I have spoken in the past in favor of net neutrality, writing,
Whoever is responsible for and best at enforcing it, net neutrality had this going for it: it was a relatively stable, relatively open playing-field for competition…. [T]he fact that companies tried to get around it via copyright protection privileges shows that it was, in fact, doing something to enforce freedom of competition. Now, without it, there is an opportunity for concentration of power…. As [Walter] Eucken illustrated, concentration can lead to instability, and instability leads to popular calls for state regulation, which tend in practice toward cronyism. Certainly, such a trajectory is not inevitable, but it is now more likely, giving good reason for pause at the idea that we do not need net neutrality — or something like it — in the future.
This week, House minority leader Nancy Pelosi voiced her support for net neutrality as well. So why would I object? Because the measures that Pelosi proposes give much more power to the government, following the trajectory outlined above in the direction of over-regulation.
Brendan Sasso of National Journal has the story:
“I oppose special Internet fast lanes, only open to those firms large enough to pay big money or fraught enough to give up big stakes in their company,” the California Democrat wrote in a letter to Federal Communications Commission Chairman Tom Wheeler, urging him to classify broadband as a “telecommunications service” under Title II of the Communications Act.
Pelosi is the latest — and highest-ranking — Democrat to back the controversial regulatory maneuver. Her position puts more political pressure on Wheeler and the other commission Democrats to invoke the powers.
Supporters argue that using Title II is the only way to enact net-neutrality rules that can hold up in court. In January, a federal court struck down the old net-neutrality rules, which were based on weaker authority under Title I of the law.
And what are those Title II powers?
Title II, which the FCC currently uses to regulate phone companies, gives the agency broad authority, including the ability to control prices and determine which customers a company has to serve. But the commission can also decide to waive any requirements under the provision.
Pelosi said that picking and choosing which regulatory requirements to impose is an “appropriate tool to refine modern rules and will prevent the FCC from overburdening broadband providers.” She also argued that the provision will allow the FCC to combat fraudulent billing practices and to better protect privacy.
I support net neutrality because it is an example of regulating the structure of the market but not the market process … at least it was. What Pelosi is proposing goes far beyond that, however.
Title II would give the government power to regulate prices for ISPs. When prices are fixed by the government — presumably at an ostensibly low rate — on a commodity (bandwidth) with relatively inelastic demand, one common problem that may come about is a supply shortage. What that would mean is that by keeping the price of bandwidth below the market price — that based on the cost of production to the supplier, the amount supplied, and the amount demanded by the consumer — the result may be slower Internet access for everyone as more and more people sign up to take advantage of the artificially low rate.
Another issue, and perhaps more alarming, is the “picking and choosing which regulatory requirements to impose” from a whole host of additional options that also would not otherwise be available to the government. Pelosi is marketing the ad hoc nature of such arbitrary regulation as a feature rather than a bug.
But it is precisely this sort of ad hoc regulation that the German economist Walter Eucken, who I drew from for my previous post, warned against. Government regulations should not themselves be a marketplace from which government officials can pick and choose on a whim. The possibility for cronyism increases the more power the state has at its disposal to regulate market processes in this way. What may happen, ironically, is that a measure supposedly for the purpose of maintaining net neutrality will simply open a backdoor to its ultimate demise.
If we are going to regulate ISPs, net neutrality is a way that regulates the structure of the bandwidth marketplace to ensure competition. But going beyond that to the regulation of market processes, such as the price mechanism and what customers can be serviced, may be just as bad as an Internet without net neutrality, ultimately hurting the very consumers such regulations are intended to protect, impeding justice in the name of justice.
For my money (literally), I say give me net neutrality … and nothing more.
