Thursday, February 26, 2015

The Net Neutrality Scam; Fixing a Problem That Doesn't Exist

By Ryan McMaken

Yet again, the government wants to fix a problem that doesn’t exist. According to the Obama administration and the FCC, it is necessary to regulate internet service providers so that they don’t interfere with people’s access to the web. The claim immediately prompts one to ask:
Who is being denied access to the web?

In the past twenty years, access to the internet has only become more widespread and service today is far faster for many people — including “ordinary” people — than it was twenty years ago, or even ten years ago. Today, broadband in Europe, where the internet is more tightly regulated, hasless reach than it has in the United States.

The administration’s plan is rather innocuously called “net neutrality,” but in fact it has nothing at all to do with neutrality and is just a scheme to vastly increase the federal government’s control over the internet.

What is Net Neutrality?

We don’t know the details of the plan because the FCC refuses to let the taxpayers see the 300-page proposal before the FCC votes on it today. But, we do know a few things.

Currently, ISPs are regulated by the FCC, but as an “information service” under the less restrictive rules of so-called Title I. But now, the FCC wants to regulate ISPs as utilities under the far more restrictive Title II restrictions. For a clue as to how cutting edge this idea is, remember this switch to Title II regulation would put ISPs into the same regulatory regime as Ma Bell under the Communications Act of 1934.

So what does this mean for the FCC in practice? According to FCC Commissioner Ajit Pai, “It gives the FCC the power to micromanage virtually every aspect of how the Internet works.” More specifically, Gordon Crovitz at the Wall Street Journal writes:
[With Net Netruality,] bureaucrats can review the fairness of Google’s search results, Facebook’s news feeds and news sites’ links to one another and to advertisers. BlackBerry is already lobbying the FCC to force Apple and Netflix to offer apps for BlackBerry’s unpopular phones. Bureaucrats will oversee peering, content-delivery networks and other parts of the interconnected network that enables everything from Netflix and YouTube to security drones and online surgery.
The administration insists these measures are necessary because — even though there is no evidence that this has actually happened — it is possible that at some point in the future, internet service providers could restrict some content and apps on the internet. Thus, we are told, control of content should be handed over to the federal government to ensure that internet service providers are “neutral” when it comes to deciding what is on the internet and what is not.

Can Goods Be Allocated in a “Neutral” Way?

The problem is that there is no such thing as “neutral” allocation of resources, whether done by government or the marketplace.

In the marketplace, goods and services tend to be allocated according to those who demand the goods the most. Where demand is highest, prices are highest, so goods and services tend to go to where they are most demanded. This makes perfect sense, of course, and also reflects the inherent democracy of the markets. Where larger numbers of people put more resources is where more goods and services will head.

It is this mechanism that drives the marketplaces for food, clothing, and a host of other products. Consequently, both food and clothing have become so plentiful that obesity is a major health problem and second-hand clothing stores, selling barely-worn discarded clothing, are a boom industry, even in affluent neighborhoods. Similarly, cell phones have only become more affordable and more widespread in recent decades.

For industries where new firms may freely enter, and customers are not compelled to buy, companies or individuals that wish to make money must use their resources in ways that are freely demanded by others. Unless they have been granted monopoly power by government, no firm can simply ignore its customers. If they do, competing firms will enter the marketplace with other goods and services.
Although goods allocated in this fashion are — according to the administration — not being allocated “neutrally,” the fact is that more people now have more service at higher speeds than was the case in the past. Furthermore, even if firms (or the government) attempted to allocate goods in a neutral manner, it would be impossible to do so, because neither society nor the physical world are neutral.
In his recent interview on new neutrality, Peter Klein used the analogy of a grocery store. In modern-day grocery stores, suppliers of food and drink will negotiate with stores (using so-called “slotting allowances”) to have their goods advertised near the front of the store or have goods placed on store shelves at eye level.

If government were to tell grocery stores to start being more “neutral” about where it places goods, we can see immediately that such a thing is impossible. After all,somebody’s goods have to be at eye level or near the front of the store. Who is to decide? A handful of government bureaucrats, or thousands of consumers who with their purchases control the success and failure of firms?
In a similar way, bandwidth varies for various ISP clients depending the infrastructure available, and the resources available to each client. And yet, in spite of the administration’s fear-mongering that ISPs will lock out clients of humble means, and the need to hand all bandwidth over to plutocrats, internet access continues to expand. And who can be surprised? Have grocery stores stopped carrying low-priced nutritious food such as bananas and oatmeal just because Nabisco Corp. pays for better product placement for its costly processed foods? Obviously not.

Who will Control the FCC?

All goods need not be allocated in response to the human-choice-driven price mechanism of the marketplace. Goods and services can also be allocated by political means. That is, states, employing coercive means can seize goods and services and allocate them according to certain political goals and the goals of people in positions of political power. There is nothing “neutral” about this method of allocating resources.

In the net neutrality debate, it’s almost risible that some are suggesting that the FCC will somehow necessarily work in the “public” interest. First of all, we can already see how the FCC regards the public with its refusal to make its own proposals public. Second, who will define who the “public” is? And finally, after identifying who the “public” is, how will the governing bodies of the FCC determine what the “public” wants?

It’s a safe bet there will be no plebiscitary process, so what mechanism will be used? In practice, bureaucratic agencies respond to lobbying and political pressure like any other political institution. Those who can most afford to lobby and provide information to the FCC, however, will not be ordinary people who have the constraints of household budgets and lives to live in places other than Washington, DC office buildings. No, the general public will be essentially powerless because regulatory regimes diminish the market power of customers.

Most of the interaction that FCC policymakers will have with the “public” will be through lobbyists working for the internet service providers, so what net neutrality does is turn the attention of the ISPs away from the consumers themselves and toward the regulatory agency. In the marketplace, a firm’s customers are the most important decision makers. But the more regulated an industry becomes, the more important the regulating agency becomes to the firm’s owners and managers.

The natural outcome will be more “regulatory capture,” in which the institutions with the most at stake in a regulatory agency’s decisions end up controlling the agencies themselves. We see this all the time in the revolving door between legislators, regulators, and lobbyists. And you can also be sure that once this happens, the industry will close itself off to new innovative firms seeking to enter the marketplace. The regulatory agencies will ensure the health of the status quo providers at the cost of new entrepreneurs and new competitors.

Nor are such regulatory regimes even “efficient” in the mainstream use of the term. As economist Douglass Northnoted, regulatory regimes do not improve efficiency, but serve the interests of those with political power:
Institutions are not necessarily or even usually created to be socially efficient; rather they, or at least the formal rules, are created to serve the interests of those with the bargaining power to create new rules.
So, if populists think net neutrality will somehow give “the people” greater voice in how bandwidth is allocated and ISPs function, they should think again.

The above originally appeared at


  1. I may be off target, however I disagree that the Internet should be treated in the marketplace as any other commodity. It is rather a public forum, such as being able to speak peaceably and freely in the town square. No one should own or market that speaking place. You can put up billboards around the town square and sell your products in the market, but the communication amongst the town's people, now the global population, should not be manipulated and restricted or preferentially provided to the corporatocracy.

    1. Why not privatize the town square?

    2. Please tell me one thing the government regulates where it is not influenced by large well financed corporations and special interest groups? The idea that the government is some kind of unbiased entity only perusing the public good is nothing but a myth. And by the way, its government regulation and market controls that create corporatocracies, not the other way around.

    3. You are correct, you are off target.

    4. "You are correct, you are off target."

      Yup. Way off.

    5. No one should own the internet? What model would you have to replace private property, the market and profit motive then? Full on socialism?

      I suggest you do a little reading on public goods theory written by Hans Hoppe. I don't think you've really thought this thru

  2. I'm I correct in surmising that the entire purpose of NN is to shut down sites like this that give people alternate views than those parroted by the government-media complex?

    1. Yes.

      Remember the days of ABC, NBC & CBS? Same news, in the same sequence given by anchors that looked the same.

    2. What would have happened if there were no internet to point out that Sen Inhofe from OK was showing pictures of Russian tanks in Georgia from 2008 and passing them off as Russian tanks in Ukraine in 2015?
      Do you think one of the MSM would have jumped on this?
      Yeah maybe after the black tie White House Correspondent's dinner was over

  3. Will the FCC shut down sites that prove with facts how Oblabber is the worst president in history? What about sites with irrefutable proof that he's a racist Chicago thug and a low-life scum bag - will those be shut down? If you use nasty names that are not PC, will that be censored? (It already is in the public square - the PC police will destroy your life if you are caught uttering non-approved speech.)

    1. This Obama-centered evil fantasy land you weirdos live in must be a horrible place.

      Let it go; you sound like a drooling buffoon.

    2. Rather than resort to name calling - your only tactic - try presenting coherent, factual statements refuting my questions.
      Better to sound like a drooling buffoon than to open mouth and prove that you are one which is exactly what YOU did. Nicely done SFB.

  4. @anonymous

    Amazing how many posters have that name. Are you all related?

    The FCC is not going to deliberately shut down any sites. What Net Neutrality will do is to impose a series of fees and regulations that will make it too expensive for most alternative news blogs to continue to operate. Most of them are already running on little or no income. The major news sources - the ones who parrot the government narrative - will just consider the costs and regulations as the cost of doing business.

  5. It was nice reading this site,,, and while we could!!!

    Back to work serfs!

  6. The main purpose of government is to limit access to a market to politically favored entities.

  7. Peter Klein's grocery store analogy is good, but I think an even better/easier one is UPS and FedEx.

    Shouldn't we have next day shipping neutrality?

    1. I'll settle for Bastiat style neutrality of Law.

  8. this is part of the "equality" mindset that is creeping into the culture."every(equal)one should have 'equal" resources.