Saving the Internet from Net Neutrality

There is an old joke that starts like this: a Democrat walks into a bookstore. He looks for George Soros’s latest book, The Age of Fallibility, and upon finding it, decides to pay the cashier $24 for it, and then goes home satisfied with his new purchase. Wait, back up. Actually, the man does not even enter the bookstore, because he fears he will either be unable to find the book, or will not agree to the price tag. His response is to lobby Congress to force bookstores to carry every book ever written and to charge the same price for all of them.

Unfortunately, this is not a joke. This is “Net Neutrality,” the story of liberal and corporate activist groups who believe that the Internet cannot control itself and will explode with high prices and repressive censorship if the government does not impose a fairly arbitrary set of rules designed to give opponents of free markets the ability to sleep at night knowing that somebody, somewhere, is imposing rules on businesses.

The Communications Act of 1934 has been in the process of being overhauled for the past few years, and it is this transition that liberal interest groups see as an opportunity to solidify government control over Internet communications. According to Title II of that act,

“It shall be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.”

The FCC is responsible for interpreting and enforcing such rules. It has interpreted them as meaning that the backbone carriers of the Internet (AT&T, Verizon, etc.) are not allowed to block or filter any traffic that goes through them, or charge different prices to different users. The impending merger between AT&T and BellSouth encouraged Democrats on the FCC to succinctly restate their goals, barring AT&T from any activity that “privileges, degrades or prioritizes any packet.”

The telecommunications companies have long argued they should be allowed to charge discriminatory rates so big traffic users like Google and Amazon actually pay for what they use instead of being subsidized by smaller users, but advocacy groups such as SaveTheInternet.com claim the above rules are necessary for a healthy Internet. If telecommunications companies are allowed to charge different prices to different users of their services, everybody will pay more, particularly poor people.

It doesn’t take a Nobel Laureate to see the backwardness of that logic. If different rates are applied to different users, then big users will pay more than small users. Google will pay more than Grandma because Google congests a lot of pipes while Grandma just looks at the weather. The free market has been extraordinarily good at determining such price structures in the past, but Net Neutrality supporters argue the Internet is somehow different, less responsible, filled with businesspeople who will make terrible mistakes and accidentally send the $19.95 phone bill to Google and the $3.5 million fiber bill to Grandma.

Other Net Neutrality advocates talk about “freedom”—the freedom to construct a business like Google or eBay from one’s garage without paying anyone for the privilege to do so. Instead your work is subsidized by your fellow citizens. This is an argument we can all appreciate. After all, Google’s founders became so wealthy that they recently purchased a 180-passenger Boeing 767 and turned it into “a party airplane.” That’s pretty sweet. Such opulence may be curtailed in the future because, according to Senator Byron Dorgan, “if the big interests who control the pipes become gatekeepers who erect tolls, it will have a significant impact on the Internet as we know it.”

Is Sen. Dorgan unaware that connecting to the Internet already costs money? It has never been free—even in the Internet’s seminal days when the military and Universities were experimenting with it, taxpayers and tuition payers were footing the bill. And since somebody most own and/or control the physical pipes and routers traffic flows along, somebody must be a gatekeeper. The government could control those gates, or We The People could control those gates through private ownership and the unrivaled, unbridled efficiency of the market system. I’d prefer the latter.

Maybe, though, the government deserves to be the gatekeeper to the Internet because it has given telecommunications companies billions of dollars in subsidies over the past decades. In particular, huge subsidies are granted for the expansion of networks into rural areas. City-slickers are forced to pay AT&T to help it reach the boondocks. The argument that these subsidies are grounds for Net Neutrality is severely flawed. If exchanging subsidies for regulation is a fair trade, then both parties should have agreed on the terms of that trade at the time of the trade. To retroactively claim the telecoms owe something in return for previous favors is unfair, particularly when so many companies in many industries receive the same subsidies but do not have to receive the same ex post facto punishment. This is no different than Brown University arguing it deserves a legal stake in businesses founded by its alumni because it provided us with such a darn fine education. We pay tuition, we receive an education—those are the terms of the deal. Whether somebody (in this case, the telecoms or the students) is unequally gaining from the deal is not relevant after the fact.

Will the telecommunications companies censor content they don’t like, charge astronomical rates, and cripple the Internet if they are allowed to make their own business decisions? There is no way of knowing ahead of time. But in surveying the rest of our nation’s economy, we may observe other industries and see how they have faired. Book stores, movie stores, newspapers, department stores, hair dressers, and many other businesses charge their own rates and provide their own services. Does your hair-dresser carry Vidal Sassoon but not Paul Mitchell? If this bothers you, is it cause for large-scale hair-dresser regulation? Of course not. Consumers will demand what they want and punish companies that do not provide it. That system has worked beautifully for countless years, and there is no reason to believe it will not continue to work well. If there are any characteristics about telecommunications companies that make them different from other companies—for example, their oligopoly-like behavior—then care should be taken to enforce current collusion laws and incubate other helpful laws that encourage entry into the marketplace. But if the telecoms are not breaking such laws ahead of time, let’s not assume we need to socialize our economy’s structure to keep them in line.

Net Neutrality legislation already failed last June, and with any luck the same nonsense introduced by Senators Snowe and Dorgan will similarly collapse. We need to choose freedom, not regulation, and if some catastrophic events occur that convince us that regulation is necessary, then we can resort to it. But let’s not engage in any pre-emptive strikes against the Internet just because a few interest groups are scared they may have to pay for their services.