Net neutrality is crony capitalism

net neutrality

With Trump’s victory, net neutrality is again a topic of discussion.

My philosophy is to generally assume any piece of government legislation will do the opposite of what it says. The Patriot Act wasn’t anything close to patriotic, the Affordable Care Act did not make care affordable, and the Environmental Protection Agency does more damage to the environment than just about anybody I know. In that same vein, net neutrality does not make the net neutral.

One of the most fundamental concepts in economics is the idea of scarcity. There are finite amounts of resources that need to be distributed. Normally, this is done through prices. Prices communicate supply and demand and coordinate the use of resources over time. The price at where supply and demand meet for maximum efficiency is called the equilibrium price. If a price is set over the equilibrium price, a surplus is created – if widgets are too expensive, people won’t buy the widgets and they will sit around, gathering dust. A price below equilibrium price creates a shortage. If widgets are too cheap, they’ll disappear and people who want widgets won’t be able to obtain them. Market forces usually push a price to equilibrium, but external forces like government can artificially raise or lower prices.

When a price is artifically set to zero, then economics pretty much goes out the window. There’s no way to allocate a scarce resource when that resource costs nothing to obtain.

Net neutrality seeks to eliminate the price of scarce resources, namely network access, to certain “edge” companies in the market.

A parallel would be if all factories and land in a city suddenly became free. If anybody could just waltz in and take over a factory, it would be complete chaos. People with no idea what they were doing would run in and make absolutely ridiculous things. The factories would not be utilized efficiently. In a free market, those with the best ideas and best plans would get the best investment and be able to outbid the worse ideas and sub-par plans. Given a price of zero and no desire to have chaos, the only alternative is to have the government allocate the resources, to allow politicians to decide who ought to recieve what.

There can be zero neutrality if resources are allocated by political means.

Free speech is a big point raised by people who advocate net neutrality. Free speech is a long, long way from government-approved speech.

Net neutrality, in effect, is subsidizing politically-connected firms, giving them an unfair advantage. These companies can use the political nature of a “neutral net” to regulate against their competitors, profiting not off of meeting customer demand, but by abusing the government’s power over the market.

FCC Commissioner Robert McDowell, dissenting against net neutrality, puts things in a fearful light:

“Using these new rules as a weapon, politically favored companies will be able to pressure three political appointees to regulate their rivals to gain competitive advantages. Litigation will supplant innovation. Instead of investing in tomorrow’s technologies, precious capital will be diverted to pay lawyers’ fees. The era of Internet regulatory arbitrage has dawned.”

The same economic laws that govern the allocation of scarce resources must be allowed to function when it comes to the internet.

Politicizing access to the internet is not the answer. Political means are abused to maximize profit at the cost of innovation, ISPs must bear the burden of profiting through meeting customer demand, not through crony capitalism.