Against Net Neutrality

By | 2017-11-27T12:39:01+00:00 November 27th, 2017|
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Net neutrality has a nice ring to it. Who doesn’t want an even playing field? But the internet evolved rapidly in a deregulated environment. And most of its trappings—a lack of censorship, equal access, tremendous diversity of viewpoint, an alternative means of accessing media, and deep stores of information—evolved before net neutrality was a legal mandate.

After numerous attempts at congressional action failed to result in new laws, the Federal Communications Commission in 2015 adopted net neutrality rules in under the leadership of Obama appointee Tom Wheeler. Now, under chairman Ajit Pai—a Trump appointee—net neutrality is at risk, as its legal underpinnings have come under greater scrutiny.

But should the end of “net neutrality” worry anyone?

Who Subsidizes Whom?
It’s worth thinking for a moment about how the internet works, and from where the FCC gets its authority. The internet, as we know, is a network. It is minimally regulated, and those regulations chiefly involve the routing of data packets and the addressing of websites. The internet involves a combination of public infrastructure as well as private architecture. The latter includes broadband cables that lead to neighborhoods, apartment complexes, and individual homes.

Internet service providers (ISPs) are a critical part of the system. They’re the ones who are paid monthly by customers for internet access and include companies like Comcast, Verizon, and AT&T. They provide the extensive and expensive “last mile” of architecture. This access is typically priced based on speed and often bundled with other offerings, such as landline telephone service, cable television, or, in the case of mobile phone providers, cellular phone service. Historically, ISPs offer something of a commodity product. And in many locales, particularly rural areas, ISP provision is not terribly competitive, growing as it does on the backbone of what were once government-protected monopolies in phone or cable television service.

As Netflix and other streaming applications have become more popular, more data-intensive use by customers taxed ISP networks that were designed for discrete and less-data-intensive website usage.

Net neutrality is particularity aimed at preventing any kind of discrimination among content, including “throttling” or price discrimination against data-hogs like Netflix. It would not allow, for example, a higher price to be charged for streaming movies versus a more modest use of data to check an email account. More important, it would not allow an ISP to privilege its own data streams; for example, if Amazon teamed with an ISP, they would not be allowed to do so in a bundled way that charged less for access by preferring Amazon’s own streaming movie and TV services. Such a joint venture couldn’t even do so in order to subsidize the extension of broadband access to rural areas currently without high-speed internet access.

Far from a sinister outlier, this kind of cross-subsidization is a familiar feature of economic life. We all know you’re not supposed to bring your own popcorn into a movie theater; the pricey concessions are part of how the theater makes a profit. In devices like Xbox or PlayStation, only compatible games work on the system. The platform provider is able to pay for its initial investment, in part, by the prospect of returns by these partially locked-in customers.

Improving Platforms
The prospect of channeling internet customer usage to favor a platform should not be worrisome, so long as there are a variety of choices on providers. These full platform modes of competition historically lead to competition at the platform level. The risk of monopoly abuse is countered because technology changes too quickly to allow any single platform to remain locked in for long.

Consider gaming systems. The move from Atari, Nintendo, and Play Station, and then to the Xbox and PS4 systems, have led to improved quality, lower prices, and wide choices for consumers. On the other hand, if Atari and its competitors were mandated to make their platforms accessible to all content providers at its height in the mid-1980s, the return on investment to create the competing platforms likely would never have occurred. But, hey, at least PacMan would be available for everybody on a “net neutral” basis.

That consequences of mandating access to ISPs as “common carriers” under Title II of the Communications Act is the chief reason conservatives should be wary of government-mandated “net neutrality.” Disruptive players are not typically neutral. They usually provide partial (and profitable) access in order to establish themselves. This model would be disallowed by “net neutrality.”

Remember the 1930s?
More ominously, numerous other regulations drafted in 1934, in the days of local telephone monopolies, could be applied to ISPs, such as limits on technology, price controls, and the like. Right now, the FCC’s “net neutrality” rules only are abstaining in this regard voluntarily, i.e., forbearance. But net neutrality rules would allow this regulatory overreach in principal.

By way of reminder, old-fashioned taxicabs are common carriers, but Uber started as a more limited access system. The unknown Uber of the future internet cannot come into existence under the net neutrality regime.

The old rules of common carriers typically involved a regulatory bargain. A limited number of cabs were permitted to operate—the limits vouchsafed by their pricey medallions—and in exchange, prices were set, and the providers were required to serve all comers on an equal basis. This limit on competition was more explicit in the case of expensive local networks with natural monopoly features, such as cable television, landline telephone, and the like.

But these natural monopolies, in spite of their monopoly protections, were often left behind by technological change. Landline use is down today due to the rise of cheap, mobile phone technology. Widespread high-speed internet access has cut into the typical “necessity” of cable television. And, as discussed above, the sharing economy has undermined the traditional market power of regulated industries like cabs, hotels, and others.

All of these disruptive technologies typically grew up not because of protective government regulation, but in spite of it. Indeed, and Uber is a perfect example, new services offered on a non-neutral basis often evolved to meet a need that was only partially and poorly met by a government regulated system.

Once upon a time, conservatives were wary of excessive regulation. They knew it meant increased government power, slowing down technological innovation, and an opportunity to substitute the goals of government regulators for the diverse desires of market participants. Attempts to corral technological growth in ways that place government regulators over ISPs are worrisome. We’ve seen other types of gatekeeping stifle technological change. One classic example is “catalytic converters,” where the technological solution was mandated by government regulators in the 1970s. Alternative, cheaper methods to accomplish the same goal have been unexplored during the interim. Similarly, in the age of “Ma Bell,” everything that hooked into the telephone network was controlled, including the telephone handsets themselves. Only when freed from regulation, did everything from answering machines to Mickey Mouse phones proliferate.

Dangers to Free Speech
The internet is empowering. But its empowering elements, not least anonymity and content neutrality, are far less endangered by the actions of ISPs than they are by the role of content aggregators like Facebook or Twitter and search engines like Google. Each of these important virtual gatekeepers has abandoned content neutrality to favor the distinct, socially liberal, but technocratic economic outlook of Silicon Valley.

In recent months, Twitter has silenced a significant number of conservative voices with their selective use of “verification” and outright bans of individuals. Facebook has gotten in bed with the Anti-Defamation League to root out “hate speech.” Web service hosts have kicked off controversial websites, almost always for right-wing views of one kind or another. And Google notoriously plays games with its search algorithm to channel viewer’s search results in a particular and ideologically-tinged direction. If these voices—some of whom are strong proponents of so-called net neutrality—continue in this direction, the prospect of neutral ISPs will matter little, as the virtual gatekeepers of the Internet will stifle free expression by leveraging their privileged, near-monopoly positions to do so.

The legacy internet—what Pai calls the “free internet”—would allow, for example, an ISP to charge Netflix or other heavy-users of web infrastructure greater access fees to reach their customers. These charges could subsidize the expansion of broadband to underserved areas. In addition, it would allow new, unseen ISPs, to offer subsidized services of their own.

Few would sign on for a highly restrictive ISP. But that doesn’t mean some might not be willing to pay less for a lower-speed offering when they currently don’t use streaming services. And fewer still would complain if that lower speed offering were bundled with limited, high-speed access to proprietary offerings made by an ISP. An overly restrictive ISP would likely face competition from alternatives, including pure wireless alternatives that can move into underserved areas with greater ease.

More internet investment and freer access to internet content is, on balance, a good thing. Like any technology, it can be used or abused. But in areas ranging from telephony to tractors, government mandates stifle innovation, favor connected companies, and allow the imposition of ideological goals. Net neutrality, far from making the internet freer, would make it more expensive, both in terms of cost and in the unknown “price” of future, ideologically driven government mandates.

About the Author:

Christopher Roach
Christopher Roach is an attorney in private practice based in Florida. He is a double graduate of the University of Chicago and has previously been published by The Federalist, Takimag, The Journal of Property Rights in Transition, the Washington Legal Foundation, the Marine Corps Gazette, and the Orlando Sentinel. The views presented are solely his own.