Why Net Neutrality Doesn't Matter

This video sums up the typical arguments of proponents of net-neutrality. They make the typical assumptions and errors that tend to go along with criticisms of apparent flaws in an unregulated (free) market. Aside from the visually appealing graphics and models, the video really doesn't have a lot of substance and is incredibly misleading.

The first false assumption is that ISPs such as Comcast and AT&T (characterized as malicious UFOs) exist to manipulate, for monetary gain, a universally available service to young minorities who seek to one day become President. They fail to mention a key component of ISPs: the P, as in "Provider". Comcast, AT&T, and Verizon provide the means through which we are able to surf the internet. The day that these companies stop providing this service is the day that we can no longer stay connected with friends and family half-way across the world, post adorable pictures of our cats with ridiculous captions, and most importantly, read fine blogs such as this one.

In order to provide this service, companies invest capital. Shareholders provide the capital to the company, and the company repays its shareholders with dividends. It's through this miracle of capitalism that we are left with relatively affordable communications services such as cell-phones and the internet. Once the companies (in this case the ISPs) can no longer produce dividends for their shareholders, the investment goes away and so does our internet. The business policy in question is whether ISPs should allot more bandwidth to clients who pay the ISP more money, thus increasing their bottom line. In any other private sector, this policy would receive no attention whatsoever. The butcher gives preferential treatment (better quality meat) to the customer who pays her more money, regardless of the character of the patron. ISPs do not wish to discriminate against any particular content on the web (ex: Google over Yahoo), but rather against those customers who do not pay as much money. So where does the controversy come from?

Many people believe that the internet is somehow above the free market. The second misconception in the video is the notion that the internet is founded on a principle of neutrality. I challenge you to name one other business sector that has "founding principles" that guide all competitors (remember, these are also the providers). To go back to the butcher analogy, that is like saying that at the beginning of butchery, the proverbial community decided that butchers would sell sirloin, tenderloin and brisket for the same price. Sadly, even internet service is a scarce resource that must be allocated just like any other good or service on the market. The community does not get to dictate what service will cost how much money; that is left up to the providers, who base prices on supply and demand.

The video then makes the error of calling this an issue of monopoly. This confused me temporarily, because I still had an image in my head of four UFOs hovering around the capital building. My understanding of a monopoly was that it only occurred in the absence of competition among multiple firms. If AT&T suddenly only gave "fast-track" privileges to a handful of websites, I would soon get fed up with waiting for http://icanhascheezburger.com/ to load. As a rational consumer, I would not take to insisting that all sites were given neutral treatment, I would switch to Comcast. If Comcast did the same, I would pick up a book. In short, if non-neutral ISP policies become too restrictive, it will affect ISPs bottom lines adversely and the market will correct itself by becoming less restrictive.

The video leaves us with an image of the Insidious Space People being catapulted from Earth's atmosphere. Back on Earth, the picketers are cheering because at long last they have their unbiased internet service for everyone! Oh wait, no not everyone, only those who can afford the now exorbitantly expensive (if available at all) internet. The image of the African-American boy filled with high hopes for the future is diminished by the Pew Research center statistic that in 2005, only 13% of African-Americans had access to broadband internet in their homes as opposed to 25% of Whites.

The internet is an incredibly important resource for all Americans, in and out of the home. Our goal should be to get the internet in the homes of as many people as possible. The best way to do that is by keeping prices as low as possible. Net-neutrality raises costs for ISPs, which are passed on the consumers, hurting the lower class especially. I would like to revise/clarify the title of this post. Net-neutrality does matter. It hurts everyone.