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From Internet to Obamanet
BlackBerry and AT&T are already making moves that could exploit new ‘utility’ regulations.
By L. GORDON CROVITZ
Feb. 22, 2015 5:32 p.m. ET
Critics of President Obama’s “net neutrality” plan call it ObamaCare for the Internet.
That’s unfair to ObamaCare.
Both ObamaCare and “Obamanet” submit huge industries to complex regulations. Their supporters say the new rules had to be passed before anyone could read them. But at least ObamaCare claimed it would solve long-standing problems. Obamanet promises to fix an Internet that isn’t broken.
The permissionless Internet, which allows anyone to introduce a website, app or device without government review, ends this week. On Thursday the three Democrats among the five commissioners on the Federal Communications Commission will vote to regulate the Internet under rules written for monopoly utilities.
No one, including the bullied FCC chairman, Tom Wheeler, thought the agency would go this far. The big politicization came when President Obama in November demanded that the supposedly independent FCC apply the agency’s most extreme regulation to the Internet. A recent page-one Wall Street Journal story headlined “Net Neutrality: How White House Thwarted FCC Chief” documented “an unusual, secretive effort inside the White House . . . acting as a parallel version of the FCC itself.”
Congress is demanding details of this interference. In the early 1980s, a congressional investigation blasted President Reagan for telling his FCC chairman his view of regulations about television reruns. “I believe it is imperative for the integrity of all regulatory processes that the president unequivocally declare that he will express no view in the matter and that he will do nothing to intervene in the work of the FCC,” said Sen. Daniel Patrick Moynihan, a New York Democrat.
Mr. Obama’s role raises legal as well as political questions. Those harmed by the new rules could argue in court that political pressure made the agency’s actions “arbitrary and capricious.”
The more than 300 pages of new regulations are secret, but Mr. Wheeler says they will subject the Internet to the key provisions of Title II of the Communications Act of 1934, under which the FCC oversaw Ma Bell.
Title II authorizes the commission to decide what “charges” and “practices” are “just and reasonable”—an enormous amount of discretion. Former FCC Commissioner Robert McDowell has found 290 federal appeals court opinions on this section and more than 1,700 FCC administrative interpretations.
Defenders of the Obama plan claim that there will be regulatory “forbearance,” though not from the just-and-reasonable test. They also promise not to regulate prices, a pledge that Republican FCC Commissioner Ajit Pai has called “flat-out false.” He added: “The only limit on the FCC’s discretion to regulate rates is its own determination of whether rates are ‘just and reasonable,’ which isn’t much of a restriction at all.”
The Supreme Court has ruled that if the FCC applies Title II to the Internet, all uses of telecommunications will have to pass the “just and reasonable” test. Bureaucrats can review the fairness of Google ’s search results, Facebook ’s news feeds and news sites’ links to one another and to advertisers. BlackBerry is already lobbying the FCC to force Apple and Netflix to offer apps for BlackBerry’s unpopular phones. Bureaucrats will oversee peering, content-delivery networks and other parts of the interconnected network that enables everything from Netflix and YouTube to security drones and online surgery.
Supporters of Obamanet describe it as a counter to the broadband duopoly of cable and telecom companies. In reality, it gives duopolists another tool to block competition. Utility regulations let dominant companies complain that innovations from upstarts fail the “just and reasonable” test—as truly disruptive innovations often do.
AT&T has decades of experience leveraging FCC regulations to stop competition. Last week AT&T announced a high-speed broadband plan that charges an extra $29 a month to people who don’t want to be tracked for online advertising. New competitor Google Fiber can offer low-cost broadband only because it also earns revenues from online advertising. In other words, AT&T has already built a case against Google Fiber that Google’s cross-subsidization from advertising is not “just and reasonable.”
Utility regulation was designed to maintain the status quo, and it succeeds. This is why the railroads, Ma Bell and the local water monopoly were never known for innovation. The Internet was different because its technologies, business models and creativity were permissionless.
This week Mr. Obama’s bureaucrats will give him the regulated Internet he demands. Unless Congress or the courts block Obamanet, it will be the end of the Internet as we know it.