A group of US academics, under the auspices of the International Center for Law and Economics, has urged the nation’s Federal Trade Commission (FTC) to warn the Federal Communications Commission (FCC) of the adverse effects of adopting restrictions on potentially pro-competitive conduct such as paid prioritisation as it considers its rule-making on the Open Internet.
They say the FTC should, as the FTC (and Department of Justice) has done in the past, urge the FCC to take an approach that promotes, rather than harms, consumer welfare.
They claim that by reclassifying broadband under Title II in an effort to ban paid prioritisation agreements included in service level agreements between ISPs and content providers, the FCC apparently plans to adopt what amounts to a per se ban on such agreements by truncating the factual analysis needed to condemn such agreements or by setting a presumption against paid prioritisation that is, effectively, not rebuttable. But neither the record established by the FCC nor basic economics supports a per se ban.
They note that in its 2007 Broadband Competition Report, the FTC adopted a “sober, realistic assessment” of both the costs and benefits of prioritisation of data on the Internet, concluding that:
Not every use of prioritisation technologies is apt to have all of these positive or negative results. Policy makers considering whether to allow or restrict any or all usage of prioritisation technologies should take into account the many and varied implications of such usage.
They contend that this is precisely what a rule of reason would do (as much as any decision rule could): allow regulators to distinguish harmful from beneficial uses and to deter only the harmful ones.
“We believe that some variant of the rule of reason approach proposed above is the only approach consistent with the law and economics literature derived from antitrust law and from the FTC’s own experience. We urge the FTC to ask the FCC to adopt such an approach in any Open Internet rules it may issue and, at a minimum, to issue a Further Notice of Proposed Rulemaking seeking comment on, and rigorous economic analysis of, such an approach,” they conclude.