Repealing Title II Classification: Scaling Back Net Neutrality As a Right Step Towards Internet Freedom

Last week, the Federal Communications Commission (FCC) took a swing at the net neutrality laws by releasing its draft order entitled Restoring Internet Freedom. If the FCC successfully votes on this next month, this Order will roll back the net neutrality laws that were enacted in 2015 under President Obama. Net neutrality proponents are bemoaning the possible end of the Internet, whereas opponents are cheering for Internet freedom. Since we live in a world prone to polarization and hyperbole, it's nice to revisit and refine arguments, so here are some points to consider as we approach the FCC's vote:

1. Title II is not the same as net neutrality. Although defining net neutrality is seemingly elusive, the best definition I found was "the government and Internet service providers providing equal treatment of all data contents, and Internet sites." You can read the piece I wrote on net neutrality three years ago here for further details and analysis. What was done during the Obama administration went beyond this definition of net neutrality. In 2015, the FCC decided to classify Internet under Title II classification. Title II is a classification per the Communications Act of 1934 that categorizes a service as a public utility. The current FCC is looking to repeal this Title II classification and return it to pre-2015 laws. I wrote on Title II classification in early 2015. I thought back then that is was a bad idea to treat the Internet like a public utility, least of all because the Internet is not a public utility nor does it function in a monopolistic market. In its policy brief on Title II (Mayo et al., 2017), the McDonough School of Business at Georgetown University illustrates how Title II makes the Internet less competitive. As the American Enterprise Institute explains in its article on net neutrality versus Title II, repealing Title II does not mean the end of net neutrality, let alone the Internet. The Internet was evolving well before the Title II classification came along in mid-2015. 
2. Net neutrality is basically a solution in search of a problem. The Internet "as we know it" was built without the Title II regulations, and did well without Title II. This is not to say that there has never been anticompetitive behavior. However, the instances of blocking or slowing down service are few and far in between. When attempting to justify net neutrality back in 2010, the FCC was only able cite four examples of anticompetitive behavior, all relatively minor (FCC, 2010, p. 17925). As the Heritage Foundation illustrates in detail, many of these cases involved challengers introducing practices that could have lowered prices for consumers. 
3. The government still has ample oversight. Net neutrality proponents provide a scary hypothetical in which ISPs block content from its competitors. Think of it as a "Wild West of the Internet" scenario. As elucidated upon in the previous point, net neutrality violations are rare. Even if the FCC stepped aside completely from regulating the Internet, the Federal Trade Commission has both the authority and knowhow to stop unfair practices (see 15 U.S. Code §45). State-level Attorney Generals also can enact their own antitrust and other consumer protection laws. 
4. Influence on telecom infrastructure investment. Research suggests that in anticipation of classifying the Internet under Title II, telecommunications companies did not invest as much capital expenditure (Ford, 2017). George Washington University economist Hal Singer estimated that ISP capital expenditures declined by $3.5B since Title II became law. Assuming that Title II had an adverse impact, removing should incentivize telecommunications companies to invest more. 
5. Price Discrimination versus Price Differentiation: Increasing Competitiveness. California Representative Ro Kahanna tweeted an infographic to illustrate the importance of net neutrality. Ironically enough, he showed how repealing net neutrality would help. Why? Because it undermines the pro-net neutrality argument. The proponents complain because charging separately will drive up prices. Let's say that I don't want to have to pay for gaming services. Instead of paying for all services, I can opt not to pay for gaming services, thereby decreasing my Internet bill. By allowing for separate charges, broadband providers can provide customers with more personalized offerings and packages. We have already seen this price differentiation play out in the mobile phone market (Greenstein and Mazzeo, 2006). 

Postscript: The FCC is more than justified in repealing Title II classification. This repeal does not mean the end of net neutrality. Even if it did, there is more than ample reason to believe that net neutrality makes for unsound economics (also see here, here, and here) that does not help the consumer (Gans and Katz, 2016; Melugin and Radia, 2017). Based on the lack of anticompetitive behavior from ISPs and broadband companies, there is a lack of ex ante justification for net neutrality (Struble and Kane, 2017).

What will help out many of the issues brought up by net neutrality proponents is more broadband competition. Instead of supporting local broadband monopolies, the government should get out of the way and allow for more broadband deployment. When compared to the European market, the light-touch approach to broadband regulation has worked well in the United States (see Harvard Business Review article here). The Title II regulations are a major barrier to Internet competitiveness and freedom, and I hope the FCC repeals Title II classification for the Internet next month.