Net Neutrality No More: FCC Votes In Favor Of Free Market Internet

The Federal Communications Commission (FCC), chaired by Ajit Pai, a Republican, voted 3-2 Thursday to repeal Obama era Net Neutrality rules.

During Pai’s speech on why repealing those rules is a good thing, a specific bomb threat was called in that necessitated the room be cleared and checked. Not surprising considering the manic fervor exhibited by defenders of Net Neutrality regulations.

The issue of Net Neutrality debate can be confusing, but it basically boils down to whether or not a free market should prevail in the internet services market.

Net neutrality is the notion that Internet Service Providers (ISPs) shouldn’t be able to “slow down, speed up, or block data as it is routed from its content originator to end users” in order to favor particular sites. The net neutrality regulations put in place under the Obama administration involved subjecting the Internet to Title II of the 1934 Communications Act, where it’s considered a public utility that is subject to the iron grip of the FCC.

The regulations severely limited the freedom of internet service providers to dictate prices on those services and the fear mongering by those opposed to its repeal is so overblown as to be without merit.

These rules were anti-competitive, anti-free market, and deserved to be repealed for many reasons.

First, the instances of ISPs slowing down or blocking data to favor certain sites over others are few and far between. Ian Tuttle notes at National Review that when the FCC first attempted net neutrality regulations in 2010, they were only able to “cite just four examples of anti-competitive behavior, all relatively minor.”

Cell phone networks, which are not subject to net neutrality-esque regulations, don’t engage in the kind of anti-competitive proponents of Net Neutrality are so afraid of in its absence.

There’s a reason for this: such behavior doesn’t stand a chance in a free market. If ISPs were restricting speeds or content, consumers would dump those companies for others that treated the content fairly.

Further, under Title II the internet is subject to a slue of regulations at the whim of the FCC. That means that ISPs had to submit proposals to the FCC (ask for permission) for any “new technology or business models” which artificially stifles innovation, and thus offerings to consumers.

The FCC also had the power to partially regulate the capital investment of existing companies and determine which companies (if any) can enter the ISP market. That doesn’t sound very much like an ‘Open Internet’ as proponents of Net Neutrality claim to be defending, does it?

In addition to regulations, Title II also gave the FCC power to levy taxes against ISPs, making it more difficult for smaller ISPs to thrive in the market while increasing costs for consumers.

FCC Chairman Pai has explained just how difficult the Obama rules regime made it for smaller internet companies:

“Among our nation’s 12 largest internet service providers,” he told the audience, “domestic broadband capital expenditures decreased by 5.6%, or $3.6 billion, between 2014 and 2016.” I ask him to elaborate. “As I’ve seen it and heard it,” he says, “Title II regulations have stood in the way of investment. Just last week, for instance, we heard from 19 municipal broadband providers. These are small, government-owned ISPs who told us that ‘even though we lack a profit motive, Title II has affected the way we do business.’ ”

The small ISPs reported that Title II was preventing them from rolling out new services and deepening their networks. “These are the kinds of companies that we want to provide a competitive alternative in the marketplace,” Mr. Pai says. “It seems to me they’re the canaries in the coal mine. If the smaller companies are telling us that the regulatory overhang is too much, that it hangs like a black cloud over our businesses—as 22 separate ISPs told us three weeks ago—then it seems to me there’s a problem here that needs to be solved.”

Moreover, the Net Neutrality rules gave the FCC power to prevent ISPs from charging websites at rates they deem to be unfair and ended “paid priority.” This is not only bad economics, it is anathema to the liberty of private companies warranted under a free market system.

Netflix is a prime example as it consumes a huge amount of peak traffic bandwidth. That costs ISPs money.

Pornography sites consume a huge amount of bandwidth. That costs ISPs money.

Were an ISP to push YouPorn to pay fees for its higher bandwidth, consumers of the ISP who did not use YouPorn would be the beneficiaries — they wouldn’t be forced to subsidize YouPorn as they currently are.

One of the simplest analogies is if you are constantly driving huge trucks, full of big heavy deliveries, along a road, why shouldn’t you have to pay more for the road’s upkeep? It certainly costs the provider of the road more in maintenance due to the wear and tear of your heavy trucks. Common sense, right?

Meanwhile, even with out Net Neutrality, other ISPs could decide that they want to absorb the costs of Netflix anyway in order to offer Netflix to their customers, since Netflix could refuse to pay the fees and use another provider. That would be an advantage for that second ISP. In other words, market choices take place, and those can provide options to consumers. Net neutrality banned such deals.

Under Net Neutrality ISPs are also prevented from engaging in what’s known as “paid priority,” where they pay to have certain bits sent to computer screens at a faster rater than others. This adversely harms smaller ISPs, which rely on paid priority since they don’t have as much resources as bigger ISPs.

This ends up being a lose-lose for consumers, who will be forced to choose between higher costs or slower Internet speeds.

That’s why giants like Facebook and Google support Net Neutrality – it’s a form of crony capitalism that suppresses their competitors. The Left is usually against Big Corporations abusing their stature to keep competition at bay, unless, apparently, those companies subscribe to the same progressive biases as they do.

At the end of the day, the best way to actually bring about a free and open internet is to introduce more capitalism into the market, not government control that eliminates competition and screws consumers as they do in local municipalities across the country.

Local governments and their public utilities are notorious for charging broadband companies exorbitant prices for access to publicly owned “rights of way,” without which they cannot erect the infrastructure necessary for Internet service.

These municipal monopolies are among the chief reasons that many places have little or no competition among ISPs.

But it doesn’t have to be this way. Kansas City, Austin, and Provo all hammered out favorable agreements with Google Fiber, the Internet giant’s ultra-high-speed broadband project, and several other cities, including several in North Carolina, have followed suit.

So while the advent of Net Neutrality repeal sparks tantrums and bomb threats from the Left, the results will be a freer market in internet that respects the property rights of ISPs (who own the infrastructure) and benefits consumers too.

That’s the way capitalism is supposed to work – mutual exchange, for mutual benefit.

It’s a good thing we now have leadership at the FCC that understands such a principle.