January 11 2011

The Internet Is Threatened By Government Regulation

The Internet is the most marvelous and open information highway humanity has yet experienced. You are likely reading this column on a screen on your laptop, desktop, or mobile handheld device. To reach you, this piece traveled over a broadband network that connects this web site's server to your device. If you are in the United States, the network you are using is a part of an overall Internet infrastructure that is owned and managed by more than 1500 providers.

Take a moment and marvel at the speed and quality with which this piece and many other net applications--from social networks to streaming video to voice services--travel to your device. And then ask yourself why government would want to meddle with this great manifestation of human ability and creative cooperation.

On December 21st, while most of us were eagerly awaiting the holidays, the Federal Communication Commission (FCC) voted to significantly change how the internet operates by imposing net neutrality rules on the broadband providers who connect you and me to the World Wide Web. Net neutrality rules refer to certain government regulation of broadband providers. The FCC justifies this unprecedented step of issuing rules to govern the network management of broadband providers as necessary to preemptively "protect" consumers from potential future discrimination by Internet providers.

Far from a demonstration of government's ability to protect its citizenry, the FCC's decision illustrates the dangers of unchecked government. Regulators, such as FCC Chairman Julius Genachowski, are appointed by the President and enjoy the jurisdictional authority delegated to them by Congress. Not only are they outside of the reach of voters, they can be disdainful of Congress and the judiciary. In passing these net neutrality rules, for example, this FCC acted in defiance of a previous congressional decision rejecting a net neutrality amendment and a recent court ruling specifying that the FCC lacked the authority to regulate network management.

The process that lead to these new rules should alarm Americans who still believe in a government with limited power that is accountable to voters. They should be equally alarmed by the rules' content. Mandates requiring transparency and outlawing blocking and discrimination may sound reasonable, but they strip providers of the ability to manage their services and limit their potential to make a profit.

And while many factors have driven the growth of the Internet, the profit motive has been among the most important. Between 80 and 90 percent of the costs of providing broadband service are fixed costs. Expanding service requires significant upfront investment. By adding to regulatory uncertainty, net neutrality will deter additional infrastructure investment as providers fear being unable to recoup those costs. This will hinder innovation and expanded access.

Additionally, the prohibition on charging content providers for delivery, and discouraging priority pricing for those who would like to pay for a special fast-lane on the Internet highway, will shift costs to consumers and businesses. This means that users will be paying more for services that are less tailored to their actual needs and desires.

The FCC and proponents of net neutrality rules rightly argue that an open Internet encourages investment and innovation, and even Genachowski acknowledges that some regulation "will stifle innovation, investment and growth." The question we are faced with, however, is not whether we want an open Internet (which we already have), but whether we want an Internet regulated by consumer demands and the market pressures of innovation in technology, or an Internet regulated by government.

Left-leaning groups, such as the feminist National Organization for Women, argue that government can and should preserve the open Internet through regulation, because otherwise corporations may act as censors, favoring supporting viewpoints over others. Women, they say, especially benefit from net neutrality because the open Internet provides them with information about their status, threats to their rights, and opportunities for advancement.

A survey of how the Internet functions in reality, however, reveals that the biggest threats to free speech and political organizing are governments, not private actors. Companies who restrict access to certain sites face competition for customers. Customers unhappy with the restrictions flow to more open providers. Compare that to what happens in China, where Internet censorship is the most stringent in the world. When governments decide to exercise censorship, citizens' only outlet is to escape into the underground to share forbidden information.

Internet users do face a very real threat. It doesn't come from the private broadband providers who may someday conspire to control our access to innovation. The real threat is government regulation which will stifle investment and innovation, raise costs for consumers and businesses, and increase the potential for government censorship of the Internet. Why would we want to take that risk?

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