Why Are People Against Net Neutrality?
On April 25th, around 10:30 am EST, the FCC will vote on reinstating net neutrality during its April Open Meeting. If the vote goes through, broadband will be reclassified as a Title II telecommunications service, shifting the responsibility of regulation from the FTC (ex-post regulation) to the FCC (ex-ante regulation) and placing broadband providers under the “same strict regulations” that currently govern telephone networks (CNET). The FCC will also require ISPs (Internet Service Providers) to treat all traffic on the Internet equally, which simplifies down to no blocking, throttling, or paid prioritization (CNET).
Under net neutrality, ISPs cannot block or throttle (purposely slow down) lawful content, applications, services, or devices regardless of the situation.
Whether for network traffic management during peak hours or economic incentives beneficial to end-users. More importantly, ISPs are prohibited from offering Internet ‘fast lanes,’ a type of price discrimination where content providers (CPs), such as Netflix and YouTube, pay additional fees to ISPs in return for ‘prioritized treatment’ over ‘the last mile,’ the final leg between networks and end-users (NCTA). CPs that pay into ‘fast lanes’ ensure their content has more bandwidth and lower latency, reaching end-users quicker.
So, if net neutrality is equalizing the ‘Internet’ playing field and providing opportunities for entrant CPs, then why is a large majority of the nation against it? This article takes a deep dive into the primary arguments of net neutrality critics to better understand the overall situation.
It’s important to recognize that this would not be the first time net neutrality was instated. Back in March of 2015, the FCC voted, in a landmark decision, to pass previously mentioned net
neutrality laws on the basis that they would drive broadband innovation and economic growth, while providing an open and accessible Internet to all (National et al. Administration). Supporters also argued that net neutrality would reduce entry barriers for entrant content producers by removing ‘fast lanes’ and termination fees, which would be largely beneficial to society (Lee). However, net neutrality critics argue that these claims, which are still being used today, either come with costly trade-offs or are unrealistic.
For starters, critics cite that proponents of net neutrality argued that the incredible success of the Internet over the past 35 years was due to ISPs treating Internet traffic equally, and so, to ensure the continued success and growth of the Internet, net neutrality regulations needed to be passed (National et al. Administration). This rationale was, and still is, partially driven by the fear that ISPs will suddenly decide to block or charge termination fees for content producers or charge outrageous fees to end-users to access various Internet services. The 2017 FCC order, which overturned net neutrality, exemplified this fear, where images depicting five-dollar fees to access Google and ten-dollar fees to access YouTube exploded in popularity, and articles foretelling the “End of the Internet” ran rampant (Aimee). However, many argue that these fears were, and still are, significantly exaggerated.
Critics of net neutrality point out that ISPs wouldn’t start treating the large majority of Internet traffic differently because it simply is not economically sound for profit-maximizing ISPs to block CPs, or charge fees on CPs or end-users.
The ISP market structure is that of a highly competitive oligopoly, consisting of cable and wireless internet providers. There are currently 2906 ISPs in the US alone, which will surely rise as the Internet continues to grow (BroadbandNow). More importantly, they cite that most nationwide ISPs are close substitutes for each other, as improvements in wireless connections have bridged the gap between wired and
wireless internet speeds. This means that wired ISPs such as Comcast, which was once predicted to dominate the ISP market, no longer enjoy faster speeds or significantly lower prices. That means that the vast majority of US Internet consumers can pick from a dozen substitutable ISPs, such as Verizon, AT&T, Xfinity, and Cox. Coupled with nearly negative switching costs, and consumers have become elastic.
Thus, critics argue that if ISP A were to place additional fees on customers to access Internet services, in most cases, customers would switch to a similar, cheaper ISP B, C, or D. Similarly, if ISP A were to block or charge termination fees to specific content producers which consumers enjoyed, and those CP’s weren’t available anymore, then consumers would switch to ISP B, C, or D that had it available.
Moreover, because ISPs are part of a multi-sided market that benefits from network and secondary network effects, it’s contradictory that an ISP would want to shrink its network by blocking content providers. In both cases, critics claim that if ISP A deviated from its current profit-maximizing price, the market is competitive and substitutable enough that ISP A’s customers wouldn’t stay.
For more evidence, critics point to recent times. Although ISPs can block content producers and create outrageous customer fees since the FCC’s 2017 order, they have not, and most likely will not. In fact, from 2022 to 2023, the price of ISP’s most popular speed tier dropped by 18.1%, and the price of ISP’s fastest speed tier dropped by 6.5%, adjusted for inflation (USTelecom), all while under no net neutrality regulations.
Furthermore, the belief that net neutrality would contribute to broadband innovation and investment is a highly contestable point.
In fact, the strongest argument against net neutrality is that eliminating Internet ‘fast lanes’ would disadvantage broadband innovation, investment, and consumer costs. Critics argue that, not only are ‘fast lanes’ currently a considerable source of
surplus for ISPs (Verge) contributing to broadband investments and lowering consumer costs, but ‘fast lanes’ are an incentive for ISPs to innovate. ISPs invest in broadband innovations only insofar that they will net positive returns in the long run, whether from increasing their installed base by offering faster overall speeds or charging higher prices to people and businesses with a higher willingness to pay.
The rapid development of high-tech innovations such as self-driving vehicles and telemedicine have created vast differences in broadband speed requirements (FCC). Most would agree that autonomous cars and telemedicine have justifiable rationales for needing faster, less congested Internet speeds than a typical Internet user. After all, who would want to risk remote surgery on a sluggish video stream or ride in a laggy self-driving car? Thus, the demand for ‘fast lanes’ not only exists but will likely increase alongside technological improvements. Banning ‘fast lanes’ halts critical technological innovations in healthcare and transportation and creates inefficiencies in the broadband market. Remember, when demand exceeds supply due to government regulations, a shortage occurs and deadweight loss results.
In the case of broadband, ISPs’ inability to meet the demand for ‘fast lanes’ due to net neutrality’s price regulations creates a shortage!
Resulting in lost consumer and producer surplus, translating to less surplus being available for broadband investments. In all, ISPs have less incentive to invest and innovate if they cannot capture the available surplus from Internet ‘fast lanes,’ which ends up hurting all Internet users, from households to large-scale businesses to CPs. Moreover, the ‘waterbed effect’ demonstrates that ISPs, who currently have two main streams of surplus, CPs and customers, would have to subsidize lost CP surplus by extracting more surplus from consumers through raising prices, making the Internet less accessible. And
yes, while critics admit that ISPs are not required to reinvest additional ‘fast lane’ surplus, they argue that the competitive state of the industry would drive most ISPs to do so. In all, the primary argument against net neutrality is that casting a blanket price regulation over the entire ISP industry would likely have significant negative effects on the Internet. The Internet is not done growing, and just as yesterday’s Internet is incomparable to today’s, today’s will likely be incomparable to tomorrow’s. Leading experts claim that our current bandwidth is simply not enough for the future, and as technology develops, the Internet needs to follow along (FCC). Thus, we shouldn’t place large regulations with foreseen consequences of limiting innovation and investment on, arguably, the most important industry of the 21st century.
Lastly, critics argue that shifting the regulation responsibility to the FCC through broadband’s reclassification as a Type II telecommunications service isn’t reasonable.
There aren’t enough instances of ISPs committing illegal pricing or blocking to justify the FCC’s complete ex-ante regulation. Instead, they show that only a few instances stand out, such as the 2005 Madison River v. Vonage Case, the 2007 Comcast v. BitTorrent Case, and the 2014 Verizon v. Netflix Case, all of which were tackled individually. Thus, it makes more sense to have the FTC and DoJ review on a case-by-case basis and let the majority of ISPs continue business as usual, then place sweeping restrictions on all ISPs due to the actions of a few ‘bad apples.’
In conclusion, the debate surrounding net neutrality is multifaceted. With proponents advocating for equal access to the internet and critics raising concerns about its potential adverse effects on innovation and investment. While supporters argue for the preservation of an open and accessible internet, opponents stress the importance of allowing ISPs the flexibility to manage their networks without government intervention. Despite the differing viewpoints, it’s evident
that the decision regarding net neutrality will have profound implications for the future of the internet and its users. As we navigate this complex landscape, it’s crucial to carefully weigh the arguments presented and consider the broader implications of regulatory decisions on innovation, investment, and consumer welfare in the digital age.
Why Are People Against Net Neutrality? Written by Rocky Klopfenstein
Works Cited
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