Net Neutrality: Was the removal of the Obama era regulation the right move?

January 22, 2018

Regulation stifles innovation

Although net neutrality is mostly seen as an obvious asset to society, there are still several persuasive arguments against it that revolve around the largely libertarian view that the vast majority of regulations are unnecessary and that the free market would be a better option.

In most cases, more regulation means less investment. As compliance costs increased and the regulatory climate became unpredictable after the start of net neutrality, investment in internet infrastructure has been in a historic nosedive over the last three years. Many experts point to Europe, which has more regulations and less infrastructure investment than America, as an example of this inverse relationship. It would be futile to invest in capacity upgrades if the government will essentially nationalize it anyway. Managing the Internet using a Title II framework created in the 1930s to deal with a telephone monopoly has led to less investment and innovation.

It is also easy to understand that different pricing models stimulate competition. Novel business models and products invariably result in competition, causing prices to decrease and quality to increase. This works out in favor of the consumer. The process is far more superior at creating better and inexpensive services than arbitrary decisions by bureaucrats. Government regulation of business models is not a good idea, especially in developing technology fields such as the Internet. Competing models must be allowed to survive or fail independently in order for the best to be created. An example of the government interfering in this process would be the first investigations under the net neutrality regulations, which were against free data offerings.

The solution for markets that don’t have a sufficient amount of competition is to not treat them as if they were monopolies, as net neutrality does. Small ISPs (Internet Service Providers) that could compete aren’t able to as they don’t have the resources to comply with these burdensome regulations. The Wireless Internet Service Providers Association, which represents small, rural companies, discovered that more than 80 percent of its companies “incurred additional expense in complying with the Title II rules, had delayed or reduced network expansion, had delayed or reduced services and had allocated budget to comply with the rules.” Other similar ISPs have been forced to delay new features because they couldn’t determine whether or not their business models would be allowed.

In addition to showing how regulations favor incumbents, the previous example highlights the fact that net neutrality is a solution in search of an issue. The problem with net neutrality is that, instead of letting different practices develop and interfering when an abuse occurs, it is prescriptive and therefore likely to favor incumbents in sustaining the existing state of affairs. The status quo is in stark contrast with the last two decades, in which lenient regulations encouraged the type of innovation that had worked so effectively since the beginning of the internet. During this period, the average speed and quantity of internet connections increased as the percentage of people without “advanced telecommunications capability” halved from 20 percent to 10 percent. Services had been enhanced and options had been increasing while companies invested over $1.5 trillion to create networks. However, in 2015, despite the lack of systemic traffic throttling and site blocking that net neutrality proponents fear, the Federal Communications Commission (FCC) created net neutrality. Repealing these regulations would not generate throttling and blocking because ISPs are aware that it will benefit them to keep a level playing field. For example, Comcast, an owner of Hulu, won’t slow down Netflix because it doesn’t want to risk losing consumers. The FCC will still expect complete transparency from ISPs regarding information such as traffic and data caps while the Federal Trade Commission (FTC), which can take action even in the absence of discovering harm, will still be able to punish deceptive practices.

These three reasons clearly show why the free market is superior to market micromanagement. Increased investment will create jobs and competition which will inevitably allow for better internet access and price discrimination, expand innovation and increase investment incentives. It is easy to forget that new, indispensable services such as Skype are only possible because of deregulation.

The net needs neutrality

With the internet being a necessity at school, home and work, it is a vital part of everyone’s lives. Over the last few years, net neutrality regulations have “ushered in an unprecedented era of innovation, creativity & civic engagement,” according to Netflix. Without net neutrality and its bright-line rules, the internet’s integrity will be jeopardized, hurting both consumers and competitors alike.

Without net neutrality, companies won’t be competing on a level playing field. Internet service providers (ISPs), who provide access to the internet, could promote partner companies and provide them an advantage over their competitors. Specifically, these sponsored websites and companies would gain more traffic by being prioritized by their partner ISPs. Additionally, smaller startup companies could be at a disadvantage, since they may not have a partner ISP. Website prioritization will hurt the internet’s market competition by creating unnecessary bias.

In addition to companies being hurt by an anti-competitive playing field, consumers will also be negatively impacted by the removal of net neutrality. Without net neutrality’s content blocking regulations, providers will be able to block websites as they please. Furthermore, they could change their payment plans to a content-bundle model, one similar to television channel packages. In this model, consumers would have to pay to reach certain entertainment websites such as Netflix or news websites such as The Washington Post. As a result, consumers may have to pay more money just to access certain parts of the internet.

With the removal of these important regulations, opponents to net neutrality will be fast to argue their positions. After the repeal, ISPs that prioritize their partners and block content will receive a strong backlash from their consumers, so they won’t immediately change their practices. Many opponents to an open internet will argue that this quiet period proves the internet is fine without regulations, when in fact issues will arise in the long run. By the time most people have forgotten about this issue, ISPs will be able to change their business practices with less objection from their customers.

While the Restoring Internet Freedom Act boasts to keep transparency, the damage will be done. The fact that ISPs will have to expose their business models does not change the negative effects that consumers and competitors will face. Instead, it verifies that these companies are not breaking the internet’s guidelines. In this case, however, these guidelines present a harm in and of themselves.

While the Federal Communications Commission (FCC) thinks the repeal of net neutrality will greatly benefit the internet, there are many who think otherwise. Over the last couple of months, millions of consumers and many well known platforms such as Twitter, Imgur and Mozilla have spoken out against the FCC’s move. In addition, some of the internet’s pioneers made a statement to the FCC, advising the commision to keep the laws. Even with all this feedback, the FCC still voted to pass its Restoring Internet Freedom Act order on Dec. 14, 2017. The commission’s decision to end net neutrality has ignored the internet’s users, competitors and creators and may hurt the integrity of the platform in the years to come.

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