Economics21

search
Close Nav

Net Neutrality Advocates’ Concerns Are Outdated

commentary

Net Neutrality Advocates’ Concerns Are Outdated

February 11, 2015

On February 26, the Federal Communications Commission will vote on whether to adopt regulations regarding net neutrality. Advocates for net neutrality, such as Save the Internet and Mozilla, argue that without regulation, Internet service providers (ISPs), including Verizon and Comcast, will attempt to charge content providers, such as Netflix and Flickr, for the bandwidth required to provide this content to customers. ISPs would be able to slow or block content at their choosing.

The 1990s model for the Internet represents the epitome of what might happen if the worst-case-scenario fears of the net neutrality advocates were to come true. In the early 1990s, when customers bought access to the Internet, they bought access to content centers such as CompuServe or AOL. These content providers gave their customers access to only their associated content, users, and sites. Customers were not able to access the rest of the Internet.

Today, since people use the Internet in a much-wider variety of ways and expect that they will be able to access any content, ISPs that block or slow content from major providers in an attempt to charge more for the bandwidth are put at a serious competitive disadvantage compared to those ISPs that do not. Put more plainly, as long as new ISPs that do not limit Internet access are free to enter the market, people have little incentive to buy access from providers that offer a limited Internet. The demand for such a partial product would quickly fall, and the ISP would ultimately be unattractive to consumers.

Even with no net neutrality law, prudent ISPs would be hesitant to limit their customers’ access because, in the longer-term, they realize that this would eventually lead to a loss of their customer base and their dominant market position.

This line of thinking is not without any caveats. Specifically, if local laws and policies drastically raise the cost of entry into the marketplace, then the ability of new ISPs to compete is limited to the geographic areas in which they can afford to rent public utility rights-of-way, get permission to do so, and otherwise cut through corruption and bureaucracy. These types of local policies stymie competition to a significant extent, and ending them should be a high priority. 

Consider the environment in which the Internet made its transition from the 1990s model, in which content was purchased through ISPs, to the current model in which only access is provided by the ISP and content is funded by content providers through advertisements. In the 1990s, there were little to no restrictions on where ISPs could develop infrastructure. As dial-up Internet could be accessed from any phone number, ISPs were free to compete to a much larger extent. Correspondingly, end-users had a much greater choice concerning their ISPs. Providers, such as AOL, which sold access to more content eventually attracted more users.  Eventually, ISPs had no choice but to provide access to the entire Internet.

The early 1990s model of the Internet, the worst-case-scenario for net neutrality advocates, was merely a stage in the development of the Internet which has already passed. Just as the market rejected this approach in favor of the new model of the Internet, it will be rejected again so long as ISPs can compete. 

So what exactly have ISPs blocked so far? One of the most prominent cases, Comcast v. FCC, involves the Federal Communications Commission’s attempt to lift Comcast’s restrictions on peer-to-peer networking—a platform frequently used for illegal file sharing.  In an even more bizarre twist, many content providers not only evade having to pay ISPs to carry their content but actually charge them for it, as is the case with ESPN360.com (now called WatchESPN). The FCC is regulating for the sake of regulation—to correct a problem which is largely hypothetical. 

To ensure that the goals of net neutrality advocates are met—namely, that the Internet remains an environment in which bandwidth is given equal treatment regardless of the content provider—policymakers must not only abandon net neutrality laws, but abandon local laws which grant virtual monopoly or duopoly status to ISPs as well by raising the cost and difficulty of entry into the market. Ultimately, the apparent need to enact net neutrality regulations stems mainly from the necessity to mitigate the projected effects of this other form of anti-competitive regulation.

 

Michael S. Lopato is a software analyst for the Jewish Board of Family and Children’s Services and a graduate student of philosophy at Columbia University. He is not representing any official position on net neutrality from either of these groups.

Interested in real economic insights? Want to stay ahead of the competition? Each weekday morning, e21 delivers a short email that includes e21 exclusive commentaries and the latest market news and updates from Washington. Sign up for the e21 Morning eBrief.

e21 Partnership

Stay on top of the issues that matter to you most



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ERROR
Main Error Mesage Here
More detailed message would go here to provide context for the user and how to proceed
ERROR
Main Error Mesage Here
More detailed message would go here to provide context for the user and how to proceed
Close