Net Neutrality: A Christmas Gift for Washington Lawyers & Lobbyists

by on December 21, 2010 · 4 comments

Well, there really isn’t anything left to be said about Net Neutrality regulation that hasn’t already been said a million times before.  Yes, it is the most important technology policy battle of our time, but man, I am sick of it!  Anyway, I’ve summarized the “The 5-Part Case against Net Neutrality Regulation” here before, so consult that for details, as well as this paper by Berin Szoka and me, “Net Neutrality, Slippery Slopes & High-Tech Mutually Assured Destruction.”

But on this day when the Federal Communications Commission (FCC) is enshrining an audacious new regulatory regime for the Internet, I’m going to ignore the shoddy economics behind the effort, the unjustifiable legal basis for it, and the whole stinking undemocratic process leading up to it.  Instead, I just want to focus on the one element of the fight that continues to interest me most, and which, ironically, the one thing that almost all intellectual combatants agree upon: Regulation is prone to excessive special interest influence.  I cannot possibly articulate this concern more succinctly than professors David Farber and Gerald Faulhaber have in this Atlantic op-ed today, “Net Neutrality: No One Will Be Satisfied, Everyone Will Complain.” They note that:

“When the FCC asserts regulatory jurisdiction over an area of telecommunications, the dynamic of the industry changes. No longer are customer needs and desires at the forefront of firms’ competitive strategies; rather firms take their competitive battles to the FCC, hoping for a favorable ruling that will translate into a marketplace advantage. Customer needs take second place; regulatory ‘rent-seeking’ becomes the rule of the day, and a previously innovative and vibrant industry becomes a creature of government rule-making.”

As I pointed out earlier this week in my essay on “Regulatory Capture: What the Experts Have Found,” countless studies by some of the most respected economists and political scientists of our time have shown that, throughout the history of economic regulation, special interests have co-opt policymakers and political bodies (regulatory agencies, in particular) to further their own ends.   No less an authority than Roger Ebert, the movie critic and vocal Net Neutrality supporter, has pointed this out in a Tweet last night:

And yet Ebert still gives FCC regulation a big thumbs up!  What gives?  Why is it that so many smart people seem to held captive by the fiction that we can somehow build a better breed of bureaucrat or legislator that will somehow be immune to special interest influence?  I can’t explain it, but all the wishful thinking in the world isn’t going to change the reality that any government agency or process big enough to control our economy will be prone to influence by the those most affected by it.  No one has ever said it better than former U.S. President, and progressive hero, Woodrow Wilson:

“If the government is to tell big business men how to run their business, then don’t you see that big business men have to get closer to the government even than they are now? Don’t you see that they must capture the government, in order not to be restrained too much by it? Must capture the government? They have already captured it. Are you going to invite those inside to stay? They don’t have to get there. They are there.” [The New Freedom: A Call For the Emancipation of the Generous Energies of a People (1913) at 201-202.]

Yes, they are already there, now more than ever.  As I noted in my old essay on “Lawyers, Lawsuits and Net Neutrality Regulation,” the Beltway is absolutely teeming with telecom, media, and technology lobbyists and lawyers hungry to grow the regulatory state in various ways.  Anyone here in town who has past copies of the Federal Communications Bar Association (FCBA) directory on their shelves knows this.  This compendium of people looking to influence public policy in this arena just grows and grows and grows. The last copy I received was practically as thick as a phone book. As I noted in that previous essay, the FCBA experienced absolutely explosive growth following passage of the Telecommunications Act of 1996 and the subsequent FCC regulatory uptick in activity.  But the growing FCBA ranks don’t even begin to capture the true extent of what the journalist Jonathan Rauch has called “the parasite economy” at work in this field.  And there’s a wicked self-perpetuating cycle of dependency at play here. The more these folks petition lawmakers and regulators asking for new law or clarifications of law, the more law gets created. As more law and regulation is created, more lawyers, consultants, economists and so on, are needed to figure out what it all means and how it all works. And when they all disagree about what it means and how it works, that leads to more congressional hearings and bill, more FCC inquiries and rulemakings, and then more lawsuits and court cases to adjudicate it all.  It never ends.

This is why I can’t help but to be amused by all the delightfully naive talk on Twitter and in the blogosphere about how the FCC’s move to impose Net Neutrality regulation is about “standing up for the little guy,” “putting consumers first” or “preserving Net freedom and openness.”  It all reminds me of a line from those rock-n’-roll sages Guns N’ Roses: “I’ve worked too hard for my illusions just to throw them all away.”   But I can’t help but be jaded by actual history, in which special interests and Washington insiders co-opt each and every regulatory process in this field for their own ends. Let’s recall what Tim Wu, the man who coined the term “Net neutrality” taught us in his new book, The Master Switch:

“Again and again in the histories I have recounted, the state has shown itself an inferior arbiter of what is good for the information industries. The federal government’s role in radio and television from the 1920s through the 1960s, for instance, was nothing short of a disgrace…. Government’s tendency to protect large market players amounts to an illegitimate complicity … [particularly its] sense of obligation to protect big industries irrespective of their having become uncompetitive.” (p. 308)

Oh, and just wait till the so-called “consumer advocates” use this new Net Neutrality regulatory regime to push the FCC to impose price control on broadband billing schemes.  No doubt, those advocates will claim this as a great consumer victory. In reality, it will push us right back into the fine hell that was the world of regulated monopoly, which we have been trying to escape for last 20 years.  Why have we been trying to escape that world of price controls and rate-of-return regulation?  Because it was a raw deal for consumers, competition, and innovation.  The promise of “consumer protection” was cruel fiction that masqueraded the reality of special interest favoritism, sheltered markets, and sub-standard services.

So, you ask, what is “The Constructive Alternative to Net Neutrality Regulation“? Well, click on that last link and find out!  That paper by my former colleague Mike Wendy and me represents an attempt to outline some different approaches to dealing with network management disputes other than heavy-handed and preemptive “Mother, May I” forms of regulation.

We don’t want to go back to the future, folks.  Yet today’s action by the FCC sets us on that path once again.


P.S. #1: Read these essays by FCC Commissioners Robert McDowell (“The FCC’s Threat to Internet Freedom“) and Meredith Attwell Baker (Hands Off Tomorrow’s Internet“).

P.S. #2: Watch this Reason TV video, which answers the question, “Will Net Neutrality Save the Internet?”:

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