Several months ago, following the lead of Illinois Sen. Dick Durbin, Congress passed and President Barack Obama signed into law legislation that included a provision capping what banks can charge retailers for electronic interchange fees. Being rational, the banks tried to offset the revenue loss created by the cap by shifting the burden on to their customers. The most transparent way many banks chose to do this was by assessing a minimum fee for all debit-card holders.
Due to the uproar which ensued, however, the transparent approach was dropped and is likely to be replaced with hidden fees that customers will likely find hard to see sometime in the future.
To be clear, any new fees are the result of Congress placing caps on what banks can charge, because the cap doesn’t actually lower the costs of electronic interchange transactions. Thus, the banks must continue to search for ways to cover the costs of electronic interchange fees above and beyond what the law allows them to charge retailers.
It’s a scenario that is played out again and again every time the government acts to regulate an industry or a service, usually in the name of keeping costs to consumers down or, some other allegedly public-spirited motivation instead of letting free markets operate. Call it the law of unintended consequences, which Congress has not yet found a way to repeal.
The same is true for “Net Neutrality,” which supporters say will keep the Internet free but in fact is a plan for making it more expensive for many of us. One of the biggest drivers of Net Neutrality has been Google, the Internet behemoth. Its goal is to keep its own operational costs lower by trying to make Internet usage more costly for others.
Type “Net Neutrality” and “Google” into a search engine and the first thing you are likely to find is this, part of a 2006 statement from Google CEO Eric Schmidt:
“Today the Internet is an information highway where anybody – no matter how large or small, how traditional or unconventional – has equal access. But the phone and cable monopolies, who control almost all Internet access, want the power to choose who gets access to high-speed lanes and whose content gets seen first and fastest. They want to build a two-tiered system and block the on-ramps for those who can’t pay.”
Sounding the clarion call of the Internet populist, Google purports to want everyone to be treated fairly. But here’s the real story: Google just doesn’t want to have to pay for the bandwidth it uses relative to other entities and content providers; it wants other people to pay more so Google can pay less.
In the old days this was called the “bait and switch” argument and, in more than a few places, it’s a discredited and unethical business practice. In the name of the little guy, the Internet’s biggest elbows are shelling money out all around Washington in order to get their way.
At the heart of the debate, according to siliconrepublic.com blog, is “who will pay for the cost of delivering the digital networks if operators are faced with ever-diminishing returns and Internet giants reap all the rewards.” There are big stakes involved – not to mention the future of the Internet itself – and Google is an increasingly bad actor.
What Google wants is what many big companies want: favorable action by the federal government to make other entities pay at least part of its costs of doing business, which in this case are the Internet Service providers that let everyone hook up to the Net.
Some congressional leaders like Sen. Mike Lee, R-Utah, a Tea Party favorite and advocate for less government control of the marketplace, have done a good job trying to get this point across in hearings.
The pressure may be working. Google has taken a lot of heat for its position, which may be leading it to see the light – if just a little bit. As Kevin Mooney recently blogged for The American Spectator, the company has “reversed itself on potential policy changes that would allow for greater government control of the Internet.”
This has some of its supporters crying “foul.” The company itself felt the need to post a statement on its public policy blog denying it had sold out on the issue. “Google has been the leading corporate voice on the issue of network neutrality over the past five years. No other company is working as tirelessly for an open Internet,” it said.
“But given political realities, this particular issue has been intractable in Washington for several years now. At this time, there are no enforceable protections – at the Federal Communications Commission or anywhere else – against even the worst forms of carrier discrimination against Internet traffic.”
There are lots of reasons to be suspicious of what Google is doing, even as it continues to maintain that it’s one of the good guys. Net Neutrality is just one of them – but it’s a big one.
George Landrith is executive director of Frontiers for Freedom.
