Net Neutrality Endangers Freedom to Innovate

By Brent Skorup.

"Much of America’s success in technology in the past 20 years can be attributed to a bipartisan national policy, codified in a 1996 law, that the internet should be “unfettered by Federal or State regulation.” After this law passed, the Clinton FCC classified all internet access service as a lightly-regulated “information service.” In 2015, however, at the urging of President Obama, the FCC decided to deem most consumer broadband connections a Title II “telecommunications service,” akin to phone service. This heavily regulated category was created in the 1934 Communications Act to restrain the AT&T long-distance and Western Union telegraph monopolies. Title II regulations allow FCC to veto new services, to regulate prices, and to tax services.

These old regulations and new, nebulous rules pose special harm to small innovators. One of those innovators — serial entrepreneur Dan Berninger — sued to get the FCC rules overturned. Berninger, who has been called “a VoIP granddaddy,” has long promoted Voice over Internet Protocol technology and companies. He helped to bring Vonage to a mass audience and to jolt the global phone industry in 2006, when Vonage offered the first flat-rate international calling. His new HelloDigital service is a similar technology that pipes prioritized, high-definition VoIP in to websites, allowing users to interact and collaborate in real time.

Berninger’s problem is that the 2015 rules include a per se ban on services like HelloDigital. His suit seeks to protect not only HelloDigital but any future scrappy company that does not have the resources or investor patience to fight for years before the FCC against heavyweights like Google or Netflix or inside-the-beltway regulation advocates.

Berninger’s opposition to Title II regulation arises from his first-hand knowledge of it. When he arrived at Bell Labs in the early 1990s, he was stunned that telecom attorneys had to be involved in — and ultimately approve — technologies and techniques he and other engineers had created. Title II’s strictures meant that new services and business plans went through the FCC for approval. The risk-averse in-house counsel at Bell Labs regularly thwarted engineers’ attempts to make a cheaper, more capable network. Title II, Berninger says, fundamentally breaks the relationship between a company and consumers. In Title II proceedings, maintaining the FCC’s institutional power mattered most; AT&T’s health was next; new services and consumer demands lagged far behind, especially when they were incompatible with those priorities.”

During his tenure at Bell Labs, internet technologies started affecting the business plans of phone companies. Having seen the dysfunction wreaked by Title II regulation, Berninger concluded, “We have to keep the FCC and regulators away from the internet.”

The stakes for Berninger v. FCC rise higher with every passing month. The Trump FCC voted in December 2017 to rescind the 2015 order and restore light-touch regulation, but that will not end the matter. For internet regulation advocates, on the verge of seeing a decade of their work go up in smoke, the 2017 deregulation represents a crisis. They have flooded statehouse switchboards, and several states, via both executive order and legislation, are “discovering” their authority to regulate internet services. This risks creating dozens of “splinternets,” each network governed by customized local internet regulation regimes and the personal views of city and state CIOs.

For now, Berninger’s HelloDigital app is on pause as judges deliberate. Will the internet will be allowed to continue evolving in an emergent fashion? Or will innovators like Berninger first need to approach the internet zoning boards sprouting up nationwide for permission to serve customers? The explosive growth of the internet economy in the last 20 years has been driven by creative entrepreneurs with the freedom to innovate. Advocates for net neutrality are endangering this economic wonder. For now, free-market champions and free-speech advocates must wait on the courts.

Brent Skorup is an attorney and a member of the Cyber and Privacy working group at the Regulation Transparency Project."