Before Net Neutrality Eats the World (Part 15): Can We Please End This. Please.

by Wayne Crews on September 9, 2013 · 1 comment

in Deregulate to Stimulate, Economy, Features, Property Rights, Regulation, Tech & Telecom

netneutralityToday, Monday, September 9, 2013, the U.S. Court of Appeals for the D.C. Circuit will hear oral arguments in Verizon’s challenge of the Federal Communications Commission’s December 2010 Order on “Preserving the Free and Open Internet.” This “Before Net Neutrality Eats The World” series has explored fundamental issues at stake; I’m wrapping it up today.

(At lunchtime today, you’ll be able to stream a TechFreedom/International Center for Law & Economics luncheon panel reacting to the proceedings.)

The Internet is still relatively new as an economic and cultural phenomenon, and it has been a full eight years since the Federal Communications Commission’s (FCC) Internet Policy Statement of 2005 that created this long and drawn out net neutrality distraction.

During this unfortunate detour and waste of resources, the runup to the case represented a unique opportunity in business and political history to build an intellectual and consumer case against infrastructure socialism, and for network property rights.

Much of the debate has focused on FCC’s authority instead, which is a bit worrisome. Sure, affirming that FCC lacks authority to control networks is vitally important; but no one, including Congress, should have such “authority.” Networks are private property, and establishing that is the priority.

Nothing important can be known today about how pricing access and content on the networks of tomorrow should be implemented, and nothing can be gained and much can be lost by prescribing conditions on how producers make their decisions as network infrastructure is deployed.

Future balances of market power and optimal pricing structures that cope are unknowable to us today; but regulation will inflict inferior business models, the rollback of which will be next to impossible.

If no FCC existed, one could not seriously propose creating the kind of entity that exists now. The agency clings to past relevance (perhaps glory, in some eyes), operating in a cocoon where the agency wonders, “will our policies create incentives?”

In real world environments firms discover their own incentives to invest. The imperative is to remove regulatory uncertainty (instead FCC has prolonged it for a decade) and to assure markets that the possibility of regulatory whim is forevermore eliminated. In this context, the task of reformers — who will obviously have to come from outside FCC — would be to de-legitimize the crippling regulatory approach to infrastructure that dominates.

Most of the allegedly problematic behaviors indicated in the 2005 Policy Statement, the 2009 Notice of Proposed Rulemaking and now the 2010 Order actually signify healthy economic activity, whether carried out by access providers or content providers, because they attract waves of competitive responses.

Former Commissioner Adelstein indicated a mistaken desire for the FCC to act because, “decisions being made today about the architecture of the Internet could affect its character for years to come.”

Yes, decisions are being made “today” about the Internet’s architecture. But there should never be a time when decisions aren’t being made about Internet technology and its deployment. FCC’s failure to understand the implications of that — that it needs to back off –sums up the problem of economic regulation as a man-made phenomenon in virtually every incarnation.

Architectural decisions must be made about proprietary networks, open ones, partially shared ones, overlapping and redundant ones; there are no times when architecture should not be in flux. It is invalid to freeze or rubber-stamp a particular architecture bias for neutrality.

A proper competitive infrastructure marketplace grants no entitlements, and does not entertain corporate welfare on any party’s behalf — content or infrastructure. Commissioners need not pick sides in a battle of giants. And any advantage so gained would be illusory: the interventionism of net neutrality hurts all sides.

Proponents of openness, freedom of speech, low prices, and all the other “good stuff” the Internet promises will benefit from letting the parties fight, the end result of which will be an ever greater “background hum” of interconnectedness that dwarfs the capabilities of today’s Internet.

Network liberalization instead of regulation should be the common goal. Otherwise, regulators and activists shall merely achieve “neutrality” on what is sub-par infrastructure relative to tomorrow’s needs.

For that reason, the response to the threat of net neutrality is a matter of CEO-level corporate guidance. As corporate net neutrality advocates may learn too late, there’s nothing special about the Internet access providers that inoculates the proponents of net neutrality in tomorrow’s communications fights. Everyone in the communications industry becomes more vulnerable to political predation in a world of government-enforced neutrality, as discussed in Before Net Neutrality Eats the World (Part 4).

Empire building is common, even inevitable at government agencies under siege by reality and the disappearance of a mission, and can only be stopped with great difficulty. But we want tomorrow’s Internet at the speed of light, not at the speed of government.

Alfred Kahn at the Civil Aeronautics Board came to realize the world would be much better off with his agency much weakened, and proclaimed in Time magazine, “I will consider myself a success in this job if there is no job when I leave it.”

New proceedings are needed in which FCC takes the opportunity to define a similar phase-out agenda for itself, one that adheres to government’s basic function of extending the institutions of property rights and contract, wealth creation.

Net neutrality enshrines the opposite principle, empowering one side of the debate (temporarily) with disposal over the others’ property, inviting retaliation, entrenching political control and decades of rent seeking. The alleged aim of the whole mess, consumer welfare, is damaged.

FCC needs to bring something to the table besides an appetite for yet more regulation.

It (and Congress) needs to question its own culpability in any residual monopoly excesses, then chart out a course for liberalization, not expand its own jurisdiction in a world no longer characterized by the “scarcity” and “public airwaves” of FCC’s origin. We’re marinating in bandwidth, and it’s only going to get better.

Stepping back is far from doing nothing.

Let’s end this here and now.

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