A Better Solution Than Net Neutrality

Much has been made of yesterday’s controversial Federal Communications Commission (FCC) decision to overturn the net neutrality rules that were implemented in 2015. Broadband providers will no longer be subject to US government requirements not to block web sites or charge for premium services, essentially changing their status back to “information providers” instead of “common carriers”.

What would it be like if we applied the concept of net neutrality to other types of businesses? For example, what if the US government required car dealerships to sell any make of car from any manufacturer, not just a single make? What if grocery stores had to sell any food manufacturer’s product and could not charge more for better positioning on its stores’ shelves? What if magazines could not charge more for a full-page advertisement or one on the back cover, but instead had to charge the same price for every ad, regardless of its size or placement in a magazine?

Ridiculous, right? Even the most ardent supporters of net neutrality wouldn’t support these types of government restrictions on auto dealerships, grocery stores or magazine publishers.

Why not? Because consumers have a large number of options for all of these products. In most urban and suburban areas, there are numerous car dealerships and grocery stores from which to choose, and there were 7,216 magazines published in the United States in 2016. US consumers have a large number of options for just about everything they want to buy.

Unfortunately, the same cannot be said for Internet Service Providers (ISPs). As noted in an Ars Technica article from 2016:

“At the FCC’s 25Mbps download/3Mbps upload broadband standard, there are no ISPs at all in 30 percent of developed census blocks and only one offering service that fast in 48 percent of the blocks. About 55 percent of census blocks have no 100Mbps/10Mbps providers, and only about 10 percent have multiple options at that speed.”

The situation is actually worse than that, as former FCC Chairman Tom Wheeler noted in 2014:

“About 80 percent of Americans homes could buy 25Mbps broadband, but generally from only one provider. At 25Mbps, there is simply no competitive choice for most Americans. Stop and let that sink in…three-quarters of American homes have no competitive choice for the essential infrastructure for 21st century economics and democracy. Included in that is almost 20 percent who have no service at all! Things only get worse as you move to 50Mbps where 82 percent of consumers lack a choice.”

So, what we have in the US broadband market are two problems:

  1. A lack of consumer choice, especially for higher speed broadband.
  2. The ability for ISPs to throttle or block services as they see fit now that net neutrality will soon be abolished.

What if we solved the second problem by simply reinstating net neutrality? It would do nothing to solve the first problem because net neutrality would never attract new ISPs to the market — if anything, it would drive some of the marginal ones away. But what if we solved the first problem? It would easily solve the second one. For example, imagine you had a choice of seven high-speed broadband providers for your home or business. Would it matter if one or two providers blocked or throttled Netflix, Vonage or any other Internet service you wanted to purchase? Not really, because you could switch to another provider that allowed them, effectively using market forces to prevent providers from blocking or throttling any service. And, you’d end up saving money because these seven providers would be aggressively fighting for your business, giving you all of the benefits of net neutrality without government intervention and at a lower cost.

Yes, I realize that having lots of different providers from which to choose is sort of a “boil the ocean” problem that is not easily solved because of a number of factors: providers tend to be natural monopolies, local governments charge lots of money for franchise fees, there may not be enough space on poles or in underground conduits, etc. But solving the fundamental problem we face in broadband services — lack of competition — is not going to be solved via net neutrality. We need to find a better way to solve it.

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