the
regulation of broadband, the Open Internet Order did not rest
the Commission's authority on Title II of the Communications
Act as traditionally applied to common carriers. The majority
notes that 275 members of Congress weighed in with the FCC in
opposition to the open Internet rules. In fact, congressional
concern was largely focused on a proposal to reclassify
broadband Internet access services under Title II of the
Communications Act. By electing to proceed under Section 706
and under Title I of the Act, the FCC did not adopt what turned
out to be the most controversial aspect of the open Internet
proceeding. Indeed, the rules adopted by the FCC reflected
broad consensus amongst stakeholders to codify many of the
existing practices by broadband providers.
The FCC's Open Internet Order Is a Product of Consensus and Compromise
Despite efforts to portray the FCC's Open Internet Rules as
an example of government overreach, the Order has received
broad support from consumer and public interest groups,
broadband Internet service providers, labor unions, as well as
high-tech and edge companies:
Broadband Providers. Jim Cicconi, AT&T's Senior
Executive Vice President of External and Legislative Affairs,
testified that the FCC's rules ``landed at a place where [AT&T
has] line of sight . . . [AT&T] can commit to these 10-year and
15-year horizon investments.''\12\ Similarly, Time Warner Cable
stated at the time of the Order's release that the rules
adopted ``appear to reflect a workable balance between
protecting consumers'' interests and preserving incentives for
investment and innovation by broadband Internet service
providers,''\13\ That view was echoed by Kyle McSlarrow of the
National Cable & Telecommunications Association (NCTA), who
stated in a letter to Republican leaders of the Committee that
NCTA supports the FCC order because ``1) it largely codifies
the status quo practices to which the industry has voluntarily
committed; 2) it contains helpful clarifying language around
such issues as what constitutes ``reasonable network
management;'' 3) it provides greater certainty about our
ability to manage and invest in our broadband services today
and those we may deploy in the future; and 4) the alternative
of Title II regulation . . . presented a stark and much worse
risk to continued investment and job creation.''\14\
---------------------------------------------------------------------------
\12\House Committee on Energy and Commerce, Testimony of Sr. Exec.
Vice President, External and Legislative Affairs, AT&T Jim Cicconi,
Hearing on H.J. Res. 37 Disapproving FCC Rules Regulating the Internet,
112th Cong. (March 9, 2011).
\13\Jeff Simmermon, FCC Votes on ``Net Neutrality''--Here's Our
Position, (Dec. 21, 2010) (online at http://www.twcableuntangled.com/
2010/12/fcc-votes-on-net-neutrality-heres-our-position/).
\14\Letter from Kyle McSlarrow President and CEO National Cable and
Telecommunications Association to Reps. Fred Upton, Greg Waldon, and
Lee Terry (March 7, 2011).
---------------------------------------------------------------------------
High-Tech Sector. The Open Internet Coalition, which
includes companies such as Amazon, Netflix, Facebook, eBay, and
Google, stated that the Order ``would provide a degree of
certainty to all participants in the broadband marketplace and
help foster an open wireline Internet online ecosystem.''\15\
Similarly, the Computer & Communications Industry Association
(CCIA) and TechNet stated in a letter opposing H.J. Res. 37
that the FCC rule ``allows flexible network management and does
nothing to inhibit broadband network deployment, while it
affirmatively facilitates innovation and investment in new
online services, content, applications, and access devices by
providing some minimal assurance they will not be blocked
arbitararily.''\16\
---------------------------------------------------------------------------
\15\Open Internet Coalition, Statement on FCC Open Internet Vote
(Dec. 21, 2010) (online at http://www.openinternetcoalition.com/
index.cfm?objectid=6C430AD4-0D2C-1EOB78C000C296BA163.)
\16\Computer & Communications Industry Association, Letter re: Open
Internet (Feb. 14, 2011) (online at http://
democrats.energycommerce.house.gov/sites/default/files/documents/
CCIA%20-%20open%20internet%20letter.pdf).
---------------------------------------------------------------------------
Public Interest Organizations and Unions. In a joint
statement, Consumers Union (CU) and Consumer Federation of
America (CFA) praised the Order for helping to ``resolve the
current uncertainty in the Internet marketplace'' and that
while ``unanimity on net neutrality may be impossible . . .
inaction is unacceptable.'' Mark Cooper, Research Director for
CFA, further stated that ``[t]he only way to preserve the open
Internet is for the FCC to immediately put in place a pragmatic
set of rules that gives teeth to the principles that have
governed the open Internet since its inception. We need to
establish facts on the ground and gain practical experience
with network management in the broadband era . . . the FCC
appears headed toward the right goal.''\17\ In addition, the
Communications Workers of America (CWA) supported the Order
because it ``resolves the issue in a way that protects an Open
Internet yet provides for incentives for investment, economic
development and the creation of quality jobs and sustainable
communities.''\18\
---------------------------------------------------------------------------
\17\Consumers Union and Consumer Federation of America, Consumers
Groups Welcome FCC Action on Network Neutrality (Dec. 1, 2010) (online
at http://www.consumerfed.org/pdfs/
Network%20Neutrality%20News%20Release.pdf).
\18\See Communications Workers of America, FCC Vote Moves U.S.
Forward on Broadband (Dec. 21, 2010) (online at http://www.cwa-
union.org/news/entry/cwa_fcc_vote_moves_u.s._forward_on_broadband).
---------------------------------------------------------------------------
Overall, the Subcommittee received letters from more than
130 organization, including the AFL-CIO, NAACP, United States
Conference of Catholic Bishops, American Library Association,
American Association of Independent Music, Leadership
Conference on Civil and Human Rights, League of United Latin
American Citizens, National Organization for Women, Free Press,
Sierra Club, and United Auto Workers all expressing their
opposition to H.J. Res. 37.\19\
---------------------------------------------------------------------------
\19\All the letters could be found at http://
democrats.energycommerce.house.gov/index.php?q=hearing/hearing-on-
network-neutrality-and-internet-regulation-warranted-or-more-economic-
harm-than-g
---------------------------------------------------------------------------
Overturning the Open Internet Order Will Inject New Uncertainty into
the Broadband Marketplace, Threatening Investment and Job
Creation
According to Hamilton Consultants, the open Internet
ecosystem has led to the creation of more than 3 million jobs
ov e past 15 years. In 2010, the U.S. tech sector grew about
twice as fast as the U.S. economy.\20\ Since 1995, venture
capital funds have invested approximately $250 billion in
industries reliant on the Open Internet, including software, IT
services, computers and peripherals, media and entertainment,
as well as networking and equipment.
---------------------------------------------------------------------------
\20\Hamilton Consultants, Inc. Economic Value of the Advertising-
Supported Internet Ecosystem (June 10, 2009).
---------------------------------------------------------------------------
Supporters of the Open Internet Order have widely praised
the FCC action for removing regulatory uncertainty over
broadband network providers and allowing investment to flow for
both network operators and edge companies. That view is echoed
by major Wall Street analysts such as Bank of America/Merrill
Lynch, which found the rules to be eliminated ``the net
neutrality regulatory overhang'' from telecom and cable
stock\21\ as well as analysts from Standard & Poor's, Citi,
Credit Suisse, Goldman Sachs, Raymond James, and Wells
Fargo.\22\
---------------------------------------------------------------------------
\21\Bank of America Merrill Lynch, Turning the page on net
neutrality (Dec. 21, 2010).
\22\See Wells Fargo Securities, Telecom Services & Cable Comments:
FCC Outlines Plan for Open Internet (Net Neutraility), by Jennifer M.
Fritzsche and Marci L. Ryvicker (12/1/10); Citigroup Global Markets,
Alert: FCC Likely to Push Forward on a Compromise Solution for Net
Neutrality Under Title I Instead of Title II, by Michael Rollins and
Jason B. Bazinet (12/1/10); Credit Suisse, Genachowski's New Net
Neutrality Framework; Generally Positive for MSOs, by Stefan Anninger
and Ashton Ngwena (12/1/10); Raymond James, Redefining Success on Net
Neutrality, by Frank G. Louthan IV, Jason Fraser, and Mike Ciaccia (12/
1/10); Bank of America Merrill Lynch, The OTT Silver Bullet, by Jessica
Reif Cohen, Ethan Lacy, and Peter Henderson (12/2/10); Goldman Sachs,
FCC Net Neutrality Rules: A Framework, with a Lot of Wiggle Room, by
Jason Armstrong, Derek R. Bingham, Ingrid Chung, and Scott Goldman (12/
21/10).
---------------------------------------------------------------------------
The majority can only point to a single investment analyst
to support its opposition to the Order--an outlier whose
perspective contrasts sharply with most investment analysts.
Contrary to the assertions of the majority, we believe H.J.
Res. 37, if enacted, would generate new uncertainty into the
broadband market, hampering investment and job creation.
First, H.J. Res. 37 would undermine the Internet economy by
allowing broadband operators to pick and choose winners and
losers. It would allow broadband network operators to block
applications, content, and services traveling on their networks
absent any disclosure to consumers and without legitimate
network management reasons. The Internet as it exists today
would never have flourished if network operators were allowed
to extend their control at the core of the network to the edge
of the network in a manner that would restrict consumer choice.
Indeed, economists such as Prof. Shane Greenstein of
Northwestern University have raised the concern that the lack
of open Internet rules will increase transaction costs for edge
providers seeking access online thereby raising costs of
introducing new products and chilling innovation and
competition.\23\
---------------------------------------------------------------------------
\23\See House Committee on Energy and Commerce, Testimony of Shane
Greenstein, Elinor and Wendell Hobbs Professor, Kellogg School of
Management, Northwestern University, Hearing on H.J. Res. 37
Disapproving FCC Rules Regulating the Internet, 112th Cong. (March 9,
2011).
---------------------------------------------------------------------------
Second, broadband providers will continue to experience the
regulatory uncertainty that the Order sought to minimize. In
addition to taking away the ``line of sight'' for broadband
companies to start making investment decisions, it is unclear
what role, if any, the FCC will assert in this matter. Without
a clear role for the FCC, broadband providers will have
difficulty determining the scope of agency action or how the
agency will address complaints about certain practices. Without
clear rules of the road and a defined process, uncertainty will
result.
Finally, a Resolution of Disapproval under the
Congressional Review Act (CRA) not only strikes the agency
rule, it prohibits the agency from going forward with another
rule that is ``substantially the same'' as the disapproved rule
without additional congressional authorization. Therefore, H.J.
Res. 37, if enacted, could prevent the FCC from going forward
with rules that are substantially similar to the transparency,
no-blocking, and nondiscrimination provisions approved by the
agency in December 2010. How the term ``substantially the
same'' would be interpreted might be subject to a reviewing
court, and no court has so far opined on the term under the
CRA. Passage of H.J. Res. 37 could therefore generate
additional uncertainty for broadband providers, high-tech
companies and investors, as well as the FCC.
A Resolution of Disapproval Under the CRA Is a Blunt Instrument That
Should Be Utilized Rarely
Successful adoption of a Resolution of Disapproval under
the CRA would strike downany disapproved rule in its
entirety.\24\ Therefore, if H.J. Res. 37 is enacted, it would overturn
all of the provisions included in the Open Internet Order. Despite
areas of broad agreement on certain aspects of the FCC's rules, such as
the need for transparency, the prohibition on blocking of lawful
content, and the right to exercise reasonable network management, the
CRA would bluntly remove even these consensus measures.
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\24\See CRS Report RL30116, Congressional Review of Agency
Rulemaking: An Update and Assessment of the Congressional Review Act
After a Decade, by Morton Rosenberg.
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In order to address this problem, Democratic committee
members attempted to amend H.J. Res. 37 to retain these
consensus provisions, but these amendments were ruled out of
order.
By way of example, during subcommittee and full committee
markup of H.J. Res. 37, Rep. Doyle attempted to introduce an
amendment that would preserve the FCC's so-called ``no blocking
rule''--which simply states that fixed broadband providers may
not block lawful content, applications, services or non-harmful
devices and that mobile broadband may not block lawful websites
or block applications that compete with their voice or video
telephony services. No blocking of lawful content has been a
common practice of broadband providers for years. Indeed, as
early as 2004, then-FCC Chairman Michael Powell gave a speech
in which he outlined four `Net freedoms. The first freedom was
that consumers should have access to their choice of legal
content. Chairman Powell stated at the time that ``consumers
have come to expect to be able to go where they want on high-
speed connections, and those who have migrated from dial-up
would presumably object to paying a premium for broadband if
certain content were blocked.\25\ The principle was reaffirmed
by FCC's 2005 Internet Policy Statement and incorporated into
the Communications Opportunity, Promotion, and Enhancement Act
of 2006 introduced by then-Chairman Joe Barton.\26\
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\25\Federal Communications Commission, Remarks as Prepared for
Delivery by Chairman Michael K. Powell at the Silicon Flatirons
Symposium (Feb. 8, 2004).
\26\H.R. 5252, 109th Cong. (2006)
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Another provision of the Open Internet Order that has
enjoyed broad support from stakeholders is the rule pertaining
to transparency. During Committee markup, Rep. Matsui attempted
to offer an amendment that would preserve the portion of the
Open Internet rule imposing a transparency requirement on
broadband providers so that consumers and developers can make
informed choices. The transparency rule requires broadband
providers to disclose their network management practices,
performance characteristics and terms and conditions of their
broadband service to consumers.
This rule is critical to promoting our Internet economy
because in order to maximize Internet usage, consumers must
have the information necessary to make informed choices
regarding the types and use of broadband service they purchase.
Transparency also generates trust, which in turn increases
consumer confidence in broadband provider practices, thereby
encouraging adoption. Thus a transparency requirement creates a
so-called ``virtuous cycle'' as increased adoption leads to
greater investment in broadband infrastructure. A transparency
rule will also help third parties like edge providers, high-
tech companies, and venture capitalists make informed decisions
on when and how to embark on innovative projects and
investments. Through disclosure of necessary technical
requirements, new and improved online content, applications,
services, and devices will be created.
During the Subcommittee's legislative hearing on H.J. Res.
37, all six witnesses testifying before the subcommittee--
including two witnesses that support the Resolution expressed
support for the transparency rule adopted by the FCC. Yet Rep.
Matsui's amendment was ruled out of order. As a result, H.J.
Res. 37 would eliminate these common sense provisions.
A Resolution of Disapproval Under the CRA Is Not an Appropriate Tool In
This Instance
In the 15 years since the Congessional Review Act has been
in place, Congress has used it just once to invalidate an
agency rule.\27\ Although there may be situations in which the
CRA is appropriate, Committee Democrats objected to the use of
the CRA in this instance because it is an extraordinary step
that runs contrary to the Committee's tradition of open debate.
Democrats urged consideration of this issue under the standard
process that includes debate and votes on amendments.\28\
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\27\In March 2001, President Bush signed into law a repeal of
Clinton Administration regulations that set new workplace ergonomics
rules to combat repetitive stress injuries.
\28\The majority originally planned to proceed directly to a
subcommittee markup of H.J. Res. 37. In response to a request from
Ranking Members Waxman and Eshoo, however, the majority agreed to hold
a legislative hearing to examine the implications of H.J. Res 37 and to
hear from other stakeholders about this topic.
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On March 7, 2010, Subcommittee Democrats wrote to Chairman
Upton and Subcommittee Chairman Walden objecting to the process
for consideration of H.J. Res. 37. The letter, which was signed
by every Democratic member of the Subcommittee, stated that by
not allowing votes on any amendments, the majority would be
departing from the Commitee's tradition of transparency and
depriving members of their right to offer amendments.\29\
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\29\Letter from Ranking Member Waxman et al., to Chairman Upton and
Walden (Mar. 7, 2011) (online at http://
democrats.energycommerce.house.gov/sites/default/files/documents/
Upton.Walden,HJRes.37.2011.3.pdf).
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During Committee markup of H.J. Res. 37, every amendment
offered was ruled out of order on germaneness grounds. The
Energy and Commerce Committee has traditionally managed
germaneness objections differently. Typically, such objections
have been raised because either (1) an amendment is not
relevant to the subject of the measure; or (2) the amendment is
outside the scope of the Committee's jurisdiction.
Neither of those circumstances applied to the amendments
members sought to offer at theSubcommittee and full Committee
markups. It is within the Committee's jurisdiction to review and
develop communications policy. And the amendments proposed by members
focused squarely on the subject of the FCC's Open Internet rule.
Accordingly, the only basis for Chairman Walden's and Chairman Upton's
rulings to uphold the point of order was that the amendments did not
conform to the CRA. Although the CRA provides the basis for denying
debate and votes on amendments, having this power does not make using
it right. Instead, the majority should have brought before the
Committee a regular H.R. bill that overrules the Commission's Order.
Taking such an approach would not have precluded members from offering
and debating amendments.\30\
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\30\Some proponents of H.J. Res. 37 suggest that it is inconsistent
for several Committee Democrats that have cosponsored CRA resolutions
in the past to complain about the process being utilized in this
instance. This is a superficial analysis. Although use of the CRA
allows for expedited procedures in the Senate, using the CRA does not
affect timing of such a measure in the House. Moreover, cosponsoring a
Resolution of Disapproval in a past Congress does not in any way
suggest that members cannot object to the use of the CRA in different
circumstances.
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The Majority's Focus on the FCC's Open Internet Rules Has Prevented the
Committee From Focusing on Critical Issues
At this critical juncture in our economic recovery,
Congress should be focused on the many pressing issues in the
communications and technology arena.
Even if this Resolution of Disapproval passes the House of
Representatives, it still must get through the Senate. After
that, it will be met with a Presidential veto. The majority
knows this, but is still willing to waste precious legislative
time on something that has virtually no chance of success.
Furthermore, this issue is squarely before the courts.
Verizon has already filed an appeal in the D.C. Circuit
challenging the Open Internet Order. The courts will review the
legal questions raised in the appeal and will decide this
matter.
If Republicans want Congress to determine the proper role
for the FCC, we believe we should work on a legislative
alternative to the FCC's approach before we simply eliminate
FCC's ability to adopt basic, common sense rules to protect
consumers in the broadband market.
The Committee should instead be focused on efforts to boost
our economy by making more spectrum available for next-
generation wireless broadband services, ensuring the
construction of a nationwide broadband network for public
safety, and updating the Universal Service Fund to provide
targeted support to communities without broadband.
Unfortunately, H.J. Res. 37 is a demonstration of misplaced
priorities and ideological agenda.
Henry A. Waxman, Ranking Member.
Jay Inslee.
Lois Capps.
Anna G. Eshoo.
Mike Doyle.
Jan Schakowsky.
Edward J. Markey.
Donna M. Christensen.
Doris O. Matsui.
Diana DeGette.