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Net Neutrality Is Corporate Welfare And It Should Be Ended

in the Free Market by

Net neutrality is one of the best examples of successful political sloganeering. The policy dictates that internet service providers must treat all internet traffic equally and cannot discriminate against sites or charge higher prices for certain types of traffic. It sounds like something that everyone should support but like most government policies, it is unnecessary and there are unintended consequences. First and foremost, net neutrality protects against problems that have almost never occurred. Secondly, the policy is effectively corporate welfare for big internet companies like Netflix. Net neutrality is a flawed government policy built on shaky legal footing that deserves to be repealed by the FCC.

The fundamental premise of net neutrality is that internet service providers have the potential to restrict access to certain sites. Proponents claim that these ISPs would block smaller independent sites or charge them high rates they couldn’t afford. They argue this would stifle the entrepreneurial spirit of the internet and prevent new companies from getting a foothold. Fortunately, the examples of that happening are few and far between. Remember, the internet existed for decades before net neutrality was enacted. These cases are also evenly spread out before and after the policy was enacted. Net neutrality is a solution in search of a problem.

Contrary to what its supporters claim, net neutrality doesn’t protect small companies, but rather dominant internet powerhouses like Netflix. Net neutrality is corporate welfare for internet oligarchs. By mandating all internet traffic must be treated equally, and charged the same rate, the policy protects Netflix from being charge a higher rate. During peak hours, the service consumes up to 37% of U.S. bandwidth. That’s more than YouTube, Amazon, and Hulu combined. Nonetheless, the company that makes $9 billion in annual revenue doesn’t pay internet service providers any additional fees thanks to net neutrality protections. Instead of investing in their own networking infrastructure they’re passing costs onto ISPs and consumers:

Central to the Internet’s value is that it is efficiency enhancing, but only if tera-bandwdith-whales like Netflix, do not use it hyper-inefficiently. Responsible Internet companies distribute their content responsibly. I am not picking on just Netflix on this issue. I strongly criticized Google-YouTube a few years back for similarly inefficiently overusing Internet capacity. I now applaud Google for reversing its runaway Internet usage via more responsible network management and for investing in extensive caching of its content nearer to its users so that it does not consume a wildly disproportionate share of the Internet’s capacity like Netflix does now. Netflix imagines benefits without costs. It does not want to invest in responsible network management on its part, it wants to shift that cost to consumers and everyone else to publicly-subsidize its profitability.

Finally, the entire premise of net neutrality’s legality falls on Title II regulations that were passed in 1934. The law was obviously never meant to cover internet service and using as justification today is absurd. The government has no legal footing to regulate the internet even if it was a good idea, which it demonstrably isn’t.

The internet not only survived but thrived for the first few decades of its existence before net neutrality was enacted in 2015. It will continue to thrive after the FCC abolishes the Obama administration’s failed policy. Net neutrality is a solution to a problem that doesn’t exist which inadvertently provides corporate welfare to a massive oligarchy. The internet will be better off without it.

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