Questions on Net Neutrality That Few Are Asking

Some see Net Neutrality as the solution to Internet woes, but what woes has Net Neutrality cured?

The Federal Communications Commission will be voting Thursday to end the set of 2015 regulations known as Net Neutrality, and the Internet will return to its pre-2015 state. What does that mean for you?

To hear protesters tell it, eliminating Net Neutrality rules is akin to infants no longer receiving the polio vaccine, or as one deft argument contends — Net Neutrality is like preventing a pregnancy by using a prophylactic. You don't know that it worked, but you're glad you had it, just in case.

The basic idea behind Net Neutrality is that telecoms will not be able to slow down or block sites that require high bandwidths for their content, and they will also be prohibited from raising costs for consumers who use more bandwidth. The motive behind the regulation is to ensure that the Internet will not be taken over by telecoms, and the government is going to prevent this theoretical problem by, in effect, creating price controls.

But were Internet users really susceptible to undesirable outcomes before Net Neutrality regulations? Has its implementation prevented the nightmarish circumstances of slow Internet speeds and access?

There's scant evidence of widespread abuse by Internet Service Providers (ISPs) prior to 2015, but the argument for Net Neutrality has gained popularity among the risk-averse by setting a rhetorical trap — it tries to make opponents of Net Neutrality prove a negative. Proponents argue that without Net Neutrality, something could happen, but fortunately, we'll never know because Net Neutrality prevented it.

Up until 2015, the Internet was working just fine. There was no systemic abuse of the system, where sites were consistently, or even frequently, targeted or blocked by ISPs. Indeed there were just four potential violations in a decade — only two were explicitly challenged. And on those occasions when a company withheld access, the Federal Communications Commission (FCC) already had means to address it, or the matter was settled in the court system.

So what does Net Neutrality achieve ... or not? Josh Steimle of Forbes wrote back in 2014 that the regulations do nothing to advance competition, protect privacy, or promote liberty.

If the telecoms are forced to compete in a truly free market, Comcast and Time Warner won’t exist 10 years from now. They’ll be replaced by options that give us better service at a lower price. Some of these new options may depend on being able to take advantage of the very freedom to charge more for certain types of Internet traffic that Net Neutrality seeks to eliminate. If we want to break up the large telecoms through increased competition we need to eliminate regulations that act as barriers to entry in the space, rather than create more of them.

Worse, the Net Neutrality rules have in fact hampered innovation — to the tune of as much as $30-$40 billion annually in the past two years.

The Restoring Internet Freedom Order provides exhaustive detail on how the 2015 rules have harmed investment. Beginning at paragraph 88 of the order, the FCC examines the effects on large ISPs, small ISPs, and edge providers. They note that investment peaked in 2014 and has declined since. They reference numerous studies of large ISPs documenting a 3–5 percent decline, including studies from USTelecom, Maria Kovacs, Hal Singer, and the Free State Foundation. The Phoenix Center suggests an even larger loss of $30–40 billion annually because of the general regulatory environment deterring investment and two-sided market development. This amount could close the gap in rural areas, and it is unfortunate that Obama FCC policies have exacerbated the digital divide.

How have ISPs fared under Net Neutrality?

The 2015 policy treats all of America’s 4551 ISPs as if they were monopolists. Such rules hit small ISPs hard as they face disproportionate costs relative to large providers when complying with regulation and the inevitable trade-off of whether to use funds for innovation or regulatory compliance. In fact, until Ajit Pai’s reform effort was launched, companies spent $800 million annually on FCC reporting requirements alone, not counting labor cost. The FCC reports that at least 60 ISPs are harmed by the policy, many having to delay or cancel network deployments and associated well-paying jobs. Small wireless providers are doubly harmed as they are hit by statutes designed for wireline networks. At least 19 municipal broadband providers are suffering under the rules. Twenty-two small providers with fewer 1,000 customers say that the regulation hangs over their business like a black cloud and deters their ability to raise capital. Brett Glass, CEO of the Wyoming-based Lariat, which bills itself as the world’s first wireless ISP, notes, “Our small, rural ISP will be happy when the pall of the Draconian regulations is lifted; we may at last be able to obtain bank loans and find investors once again!”

Despite the emotional appeal of Net Neutrality proponents of "fairness," which does nothing to acknowledge the notion that priority delivery is already a thing (ask Amazon Prime!), on a sheer common sense level, why would businesses cut off their own noses to spite their faces?

When a business can't provide what its customers want, customers go elsewhere, and that's where competitors get their chance to shine. If businesses are deterred from growing and accommodating customers, everyone gets stuck in the slow lane.

Have you felt any impact from Net Neutrality? Share your experience please.

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