Net neutrality is about control, not consumers

Written by The Frontier Post

Mark Jamison

Net neutrality is an idea whose time has passed. Well actually, that’s not quite correct: It’s an idea whose time never came, because the potpourri of policy ideas referred to as net neutrality — e.g., all “bits” should be treated the same (no fast lanes) and companies may not pay for customers’ data use (no zero rating) — were never good for consumers.

It is thus difficult to understand why some members of Congress and President Joe Biden’s appointees to the Federal Communications Commission (FCC) — now-Chair Jessica Rosenworcel and Gigi Sohn, who was appointed fill the empty commissioner seat — seemingly want the FCC to resurrect net neutrality regulations. Those regulations were adopted under Chairman Tom Wheeler (with Sohn on his staff), then dropped under Chairman Ajit Pai.

Jessica Rosenworcel, Chair of the FCC, speaks at a hearing of the Senate Commerce, Science, and Transportation Committee in Washington, DC, November 17, 2021

The evidence against net neutrality regulations is quite strong. My 2018 review of the relevant economics literature concluded that the research almost always found such regulations are harmful for consumers. One exception where net neutrality regulations could protect consumers would be a situation in which a broadband provider blocks consumers from accessing websites they want to view. The research found that this practice (“blocking”) would in fact hurt consumers. But there are ironies in net neutrality advocates using the possibility of blocking as an argument for regulation. One irony is that such blocking almost never happens. Another is that these advocates are often strong supporters of blocking certain content at other layers of the internet stack.

Since 2018, new empirical research has emerged confirming that the FCC’s current light-handed approach is best for consumers. A group of economists in Europe examined the effects of net neutrality regulations across Organisation for Economic Co-operation and Development economies, and found:

Net neutrality regulations exert a direct negative impact on fiber investments and an indirect negative impact on fiber subscriptions. Our results, which are in line with our theoretical propositions, strongly suggest that policymakers should refrain from imposing strict net neutrality regulations.

Other studies compared the performance of US broadband networks during the pandemic to their more regulated peers abroad. George Ford found that fixed broadband in “54 of 108 countries experienced a speed reduction . . . download speeds in the United States were stable.” For mobile networks, he found that download speeds in the US increased in both absolute terms and relative to peer countries. Anna-Maria Kovacs’ study concluded that “U.S. networks generally outperformed their peers” during the pandemic. For example, according to her estimations, “The U.S. mean download speed during the pandemic period was 138 megabits per second (mbps) while the weighted mean download speeds of the EU, EU-4, and OECD were 102 mbps, 106 mbps, and 89 mbps, respectively.” (The EU-4 are the largest countries in the EU: Germany, France, Italy, and Spain.)

With so much scholarly research showing that net neutrality regulations are harmful, why do so many in Congress and the Biden administration push for them? Perhaps Sohn let the answer slip during her confirmation hearing:

The net neutrality debate, which I have been [in] now for 20 years, is really more about whether there is going to be oversight. . . . It’s really much broader than the no blocking and throttling. . . . We cannot leave an essential service such as broadband without oversight.

There are at least two problems with Sohn’s statement. First, it’s a non sequitur: It doesn’t follow that everything important should be under government control. In fact, given the political and bureaucratic incentives inherent in regulation, an argument could be made that the opposite is often true. Second, Sohn’s unstated premise — that absent the FCC imposing net neutrality regulations, there is no regulatory oversight — is false. The Federal Trade Commission provides consumer protection oversight along with privacy and competition regulations for broadband. Moreover, states also have consumer protection regulations, and the FCC maintains light-handed oversight under the rules established during Chairman Pai’s tenure.

It must be that regulatory advocates seek to treat broadband as a public utility regardless of the consequences for customers. A public utility framework would give the FCC broad control over broadband providers, as Sohn explained, including determining what services would be provided and where, where investments would be made, what innovations could be adopted and when, who can compete with whom, what prices would be charged, and how much money providers would be allowed to make (although Sohn implied she is uninterested in regulating prices).

What would be the consequences of utility-style regulation of broadband? Because the FCC would be able to determine each provider’s present and future, broadband providers’ eyes would naturally turn away from their customers and towards Washington, DC. That would be very profitable for those involved in regulation, but customers would pay for it.

Courtesy: (AEI)

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