Pai Rolls Back FCC Net Neutrality Rules (Audio)

Thanks for joining us, Rob, thanks so much for having me. Um. So, I'm guessing you, when you're on the SEC, you you oppose at least an earlier version of the net neutrality rules. I'm guessing you think that what the Chairman did yesterday is a good thing. Tell tell us why. Well. First, net neutrality has no legal term of our no legal definition. So UM, it's important to understand what we're talking about.

I think we're talking about a free and open Internet where consumers can free roam and use UH and download the content and apps of their choice, provided their lawful and things of that nature. And that's what we've had since the Internet was privatized in the mid nineteen nineties. UH with other laws under other law, and for the first six years of the Obama administration it was other law.

What the FEC did over two years ago, though, was to use the nineteen thirty four law to classify Internet access services broadband services as a telecommunications service, something called in the shorthands Title two's Title two of the Communications Acts of four to get technical and that brings with it about a thousand different legal requirements and a lot

of questions as a result. So what a jeep Pie, my friend and former colleague we served together on the FECs is doing is proposing we think we haven't seen the proposal just yet, but what he outlined yesterday um is to try to figure out a different legal path to do that so that all parts of the Internet ecosystem can thrive without these uncertainties. Rob, how high are

the stakes here? You know the stakes are high. But the good news is is that you know, prior to or ten, when the FEC tried another time to impose new rule, uh, the Internet marketplace was thriving both. You know, if you look at the the edge providers content and apps and services of one form or another. Uh, we're all thriving as we're network operators. It was the wireless companies, the cable companies, the phone companies that actually connect consumers

to the Internet. And so the trick here is to try to find that sweet spot, that balance, which I'm optimistic can be found. Maybe it has to be found through Congress as well. That's a whole another topic we can talk about. But the stakes are high because it is the future of the Internet. But the good news is is that everything has been thriving thus far even without these Title two rules that went into effect two

years ago. So one thing you touched on. One thing Chairman Pie talked about yesterday was was the notion that that companies are doing have done very well, uh with with what he called light touch regulation. And he talked about the great success stories companies like Google and and Facebook, UM.

And there's a trade group called the Internet Association that that that supports the existing rules in a posed what what the Chairman did yesterday, and that group includes some of these very h companies that are success stories, the Google's, the Ebays, Microsoft, Netflix, um, which we make of their their opposition, Well, they've also opened the door. Michael Beckerman, their CEO, who I know very well, uh, they've left the door open to having a dialogue, whether it's with

the SEC or with Congress. UM. Some of those edge providers historically were very worried about Title two and coordinating it off to just apply to network operators again, broadband companies UM rather than other parts of the Internet ecosystems such as themselves, UM and the FCC in put in place this general conduct standard to kind of say we're gonna do X, y and Z, but also we're going to have authority over the general conduct of anything in

the Internet ecosphere. And I think that concerned a lot of tech companies of all stripes UM. And if you think about some of these companies, they have their own networks, right, thousands of miles of fiber connecting routers and servers all over the country, all over the world to pervade content and apps and all the rest. So they themselves have content and networks just the way a Comcast or a

T and T does at this point. So you know, the markets, the consumers are demanding convergence, and the markets are responding. Companies are responding, so they're all starting to blur together to kind of look like the same animal.

In some cases, so you have to ask yourself, as an eighty three year old law that was designed to regulate telephones that were held in two hands, uh the right mechanism or or should we find something that's more modern and more flexible that can really protect consumers in this very dynamic, sometimes ephemeral marketplace we're talking about. The fccs plans to roll back its rules governing net neutrality.

Supporters said the rules prevented the creation of Internet fast lanes available only to companies that could afford to pay the price. Here's what then Chairman Tom Wheeler said when the FCC approved its rules in Today is a red letter day for Internet freedom for consumer words who want to use the Internet on their terms, for innovators who want to reach consumers without the control of gatekeepers, for a future in which there are rules to protect the

Internet and its users. But yesterday, current chairman A Pie said the rules were stifling investment and innovation. I think what the SEC doesn't need is heavy handed regulations that settled businesses with a lot of rules that simply disincentivize them from building those networks. And that's going to be the course we are charting henceforth, Our guest is former

SEC Commissioner Robert McDowell. He was a Republican appointed member Republican member of the Commission, and he supports what Chairman pie uh said yesterday. Rob you know, one one argument that you've heard a little bit from Tom Wheeler and hearing from other opponents of this move is that essentially the Internet is being left to police itself and it's a bit of a going to be a bit of

a wild West out there. And what you could have is companies that favor either you know, uh, you know, an entity they own or somebody who pays them money, uh, in order to get faster internet service, using that you know on the website or using that app or whatever. What what's the argument, what's the counter to that? Well, first of all, that's been said for about fifteen years, uh, and it has never happened. There's there's little to no

evidence that that happened. And if there were evidence, if it were happening, there were other laws on the books that already existed that would have either prevented that or punished the bad actors if they tried to do something like that. Um. So you have a section to the of the Clayton Act. You have Section five of the

Federal Trade Commission Act. And this is important because what the FEC did in when it classified internet access as a telecommunication service under the Communications Act four it took away jurisdiction from the Federal Trade Commission, which polices every other corner practically of the economy, including very complex high tech corners of the economy, to prevent or punish anti

competitive conduct by market players. Um so you took a cop off the beat actually with the title to classification, and you brought in about a thousand requirements um of Title two of that Act, which created all these questions and all this uncertainty that Chairman Pie is speaking about

right there. So the notion that somehow companies are going to be able to broadband companies are gonna be able to discriminate in an anti competitive way against other market players or harm consumers isn't true because there are other laws that would exist but for this title too. But isn't it the case that, I mean, any trust laws tend to look backwards at conduct that are already happened. Isn't it better to have rules that look forward, especially

given how quickly the tech industry works. You know, by the time you know the antitrust case is brought against Microsoft, the industry has has changed dramatically before you get to a final judgment. In a case like that, it wouldn't be better to have rules that we know, know what's what is? Uh, you know that they sort of govern

what companies do before they do it. Well, Actually, when you have a fast paced, quickly changing marketplace, UM, it is that enforcement that seems to work better rather than regulators trying to guess where the market is headed. And in part that's what was happening here. Uh. Chairman Pie

would argue, UM and others. So, uh, you have the Department Justice, any trust division and the Federal Trade Commission able to police those high tech areas in a lot of complex areas, whether it's privacy or any trust or consumer protection, etcetera. UM. And if you look actually the speeches and the writings of Acting Federal Trade Commission Chairman Marine Olhausen, she talks extensively about the issue you just raised to say, Look, what you need are flexible rules

that punish market actors and create dist incentives. And really this can be proven out by looking at market behavior leading up to the vote on that neutrality that was largely struck down by a court uh and order. Um, you know, let's look at the marketplace. Until then, it was doing wonderfully, beautifully well, and it still is by

the way overall. But what Pie is trying to do is to remove the uncertainty and try to find something that's more modern and more flexible so that every aspect of the inner ecosphere can thrive, and not just certain parts of it. Rob Is it true that only Congress can ensure that net neutrality doesn't swing like a pendulum with each administration? Yeah, you know what, And that's speaking personally.

I think that's ultimately what should happen. Of course, it's very hard to get anything through Congress right now, but you're right, every four to eight years we could have a new regulatory regime depending on who's elected president, who the new chair is uh. And that creates more uncertainty and more harm. And that's why I'm optimistic and hopeful.

Maybe I'm more hopeful that I am optimistic that all the parties could come together once they see where Chairman Pie is going, and come to the table in Congress to try to get something done. This was actually close to happening in you had Chairman John Thune of the Centem Commerce Committee and the ranking member Bill Nelson very close to agreeing on some principles for legislation until it looked like the FEC was just going to go ahead.

And there are a lot of pressure groups who are pressured Center Nelson and some others to back off of legislation. But you're absolutely right. I mean, I think all aspects of the Internet eco sphere could could benefit from sitting down with members of Congress and just saying, hey, this

is something that historically has been bipartisan. Keep in mind here, I was the senior Republican sometimes the only Republican on the FCC ardently defending Clinton Gored administration policy regarding the Internet. The Clinton gord administration was very much opposed to Title two, and that was the case through the first six years of the Oban administration as well. Uh, and something change. So so here we are, what if you give me the fifteen second version of what you would like to

see replace the rules that are being scrapped. Well, you want to make sure that there's not an opportunity for blocking or the throttling of of internet access. Uh, the anti competitive conduct that would favor some content over others. Um, you want to make sure that it's free and open and that consumer demand is not frustrated, that consumers continue to gain happy. Okay, thank you so much to Rob McDowell, former FEC commissioner or guests talking about the FCCS changes

on Internet broadband regulation. Coming up on Bloomberg Law, We're going to talk about that two year prison sentence for Jesse Litvack. He was convicted of lying to a customer about bond prices. That's the case that has certainly gained notice on Wall Street. That's coming up