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Ten misconceptions about ‘net neutrality’

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets.

From “no one owns the internet” to “this will destroy the internet”, a great many lies are being peddled about the pending repeal in the US of “net neutrality” – the remarkably manipulative name for a set of rules that grants government increased control over the internet.

With the imminent repeal in the US of “net neutrality”, a set of rules instituted by that county’s telecoms regulator in 2015, the cacophony has become deafening. The move is being protested against far and wide, and countries around the world are taking notice.

The basic argument is that telecoms networks ought to be regulated like monopoly utilities, and should not be allowed to discriminate, by speed or price, based on what kind of data is being transmitted, who the content provider is, or who the consumer is. It is essentially an argument for handing control over internet infrastructure to the government and creating one-size-fits-all products for everyone.

Not surprisingly, the amount of counterfactual propaganda spouted by “net neutrality” supporters is piling up. It’s time to disabuse them of some of their more cherished ideas.

1. No one owns the internet. It should be free.

This gem comes from R.S. Sharma, the head of the Telecom Regulatory Authority of India. This astonishing claim will come as news to the people who construct the cables, keep the servers powered and running smoothly, write and maintain the internet’s software, secure the banking transactions, and connect customers to the internet.

He claims, “it should be open and accessible to everyone”, as if it isn’t. His view is based on the mistaken notion that the internet is a basic human right. No economic goods (that is, scarce goods that require work to produce) can ever be a basic human right. Access to those goods can be a right, certainly. Nobody ought to prevent you from acquiring food, water, clothing or shelter, for example. However, the idea that one has the right to the goods themselves implies that someone, somewhere, should be required to produce them for you, and, if you cannot or will not pay for them, give them to you for free. That is the very definition of slavery.

If internet infrastructure were to become a basic utility, given to users at a low or zero rate, then no sane company would invest in improving it. Why would they, if they cannot claim ownership and profit from the capital they invest?

This would leave it up to the government to contract for the construction and improvement of internet infrastructure. They would have no profit motive to do so, and the internet would go the way of water, electricity, and the postal service, none of which the government is able to provide reliably, timeously, in sufficient quantity, at adequate quality, and at a reasonable price. Consider the ambition of the South African government to bring broadband to the masses, which has taken 15 years and cost billions of rand, and for which we have diddly-squat to show.

Remember, it was the government that decided (in 1995) that landlines were critical basic infrastructure that had to be provided by a protected monopoly to everyone, while mobile phones were toys for the rich. The number of landlines promptly plummeted, while competing private network operators got mobile phones into the hands of even the poorest among us. Why on earth would anyone trust this or any other government with control over the internet?

If the government were to regulate the internet as a utility, or provide it for “free”, we’d all end up with the same unreliable, throttled and capped connection, some of the time.

2. Without ‘net neutrality’, the internet will die.

If you believe what you read on the internet, the end of “net neutrality” rules will cause the death of the internet, or at least its death as we know it. It “could destroy internet marketing”. “AT&T begs Supreme Court to destroy the internet”. You can’t make this stuff up.

Let’s stop and breathe for a minute. “Net neutrality” rules were imposed in the United States in 2015. They’ve been around for only two years. Was the internet dead or dying before then? Did internet marketing not exist? Was the internet not great?

Let’s recall the history of internet penetration achieved by private companies operating without “net neutrality” rules. Other than a slowdown after the economic crisis of 2008, there’s no evidence that the internet was in trouble.

Globally, private companies have delivered internet access to over half the world’s population in just two decades.

This is hardly a picture of an internet in crisis. The claim that repealing rules that have only existed for a couple of years will “destroy the internet” is patently absurd.

In fact, the growth of the internet was the result of a free market, not government regulation. It is impossible to allocate scarce resources in a neutral way. The internet might be growing rapidly, but it is not unlimited, and never will be. Because it is not unlimited, network operators are required to make decisions about what to permit, what to block, what to prioritise, and what to charge for different uses of the internet. Prohibiting this is absurd (and in fact, “net neutrality” rules didn’t really do so).

Treating the internet as if it were an infinite resource would be the fastest way to stop its growth in its tracks. Allowing the price mechanism to operate in a free market is what creates abundance and brings down prices – as it has done for food, clothing, kitchen appliances, computers, mobile phones and, indeed, the internet itself.

The Institute for Economic Affairs puts it well: “If operators anticipate they will not be able to freely manage the telecommunication capacity they build, they will invest less. So, amid the current explosive growth in smartphones and video services, we would start experiencing a decline in quality, both because management of the scarce resource is not left to those who would benefit most from managing it, and due to reduced incentives to increase capacity.”

3. Without ‘net neutrality’, there will be ‘fast lanes’ on the internet.

One of the scary scenarios proposed by “net neutrality” supporters is that repealing these regulations would allow large content providers, like Netflix and YouTube, to pay a special rate to telecoms networks to prioritise their content. This will, it is claimed, shut out competitors and marginalise startups.

But that was the case before “net neutrality” rules, when the internet worked just fine. More important, “net neutrality” rules did not prohibit this. They allow for prioritisation (so streaming video takes precedence over texts and emails), and they still allow charging for the bandwidth content providers use.

Will some operators try to create walled gardens? They might. CompuServe did. AOL did. But look where they are now. Apple does, too, and yet people are falling all over themselves to pay a premium for getting locked into Apple-approved products, applications and services. Should the government intervene? Same with Facebook. “Net neutrality” didn’t stop them.

4. Opponents of ‘net neutrality are greedy capitalists, and supporters are the good guys.

Sure, opponents of “net neutrality” are telecoms network operators, and they’re greedy capitalists. But supporters of “net neutrality” are large content providers, who are greedy capitalists too. They’re not arguing about what’s best for us, the users. They’re arguing their own pocketbooks. They’re motivated purely by profit. They would rather not have to pay networks for their own heavy network use, just like consumers would rather not pay more for heavy network use like video streaming, downloading, or gaming, than they do for using social media, web browsing and the occasional email. Everyone argues their pocketbook. Nobody is being altruistic here.

Amazon, Google, Facebook, Netflix, Vimeo, Kickstarter, PornHub, DreamHost, Twitter, Reddit, Imgur, Yelp, Spotify, Tumblr, Soundcloud, O’Reilly Media, Slashdot, Fark, Stack Overflow, and Y Combinator are just as much greedy capitalists as anyone else. They might claim to be on the side of the people, but many have shown they’re quite willing to sell out their users to government spies and corporate interests. They don’t give a damn about users, except inasmuch as users remain willing to pay them for their services. They’re no different from telcos or ISPs. They’re just less honest about it.

5. Without ‘net neutrality’, telecoms companies can do what they want.

No, they cannot. They’re still not entitled to compromise user privacy, or engage in anti-competitive behaviour. They’re not allowed to charge hidden fees, misrepresent the product they sell, or throttle connections without full disclosure. And, as always, these abuses can be challenged in court or in front of regulators.

It is tempting to want to prevent such abuses in the first place, by prescribing the nature, quality and price of products. But governments are not capable of doing this. They simply do not have the information required to decree one-size-fits-all rules and determine prices. Doing so would stifle innovation and reduce consumer choice, without any real benefit.

6. Without ‘net neutrality’, companies will be able to censor users.

Private companies can and do censor users of their platforms, and this is perfectly permissible. It always has been, and it always will be, whether or not “net neutrality” rules exist. The same content companies that say that without “net neutrality” you’ll be censored, routinely censor users themselves. Facebook has community guidelines. Reddit has rules. Google down-ranks what it determines – in its infinite wisdom – to be “fake news”, and removes some offensive content altogether.

And that’s okay. I don’t use Google, because I don’t trust its wisdom. I don’t use Facebook, because I don’t like companies who consider me a “dumb fuck”. And neither has any regard for my privacy. But they’re entitled to do whatever they wish on their own platforms. You’re entitled to say whatever you like, and the government cannot stop you, but a private company does not have to transmit your message.

7. ‘Net neutrality’ rules are necessary to curb monopoly abuses.

Competition is necessary to curb monopoly abuses. Competition doesn’t even have to exist; merely the threat that competition can arise is enough to keep monopolies in check.

If, in your particular market, there is not enough competition, then the legislation that prevents more competition – such as restricted licensing – needs amending. You can’t use regulations to bandage the festering sore of monopolies created and protected by government regulations in the first place. That’s how the regulatory state grows ever-larger and more powerful. Worse, that’s how monopolies survive: by reducing the motivation customers have to support existing or emerging competition.

What is needed is to repeal regulations that raise barriers to entry for new competitors. Even the biggest monopolies – think IBM, or Netscape, or Microsoft – can be toppled in a free market in which new competition can arise. Whenever something becomes regulated as a utility, monopolies survive forever.

8. Governments are benign regulators who will act in the interests of the people.

Hahahaha. The government is the biggest monopoly of them all. The world over, governments fall prey to cronyism and corruption, and act in the interests of big corporations. The world over, governments violate the rights of citizens. Ordinary people can’t easily or cheaply take their business somewhere else. Asking government to police monopoly abuses is to set a fox to guard the hen house.

9. It is unreasonable to charge different rates for content from different sources.

Everyone does. Electricity providers pay different rates for energy from different sources, and those prices are passed on to consumers. In sophisticated markets, consumers can choose from which source they’d rather have their electricity, and pay accordingly.

Supermarkets pay different prices for food from different sources, and consumers have the choice whether or not to pay the price for it. You can have cheap little bananas from down the road, big fat bananas from far away, or organic bananas from a hippie, but they’ll all have different prices.

There’s nothing wrong with supermarkets granting favoured suppliers more shelf space or premium positioning. If this would not be in the interest of the supermarket, because nobody wants an entire shelf full of one brand of tea, they simply won’t do it. Sure, large suppliers end up having better access to supermarkets than small startups, but that has not killed the market for groceries, nor prevented new brands from becoming successful, provided that they’re better than their competitors.

If we expect differential pricing in all other industries, why shouldn’t we expect it on the internet? Prohibiting differential pricing not only makes it impossible to price products based on their cost, but it is the reason why in some countries internet companies are not legally allowed to offer limited services for free.

You read this right: when greedy capitalists try to give stuff away to poor people, they get scorned for not offering them the same quantity and quality that rich people pay for. That’s like refusing free small cars for everyone because they’re not supercars, and they don’t come with a mansion and a yacht. It’s beyond absurd, but it happens.

10. American internet regulations don’t matter in South Africa.

Since many major content providers are based in the US, the conditions under which they can transmit content across the internet matters worldwide. Many other countries, including South Africa, also follow policy cues from foreign countries, including the US.

The local Internet Service Providers’ Association (ISPA) in 2016 came out in favour of “net neutrality”. Its view is riddled with the same inaccuracies and misconceptions that we’ve seen above. All it really wants is full disclosure of bandwidth policies, which isn’t a “net neutrality” issue at all. It says that internet sites that require a lot of data might be blocked due to cost concerns, but there’s nothing stopping this from happening right now. Many ISPs, in fact, throttle or shape bandwidth, for exactly this reason. Many consumers don’t care, or even support such policies because heavy users don’t get to slow the network down. Many other consumers shop around to find an ISP that provides them with the product that they want, instead.

ISPA’s position is at odds with its own stated position in 2014, when it said there is no need for “net neutrality” regulations in South Africa. TechCentral’s Duncan McLeod agreed, and fleshed out the argument by saying there is sufficient competition among SA’s ISPs that consumers can choose better products, or jump ship entirely, if their provider starts discriminating against the wrong kind of traffic.

Repealing “net neutrality” rules in the US will not destroy the internet as we know it. Conversely, the South African internet landscape will not be improved by “net neutrality” regulations. The damage that was done by government-protected monopolies or licensed cartels will not be undone by treating the internet as some sort of open-access commons nobody owns and everyone can freely access. On the contrary: that sort of thinking will take us straight back to the dark ages. DM


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