Net neutrality ruling strikes blow for freedom
Right about now the White House is probably thinking about packing the courts. Just as the Roosevelt-era Supreme Court voided a key New Deal effort to regulate commerce in 1935, a U.S. appeals court just put the kibosh on a Federal Communications Commission effort to regulate the Internet. This far and no farther, the court said to further federal intervention in the American economy.
The appeals court kneecapped FCC intent to impose net neutrality as part of its grand broadband plan. Such rules would seek to prevent phone and cable companies from potentially charging providers that supply huge amounts of bandwidth-gobbling traffic. This regulatory debate has been turned into an unusual David (scrappy web firms) vs. Goliath (entrenched telecoms) morality metaphor. Despite being three times larger by market capitalization, Google, for example, still has far more “cool” cachet than Comcast, which challenged the FCC. The Davids are also Friends of Obama, giving massively to his presidential campaign.
But what it all really comes down to is who will pick up the tab for future network upgrades to handle applications such as high-definition video. In a net neutral world where prices were fixed at, essentially, zero, the telecom operators would pay — before passing costs along to consumers, of course. On the other hand, maybe operators want to charge content providers tolls for putting their traffic into express lanes. Or perhaps another business model is just around the bend. Under net neutrality, the current system would be locked into place.
Government should have high hurdles to clear before setting prices. In the end, net neutrality seems little more than rent-seeking by content providers who wish to use government to distort market forces in their favor. It’s akin to a computer maker successfully lobbying for price controls on shippers like FedEx when transporting goods from China. When it bought new planes, the shipper would have to eat the cost or pass it downstream.
The Internet tussle is unlikely finished. The FCC might ask for the decision to be reconsidered or seek review by the U.S. Supreme Court. The Obama administration could also turn to Congress to clarify the regulator’s authority. A more radical option, one advocated by consumer groups, would be for the FCC to legally reclassify broadband. Such a move would give the agency broad power to regulate the Internet like it was the old-fashioned landline telephone service. That sort of command-and-control apporach hardly seems a policy suited for the 21st century.