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In Open Internet Ruling, The D.C. Circuit Defers To An “Economics-Free” Agency

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960x0June 14, 2016 will be remembered as a sad day for economics. In a 2-1 decision, the D.C. Circuit blessed the Federal Communication Commission’s reclassification scheme, which anachronistically treats modern-day Internet service providers (ISPs) as if they were monopoly-era common carriers. The appeals court refused to engage on the economics, deferring to the “predictive judgments” of an expert agency.

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In March 2015, the FCC ordered that “light-touch” common-carrier rules—economic doublespeak—were necessary to support a ban on paid-priority arrangements between ISPs and edge providers. In an ideal regulatory regime, (1) the FCC would be compelled to apply cost-benefit analysis, showing that the benefits of the ban exceed the costs (and that no less-restrictive alternative generates even greater net benefits); and (2) a reviewing court would scrutinize the FCC’s cost-benefit analysis. Neither happened here.

Not only did the FCC refuse to perform any cost-benefit analysis of its draconian rules, the majority of three-judge panel refused to question the FCC’s 2015 Open Internet Order on policy grounds or on the economics:
Critically, we do not inquire as to whether the agency’s decision is wise as a policy matter; indeed, we are forbidden from substituting our judgment for that of the agency.” Nor do we inquire whether “some or many economists would disapprove of the [agency’s] approach” because “we do not sit as a panel of referees on a professional economics journal, but as a panel of generalist judges obliged to defer to a reasonable judgment by an agency acting pursuant to congressionally delegated authority.” (citations omitted).

With economic considerations off the table, the majority narrowly focused on whether the FCC had the legal authority to subject ISPs to common-carrier rules under Brand X and Chevron.

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