Analysing Net Neutrality: Good Riddance
While it has yet to get through a final senate vote, Net Neutrality is very nearly dead. Polls show (not that you should trust polls) that the "majority of Americans" support Net Neutrality. This is due, in great part, to disinformation campaigns and poor understanding of basic economics, regulation and Net Neutrality itself. There are a few myths and misconceptions that should be cleared up before analysing anything.
Myth #1: Net Neutrality keeps the internet free
This is the biggest myth and it is very easy to understand why this is false.
- Net Neutrality is a regulation
- The government must enforce regulations with various means
- Enforcing a regulation is necessarily a restriction of freedom
- Therefore, Net Neutrality is the restriction of freedom
Leaving the internet in the hands of ISPs is not the antithesis of freedom. In fact, you could start up your own ISP and provide internet. That means that a lack of government regulation on the internet leads to more freedom because anyone has the legal ability to start up their own ISP.
Myth #2: Regulating monopolies won't harm small ISPs
The reality is the exact opposite of this. Every regulation has its loopholes. Many regulations were built intentionally with loopholes. It's very difficult for a normal person to find and make use of these loopholes, but the monopolistic companies have strong legal teams to find their way around regulation. Small businesses do not have these resources and so they are burdened with necessarily higher costs. The notion that there are small ISPs that are legitimately in favour of Net Neutrality is laughable. Only an idiot would want to pay more to make no additional profit. It's a simple marketing tactic to gain public favour. It's impossible to know how many startup ISPs had to shut down or could never exist in the first place due to the regulations, but any decrease in the incentive to start up a new ISP is a bad thing for the industry, and bad for consumers.
Myth #3: Net Neutrality doesn't hamper innovation
This is simply bad economics. There is a list of small ISPs claiming they haven't reduced innovation due to Net Neutrality, but this is impossible to know. Perhaps if they lower costs they would have more resources to operate. The list of ISPs is not a good argument because there would be a large number of ISPs who have had innovation hampered as well. An increase in costs necessarily reduces a company's resources. A reduction in resources reduces the chances of innovation. In the unrealistic best case scenario where there has been no less innovation, the chance of innovation still decreases. This is a bad thing.
Basic Economics: Regulations decrease welfare
I quickly drew up the above graph to demonstrate how an increase in cost for the ISP will decrease welfare. As you can see, when the supply increases from the black to the blue as a result of regulation, the quantity (internet available) will necessarily decrease and the price will necessarily increase. This is just a hypothetical with no prices attached because it's impossible to determine exactly how the market will change, but there's no doubting that under Net Neutrality, the internet would have more limited physical and non-physical access and more expensive access. Net Neutrality does not have a Get Out of Jail Free pass when it comes to basic economic principles so the same rules would apply.
Details about Net Neutrality: The Doomsday Scenario was always legal
It was found that the worries that ISPs would throttle internet were unfounded since it was always legal. Net Neutrality, in all its greatness at "protecting freedom" did not legally prohibit the throttling of internet.
If you read the above section of Net Neutrality you will notice the words "sufficiently clear" and "adequately clear". In legal terms, this means that it needs to be part of the written contract, even if it's fine print on page 872 of 1005. You never need to actually see the term with your own eyes if you've signed the contract.
Under Net Neutrality, did the monopolies constantly throttle internet? No. It was perfectly legal for them to do so, and they chose not to. Without Net Neutrality there is no reason to believe they will do anything differently because it's incredibly bad PR. When Comcast and Netflix had their bout, it was bad PR for Comcast, despite them doing nothing wrong and the "throttling" being due to a bottleneck with the intermediary between Netflix and Comcast which was caused by the disproportionately large amount of traffic and data usage that Netflix has.
Net Neutrality was a massive power grab
There was an excellent post on Reddit about how Obama took control of the internet without anyone noticing, which has been archived here. This post briefly goes over the history of the internet and the government attempting to regulate it. The most notable power grab was the Countering Information Warfare Act 2016. As Title II entities, the government could refuse to renew, or cancel, an ISP's broadcasting license at any time. This coupled with the Countering Information Warfare Act meant that the government could use a third party "fact checking" website like Snopes, which was been thoroughly dissected and is not a reliable site, could advise the established "interagency center" to force the removal of certain websites and threaten to not renew, or cancel, the broadcasting license of an ISP.
This would give the president direct control over the internet, a power which no single man should have.
Net Neutrality was one of the biggest scams in recent history
Net Neutrality was bad economics which reduced the welfare of society. It did not stop the ability of monopolies to throttle the internet. It gave the president control over the internet when coupled with the Countering Information Act 2016.
Net Neutrality was never:
- Pro-consumer
- Pro-freedom
- Economically logical
- Able to harm monopolies
The mass disinformation campaigns made it seem like a positive thing, but there was nothing positive about it. Don't blindly put your trust in regulations and laws with nice names. There was nothing patriotic about the Patriot Act and there's nothing neutral about Net Neutrality.
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There’s an important distinction between “free to” and “free from”. Free to use with low barriers to entry = good. Free from regulation = good. But an unregulated market will favor dominant big business who are inefficient innovators. The sweet spot is somewhere between what we now have and what we used to have. This journey will be slow and painful.
I think the ending of Net Neutrality was a transfer of power from the big internet corporations like Google, Facebook, Twitter, Yahoo, Microsoft, ... to the ISP's.
With Net Neutrality in place the ISPs suffered and big traffic internet companies were big winners. But the transfer of power was from the government to the free market.
We shouldn’t confuse “ISP” with the “Telcos”. You can expect these Tier 1 telcos to milk their ISP business to subsidize their ailing telco operation. We can expect to see accelerating vertical integration and emergence of new oligopolies.
An oligopoly could expand, but a new one would mean that the current oligopoly/monopolistic structure would have to fail. If they do fail, a new oligopoly structure will be welcomed by most for a while. That would show that the market is healthy since business entities can die and be replaced.
Oligopolies don’t expand; they stagnate.
Only in the long term. While they eat up competition they expand. An oligopoly begins as the biggest market share and can eventually be almost all the market share.
I have heard that Australians don't have net neutrality. I wonder how the American ISP market compares to theirs....
The American market is far stronger because everything is physically closer. There’s too much land to cover here and there’s been a lot of government influence. Our biggest telecom used to be government owned and so didn’t need to compete for its market share once it was privatised.
America’s Internet is strictly better than Australia’s. The lack of government influence for 20 years grew that a lot. Right now we’ve had a slight advancement with the NBN, but it was rolled out poorly and there are problems frequently. Never trust the government to make your internet.
I think the main thing people are concerned with is the simple fact that with more freedom comes more opportunities to take advantage of it in egregious ways.
Yes, Net Neutrality offers more freedom. Freedom to set different prices for Internet, freedom to offer more for less, and freedom for small, startup ISP's to offer a bigger variety of service to small, out-of-the-way areas.
The biggest issues people have with Net Neutrality are:
Ironically enough, Ajit Pai not listening to thousands upon thousands of people not wanting Net Neutrality is a good example of what could happen if one puts their trust in what are supposed to be higher powers/higher authority. Whether you are for or against Net Neutrality, it's clear to see that the PR surrounding it was handled very poorly. They put Ajin Pai's dumb mug over a green screen holding a fidget spinner. Just that alone shows how badly they handled it.
But back to my point. Ajit Pai, instead of trying to explain himself or explain what Net Neutrality was in a clear, concise manner easy for all to understand, was very vague and never really explained why it was such a good idea to remove it. Instead he mocked those who said "no" in a very clear, public, scathing manner and never once offered any counterpoints.
Not only was this handled poorly, it did little to quell the public's lack of trust in a higher authority. It reaffirmed that people higher than them cannot be trusted, and counterintuitively convinced them further that the removal of Net Neutrality is bad.
I'm glad you discussed the various points regarding Net Neutrality and cleared things up, because so far, not many people have tried to do this properly. I, personally, am ambivalent toward the subject, mostly because I'm still unsure what will come of removing it. I think this unknown quantity is what scares most people- the fear of the unknown, of change, is very strong in most.
I think companies won't risk losing hundreds of customers by throttling certain sites to an extent, and I certainly don't think the internet is going to be offered in packages. That's simply paranoia and overthinking.
But I also think that the reintroduction of stiff competition in the market will actually potentially destroy small startups, as big companies will more easily be able to afford lowering their prices than smaller companies who have little to their name.
More regulation hurts startups. Competition and freedom does not. The latter requires hard work and intelligence to pull out on top, which is a good thing.
A core factor in why people don’t want freedom is laziness. Freedom requires vigilance and smarts. That’s more effort for you than if you sell out to the government, but the rewards are far greater.
I agree with you to an extent, but if a multibillion dollar company like Verizon or AT&T face off against a small startup, the small startup, unless very well-funded and well-supported, will die out because they won't be able to afford cutting their prices.
Think of it this way. Pretend that some shallow girl wants to date someone. Say you and Bill Gates. You save up every penny for a month straight so you can take her to a pretty nice place. You plan to take her in your car to a cozy 3-star eating establishment with outdoor seating on a nice day.
Bill Gates has a team of servants find the best romantic spot for a dinner, and plans to fly the gal to that place (most likely a different country), giving her the best possible treatment the entire way, and possibly even a five-star reservation at a nearby hotel.
Who would win her affection? Bill Gates. Obviously. He is able to provide more for less effort than you can.
The same goes for big ISP's. They can afford to waste/spend more money giving their customers really good deals, early startups simply cannot keep up.
Now, it may be true that startups have more freedom now, but that freedom extends beyond just those startups. The whole purpose of getting rid of Net Neutrality is to remove restrictions from EVERYONE, not give people preferential treatment. It's to decentralize the internet.
Unfortunately, just due to the nature of things, small startups will still be up shit creek, just because the larger companies have more money to spend, have been around longer, and are much more experienced in how the economy works/how to run a business.
What you're describing is anti-competitive behaviour. That's illegal in most places. In areas with little regulation it is never a problem because monopolies make zero profit in the long term when there is no barrier to entry and exit. There is a barrier to entry for ISPs, but the more freedom the lower this barrier becomes.
If there were no regulations and laws at all, I would be confident that Verizon would collapse quite quickly. In a totally free market predatory behaviour doesn't work out well and consumers will look elsewhere.
Net Neutrality at its core was government control over ISPs. It was never about business or economics. Always control and power.