Opinion: Nothing Neutral About It

This post orginally appeared on LinkedIn Pulse on February 26, 2015.

Today, three unelected commissioners on the Federal Communications Commission passed - 3-2, along party lines - perhaps the most sweeping and potentially destructive regulations related to the internet since its birth. Let that sink in for a minute. Not Congress. Not the Supreme Court. Not a resolution ratified by a 2/3rd majority of the states. Not even a Presidential Executive Action. Three unelected Federal government bureaucrats. Three Americans that have to wait in line at Starbucks and go through the TSA line, just like you & me.

You may have heard about it - a little something that has been swaddled with the innocuous enough sounding nickname "Net Neutrality".

On the surface, the objectives seem noble enough. Prevent the big, bad cable & telecommunications companies from sticking it to the people (by way of sticking it to websites that use a lot of their bandwidth) by throttling throughput, assessing surge pricing (now that would be a horrible business model, wouldn't it Uber), or just plain throwing up roadblocks to keep bits from reaching their intended destinations. Sounds fair enough.

And if the FCC had adopted specific rules to address that very specific set of scenarios - as have been the talking points behind the ruling today - there probably would be little in the way of backlash.

But that's not what the FCC did today.

The action today reclassifies the Internet as a utility, and subjects it to the regulations contained in Title II of the Telecommunications Act of 1934 (which somewhat ironically, was the law that created the FCC to begin with). An act 300 pages long and written almost a century ago, when the 'state of the art' in telecommunications technology was the telegraph. And if you're now thinking to yourself 'how in the world could rules written to regulate telegraph transmission lines possibly be relevant to today's dynamic broadband networks, you're starting to see the issue here.

But it goes deeper than that.

First, this action attempts to address an issue that really isn't an issue at all. The examples of this sort of abuse are neither pervasive nor widespread, and in most cases, when carriers have been caught behaving badly, the consumer backlash was more than sufficient to cause them to snap back in line. Despite David Karp's most valiant effort to educate us otherwise (dude, did you even rehearse before going on air??), there has yet to be a strong, salient case built to justify such sweeping regulation based on actual, past transgressions. There's not a systemic wrong that the FCC needs to right.

Second, while in the 20th century, Telco companies were indeed the only game in town when it came to 'broadband', e.g. a de-facto monopoly, that's no longer the case. Cable is a major player now, technology is enabling wireless, mesh, etc. to become legitimate alternatives, and new entrants into the market like Google are giving consumers and businesses more options than ever before when it comes to broadband. That creates a little thing called competition, and when there's competition, market forces exert monumentally more influence over behavior than government oversight.

We don't need new regulations passed by 3 unelected bureaucrats to fix a problem that isn't really a problem when competition is increasing and there are multitude incentives for carriers are to provide better and faster service to their customers. That's called 'incentive alignment.'

Finally, there is the not-insignificant matter of subjecting the Internet (inside US borders anyway) very broadly to the whims of politicians. There isn't a single example - save potentially national defense - of an industry that is more efficient, more cost effective and provides better services to its customers that is managed by the Federal government. Not one.

Unfettered innovation fueled by smart people and forward thinking investors has gotten us to where we are today. Which is pretty awesome. By contrast, how much VC investment has gone into the Federal Government contractor sector recently? Know any entrepreneurs that are losing sleep coding disruptive technology for the Feds? Uh huh.

So how much longer will carriers and new entrants continue to invest heavily in improving technology and service quality when the FCC gets the final say on what is & isn't allowed?

As an aside, my cable company now offers gigabit internet speeds to the home because Google is planning to launch Google Fiber in this market. Not even 'launched' - planning to launch. Competition works.

Now, there's a lot of hand waiving about how the new regulations 'forbear' more onerous elements of Title II like pricing controls, and don't impose new restrictions like tariffs or content filters or rules about how & where broadband infrastructure can physically exist. But the ruling qualifies that forebearance with 'at this time.' Oh really? Now that Pandora's box has been opened, who's to say how future unelected FCC commissioners might interpret this precedent? Or decide 'at this time' is in the past? If it really is so easy that 3 unelected government employees can unilaterally and fundamentally change the rules of the internet, there really are very few limitations on how far that regulatory power can go.

Even if you support the ruling today, the 'ends justify the means' process by which it was adopted should concern you. The shoe will always be on other foot at some point, and this sort of de-facto quasi-legislative rule making can cut both ways. It's a dangerous precedent to set.

The proclamations are that 'consumers won today.' But it's a Pyrrhic victory. There was really never any enemy to vanquish, and the new dangers this kind of action introduce far outweigh any potential benefit to the consumer - if there even are any.