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Con: Current competition among Internet companies is best path for consumers

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Nick Schulz
September 18, 2010
EDITOR’S NOTE: The writer is addressing the question, Should the FCC reject the Google-Verizon plan and impose Net Neutrality?

The U.S. economy remains weak with high unemployment and sluggish growth, but there is at least one bright spot—an industry that continues rapidly innovating, bringing new products and services to market. Information technology—particularly broadband and wireless Internet—is thriving and gives hope that America’s economy can get back on track again.


What explains the strength of this sector? At least, two things.


First is strong competition. As technology behemoths Apple, Microsoft, Google, Verizon, AT&T, T-Mobile, Sprint, Comcast, Time Warner and more—slug it out for consumer dollars, their primary weapon is innovation.


Hence the explosion of new offerings such as the iPad, Netflix’s streaming movies, and Virgin’s new Mifi wireless broadband, to name a few. No other sector is as dynamic. Investment in R&D remains strong.


Second is a light regulatory framework. Ever since the Internet began transforming American life in the 1990s, Washington policymakers wisely kept in check their impulses to micromanage this freewheeling sector.


Could anything upset this fortunate state of affairs? Maybe. Pro-regulatory forces are up in arms over the recent release by tech giants Google and Verizon of a blueprint for a proper regulatory approach to the Internet. The critics fret this Goorizon plan will end the Internet as we know it and are demanding government step in to regulate.


Despite the heated opposition, here’s why you shouldn’t be alarmed at the Google-Verizon proposal.


For the most part both companies want a continuation of the light regulatory touch for broadband Internet that has prevailed for 15 years. Minimal regulation has been good for both companies, of course. But that’s not what is important. What matters is that it has been good for consumers.


What really has the critics of the proposal upset is that both companies oppose new net neutrality regulations for the wireless Internet.


Net neutrality means different things to different people. For those critics of the Google and Verizon blueprint, it means that all data that moves over the wireless Internet should be treated equally; and wireless providers should not be permitted to block applications for use over their spectrum.


The problem is that net neutrality has never existed over the wireless Internet and it never will, for good reason.


Wireless spectrum is a scarce resource, and managing the increasing flow of telephone calls, text messages, e-mails, video games, audio and video streams and who knows what else in the future—means data can’t in any meaningful sense be treated equally or neutrally. Network operators must have the flexibility to manage their networks as they see fit.


What’s more, all wireless providers already block the use of certain applications, such as P2P software, that would be too disruptive to their wireless systems. This is common sense and good business practice.


The critics of the deal say big companies will only act in their own self-interests and so they must advocate on behalf of the consumer. They say Washington must step in to regulate the market.


But the best guarantor of a consumer’s interest is vigorous competition. And wireless is wildly competitive. Companies in uncompetitive industries do not need to spend money to advertise, innovate or improve their offerings because consumers don’t have a choice.


A quick glance at TV, newspapers, magazines and the Internet, teeming with ads from wireless companies, is just one indicator of how competitive the industry is. The steady stream of new products and services is another.


The last thing a struggling American economy needs is regulators with itchy trigger fingers taking aim at one of the country’s most dynamic sectors. Instead, let’s watch its continued evolution and act only when consumer harm is obvious. Given the competitive nature of information technology today, that’s unlikely to happen any time soon.


Nick Schulz is editor of American.com and a fellow at the American Enterprise Institute. Readers may write to him at AEI, 1150 17th St. NW, Washington, D.C. 20036.

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