Not neutrality, courtesy of the FCC

Wayne Crews VP for Policy, Competitive Enterprise Institute
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The Federal Communications Commission (FCC) has just finished collecting yet another round of comments in the “net neutrality” debate over proposed regulation of Internet traffic management (you may find CEI’s latest filing by Ryan Radia here). It is important to appreciate the profound significance of the fact that the FCC is unwilling to even affirm that it will leave future managed, specialized Internet services alone. And wireless services? The FCC is chomping at the bit to regulate those.

“Agency neutrality” is the only proper public policy; just leave the competitive marketplace alone. But the FCC won’t even stay out of what doesn’t exist yet.

While for the time being, customized services are largely exempt from regulatory scrutiny, the FCC clearly wants that to change: “[W]e are sensitive to any risk that the growth of managed or specialized services might supplant or otherwise negatively affect the open Internet,” the agency said in an earlier request for comments. The agency asked — as if it were even conceivable in this predatory environment for no one to take the bait and say “yes” — “Should any of the rules proposed here for broadband Internet access service apply to managed or specialized services?”

The FCC is not asking for input to dissuade itself, it intends to regulate; this is not a “should we?” proceeding, it is a “we are going to” proceeding. Unless Congress stops it, of course; that’s where we are now with autonomous, unelected, unaccountable agencies across government.

Of course, nothing about fostering “smart pipes” on the Internet precludes the maintenance and expansion of the “dumb” ones with unfettered access that characterize our experience now. Dumb pipes can flourish alongside the new. That “background hum” of the Net will escalate with private investment in smart, specialized networks over coming decades.

If the FCC were concerned about consumer welfare rather than it’s shrinking turf (from a reason-to-exist perspective), it would best contribute by being out front articulating the case for smart pipes, not treating the Internet’s infrastructure as some inexplicable husk that fell out of the sky. Indeed, the agency seems to adhere to a “big bang” theory of infrastructure origins: It just showed up somehow, and we needn’t worry about where future generations of infrastructure will come from.

Critical new developments in economics such as the work of Hernando De Soto and Daron Acemoglu stress the private property rights foundation undergirding the creation of wealth in developing nations.

What the FCC, in every important respect, fails to realize is that property foundation’s importance for wealth creation in frontier areas — like broadband infrastructure deployment and pricing — in which property rights have yet to be adequately extended. I always argue that homo sapiens is fairly competent at legitimizing property rights for “short and fat” property like a house or a car; but we remain in the Stone Age when it comes to legitimizing proprietary approaches to “long and thin” property (or intangible property and many other complex varieties).

We lack a “John Locke for the digital age,” so to speak; perhaps capitalism is still too new historically for one to have emerged. Nonetheless, the proper policy is “agency neutrality”; Congress should command the runaway FCC to allow both open and proprietary network approaches to flourish, not impede the latter with regulatory constraints.

Liberalization and embracing proprietary regimes affords limitless room for neutrality; but a compulsory neutrality regime that undermines specialized services would hinder proprietary decisions over pricing and access policies and effectively “ban” new infrastructure of that kind. This collapse in philosophy and in leadership is worsened by the effort to extend neutrality regulation to wireless services that, compared to what is to be if regulators can only restrain themselves, barely exist today.

Stubbornly refusing to allow dumb pipes to acquire consciousness locks in an inferior Internet to the benefit of no one except its overseers. The “capital-I” Internet of today may or may not be the same as not-yet-created multimedia networks that may exist in the future; those could have numerous dedicated purposes and it would be suicidal for us to have blindly adopted an overly open architecture that is an artifact of the Internet’s public-funding origins. That is, future networks may use Internet technology, but perhaps not all use the same physical network in decades and centuries to come. This is especially feasible as societies months, years, and generations hence become wealthier and unforeseen network industry ventures spawn an assortment of dedicated networks.

Online security and safety might be one driver for such innovation: Metcalfe’s Law (the more the merrier, to put it crudely) is true, but so is this corollary: if miscreants on your network are deliberately devoted to destroying it or otherwise creating pandemonium or preventing you from making security and privacy guarantees to anyone, then the value of your network rises as you eject them.

Note that, in contrast to the net neutrality vision, a “Splinternet” vision is one of a future of vastly greater and more diverse network-and-infrastructure (and content) wealth than imaginable today. Relatedly, even as we strive to protect political anonymity online, some may desire less commercial anonymity in some contexts, which could drive the creation of such networks.

Thus the proper stance from which to think about net neutrality is that we’re 10 years away from a communications revolution, and 20 years away from the one after that, and so on; or stated differently, innovations will churn along long after we’re long gone. But what we can say is that imposing neutrality on a sub-par network, and particularly extending the concept to new private managed services and wireless networks, locks in 2010.

Wayne Crews is Vice President for Policy at the Competitive Enterprise Institute in Washington, D.C., and the author of the 2010 edition of “Ten Thousand Commandments.”