I was elated when I heard that the DC Court of Appeals struck down the Federal Communication Commission’s power grab via its so-called “net neutrality” regulation that prohibits ISPs from “discriminating” (aka charging more for worthless content that doesn’t drive traffic) against websites and content creators.
The court’s opinion focused on the fact that the FCC had no statutory power to for a such a radical government takeover. ISP’s are currently considered “information carriers” by the Commission and thus exempt from most regulations that effect “telecomm carriers” like broadcast networks. The decision will likely spark an effort by the pro-regulation commissioners to reclassify ISPs as telecomm carriers in order to make the rules more feasible.
For the sake of a laissez faire internet, I sure hope we avoid this scam. As the Cato Institute’s information technology analyst Jim Harper points out, the effect of enacting net neutrality or any other quasi-government takeover scheme would be to transform a vibrant and dynamic laboratory of innovation into something resembling a public utility like your local creepy low-quality public access channel. Harper writes:
[T]he FCC has sought for years now to regulate broadband Internet service providers something like it used to regulate AT&T, with government mandated terms of service if not tarriffs and price controls. This doesn’t fit the technical environment of the Internet, which allows for diverse business models. Companies that experiment with network management, pricing, internal subsidy, and so on can find the configurations that serve widely varying consumers and their differing Internet needs the best. If government believes in fast lanes and slow lanes, surely Internet service providers could optimize service for movie delivery, video calling, and such, while email arrives a little less speedily.
We made the case more than five years ago that “ ‘Net neutrality” is a good engineering principle, but it shouldn’t be a legal mandate. Technology and markets surpassed any need for command-and-control regulation in this area long ago. But regulators don’t give up power without a fight. To maintain power, the FCC may try to make Internet service a public utility.
So government control would kill innovation and further erode Americans’ ability to communicate and exchange free of state interference–which I suspect is part of the real motives of many of the pro-regulation commissioners and the other interests pushing this farce.
The effort to push net neutrality is very much analogous to the imposition of anti-trust laws in the 19th and 20th centuries. Like net neutrality, anti-trust were advertised on the grounds that they were needed to fight giant alleged corporate monopolies like Standard Oil and US Steel. But in reality, they were simply protectionist laws designed to preserve the profits and market-share of inferior producers by using the state to kneecap more innovative cost-cutting firms, and in reality anti-trust does more than ever to promote monopoly and oligopoly rather than decentralized competitive markets.
The same will be true of net neutrality should it ever be instituted. The inferior content-creators who lose market share and would traditionally be charged more of a premium for consuming bandwidth will be empowered to leverage political favor with the the commissioners and congressional committees to file suit against “discriminatory” ISPs who charge them more, and thus destroying any incentive to be entrepreneurial and invent new and better services for consumers, killing off the heart of sector entirely.
This is exactly what happened in the 19th century when Congress created the Interstate Commerce Commission to ban “discriminatory” rates against inefficient shippers and giving preferential rates to more efficient ones. The result was billions of dollars in losses in today’s dollars in economic growth since railroad industrialists had to make extreme cutbacks in order to absorb the government-mandated losses that came with charging expensive and inefficient shippers.
As economic historian Burton Folsom writes in his book The Myth of the Robber Barons, quoting the successful railroad tycoon James J. Hill, “rates vary with conditions.”
More from Hill:
[Rates] vary from day to day, almost…You’re dealing with the questions that exist today. Can you apply conditions that exist today to tomorrow or next week or next month? It is absolutely impossible…
The FCC stupidly believes that it can. Let’s hope they never get the chance.