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Title II Will Kill Internet Investment, Critics Claim

Opponents of the FCC’s plan to assume regulatory control over the internet say they are less concerned with what is known about it than with the many aspects that remain uncertain.

On Thursday, the FCC is widely expected to approve new rules subjecting internet providers to regulation under Title II of the Telecommunications Act, the same statute that applies to landline telephones. (RELATED: Testing the FCC’s Net Neutrality Political Calculus)

The proposal is designed to enforce net neutrality— the concept that internet service providers should not be allowed to either block legal content or prioritize certain types of content by charging fees for faster access speeds—but many critics believe Title II will stifle innovation and harm consumers.

At an event hosted by the Hudson Institute on Tuesday, former FCC Commissioner Robert McDowell and tech policy expert Scott Cleland outlined the case against Title II, claiming its various provisions will impede innovation, create long-term uncertainty for investors and could even open the door to more heavy-handed regulations in the future.

“The entire foundation that the internet has been built on in this country is under threat” from Title II, Cleland began, pointing out that internet speeds have increased more than 200 times since the government adopted a hands-off approach to the industry in the 1990’s, while at the same time prices have fallen and internet access has exploded.

For some perspective, Cleland noted that, “We have expanded broadband access to virtually the entire population in the last 20 years,” whereas it took about 60 years to achieve the same level of access to electricity, a highly regulated market.

Historically, McDowell summarized, “regulation keeps prices high and innovation low, and consumers suffer,” as has been illustrated each time the government has de-regulated an industry. (RELATED: GOP Net Neutrality Bill Could Preempt Internet Regulation)

“The beautiful thing about the Internet is that it allows innovation without permission,” Cleland said, but internet service providers (ISP’s) “are beginning to realize they will be under a ‘mother-may-I’ system,” whereby they will need FCC approval before implementing new ideas.

To make matters worse, Cleland also predicted that when companies seek out that permission, “the FCC will have an incentive to say no in order to justify the rules’ existence.”

In an attempt to ease such concerns, FCC Chairman Tom Wheeler has promised that, “The proposed Order applies some key provisions of Title II, and forbears from most others,” but rather than reassurance, Cleland and McDowell say forbearance will simply create ambiguity. (RELATED: This is What a Republican FCC Commissioner Had to Say About Wheeler’s Net Neutrality Plan)

Since Wheeler released a draft of the order last month, McDowell pointed out, “it has grown from applying 3 to about 13 sections [of Title II],” and while the rules call for partial enforcement, he said that from a legal perspective, “it is unclear what that means.”

Even if the current commissioners follow through on their forbearance promises, though, there is nothing to stop future Commissions from reversing the decision, prompting McDowell to ask, “Don’t people have the right not to be treated arbitrarily and capriciously?” (RELATED: Net Neutrality Bait and Switch to Title II)

Cleland took an even stronger stance, calling forbearance “a practical joke played on the industry,” because while in theory it offers protection against excessive regulations, in practice the government rarely approves its application.

After 18 years’ experience with forbearance, he explained, firms “know it’s like Lucy pulling the football away from Charlie Brown.”

By pledging to forbear from so many potential rules, therefore, the FCC will create a great deal of uncertainty for investors, and as Cleland noted, “When you create uncertainty for investors, you get less investment.”

As a result, Cleland predicted that, “On margin, over time, you will see a shift from risky bets to less-risky bets,” leading to fewer technological breakthroughs and more gradual improvements in service quality. “At a minimum,” he said, “it will slow down investment decisions.”

“The internet is currently a utopia of entrepreneurialism, but Title II will cut into that,” McDowell concluded, adding that the FCC proposal “is bad for America, but very good for lawyers (which itself is bad for America).”

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