The Consumer Costs of Net Neutrality

Proponents of regulating Internet services and service providers, called net neutrality, have seen their cause take a hit in recent months, but that’s not stopping them from finding other avenues to impose their favored regulations. In January, a DC Appeals court struck down the FCCs net neutrality rules, saying they weren’t permissible for companies that were regulated under the light-touch regulation of Title I of the Communications Act. Title I applies to information services, which is where Internet services is categorized.

Now, in order to sneak net neutrality past the public and the courts that have continuously ruled against Internet regulations, the FCC is considering reclassifying Internet Service Providers (ISPs) under Title II of the Communications Act, which would label them as common carriers and put them in the same category as any telecommunications service, like a local or long distance phone company. The new regulatory class would saddle ISPs with new obligations and regulations, including price caps and service rules that would allow the FCC to more closely impose their net neutrality restrictions on the ISPs.

This new classification would be a backdoor to net neutrality and it’s unnecessary.

We’re already seeing many ISPs and content providers working together to figure out better and cheaper ways to provide content to consumers. For instance, Netflix has entered into agreements with several ISPs to deliver their content to their customers better and faster; ESPN has been in similar talks. These fast lane net neutrality loopholes do nothing to slow other competitors down—they simply ensure that their paying customers get their product in a quality manner. This has been a boon to Netflix, now boasting over 50 million subscribers, with more revenue and more US subscribers than HBO.

With companies like Netflix, who (ironically) are strong proponents of net neutrality and who are now paying for access to fast lanes, the question arises of what exactly the FCC and net neutrality advocates want to regulate? If pro-net neutrality companies are willing to pay for fast lanes, are they really just after banning ISPs from slowing traffic and content, or is it truly about creating a “class-free” Internet? If it’s the latter, the FCC could be years behind the curve.

Tiers of Internet service have existed for years, with consumers paying more money getting faster Internet service. And why shouldn’t that happen? Some people stream 2-hour movies every night of the week and some only want Internet to check their email and read the news. Requiring those two consumers paying the same rates seems rather anti-consumer.

At the same time, ISPs shoulder an enormous infrastructure cost from the bandwidth-heavy traffic that come from streaming video from YouTube, Netflix, Amazon and iTunes. If ISPs are left to pay for it all, the costs will ultimately be passed onto consumers—many of which will not be heavy bandwidth users. So far, ISPs have shouldered much of the burden–$1.2 trillion in broadband investment since 1996. So why should they subsidize the costs of Netflix users?

It seems with companies like Netflix accounting for 34% of all Internet traffic during peak hours that some of the costs should be shouldered by them and other heavy content providers—and they have, with Netflix and other content providers like ESPN striking deals with ISPs to ensure their content is delivered seamlessly and as speedy as possible.

The FCC should be focused on making Internet as affordable and innovative as possible. Saddling Internet providers with more regulations and, and in turn passing these costs onto consumers, is a dangerous and pricey path.

Zack Christenson writes on digital tech issues for the American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization.  For more information, visit www.theamericanconsumer.org.

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