Net Neutrality Not the Savior One Might Think (Part II)

Last week, I explained what the FCC’s new “net neutrality” rules are intended to do, but here is the reality:

A government decree will never resolve disputes in a way that enhances innovation and lowers costs for consumers.  Compliance with the net neutrality rules creates another barrier to entry for potential competitors to incumbent ISPs. And experimentation with Internet service plans is now prohibited.

Without net neutrality, some consumers could purchase a plan that is optimized for data-intensive online video-gaming and streaming, while others could purchase a lower-cost plan that is optimized for low-bandwidth surfing.

Treating data differently to provide lower cost plans and increase Internet access is not just hypothetical. Facebook’s intended to provide free Internet service to millions of individuals around the world who do not have access. The initiative manages access to Internet services and bars high-bandwidth services from the network, which was met with a chorus of complaints that it violated the spirit of net neutrality. A similar type of initiative to provide low-cost internet would be impossible in the United States under net neutrality rules.

If there were more robust competition among Internet providers the whole net neutrality debate would be irrelevant. If an ISP excessively throttled Internet services then consumers would have other options.

In countries like South Korea and the United Kingdom there is much more competition between ISPs. As expected, these countries also have much faster speeds and lower cost for their internet.

There are a two ways that the United States could induce this type of competition:

  • The FCC could invalidate unreasonable barriers to entry for ISPs in local and state jurisdictions;
  • The FCC could require that incumbent ISPs lease access to last mile infrastructure to competitors.

The United States should not go down the road of excessive management of ISP business practices. The increasingly expansive meaning of net neutrality threatens to undermine long-term innovation among internet providers.

Net neutrality may also have the unintended consequence of adding another barrier to entry for ISP competitors and creating more complex regulations.

The better solution is for the market to sort out what the best management practices are for the Internet, not the government.

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