Net neutrality regulations target innovation, limit open Internet

In December 2010, the Federal Communications Commission imposed network neutrality regulations on broadband-access providers. These providers would be forbidden to block subscribers’ use of certain types of high-volume-using devices or software, or to unreasonably discriminate by offering superior access for extra fees.

The Senate on Thursday voted down a Republican bill to block net neutrality, and President Barack Obama had pledged to veto the bill if it passed.

The FCC had decided net neutrality rules are necessary, because the Internet was supposed to bar major “gatekeepers.” This view is faulty; online networks are an evolving ecosystem relying on freedom to innovate.

Universities often bar bandwidth-gobbling services such as Skype. They limit traffic to improve overall performance. A truly open Internet allows consumers, investors and entrepreneurs to choose among many models, discovering efficiencies.

Antitrust regulators have not brought a single major case accusing a firm of anticompetitive practice. Indeed, the Department of Justice Antitrust Division recommended that the FCC not impose neutrality rules, which might reduce investment in broadband networks.

But the commission insisted rules were needed because otherwise, we would be “allowing gigantic corporations … to exercise unfettered control over Americans’ access to the Internet.”

This “unfettered control” is actually considerably fettered — by competition that delivered the open platform the commission supposedly seeks to protect. And, it was not exactly a gigantic corporation that was first to feel an FCC neutrality complaint. That honor belongs to MetroPCS, America’s fifth-largest mobile operator.

MetroPCS offers an all-you-can-eat plan for wireless talk, texting and data for just $40 a month — and it blocks video streaming. But, with a special compression format made by Google — the owner of YouTube — MetroPCS offers its customers unlimited YouTube videos. This discriminates against other video websites, the FCC ruled.

Net neutrality attacked MetroPCS, singling out its business model as suspiciously non-neutral. In forcing innovative firms to defend themselves about offers that improve consumer welfare, a clumsy government does not advance an open Internet, but harms it.

Thomas Hazlett is professor of law and economics at George Mason University. He wrote the Encounter Books Broadside “The Fallacy of Net Neutrality,” from which this article was adapted.

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