FCC’s Net Neutrality Rules

Hopefully this won’t stand:

U.S. communications regulators adopted Internet traffic rules Tuesday that prevent providers from blocking lawful content but still let them ration access to their networks.

The rules aim to strike a balance between the interests of Internet service providers, content companies and consumers, but some industry analysts think a court challenge is still likely.

At issue is whether regulators need to guarantee that all stakeholders continue to have reasonable access to the Internet, a principle often called “net neutrality,” or whether the Internet is best left to flourish unregulated.

I’ll get to the specifics in a moment but it’s important to remember a couple of things when considering the implications of the FCC decision.

First, the courts have already ruled that the FCC does not have the authority to do this but they decided to thumb their noses at that little technicality and regulate anyway. Throw in that rarest of birds, bipartisan Congressional agreement that the FCC should not go down this road, and you have pretty much all the big dogs that count opposed to this move.

Second, everything that you read today, including this post, that purports to tell you what all this means should be viewed as highly speculative at best. The FCC announced a broad outline of regulation where none previously existed. The regulations have yet to be written and that is where the real action will take place. Most of you have been following the reregulation of the financial services industry enough to know that those about to be regulated are quite adept at influencing the nuts and bolts in a manner that furthers their interests.

With that in mind, the ruling today would surprisingly seem to favor the Internet Service Providers. Recall that all of this started with the content providers, Google, Amazon etc. lobbying for some sort of regulation that would prevent the ISPs from taking actions which would limit their ability to transmit data through the pipes. Their fear was that as they ate up more and more capacity they might find their offerings restricted. The commission gave them protection from discrimination but also gave the ISPs the green light to charge them for data heavy content.

If you’re looking for a ray of light here, at least the FCC seems to have recognized some property rights. The ISPs built and maintain the transmission network and, believe it or not, the government said that they should be able to charge for the use of their asset.

The other party here is the wireless carriers. The FCC did give them the OK to discriminate against data heavy content given the constraints on their capacity. Don’t worry, you will continue to see more and more content available for viewing on your cell phone and other wireless devices, just be prepared to pay for them big time.

As I said at the outset, we should all hope that someone steps in and puts an end to all of this. This all started as an attempt by the content providers to game the political system to their advantage. Google behaving as Goldman. Regulation was sought not to cure some obvious abuse of privilege, but to put in place a framework that preserved the status quo potentially at the expense of other industry participants. That we now appear to have a solution that thwarts the original intent of the content providers should provide no comfort in as much as it appears to be a negotiated agreement among the biggest players in the industry. To assume that it does not cement the interests of existing players at the expense of others would be folly.

The Internet in its short life has been a marvel of invention and competition. There is no evident, compelling reason to muddle this success with attempts at central planning.

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