Why Free Market Fans Should Favor Net Neutrality
Last December, the FCC under the leadership of Chairman Ajit Pai voted to repeal net neutrality rules. This was over the objections of major Internet companies, as well as 75% of Americans. Several states, including California, New York and Virginia, have proposed state level laws implementing net neutrality rules. In spite of widespread opposition to the repeal of these rules, there was one sector of American society that was near-unanimous in endorsing the repeal of net neutrality: staunch advocates of the free market. Chairman Pai argued that there was no problem necessitating these rules as remedy and that the repeal of net neutrality improved broadband nationwide. Senator Ted Cruz referred to net neutrality as "Obamacare for the Internet" and various think tanks committed to free market policies argued net neutrality rules threatened Internet freedom.
To dissect these arguments, it is important to understand what net neutrality exactly is. Proponents of net neutrality rules describe net neutrality as being about treating all data equally. Fundamentally, net neutrality rules are policies preventing telecommunication services from prioritizing certain websites over others. The general concern cited by supporters of net neutrality is a nightmare scenario of a two-tiered Internet depending on how much one would pay. While this obviously appears to be hyperbolic, there are valid reasons for such concerns. For instance, the country of Portugal does not have the same sort of net neutrality rules as most other countries and this had led to pricing schemes based on different kinds of applications. From this model, it is very easy to see how a tiered service could develop, which would make it harder for the poor to have the same quality of Internet service.
Most opponents of net neutrality argue that these fears are unfounded. They argue net neutrality rules are unnecessary because a free market approach will punish companies that violate net neutrality principles. The argument is that competition means voluntary net neutrality policies will be the general rule as companies that violate these principles will be outcompeted. Imposing these rules is also argued to stifle innovation and prevent the adoption of policies that will ultimately drive down Internet costs. Overall, there are two primary arguments against net neutrality and both are generally based on free market ideals: Competition will allow the market to self-regulate and these regulations will inhibit potential innovations. However, I regard this view as inaccurate.
That is primarily because of the nature of communications in America. The telecommunications industry in America has in essence become extremely monopolistic across the United States. In most areas, it is not realistically possible to change which telecom company you utilize, because whichever company you are currently with has a de facto local monopoly. With some exceptions, most Americans cannot choose their own ISP, which significantly weakens any sort of self-regulation of the telecom industry. This lack of competition will inhibit the ability of consumers to freely choose which services they will use. Instead, they have no recourse should the communications company they utilize choose to abandon the principle of net neutrality.
In fact, net neutrality as a policy helps increase competition rather than inhibit it. In the event that Internet service providers increase speeds for websites paying more, the most likely result will be an increased advantage for established websites, while up-and-coming websites will either be slowed down or will have inferior quality of service to the mainstream ones. This is not good for competition, as it will allow the established players in the market to further cement their place while leaving smaller startups behind. The repeal of net neutrality will almost certainly lead to an unfair playing field for new companies seeking to expand. It will also go on to actually stifle innovation as competition goes down. This is definitely bad from a free-market standpoint.
How likely is it that these concerns about impaired competition from repealing net neutrality will actually come to pass? Well, given that ISPs are reluctant to commit to upholding the principles of net neutrality, it is more likely than one might think. While it is understandable to be concerned about net neutrality rules being threats to the free market, net neutrality is a more complicated case than many other regulations. The debate over net neutrality is not over whether more competition is better than less, but rather what policy serves to maximize competition. Looking at the available evidence, it would appear net neutrality rules do more to aid competition than hinder it. For this reason, supporters of free market policies should reconsider partying with Ajit Pai and instead consider backing the effort to revive net neutrality rules.