Neutering the Net

The Washington Examiner has published my op-ed on net neutrality:

A war is waging over the future of the Internet. On one side are the supporters of “net neutrality,” a proposal to ban Internet service providers (ISPs) from giving different treatment to network traffic from different sources. The Internet Freedom Preservation Act of 2009, introduced in the House two weeks ago, is their latest salvo.

On the other side are those who believe that regulation will threaten the very freedom that has allowed the Internet to thrive.

The net neutrality movement is an unfortunate departure from the “keep your hands off my Internet” attitude long held by many on the Web. Advocates of neutrality legislation are asking Congress to write into law what they see as an Internet that treats everyone equally. They are concerned that new technologies and business models might give big players an advantage over the little guy, or worse, that ISPs might use their market power to force a crippled Internet on their customers. Both fears rest on significant misconceptions.

The Internet has never been a level playing field. Big companies like Google, for example, offer their customers an Internet “fast lane” by building server farms all over the world. Cable broadband providers still reserve most of their bandwidth for cable TV. Far from hurting the Internet, these non-neutral elements have been essential to pay for the wires and servers than carry the Web as we know it.

Neutrality is not an all-or-nothing choice. Different elements coexist and make each other better. Companies that take advantage of openness can wipe the floor with those who do not, as AOL’s competitors did in the late nineties. At the same time, if Google’s servers gave the company no advantage, Google would never have built them, and the Internet would be slower for everyone.

Future innovations will be just as helpful, if we allow them. ISPs might save their customers money by “unbundling” Internet access, as we often wish cable companies would. Or they might take a cue from mobile providers and let their customers choose “preferred sites.” Some of the strongest proponents of neutrality laws—Google, Amazon, and eBay—made their fortunes with the same “dynamic pricing models” that they want to deny to ISPs. No one could have predicted the diversity of prices and services that has made AdWords possible, and there is no reason ISPs and their customers cannot benefit from the same strategy.

Many neutrality advocates admit that non-neutrality could help the Internet, but they worry that ISPs will exploit non-neutrality to swindle their customers. Doomsayers warn that ISPs will start cutting users off from some parts of the Internet in exchange for bribes from powerful players. Neutrality advocates want to make these practices illegal, to stop the problem before it starts.

That theory has several problems. The first mark of a monopolist is price gouging, not shoddy service. There is no evidence that ISPs are gouging prices, and even if they were, net neutrality would do nothing to stop them. More importantly, though, if competition were lacking, neutrality laws could only make the problem worse.

It is nearly impossible to compete directly with a powerful company. Instead, competitors try to enter the market by offering something new, like Progresso did with upscale canned soup or Apple did with the iPhone. Yet the goal of neutrality legislation is that ISPs should compete only on price. By forcing new companies to use the same business model as the big dogs, the law would make competition much more difficult.

Many advocates answer that ISPs will never be competitive, and that the best we can hope for is to regulate them. In fact, that is exactly what regulators thought in the 1920s, when the Bell telephone monopoly was just taking off. They assumed that competition had no chance, so they ignored the anti-competitive effects of their rules. Those mistakes choked the telephone industry for decades.

Competition is not perfect. It never has been and never will be. But assuming that we can do without it, that we can help consumers by prohibiting diversity, is a blunder too costly to make again.

The Internet is a process in motion. New sites and applications come and go in the blink of an eye, and that dynamism has created a wealth of content like nothing ever before. We cannot expect anything less of the technologies that carry that content, or of the businesses that pay for those technologies. They too must come and go and change as the Internet grows. The Web should not rely on one unchanging business model any more than it should run on just one browser.

We had it right the first time. Congress, keep your hands off!