Tuesday, November 11, 2014

“Net neutrality”...

“Net neutrality”...  What do I think about it?  I think about it in apocalyptic terms: if enacted, it would be the end of the Internet as we know it.  Bye bye, competition and lively innovation; hello, stifling regulation and taxes.  Bye bye, small and innovative ISPs; hello, a few big moribund and hidebound ISPs (think AT&T).

For the details, see Andy Kessler's plain language, even-handed primer.  Following the money trail, Forbes talks about the inevitable taxation that would follow.

“Net neutrality” is a carefully selected term – it sounds positive, it sounds like something nobody in their right mind would be against.  In actuality it is a euphemism for regulation.  The way that the nice-sounding net neutrality would be implemented is by creating a regulatory bureaucracy, and that bureaucracy would start publishing rules and regulations by the hundred, and charging fees and taxes.  The result of that is totally predictable, as we've seen this movie many times before: innovation will be stifled (by all the regulations), large incumbents will be empowered (as the relative cost of regulatory compliance for them is low), and new entrants will be discouraged (it would have to be an extraordinarily well-funded startup to be able to pay for regulatory compliance and the associated documentation).  Our ISP in California was a small, one-man operation that provided radio-linked Internet access.  His startup was self-funded.  If ISPs were regulated as a utility, he would never have started his little company – and we would have been stuck with the terribly inferior (and much more expensive) satellite ISP that we used before he started his company.  Multiply that by a few tens of thousands, because that's how many ISPs we have now.  If net neutrality is implemented, it's easy to predict that all these ISPs will be consolidated into a few big ones, or they'll go out of business.

One aspect of the net neutrality proponents' argument astonishes me: they're actually arguing that consumers should get something for nothing.  It's the socialist mindset applied to technology.  What do I mean?  Consider that the central argument for net neutrality proponents is the notion of “no fast lanes”.  Said another way, they want anyone to be able to access anything, as much as they want to, with no restrictions or costs.  The ISPs are in the business of renting their pipes, and their pipes can only carry so many bits per second (called “bandwidth”).  It's exactly analogous to your plumbing pipes: they can only carry so many gallons per minute.  The net neutrality proponents want to tell the ISPs that they can't restrict how much data any source (like Google, or Netflix) tries to push down their pipes – and they also can't charge any more for it.  That means that the only way the ISPs could pay for bigger pipes is to charge the consumer – and when the FCC regulates the ISPs as a utility, those price increases will have to be approved by the FCC.  The likely result is the same one we had when the FCC regulated AT&T: slow service and slower increases.  It's a recipe for an Internet quagmire.  It will work just as well as Venezuela's attempts to regulate toilet paper prices.

Even more astonishing to me is that the Democrats manage to get some political traction with this when there is no problem that needs to be solved.  Their entire argument is couched in scary-sounding hypotheticals: the ISPs could block web sites; the ISPs could create “fast lanes” (which actually might be a good idea!), etc.  None of these things are problems today.  It's as if they said “grocery stores could carry only Wonder Bread!” and used that as an excuse to regulate grocery stores!  That hypothetical argument totally ignores the beneficial effects of competition.  The grocery store that carries only Wonder Bread would soon find itself out-competed by other stores.  The ISP that blocks Netflix will find itself out-competed by other ISPs – and thanks to the current lack of regulation, there are plenty to choose from.  We live out in the sticks in northern Utah, and we have nine ISPs to choose from: one cable provider, two DSL infrastructure providers, two satellite providers, two cellular providers, and two wireless point-to-point providers.  If our cable provider decides to block sites we want access to, with one phone call I'll switch to an ISP that doesn't.  Where's the problem?

Imposing a regulatory regime on the incredibly successful Internet should be an absolute last resort that is considered only in the presence of a huge problem that the competitive landscape doesn't address.  Today is not that day...

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