FCC Confronted with Congressional Regulation

Forces are at work to clamp down on the FCC's ability to regulate and tax the Internet. After putting up with no less than three revisions to how it can tax and control the domestic Internet, Congressmen Jim DeMint, from South Carolina, said he would soon introduce a bill that would reform the FCC and guard against unnecessary taxation and regulation of the Internet and other media services.

The "Consumer Choice Act" is based on a bill introduced in 2005, which would "reform the FCC into a market-based, antitrust-style framework, using an 'unfair competition' standard". It would essentially model the FCC after the FTC and take away the commission's ability to make longstanding "law" - instead limiting any regulations to 5 years with option for renewal.

This is in response to recent moves by the FCC to function an unelected taxing authority with the capability to bring new regulations and costs to consumers - particularly with respect to interstate trade laws and Internet sales. What prompted this resurgence of interest in bringing down the FCC's power grab was the commission's "third way" plan, proposed by Chairman Julius Genachowski in early May, which would reclassify the transmission of data as a telecommunications service, opening the floodgates to regulation and taxation.

The FCC's pursuit of regulatory, and thus taxation, power comes from an interpretation of the Communications Act of 1934 that gave them limited authority to regulate broadband services. To exercise this, in 2008, the FCC attempted to ban Comcast from blocking peer-to-peer sites like BitTorrent - something that was smacked down by the D.C. Circuit Court earlier this year. 

Next week, the Commerce Committees of both houses will hold a series of sessions about communications policies, chiefly concerning broadband regulation and the authority of the FCC. While later meetings will touch on spectrum policy and ways to expand broadband adoption as well as capacity, this first part is what has a lot of retailers concerned - and wondering how much power the FCC will be able to nab before it is stopped. According to the 16th Amendment to the constitution:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

We don't see anything in there about the FCC... The significance of Jim DeMint's efforts lie in that his is the first to react to the FCC's broadband plans with legislation. Given their proclivity to continue pursuing legislation on these regulatory matters (they've been at it for over 2 years now) this may be the only way to clearly define their abilities and shut them down from further encroaching into these areas. 

This isn't the first time regulation has been attempted to reign in the FCC. Following the FCC's net neutrality proceeding, Sen. John McCain, introduced a bill to ban the FCC from enacting rules that would regulate the Internet. Later, Marsha Blackburn introduced the "Real Stimulus Act of 2009", which included provisions to keep the FCC from "needlessly imposing regulations on the Internet." Given the bloat of both bills and the vagueness of much of the language, neither made it out of committee.

Subsequent attempts at regulating the regulator have been either unsuccessful or withdrawn. To get a feel for the industry feedback on the FCC's attempts at power grabs we can look to several key responses, here are some choice quotes - some of which are more direct than others:

"While we remain concerned about unjustified regulation, we are encouraged that the careful balancing the chairman promised in his public statements since first announcing a 'Third Way' has led to a rational next step as all stakeholders continue to work together to keep the Internet ecosystem growing and open."

- David L. Cohen, executive vice president at Comcast

"Reclassifying high-speed broadband Internet service as a telecom service is a terrible idea. The negative consequences for online users and the Internet ecosystem would be severe and have ramifications for decades. It is difficult to understand why the FCC continues to consider this option."

-  Tom Tauke, Verizon executive vice president for public affairs, policy and communications

"It will create investment uncertainty at a time when certainty is most needed. It will no doubt damage jobs in a period of far-too-high unemployment. It will also undermine the FCC's own goals for the National Broadband Plan. A better and more proper approach is for the FCC to defer the question of its legal authority to the US Congress.

- Jim Cicconi, AT&T's senior executive vice president for external and legislative affairs

"We see little benefit to changing course and great danger in attempting to shoehorn modern broadband services into a Depression-era regulatory regime without serious collateral effects to investment, employment, and innovation." 

- NCTA president and CEO Kyle McSlarrow.

"Despite the fact the FCC has heard from more than half of the elected officials in Congress that this approach is wrong, the Commission has chosen to ignore this diverse and bi-partisan group of Senators and Representatives from around the country. Instead, the commission's action is a dangerous solution in search of a non-existent problem."

- CTIA president and CEO Steve Largent 

We'll keep tabs on where this goes, but our gut says that the best move is to place any sort of real regulatory, and especially taxation control, in the hands of Congress, not the FCC.