Net Neutrality: A Primer

net neutrality keyboard computerIf you went online this Thanksgiving holiday weekend, you probably encountered a post (or 20) about net neutrality. Prompted by the Federal Communications Commission’s (FCC) proposal to repeal its 2015 Open Internet Order, social media was inundated with alarmist screeds lamenting the demise of “the internet as we know it.”

But as with many social media outbursts, the rhetoric far outpaces reality. The proposed order would restore the legal framework that governed broadband providers until 2015 — the framework under which “the internet as we know it” grew and flourished. And it would restore the Federal Trade Commission’s (FTC) authority to regulate broadband providers’ business practices (including consumer privacy), which was stripped by the FCC in 2015.

That’s not to say that there are no good arguments for and against net neutrality. But the nuances of the debate are not easily reducible to 140 (or even 280) character sound bites. This blog post is designed as a primer for those interested in getting up to speed on the net neutrality debate.

What is net neutrality?

Net neutrality is the idea that broadband providers should treat all internet traffic the same, regardless of its content or sender. In 2015, the FCC enshrined this principle in a rule that prohibited broadband providers from blocking or throttling internet content, from prioritizing some traffic over others on its network for a fee, and from otherwise engaging in conduct that would unreasonably interfere with or disadvantage the ability of internet content providers to reach consumers or vice versa. To provide legal authority for this rule, the FCC reclassified broadband providers as Title II common carriers, subjecting them to the regulatory framework written to govern the old wireline telephone network.

Why might that be important?

Proponents argue these rules are necessary because of the unusual position that broadband providers play in the internet ecosystem. Broadband providers control the route between a consumer and the internet. Critics fear that a broadband provider may abuse this position by blocking information with which the company disagrees, or by favoring traffic from affiliated companies over internet-based competitors. They also fear that allowing paid prioritization would favor well-funded internet content providers over less wealthy startups.

Are these concerns valid?

The speech concern seems specious. Broadband providers have never blocked content with which they disagree, and any attempt to do so would likely face public condemnation. Perhaps the most high-profile silencing of an online voice came earlier this year, when the neo-Nazi Daily Stormer newsletter was shut down following the Charlottesville rally. But it was suppressed not by broadband providers but by companies such as GoDaddy, Google, and Cloudflare. The Daily Stormer incident revealed that there are multiple chokepoints in the internet ecosystem, which undermines the argument that broadband providers pose a unique threat to the flow of information online.

The anticompetitive concerns are somewhat stronger. Broadband providers have incentives to favor affiliated companies over unaffiliated competitors. In 2005, a small telephone company called Madison River blocked its internet customers from using Vonage’s internet-based phone service because it feared customers would cancel their telephone service. One could imagine a broadband provider with a cable affiliate taking similar action to disadvantage Netflix or other internet-based video competitors.

But these concerns are largely hypothetical. Madison River is the only clear example that critics cite of such anticompetitive behavior — which is a pretty good track record over the past 20 years. Broadband providers also have strong counterincentives not to block or degrade content. The more content a consumer can reach online, the more valuable the connection is, and the more the consumer is willing to pay for it.

Moreover, antitrust law already protects consumers from this type of anticompetitive behavior. Economists recognize these concerns as vertical foreclosure claims. Over the past several decades, courts have developed a robust and detailed framework to assess when such practices are likely to harm consumers. One of the ironies of the 2015 order is that it strips the FTC — America’s strongest antitrust cop — of jurisdiction over broadband providers. Net neutrality proponents thus bear the burden of proving why broadband providers should not be governed by the same competition laws that regulate the rest of the American economy.

The benefits of prioritization and innovation

The FCC’s 2015 net neutrality regulation also prohibits prioritization that may benefit consumers. Different applications have different sensitivities to congestion. A small delay in packet delivery may be imperceptible to someone browsing the web but can erode the quality of a video stream or a telemedicine app. Prioritizing these packets could improve the experience for Netflix users or rural doctors, without adversely affecting users of congestion-insensitive services. But this type of pro-consumer traffic optimization is forbidden by net neutrality because of fear of anticompetitive abuse. Even the post office offers priority delivery — everyone can use the first-class rate, and those who need to get there faster can buy express mail. But broadband providers cannot offer similar tiers of service.

More generally, net neutrality discourages innovation by broadband providers. It assumes that the way broadband is currently delivered is the way it must always be, which limits providers’ ability to test new business models. For example, Sprint sought to offer a low-cost wireless plan with unlimited talk, text, and access to a social media plan of the subscriber’s choice. Such plans are available in other countries and cater to consumers (like my teenage daughter) who use their phones primarily for Instagram or Facebook and do not need to pay for an all-inclusive wireless broadband plan (perhaps because they already have full access at home). But Sprint ultimately shelved its plans following criticism that such an offering violated net neutrality.

If you’re interested in a more detailed discussion of these issues, check out my recent article “Revisiting net neutrality,” which was part of the Free State Foundation’s Perspectives series.

An appeal to civility

Despite the rhetoric, the FCC’s decision to return to the light-touch regulation of pre-2015 does not pose an existential threat to the internet. Ultimately, the net neutrality debate boils down to a discussion about whether existing antitrust law is sufficient to guard against the anticompetitive harm of vertical foreclosure, and if not, whether the FCC’s additional prophylactic rules do more harm than good.

Reasonable minds can, and do, disagree about these issues. But they should do so reasonably. Over the Thanksgiving holiday, the debate turned dark and personal. Social media featured a stream of hostile, sometimes racist attacks on FCC Chairman Ajit Pai, who was also harassed at his residence and saw protesters call out his children by name. On this, I agree with net neutrality proponent Free Press: This vitriol has no place in this discussion. The net neutrality debate will not end with the FCC’s vote on December 14. But hopefully it will continue in a much more civil tone than was on display during this past week.

From - AEI.org - by Daniel Lyons

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