Other Regulatory Overreach Topics:

Internet Freedom



The Issue


Over the past 20 years, the world has been changed immeasurably by the advent of the Internet and other communications technologies. These breathtaking advances have not only expanded the economy, but also improved the quality of life for billions of people around the globe. For the first time in world history, information is available to individuals at literally the touch of a finger, letting them stay in contact with friends and family, giving them access to goods and services from around the globe, and enabling them to participate in civic debates.

This revolution in human affairs is a free-market success story. Though early technologies were developed as a Defense Department research project, the Internet long ago shed its government links and has thrived as a largely unregulated network of networks, harnessing the energy and creativity of countless private individuals and firms. No central authority dictates what services are provided on the Web, what technologies are used, or what content will be available. The result is an innovative and competitive cornucopia of offerings and a network that is still expanding.

This Internet freedom, however, is threatened. State and local politicians want more revenue from e-commerce, regulators want to mandate “neutrality” among Internet traffic flows, and foreign governments are seeking control of Web content and governance. Members of Congress and other U.S. policymakers must defend the Internet from such intrusions, allowing it and its users to enjoy the freedom that has made it so successful.


Recommendations


End FCC Regulation of the Internet. In a February 2015 decision, the Federal Communications Commission (FCC) imposed far-reaching regulations on U.S. Internet service providers. Reversing a 20-year bipartisan consensus in favor of “light-touch” regulation of Internet service providers (ISPs), the agency declared these providers to be common carriers—or public utilities—subjecting them to a host of mandates and prohibitions under the 1934 Communications Act. Foremost among these is a mandate that providers treat all information being delivered over their network identically. This means ISPs could not offer discount or premium pricing plans to firms providing Web content. Going even farther, the FCC adopted a “general conduct” rule, by which it has the power to ban any other practices that would “disadvantage” companies offering conduct. This new power is so broad and ambiguous that virtually no activity is safe from potential FCC constraints. Policymakers should reject any efforts to restore these harmful new rules.

Block Sales Taxation of Out-of-State Internet Sales. Several bills pending in Congress would allow state governments to force retailers in other states to collect their sales taxes. Intended to equalize the tax burdens between so-called brick-and-mortar retailers and their online counterparts, the proposals would actually create new disparities and impose new burdens as sellers struggled to deal with the tax laws of some 10,000 jurisdictions and 46 state tax authorities. The proposal also would violate principles of federalism, making sellers subject to the laws of states with which they have no connection. Policymakers should reject these dangerous proposals.

Keep ICANN Accountable to Stakeholders, Not Foreign Governments. The Internet Corporation for Assigned Names and Numbers (ICANN) is a private corporation founded by the U.S. government to manage the “address book” of the Internet. This includes such tasks as deciding on which top-level domain names such as .com and .org should be used, and managing routine updates to the underlying Internet software, or “root.” Since its creation, ICANN has operated under a contract with the U.S. Department of Commerce. Oversight by Commerce has served to protect ICANN from foreign governments, some of which would like to use ICANN to further their own interests. to influence ICANN to advance their preferred policies. In March 2014, Commerce announced its intention to end that contract and to make ICANN independent. Before any such change takes place, however, institutional reforms need to be in place to ensure that ICANN is accountable to its users, not governments.

Enforce Intellectual Property Rights Without Undue Regulation. Websites selling counterfeit goods, including tangible items such as branded clothing, pharmaceuticals, and digital goods like Hollywood movies, have proliferated on the Internet. Such activity is a form of theft, and the federal government has a legitimate role in preventing it, but broad-brush efforts to combat piracy can have unintended consequences, such as impeding the growth of technology, weakening Internet security, and weakening free speech rights. Policymakers should consider the consequences of and alternatives to any anti-piracy regulations very carefully before moving forward. The protection of intellectual property should not be used as an excuse for harmful government regulation of Internet content.


Facts and Figures


  • Broadband is one of the biggest areas of investment in the U.S. economy, with $78 billion in private capital invested in 2014 by ISPs into their networks.
  • In 2000, the portion of U.S. households with a home connection to broadband was 3 percent. By 2013, that number had jumped to 70 percent.
  • Historically, the processing power of computers has doubled every 18 to 24 months, shorter than the time it can take to write and implement a major regulation.

Selected Additional Resources


James L. Gattuso, Alden F. Abbott, Curtis S. Dubay, David Inserra, Paul Rosenzweig, Michael Sargent, and Brett D. Schaefer, “Saving Internet Freedom,” Heritage Foundation Special Report No. 168, June 3, 2015.

James L. Gattuso, “Online Piracy and SOPA: Beware of Unintended Consequences,” Heritage Foundation WebMemo No. 3438, December 21, 2011.

James L. Gattuso, “Taxing Online Sales: Should the Taxman’s Grasp Exceed His Reach?” Heritage Foundation Backgrounder No. 2817, June 19, 2013.

James L. Gattuso and Michael Sargent, “Beyond Hypothetical: How FCC Internet Regulation Would Hurt Consumers,” Heritage Foundation Backgrounder No. 2979, November 25, 2014.

Brett D. Schaefer and Paul Rosenzweig, “The U.S. Must Reject the ICANN Transition If Accountability Falls Short,” Heritage Foundation Issue Brief No. 4471, October 14, 2015.