“Dangerous and disturbing this puzzle is. Only a Jedi could have erased those files. But who, and why, harder to answer.” Yoda, Star Wars: Episode II – Attack of the Clones (2002).
In an earlier post, I wrote that the FCC lacks jurisdiction to enact net neutrality rules without allowing carriers latitude to make reasonable distinctions and discriminations in the provision of services. In this post I’m including my suspicions as to why the FCC has erased a general notion of reasonableness from its proposed net neutrality rules. I suspect that the FCC is proceeding this way to avoid the holding in Orloff v. FCC, 352 F.3d 415 (DC Cir. 2003).
In Orloff, Verizon Wireless had negotiated with prospective customers and given them special concessions. The complainant alleged that Verizon, in giving sales concessions, had violated section 202(a) of the Communications Act by treating similarly situated customers differently. Pursuant to a primary jurisdiction referral, the FCC determined that in a competitive market, market forces were sufficient to protect consumers from unreasonable discrimination. Thus, even though Verizon Wireless had treated similarly situated consumers differently, Verizon Wireless had not engaged in “unjust or unreasonable” discrimination in violation of Section 202(a).
The court affirmed the FCC’s conclusion that, in a competitive market, differential pricing is not unjust or unreasonable.
The DC Circuit upheld the FCC’s ruling. The court rejected the complainant’s contention that she was entitled to prevail merely because Verizon Wireless had given different concessions to similarly situated customers, i.e., Verizon Wireless had engaged in discrimination. The court noted that section 202(a) prohibits only “unjust and unreasonable” discrimination, leaving the question of whether the practices of Verizon Wireless were actually unjust or unreasonable. The court affirmed the FCC’s conclusion that, in a competitive market, differential pricing is not unjust or unreasonable. “Customers dissatisfied with Verizon’s charges or service may simply switch to another provider.” (Orloff, 352 F.3d at 421). The court also noted that haggling is a normal feature of many competitive markets, and allows consumers to play competitors against each other, such that consumers “can only benefit.” (Id.) Perhaps most importantly, the court noted that a strict application of nondiscriminatory pricing would impose a requirement analogous to tariffs, which the FCC has expressly eliminated with the blessing of Congress.
By erasing the general “unjust and unreasonable” qualifiers in section 201 and 202 of the Communications Act, the FCC’s proposed net neutrality rules would subject the competitive wireless market to a de facto tariff regime. Although there would be no formal tariff-filing requirement, a wireless service provider would, in effect, be bound by its published prices. The result would be the type of intense regulation that has no business in a competitive market.
“Meditate on this I will.” Yoda, Star Wars: Episode II – Attack of the Clones (2002).
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Net Neutrality tariff