James Pethokoukis

Politics and policy from inside Washington

Net neutrality rules a blow to free markets

Dec 21, 2010 18:34 UTC

Milton Friedman had it right. Business is no friend of free markets. The Federal Communication Commission’s “net neutrality” ruling is more evidence of this. What the FCC should have done is called it a year, went on holiday and left the Internet alone.

Instead, it found a solution in search of a problem. And that solution was more or less supplied by Verizon and Google last August. To a great extent, the new rules codify that blueprint, which — at least as those companies see things — acknowledged both the inevitability of some government rule-making and the need to better divvy up future costs and revenues between telecoms and content providers.

The FCC’s new rules would ban providers such as Comcast and Verizon Communications from blocking or delaying lawful Internet traffic, such as online services offered by competitors. But the giant telecoms and landline providers would be allowed to sell faster service to content companies such as Google and Amazon. And they could increase rates for subscribers who use the Internet for tasks that gobble bandwidth such as high-definition video.

Certainly, it could have been worse. As I wrote last April:

This regulatory debate has been turned into an unusual David (scrappy web firms) vs. Goliath (entrenched telecoms) morality tale. Despite being three times larger by market capitalization, Google, for example, still has far more cachet than Comcast, which challenged the FCC. 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. 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.

Now the fight turns to Capitol Hill, with Republicans especially eager to do battle. The GOP views the ruling as an initial effort by the Obama administration to push its agenda through regulatory agencies now that Democrats no longer completely run Congress. Expect the Republican-controlled House to quickly pass a disapproval resolution under the Congressional Review Act to overturn the ruling. If the measure then gets 51 votes in the Senate, it would be up to President Barack Obama to sign or veto.

Hopefully his recent pivot to the center will continue for at least a little while longer.

COMMENT

Thanks President Obama for another sell-out by your administration. You are now fully engaged in complete double-talk. This is not net neutrality and you know it. This is a complete cave-in- your specialty – to the ATT’s, Verizons, Comcasts and Googles of this world. Along with the tax-cut fiasco you really are racking up quite a record as a Republican. What about a few considerations for the people who fought hard to elect you.

Posted by jefflz | Report as abusive

Net neutrality compromise won’t calm new Congress

Dec 21, 2010 17:40 UTC

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

WASHINGTON – Under the so-called net neutrality proposal from the U.S. Federal Communications Commission, broadband access providers like Comcast and Verizon would be prevented from blocking or discriminating against lawful Internet traffic. But they would be allowed to sell faster service for those who want to deliver video, games and the like. And they could increase rates for subscribers who use the Internet for those tasks that hog bandwidth.

To a great extent, the rules codify a compromise plan cooked up last August by Verizon and Google. That blueprint acknowledged both the inevitability of some government rule-making and the need to better divvy up future costs and revenue between the layers of pipes and those who deliver material through them.

Both views will do battle on Capitol Hill. Democrat Senator Al Franken says the FCC’s plan is “worse than nothing.” Republicans, meanwhile, see the ruling as an initial effort by the Obama administration to lean on regulatory agencies now that Democrats no longer completely run Congress. Expect the GOP-controlled House to quickly pass a disapproval resolution under the Congressional Review Act to overturn the ruling. If the measure gets 51 votes in the Senate, it would be up to the president to sign or veto.

By trying to play Internet traffic cop, the FCC may wind up getting run down. In the meantime, it’s just creating logjams elsewhere.

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