Broadband Is Not a Public Utility

Broadband Is Not a Public Utility

On Wednesday, FCC chairman Tom Wheeler ran an op-ed in Wired announcing his intention to move forward on classifying broadband Internet under Title II of the Communications Act of 1934 -- meaning it will be treated as a public utility and regulated the same as phone lines or electricity. This move has been coming for some time, first signaled by Wheeler in a speech at the Consumer Electronics Show in January.

In his announcement, Wheeler uses an example to illustrate his point, but he proves the exact opposite -- he shows that less regulation is actually a better move. In his example, he talks about the 1960s, when AT&T prohibited users from attaching non-AT&T equipment to its network, and claims the Internet flourished much later because the FCC mandated open networks so that consumers could use their own equipment (such as modems).

But the fact is that government involvement with public utilities caused the problem of AT&T's having so much power: The company was part of "Ma Bell," the conglomerate that through much of the 20th century had a government-sanctioned monopoly on phone service. In other words, Wheeler's example shows precisely how regulations can harm consumers and competition. When companies and consumers are left to themselves, we get good outcomes, like how the Internet has flourished for the past 25 years.

Wheeler also points to the vast investment that's been made in wireless data networks over the last 21 years. But as Peter Suderman points out, wireless networks are exempt from Title II regulation. It's unlikely we would have seen so much build-out in wireless networks with heavy regulation and government helping to set prices, much the same way it does in other public utilities.

According to one study, investment in broadband networks over the next 5 years is projected at $218 billion, but could drop to as low as $173 billion with Title II reclassification. As more and more consumers come online, the new capacity and better speeds become vital, something Title II reclassification doesn't help. Investment in broadband infrastructure is vitally important to the tech community, which is why over 60 major tech companies have come out against reclassifying Internet providers as public utilities.

The announcement is bad news for consumers. With market incentives playing less of a role, it could mean less investment by broadband providers into new networks, meaning poorer service and slower speeds as the current networks become overwhelmed. And with Title II reclassification comes more costs to consumers, with a Brookings Institution study suggesting a potential 12.4 percent increase on the average consumers broadband bill.

Wheeler also singles out "paid prioritization of data" as something Title II reclassification would prevent. But often, paid prioritization is a good thing. As American Consumer Institute president Steve Pociask points out, if ESPN wants to pay Internet providers to make sure ESPN fans get their content without it counting against their data plans, why shouldn't that be allowed? And what about a doctor, attempting to assist a surgery from 3,000 miles away, who'd like to pay for priority over other traffic? These deals absolutely ensure a consumer welfare gain.

The Internet shouldn't be regulated as if it's a common utility, because it isn't. It's an ever-evolving, privately owned, and competitive network, with new technologies and applications coming online every day. That makes regulation under antiquated laws a fool's errand.

Zack Christenson writes on digital tech issues for the American Consumer Institute, a nonprofit educational and research organization.

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