By Josh Rouwhorst
A few days ago, Ajit Pai gave an interview on Marketplace. He said that when all the people who have been afraid of losing net neutrality wake up on December 15, they’ll see the internet will be the same as it has been. And that is true. The internet has not changed. Yet. But it probably will. Here’s a couple ways we will probably see crony capitalism appear because of the FCC’s decision to end net neutrality, and what the next steps are.
A common practice even in the EU is allowing mobile providers to grant access to certain apps without cutting into your data plan. Which may be nice if you want to be able to watch Netflix or YouTube on the go and don’t want to pay for a large data plan. But lets say you’re using 2 gigabytes of free data for Netflix a month, which would normally cost you $30 extra to your carrier. That $30 cost isn’t gone, it has simply shifted. But where?
Either your mobile carrier will decide to shoulder the cost or will pass that cost on to Netflix. If the carrier takes on the cost, then you’ll see the base price for their plans increase to compensate for the data. More likely, the carrier will pass it on to Netflix which will mean that Netflix has to increase their price. Now, your carrier may give Netflix a discount on that data, and Netflix could pass those savings onto the customer. This would effectively create a group discount. However, whether Netflix is covering the cost or your carrier is, what you are paying now has nothing to do with how much you actually use the service, but how much you may use the service.
None of this is inherently bad or immoral. For instance, I believe group discounting in education is good by having public schools paid for with tax dollars. However, this raises a question of priorities in the market place. If your priorities for the market place is competition and innovation among for-profit companies then allowing group discounting is a negative.
Netflix would be going into a mobile deal with an established user base. But let’s say there is a streaming company start-up attempting to compete with Netflix. Even though they may have better compression, a simplified interface, or more content, they now also have to find a mobile carrier willing to provide their service for free for a cost they can afford while trying to build up a user base. Since they’re coming late to the game, they won’t have the bargaining power established companies like Netflix would have had. Which is the crux of the issue.
Personally, I believe the free market is the best solution for many industries. However, we need to make sure companies are not shielding themselves from competition. The market works best when companies are vulnerable to new companies with better strategies arising to take their customers. If mobile carriers allowed everyone access to MySpace for free in 2003, Facebook likely would never have been seen outside Harvard. In short, attacking net neutrality is attacking small business.
Comcast owns NBC which creates a strong incentive for them to provide NBC streaming services to their customers at faster speeds than NBC’s competitors. In the interview with Ajit Pai, he said that competition in the free market will prevent this practice. But when the only choices you have are Comast, Dish Network, or AT&T, there is no true competition since each option comes with a whole host of unrelated pitfalls.
Even now, my internet is through Comcast not because they provide good service, but they are the only cable internet provider allowed to sell their service in my area. I don’t want internet that cuts out when there is a storm, so satellite internet through Dish Network is off the table. And don’t get me started on AT&T. At then end of the day, Comcast is not competing with other cable internet companies, they are “competing” with completely different ways to get internet and they happen to have sole authority to use the most attractive technology in my area.
Which means that if CBS wants me to be a customer if their streaming service, they will have to pay a fee to Comcast that NBC won’t have to pay.
While I was fuming about the FCC’s decision the other day, my girlfriend, in her infinite wisdom, made a very good point that this may be a good thing in the long term. Regulations are not always a good solution to these problems.
Regulations change when power shifts to the opposing party. Net neutrality shouldn’t be a regulation that can come and go and this could be the motivation we need to push for a lasting change.
There are lawsuits already in motion over net neutrality which could lead to a supreme court decision. If it doesn’t, we need to push congress to enact a law for net neutrality. We likely won’t be successful until Republicans lose power in 2018, but people are learning more about what net neutrality stands for now than ever before. Make sure they know that this new form of crony capitalism won’t appear overnight. It will be a slow growing cancer. We need to be ready and we need to start making calls to representatives now.
We need to resist.