What is “net neutrality”? Net neutrality is government regulation which prohibits internet service providers from diffrentiating internet traffic based upon its content and/or the service being used. Advocates are concerned about internet service providers charging different amounts for different types of traffic or manipulating how internet traffic is processed so, for example, to increase the priority of a certain website’s traffic or decrease the priority of a certain website’s traffic.
Generally, regulation advocates point to something happening, identify it as a problem that government needs to solve, and propose regulation they feel will accomplish that goal. This is not the case with net neutrality because right now internet service providers are voluntarily complying with the standards net neutrality advocates seek to codify. This is even after a federal appeals court ruled in Comcast v. FCC that the FCC (at least currently) lacks the authority to prevent companies from engaging in this behavior. Given all of this, one must wonder why is regulation needed to address this in the first place.
Like many other newspapers, the New York Times runs advertisements. The newspaper and advertiser agree on the ad, where it will appear, how much it will cost, and on which printing(s) it will appear. All well and good. And, of course, the New York Times can reject any ad which it does not wish to run. The reason could be because the content is inappropriate for the paper’s readership. It could be because it advertises a competing newspaper. It could be because the editor has a random grudge against a local business and won’t support its ads. Whatever the reason, the New York Times has the freedom to not run certain advertisements. The freedom to refuse to facilitate speech one doesn’t like is part of one’s First Amendment freedom of speech rights. There is no reason this right should not carry over to internet providers as well, just like any other entity.
Many airlines offer passengers who pay for a “first class” ticket improved service for extra money. This extra service is for those willing to pay more. In addition to covering the costs of providing the extra service, this revenue helps the airlines lower fares for the other passengers, so its existence helps them as well. Similarly, television providers (both cable and satellite) offer various premium channel packages for extra fees. Nothing is wrong with these business models. Of course, nothing is wrong with a business model that handles all traffic equally either. Supply and demand will determine which business models are best just fine, just as described above in the airline and television industries. Congress and the FCC do not need to enforce a particular business model on internet service providers, as it might end up that way in the future. It’s entirely possible that at some point poorer consumers will be served by options of cheaper, more limited internet. Under net neutrality, however, internet service providers would be prohibited from pursuing such plans.
Logically, companies in any industry don’t want to be regulated. So it should cause one to pause when companies in an industry come out in favor of them being regulated. Google and Verizon Wireless did just that in a recent joint proposal to the FCC as a suggestion for how to implement Net Neutrality. In the first four of their seven points, Google and Verizon start off sounding like they support their own regulation. (“This means that for the first time, wireline broadband providers would not be able to discriminate against or prioritize lawful internet content, applications or services in a way that causes harm to users or competition.”) However, the fifth and sixth create a couple exceptions to their Net Neutrality propsals for “additional services” (it’s unclear how this is defined) and internet service provided wirelessly.
Now that we’ve examined their proposal, we should ask why would they propose it in the first place? The answer is to gain an advantage over its competitors, an example of behavior known as rent seeking. Businesses can and will use not just market advantages to seek profit, but legislative advantages if it can create them. Verizon is already a leader in wireless internet service, and with its FIOS technology and Google’s constant innovations, it seems like these rules are being constructed to create an advantage over more traditional internet service providers which use DSL or cable lines and would thus be subject to the net neutrality provisions while Google and Verizon are comparitively less regulated.
The common response to this by net neutrality advocates is to reject the Google and Verizon plan and adopt a stronger one instead. Indeed, this is already happening by some advocates. History shows, however, that industry is heavily involved in the regulatory process and puts heavy pressure to implement them in its favor. This is common with regulation, since the benefits to a single given consumer from net neutrality are relatively minor, while the costs are borne by the companies. Since these internet service providers don’t really care about much except internet aceess, they have lot of reason to lobby and shape the regulation to their advantage, and bigger providers have more resources to do this. Consumers care, but it is a small fraction of things they must worry about in their lives, and give the legislation little attention. This results in regulation that hurts consumers by distorting the industry away from customers’ true preferences. For example, exempting wireless from net neutrality may mean that cheap wireless limited internet plans exist, while even cheaper cable ones legally can’t, which hurts consumers seeking this type of plan. The net result of all of this is the FCC implementing policies that actually have significant support from within the industry. However, if the regulation was actually achieving its goals, this regulation should actually be opposed by the industry.
If the government regulates net neutrality, policies for internet access are set by one entity: the FCC. However, if the government stays out, each company will set its own policies. If you don’t like the FCC’s policies, you are stuck with them unless you leave the United States. If you don’t like your internet service provider’s policies, you can simply switch to another one. So which model sounds better to you?
Filed under: Internet, Regulation
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