High Consumer Costs of Net Neutrality

The fight over net neutrality continues to rage as more tech companies just recently join the fight. This time, though, 60 major tech companies joined to come out against Title II reclassification, which would reclassify broadband as a public utility under the Telecommunications Act, much the same as telephone lines currently are.

Title II reclassification is popular amongst net neutrality proponents like President Obama, but still opposed by many pro net neutrality folks, including the chairman of the FCC. The Fight over Title II reclassification has been ongoing for some time, but ramped up recently when President Obama made a statement in support of the idea.

The tech companies coming out against Title II reclassification include heavyweights such as Intel, Cisco, IBM, and Qualcomm. In a letter addressed to the FCC and Congress, the consortium of companies feel that reclassifying broadband services would “be hurt by the reduced capital spend in broadband networks that would occur if broadband is classified under Title II.” In other words, with the government stepping in and controlling a major portion of the Internet, the incentive to invest in further broadband build-out becomes less appetizing for everyone involved. As they go on further in their letter:

While many experts have noted the damage Title II could do to network investment, the harm would cascade out far beyond the provision of broadband service because the Internet is now so entwined with our entire economy. As the White House explained last year, “[the] build-out of broadband infrastructure itself is a major driver of American investment and job creation … even more significant are the ways that connectivity is transforming a range of industries, from education to entertainment to agriculture to travel.”

Reversing course now by shifting to Title II means that instead of billions of broadband investment driving other sectors of the economy forward, any reduction in this spending will stifle growth across the entire economy.

One study points out that broadband investment is projected to be $218 billion over the next 5 years, but could drop to as low as $173 billion with reclassification—this at a time when broadband networks are already stretched thin as it is. With a drop in broadband investment, consumers lose both through a decrease in quality of service and increased costs.

Taxes and fees would most likely increase as well. As ACI’s president Steve Pociask lays out at Tech Policy Daily, the variety of fees that each municipality could impose across the country could be huge, with each state having different rules and regulations and fees for reclassification. It could be much the same way wireless fees are currently imposed at the state and local level, with consumers in seven states paying over 20% in taxes on their wireless bills. A new study out from the Progressive Policy Institute pegs the state and local fees at $15 billion per year, with federal fees at $2 billion per year.

While an open Internet is a good goal, reclassifying the Internet under Title II is bad for everyone involved—consumers especially.

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 about the Institute, visit www.theamericanconsumer.org

 

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