You can’t build a better Internet out of red tape
If the latest installment in the long-running net neutrality debate has rendered you mentally exhausted, allow me to approach the future-of-the-Internet argument from a less draining direction. You needn’t worry about mastering such tech and regulatory topics as Title II regulations, peering, and fast lanes.
The net neutrality crowd’s fundamental worries can be boiled down to this: They believe that if the Federal Communications Commission leaves the Internet largely unregulated, the leading Internet service providers like Comcast and Verizon will take advantage of their growing powers to 1) fleece customers and websites (and services) with new charges and fees; 2) reduce commercial innovation and competition by ghettoizing new sites and services that won’t pay their new tolls; and 3) censor content that doesn’t serve their corporate masters. The wild, wonderful Web that we’ve roamed for the past two decades will be subdivided by the cruel, corporate gatekeepers into millions and millions of tiny veal stalls. And the great Internet dream will die.
Few who have held an account with Comcast, Time Warner, or other major Internet service providers would be surprised if these companies behaved in dictatorial and choice-limiting ways. They entered the Internet business to make money, not build a techno-utopia for you. They’re as ruthless as you when you buy a house.
Although the Internet service providers have yet to string the Web pasture with barbed-wire veal stalls or price competing Web sites and services off the Internet, the worry remains that they might if unimpeded. The worry is not irrational: Big Internet service providers have potential leverage over their customers, other Web economy businesses, and the market for ideas simply because there is little competition. If you don’t like Comcast’s terms, you usually can’t turn to another broadband provider in your market, because there isn’t one.
And whose fault is that? Well, that would be the government’s fault. It regulated the cable TV business with a heavy hand since its infancy, giving monopoly rights to operators to string cities with coaxial cable. Those policies have been relaxed, so now it’s easier for a new provider — like telephone companies or fiber-upstarts like Google — to create broadband competition. But the market power of entrenched cable operators and the remaining regulatory hurdles still deter new entrants, suppressing the sort of competition that would make broadband companies more mindful of the needs of customers.
The most ardent net-neutrality advocates (President Barack Obama is in the process of becoming one), believe that broadband is so vital to life, politics, and commerce that it must be regulated as vigorously as public utilities like water, electric power, and natural gas, with regulators determining price and terms of service. But as Berin Szoka writes, “utility regulation is a self-fulfilling prophecy: It assumes competition is impossible—and keeps it that way.”
Noting that the technology behind broadband service is nowhere near as static as that for water and electric power, Szoka suggests that policies that encourage competition between Internet service providers instead of carving out monopoly rules will produce the best results. I’m lucky enough to live in one such market, where Verizon pits its Fios service against Comcast, giving me both price and service leverage.
An unspoken premise behind so much of the net-neutrality debate is instead of allowing the market to distribute bandwidth – an unusually scarce resource — the government must intervene to make sure that it is allocated “fairly.” The fallacy here is that available bandwidth is a function of technological progress and built-out infrastructure, and we haven’t even begun to approach the technological limits of how much bandwidth we can produce and distribute. To pinch a phrase from an old column of mine, more capitalism—not less—charts the path to abundance. Bandwidth abundance will help reduce the chances of Comcast censoring the Web or blocking the next Facebook from happening.
The fact that Comcast is currently shaking down big customers like Netflix to prioritize the transmission of terabyte-after-terabyte of movies to viewers is a good sign. It signals to the market that bandwidth is a valuable commodity, and that money is to be made in producing more of it. That’s not a bad thing! FedEx and the U.S. Postal Service charge a premium for expedited delivery, so why should it be evil for Comcast to charge the same to move Netflix’s goods? If the FCC insists on butting in to allocate bandwidth more “fairly,” the market will logically read this intervention as a signal that politics and not cash determine how bandwidth is distributed, and the growth of broadband will stall. In fact, it already has. Obama’s saber-rattling this week caused AT&T to postpone investment in high-speed Internet projects in 100 U.S. cities.
Instead of erecting new barriers to investment and competition, policymakers would be wiser to eliminate them by encouraging new Internet service providers to string cable on utility poles. And don’t forget the over-the-air Internet. My friend Thomas W. Hazlett, former chief economist for the FCC, proposes that we use auctions to reallocate underused frequencies, now controlled by TV stations, to mobile operators and thereby increase phone and Internet competition.
Because my crystal ball has gone missing, I don’t know with any certainty what the Internet will look like in 10 years if we encourage new Internet entrants and more competition instead of giving the FCC the powers that President Obama desires. But I would guess that with proper economic incentives and the continued application of a light regulatory touch, engineers will devise new technologies that will make our current Internet bandwidth look as pathetic as our old dial-up services.
Let’s not fight over the pieces of pie. Let’s make the pie bigger.
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PHOTO: A NBN Co worker arranges fibre-optic cables used in the National Broadband Network in west Sydney July 11, 2013. REUTERS/Daniel Munoz