Fred Barnes always told me that the two most boring words in the English language were “entitlement reform.” Well, “net neutrality” is probably second on the list.
And funnily enough, net neutrality is boring for almost exactly the same reasons entitlement reform is:
1) It’s a complicated subject that requires people to know a lot about a bunch of disparate disciplines.
2) There is no “good solution” to the problem. What we’re really talking about is trying to find the least-bad answer. And politics is not designed to evaluate “least-bad” options. One side insists that they’ve got all the answers and there are no tradeoffs to their position. The other side does the same. And then they fight.
3) And because of this, the arguments advanced on both sides are often terrible.
To pick just one example at random for point No. 3, here’s Sandra Fluke (remember her?) claiming that killing net neutrality will “kill access to abortion information.” She would have you believe that net neutrality is really, you know, a reproductive rights issue. I don’t mean to single Fluke out because the truth is that if you look across the political spectrum, pretty much anyone with an ox says that either killing (or keeping) net neutrality is going to get them gored.
So let’s reduce the issue to its simplest form and try to explain why both options are bad.
“Net neutrality” deals with the companies that own the broadband pipe. When you sit down at your computer to check Facebook, you’re on a broadband network provided by a company—Verizon, Comcast, Cox, etc.—that owns the pipe going to your house. Currently, they can charge you for the speed of your service, but they can’t charge you for how much data you consume coming out of their pipe.
Now sitting on the other end of that pipe is the internet that you use. So Facebook is coming through the pipe to you. And so is Amazon. And so is WeeklyStandard.com. All of these businesses use that pipe to get to their customers. And the guys who own the pipe—the Verizons and Comcasts and Coxes of the world—aren’t allowed to charge them anything.
So far, so good.
The problem is that while most websites don’t use much of that pipe, some internet companies use a lot. Like Netflix.
Something like 35 percent of data going through the pipes in North America is coming from Netflix. YouTube uses about 17 percent of the pipe. Amazon’s streaming video service is close to 4 percent. Those numbers bounce around from quarter to quarter as the businesses expand and contract and compression protocols change but the exact numbers aren’t important. What’s important is that some huge percentage of all the data being streamed to consumers through the pipes owned by the broadband providers comes from a handful of companies. And these companies pay precisely nothing for this carriage. Because of net neutrality.
This looks like a classic free market problem, right? If you own the pipes and some other company is using a third your bandwidth all by themselves, you’d like to charge them for it. Because it’s expensive to run a broadband operation and it’s really expensive constantly having to expand and speed up your network.
So that’s the argument for killing net neutrality: All you’re really doing is giving broadband providers the ability to charge the entities that use the lion’s share of their pipe and impose all sorts of expenses on them. Simple enough.
And this argument isn’t wrong, exactly. But it comes with a pretty significant downside.
Remember when Amazon was young and it dodged collecting state sales taxes because it was an internet retailer and not a brick-and-mortar store? The brick-and-mortar stores went crazy, saying, “How are we supposed to compete against Amazon when consumers don’t have to pay sales tax with them?” And Amazon fought and fought and fought against the imposition of sales taxes on the internet.
Until, that is, Amazon became totally and completely dominant in all sectors of internet retail. At which point they suddenly became very much in favor of internet retailers having to pay state sales taxes. Because they’d established something like a monopoly position and the state sales tax then became another barrier to entry against potential future competitors.
Well, that’s probably what will happen if you kill net neutrality. Netflix is huffing and puffing about it today, but they’ll make their peace with the companies that own the pipe. And so will Google and Facebook and Amazon. They’ll pay. And in return, they’ll get preferential service that will help lock them into their positions in the marketplace and make it a lot harder for a small start-up to compete with them at some point in the future.
Sure, the Disney-Fox-ESPN-Marvel-Star Wars service will be able to pony up. But a totally new service, like what Netflix once was? It’s hard to see how that happens again if net neutrality is dead. So killing net neutrality maybe isn’t a great idea. Don’t do it.
Except hold on a second—because keeping net neutrality carries its own set of problems. We said up top that it’s a classic free-market problem: You have a handful of companies such as Netflix freeloading on the backs of the broadband providers. That comes with a real cost to efficiency. Networks won’t improve as fast as they could. The price to consumers will probably be higher than it should, because they’re paying both their share and the share of the content companies at the other end of the pipe. This isn’t an optimal system, either.
Like I said, neither pathway is a good answer. We’re left trying to pick the least-bad option with the near-certain understanding that it may make some things better and will almost certainly make other things worse.
My own preference, for whatever it’s worth, would be to keep net neutrality in place for one simple reason: status-quo bias.
In general, I think people underestimate the power of status-quo bias because they fail to appreciate how sensible it is as an operating principle. I’d keep net neutrality solely because it’s the system we have right now and we understand its downsides pretty thoroughly: It’s unfair to broadband providers; it stifles broadband innovation; it results in higher costs for consumers.
If we kill net neutrality, we might fix those inefficiencies at the cost of the new problems we can anticipate. But there may also be a bunch of negative consequences which we can’t anticipate. Maybe some of them will be really bad.
Or maybe they won’t. But the point is that whatever the downsides of net neutrality are, we understand them and we can more or less live with them.
When it comes to a force as enormous as the internet, I’d argue that we shouldn’t play for more; that this should be good enough.
But your mileage may vary.
