CNBC Debate on Net Neutrality Regulation & Pricing Freedom

by on August 5, 2010 · 7 comments

Today I appeared on CNBC’s “Power Lunch” to debate Net neutrality issues and the specific role of pricing in this debate. Specifically, the producers wanted to know whether websites should be allowed to pay a higher fee to allow consumers faster access to their sites or should it be equal for every website.  The show was partially a response to the rumors that the may be some sort of deal pending between Verizon and Google about prioritized services. On the program, I was up against Craig Aaron of Free Press.  During the discussion I made several points, many of which first appeared in my 2005 essay on “The Real Net Neutrality Debate: Pricing Flexibility Versus Pricing Regulation.” Here are the key points I tried to get across:

  • In a free-market economy, companies should be able to freely set prices for goods and services without fear of government price controls.
  • This isn’t about consumers paying more for basic Internet access or having their connections “slowed down”?  This is about whether the government will allow some broadband services to be differentiated or specialized for unique needs, such as online gaming, live event telecasts, secure telepresence conferences, telemedicine, etc.
  • Differentiated and prioritized services and pricing are part of almost every industrial sector in a capitalistic economy. (ex: airlines, package shipping, hotels, amusement parks, grades of gasoline, etc.)  Why should it be any different for broadband?
  • It’s always important to remember that there is no such thing as a free lunch. Something has to pay for Internet access. It doesn’t just fall like manna from heaven.  Differentiated services may help in this regard by allowing carriers to price more intensive or specialized users and uses to ensure that carriers don’t have to hit everyone – including average household users – with the same bill for service.  Why should the government make that illegal through Net neutrality regulation?
  • Heavy-handing tech mandates – especially Internet price controls – could have a profoundly deleterious impact on investment, innovation, and competition. After all, there can be no innovation or investment without a company first turning a profit.   We don’t want to return to the era of rotary-dial regulated monopoly, in which our choices were few and our services were standardized and rudimentary.  We should let our current experiment with facilities-based, head-to-head competition continue.

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  • http://blog.infinitemonkeysblog.com Jim_Lakely

    Great job, Adam. It appeared that they gave Craig twice as much time to make his arguments, but you still came out way ahead.

    For him to say that even cities have “at most” only two Internet providers is simply a lie. In my suburb of Chicago, I have two cable providers, ATT U-verse, another DSL company, and (soon) fiber. This is not uncommon across the country. And even if there are only two providers, that “duopoly” is still not abusive, if consumer surveys have any weight.

    You can bet that if consumer surveys showed rampant discontent (a near impossibility in a truly competitive market, of course), guys like Craig would be leading with that argument every day. But the fact that a large majority of consumers are satisfied with their Internet service is inconvenient to their arguments, so they ignore it and construct phony controversies and hypotheticals.

  • Glenn Fleishman

    “# In a free-market economy, companies should be able to freely set prices for goods and services without fear of government price controls.”

    I'm not sure what country you're living in, but broadband service is the result of many decades of specific government-mandated monopolies being opened in quite specific methods to allow limited forms of competition that have nearly exclusively benefited incumbents.

    If we had a free market, we would have something akin to legitimate competition or the potential for such. In most markets, one or two providers offer a substantial percentage of the population something like the widespread broadband speeds available in most other developed countries.

    That's not a market.

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