Congress must establish clear, equitable internet rules now

Now that the dust from Mark Zuckerberg’s dramatic testimony has settled, those of us hoping for real changes to internet privacy standards are asking: What will Congress actually do to keep the Facebook crisis from happening again?

In the wake of the hearing, Congress has a tremendous, but brief, opportunity to act. Here are three steps they should take—starting now.

First, let’s make all firms in the internet space adhere to a single clear, common set of privacy principles. Right now, internet privacy is a grab bag. Many users were surprised to learn that they can actually control some of what Facebook shares, but its not intuitive, transparent or for many, easy.

Think, for example, about how many times you tap the “I agree” button on your smartphone to download an app without having the slightest notion of what you’ve agreed to.

Furthermore, the information that Facebook collects is different than what Google or LinkedIn collects, or what your internet service provider may ask for.

Instead, have one clear set of rules leading to one clear set of consumer expectations of how their privacy will be protected on the internet, and have those rules apply to everyone in the internet ecosystem. Give consumers simple choices, with the presumption that they own their data unless otherwise stated.

Along with one set of rules, have one regulator—the Federal Trade Commission (FTC), whose enforcement authority under Section 5 of the FTC Act can be made explicit—so that consumers have a place to turn if they believe the rules have been broken.

The FTC is perfectly suited to regulate this. It’s an expert agency on consumer protection, and it has investigated and cited Facebook in the past.

In addition, the FTC already has developed a clear set of privacy principles that make sense, including providing greater transparency in disclosing details about the collection and use of information and simplifying choice for consumers and business.

We should also replace regulatory policy uncertainty with a stable policy framework for regulation. To an economist, a clear advantage of having one regulator is that reducing regulatory policy uncertainty can help improve economic performance.

A 2016 economics paper by Baker, Bloom and Davis makes the case clear: They find that economic policy uncertainty “is associated with greater stock price volatility and reduced investment and employment in policy-sensitive sectors.”

At the macro level, policy uncertainty, according to the authors, is associated with “declines in investment, output, and employment in the United States” and in other major economies.

We saw an example of this recently in the contrasting treatment of internet regulation. From 1998 until 2015, investment in broadband internet boomed, falling only with changes in the business cycle, such as the financial crisis of the last decade.

But from 2015 until earlier this year, broadband internet was more heavily regulated — inappropriately in my view — under rules designed for the old telephone monopoly. Not surprisingly, as the Federal Communications Commission determined, this led to “considerable social cost, in terms of foregone investment and innovation.”

Having a stable policy framework for internet regulation, particularly when these policies are based on sound economics, should have a positive effect on investment and therefore on innovation.

Having a stable policy framework for internet regulation, particularly when these policies are based on sound economics, should have a positive effect on investment and therefore on innovation.

Finally, Congress should allow firms to experiment, as long as they don’t discriminate in an anti-competitive way. Having one clear set of rules that applies to everyone should not, however, defeat or deter innovation. Experimentation in areas such as pricing helps spur competition and innovation.

But some basic rules must also be clear. For instance, there should be no blocking of websites or unfair discrimination based on content and no throttling of speeds based on content. Again, these rules should apply equally to everyone in the internet ecosystem.

If they only apply to some types of companies, that would lead to unfair advantages for others and distort competition. This is exactly the opposite of what we want for the internet, which should remain a fiercely competitive market featuring a wide variety of consumer choice.

In short, the government does have an important role to play in protecting consumers’ privacy and catalysing competition, so long as it plays that role carefully and fairly, minimizing the opportunities for companies to game the regulatory system for unfair advantage.

With the Facebook hearing behind us but the public still searching for answers, the time to act is now.

Congress should adopt a stable policy framework for internet regulation that will promote competition and protect privacy, thereby spurring the innovation that Americans have come to expect on the internet and on which so much of our modern economy now depends.