On Net Neutrality, the GOP Is Making a Mistake

 

Prelude: Troy asked me to adapt this piece from a private thought that I distributed to a conspiratorial listserv of which I am a member. Because I know Troy, I am reasonably confident that he suggested this piece to me principally because it would open me up to immolation at the fingertips of Richard Epstein, whom I have had the pleasure of hosting for dinner in Palo Alto several times, on no occasion succeeding in winning an argument against him. Richard wrote recently on this page that net neutrality is “a solution in search of a problem.”

Conservatives should be for net neutrality. It isn’t a perfect solution, but network discrimination is indeed bad, and the last-mile Internet industry is more like a government whose actions we should seek to restrain than a private market which, unmolested, will constantly improve.

As the GOP embarks upon a one-year-long period during which its only responsibility is to avoid doing deeply unpopular things that subvert conservative principles, it would seem on the verge of doing just that.

First, the pragmatic picture: net neutrality is, with the voter, on the side of the angels. The only entity widely known to oppose net neutrality is Comcast, the company with the lowest customer satisfaction rating of all companies in the United States. The manufacturer of this tube of catheter lubricant delights more people than Comcast.

Until a week ago, Comcast was the only major brand widely thought to oppose the notion that all websites should be treated equally. Then the President announced that he supported net neutrality. Like contrary lambs to the slaughter, certain elements within the Republican party immediately discovered a passion for perfect fealty to libertarian principles in this area.

So at the very least the GOP ought to save its breath on net neutrality.

But in fact the GOP should be advocating strongly for net neutrality, and taking a moment to explain why consumers who lust for fast and fair Internet access to bank, trade stocks, buy Chinese baubles, read news, view films, and speak with family are being denied just that by ancient ’60s-era left-wing contumely that sought to control the ownership of copper networks, insensible of a future day in which those networks would be part of an open global network rather than, as they were then, a closed circuit. The need for net neutrality today is the result of short-sighted big-government subornation yesterday.

In other words: liberals screwed up the largest and most lovely experiment in conservative free-marketism that has ever existed: the Internet.

You can see this in a subcutal layer of the Internet: content delivery networks. Akamai and Level3 are two examples. These represent a market solution that came about as a competitive resource allocation layer to solve the issue, borne of government-monopoly-assigning local Cable Franchise Boards, of last-mile carriers being slow and uninnovative and lazy. They consolidated for twenty years, because that was the only way to grow, and no one could run new cable. (Because of liberals.) These guys make decent margins and live in a highly competitive space. Anyone can use or not use any one of them, and their packets will still get through.

Now that there are trillions of dollars transacted over the web, the last-mile guys — Comcast, Time Warner, AT&T, and the rest — want to play toll collector, working both sides of the road. Their new way to grow is to build a wall around individuals’ homes. Individuals need to pay to get out, and businesses need to pay to get in.

This is a sea change in the product they are selling. ISPs profess to sell Internet Access, which is a product that is defined like this:

a certain uniform speed of best-efforts routing of packets from the net, through your ISP, into your home; and from your home, through your ISP, out onto the net.

Now they want to silently change the product. They want the product to be access to The Comcast Network, which may or may not be the Internet. The only reason consumers would put up with this is because of blunt force. These tolls booths were built by the government.

Another, simpler, way of viewing the issue is that the net is a digital analogue of the real-life marketplace. You protect the sanctity of the marketplace with everything you’ve got, because the cupidity within it, the ability to sell and profit within it, is what creates innovation and wealth and solves diseases and cuts away poverty. In real life, the government is the big boss whom we constrain with law and, at its very taproot, with the Constitution. On the net, the last mile carriers are the big bosses. Every other step of the Internet is perfect competition — literally. Google ‘traceroute‘ and run some. Your network request could traverse any number of networks. It’s only that wire to the home of the consumer that allows for abuse.

It’s better for free market principles for Comcast and TWC and ATT to have 10% margins and for us to have millions of new businesses built, movies made, songs released, stocks traded, genomes parsed, Uber calls processed, &c., than for Comcast and TWC and ATT to have 20% margins. Especially because these guys only have the share they do because of government created scarcity.

So the GOP is presently to defend an Internet situation that displeases virtually all voters by the exercise of an abstract principle — don’t regulate — which, applied to a market rigged by government a long time ago, produces a deeply unpleasant result which does in point of fact restrain trade. By seeking purity on an uneven playing field, the GOP will lose popularity and the argument.

Instead, the GOP could support net neutrality and work at the state level to dispossess state and local bodies of the ability to prevent Internet innovators from running new pipe. It could proscribe the FAA’s authority over drone- and balloon-delivered Internet. It could make it easier to launch satellites. It could wrest from the FCC control over radio spectrum and allow manifold microwave operators (like Monkeybrains in San Francisco) to launch high-speed links in dense areas.

It could strip many D.C. bureaucrats of many powers and allow genuine innovation, all the while ensuring that a few companies who connived over the years to collect up old government toll booths cannot use them to prevent free trade.

In short, this is an easy one.

This is all I have time for just now, but happy to get into it on a much more technical level later.

There are 49 comments.

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  1. Fricosis Guy Listener
    Fricosis Guy
    @FricosisGuy

    Joe Malchow:Instead, the GOP could support net neutrality and work at the state level to dispossess state and local bodies of the ability to prevent Internet innovators from running new pipe. It could proscribe the FAA’s authority over drone- and balloon-delivered Internet. It could make it easier to launch satellites. It could wrest from the FCC control over radio spectrum and allow manifold microwave operators (like Monkeybrains in San Francisco) to launch high-speed links in dense areas.

    If the GOP supports net neutrality, it will get none what follows that suggestion done. Instead, we’ll end up with yet another favor-dispensing machine that started as an attempt to solve a “market failure.” Which market failure was created by favor-dispensing machines that were started as an attempt to solve other market failures.

    I’d rather we take on the last-mile monopolies directly. It isn’t like they’re loved.

    • #1
  2. Mendel Member
    Mendel
    @Mendel

    If the root problem is the ISP’s monopoly over the last mile – and we grant that some form of government interference is necessary to prevent that monopoly from being exploited – wouldn’t local loop unbundling be much simpler and justifiable than having an agency decide which of thousands of deals between service and content providers constitute anti-competitive behavior?

    • #2
  3. captainpower Member
    captainpower
    @captainpower

    Thank you for writing this.

    Government has distorted the market.

    That is the underlying problem that the title of Mr. Epstein’s article claims does not exist. Technology sites like Arstechnica have been covering this issue since before it was a political issue. It is an issue.

    For quite a while, the constraints imposed by government were responded to in a uniform way, but times have changed and companies are doing things that they didn’t before and it’s bad.

    How can we undistort the market and let it be a freer market?

    I would love to hear more conservative ideas in that direction rather than in the “let’s do nothing because the market should be free” denial of the government distorted status quo.

    • #3
  4. Petty Boozswha Member
    Petty Boozswha
    @PettyBoozswha

    Google has tens of billions of cash in the bank. Can’t they do some sumo wrestling with K Street to get balloon transmitters to break the last mile monopoly?

    • #4
  5. Casey Member
    Casey
    @Casey

    After careful consideration, I’m on the side of not caring much. I have a feeling that puts me in the basket with pretty much everybody.

    • #5
  6. Charles3669@gmail.com Member
    Charles3669@gmail.com
    @TheChuckSteak

    I don’t understand the dissatisfaction with the internet. Are you aware that the internet has made all the strides it has made without the government regulating it to the hilt?

    • #6
  7. user_352043 Moderator
    user_352043
    @AmySchley

    Petty Boozswha:Google has tens of billions of cash in the bank. Can’t they do some sumo wrestling with K Street to get balloon transmitters to break the last mile monopoly?

    That’s what they’re doing in my town.  I was so happy to sign up with Google Fiber and ditch AT&T.

    • #7
  8. Ross C Member
    Ross C
    @RossC

    I guess I don’t understand the monopoly argument.

    Does Comcast have a monopoly on internet access anywhere?  I would guess, some combination of phone, cable, cellular, satellite, and anything else are in competition most everywhere.

    Additionally, Epstein’s argument about other analogous delivery systems is nowhere rebutted.  Why can real packages be delivered at varying speeds but not data packages.  If a provider tries to limit what the internet is, and does not provide good service won’t people switch to phone based or cellular based service?

    I would agree on the deregulation argument, but net neutrality seems like it is itself a regulation.  It is unclear to me why the system of legal torts is not enough to police this.  If it becomes overly burdensome then maybe regulations about what internet provider’s can’t do.

    • #8
  9. skipsul Member
    skipsul
    @skipsul

    What you are arguing for here is not “Net Neutrality” so don’t call it that.  You are arguing for breaking the local loop monopolies, so you should call it that.

    I’ve got 1 single cable company in my town, no one else can get in (Time Warner, soon to be the dreaded Comcast).  I’ve got 1 single phone company in my town (Frontier) with their crappy DSL and unreliable service.

    No Fiber is available or ever will be under the bizzaro local, state, and federal regs on last-mile, and I live in a pretty major suburb of a large city.

    Deal with that, rather than the picayune arguments of Net Neutrality.

    • #9
  10. user_428379 Thatcher
    user_428379
    @AlSparks

    I work in tech, and I’ve been inundated with pro net neutrality via the tech sites I read.  The Silicon Valley establishment is begging for net neutrality.  That in itself makes me suspicious.

    My first objection is the FCC is making a power grab without specific statutory authority from Congress.  The statutes the FCC operates under mostly precede the internet.

    And Epstein is right.  All the sky is falling arguments are over what could happen, not what has happened.  If we give the FCC more power over the internet, they will never give it up.  So let’s not grant them the power unless and until the sky actually falls.

    And I know it’s click-bait, but the “Republicans are making a mistake” argument when they don’t grant government more power or raise taxes is tiresome.

    • #10
  11. Bryan G. Stephens Thatcher
    Bryan G. Stephens
    @BryanGStephens

    More Regulation is always bad, it *will* be abused. The Internet works fine as it is.

    I expect in 10 years time, we will laugh at the bandwitdh we have now. Not sure how, but some tech guy is working on it as we speak.

    Leave it alone.

    • #11
  12. Frank Soto Contributor
    Frank Soto
    @FrankSoto

    TheChuckSteak:I don’t understand the dissatisfaction with the internet. Are you aware that the internet has made all the strides it has made without the government regulating it to the hilt?

    What he said.

    • #12
  13. The King Prawn Member
    The King Prawn
    @TheKingPrawn

    The real question isn’t “what’s best for the end customer” in this fight. Taking away the gate keepers’ keys and throwing wide the gates solves that problem. The real fight is between very large corporations trying to wrest the best regulatory outcomes for themselves from the political system. There’s a ton of competition, but it’s all over who writes the regulation and to who’s favor it leans. Watching Google and Time Warner duke it out is very similar to watching ISIS and Iran go toe to toe.

    • #13
  14. user_1050 Member
    user_1050
    @MattBartle

    This is what I picture…

    You know how every few years enough people complain about gas prices that Congress decides that it has to hold hearings? They call oil company executives in to sit and get yelled at by Congresscritters who have no idea what they’re talking about. Nothing is revealed and nothing happens. It’s silly theater.

    Now imagine that every time someone complains about their Internet speed, tech company executives have to sit there and get yelled at by Congresscritters who have no idea what they’re talking about.

    That will be the major accomplishment of Net Neutrality.

    • #14
  15. Vance Richards Member
    Vance Richards
    @VanceRichards

    Frank Soto:

    TheChuckSteak:I don’t understand the dissatisfaction with the internet. Are you aware that the internet has made all the strides it has made without the government regulating it to the hilt?

    What he said.

    And I’m pretty sure once more regulations are added people who like the internet service they have today won’t be able to keep it.

    The White House wants to stop providers from charging more for priority services. If that happens, wouldn’t providers make up for that lost revenue by increasing everyone’s rate? More local competition would help to lower prices, but I do not see how Obama’s plan would lower cost for anyone other than the companies that are currently paying for those special services.

    • #15
  16. Basil Fawlty Member
    Basil Fawlty
    @BasilFawlty

    Net neutrality = marriage equity = bs.

    • #16
  17. Spin Member
    Spin
    @Spin

    That Internet is going nowhere…

    • #17
  18. Guruforhire Member
    Guruforhire
    @Guruforhire

    Making good service illegal is not the solution to problems possibly created by local monopolies.

    • #18
  19. Umbra Fractus Member
    Umbra Fractus
    @UmbraFractus

    Joe Malchow: First, the pragmatic picture: net neutrality is, with the voter, on the side of the angels. The only entity widely known to oppose net neutrality is Comcast, the company with the lowest customer satisfaction rating of all companies in the United States. The manufacturer of this tube of catheter lubricant delights more people than Comcast.

    If that’s true, then let Comcast’s competitors do it voluntarily. This does not need to be an issue for federal law.

    • #19
  20. user_252791 Member
    user_252791
    @ChuckEnfield

    Just to be clear, I support Richard Epstein’s conclusion, but take issue with much of his reasoning, while I agree with many of Joe Malchow’s arguments but not his conclusion.  You can see my comments to Richard’s most recent post if you want more details. I agree with Joe Malchow that consumer internet access is not a very competitive market for most consumers.  Net neutrality addresses some specific problems that could arise from that lack of competition, but it also has drawbacks.  By and large, there is no significant problem right now that net neutrality can solve, so why live with the downside.  However, I won’t rule out changing my position if the scope or nature of the problem changes.

    My main reason for commenting on this post is that I saw a few things in the comments that I thought should be addressed.

    First, is Richard’s point about analogous delivery methods. Let’s just say that he understands law and economics much better than he understands networking.  For most people, there’s no good alternative to the cable company for affordable, fast, reliable internet connectivity.  (Yes, I said affordable.  You may think Comcast is raping you, but price out business class solutions, for which there is a competitive market by the way.)  Very few markets have Google fiber or FiOS, DSL is a slow and unreliable service on outdated and ill-suited media.  Satellite is, well…., satellite.  Wifi depends on some other fast, affordable last mile service to have a reasonable business model.  4G will require a decade or more of build out before it has a chance of displacing wired ISP services for household use, and it will be slower than wire for far longer than that.  I firmly believe there will be good alternatives to the cable company some day, and a less restricted market now may accelerate the process, but that day is not today.

    Second, The FCC already has the authority to enforce net neutrality.  The courts simply said that the FCC has to decide whether ISPs are content providers or common carriers.  Common carriers have many restriction on their business practices, of which net neutrality is but one.  The FCC attempted to force net neutrality on ISPs, while still classifying them as content providers in order to remove the burden of some other requirements.  The FCC can change the status of ISPs to common carriers at any time.  They need no act of congress or executive order to do so.  I have not heard the details of Obama’s plan, but I assumed he would issue an order forcing the FCC to make the common carrier designation.  If we’re going to have ISP net neutrality, this is the worst possible way to go about it.  It would be preferable for congress to legislate it rather than burden ISP’s with countless other restrictions designed for 1950’s phone companies.

    Finally, I agree with many of the comments which say the best way to address the lack of competition is to create competition.  That said, I haven’t heard any recommendations regarding how that would be accomplished.  Eliminating CATV franchises would be necessary, but far from sufficient to accomplish that.  Anybody have any other ideas?  FWIW, I don’t think we can legislate our way out of that rat hole, but I’d love to be wrong about that.

    • #20
  21. George Savage Contributor
    George Savage
    @GeorgeSavage

    Joe, the arguments you make are, as always, compelling.  I nevertheless oppose  net neutrality because, in practice, empowering the federal government to define on a case-by-case basis which private business arrangements are “neutral” enough will take us to a very different destination than conservatives and libertarians expect.  Why else do you think the crony capitalist enablers in the Obama administration are big supporters?  Has the President ever supported a truly free market solution for any problem?

    We should not discount the deleterious effects of allowing more of the federal camel into the Internet tent.  Today’s Internet is so dynamic because it is so much freer than other sectors.  Given the large dollars involved, net neutrality provides the feds with a lever which, over time, will inevitably reshape the net into the image of the over-regulated communications media that preceded it.

    Consider a cautionary worst case:  healthcare.  In my business there are so many overlapping regulatory mandates that innovative thought is a rarity.  And even where preventive regulations do not apply–a rarity in a world of the FD&C Act, HIPAA, the Hitech Act, Sunshine Act, CMS reimbursement rules and more–people in the trenches are conditioned to believe that anything new must somehow be illegal.  “Why bother?” is too often the response.  So instead of better and cheaper, healthcare routinely delivers about-the-same and more expensive.  Much more expensive.

    Let’s not risk putting the Internet on the same sorry trajectory.

    • #21
  22. Basil Fawlty Member
    Basil Fawlty
    @BasilFawlty

    My analytic framework for reaching a position on net neutrality is as follows:  Is Obama for it?  If the answer is yes, then I’m against it.  You’re welcome.

    • #22
  23. user_435274 Thatcher
    user_435274
    @JohnHanson

    There is a problem, and the problem was created by government. Control by a single entity of access to me would be bad.  However, that is not the situation that exists.  Currently I have access to four different means of internet service, telephone, wireless, cable, and satellite and while currently each of them is a monopoly, they are competing with each other for my dollar.    I agree that there is a limit on truly competitive access, but the solution is not the traditional liberal one of solving a government created problem by enacting yet another government program.  The real reason the left supports “Net Neutrality” is it is a camel’s nose into the tent issue, that establishes the right of the Federal Government to regulate and control the content I see, not through price (a fair way to do it) but by whether the content meets the governments ideas of what I can look at.  They deny this, but it is the way to establish the internet as something to be controlled by government.

    The right solution is to attack the last mile monopolies but leave providers able to charge whatever the want to whomever they want, and let me pick who works for me.

    Don’t create a new Federal office of Net Management, rather restrict the FCC to technical regulation of services to prevent interference, and get out of the business of regulating electronic communication, all forms of it, including the older traditional phone networks called “Common Carrier”, station ownerships, and content regulation of any form.

    Solve government created problems by shrinking government, not by expanding it.

    • #23
  24. Wordcooper Member
    Wordcooper
    @Wordcooper

    Obama’s vision of this Net Neutrality would be better termed Net Government Monopoly (eventually). They just want to do with the last mile what local governments are already doing, meddle.

    How about calling it Net Freedom? And disallow local government from creating or blessing monopolies.

    • #24
  25. Fricosis Guy Listener
    Fricosis Guy
    @FricosisGuy

    Jimmy Gault:Finally, I agree with many of the comments which say the best way to address the lack of competition is to create competition. That said, I haven’t heard any recommendations regarding how that would be accomplished. Eliminating CATV franchises would be necessary, but far from sufficient to accomplish that. Anybody have any other ideas? FWIW, I don’t think we can legislate our way out of that rat hole, but I’d love to be wrong about that.

    Joe’s post mentioned some. Another straightforward way to attack the last-mile issue is to drive the already-regulated utilities to allow access to right-of-ways (e.g., poles, conduits, etc.).

    To your comment re: Google Fiber, local monopolies use this control to disallow Google from stringing or running fiber. Voila, no Google Fiber.

    • #25
  26. Fricosis Guy Listener
    Fricosis Guy
    @FricosisGuy

    The dreaded double-comment.

    • #26
  27. user_252791 Member
    user_252791
    @ChuckEnfield

    Upon further investigation, I think my previous comments were a little unfair to Richard Epstein.  I based them on his most recent Ricochet post on the subject and some remarks in previous Law Talk podcasts.  I just listened to the Libertarian Podcast that Troy posted yesterday, and his position is very close to my own.

    I still disagree with him on the extent of competitiveness of the current market.  He seems to think that, while not perfect, the current market is highly competitive overall, and I think the current market is acceptably competitive in certain regions and not nearly competitive enough in most of the country.  We seem to agree that technological innovation and business model refinement are likely to make this market more competitive over time as long as the government doesn’t get in the way.

    I also disagree with his assessment of the FCC’s authority to mandate net neutrality under existing rules.  While I acknowledge Richard’s understanding of the legal issues is undoubtedly far more detailed and reasoned than my own, I’m also aware that he often gives us his analysis of the legal issues as he sees them, rather than an analysis of the legal issues as the courts are likely to see them.  I think the FCC believes it has this authority, and in my experience the courts give the FCC considerable deference on these issues.

    Neither of these differences affects our common conclusion that now is not the time to act on net neutrality.

    • #27
  28. Mario the Gator Member
    Mario the Gator
    @Pelayo

    I am firmly against Net Neutrality.  There is competition for the last mile.  I can buy internet access from Cable TV providers, my local LEC (AT&T) and from 4 different Wireless providers (AT&T, VZW, T-Mobile and Sprint).  If any one of them does something to throttle traffic or put certain traffic in “fast lanes” in a way that I don’t like, I can vote with my wallet and use another access provider.  That is called the “Free Market”.  It is a simple equation folks:  Free Market > Government Regulation.

    The Government messes up everything it touches.  Now some people want them to get their hands on the Internet.  Come on.  Nothing good will come from Net Neutrality.  The name should be Net Regulation.

    • #28
  29. user_3467 Thatcher
    user_3467
    @DavidCarroll

    It is delusional to think that more government regulation protects free market principles.  George W. Bush mouthed that delusion.  And here it is again.

    Very similar arguments to Joe’s were made until about the thankfully long-dead fairness doctrine that required political balance on any network using the airwaves.  And then came Rush Limbaugh.  (The FCC abolished the fairness doctrine in 1987 and two presidents vetoed Congressional bills attempting to revive it:  Ronald Reagan and George H.W. Bush.)

    • #29
  30. captainpower Member
    captainpower
    @captainpower

    Wordcooper: disallow local government from creating or blessing monopolies.

    Who has the authority to do that? The states? The federal government?

    Traditionally, it has been left up to the municipality.

    To do it at the Federal level would certainly simplify things by eliminating the problem where you have a different monopoly in every city (and the cities prevent progress by extorting/colluding with the companies for monopoly status – see Google Fiber’s success in places that cut red tape).

    But what gives the Federal government the right to do that?

    Seems like a bigger case to be made for state-by-state regulation (deregulation? demonopolization?) but I’ve not heard it discussed anywhere.

    • #30

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