Tags: Net Neutrality | FCC | regulation | Tom Wheeler | ICC | railroads

WaPo: Will Regulation Impede Internet as It Did the Railroads?

By    |   Thursday, 05 March 2015 03:14 PM

Washington Post columnist Robert Samuelson warns that Internet users would be well advised to closely scrutinize claims by advocates of new net neutrality regulations enacted by the Federal Communications Commission that such schemes will protect consumers from "discriminatory" behavior by Internet Service Providers.

In fact, Samuelson writes, the opposite is likely to happen. Like the railroads of the 19th and 20th centuries, today's Internet Service Providers such as Comcast and Verizon "inspire awe and dread" among much of the American public.

And in response, advocacy groups who say they want to help "the little guy" are demanding tougher regulation over those providers that could impede the Internet's growth – much as regulation did to the railroads.

In 1887, the Interstate Commerce Commission was created. The ICC regulated U.S. railroads and worked to protect the public from abusive increases in freight rates.

Railroads were required to get permission from the agency for virtually everything, including rates, abandonment of little-used routes and mergers. Railroads had great difficulty fending off competition from barges and trucks.

By the late 1970s, there was a political consensus in Washington that the ICC had so weakened the railroad industry through regulatory micromanagement that a government takeover might be necessary. Instead, Congress deregulated the railroads in 1980 and eventually the ICC was abolished.

Deregulation, Samuelson wrote, "succeeded brilliantly," with railroads giving up unprofitable lines and devising innovative pricing packages which rewarded shippers for moving more freight in bulk.

The industry has become profitable and now boasts of spending upwards of half-a-trillion dollars since 1980 to improve the U.S. rail network.

But today, the FCC, which recently voted 3-2 to adopt its net neutrality plan, is seen moving towards the old, discredited economic model exemplified by ICC regulation of the railroads.

"It's unclear what justifies new regulation," Samuelson writes. "The FCC plan bars companies like Verizon and Comcast – Internet Service Providers (ISPs) – from blocking any Internet connection. But there was never any support for this sort of censorship, and the agency's press release [announcing the regulatory change] contains no evidence that it is widespread."

The real issue, Samuelson writes, is "who will finance new Internet investment. Do big users like Netflix and Facebook bear some costs or are these left to the ISPs – which shift them to the monthly bills of households?"

In 2014, for example, Netflix agreed to pay Comcast for smoother streaming of its videos.

"The open question is whether the FCC will permit these interconnection payments and, if so, at what level. But the FCC has weakened the ISPs' bargaining position by requiring them to accept all comers," Samuelson writes.

If Netflix doesn't pay its full costs, someone else will. That could end up being the "little guy,"  in the form of higher rates or less consumer choice.

For now, "the FCC majority promises not to adopt 'utility style' price regulation (in effect: limiting profits), which – it concedes – would discourage investment in added Internet capacity," Samuelson observes.

Instead, FCC Chairman Tom Wheeler pledges "light-touch" regulation. But this promise "is good only until some future FCC changes it. If typical telecom bills increase, political pressures for full-scale rate regulation would surely intensify," notes Samuelson.

But the FCC has proposed a "general conduct" rule for the Internet that is the opposite of regulating with a light touch. That rule, Wheeler says, "can be used to stop new and novel threats to the Internet."

That means in essence that "anyone with an Internet gripe can petition for relief," says Samuelson.

By doing this, the FCC, as the example of the railroads illustrates, "threatens to exact a slow and growing economic toll on the Internet's vitality," he concludes.
 

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US
Washington Post columnist Robert Samuelson warns that Internet users would be well advised to closely scrutinize net neutrality regulations.
FCC, regulation, Tom Wheeler, ICC, railroads
613
2015-14-05
Thursday, 05 March 2015 03:14 PM
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