On 14th December 2017, the FCC voted to repeal Obama era net neutrality rules. This has sent the web — the very thing at stake here — into a loud and endless debate on the consequences of this decision, with a great portion of the public arrayed against the ruling. You can see a clear spike almost immediately after the ruling on the Google Trends graph below, and although searches have seemed to level off there is no doubt that the topic remains much discussed online.
A poll conducted by University of Maryland’s Program for Public Consultation found that 83 percent of voters disagree with the repeal. This majoritarian disagreement is bipartisan, with 75 percent of Republicans and 89 percent of Democrats voting against in the poll.
There is a lot of confusion as to what the consequences of the repeal will be, however. And it’s not just confusion on the layman’s part, but also in academic and political circles. The research is still in its infancy and it will be real-world experience that will truly tell us whether the repeal will hurt the consumer, or benefit us.
That being said, there are strong reasons to believe that the repeal of net neutrality will bet a net-good for the consumer (pun unintended). In this article, I will weigh the arguments for net neutrality rules versus those against. Should you have questions that are left unanswered, I welcome you to post in our comments section.
Why Net Neutrality’s Repeal Might be a Bad Thing
Net neutrality rules, introduced in 2015, introduced regulations that treated internet service providers (ISPs) like utility companies. They were intended to protect consumers and pre-emptively disallow anti-competitive practices. The main tenets of net neutrality included (paywall):
- Service providers could not block or discriminate against any content by blocking websites or apps, as long as the content was legal.
- Transmitting data at different speeds, depending on the content provider or the nature of the content, was disallowed.
- Providers could not create a ‘fastlane’ for content providers willing to pay more to provide faster or preferential services to their customers.
Proponents of net neutrality believe that repealing these rules will hurt consumers in two main ways.
First, proponents are worried that without net neutrality ISPs will have an incentive to provide their services in bundles, much like cable television today. Meaning, if you want to watch Netflix, you’ll have to choose a provider and a bundle that includes access to that content provider. This is something that we have seen, on a limited basis, in other countries, such as Portugal:
In Portugal, with no net neutrality, internet providers are starting to split the net into packages. pic.twitter.com/TlLYGezmv6
— Ro Khanna (@RoKhanna) October 27, 2017
I say “limited basis,” because Ro Khanna’s example can be misleading. The internet provider he is using as an example, Meo, packages add-on subscriptions to their mobile service. And Portugal does indeed have net neutrality rules, they are simply issued and enforced by the European Union versus the Portuguese government. Still, without net neutrality, many argue that this type of business model will become more prevalent.
Second, proponents are concerned with the effects net neutrality can have on competition between content providers. By establishing a “fast lane,” or preferential treatment between different content providers, proponents argue that small companies and entrepreneurs looking to establish themselves in the market will face an important hurdle that can stifle their investment. As a result, content provision will become increasingly monopolistic, or at least less varied than it otherwise would be, making the internet a worse experience for the consumer.
It is also argued that the repeal of net neutrality will hurt low income, minority, and other marginalized social groups the most. Not only will discriminatory pricing (charging different prices for different levels of service and different content) possibly cause a rich-poor divide on the internet, where the poor are condemned to an inferior experience, but it may also make it more difficult for them to access necessary websites and apps. An internet provider may decide not to allow access to certain telemedicine services, based on how much the consumer is paying. Proponents of net neutrality posit that this lack of service will disproportionately fall on minorities and the poor, since they are the least able to afford higher priced packages (on average).
These arguments are powerful and they paint a bleak picture of what the post-net neutrality internet will look like. The question is: are these fears overblown? Many believe so.
Why Net Neutrality’s Repeal Might be a Good Thing
As always, there are two sides to the coin. If there are strong arguments against the repeal, the truth is that there are equally as strong arguments for the repeal.
Some have argued that the 2015 net neutrality rules were simply misaligned with reality. According to Robert McMillan, writing for Wired,
The only trouble is that, here in the year 2014, complaints about a fast-lane don’t make much sense. Today, privileged companies—including Google, Facebook, and Netflix—already benefit from what are essentially internet fast lanes, and this has been the case for years.
He goes on to explain how major content providers have dedicated servers within the ISPs, meaning those servers’ bandwidths are reserved for them. This allows content providers, at least those who benefit from these agreements, to bypass traffic bottlenecks and other problems that can reduce the quality of their services. Similar results can be achieved through content delivery networks, which are distributed networks (the content is distributed among geographically spaced servers) that help improve the speed and quality of the content.
It may be the case that companies have simply learned of ways of bypassing regulations, bringing into question the efficacy of net neutrality. This efficacy will come up below, as we explore the alternatives to net neutrality that many of its detractors offer. It’s also possible that this is simply a better model, one that not only benefits big companies but small companies as well. It has also diluted the power of the ISP as the middleman, as long as ISPs cannot corner the content delivery network market — something which seems unlikely, given the head start other companies (like Amazon and Google) have.
The Role of Growing Competition Between ISPs
A strong case against net neutrality is provided by Nobel Memorial Prize (in economics) winner Gary Becker, who co-authored a study with Dennis Carlton and Hal Sider: “Net Neutrality and Consumer Welfare.” There are two major arguments they pose that are worth exploring.
They argue that net neutrality will hold back investment in broadband access, ultimately acting to reduce competition between ISPs. Why would this be the case? Internet access, like any economic good, is a scarce good; there’s only so much bandwidth to go around. Thus, when these bandwidth limits are exceeded, companies under net neutrality rules will find it very difficult to develop new business models that help them prioritize traffic and remain profitable under these circumstances — especially up and comers who don’t have the profit margins of more established ISPs. A 2010 filing by the Department of Justice (DOJ) provides similar reasoning, warning that price regulation — which net neutrality is — can stifle further investment in the internet’s infrastructure.
Furthermore, Becker, et. al., argue that growth in competition between ISPs makes the fears that drove net neutrality largely baseless. Between 2002 and 2008, “the number of high-speed broadband access lines in the United States grew from 16 million to nearly 133 million, and the number of residential broadband lines grew from 14 million to nearly 80 million.” Furthermore,
[P]rices for broadband Internet access services have fallen sharply. For example, in 2002, Charter Communications was offering broadband service with 512 to 768 kbps speeds for $40 per month.19 Today, Charter offers a bandwidth of 10 mbps, roughly 13 to 20 times faster service, for the same $40 per month.20 Similarly, the price of Verizon DSL service with 768 kbps download bandwidth fell from $49.95 in 2001 to $19.99 in 2007.
They argue that, given this competition, anti-consumer discriminatory practices by part of an ISP is regulated by the competitive market. If a service provider hurts you, you will switch to a competitor. They cite the case of Madison River Company, which is perhaps one of the stronger examples of anti-market behavior by part of an ISP, to show how internet companies are so quickly constrained by competition and consumer votes. When their restriction of access to VoIP providers, like Vonage, was made public, they quickly chose to pay a fine and repeal their policy.
Not all actions used as examples of anti-competitive behavior may actually be anti-competitive, either. Another common example used in support of net neutrality is Comcast’s decision to degrade services by certain content providers, such as BitTorrent (a downloading service), when their customer base hit bandwidth limitations. These policies may be pro-market in that they allow for a more efficient use of bandwidth, prioritizing certain content over others, and therefore protecting a subset of their consumers from negative spillovers caused by the behavior of the other subset (BitTorrent users, for example). In other words, why should you have to pay — through worse internet service — for the overuse of bandwidth by your neighbor?
Interestingly, this argument seemingly upturns the belief that the repeal of net neutrality will hurt the less economically wealthy or those who are in greater need, like medical patients. Under net neutrality, an ISP cannot give preference to telemedicine services, meaning that in situations of bandwidth overuse it’s those who need the internet the most that are often the ones who pay the price.
Finally, the explosion of investment in broadband and internet services as a result of the increase in demand for these services should also be considered. Nowadays we have various service providers to choose from, across multiple devices. We get internet to our desktops, laptops, cell phones, tablets, televisions, and even refrigerators. This creates a lot of room for competition that ought to be considered before we implement wide-ranging rules that take for granted the belief that the internet industry is uncompetitive.
Can Net Neutrality Hurt Investment in Content?
Proponents of net neutrality argue that charging content providers for access to ISP networks will decrease investment in content provision. This is the same argument we made above, that the repeal of net neutrality will make the market less competitive by making it harder for smaller content providers to compete.
However, this is only one facet of the dynamic between ISPs, content providers, and consumers. Investment in broadband availability also plays a role, because the more accessible internet is, the more consumers that content can reach. If net neutrality hurts investment in internet infrastructure, this will, in turn, affect content providers by making investment in content less lucrative. This would, unintentionally, increase the cost of broadband, perhaps not through a physical increase in price, but instead through a decrease in quality (thus, paying the same amount of money for worse service).
Furthermore, “fast lanes” help established content providers to continue providing increasing quality of service. In a world of net neutrality, the incentive to develop technologies such as HD or 4K streaming may be curtailed if these content providers can’t get the broadbrand preference they need to effectively offer their services to consumers. As we’ve seen, even in a world of net neutrality, providers have had to find workarounds to do just this, thus we see effective “fast lanes” through dedicated servers and content delivery networks.
What all of this suggests is that the relationship between content providers, content deliverers (ISPs), and content consumers is much more complex than net neutrality proponents believe, and that net neutrality regulations can have unintended consequences as they play out along facets that proponents may not have considered. All the same, I must temper this line of argumentation by saying that, ultimately, it’s an empirical question as to which force, or angle, is the most important. It’s a question that will have to be answered through further investigation and data collection.
Are There Alternatives to Net Neutrality?
Robert McMillan argues that more emphasis should be placed on regulating the competitive landscape. That is, making sure that the rules are set up to promote competition, versus providing an environment in which existing ISPs can monopolize their markets. Knowing when a company is acting in an anti-competitive way is very tough because not all practices traditionally attributed to monopolies are anti-competitive. Price discrimination — charging different content providers and consumers differently — can help companies, especially smaller companies, make returns on their investment, promoting competition. Becker, et. al., suggest that, because of this, traditional anti-trust law is better suited for internet regulation, where all the facts of the case can be collected and each situation can be judged within its proper context.
Furthermore, there are non-government organizations that monitor the internet and the practices of the companies that use it. Measurement Lab, or M-Lab, is one example of a third party organization providing the public with data about their broadband connection and provider, helping to inform consumers as to the performance of their services. These “market solutions” must be paired with the inherently difficult of restricting competitive innovations, evident in how difficult it has been for governments to regulate content providers that are arguably detrimental to their functioning, such as WikiLeaks. Similarly, consider the challenges advertisers face with the constant evolution of ad blocking technology.
More limited regulatory ventures may also be a better option. Sweeping regulations like net neutrality, as we’ve seen, may impact investment in internet infrastructure and services in increasingly complex ways, making consequences difficult to discern until the cost has been experienced by the consumer. More limited regulation would bring a more methodical, surgical approach to ensuring that the internet remains competitive and open.
Finally, it’s worth looking into how the public can be empowered locally to avoid unintentional monopolization of local markets. Local governments may give preferential treatment to certain providers, making it more difficult for new providers to enter the market, in the same way that they grant local monopolies to utility services, like water, trash, and electricity.
What is clear is that there are no obvious answers, and that the research surrounding net neutrality will continue to discover new findings that will impact how we view internet regulation.