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Dumb Pipes, a Dumb Idea: Net Neutrality as 21st Century Socialism

This week's C:\Spin (#197), CEI's tech policy newsletter, casts net neutrality in the appropriate light. Calling out proponents of neutrality for what they are--political predators--my colleague Wayne Crews lays bare the misconceptions and wrong-headed thinking that make up the neutrality debate:
“You know who owns your pipes? Your customers. You have no right to set up a tollbooth.”

- Sen. Byron Dorgan (D-ND), September 17, 2007

Sen. Dorgan's statement refers to the broadband infrastructure built up by the telcos and their rivals. It lays the “net neutrality” issue bare: if you're an infrastructure owner or Internet service provider, government people like him shall dictate your relationships with the world at large. Welcome to infrastructure socialism, 21st century style. Online activists teamed with superstars like Google seek a perpetual “open access” business model imposed on Internet service. Last summer's master stroke: to link future wireless spectrum auctions to accommodating the policy. Comcast recently received letters of inquiry from the Federal Communications Commission (FCC) in response to a petition filed by a coalition averse to what it regards as unjustified data discrimination against file-sharers. They seek fines in the millions. Barack Obama, unveiling his “innovation agenda” late last year, pledged, “I will take a backseat to no one in my commitment to network neutrality. Because once providers start to privilege some applications or web sites over others, then the smaller voices get squeezed out, and we all lose.” Sen. Dorgan, naturally, spies an opening for his net neutrality legislation (co-sponsored with Sen. Olympia Snowe, R-ME). Representative Ed Markey has introduced legislation to investigate neutrality as well.
But net neutrality rests upon the fallacy that infrastructure and content companies are naturally at odds; that competition and customer service require political force. Everybody agrees openness is good; nobody wants their favorite websites or activities blocked. But it's not OK to condemn the very possibility of adopting proprietary, exclusionary business models—especially at this critical point in business and communications history. It's only 2008. All wealth—infrastructure and content alike—must be created, often over decades. Net neutrality, by turning existing pipes into passive, regulated husks, is as fantastic as “Search Neutrality” imposed upon Google would be. (“All search results must appear first!”) It's just not as obvious. Elevating the principle of mandatory net neutrality above the principle of investor ownership and wealth creation in pipes and spectrum deflects market forces away from the infrastructure development that we need. And we do need it: recent news notes potential bottlenecks on the Internet caused, not by anyone's blockage, but by escalating data and video. Growing hand-in-hand in response to market demand, private infrastructure companies can handle any traffic growth at all; with neutrality, it's in no one's interest to take the risk or bother. If private ownership rights are proscribed simply because property is long and thin (or intangible, like spectrum), governments, commissions or heavily regulated utilities will dominate infrastructure rollout. I submit this is not a desirable state of affairs. The neutrality movement's demand for centralized management is all the more incomprehensible since enhanced power will render any dominant entry more vulnerable to future political predation. (Google's recent hassle over the DoubleClick acquisition is only one example.) Plus, the balance of power between content and infrastructure can swing. Precisely how neutrality proponents think government control over communications infrastructure squares with the First Amendment is another marvel. In any event, for the FCC or Congress to advance net neutrality regulation is to discriminate in favor of one side in a battle of equals. Since Adam Smith we've known that governments that avoid taking sides in private disputes (here, infrastructure and content companies) enable more prosperity for all. Ultimately, the Internet is too slow and needs to be transformed into (or replaced by) something better. Internet-type technologydead and boring,” Mark Cuban recently noted that we've “reached the point of diminishing returns” given today's broadband capabilities. matters; not necessarily the Internet's specific configuration today. Calling the Internet “ The idea of future multimedia-saturated generations getting by on the existing “pipes” inventory is absurd. Let's boil it down. Competition in creation of core networks is as important as competition in the stuff we sell over the networks later. We need to discard the idea that networks themselves cannot be regarded as a competitive unit. The religion that only the movement of bits from point A to point B on an existing network counts as “competition” must yield. Neutrality advocates invoke the sanctity of “dumb pipes,” but we would more properly acknowledge a competitive dimension upholding the possibility of the “genius” of pipes. Price and service differentiation will become increasingly critical to well functioning network services. The very content providers now complaining will themselves likely seek “preferential” treatment, or to pay less for non-vital transmissions, down the road. But such “discrimination” is perfectly consistent with even greater openness than we enjoy now; nothing about fostering smart pipes is incompatible with retaining “dumb” ones as consumers desire. That's because the “background hum” of today's commodity Internet can also grow in concert with proprietary services that use Internet technology, but may or may not ride the same pipes as the “capital-I” Internet. Policy should not discourage the possible emergence of such a “Splinternet” by catering to the old-school model of infrastructure socialism and sleepy-headed “openness.” Fostering infrastructure wealth—of both the proprietary and open kinds—is the only valid public policy goal, the only avenue to a constant escalation in the basic capabilities of the Internet as a whole, much as we've already witnessed without net neutrality interrupting the process. (Dialup, anybody?). There's already a colossal task at hand—to demolish regulatory silos to foster cross industry partnerships (power, water, rail, sewer) to fund cripplingly expensive national infrastructure development. This—and restraining FCC—should occupy policymakers. Net neutrality, and similar predatory schemes like compulsory licensing, would never emerge in a free market, and is inoperable without a permanent, priestly regulatory commission. It's so misguided that it would be worth Congress stepping in to prevent its mandatory application altogether via FCC's “four principles”, not debate it as a live policy issue. Policymakers must acknowledge “discrimination's” elemental role in infrastructure and bandwidth creation consumer welfare, and cybersecurity—all the desirables of content and service. To hold in 2008 that pipes should henceforth be dumb exemplifies the blindness of political regulation, how the very ones in charge of communications policy can most threaten it. Nothing important can be known today about proper pricing and routing of content on the networks of tomorrow; and nothing can be gained and a lot can be lost by prescribing it now. Reject “nut” neutrality, swear allegiance to tollbooths.
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