A Funny Thing Happened On The Way To Net Neutrality

REUTERS/Yuri Gripas

Matthew Kandrach President, CASE
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A “Kinsley Gaffe” happens in Washington, D.C., when someone accidentally tells the truth — and the Democrats committed a big one yesterday when they admitted their supposed concern for “net neutrality” was actually camouflage for a much more aggressive goal: imposing unpopular and politically unacceptable price controls on the internet.

This issue has been lurking in the dark corners of the net neutrality debate for years.

Back in 2015 when the Obama Administration was working on its version of net neutrality, everyone understood that rate regulation was a deal-breaker. While there was broad and bipartisan support for basic rules to keep the internet open and free, there was little political appetite for the government to directly set prices, an intrusion in free markets that even most Democrats did not support.

FCC Chairman Tom Wheeler was determined to convince the public that his proposal would not regulate rates. In explaining how the FCC would “forbear” from using many of its powers under the absolutist “public utility” version of net neutrality he was seeking, he promised, “that means no rate regulation.” This promise was then documented in the FCC’s final order, which trumpets: “no rate regulation!”

But yesterday, pro-regulation Democrats let the cat out of the bag. Riding the euphoria of a supposed “Blue Wave” they are already banking on, they repeatedly dropped the mask FCC Chairman Wheeler had been so careful to wear when he promised net neutrality had nothing to do with prices.

Leading the charge was Minority Leader Chuck Schumer, who put the point directly.

In an article titled “Consumers May Need Internet Affordability Protections,” Mr. Schumer was quoted arguing, “People say, well, let a private company do whatever it wants, let them charge whatever they want. But in certain goods which are essential, we don’t do that.”

He continued, “Our Republican friends say ‘let the free market prevail.’ We don’t do that for highways.”

Other Democrats echoed the theme, with bill sponsor Ed Markey saying his legislation was needed to battle “higher prices for consumers” and Senator Maria Cantwell warning of “exorbitant prices” if the 2015 rules (the ones Wheeler said had nothing to do with prices) are not restored.

This is a giant step backward and a breach of the promises made back in 2015, commitments that were critical for many reasons.

Philosophically, Americans will accept some necessary and limited government regulation, but they know the economy craters when government intervention becomes too extreme. And price regulation is the most extreme form of government control of markets that we know.

As a practical matter, imposing price rules on the internet would have a devastating impact on the ability of broadband providers to raise capital funds and plan the deployment of costly new networks. Without the ability to meet market demand and set prices to cover costs, no business can risk the kind of massive investments needed to build new internet systems or improve existing ones.

That’s why even progressive commentators have warned that the Markey Schumer CRA plan to restore the 2015 rules will set back efforts to close the digital divide and make it harder to connect far-flung rural communities – because the fear of price controls and over-regulation will drive away needed investment. Over time, that means more Americans stranded without high-speed broadband and less innovation and a slowdown in the breakneck growth in speeds we currently take for granted.

Net neutrality is vital and there is broad and bipartisan support for a straightforward bill to ensure all data is treated equally, no websites are blocked and throttled, and no one is censored or discriminated against online.

But adding in rate regulation destroys that consensus. It takes a compromise issue and makes it controversial. And it sets back the hope of a net neutrality deal that protects consumers everywhere they go online.

Schumer and team may have Kinsley gaffed their way into a corner on their current price control approach to net neutrality. But nothing is stopping them from meeting Republicans at the table and working on a new bill that would actually strengthen and protect the internet for good.

Matthew Kandrach is President of CASE, Consumer Action for a Strong Economy, a free-market oriented consumer advocacy organization.