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From the Archives: Policy analyst James Gattuso discusses the problems with Net Neutrality – Part I

Policy analyst James Gattuso discusses the problems with Net Neutrality – Part I
January 24, 2011 12:03 AM MST

When the Federal Communications Commission issued rules regarding Net Neutrality in December 2010, it set off a debate about the value and legitimacy of those regulations.

Net neutrality James Gattuso Heritage Foundation
Earlier this month, the Charlottesville Libertarian Examiner had an opportunity to interview James Gattuso, senior research fellow in regulatory policy at the Heritage Foundation in Washington. Gattuso had addressed a group of Virginia political activists in Richmond about the FCC’s new rules.

Gattuso summarized his remarks by saying that “the FCC last month adopted rules to regulate the Internet. They’re vague rules but, I think, very detrimental rules to society and the economy.”

‘Vague notion of fairness’

The argument for these rules, he said, “is essentially a vague notion of fairness,” which posits that “ISPs -- companies like Verizon and Comcast, which provide Internet service to individuals and businesses -- should treat all traffic the same, with no differentiation between how the speed or quality with which they’re delivered.”

This, he went on, is a “tempting idea but ultimately flawed.”

It is flawed “because for practical purposes there’s always been and needs to always be differentiation” in services regardless of what kind of business is under discussion.

Moreover, Gattuso said, “the idea of premium services and discount services is inherent to a marketplace. I can’t think of a single industry that does not use premiums and discounts. It’s an economic tool that’s beneficial to consumers.”

Premiums and discounts, he continued, are “necessary to the success of the Internet itself.”

No legal authority

Gattuso also argued that the FCC lacks the legal authority to issue Net Neutrality regulations.

James Gattuso net neutrality Heritage Foundation
James Gattuso (c) 2011 Rick Sincere
The FCC gets its authority from the Communications Act of 1934 and many subsequent amendments, he said. This law “gives the FCC authority over broadcasting. It gives the FCC authority over the telephone system, but it does not give authority anywhere in the text [for] regulating the Internet.”

To get around this lack of legal authority, Gattuso noted, “the FCC has argued in the past that it has what is known as ‘ancillary jurisdiction,’ which means if they regulate something that is similar to the Internet, they can regulate the Internet itself.”

The problem with this position, however is that the claim “was thrown out in a case in federal court last April, without much ceremony. It was not taken seriously by the court, nor should it have been,” said Gattuso.

However, he added, “with this December decision, the FCC is coming back again with a very similar argument, this time based upon a particular section [of the code] that was meant to be deregulatory.”

In that section, “Congress instructed the FCC to act to encourage development of advanced Internet services. This was a provision that was meant to instruct the FCC to deregulate, to reduce barriers, to advance Internet services if they are not being deployed.”

What the FCC is claiming now is that this deregulatory provision of communications law is “in fact a new grant of authority that they did not otherwise have, mandating them to regulate.”

This, Gattuso concluded, is “a complete reversal of what Congress intended and, ultimately, also legally flawed.”

In Part II of this interview, James Gattuso talks about what the congressional response might be, and whether Net Neutrality is a threat to freedom of expression.

Publisher's note: This article was originally published on on January 24, 2011. The publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to since April 6, 2010. It is reposted here without most of the internal links that were in the original.

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