Why ‘Net Neutrality’ Is A Dumb Idea
(This post originally appeared on Forbes)
Wouldn’t it be great if a two bedroom, 2,000 square foot apartment on Park Avenue cost the same as one in Queens? Or if a front row ticket to a Broadway show cost the same as one in the mezzanine? Wouldn’t it be great if you could buy a new BMW for the same amount as a new Hyundai? Or if the price of a Harvard education were equal to one from your local community college? These things are priced differently. They are not neutral. Nothing is neutral in a free market economy.
Which is why “net neutrality” is a dumb idea.
There was once a time when the Internet was open to all, just like the days when gasoline was plentiful and water could be drunk from any available stream. But the world has changed. The “Internet” is not, contrary to what many believe, a place of unlimited access. And it is certainly no longer free. There is only so much data that can flow in and out of “it” through the spectrums provided. “It” is like real estate. Demanding that the speed of access to it be provided at the same cost to everyone is like demanding to pay the same for a room at the Hampton Inn or the Ritz Carlton (no offense, Hampton Inn). If people want a better location they have to pay more. Why would the Internet be any different? There’s no such thing as neutral.
And supporting net neutrality will hurt us in the long term because it will hurt those who can help us. Say what you will about Comcast CMCSA +1.29%, Verizon and AT&T T -1.71% but they are large companies with hundreds of thousands of employees that have invested billions in the infrastructure that we now call the Internet. And they will continue to invest to make it better (and it needs to be better). But only if the motivation is there. And that motivation is return on investment for their shareholders. The Internet speed in the U.S. is the 8th fastest in the world (South Korea is the fastest). Want to make it the fastest, or at least much faster? Let these companies spend their money, rather than taxpayer money, to improve this infrastructure and bandwidths. And let them charge more to the people who are willing to pay more. There will always be people willing to pay more (yes, even startups – and isn’t it ironic how the startup, venture and “entrepreneurial” community is so against others making money if it happens to affect their own companies?).
And by the way…it won’t be that much more. WhenNetflix NFLX +3.69% had its scrap with Comcast a few months ago over access and speed of delivery, they wound up paying more for the privilege. Was the cost ultimately passed down to their consumers? Yes. Not to their existing customers (we pay $7.99 a month) but to new customers, who now have to suffer – brace yourself – a one or two dollar monthly increase for the service. A year’s worth of Netflix could cost a new user up to $120! What a catastrophe! If Netflix wants you as a customer they will have to justify their increased price by providing great content. And the best part: the government hasn’t been involved. It’s a free market. You choose.
Unfortunately, the government will ultimately be more involved. That’s because the Internet isn’t just an apartment, or a car. It’s now a utility. And everyone needs some type of access to it. If we require it to be totally neutral we’re in effect socializing it. And that will need management by an independent source – the government. Who will pay for that? Taxpayers. How well will it be managed? Well…take a guess.
However, if tech companies like Comcast, Verizon, AT&T and the like are allowed to make a profit and run this critical component of our economy aren’t we putting this responsibility in better hands? And could there be abuse? Most definitely, which is why we’ll still need some type of public and private oversight just like we now have over private companies that provide us with energy. Abuse can be monitored and limited. The public can be represented. And the cost will overall be much, much less.
The bad news for consumers and business owner like me is that either way, there will be higher costs in the future. If the FCC imposes more “neutrality” then expect greater government oversight which will ultimately lead to government control…and more taxes. If the larger companies are allowed to charge for faster access, even with some type of quasi public/private oversight, that will also result in higher fees. The costs will be higher either way. But the results, if left to the private sector, will be better.