The FCC’s Psychology of Abundant Regulation
By Phil Kerpen
The Internet is a great deregulatory success story: government got out of the way, took a light-touch, hands-off approach and the results are obvious. But some on the left are adamant that heavy-handed government regulation would somehow serve consumers better than intense competition. The latest proof is a sharp about-face from Federal Communications Commission (FCC) Chairman Julius Genachowski on the issue of usage-based pricing, citing a concern about “the psychology of abundance.”
It’s hard to think of something more abundant than broadband Internet, which these days seems to be everywhere. So the only “psychology of abundance” I’m concerned about is an unneeded abundance of regulation.
The FCC attempted regulation of broadband Internet in a legally-dubious (and likely to be struck down in a pending DC Circuit case) order issued in December of 2010, in the frantic aftermath of that year’s landslide election in favor of smaller government. That so-called “net neutrality” or “open Internet” order purported to stop the threat of phone and cable companies blocking access to websites or censoring speech – a fake threat that has never happened because they would lose customers in droves. Competition works.
In truth, “net neutrality” was and is all about prohibiting innovation in network management and in broadband business models, advancing the interests of big content companies like Google and IAC/InterActiveCorp – Chairman Genachowski’s former longtime employer – at the expense of broadband providers and consumers.
With explosive growth in online video driving bandwidth demand, network management is an increasingly critical issue. If networks can’t be managed effectively, then a tiny number of people – typically people who download massive quantities of high-definition video or heavy users of file-sharing services – can degrade network performance for many other consumers.
One possible market-based solution to this issue is for broadband providers to reach agreements with content providers to provide additional capacity on commercial terms. Then part of the costs of expensive broadband networks would be paid by content providers and advertisers, instead of falling entirely on consumers.
But big content providers – like Google, YouTube’s parent company – got the FCC to limit that possibility with the net neutrality order. They want a free ride at the expense of consumers.
The next key question, then, is whether the small number of people who disproportionately consume bandwidth can be charged more than people who just use the Internet for email and web surfing. Advocates of net neutrality regulation insisted over and over again that such a practice – known as usage-based pricing – was not only acceptable but desirable.
Tim Wu, the former chairman of left-wing advocacy group Free Press who coined the term “net neutrality” said in 2010: “if you’re cranking Netflix all day and downloading 10 gigs, I’ve never thought it unreasonable to have to pay more. That’s a billing question, not a net neutrality question.”
Chairman Genachowski agreed as recently as May of this year, when he said: “business model experimentation and usage based pricing could be a healthy and beneficial part of the ecosystem that could help drive efficiency in networks, increase consumer choice and competition and increase fairness because it can we said result in lower prices for people who consume less broadband.”
Last week he did a very abrupt about-face. Now, the chairman said in response to a direct question about usage-based pricing: “Anything that depresses broadband usage is something that we need to be really concerned about.” He went on: “We should all be concerned with anything that is incompatible with the psychology of abundance.”
Bear in mind that existing data caps apply to pricing tiers, but broadband providers don’t shut down Internet connections when caps are reached. There is no real threat to psychological abundance.
Moreover, we live in a world of finite resources – and attempts by government regulators to intervene are far more likely to create shortages than abundance. If the FCC follows through on this new “psychological” concern by requiring broadband providers to offer only unlimited, uncapped service for everyone at the same price, then moderate users will see their Internet bills spike to keep up with the costs of serving the tiny number of people downloading high-definition moves all day long.
But maybe breaking the economics of the Internet and forcing a total government takeover – at taxpayer expense – was always the goal. Indeed Robert McChesney, the founder of Free Press, infamously said: “What we want to have in the U.S. and in every society is an Internet that is not private property, but a public utility.”
I’d prefer we let the free market work.
Cross posted at: www.americancommitment.org
© Copyright 2012 Phil Kerpen, distributed by Cagle Cartoons newspaper syndicate. Mr. Kerpen is the president of American Commitment and the author of “Democracy Denied.”