by Thomas G. Donlan, Updated May 20, 2017 1:22 a.m. ET
Proponents of net neutrality protest against FCC Chairman Ajit Pai outside the American Enterprise Institute earlier this month in Washington, D.C. Getty Images
To the zealous guardians of fairness and the so-called public interest, Ajit Pai is a very dangerous man, in what they believe is a very important job. To those whose zealotry leans toward liberty and ignores economic equality, Ajit Pai is an important man in a very dangerous job.
After five years as a member of the Republican minority at the Federal Communications Commission, Pai is now chairman of the Republican majority, and the FCC chairman wields nearly all of the commission’s regulatory power. In his most controversial use of power so far, Pai is rebalancing the battle over net neutrality. The battle, however, has gone on for decades, and there’s no end in sight.
In three decades, the internet has become the most powerful force in communications, largely because there has never been a single hand or mind guiding it. Those who controlled its technical details were practical anarchists who believed in a mission to keep the internet open to every person and idea.
The internet in its pure, original state crossed borders and distributed ideas without limit, but authoritarian countries have different ideas, focused on censorship and suppression of ideas. The democratic countries of Europe have created extreme rights of privacy and protection from offensive content. Even in the U.S., the liveliest question now is whether some government control of the internet is necessary to keep it free and open for Americans.
In 2015, under the previous FCC chairman, Democrat Tom Wheeler, the commission established a net neutrality policy that said internet service providers, especially the big ones like Verizon Communications, AT&T, and Comcast, had too much power. Wheeler discerned that the service providers could favor their own interests over those of content providers, streaming services, and their consumers. The ISPs could manage internet traffic over their wired or wireless networks, especially the wires of the “last mile” into millions of homes, where the ISPs have monopolies or duopolies.
For example, a service provider might take a payment from a streaming service and route a movie download through a fast connection, while another streaming service’s movie might be put on slower connections. The ISP also might block traffic entirely, for economic or political reasons.
Wheeler’s FCC gave itself authority to police provider tactics that it deemed to threaten competition, free expression, or the future of the internet as a public service.
Even the Electronic Frontier Foundation, long an advocate of net neutrality, warned that those powers might be risky—“a recipe for overreach and confusion.” Ignoring millennia of lessons about the abuse of power in economic regulation, the foundation urged the FCC to practice “light-touch regulation.”
The FCC had tried to enforce net neutrality before, but each time it ran into federal courts that held that the commission couldn’t take up that cudgel without authority to regulate ISPs as public utilities.
Former President Barack Obama promised in his 2008 campaign to make the internet a “level playing field.” In service to that dubious end, Wheeler shored up the FCC’s enforcement power to manage traffic on the private networks of the internet.
The commission designated internet providers as “common carriers,” a term left over from the late and unlamented Interstate Commerce Commission and its heavy regulation of interstate trains, buses, and trucks. In the days of Ma Bell’s near-monopoly on telephone service, the FCC also treated telephone companies as common carriers.
Signal features of common carrier status are rate regulation that forces all customers to be treated alike and rules that give a regulator control over firms’ entry, exit, and offerings of service to the public. Usually, regulated firms must seek prior approval for every market change.
Such rules are intended to substitute for market competition, on the presumption that firms in the regulated industry have monopoly power. Often, however, the regulators have supplied the monopoly power by excluding competitors. (For perfect modern examples, see the municipal taxi commissions that have tried to exclude competition from Uber, Lyft, and other ride-sharing services.)
Today’s telecommunications industry is no monopoly. There are hundreds of internet service providers, hundreds of content providers, and thousands of networks. The excuse for regulation now is that most American homes have only one or two hard-wired connections to the internet, provided by companies that acquired their privileged places as phone companies or cable-TV companies.
Most Americans, however, have at least one wireless broadband device, and they have choices among wireless broadband providers, whose services will get better and more competitive as long as they are not subject to regulatory oppression.
Beyond the protections that competition may provide is the question of whether protection is warranted at all. We must ask: Who owns the wired and the wireless networks, and by what stretch of authority does the FCC presume to manage them against the wishes of the private investors that built them?
Supporters of net neutrality regulation say that only the government can prevent internet service providers from offering content or services at different prices. But it’s far from clear that multitiered pricing is a bad idea. Finding customers who will pay more for better service is properly known as “progress.”
People make investments in the hope of earning high profits from top-tier customers who pay top dollar for the latest and best products. Those high profits, in turn, finance the eventual expansion of better products and services for lower-cost tiers, on the internet as much as in the grocery store. Net neutrality would stand in the way of investment in internet innovation.
Free markets aren’t equal, and equal markets aren’t free. Ajit Pai’s vision of free and unequal markets is a vision of progress for all, far superior to the Obama administration’s old vision of handcuffed monopolies forced to support a political standard of equality.