Net Neutrality vs. Basic Economics

The internet is a utility that is (and should be) provided by private companies. It costs capital to create, operate, and sustain. It is a capacity-limited resource. As demand grows, equilibrium is sought. This can normally be achieved by raising prices to discourage usage. This is the basic law of supply and demand. What the FCC has done is impose a mandated equal-cost floor for all consumers (either on the input or the output side). This burdens consumers by forcing companies to universally raise prices to offset the costs of meeting demand. Lifting net neutrality is a reasonable decision to remove government regulations that serve no purpose and would provide companies the power to charge those who impose the greatest burden on the system the highest proportion of the costs. And now that the government is attempting to decrease these burdens imposed on business, the misinformation campaigns have gone full-bore by those who wish to continue the dominate the markets through government coercion.

Those who would further the reach of government power and regulation evoke traditional fear tactics by claiming that consumers would bear a significantly increased cost burden or that they would be blocked from accessing certain sites and thus our great savior, big government, is needed to protect us from the free market. There are many fallacies in these assertions. The first is that costs would be passed onto output-side consumers. While an option, and possibly a solution for cable providers given the ability to spread costs across many users and thus mitigate the individual impact, this seems less likely than the costs being passed on directly to the sites being accessed. This would most certainly impose costs on those companies who wish to utilize this utility to share their content with consumers. But under net neutrality, it is the service provider or output-side consumers who are currently forced to bear this cost. An analogy would be requiring the New York Times to print all content submitted to them at the same cost regardless of how much was submitted by the writer. Naturally, we can see that this would not be sustainable for the NYT, but we don’t criticize them for charging by the line and thus are able to keep costs for readers relatively low.

Unsurprisingly many of the large and popular sites (Google, Facebook) oppose the lifting of net neutrality because a government-imposed regulation on prices is in their best interests and their bottom lines. Smaller sites would also likely bear a cost, but imposing an unreasonable cost on these sites is illogical for two reasons: 1) it is in the best interest of service provides to provide the greatest variety of content to subscribers and 2) imposing unduly harsh costs on sites would likely drive them from the revenue pool resulting in no revenue vice even a little revenue with more reasonable pricing structure. But, to address another fallacious assertion, in the event certain sites are unable to support the costs demanded by their site usage, their inability to pay the costs is no more “denying” consumers access to their site than it is the NYT “denying” customers access to advertiser’s ads in their papers.

Net neutrality itself has only been imposed since 2015 in the US, yet has been misrepresented as some essential liberty since the beginning of the internet. Instead, it is merely another regulation imposed by unelected bureaucrats circumventing the legislative process assigned to Congress by the Constitution. But that is not the key point of emphasis. Instead, net neutrality at its core is the product of further attempts by government bureaucracies to manipulate the markets while repeatedly ignoring the principle of unintended consequences. Governments loathe relinquishing power and are more than happy to ignore the fact that it is government that created the regional cable provider monopolies we consumers must suffer through by imposing, you guessed it, more regulations.

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