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The Significance of Sen. Al Franken's Call to Impose Net Neutrality on Google, Facebook and Amazon

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Antitrust and technology market regulatory interventions are staging a comeback, even in the era of President Donald Trump's  push for broad regulatory rollbacks.

In a recent speech at an Open Markets Institute panel session called "Are Tech Giants Too Big For American Democracy?" Sen. Al Franken (D-Minnesota) had a surprise for big tech.

Not only does the Senator want to preserve government oversight over information flows in the form of regulated "net neutrality" for Internet service providers (the rules that Federal Communications Commission under Ajit Pai wishes to roll back); Franken also wants to extend the neutrality concept to content companies.

Addressing the prominence of firms like Google, Facebook and Amazon in data gathering and advertising, Franken wrote in the Guardian (contemporaneous with his speech):

As tech giants become a new kind of internet gatekeeper, I believe the same basic principles of net neutrality should apply here: no one company should have the power to pick and choose which content reaches consumers and which doesn’t. And Facebook, Google, and Amazon – like ISPs – should be “neutral” in their treatment of the flow of lawful information and commerce on their platforms. ... While we fight to preserve the Order, we must now begin a thorough examination of big tech’s practices in order to secure the free flow of information on the internet.

There are separate quarrels I'd have with Franken with respect to government data collection vs. private data collection for marketing purposes.

Instead, for the moment I only wish to observe that, in a free society that does not practice censorship, there is no such thing as information monopoly or gatekeeping, and that government should not be regulating information flows or the size of microphones.

The irony is that the tech giants have been the ones agitating for net neutrality regulation this past decade-plus, such as in this 2009 letter from tech executives to the FCC.

That this would ricochet badly was something we warned about at the Competitive Enterprise Institute years ago, for example in an early 2010 filing to the Federal Communications Commission in its proceeding on "Preserving the Open Internet" and "Broadband Industry Practices" (and still earlier in 2008).

The writing was on the wall, since even in 2003, there had been those calling Google an "essential facility," which was ludicrous: it was made out of ones and zeros.

And sure enough, the European Union has been trial-ballooning content and app neutrality (along with maintaining stringent privacy rules) long before Franken weighed in.

In the Internet realm, the distinction between content and infrastructure companies had always been artificial as far as "regulation" could be concerned, since each moves toward the other's turf.

One relevant part of my 2010 filing appears below, fretting over what was in store for net neutrality advocates when the time came for score-settling and the political predation in play today:

Proposed Rule Fosters Political Vulnerability for All Market Participants

Not every competitiveness issue is properly a public policy question. But they all become so when somebody who wants special treatment gets the ear of a regulator. Net neutrality advocates’ premise is that infrastructure companies should not control content, but that it’s perfectly acceptable for content companies, in conjunction with an even more powerful government, to control infrastructure.  It’s difficult to exaggerate the negative implications of entrenching this extraordinarily interventionist idea further in law and policy at this stage of communications history.

An irony is that net neutrality’ advocates increase their own vulnerability to political predation as a result of this proceeding. The many CEOs that wrote the FCC in favor of this rulemaking could regret it, and their Boards, managements and shareholders should take note of this folly while there’s still time (to the point of advocating a Congressional ban on the rulemaking, or at least a resolution of disapproval on the rules). Alternatives to Net neutrality, steps to promote access that reduce agency power—unlike neutrality and the body of intervention following it that would enlarge agency power, require CEO level advocacy.

Firms that favor net neutrality are already finding that their own escalating market power renders them vulnerable to the same political predation now unleashed on the infrastructure industry. One could just as credibly—that is, perversely—make a case for “Search Neutrality” (All search results shall appear first!). It is not only Internet access being improperly dubbed an essential facility; If network owners are to face regulation, search engines won’t likely be immune from predatory activism against search ranking algorithms, proprietary content placement, advertisement and other service pricing, privacy standards and more. Neither infrastructure nor content companies nor their customers ultimately benefit from a self-destructive regime in which no one can change course and charge for (or pay for, or demand) premium quality services well beyond the capabilities of today’s technologies.

Neutrality assumes that broadband service providers are not entitled to set the terms on their networks.  Likewise, major content firms will increasingly find that they are not entitled to their business approaches either. (As it’s been joked, business might win more battles if it ever fought any.)  The NPRM should be taken as a warning:

"At least one commenter in this proceeding has suggested that we should read the Internet Policy Statement as embodying obligations binding on content, applications, and service providers in addition to broadband Internet access service providers. Although the question of Internet openness at the Commission has traditionally focused on providers of broadband Internet access service, we seek comment on the pros and cons of phrasing one or more of the Internet openness principles as obligations of other entities, in addition to providers of broadband Internet access service." (p. 40, paragraph 101)

Market power and information-gatekeeper accusations will extend to content companies [note Franken used this exact term above]; they can now reject neutrality, or be regulated themselves later—it’s as simple as that.  It’s in the interest of all sides of this debate—a clash of the titans in the good sense of the term, given the bounty consumers stand to gain—to come to terms on a mutually beneficial FCC rollback instead of the hyper-regulatory regime that neutrality will impose. This is the crucial point in business and market history to make a choice between regulation or “bandwealth.”  This proceeding is well on the way to enlarging the scope of future regulatory purview well beyond what many anticipate, thus this appeal for reconsideration. Net neutrality conflicts with the genuine needs of consumers and ultimately its advocates’ goals—but comports well with agency turf building. A network in which government regulates infrastructure is one in which complementary content regulation is easier as well.

Letting lieutenants run show on the 2010 Washington battlefield is disastrous policy for American high tech business. The temporary gain from securing temporary regulatory advantage pales in comparison to the rewards of network, content and communications liberalization. Neutrality is in some ways like antitrust; It serves as a non-market tool of (phony) competition whose non-objectivity everyone exploits to selfish advantage. Few actually oppose such slippery rules on general principles even when they know they should—they do so only when they are themselves the target. Even critics sometimes unfortunately want neutrality they can live with, as opposed to registering the fundamental opposition that’s warranted. The “four principles” themselves needed undressing years ago; few seemed willing to do that, now the price is being paid. At stake is not merely the destruction of infrastructure wealth but of content flexibility, consumer welfare, and even infrastructure security. Embracing infrastructure socialism sets in place the machinery for endless future headaches.

We can allow politicians and regulators to usher in a tightly regulated Internet on which both infrastructure and content are governed from Washington in violation of every principle of a free society, or we can have effectively infinite Splinternets and Cyberspaces.

Originally published to Forbes Online.