Vote of Disapproval on Net Regs

Unfortunately, the Federal Communications Commission (FCC) moved ahead on September 23 with its misguided net neutrality regulations, publishing the rules in the Federal Register. The rules are now scheduled to go into effect on November 20.

But might the Senate move against these regulations before then?

U.S. Senator Kay Bailey Hutchison (R-TX), the ranking member on the Commerce Committee, is planning to push for a vote of disapproval to stop these regulations before they go into effect. In April, the U.S. House of Representatives voted by a margin of 240-179 to stop the FCC.

There are four fundamental problems with this regulatory move by the FCC.

First, the FCC lacks the legal authority to regulate broadband providers. In fact, last year, a federal appellate court tossed out an FCC attempt to sanction Comcast, noting that Congress never gave the FCC such powers.

Second, as the FCC has admitted, this is a "prophylactic" step, in that no vast effort exists by broadband providers to stop, undermine or deter certain Internet traffic. Considering that ISPs serve two markets - content providers and consumers - it's hard to figure out what the incentive would be to diminish service. If providers did so, they would only aggravate their own customers, driving them elsewhere, while also placing themselves at risk of broader public and political attacks. From the very start, the push for net neutrality regulation has been based on scary fantasies, rather than the real world.

Third, while net neutrality regulations are dressed up in nice rhetoric about keeping the Internet free and open and stopping ISPs from discriminating against certain Internet traffic, in reality, net neutrality is all about increased government regulation of and control over the Internet. In the end, political appointees will dictate pricing and network management models to private enterprises. It should be obvious that consumers and content providers benefit far more from broadband providers competing and testing their models in a dynamic online free market subject ultimately to the consumer, as opposed to turning ISPs into government regulated utilities.

Fourth, this regulatory overreach, the uncertainty that comes with it and the eventual government dictates serve as real disincentives for investing in broadband innovations and service. That would be bad news for all involved, including the small businesses that have benefited so much from the expansion of and innovations in broadband networks as consumers, content providers and telecommunications players.

Ironically, U.S. Senator David Rockefeller (D-WV) has said that opposition in the Senate to the FCC's actions would be bad for the economy. TheHill.com reported: "Rockefeller warned the tussle over the rules would lessen certainty for businesses in the midst of the nation's prolonged economic slump. ‘I fear their actions will do nothing more than impede the investment and innovation we need in our digital economy,' he said."

Of course, understanding the economics at work, it's the FCC's regulatory move that has created uncertainty, and will impede investment and innovation in the digital economy.

Senator Hutchinson had it right in observing: "Companies and industries that use broadband communications have flourished over the last decade without government intervention, yet the FCC has chosen to ‘fix' a problem that does not exist... Rather than imposing new, unnecessary regulations on one of the few thriving sectors of our economy, government should get out of the way, and allow new jobs and investment in broadband technologies."

The Senate needs to send a clear message in favor of maintaining a competitive, dynamic and innovative communications market by voting to stop the FCC's misguided effort laying the groundwork for a de facto government broadband takeover.

Unfortunately, though, even if the Senate takes such action, the President has promised a veto. That puts the issue of net neutrality regulation back in the courts, leaving the small business community and everyone else hoping that the courts will make clear that the FCC lacks the authority from Congress to regulate the Internet. In the meantime, we're all left with nothing but uncertainty due to more regulatory activism courtesy of the Obama administration.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.