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The Premises of Net Neutrality

In the electric power industry, if you run an extension cord across the street to serve another, you go to jail. The local utility has a protected monopoly. We’ve put most of that "public utility" vision behind us in communications. Wired and wireless and satellite options abound for Internet service; we'll likely see blimps and communications drones, and who knows what else.

Yet special interests still want the Federal Communications Commission (FCC) to regulate the content flows and grid infrastructure, the prices and services of the Internet via something called net neutrality. They actually are quite open about wanting government regulated monopoly power.

The Internet as a utility, like the power company. They want speed limits.

We're nearly a decade into a series of disruptive efforts to inflict "net neutrality" on the Internet; Neutrality is the idea that we won't have access to content where and when and as fast as we want it without government and special interests controlling the wires.

Neutrality proponents want to inflict a "Mother-May-I" method of operation on the Internet; they want planning boards and regulatory affirmation of content carriage arrangements and of infrastructure deals.

It's not a bright new idea, and not even one rooted in a plausible belief in natural monopoly, or one informed by angelic visions of "common carriage. Regulation like net neutrality devolves into cronyism. It was also rooted in cronyism.

Early telecommunications and power networks were highly competitive, with duplicative infrastructure. The powerful didn't like the competition. The cronies got a franchise and guaranteed profit, everybody else got shut out, and the effects still linger.

Natural monopoly is unseen in nature. Monopoly gets created by governments and cronies through exclusive franchises that ban competition, and regulatory “certificates of convenience and necessity.” Competition is the norm, not something governments "create" or safeguard.

But the residue of the utility mentality persists in calls for regulated access to others’ technologies and networks, even when proponents know content and infrastructure enterprises increasingly blur. Everyone encroaches on everyone else's turf all to the benefit of customers, rendering regulation gravely destructive.

Tomorrow's slow lanes faster than today's top speeds, in the same way that dial-up modems are a thing of the past.

Federal Communications Commission Chairman Tom Wheeler appears before the House Energy and Commerce Committee this week, to face a range of questions.

It would be helpful for the Energy and Commerce and future proceedings to address what are faulty premises of net neutrality:

  1. “Market failures” matter, government failures do not exist.
  2. Infrastructure companies and content companies are naturally and inherently at odds.
  3. Infrastructure companies should not control content; however, content companies, special interests and regulatory bureaucracies like FCC should control infrastructure.
  4. Compulsory net neutrality spawns openness; Market impulses do not.
  5. Infrastructure companies’ interest lies in withholding rather than selling access. Therefore network competition requires political or regulatory force to exist.
  6. Discrimination is bad, and non-discrimination exists; Net neutrality is not itself a form of discrimination or of picking sides
  7. Communications flows (video, information, voice, future innovations like holograms) are maximized by preventing property rights in infrastructure.
  8. Networks best exist as passive husks; they cannot be a competitive unit. Only the movement of bits from point A to point B on an existing network counts as competition.
  9. Wall Street, rivals, advertisers, shareholders, consumers and the media are passive and cannot react to inefficient network management
  10. Capital markets cannot be engaged to generate new infrastructure.
  11. Neutrality is the highest value: User ownership of grids; liberalization of non-telecom network industries to enable wide-scale, cross-industry infrastructure consortia; “splintering” into and out of the public net by private carriers--all have no role to play on tomorrow's Internet and may safely be ignored.

To neutrality proponents, alternative, profit-driven modes of future infrastructure expansion and organization matter less than FCC regulating the mode that happens to exist today. Freezing it in place presumably forever is what benefits the public.

Opponents see infrastructure wealth as something dynamic, created, managed and duplicated in response to price signals and technological advance.

Our modern problem embodied in the net neutrality war is not rooted in a lack of competition today, but in yesterday’s outlawing of competition. The impulse to maintain that regulatory oversight instead of liberalization and actual competition fuels net neutrality, not some exalted vision of consumer welfare.

For more, see the series Before Net Neutrality Eats the World.