This article first appeared at The McAlvany Intelligence Advisor on Thursday, February 26, 2015:
Ronald Reagan was right:
Government’s view of the economy could be summed up in a few short phrases: if it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
Tom Wheeler, the current FCC Chairman, doesn’t think that’s funny. He thinks they are his marching orders. Encouraged by his boss, Wheeler is reaching for the biggest hammer in his toolbox to bludgeon the internet into submission and turn it into a utility. On Thursday Wheeler will roll out the 332-page so-far secret document (after his commission has voted to pass it, of course) so the rest of us can see what’s in it. Few will be pleased with what they find.
The first thing will be changing the classification of the internet from an “information services” industry to a “telecommunications” industry, thus allowing the onerous – some call them draconian – rules now to apply to the internet, thus turning it essentially into a utility: bland, beige, quiescent, orderly, stagnant, inefficient, and expensive. But according to Matt Wood, a blogger at Free Press who is “all in” for “net neutrality,” this is a good thing. After all, he wrote, “Letting the carriers charge more (or less) money to reach certain sites is discriminatory, and it’s now how the Internet is supposed to work.”
Now there’s a fellow whose understanding has exceeded his intellect. The internet “works” because information providers and the telecommunications industry have worked together to create the Gutenberg Press of the 21st Century. The effects of that press continue to ripple even after five hundred years.
Examples of such nasty “discrimination” continue to be rolled out to justify the new intrusions. Easily the one most often mentioned is what happened in the tiny town of Mebane, North Carolina. Back in 2004 Madison River Communications (MRC) had the audacity – so the story goes – to block Vonage’ access to its customers, allegedly because it competed with a local voice-over-internet-protocol (VoIP) service. The FCC rushed in to correct this monstrous outrage, enforcing an agreement between the two with the threat of force.
It turned out that the FCC’s intervention not only wasn’t warranted, but that the blockage would have been resolved simply by the action of the free market. Today, the folks in Mebane now have the choice of five – count ’em – internet service providers, and the Vonage incident is ancient history.
But, to Wheeler, facts really don’t matter. What matters in his world is that anything that smells like discrimination must be stopped at all costs. Those nasty capitalist ISPs discriminate by – horror of horrors – charging different rates and providing different services for their customers! The charges are based on how much they use, what content they subscribe to, the size of the servers required to forward the content, the complexity of the platforms connecting the data between the providers and the end users, as well as the mode of communication.
To Wheeler, this is awful. This can’t be allowed. It’s discriminatory. Something must be done!
In other words, all automobiles, in the worldview of the Obamas and the Wheelers (and their facilitators seeking to benefit from less competition, like Facebook, Google and Netflix), ought to be beige in color, have identical horsepower, the same number of doors, the same trunk space, and get the same gas mileage no matter how far or fast they may be driven. After all, in their worldview, offering free market choices is a sin from which only government agencies like the FCC can save us.
When the secret document is opened on Thursday, one may expect to see language similar to this (taken from other attempts to enforce “net neutrality” onto the internet): “Broadband service providers may only prioritize … based on the content, applications, or services … purchased by the end-user, without charge for such prioritization.”
If there’s anything that will dampen enthusiasm for innovation, it will be the removal of any incentive to do so. The Wheeler mindset – shared by his boss – is filled with myths and misperceptions about how the real world works. One of those myths is that the internet has always been neutral. As internet developer David Clark noted, this is one of the statists’ “happy little bunny rabbit dreams,” that the “internet is not neutral and never has been.” That’s the natural result of innovators trying to find ways to please customers with better services, more robust connections, richer content, and faster downloads. They should be free to experiment with such things without having to run to the government for permission first.
Another myth is that net neutrality regulations are the only way to promote an open and dynamic internet. In fact, the surest and fastest way to dampen the internet’s innovations is to turn it into a utility. It is in the ISP’s interest to provide high-quality, high-speed internet just as it is in the smartphone makers’ interest in providing great new phones (and apps), and automakers’ interest in building attractive, feature-laden, highly reliable cars.
According to Wheeler and Obama, these new net neutrality regulations are the only way to improve competition. That’s backwards, of course. Nothing that Wheeler or his cronies do will have anything whatever to do with improving competition, nor will their efforts expand or increase choices for consumers. All they will be able to do is slow things down, while increasing the costs to consumers. In fact, the first thing internet customers will notice once the change from free market to utility is complete is the increase in fees that fill lines in customers’ phone bills: fees, service charges, etc.
Another myth being promoted in favor of net neutrality is that the new rules will make broadband cheaper and faster. Not according to Mercatus:
First, the FCC’s [new] rules will make broadband more expensive, not cheaper. The rules [will] regulate Internet companies much like telephone companies and therefore federal and state telephone fees will apply to Internet bills.
Second, it takes enormous capital investment to offer improvements. That capital must have the opportunity to be rewarded if those improvements succeed. By turning the internet into a utility, capital will find a home elsewhere.
Finally, nothing is being said in the media favoring net neutrality about content. All the conversation is about communications and eliminating discrimination. But once the camel’s nose is under the tent, it will just be a matter of time before the FCC will find content that is objectionable which must then be regulated out of existence. It’s a short hop from net neutrality to content regulation.
Ronald Reagan was right.
Mercatus: Five Myths about Net Neutrality
New York Times: F.C.C. Plans Strong Hand to Regulate the Internet
Heritage: Beyond Hypothetical: How FCC Internet Regulation Would Hurt Consumers – the full report
The New American: Net Neutrality Is a Trojan Horse Virus Infecting the Internet