Crony capitalism is alive and well. If you need proof, look no further than the Federal Communication Commission’s new Title II regulations imposed in the name of “net neutrality” under pressure from President Barack Obama, and the big businesses that benefit.
Net neutrality proponents did a masterful job of marketing it with the help of late-night hosts and political spin, arguing that it would level the Internet playing field. The truth, however, is that it will insert Washington bureaucracy and control into the 21st century’s greatest success story. The Internet, which has empowered hundreds of millions of Americans in so many aspects of life, will now be subject to the same types of regulations that governed telephone service in the 20th century.
As someone who led a $87 billion company for six years, I know this: Only big companies can deal with vast, sweeping regulation like the 313 pages imposed by the FCC. This administration has had a habit of identifying a particular problem and then convincing the voters that we require enormous new swaths of government control to fix it.
For example, Dodd Frank started out as way to protect consumers. But the consequence of Dodd Frank has been that 10 banks too big to fail became 5 banks too big to fail with record bonuses all around. Meanwhile the community banking system, which gives Main Street and mainstream entrepreneurs its credit, is on its back. In other words, the big got bigger and the smaller got weaker.
The Affordable Care Act exists because we had a problem: health insurance was too expensive, and people with pre-existing conditions were shut out of the market. Those are real problems.
But after enacting a piece of legislation that is literally longer than a Harry Potter novel and accompanying it with tens of thousands of pages of additional regulation, millions of people saw their plans canceled or their access to their doctors limited. And health care isn’t any cheaper.
Title II regulation gives the Federal Communications Commission nearly unlimited authority to micromanage how, when and where Internet companies innovate.
Whereas the old Internet was “permissionless,” the new Internet will require bureaucratic approval for the most mind-numbing minutiae and create huge areas of uncertainty . Major companies such as Google, Facebook, Amazon, eBay and Netflix now have a government-conferred advantage over start-ups because they can afford the lobbyists and lawyers necessary to navigate the new Title II landscape. When influence trumps innovation, big entrenched companies benefit.
A lot has been made of the “Netflix problem.” Last year, Netflix claimed that their customers saw a degradation in the quality of their Netflix service because Comcast and Verizon were unfairly trying to make Netflix pay for network upgrades. But here’s the kicker: The new FCC rules don’t address this issue.
Instead, the FCC has said they will review such disputes when complaints are filed. So the very problem advocates cited as proof that we need hundreds of pages of new regulations won’t even be addressed.
The new Internet will also lead to higher prices — the very thing net neutrality was supposed to prevent. Broadband fees will necessarily increase for three reasons:
One, the Internet economy will no longer benefit from the competition that has steadily driven prices down over the past two decades.
Two, companies will devote more of their resources to lobbying and regulatory compliance, passing the costs of these activities directly on to consumers.
Three, as Commissioner Ajit Pai notes in his dissenting vote, under Title II “the FCC now has a statutory obligation to make sure that all Internet service providers (and in the end, their customers) contribute to the Universal Service Fund,” which is financed by a tax that up until now broadband service wasn’t subject to.
In exchange for higher prices, we may see Internet quality decrease. In Europe, where broadband providers have typically been classified as public utilities for years, just over half of Europeans have access to high-speed Internet, compared with 82% of Americans.
The past six years have seen Washington establish unprecedented control over ever more of American life, from health care to finances to everything in between. The only area, it seemed, that was free from the Obama administration’s grasp was perhaps the most dynamic sector of the economy — the Internet.
There’s the old saying that if all you have is a hammer, everything looks like a nail.
For politicians, regulations and bureaucracy are their hammer. For so long, they have been in the business of managing problems, they’ve forgotten that leadership is about envisioning solutions. We need leaders who understand the power of technology and can imagine a new way of doing business that encourages new tech start-ups and drives innovation on the Internet.
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