The Curious Case of Net Neutrality

Everyone please welcome Insula Qui, our first additional writer at Zeroth Position.

Last week, many libertarians came out in support of a major government program. This would seem odd to many onlookers, as libertarians are supposed to believe in free markets and their efficient allocation of resources, but this issue has divided libertarians like few others. This program is net neutrality, and even anarcho-capitalists have managed to justify supporting it on some occasions, although that is much rarer.

To explain the problems within the concept of and support of net neutrality, a working definition is required. In essence, the point of the regulation that assures the net will stay neutral is to ensure an egalitarian allocation of bandwidth among people and websites. This means that no Internet service provider (ISP) should be able to charge extra for access to certain websites or discriminate when it comes to the Internet in any other way. This seems good and necessary at first glance, but even a cursory examination defeats this. Net neutrality was adopted in 2015, which means that for most of the existence of the Internet, there was no need for any legislation. Yet this legislation was created, not because any ISPs were being unfair, and not because ISPs were considering being unfair. The only reason why net neutrality was created and subsequently passed was to ensure that the Internet would stay the same as it always had been. It turns out that we apparently require massive legislative efforts to ensure that absolutely nothing would change.

The Past Is Prologue

To understand why this debacle started, we must examine the origin of the troubles. The legal procedures were initiated by the situation that was going on between Netflix and different ISPs. The entire spectacle may be summarized as follows: Netflix was using so much data that it was getting slower. That was the entire problem that Netflix had with the ISPs, and that was the start of the entire legislative progress to instate net neutrality. (What was going on was slightly more complicated, but that was the gist of their complaint.) Various streaming services were growing larger on the Internet, so the ISPs were faced with a lot of bandwidth consumption on a continuous basis. With streaming, it is impossible to load the entirety of the data quickly because there is so much of it, meaning that the bandwidth is constantly and intensely used. Since streaming was so popular, there was bandwidth constantly in use and since bandwidth is a limited resource, the streaming sites were getting slower, which was reflected in their bottom line. Because the streaming sites were getting so popular and using gigantic amounts of data and bandwidth, they could not expand more without getting slower and thus expanding less.

This was a problem created by streaming platforms that mostly affected said platforms. ISPs would lose some profitability, but they would still keep most of their profits if they handled streaming more slowly. Most sites without streaming would be affected much less, as they did not need this continuous stream of data and the few thousandths of seconds by which they would have been slower would have gone unnoticed. Netflix and other streaming sites were unable to fix the problem on their end; they already use every compression mechanism possible to optimize their storage and streaming capability without compromising the quality so much that the experience is reduced. Thus, the streaming sites were completely at the mercy of the ISPs to fix this problem. The heroic ISPs rushed in to help the streaming sites, offering to build new infrastructure and give the streaming sites priority in the use of that infrastructure. There was one caveat; the streaming sites would have had to pay for it, which would have caused a drop in their profits, which would have eventually made them increase streaming prices to remain sustainable. Because even the smallest increase would scare off marginal users, this was not in the self-interest of the streaming sites.

Therefore, the streaming sites started advocating net neutrality, claiming that being charged to fix the problem that they caused for themselves was somehow discriminatory to the freedom of the Internet. They also claimed that the ISPs were throttling access to their sites, and that because they could not expect the ISPs to build their infrastructure for them meant that ISPs were planning to turn the Internet into something unfree. In their view, the way to increase freedom with respect to the Internet is obviously to give the government giant amounts of legislative control over it. Because of the appealing notions that the little guy should not be discriminated against by the big scary ISPs, and that the ISPs should not make certain websites into subscription services, a large Internet bandwagon took shape. Almost every large platform took the side of net neutrality, for the sake of fairness and freedom, of course. Even people who constantly tout their knowledge in basic economics were extremely happy that the state could ensure that the ISPs would not discriminate against information that they dislike or try to rent seek on their monopoly.

Statist Problems and Market Solutions

Having described the frankly ridiculous situation, we must look at the problems within this approach, of which there are several. First, there has never been any reason to suspect that any ISP would move to a subscription service model or that they would artificially restrict information they dislike. This has never been actualized and has never been a close concern; it is based on conjecture on par with the implication that warlords would take over without the state. Second, bandwidth is a finite resource; there is not infinite Internet service to go around. This can be improved greatly with increased infrastructure, but this is not cost effective to the ISP.

To fix this, two steps may be taken. Bandwidth could be restricted in one area so others can get more bandwidth, or the company that needs more bandwidth should pay for additional infrastructure, both of which violate net neutrality. This is, in essence, a problem of trying to redistribute bandwidth from the smallest users to the largest users. When bandwidth needs to be equitably arranged, the people who use the least bandwidth would need to use even less to subsidize the people who use more bandwidth. The bandwidth for a neutral use could not come from anywhere else. This is somehow supposed to protect the little guys and make sure that the Internet is accessible for everyone.

The next problem is that this prevents selective Internet access for people who use the Internet for very specific purposes. If one needs to allocate one’s bandwidth to some very certain areas and does not care about the rest and is fine with that being slow, one could very well have the ISP provide a service of throttling certain sites and increasing the speed of others. And these are just the problems when we assume that net neutrality is really supposed to provide for a neutral net.

In reality, it has been the case that giving control over services to the government is generally a bad idea; more often than not, the state abuses all powers it has and creates as many powers as it thinks it should have. Thus we may understand how it could be that having the FCC in control of determining even more in the way of how ISPs act may not be the best idea. It may be that increased regulation would do even more harm to any new ISP that would try to attempt to provide this service. This all is compounded by the fact that the entirety of the problem of monopoly in the provision of the Internet is caused by the government in the first place.

It is not as though the Internet is a natural monopoly; no matter what many would have us believe, natural monopolies do not exist; just the optimal size of firms differs. However, when an industry is over-regulated, it will become less competitive as the barrier to entry into that industry is increased. It happens to be that the Internet is one of the most regulated industries.

There are huge issues with providing cables; thousands of people whose approval is needed, dozens of restrictions and last mile rules, etc. The government has a firm grasp on the net no matter what. This is best exemplified with the legal issues Google Fiber has been having when trying to establish themselves as a competitor to the current oligopoly. A company as powerful as Google has been unable to establish themselves in the market due to legal issues, as cost is certainly not a problem for them if they think they will outcompete the existing systems. Without this state-imposed oligopoly, there would be no problems with competition within the Internet. The optimal size of firms is probably much smaller than the firms which exist now. The market would do its job, the provision of the Internet would be decentralized in its construction, and quality would increase while prices fall.

Libertarians Against Cyber-Liberty

However, this does not seem to be a priority to many people, as most claim that we must regulate companies to solve problems that regulation created in the first place. To them, the only way to combat problems caused by the government is with an increase of government control in that area, the problems caused by this control need to be fixed by additional government control, and so on.

Unfortunately, it seems as though many libertarians, instead of sticking to their free market principles and trying to solve the problem that government regulation caused in the market of providing the Internet, are apathetic about this original regulation. It is almost as if these libertarians think that if the government was more involved in the market, then the market would be more free. This is not Internet-libertarianism, but Internet-communism. What else can one call the desire to redistribute bandwidth equally among all by the force of the state?

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