Net Neutrality: A Costly Solution in Search of a Problem


May 28, 2024 12:32PM

Remember how the internet slowed down and became unusable seven years ago?

If this doesn’t match your recollection that’s because it never happened.

When Net Neutrality regulations were rolled back seven years ago in 2017, having only been in place for two years, dire warnings abounded. CNN declared the vote meant “the end of the internet as we know it.” Sen. Bernie Sanders said, “This is the end of the internet as we know it.” Other members of Congress and other media outlets had similar doomsday statements.

None of the predictions came true. The internet has thrived and in the United States, it withstood the biggest of stress tests: the COVID era internet traffic spikes. According to industry analysis, online data increased by 40%-60% during those months.

Despite all this good news and none of the dire prognostications coming true, Net Neutrality rules are back in place as of May 2024.

Net Neutrality might be a familiar term. The phrase and concept were first coined in 2003, and it essentially means that all internet traffic transmitted over wires or wirelessly should be treated equally. Will Rinehart at AEI has a good, short history of how we got to where we are in the Net Neutrality debate.

However, the term since about 2015 has meant that the federal government should treat internet service providers like utilities and prohibit them from throttling data, among other regulations. The ban on data throttling, one of the main aspects of Net Neutrality, sounds appealing, but, in reality, it would make the internet more expensive and slower. When internet service providers can adjust transmission rates as per consumer demands, including raising prices for those who use more data, consumers get the highest and fastest quality. Treating all data traffic equally means the grandfather who sends one email a week and watches one show on Netflix is treated the same as his always-online neighbor who downloads movies, music, and live streams video games for a living. As Jennifer Huddleston at Cato pointed out, Europe, which has strict Net Neutrality regulations, had to slow down streaming services during COVID because there was too much demand. US networks, without Net Neutrality, handled COVID loads well, because they could adapt. While a well-intended regulation, anti-throttling regulation can lead to the very thing it seeks to prevent.

We are talking about Net Neutrality today because, on May 7, 2024, the Federal Communications Commission (FCC) reinstated regulations from 2015 that were repealed in 2017. My friends at TechFreedom said it well: internet services have been “re-re-re-classif[ied].” (Is your head spinning yet?). It’s worth remembering that during the 2017 repeal, some pro-Net Neutrality activists were so vehement in their beliefs as to send death threats to Ajit Pai, the Chair of the FCC at the time, and his family. He and his family were provided 24-hour security. There was even a bomb threat at the FCC on the day of the repeal vote.

Unique among public policy proposals, this debate features a real-world test of a theory. To promote a flourishing internet ecosystem, does the government need to require internet service providers to treat all traffic equally? The answer is clearly no. As former FCC Chairman Pai said in a recent interview, “Most people of good faith realize that it’s an issue that doesn’t really matter at all” and it’s a “dead letter when it comes to the real lives of consumers in the digital world.”

As noted above, FCC Net Neutrality regulations were only in place for two years, yet broadband speeds have increased and costs have decreased over the years. There’s also been an explosion of media streaming services and online entertainment options. The services and platforms are getting better, cheaper, and more accessible—all without Net Neutrality.

So what’s next now that the rules are back in place?

Courts might overturn the FCC’s recent decision. It’s long been argued that the FCC overstepped its legal authority by passing Net Neutrality regulations and recent Supreme Court cases have strengthened those arguments. There is a good argument to be made that these regulations qualify as a “major question” which means Congress must pass regulations on such matters, not federal agencies.

If the rules remain in place then consumer broadband costs might rise and internet services will improve much more slowly. The economist Dr. George Ford at the Phoenix Center in 2018 found that increased regulation lowered investments in new services. Notably, the current FCC dismissed Dr. Ford’s study saying his findings had “no value.”

All along this has been an issue for Congress to consider. Yet the historical record shows the internet, internet service providers, internet platforms, and consumers are doing just fine without onerous Net Neutrality regulations. Net Neutrality regulations are likely to impose more costs than benefits to American consumers.

Regulators should match their rules with reality and in this case, that’s clearly not happening.