Why Net Neutrality Is Not a Solution
It's a step in the right direction, but not the answer.
There's a picture that's been floating around the web for the last two years. A satirical mock-up that strikes fear in the heart of every heavy Internet user like the videotape in The Ring. It foretells a horrific world with no regard for net neutrality. A world where internet service providers were able to run wild and unregulated.
But in the last couple of years, legislators finally got around to learning there's life beyond dial-up and realized what the web-surfing public has long known: Without a set of laws, cable companies have the ability to control which online content and services can be accessed and just how quickly.
There's been legitimate concern that, say, Time Warner Cable (TWC) could choose to block or throttle video streaming sites such as Hulu, Netflix (NFLX) or YouTube (GOOG) because they interfere with its own television subscription services. (Many would argue existing download caps for heavy users already do that.)
And when residents are locked into one cable provider due to state-enforced monopolies -- courtesy of the same ever-insightful government officials! -- customers have no alternative.
So today, Federal Communications Commission Chairman Julius Genachowski unveiled plans to create net neutrality laws which will prevent telecom companies from blocking or throttling bandwidth on specific content or applications. Speaking with the Brookings Institution, a Washington think tank, Genachowski stressed that the "free and open Internet" can't be compromised by restrictions, using rhetoric that sounds disconcertingly like a salesman pitching the web to a VC in 1993:
The Internet is an extraordinary platform for innovation, job creation, investment, and opportunity. It has unleashed the potential of entrepreneurs and enabled the launch and growth of small businesses across America. It is vital that we safeguard the free and open Internet.
If approved, the future bill would also affect wireless companies like Verizon (VZ), Sprint (S), and AT&T (T) -- which would make the recent FCC investigation on whether AT&T or Apple (AAPL) legally blocked Google Voice on the iPhone an open-and-shut case.
While it's refreshing to see a government agency finally seeing the threat posed by an oppressive ISP, we still could be a few years away from actual legislation, leaving a wide window open for those companies to introduce some inventive policies and fees in the meantime.
Much to the chagrin of locked-in customers, Time Warner and Comcast (CMCSA) have already tested download caps in some markets -- the latter already embroiled in litigation with the FCC over throttling bandwidth for peer-to-peer traffic. Even after the net neutrality laws are passed, if an ISP finds a customer is accessing too much content, it can throttle or completely halt the connection and still be within the guidelines of the law.
How long before we hear, once again, that unregulated bandwidth could overload the Internet?
Net neutrality is still a stopgap on the long road toward loosening local media laws. If the cable industry was truly a free market, customers would have a multitude of choices as to which company provides their television and Internet. As it stands, the multi-billion-dollar companies have little to no competition from smaller providers offering better rates and service. And they have the funds, power, and influence to keep it that way.
And yes, for all its altruistic intentions, this is another case of the government stepping in and enforcing policies over private businesses. Although this matter boils down to deregulation rather than regulation, who's to say that the same overbearing control won't simply be shifted from cable providers to government agencies? Neither party is exactly a bastion of honesty and trust.
The FCC is already willing to redefine what broadband actually is to provide rural areas with "high-speed" access.
But ultimately, this is a situation where cable companies are sluggish to improve their infrastructure. Despite countless billions in service fees and taxpayer dollars, the average broadband speeds in the US pale in comparison to overseas markets. Perhaps they know what many customers already do: Faster broadband speeds means more streaming video and less need for a television subscription.
Overall, establishing and enforcing net neutrality is a step in the right direction, but one by a blindfolded man in front of a bear trap. An agency with tried-and-true foresight could avoid the surprise policies and fees along the way. But botched legislation could leave the door open for cable providers to exploit loopholes and continue to bilk the public out of every penny they can.
And with that, TARP continues to repeat itself.
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