Net Neutrality is dead — “the world as we know it will fall apart.” Overwrought is humbled by the frenzied reactions to the Federal Communications Commission repeal of Net Neutrality.
Basically what the FCC, led by its Chairman Ajit Pai (appointed to the Commission by Barack Obama) did, was to revert to pre-June, 2015 rules.
The Obama Commission, pushed by the White House, in 2015, decided to regulate the prices internet carriers could charge at the urging of the “Bigs” — Google, Netflix, Amazon and Facebook. Downloads from the Bigs, use well over half of network capacity. And, when prices are regulated innovation suffers.
The Bigs did not want to compete against each other by purchasing network elements that would enhance user experience. In short, the networks, the life blood of transmission quality, were not incentivized to improve because they couldn’t earn a return on investment.
The Bigs used late night comedians and excellent branding (neutrality) to scare people who had thought little about telecommunication’s networks and their configuration. In recent weeks the untethered emotion got so bad that Chairman Pai had to have a security detail and his children had to endure hateful demonstrators and their signs.
Currently the United States is well behind in delivering bandwidth speed to homes and businesses. Wikipedia reports that as of the fourth quarter 2016, South Korea had the fastest average internet speed in the world. The U.S. was 11th. In part, this disparity has resulted from controls on providers. Plus, in South Korea, the government invested heavily in communications infrastructure. In the U.S., with modest exceptions, we have depended on market forces for our communication’s infrastructure quality.
Indeed, there are wide disparities across the wireline and wireless network spectrum. One of the fastest internet networks is supplied by Google Fiber in several rapid-growth cities. My digital subscriber line (DSL) service provided by Verizon is only 1.6% the Google Fiber speed of 1 gigabit. Admittedly, I live on a farm.
A generation ago, when I was helping to prepare Secretary of Commerce-designate, Robert Mosbacher, for his confirmation hearing, I analogized network links to oil pipelines. Mosbacher was in the oil business. In essence, the larger the pipe or communication wire or wireless link (sped by ingenuous use of electronics) the more rapid the flow of oil or data. Many Americans only have a slow service option.
Net Neutrality, if applied to our highway system would have allowed truckers to use the highways without extra charges regardless of how they beat up the road. The Heavy Highway Vehicle Use tax generates several billion dollars in annual revenue. Anybody for a Heavy Broadband Use Tax?
Turning from oil pipelines and highways back to communications, consider the generational changes in Apple’s iPhone. The first generation was priced at $499 and the just released iPhone X is priced at $999. Apple, beginning with the iPhone 4, marketed each succeeding generation by bragging on “blazing fast processor speeds.” Packaging and marketing services and devices by wireless network companies brought down the device cost for most consumers. But, Apple’s newest feature-packed smart phone is just one option of many with prices varying accordingly.
Returning to the implications of the repeal of Net Neutrality, the public needs to keep in mind that there is enormous headroom for network improvement. But, we must depend on market incentives that will provide the revenue streams for research, development, and deployment.
The repeal of Net Neutrality means market incentives and disincentives will happen. There is a powerful disincentive for network providers to charge more for the service we now get. On the other hand, there will be powerful incentives for both network and service providers to offer new high speed services that will accelerate growth.
And, to put it mildly, there is absolutely no incentive nor would there be any political support for network owners to censor service providers.
I began my career in the communications business as a radio broadcaster in 1977. Measuring today from yesterday’s experiences, progress seems almost miraculous. But I know, because I was there, that on numerous occasions the incumbent companies wanted to use regulation to protect their market positions.
Net Neutrality was a brilliant marketing campaign to protect giant companies like Netflix and Google (parent: Alphabet).
The only way forward for us is the American way — to let market forces advance America’s future. Along the way there will be work for the government but it will need to be surgical — Net Neutrality was a blunt instrument.