Imposing Title II With Forbearance Is 'Recipe for Disaster,' Pai Says

“There are a lot of different Title II provisions and I have yet to hear anyone supply a consensus answer [on] what regulations should stay and which ones should go,” Pai said. “Some of the very advocates who have been pushing for Title II regulation and have held up the fig leaf of forbearance are now starting to turn around and say, ‘Well, we don’t want the FCC to forbear from this regulation or that regulation because we consider it to be critical to the functioning of an effective marketplace, for the protection of consumers.'”

Pai said the FCC has the authority to forbear from provisions of the title under Section 10 of the Communications Act, but making forbearance decisions has never been easy. “The FCC has to develop a very detailed factual record to support forbearance,” he said. Typically it takes the FCC “almost a year” to decide on “run-of-the-mill” forbearance proposals, he said. “This is going to take a lot longer than that.”

In comments at CES last week, Chairman Tom Wheeler declined to go into detail about what forbearance might look like, except to note that the Communications Act places strictures on how wireless is regulated under Title II (see 1501070054). Pai said Wednesday some have suggested Sections 201, 202 and 208 would be the only operational parts of Title II the FCC would focus on in its revised rules.

Some net neutrality proponents argue that Title II is the “only clean way” to impose rules and with forbearance “we could get, to put it crudely, all of the good stuff of Title II and none of the bad stuff,” Pai said. Now these same advocates are saying “we can’t forbear from Section 254 for this reason, we can’t forbear from Section 222 for that reason,” he said. Some who argued that forbearance is a “safety valve” want to see “that valve remain as tightly constrained as possible,” Pai said. “Just as a conceptual matter, I think that’s going to cause a lot of difficulties for the agency.”

The 10th U.S. Circuit Court of Appeals' 2012 decision in Qwest v. Phoenix, addressing the FCC's use of forbearance, looms large, Pai said: “The factual foundation has to be there and under the Qwest-Phoenix standard it’s going to be very difficult for the agency to be able to prove that the marketplace is competitive enough to justify forbearance from any particular part of Title II."

Pai said the FCC’s net neutrality rules are a “solution in search of a problem.” He said he's willing to have the FCC look at problems if they crop up. “If there are particular instances in which the FCC’s abjuratory power is called for, that’s one thing, but to adopt prophylactic regulations covering an entire industry I would argue is not the right way to respond to those isolated instances,” he said.

Pai also said the market for peering and interconnection has become more competitive, with prices down 99 percent in 10 years. “We are seeing more and more companies rely on competitive content delivery networks, CDNs, or simply build their own CDNs,” he said. It’s unclear where the FCC would draw the line if it starts to get involved in interconnection disputes, he said. The FCC could “insert itself into all sorts of competitive issues” regarding edge providers, he said. “That’s not going to redound to the benefit of anyone.”

Free Press Policy Director Matt Wood challenged Pai’s statements on Title II. “If you want to look at what we and other advocates have actually said, instead of guessing what we might do, then yes: Free Press is on the record saying that Sections 222 and 254 should be in the conversation,” Wood told us. “If Commissioner Pai wants to say that consumer privacy and universal service are the so-called bad parts of Title II, that's a shame.”

Wood said Pai’s characterization of the forbearance law as “fig leaf” is a “slap in the face not to us, but to the Congress that wrote his agency's authorizing statute.” The core provisions are Sections 201 and 202 of the Communications Act, he said. “It's not just that the FCC should return to those provisions for the sake of good policy; it has to return to the law that Congress wrote unless the agency can show that its protections are no longer necessary.”

"If the FCC makes a foundational argument that the Internet access market has changed to such an extreme degree that the commission must reverse itself and declare it subject to Title II, while on the other hand attempts to forebear from all but a handful of the 1,000 or so requirements of Title II based on a different rationale, it will be undermining its own logic for classification and lose in court," said former FCC Commissioner Robert McDowell, now at Wiley Rein.

Since the FCC historically has interpreted its forbearance authority in a very narrow manner, Free State Foundation President Randolph May said four years ago he recommended that Congress modify the statutory provision in a way that would require the agency to grant forbearance in a more liberal fashion. “Of course, that hasn't been done,” May said. “So, it's hard for me to see how the commission could make the findings that would justify imposing Title II regulation and then immediately turn around and forbear based on findings at odds with those it just invoked. The commission would have to twist its prior precedents almost beyond recognition. I don't think even a double dose of Chevron deference will persuade a court that the agency's action is reasonable." The Chevron case, decided in 1984, provides the basic legal test for determining whether to grant deference to a government agency's interpretation of a statute.