Pai, O'Rielly Say Net Neutrality Order Will Stifle Innovation

Pai and O’Rielly said the rules address a problem that doesn’t exist. O’Reilly said he read the entire order during his honeymoon on the beach in Hawaii. “It is a page turner,” he joked: “You’re looking for justification and rationalization and, of course, a lot of that is missing. … It’s guilt by imagination.”

The FCC majority seems determined to trample on innovation, O’Rielly suggested. “The commission has defined this is what the product must look like, it must be at these speeds, it must have these features,” he said. The order is a “disturbing portent of what’s to come,” Pai said.

Pai predicted when high-tech players see the net neutrality rules they won't be happy with “a number of things.” Google managed to head off rules covering broadband subscriber access services and made the case to the FCC in “11th hour” arguments that such services don’t exist. “It demonstrates what happens when an agency, which doesn’t have expertise in this area, opines in the dark,” Pai said.

“When you read this document, it’s worse than you imagined,” O’Rielly said. Edge providers eventually will be “subsumed” under FCC authority, he said. “That’s extremely problematic,” he said. “They do not want that.” The order inevitably will lead to rate regulation, he said. “When a complaint is filed how do you resolve it without having some type of consideration of rates and what’s being offered in the marketplace?” O’Rielly asked. “That means that the edge providers are going to be subsumed into that debate and that is a terrible place to be.”

Some may think that with reclassification, broadband falls under Title II of the Communications Act while Telecommunications Act Section 706 has been set aside, O’Rielly said. “The truth of the matter is you get both,” he said. “It’s not one or the other.”

TechFreedom President Berin Szoka suggested Chairman Tom Wheeler had ignored Republicans' proposals on net neutrality. “I’ve gotten used to that, I think,” Pai said.

Pai cited the “joyous” reaction from the Democratic National Committee to approval of the rules. “Hooray, the FCC just approved President [Barack] Obama’s plan,” Pai said, quoting the group’s website. “This should not be a political issue,” he said. “It never has been before.”

Former FCC Commissioner Robert McDowell, now at Wiley Rein, characterized the net neutrality order as “a runaway train that was never on the rails,” during the same program Friday. Net neutrality proponents “did a masterful job of messaging here,” he said. “They had to create the sense of a crisis and then say, ‘the Internet is so horribly broken that only the government can fix it,’” he said. The message was “three unelected Washington bureaucrats” can manage the Internet “better than entrepreneurs and engineers and consumers.” Net neutrality is “an empty vessel” anyone can use to get the government to “regulate their rival, but not them,” McDowell said. “That’s what many requests boil down to at the FCC and other agencies.” The best-case scenario is the order is “blown” to “smithereens” in the appellate courts, he said.

But Michael Calabrese, director of the Wireless Future Project at New America’s Open Technology Institute, defended Wheeler and the FCC’s order. The FCC got a huge number of comments on both sides of the issue, including from Obama, he said at the event. Wheeler’s thinking evolved from a commercial reasonableness standard under Section 706 to a sender-wide classification theory to Title II with forbearance, Calabrese said. “There was a whole evolution that went on based on what was in the record,” he said.

An Entirely Prophylactic Order

The FCC rules are “almost entirely prophylactic,” Calabrese said. “It will have virtually no impact on the Internet.” He said the Netherlands adopted similar rules a few years ago and nothing has changed.

The order means “shifting from a regime based on competition among broadband providers,” CEA President Gary Shapiro said during a Georgetown University Center for Business and Public Policy press call Friday. Though the agency said it would forbear from much of Title II, “the FCC changes rapidly, commissioners come and go ... . They're forbearing today but the legal standard that Congress has for forbearance is just what is in the public interest, which we know could mean whatever the FCC commissioners think it means. That forbearance can change very, very quickly.”

McDowell, who was also on the call, expressed skepticism about the agency’s characterization of the order as being “light touch,” calling Title II classification “giant” and “pervasive.” McDowell said the “notion of being able to nimbly pick and choose” aspects of Title II “is a fallacy.” Reclassification could apply to edge providers, he said. The agency’s ability to judge interconnection agreements, he said, is “de facto rate regulation.”

In defense of the FCC, Computer & Communications Industry Association President Ed Black questioned Friday why there had been so much uproar over the order. “The FCC took an historic action that in reality is an historic non-event,” he said. “What the FCC did was simply preserve the status quo so that all Internet users and businesses have uninterrupted access to Internet content.”