For Sensible Deregulation: Why We Need Net Neutrality (for now)

The following is loosely transcribed from a speech I gave at George Mason University

In the late 1980s and early 1990s, the Soviet Union was in trouble. It had been on a protracted economic slide for many years, and showed no sign of lifting. Mikhael Gorbachev, leader at the time, fancied himself a reformer, and went on a spree of deregulation and privatization. But coming from such a regulated environment, the sweeps of deregulation were not – and could not be – total. People were free to do things they were not before, but the perverse incentives still existed. The house of regulatory cards collapsed: capital fled the country in a firesale, and with it went all potential for the future of the Soviet Union.

Now we’ll come back to that story later, and talk about Net Neutrality. Net Neutrality is an unpopular issue among Libertarians, many of whom take the Rothbardian position – against all regulation at all times. Though it would perhaps be ideal to have a completely deregulated market, this is not what we have, and we must be careful how we get there.

Let me start off with a brief explanation of what net neutrality is. Imagine a line with you on one end, and Google searches, Youtube videos, and Rush Limbaugh podcasts on the other. Between us on my end is my service provider AT&T, and on their end, their respective servers, each of whom we pay respectively for access to each other. The key stipulation of net neutrality is that AT&T must treat all traffic coming towards me the same. Whether I want to listen to Rush Limbaugh podcasts or send my friends Rick Astley videos, AT&T may not filter or give preferential treatment to data coming from one server over another.

Without net neutrality however, AT&T suddenly gets to charge me for access and to charge Google for getting their data to me. Content providers and websites get double charged. What this means is the death of free on the internet. Those increased charges aren’t going to be absorbed by Google; they’re going to be passed to the consumer. No more free Gmail, Youtube, Twitter, Facebook; and what of small blogs like this one?

The most significant factor in the internet’s takeoff as a tool of commerce and communication has been the low barriers to entry. If we take that away, we essentially kill the internet: compare the power of the internet on a computer to the nonneutral mobile networks owned by regional monopolies: choice is stifled, telecoms hype their own inferior products at the expense of more capable third parties, and they want a shot at your computer too. Without the ability to pay double, small content providers will be relegated to the lowest tier of access. People will get reduced, if any, access to the material of all but the well-endowed, and that’s a best-case scenario. Countries like Iran and China use a nonneutral internet to outright filter political speech.

Daniel Klein in his paper Mere Libertarianism explores situations like this in which, even from a Libertarian perspective, between two different options for reform, the “higher-liberty” option may not necessarily be the most desirable. As he puts it in a football analogy,

We may judge the state’s 11 yard line to be better than the state’s 10 yard line, yet the state’s endzone (total liberty) to be best of all.

Seen as a policy in isolation, the abolition of net neutrality might seem to be the “higher-liberty” option between the two. But unfortunately, the patchwork nature of legislation and regulation forbids us from looking at it in isolation. The government has given regional monopolies to telecoms all over the United States – Verizon in the Northeast, AT&T and the former Baby Bells in a lot of other places, for example – stifling the potential exercise of consumer sovereignty. Where in a pure market net neutrality would be an irrelevant issue, previous government action has washed away the competitive levees which would otherwise protect consumers.

This is where we get back to the Soviet Union. Whether or not total liberty is synonymous with the highest standard of desirability, it is certainly not a straight line from a point of government regulation. Am I saying that net neutrality legislation is ideal, or even good? Not in the least. Only that it is ultimately harmful to our infrastructure and to consumers if a nonneutral internet is allowed before intra-regional competition can be firmly established nationwide. Deregulation may be the right direction, but in states of transition, we must take care to deconstruct our house of cards in such a manner that it does not first collapse upon us.