The FCC’s proposed broadband privacy rules: The harmful effects of regulating without evidence or analysis

Geoffrey Manne —  31 May 2016

Last week the International Center for Law & Economics filed comments on the FCC’s Broadband Privacy NPRM. ICLE was joined in its comments by the following scholars of law & economics:

  • Babette E. Boliek, Associate Professor of Law, Pepperdine School of Law
  • Adam Candeub, Professor of Law, Michigan State University College of Law
  • Justin (Gus) Hurwitz, Assistant Professor of Law, Nebraska College of Law
  • Daniel Lyons, Associate Professor, Boston College Law School
  • Geoffrey A. Manne, Executive Director, International Center for Law & Economics
  • Paul H. Rubin, Samuel Candler Dobbs Professor of Economics, Emory University Department of Economics

As we note in our comments:

The Commission’s NPRM would shoehorn the business models of a subset of new economy firms into a regime modeled on thirty-year-old CPNI rules designed to address fundamentally different concerns about a fundamentally different market. The Commission’s hurried and poorly supported NPRM demonstrates little understanding of the data markets it proposes to regulate and the position of ISPs within that market. And, what’s more, the resulting proposed rules diverge from analogous rules the Commission purports to emulate. Without mounting a convincing case for treating ISPs differently than the other data firms with which they do or could compete, the rules contemplate disparate regulatory treatment that would likely harm competition and innovation without evident corresponding benefit to consumers.

In particular, we focus on the FCC’s failure to justify treating ISPs differently than other competitors, and its failure to justify more stringent treatment for ISPs in general:

In short, the Commission has not made a convincing case that discrimination between ISPs and edge providers makes sense for the industry or for consumer welfare. The overwhelming body of evidence upon which other regulators have relied in addressing privacy concerns urges against a hard opt-in approach. That same evidence and analysis supports a consistent regulatory approach for all competitors, and nowhere advocates for a differential approach for ISPs when they are participating in the broader informatics and advertising markets.

With respect to the proposed opt-in regime, the NPRM ignores the weight of economic evidence on opt-in rules and fails to justify the specific rules it prescribes. Of most significance is the imposition of this opt-in requirement for the sharing of non-sensitive data.

On net opt-in regimes may tend to favor the status quo, and to maintain or grow the position of a few dominant firms. Opt-in imposes additional costs on consumers and hurts competition — and it may not offer any additional protections over opt-out. In the absence of any meaningful evidence or rigorous economic analysis to the contrary, the Commission should eschew imposing such a potentially harmful regime on broadband and data markets.

Finally, we explain that, although the NPRM purports to embrace a regulatory regime consistent with the current “federal privacy regime,” and particularly the FTC’s approach to privacy regulation, it actually does no such thing — a sentiment echoed by a host of current and former FTC staff and commissioners, including the Bureau of Consumer Protection staff, Commissioner Maureen Ohlhausen, former Chairman Jon Leibowitz, former Commissioner Josh Wright, and former BCP Director Howard Beales.

Our full comments are available here.

Geoffrey Manne

Posts

http://laweconcenter.org/

One response to The FCC’s proposed broadband privacy rules: The harmful effects of regulating without evidence or analysis

  1. 

    Hey Geoff,

    I agree with the bottom line, but I’ve got a couple of warnings about the argument.

    First, I’m quite skittish about using behavioral economics claims to prop up policy positions. Perhaps its most well known such claim is that “opt in” vs “opt out” matters. The first part of your argument looks like you are buying into this. Unless you add that there are real costs on clicking the “opt” box, an argument like this can come back to bite when the behavioral economists come up with more putatively benign “nudges”.

    The second is that sense that the argument is couched as “second best”, in that the ISPs should be able to do what their competitors can do. I’ll assume for now that you’re not advocating that the FCC be able to regulate Google’s privacy policies, or anything else. There’s also a risk in designating edge providers as competitors of ISPs, since that feeds right into the FCC’s justifications for “neutrality”–its concern that ISPs would be discriminating against competitors.

    It might have been more productive in the longer run to couch the argument more directly, that the benefits of information sharing are great and the costs exaggerated. Perhaps the full filing, which I have not read, does that.

    Along with this is reiterating an argument you all have made before, which is that but for this Title II stuff, the FTC could come up with the uniform policy and not require that the FCC engage in either “second best” regulation or assert authority over the edge providers. Not that you all are big fans of the FTC’s privacy development either!

    Best of luck with this, and I hope you don’t find yourself arguing against some of these points down the road.

    Thanks,

    Tim

    On Tue, May 31, 2016 at 7:46 AM, Truth on the Market wrote:

    > Geoffrey Manne posted: “Last week the International Center for Law & > Economics filed comments on the FCC’s Broadband Privacy NPRM. ICLE was > joined in its comments by the following scholars of law & economics: > Babette E. Boliek, Associate Professor of Law, Pepperdine” >