Good riddance net neutrality

An economically illiterate idea

By Mark Luedtke

T-Mobile offers a great deal for some customers: free Netflix. The Motley Fool reports, “T-Mobile One family plans that have at least two lines will enjoy Netflix (NASDAQ:NFLX) bundled for free at no additional charge. The new offering is officially called Netflix On Us.”

Offering stuff for free is a proven way to bring in more customers because it adds value to consumers. You might think nobody would be against providing greater value to consumers, but you would be wrong. Net neutrality advocates claim this violates some mythical spirit of the internet. You can read lots of articles about net neutrality without ever reading what it really is. The Electronic Frontier Foundation (EFF) defines net neutrality as “the idea that Internet service providers (ISPs) should treat all data that travels over their networks fairly, without improper discrimination in favor of particular apps, sites, or services.”

If you don’t think about it any further, that may sound like a good idea. It’s not. T-Mobile’s plan to offer free Netflix violates that principle because it favors Netflix over other data suppliers.

I prefer a more honest definition. Net neutrality is the idea that bandwidth owners should be subject to violence if they favor some data suppliers over others regardless of the demands of consumers. Defined this way, it’s easy to see net neutrality is an immoral idea that, if enforced, damages consumers.

Net neutrality is akin to requiring every shopping mall to include every store on the planet. Or requiring every store to sell every product on the planet. It’s impossible.

Net neutrality is based on faulty economic reasoning. It assumes the internet is unlimited. But even though it may appear as if the internet is unlimited, bandwidth is a scarce resource like space in a mall or in a store. My internet data packets and your packets can’t occupy the same space on the internet at the same time. Therefore, the owners of the bandwidth, ISPs, must allocate packet space. Since ISPs must satisfy consumers to make money, they preferentially allocate packets to services consumers demand the most. Like Netflix.

Fortunately, the Republican-led Federal Communication Commission (FCC) is moving in the right direction. CNET reports, “[FCC Chairman Ajit] Pai has called the Obama-era rules ‘heavy-handed’ and ‘a mistake,’ and he argues that they’ve deterred innovation and depressed investment in building and expanding broadband networks. To set things right, he says, he’s taking the FCC back [to] a ‘light touch’ approach to regulation.”

I guess no regulation is too much to ask for. The only effective regulatory regime known to man is unfettered competition in a free market.

Net neutrality advocates believe this is armageddon for what they mistakenly call the free and open internet. An ACLU senior policy analyst claims, “Internet rights are civil rights. Gutting net neutrality will have a devastating effect on free speech online. Without it, gateway corporations like Comcast, Verizon, and AT&T will have too much power to mess with the free flow of information.”

This is nonsense. There’s no such thing as internet rights. There’s no right to speech on the internet. There’s only property rights, and the ISPs own the property. Unfettered competition between ISPs guarantees the best internet service for consumers.

But there’s the rub. While I disagree with net neutrality, I’m sympathetic to its advocates. Unfortunately they don’t understand the problem they tried to address with net neutrality. The problem is cronyism. Cronyism, by definition, is government intervention in the market. Every government intervention in the market creates worse problems, and those problems mislead the misinformed into demanding more government intervention in the marketplace. Net neutrality is a perfect example.

Because government has organized several corporations into a national ISP cartel, there will be little competition among them.

As critics suggest, ISPs will favor their own content over competitors. We’ll probably suffer homogenization of content like we see on cable TV. Two thousand channels but nothing interesting on because all two thousand channels are owned by a handful of crony corporations. But this was already happening despite the FCC’s net neutrality rules. Changes to the internet because of these rule changes will be minor.

Cronyism is the bane of our economy, and because information is so important to controlling people, it’s the bane of the entertainment and information sectors. Cronyism is an inevitable consequence of coercive government. As Ronald Reagan so famously said, government is not the solution to the problem. Government is the problem.

The views and opinions expressed in Conspiracy Theorist are the views and/or opinions of the author and do not reflect the views and/or opinions of the Dayton City Paper or Dayton City Media and are published strictly for entertainment purposes.

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Mark Luedtke
Reach DCP freelance writer Mark Luedtke at MarkLuedtke@DaytonCityPaper.com.

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