Say Good-bye to the Internet as We Know it

The New York Times [nytimes.com 2/4/15] reports that Federal Communications Chairman (FCC) chairman Thomas Wheeler:

proposed regulating consumer Internet service as a public utility, saying it was the right path to net neutrality. He also included provisions to protect consumer privacy and to ensure Internet service is available for people with disabilities and in remote areas.

Mr. Wheeler’s plan would also for the first time give the F.C.C. enforcement powers to police practices in the marketplace for handling of data before it enters the gateway network into people’s households — the so-called interconnect market. For good measure, he added a “future conduct” standard to cover unforeseen problems.

The tendency is to debate what the FCC will or will not do to the Internet once it has full control over the Internet, as with a public utility. The implication is that if the FCC ends up doing “X,” then it will have been wrong for the federal government to take over; while if the FCC will do “Y,” it will be perfectly harmless.

That’s not the proper debate to have here. The issue to debate is whether the federal government is entitled to take over the Internet at all. Because transforming control of the Internet into a “public utility” is, in actual fact, a seizure of private property.

Naturally, some companies who provide service on the Internet favor this proposal while others (such as Verizon) oppose it. Any business has its interests, and a business will naturally voice its interests, taking that voice to court, if necessary, and if the cost is worth it.

However, the conflicting views of Internet service providers should tell you something right there: That there is no such thing as “net neutrality.” The fantasy of this proposal is the one nobody seems to wish to name, or even have identified. The fantasy is that government, by taking over the Internet, can substitute the outcome of free market outcomes with its own wiser, more “just” conclusions.

As the article states,

Mr. Wheeler’s  plan would also for the first time give the F.C.C. enforcement powers to police practices in the marketplace for handling of data before it enters the gateway network into people’s households — the so-called interconnect market. For good measure, he added a “future conduct” standard to cover unforeseen problems.

What are the objective particulars and limits of the FCC’s new “enforcement powers”? They’re not specified. The scope of those powers will be identified on a case-by-case basis, or even the whim, of a 3-2 majority on the FCC. What does it mean to give the federal government “future conduct” provision to exercise over “unforeseen problems”? Arbitrary and potentially unlimited authority. What’s neutral about that?

The reason most people won’t object to this order is that it’s sold as, “Policing the Internet.” People will reason, “You have to have some kind of government overseeing things. Otherwise it’s a Wild West, and we cannot have that.”

This vague, floating abstraction has no connection to what the government will actually do once it takes over Internet connectivity as a public utility. The point is: The government can do whatever it wants, at least if it’s rationalized as “fairness” in the context of connectivity and the Internet.

You can be sure that with this approach, as with other regulatory measures, the government will — in practice — end up picking winners and losers. It will favor Comcast or Verizon in this or that situation; and it will favor Netflix or Amazon.com in some other situation. Favored companies will start to acquire political power, rather than the power of the purse exercised by their customers (the only kind of power in a free market). The Internet as we know it will “evolve” from a context where it’s primarily determined by the needs, wants and preferences of customers and replaced (partially or fully) by the needs, wants and whims of a few people in charge at the FCC.

What people seem unable to get through their heads is that when government does this “policing,” it’s taking over for consumers decisions that should have been left to the marketplace. It’s true that a free marketplace produces winners and losers. But those winners and losers are determined by consumer choices. The moment the government becomes involved and starts deciding that Comcast should win this or that debate while Verizon or Netflix will lose it, then government has substituted its 3-2 judgment at the FCC for the decisions of millions of consumers in the marketplace.

Is it an uncontrolled Wild West now? No. It’s just that (1) some companies are unhappy with the private market and (2) the federal government cannot stand not having arbitrary control over this major sector of the economy as it does over most others. Incidentally, I’m not claiming that the Internet and telecommunications world as we know it is literally a free market. I would not be surprised to learn that there are all kinds of regulations that should go away to allow the marketplace to function better. However, “net neutrality” is, in effect, the establishment of the principle that activity on the Internet (at least technology-wise) is no longer a function of private property. It’s the one sweeping regulation to cover all present and future (as yet unnamed) regulations.

I’ve often heard it said that you cannot put “faith” in the marketplace, and that we must have federalized and objective regulations in place of faith. But giving the federal government — not even Congress, via legislation, but a body of five government bureaucrats appointed for political reasons — total control over decisions previously left to the marketplace is neither objective nor controlled. It’s arbitrary and capricious.

The open Internet order, the FCC officials said, will give the commission strong legal authority to ensure that no content is blocked and that the Internet is not divided into pay-to-play fast lanes for Internet and media companies that can afford it and slow lanes for everyone else. Those prohibitions are hallmarks of the net neutrality concept.

How will the Internet look and be different once the FCC implements this seizure? Nobody can predict. All we know for sure is that unless the FCC fails to act on its newly declared and arbitrary powers (most unlikely), that the Internet will now become less a function of the private marketplace, including the decisions of private, individual consumers, and more the decision of a few politically biased officials who will decide what “fairness” is. We’ll see the impact over time, and most of us will never consider what hit us. That’s how it goes with every government seizure, acquisition or nationalization sold as “regulatory rationality” to an uncritcal, unthinking and befuddled public.

It’s a declaration that all activity taking place on the Internet, including connectivity, “Is not a for-profit enterprise, at least not entirely; it ultimately belongs to the federal government.” In principle, it’s little different from a nationalization of not just one industry, but of a whole sector of the economy. Because profit will still be permitted — under government guidelines, of course — the appropriate economic name is fascism, rather than socialism.

Ayn Rand, in her essay entitled, “The Property Status of Airwaves,” identified the key issue in government control of technology when opposing federal regulation and effective ownership of radio and television airwaves. She wrote,

Any material element or resource which, in order to become of use or value to men, requires the application of human knowledge and effort, should be private property – by the right of those who apply the knowledge and effort.

This is particularly true of broadcasting frequencies or waves, because they are produced by human action and do not exist without it. What exists in nature is only the potential and the medium through which those waves must travel. (That medium is not air; in legal discussions it is often referred to by the mythical term of “ether” – to indicate some element in space, at present unidentified.) Without the broadcasting station which generates the waves, that “ether” – on our present level of knowledge — is of no practical use or value to anyone.

In this passage (and throughout the entire article, which I highly recommend), Rand nails the fundamental point that activities we come to eventually view as “public goods” or utilities are, in fact, created by private, for-profit behaviors — and maintained based on such private behavior. The exact same principle applies to the Internet today. There’s nothing “publicly owned” about the activities and achievements of private individuals, whether those achievements occur in the realm of technology or the realm of culture — art, writing, etc.

In a way, you can follow the logic of Obama, Wheeler and others who essentially argue, “The broadcasting airwaves are considered public utilities; so why not the Internet too?” The FCC is merely consolidating power that Rand would argue (and I fully agree) it never should have been granted in the first place. Internet connectivity — the Internet as we know it — is the product of private enterprise, and relatively free enterprise at that. Surely, there are some companies who have complaints about how things are going, and therefore they want the federal government to take over because they believe that will benefit their business interests. But this isn’t what the federal government is supposed to do. The government is, in fact, supposed to remain an authentically neutral policeman — enforcing private property rights and upholding voluntarily entered contracts, but not deciding who owns what, or who the winners and losers of economic competition should be. That decision is supposed to be left to customers.

If you dislike business and profits, “net neutrality” will not end these things. It will only shift profits away from where they would have gone in a free marketplace and move them in the direction of companies who otherwise would not have made as much profit (or any at all), and now do so because of the government regulation in their favor. If you call this “neutrality” and “fairness,” you haven’t given this issue the thought required to be entitled to hold an opinion.

It’s likewise sloppy thinking to assume that government control of the Internet means the FCC will never tamper with Internet content. As Rand wrote,

The Act of 1927 [establishing the FCC] did not confine the government to the role of a traffic policeman of the air who protects the rights of broadcasters from technical interference (which is all that was needed and all that a government should properly do). It established service to the “public interest, convenience or necessity” as the criterion by which the Federal Radio Commission was to judge applicants for broadcasting licenses and accept or reject them. Since there is no such thing as the “public interest” (other than the sum of the individual interests of individual citizens), since that collectivist catch-phrase has never been and can never be defined, it amounted to a blank check on totalitarian power over the broadcasting industry, granted to whatever bureaucrats happened to be appointed to the Commission.

Can you imagine, especially in today’s cultural and political atmosphere, the possibility of gaining a license to place your content on the publicly owned Internet? In an era where the IRS routinely singles out politically unfavorable groups for audits and reviews, do you think politically unfavored groups will have much of a shot at obtaining or retaining a license by the FCC, should it ever go that route?

You might reassure yourself that the Supreme Court can be counted on to curb or stop any attempts by the present or some future FCC to control Internet content. But how rigorous and consistent has the Supreme Court proven to be on such issues, sadly? Remember the Obamacare decision, where the Chief Justice essentially claimed that a voting majority gets to decide Constitutionality in health care. Will he say the same with free speech on the Internet? And, more than that, how do we justify expanding government powers on the premise that, “It’s OK, the courts will eventually stop them if they get out of control.” Why take on such a risk so that some for-profit companies may benefit at the expense of other for-profit companies, in defiance of consumer choices that should have been left to the marketplace?

Internet “neutrality” is a fiction based on the fallacy that government can substitute for people freely acting in a marketplace. It sets us on the course of turning the magnificent private sector creation known as “the Internet” into the government-perverted creature that we see in health care and public education. It’s amazing how the least popular aspects of society are the most controlled and regulated by the government. People detest the results, but they keep voting for more of the same (or at least tolerating it).

Say good-bye to the Internet as we know it. Whatever is coming, it won’t be what we have now, and it won’t be better if the federal government is “policing” and manipulating events according to its politicized vision.