Neutering the Net

Why Microsoft, Amazon, and other charitable organizations want to regulate the Internet into prosperity

Is there any debate that gets things more fundamentally ass-backwards than the current battle over "net neutrality"? The sort of preemptive regulation at the heart of proposed legislation rarely works out well, especially in fields where technological change is the rule and not the exception.

Proponents of net neutrality argue that the telecom and cable companies who effectively control access to the Internet should be forced to make sure that all traffic be delivered at the same rate of speed. Due to Federal Communications Commission rule changes made last year, these companies are in a position to charge for "tiered service"—to charge content and application providers money if those providers want to make sure their Web pages and info streams get to surfers first and faster than content from providers who don't pony up. The House of Representatives has already passed a bill that includes net neutrality provisions and failure-to-comply fines and the Senate is slated to consider the matter today sometime. (Full disclosure: Reason Foundation, the nonprofit that publishes Reason Online, receives support from companies and individuals on both sides of this issue.)

"The future of the Internet is at stake," avers no less a cyber-celebrity than Vint Cerf, one of "the fathers of the Internet" and an advocate for net neutrality. If ISPs are allowed to charge some bandwidth users more than others, goes this line of thinking, the virtual marketplace of ideas will eventually devolve into...well, something like broadcast TV, a medium that has never suffered from too little regulation. Yet that most disturbing outcome imagined by net neutrality advocates isn't particularly scarifying or convincing. Consider this recent New Republic house editorial, which presents a very representative argument in favor of net neutrality. Subtitled "The Bush administration prepares to wreck the Internet," the piece conjures up the following dread scenario:

Imagine you were choosing whether to buy a book from Amazon.com or Barnes and Noble's website, and you knew that Amazon's site would load much faster, allowing you to scan books and sample their content much more easily. Or imagine that Fox.com's streaming video came up instantly and CNN.com's balked. Or that whitehouse.gov loaded quickly while the site of a contentious political magazine was plagued by delays.

Forget for the moment that ISPs haven't kicked in tiered service yet, so there's no real telling what form(s) it might take. As Julian Sanchez noted at Reason Online back in April, the fears of net neutrality boosters—an entertainingly broad coalition ranging from high-tech behemoths such as Google and Microsoft and Amazon to political groups such as MoveOn and the Christian Coalition—revolve so far around a phantom menace. "It's true...that ISPs could misuse their control of the onramps to the Internet in a shortsighted attempt to extract monopoly rents, rather than benefit consumers," wrote Sanchez. "That's not a reason for preemptive regulation; it's a reason to see what happens... Hasty regulation that responds to hypothetical abuses may also prevent us from discovering benefits we haven't yet hypothesized."

Let's assume that The New Republic's worst fear of a fast-loading foxnews.com page comes true, even for those of us who prefer other, even more fair-and-balanced, less-comical news sources such as, say, The Onion. What are you likely to do in such a situation? Lump it or leave the company that delivers your broadband (as The Washington Post has reported, more than 60 percent of U.S. ZIP codes are served by four or more high-speed providers, a figure that will only continue to increase)? At the very least, you'll bitch and moan to your provider, which is known to have some beneficial effects, even with near-monopolists. Remember what happened to the biggest ISP of them all, AOL, during its rise to dominance a decade or more ago? Originally a closed system, it had to allow its users to email with non-AOL customers, then it had to allow its customers full access to the Internet, then it had to go to flat-rate pricing, then it had to woo subscribers with ever-increasing free hours, giveaways, and the like. AOL still regularly upgrades its system and its services not because it wants to, but because it has to.

Such capitulations to customers are the rule and not the exception among market leaders, whether you're talking about cyberspace or fast food. As Ohio State University political science professor and Capitalism, Democracy & Ralph's Pretty Good Grocery author John Mueller notes, even monopolists have reasons to court a captive market. If they do so, he explains, they're "more likely to be able to slide price boosts past a wary public—that is, such moves are less likely to inspire angered customers to use less of the product and/or to engender embittered protest to governmental agencies."

The argument that ISPs will degrade a good chunk of their service is speculative beyond belief and a short peg on which to hang overarching regulation. But there's also a strong dose of self-serving dudgeon in the attacks on the telecoms and cable companies that's annoying. It's self-evident why firms that are mostly in the content business—Google, Amazon, eBay, Microsoft—don't want to have pay anything extra. But does it follow that, as The New Republic concludes, "Allowing companies to levy a toll on information providers is not just a blow to consumer choice—it's a blow to democracy?"

If it does, then I'm left wondering how The New Republic—an information provider of sorts—can stomach charging folks between $29.95 and $39.97 for full access to its web site. Does that constitute a "toll" that should be struck down in the interests of democracy and the marketplace of ideas? Or is it a fairly straightforward transaction that, among other things, provides the magazine revenue that it uses to improve and market its product? Isn't there every reason to believe that cable companies and telecoms would similarly use whatever revenues they generate via tiered services to develop the next big thing in terms of networked communications? And isn't there also reason to believe that some of the cable companies and telecoms might not go the tiered-service route, just as some political commentary magazines—including this one—offer free online access to their material?

In any case, it's worth remembering that the Net—most obviously in the form of the World Wide Web—has in large part become a mass phenomenon not in spite of but because of the profit motive. That's easy to forget in a world in which faster and cheaper broadband, user-friendly interfaces, and e-commerce are no longer considered exotic or risky—or an affront to the rigorously non-commercial ethos that, as Wendy Grossman pointed out in her useful 1998 book net.wars, ruled the earlier days of the Net.

You don't have to believe that the cable companies and telecoms are kind-hearted altruists to realize they are desperate to get an edge on their competitors. That very desperation is likely to drive innovation that will benefit end users especially. As Red Herring noted a few months ago, not only did home broadband usage jump 28 percent between 2005 and 2006, the cost of a high-speed connection is going down. "At this point," an analyst at Nielsen/Netratings told the tech mag, "broadband is, if not comparable, at least fairly similar to dialup prices." As The Washington Post—whose parent corporation is both an ISP and a content provider—put it in a June 12 editorial that tracks closely to Sanchez's earlier Reason Online argument:

Allowing builders of Internet infrastructure to recoup their investment by charging the Googles and Amazons for use of their network would balance the incentives for innovation more closely. Ironically, a non-neutral net would accelerate the spread of zippy broadband that can deliver movies, allowing hobbyists with camcorders to take on Hollywood studios. The neutrality advocates who criticize corporatized cable TV should welcome that.

That, too, is speculation, of course. But it seems to me a far more likely outcome than an Internet pipe-provider turning out the lights on CNN while pushing Fox News in your face. "Congress should stay out of cyberspace," counsels the Post. The government "should not burden the Internet with preemptive regulation." In any case, if you do nothing it will be a lot easier to revisit the problem later than it will be if you implement an expansive regulation such as net neutrality.

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