Yglesias vs. Google

My old roomie Julian Sanchez and my friend Matt Yglesias go at it over neutrality regulation on Bloggignheads.tv. If you haven’t seen it yet, Bloggingheads.tv is (as its name implies) a site featuring popular bloggers debating the issues of the day on camera. My favorite thing about the Sanchez/Yglesias spot was the fact that Julian was smoking. People haven’t smoked on TV in decades–and especially not talking head pundits! It felt deeply subversive to watch politics being debated in between drags of a cigarette.

Anyway, my sympathies are with Julian’s side of the argument, but I thought Matt’s argument, which he dubbed a vulgar Marxist perspective, is interesting: basically, he doesn’t feel qualified to evaluate the technical merits of the issue, but he figures that given that Google’s interests lie in getting more content to consumers cheaper, their interests are more likely to align with those of consumers. And therefore, for those who aren’t competent to analyze the issue on their merits, it’s best to err on the side of supporting Google and other Internet companies.

In evaluating this argument, I think it’s worth distinguishing the short-term and long-term impacts of regulation. Julian covered the short-term argument pretty well: it might be that without the ability price discriminate, telcos will have less incentive to invest in new infrastructure. That’s clearly bad for consumers, but it might be good for Google if it ensures Google free access to whatever new infrastructrue investment the telcos do make. I don’t think it’s crazy to think that Google’s interests might diverge from those of consumers on this front.

But I think the long-term implications are more interesting, and ultimately a lot more important. Because what network neutrality does, for the first time, is to give the FCC (or some federal agency) authority over the administration of the networks that comprise the Internet. The debate so far has focused on cable and telephone companies, but there’s no reason to think the extension of authority contemplated by the pro-reguatory side would be limited to those networks. University networks, WiFi hotspots, hotel connections, and any new broadband technologies that arise in the future would also be covered.

Any time you create new regulatory authority, you create new opportunities for rent-seeking. Network neutrality is a complicated subject, and no one other than telecom lobbyists is likely to be paying much attention after the law is passed. Which means that it will be quite easy for the FCC to gradually expand its authority to subjects that are only tangentially related to the core issue of network discrimination.

This, it seems to me, is bad for everyone, but it’s less bad for larger and more politically well-connected companies. The telcos can afford to hire the lawyers and lobbyists they need to ensure their interests are protected. So can Google and Microsoft. On the other hand, ordinary consumers, and small web sites like the Technology Liberation Front, will be more or less at the mercy of the FCC’s decision-making process.

Here, I think, Yglesias’s interests clearly diverge from those of Google and Microsoft. Google and Microsoft don’t have to worry about these kinds of regulatory capture concerns, because they’ve got as good a shot at anyone of being the ones who do the capturing. If the telcos want to push regulatory changes that benefit them at the expense of Internet users, Google and Microsoft will have the clout to cut a deal that ensures their interests are protected. It’s smaller sites and individual Internet users who are unlikely to have their interests effectively represented in future regulatory battles.

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