Net neutrality is a topic of conversation among tech people. It’s been in the vernacular among political people for a while. The language dominating the debate is totally misleading. Of course Americans value liberty, or freedom. You’ll see slogans like “Keep the Internet Free”. Who can be against that?
Democrats tend to favor net neutrality, and Republicans tend to be against it. There are two camps within the parties.
On the Democratic side, one camp favors net neutrality because federal regulation is the answer to every problem facing mankind. They are what Reagan called the “web spinners”. All they do is come up with these fantastic, unrealistic plans that tie common people in knots. They leave and create more problems elsewhere while the fixers come up and clean up the mess. Reagan also said, “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Years ago, these Democrats saw net neutrality as a way to limit freedom of speech. They don’t like the right wing discourse on AM radio, or the fact that right wing opinions can be spread easily via the internet. They have since changed their tune to suit their needs.
Then there are other Democrats that truly worry about corporation monopolistic competition issues over the last mile of internet connectivity. They are worried that corporations can use their power to cause economic inefficiency. Big corporate could use monopoly to price innovation out of the market. While corporations haven’t done that yet, it certainly could be possible and the concern is justified. I am empathetic to the concerns of these Democrats and I think that if the faction of Republicans (a minority, I am aware) could get together and figure something out, the internet might benefit. For example, it would take a Senator Ted Cruz and Senator Ron Wyden to get together.
On the flip side there are Republicans that are the exact opposite of the first group of Democrats. They are angry over threats to free speech. They also don’t see any issue with corporations controlling the internet delivery mechanisms. They are comfortable with Big Corporate. This is the majority of Republicans.
Then there are Republicans like me. My experience with government regulation is not good. Government screws up more than it fixes. As regulation increases, the only beneficiaries are the massive corporate interests that the Democrats hate. Only the big guys can afford to absorb the costs of regulation. I’d rather see the FCC do nothing, and take more time to figure out a way to increase competition than regulate existing corporate interests.
Net neutrality legislation that is dominated by Democrats and the faction of Republicans that are on the side of big corporate will cause companies like Comcast($CMCSA), Verizon($VZ), and ATT($T) to have more domination not less. ($CTR, $TWC, $CHTR) Look for consolidation in the industry, and big players figuring out how to circumvent any legislation through legal definitions of what is what. Post regulation, they will spend more on lobbying, not less.
Professor George Stigler mathematically defined how regulatory capture works. He received the Nobel Prize in Economics for his research. Regulatory capture says that under certain circumstances, government agencies designed to regulate a particular industry would be likely to end up serving that industry’s interests at the expense of the public.
That will happen with net neutrality.
If I look at other pieces of legislation, the government has screwed up more than it’s helped. Take Dodd-Frank for instance. It was passed as a big control on big banks. What’s been the actual result? Big banks are more dominant and are backstopped by taxpayers. Small community banks are out of business-and local access to capital is impossible.
What about Obamacare? Ignore the horrible implementation, and all of the political discourse. What has happened to industry? Insurance companies have become more dominant. They are consolidating even faster than before. Doctors are abandoning local clinics, and becoming a part of big multi-state hospital operations. The New England Journal of Medicine writes,
The Affordable Care Act (ACA) has unleashed a merger frenzy, with hospitals scrambling to shore up their market positions, improve operational efficiency, and create organizations capable of managing population health. The figures are impressive: 105 deals were reported in 2012 alone, up from 50 to 60 annually in the pre-ACA, pre-recession years of 2005–2007. This activity could have lasting repercussions for consumers; the last hospital-merger wave (in the 1990s) led to substantial price increases with little or no countervailing benefit.
So tell me again, why do you think the result of net neutrality regulation will be any different? Regulation will unleash a vicious circle. I predict net neutrality regulation will limit competition, and innovation. It will cement current dominant players in position. I am going to say, the market agrees with me.
