Net Neutrality: Nine Months Later

Net Neutrality: Nine Months Later

In December 2017, Ajit Pai ruined the entire internet by repealing the Obama-era Net Neutrality. Internet Service Providers (ISPs) were now allowed to charge “arbitrary” and “predatory” rates which would cripple innovation and deny people access to the internet. Today, startups and small companies have slow, if any, internet connection. Consumers struggle to pay internet bills and access content; independent content creators like Netflix have folded into ISP conglomerates like Comcast and Verizon. Yahoo, a Comcast company, has overtaken Google thanks to suspiciously speedy connectivity.

DQ7fUDuUMAEFbNW.jpg
DPK995lUEAAGT1x.jpg
5b8815ed27769.image.jpg

..or so you would believe, if you’d read the brief but fervent news coverage of Net Neutrality’s repeal late last year. The Huffington Post (whose source, it should be noted, was Reddit) forecast astronomical prices just to access sets of websites, predicting people might have to “[choose] between access to online marketplaces and access to the news”.

The doomsaying wasn’t limited to sleazy news sites either. The New York Times, CNN, and hosts of other reputable news and tech sites warned of the impending unfairness. In November of 2017, in an interview with Congressman Joe Kennedy III, our very own Anthony Cosentino reported that, “net investment in ISPs has fallen by 5.6% since the rule change in 2015”. Despite this, the article ends with a decidedly unambiguous call to stop Ajit Pai and use the government to “[keep] our internet free for good”.

[N]et Investment in ISPs has fallen by 5.6% since the rule changes 2015

The Comedian-Televangelist John Oliver even pled Net Neutrality’s case desperately (and hilariously) in 2017. His main argument was that, “ISP’s...should not be able to engage in any F*ckery” and “it helps ensure a level playing field”.

Mr. Oliver also laid into the various ISPs who shockingly* all support Net Neutrality – Oliver frames this support as fraudulent and uncredible. However, as we will see, this support is not only real, but economically justified for ISP companies.

 

In order to understand why large ISPs want government regulation such as Net Neutrality, we should examine the many other occasions when our government has regulated pricing for large companies. Here, the railway regulation of the late-19th and early 20th centuries is incredibly revealing.

 The Analysis of the Railroad Era is drawn from Murray Rothbard's  The Progressive Era.   Full Audio Book/PDF . 

The Analysis of the Railroad Era is drawn from Murray Rothbard's The Progressive Era. Full Audio Book/PDF

    Today, it wouldn’t be unreasonable to say the internet connects people more so than roads and railways. But before the internet, that job was left to, well, roads and railways. With (more than) a little meddling and some genocide, the government cleared the way for railroads to dominate the Westward travel of people and the Eastward shipment of goods. They left the actual building of the railroads to private companies, who returned the gesture amply in the form of shares and kickbacks. When angry farmers and businessmen protested the unfair practices of the industry – rebates or distance-based pricing (analogous to the price fixing of Net Neutrality) – the Progressive Congress passed a flurry of laws to enforce “fairness” within the industry.

 

Perplexingly, railroad magnates were not only in favor of this legislation, they pushed for even more. Perhaps this is because even when Progressives enforced a price maximum with the Hepburn Act, this merely legitimated railroads in unanimously raising their prices to the legal limit, something absurdly undesirable in a true free market. ISPs are today, doing the exact same thing.

The reason? When you set one rate for a vast array of different services, the universal price shoots up to match the would-be price of the most expensive service. In the ISP world, Verizon supplies internet to the common adult, who does little more than check his email and stream some content. Verizon also supplies internet at the same price to the teenager playing Fortnite while on Skype for 60+ hours a week. Under Net Neutrality, Verizon is legally bound to charge both people the same price. Naturally, Verizon will charge them both at a price closer to the cost of covering the Fortnite gamer’s usage, meaning the common adult is way overpaying for his email.

If this pricing method is enforced by the government, Verizon is entirely blameless for overcharging a majority of its customers, meaning that the more rules the government makes, the fuller Verizon’s coffers.

So, what have been the negative effects of the repeal? Virtually nothing. As Kim Hart, an Obama-era FCC employee, pointed out before the repeal, “It shifts the burden onto consumers”, meaning they would have to choose their ISP more carefully, and maybe even read the Terms and Conditions. Internet costs, which have been decreasing since the internet’s inception, have either stagnated or continued to fall.

Verizon is entirely blameless for overcharging...its customers...the more rules the government makes, the fuller Verizon’s coffers
Apple-logo-4DC2B05F7D-seeklogo.com.png

Recently, ISPs have been fighting harder for customers by bundling deals (like Streaming Subscriptions) and slashing prices to edge out the competition, exactly as early railroad companies did pre-regulation. This has yielded cheap, all-access, high-speed internet to a vast majority of Americans, and even better, is the natural process of raising consumer standards while ensuring that you get what you pay for. After all, Americans have proven time and again that they are willing to pay for quality (See: Apple, Beats, BMWs).

 

The vital lesson we learn from this episode in government interference is not about Net Neutrality, nor about railroads. It is that large corporations will always have more say in government, and will nearly always favor legislation, especially when it includes price-fixing. Without artificial and misguiding incentives, the only thing companies can do to stay alive is offer a better or cheaper service than anyone else.

This, not any law, is what will keep our internet free, for all, and for good.

On Kavanaugh

On Kavanaugh

As the Economy Booms, Trump Makes Progress on Trade

As the Economy Booms, Trump Makes Progress on Trade