Internet "Fairness" Revisited

Monday, July 03, 2006

The good news is that Congress recently fought back a push for so-called "net neutrality". The bad news is that despite the existence of some very good arguments against the idea, opponents of freedom of speech from the left and the right (aided by useful corporate idiots such as those in charge at Google) seem very likely to continue this fight at some later point in the future.

Aside from the fundamental reason that "net neutrality" is wrong -- that it violates property rights as noted in the link above -- a very good article by Brian C. Anderson at City Journal takes a closer look at the practical implications of the idea.

Here are just a few of the myths perpetuated by fans of "net neutrality" and busted by Anderson.

(1) That the law is needed to ensure that all voices are heard. [M]andated net neutrality is completely unnecessary. For the telecoms to become site-obstructing bullies would be an odd business model, explains tech guru George Gilder of the Discovery Institute. "The providers have no incentive to kick anybody out," he says. "They want to get as much content as possible on their conduit. That’s what attracts customers." This is why bloggers shouldn't fear that differentiated service will prove an enemy of openness.

Competition will give providers a positive incentive to stay honest. Say Verizon wants to charge Amazon oodles to join the fast lane, and Amazon refuses. Verizon could boot Amazon off its network in retaliation. But zillions of Amazon fans would jump ship to another supplier. "The market works these things out, as it should," advises regulatory theorist Peter Huber.

(2) That the law is needed to ensure that customers have choices. [A]s {George] Gilder [of the Discovery Institute] observes, "the broadband market is one of the most competitive arenas in the world economy." FCC numbers show that around nine out of ten U.S. zip codes have two or more broadband providers (and duopolies can be very competitive); 60 percent have four or more -- and the rivalry for the digital "last mile" into the home or office is getting fiercer. "In some suburbs, you now have a cable supplier, maybe two, you have the telephone company, you’ve got WiMax, you have various brands of satellite, WiFi, on and on," enthuses Gilder. Competition is a key reason, a Pew study finds, that 42 percent of Americans enjoy broadband access, up from 30 percent only a year ago. After a telecom price war drove down monthly broadband rates, middle-class and working households in particular signed up in droves.

A neutrality law would dampen this healthy competition. "Without neutrality," Vanderbilt law prof Christopher Yoo, a leading thinker on Net regulations, informs me, "providers could compete on quality of service, giving, say, voice communications a higher priority to make Internet telephony work better, or they could boost the security features of the network, in each case targeting a smaller subset of the market, like specialty stores in a world dominated by larger, efficient stores offering one-stop shopping." A neutrality law, forcing all traffic to be treated the same, would transform broadband into a kind of commodity. "That would favor the largest firms, those with the largest economies of scale," elaborates Heritage Foundation telecom expert James Gattuso. Challengers -- especially tiny ones -- would have a hard time getting into the market.

(3) That the law is needed to ensure that everyone gets the services they "need". Given today's bandwidth scarcity -- the U.S. still lags far behind South Korea and many other nations in bandwidth per capita, despite all the competition -- it's more rational to use prices to allocate the resource efficiently. "While someone sending personal e-mail may be perfectly fine with an occasional delay of a few seconds," Gattuso says, "delay could be deadly if a hospital or health care provider was sending vital medical information." Creating Internet "lanes" -- with the fast lanes costing more -- helps solve this problem. [numerals and headings added]
In other words, the unregulated market will work to ensure that all views are represented on the Internet, that there will remain incentives for investment that will eventually improve the infrastructure of the Internet, and that those who actually need fast access will be able to get it. These are not, in and of themselves, fundamental reasons to fight against efforts like "net neutrality", but they are examples of benefits that spring directly from the fact that the rights of those in the business of providing Internet service are being protected.

And if that's not convincing enough, consider some of the negative consequences such regulation would have.
(1) [I]f government busybodies keep networks from tapping new revenue, forget about new investment. "A net neutrality measure would just put a stop to it," Gilder predicts. As it is, Bernstein's Moffett notes, Wall Street is getting leery of network capital outlays. Verizon's stock limped throughout 2005, for instance, "due to the capital markets' distaste for the expensive capital investments in [the firm's] . . . fiber optic deployment," he says. Uncertainty about the regulatory future is a major reason for Wall Street’s gloom. As the Progress and Freedom Foundation's Adam Theirer suggests, enforced neutrality "would essentially tell infrastructure operators and potential future operators of high-speed networks your networks are yours in name only and the larger community of Internet users—through the FCC or other regulatory bodies—will be free to set the parameters of how your infrastructure will be used in the future." Not a business to bet on. And so, with ever more information surging through the Internet's overburdened pipes, such infrastructure socialism would mean a big slowdown.

(2) Net neutrality would swiftly become a bureaucratic nightmare. "Neutrality regulation might as well have been labeled the 'Telecom Lawyer & Lobbyist Full Employment Act of 2006' because it would generate mountains of regulation and litigation in coming years," says Theirer. ...

(3) There’s no guarantee that the quest for neutrality would stop with the providers, either. The educational site KinderStart has just slapped a lawsuit on Google for downgrading its page rank. Because of its prominence, the suit argues, Google has become an "essential facility," and thus should face government review for fairness. Welcome to the newest right, says tech writer James DeLong: "search engine neutrality." Of course, the arguments made against Google's freedom to run its business are analogous to those Google is now making against the telecoms.

The biggest reason to be thankful Congress resisted net neutrality: the scary prospect of Ted Kennedy and Nancy Pelosi trying to stamp out broadband traffic "discrimination." Some of the most vocal neutrality advocates, including Save the Internet campaign organizer Free Press, relentlessly agitate for regulation of other media to fight "corporate interests" and guarantee "fairness." The deeper agenda at work in the net neutrality debate, insufficiently noticed by most commentators, is the Left's zeal to get a hold of the new media, which have given conservative voices powerful outlets, shattering the liberal monopoly over news and opinion outlets -- and regulate those outlets out of existence, so we can all go back to the days when the New York Times and other elite liberal institutions set the agenda. [numerals and bold added]
This last point, that Internet regulation is a step towards installing a new Fairness Doctrine, echoes exactly the point I made recently when I heard about a conservative lawyer seeking to regulate Google as a utility -- except that this article, in one of its few serious flaws, errs in underestimating the desire by some on the right to censor the Internet.

Anderson ends on a chilling note.
It's thus not hard to imagine a network neutrality law as the first step toward a Web fairness doctrine, with government trying to micromanage traffic flows to secure "equal treatment" of opposing viewpoints (read: making sure all those noisy right-wingers get put back in their place). European Union advisory bodies have already called for such a rule, potentially forcing all opinion sites viewable in Europe -- from tiny blogs to big news organizations -- to post opposing opinions or face fines. [bold added]
The Fairness Doctrine is a lot closer to being brought back -- with a vengeance -- than many of us would care to believe.

-- CAV

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