Net Neutrality: Good Riddance

On 26 February 2015, the FCC ruled in favor of net neutrality by reclassifying broadband access as a telecommunications service and thus applying Title II (common carrier) of the Communications Act of 1934 to internet service providers. According to then FCC commissioner Ajit Pai, net neutrality gives “the FCC the power to micromanage virtually every aspect of how the Internet works.”

Federal regulators at the FCC voted this Thursday to reverse that ruling. Critics claim it will allow Internet providers to speed up service for some apps and websites — and the move to deregulate the telecom and cable industry is a major setback for tech companies, consumer groups and Democrats who lobbied heavily against the decision. And it marks a significant victory for Republicans who vowed to roll back the efforts of the prior administration.

But is this a bad thing? Aside from George Soros and those that voted for Hillary Clinton, does anyone really think putting the U.S. Government in charge of the internet is a good thing? When all the large tech companies come together in favor of something, that should raise a major red flag. It’s not about open access, fairness, increased innovation, but about maintaining market leverage and stifling competition. The same crowd behind the “Too Big to Fail” bank bailout are the same ones backing net neutrality rules. The notion that your email is going to slow down, Netflix will be jammed, or you’ll be charged to view web pages is a ruse. Google, Netflix, Amazon and others with deep pockets have already bypassed the internet backbone and use private peering and content delivery networks (more on this later), and you already pay extra for “premium content”. Net neutrality rules inherently hamper smaller entrepreneurial startups by pumping the brakes on high data leveraged services and applications, especially those that want to use high-end pay for access applications.

As a concept, net neutrality sounds like a good thing. However, as legislation or policy, all of us should have concerns.

The telecoms have too much power. Nobody likes the big ISPs–we like more competition, and nobody likes monopolies. Why then would we possibly trust the U.S. government, the world’s largest monopoly to get its hands on the internet? Take a look–

Glenn Greenwald’s book No Place To Hide gives a big reason why we need the government out of the internet. The U.S. government tampers with Internet routers during the manufacturing process to aid its spying programs. Net neutrality, in the name of fairness will require that government verify that the telecoms are doing what they’re told. Will the government need to install hardware and software to monitor Internet traffic? Will the NSA be involved?

“Some Internet providers may initially fight or test the legal boundaries, but the FCC has ways of breaking defiant firms. The most alarming is that the agency is increasingly using license and transaction approvals to coerce various policies — like net-neutrality compliance, increasing the number of, say, public-affairs, Spanish-language, and children’s TV shows, and abandonment of editorial control of TV and radio channels — that it cannot, or will refuse to, enact via formal regulation. In the long run, Internet and technology companies, now FCC supplicants, will have to divert funds from new services and network design to fending off regulatory intrusions and negotiating with the Internet’s new zoning board.” –Brent Skorup of George Mason University

While the telecom industry may be insipid, it is so mainly by regulation. Where deregulation has occurred, innovation has flourished. Would a government controlled phone system have given us smart phones, and at the service prices we enjoy?

Government regulations that purport to protect the individual are meant to maintain the status quo and protect corporate interests. The regulations are written by large corporations which collude with regulatory officials to protect their interests. The regulations are only meant quash innovation and competition. Crony capitalism, plain and simple. The banking and housing mortgage crisis is an example of what happens when the government and industry collude to manipulate the market (see Fannie Mae, Freddie Mac). “The FCC can decline the request for an opinion, can permit the innovation, or can require more information from the submitting party,” writes Brent Skorup of George Mason University. “These opaque determinations cannot be appealed, and affirmative decisions can be reversed at the agency’s whim.”

In other words, if you are a typical consumer, your access to online content is already intermediated by the decisions made at a few companies to prioritize certain content based on their view of this information’s importance or its relevance to you. To make money, these firms sell targeted access to you based on data they’ve harvested from everything from your click patterns to the contents of your emails. By 2012, Google made more in ad revenue than all U.S. print media combined.

The idea that net neutrality will benefit the ordinary people is total horse manure…

The net neutrality argument has always been misguided, and since 2015, has only functioned to make it harder for new companies to get into the game. The issue is not fast lanes, fees or throttling (all of which happens now), but lack of competition, something that has been limited. If the giant telecoms are forced to compete in a truly free market, they won’t exist 10 years from now. What we would see is better options and service at a lower price. Some of these new options may depend on being able to take advantage of the very freedom to charge more for certain types of Internet traffic that Net Neutrality seeks to eliminate. If we want to break up the large telecoms through increased competition we need to eliminate regulations that act as barriers to entry in the space.

Additionally, the FCC also has the power to “partially regulate the capital investment of existing companies” and determine “which companies (if any) can enter the ISP market,” per Tuttle. In total, the Internet being under Title II’s jurisdiction puts “nearly $1 trillion of GDP and 2.5 million jobs under a new regulatory regime,” according to the American Action Forum. And what the FCC constitute’s as “abuse” can be changed at any moment.

What this means is that Title II entrenches the FCC’s tentacles into the ISP market and controls it with an iron fist.

As a resource and commodity, internet bandwidth should be allocated by the free market, not by government regulation. Certainly, more messy, the marketplace is still the engine that drives America.

Creative destruction is a concept in economics which since the 1950s has become most readily identified with the Austrian-American economist Joseph Schumpeter who derived it from the work of Karl Marx and popularized it as a theory of economic innovation and the business cycle.

According to Schumpeter, the “gale of creative destruction” describes the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”. In Marxian economic theory the concept refers more broadly to the linked processes of the accumulation and annihilation of wealth under capitalism (source Wikipedia). As we have seen in the tech field, free markets do well to promote the process of creative destruction.

Free market competition ensures that companies do not have the leverage to discriminate against particular websites. Certainly, consumers would dump those ISPs in favor of others if those ISPs slowed down or blocked data as favoritism toward certain sites. We just wouldn’t stand for it.

Fifteen years ago, internet traffic was distributed across thousands of companies. By 2009, half of all internet traffic originated in less than 150 large content and content-distribution companies, and today, half of the internet’s traffic comes from just 30 places, including Google, Facebook, and Netflix. Google expanded its online operation to a network of private data centers across the globe, and set up routers inside many of the same data centers used by big-name ISPs so that traffic could move more directly from Google’s data centers to users. This type of direct connection is called “peering”.  By setting up servers inside many ISPs companies like Google could more quickly deliver YouTube videos, webpages, and images. This is called a “content delivery network,” or CDN.

“Transit network providers” such as Level 3 already provide direct peering connections that anyone can use. And companies such as Akamai and Cloudflare have long operated CDNs that are available to anyone. But Google made such arrangements just for its content. Netflix, Apple and Facebook have also built their own CDNs.

Between higher taxes and regulations, the FCC has made it more difficult for smaller ISPs to thrive in the market while increasing costs for consumers. FCC Commissioner Ajit Pai explained how smaller ISPs are struggling as a result of net neutrality regulations:

“Among our nation’s 12 largest internet service providers, domestic broadband capital expenditures decreased by 5.6%, or $3.6 billion, between 2014 and 2016. Title II regulations have stood in the way of investment. Just last week, for instance, we heard from 19 municipal broadband providers. These are small, government-owned ISPs who told us that ‘even though we lack a profit motive, Title II has affected the way we do business.’ ”

The small ISPs reported that Title II was preventing them from rolling out new services and deepening their networks. “These are the kinds of companies that we want to provide a competitive alternative in the marketplace,” Mr. Pai says. “It seems to me they’re the canaries in the coal mine. If the smaller companies are telling us that the regulatory overhang is too much, that it hangs like a black cloud over our businesses—as 22 separate ISPs told us three weeks ago—then it seems to me there’s a problem here that needs to be solved.”

Nothing should stay the same, and as these services age, there will be more incentive for entrepreneurs to create new technologies, some that may make fiber obsolete. I’m not sure if it’s just me, but it seems since the government got involved in the internet game, innovation and service has seemed to decline. This could just be a natural plateau, or a bottleneck. It seems everything is stuck propping up the status quo, all to the detriment of real innovation. Rather than more government control, infusing more capital into ISP market.  The FCC should be encouraging de-regulation in order bring in more competition, which is the best way to curb corporate abuse.

About the Author

Wayne Creed

Administrator

View All Posts