AEI, Bureaucracy, central planning, Common Carrier, Cronyism, Don Boudreaux, FCC, Google, Internet REgulation, ISPs, Jeffrey Eisenach, Market Solutions, Net Neutrality, Netflix, Peter Suderman, Reason, Ronald Coase, Tom Wheeler, Wired
Once again, President Obama is trying his hand as populist candyman, now pressing the FCC to adopt “net neutrality” rules for regulating internet service providers (ISPs) as common carriers. Net neutrality refers to regulations on ISPs that would prohibit different treatment of different types of internet content, matters that are better left to market participants. Obama has no idea what he’s doing or who he’ll be hurting (hint: internet users of all stripes). The candy is an illusion. Peter Suderman’ has an aptly titled article on this topic at Reason: “Will 2015 Be the Year the FCC Regulates the Internet Back to 1934?” He offers some background on the history of U.S. telecommunications regulation and explains the context within which FCC Chairman Tom Wheeler and the Commission will deal with the issue. Suderman closes with this thought:
“If Wheeler does take this route (reclassification of ISPs as common carriers], as he now seems to determined (sic), we’ll end up with an Internet that is more regulated, more subject to regulatory uncertainty in the near-term, and more like a public utility from another era than an information delivery service for the modern age. It’ll be 2015—but for the Internet, it’ll be 1934 all over again.”
Wired also gives its perspective but implies that Wheeler is seeking ways to reclassify the ISPs, impose neutrality rules, while also creating sufficient exceptions to mollify the ISPs, avoiding litigation as well as market disruption. That would be nice as far as it goes.
Net neutrality is a misnomer, as Sacred Cow Chips has discussed on two previous occasions in “The Non-Neutrality of Network Hogs“, and “Net Neutrality: A Tangled Web“. A lowlight is the corporate cronyism inherent in calls for net neutrality. The biggest beneficiaries are not consumers, but large content providers such as Netflix and Google, though the latter has altered its position on neutrality now that it is entering the market as an ISP. Another lowlight is the disincentive for network expansion created by forced subsidies to the large content providers, who are extremely heavy users of internet capacity.
Jeffrey Eisenach at AEI picks apart the arguments in favor of internet regulation. He also counters assertions that consumers are likely to benefit from internet regulation. Here are two choice quotes:
“And while much is made of consumers’ limited choices, the broadband market is actually less concentrated than the markets for search engines, social networks, and over-the-top video services: discriminatory regulation of ISPs cannot be justified on the basis of market power.”
“Finally, there’s the argument about fast lanes and slow lanes, or, in regulatory jargon, “paid prioritization.” The simple reality is that edge providers like Netflix require prioritization for their services to work. It’s just the “paid” part they don’t like.”
Finally, Don Boudreaux provides two relevant quotes on regulation, one from the great Ronald Coase, along with some of his own thoughts. I close with Boudreaux’s summation:
“Government imposition of “net neutrality” will substitute bureaucrats’ politically poisoned judgments on what are and what are not appropriate business practices for the market-tested judgments of legions of suppliers competing for the patronage of hundreds of millions – indeed, often billions – of consumers.“
Pingback: Can Federal Regulation Enrich Your Web? What? | Sacred Cow Chips
1/14/2015 7:34 AM CST
FINALLY! I am so sick and tired of these regional monopolies screwing us over. Where I live, my only choice is verizon fios. Every year my costs go up and I have to lower my speeds to get my bill down. I am currently paying $99/month for 50/50 internet only. This is a complete ripoff. In every modern country where internet is a utility, they have “local loop unbundling” where the lines can be leased out to competitors at wholesale cost. This means there are many providers to choose from. They actually have to compete for peoples business. The result is much higher speeds and much lower prices than here in the USA. Anyone who is against what obama and wheeler are trying to do is either: 1. an idiot, 2.
You must be very angry. You seem to have big problems with your ISP. I don’t. My service is great and affordable. By the way, a monopoly means one seller. There are competitors in every market, so the “regional monopolies” are a thing of the past. We already have a degree of unbundled access in the U.S., but not from the loop to the home. However, the latter decision was the FCC’s and is in no way dependent on common carrier status for ISPs. And it has nothing to do with the faux neutrality now under discussion. Sounds like you need to try another ISP, you poor devil!
Pingback: Netflix: Oops… No, Let’s Not Regulate The Internet | Sacred Cow Chips