May Contain Blueberries

the sometimes journal of Jeremy Beker

Since the recent ruling in Verizon v. FCC where the US Court of Appeals for the DC Circuit overturned the FCC net neutrality rules (see the EFF Net Neutrality page for background), there has been considerable discussion about the potential harms (or benefits) of this ruling. I have listened and read and I feel that the mainstream media is missing the large but subtle danger that this ruling causes and why it is critical that the FCC move to reinstate these rules.

The argument that I keep hearing about why the net neutrality rules are needed is that if internet carriers are allowed to offer differentiated internet service for a fee that it will harm consumers by raising the prices that consumers will pay. For example, ESPN might pay Verizon to allow its customers to stream its video for free but will then raise the cost to the consumer to cover this. While overturning the net neutrality rules would allow this, I don’t believe this is a threat. Both ESPN and Verizon know that consumers will prefer a lower cost solution so will not go for that. And if Verizon and ESPN can make a deal that makes it cheaper for the consumer, it might even be a benefit for the consumer. And here be dragons.

I believe that deals such as the one I outlined could be a short term benefit to consumers, but will change the way the economy of innovation works in a way that will harm consumers in the long term by shifting the cost structure of innovation in the favor of existing, large players.

The history of innovation on the Internet has been driven by the little guys. Google, the giant it is today, started as two guys in a dorm room. Facebook, another giant, started in a dorm room. In these and many other instances, the innovators had very limited resources. But, and this is the critical point, once they started providing a service on the internet, access to their new service was provided at the same level as the big players and consumers could judge the merits of say, Google vs. Altavista on the merits of the products and make a choice as to which was better.

My fear is that without net neutrality rules, the barrier to entry will be increased for new companies that can disrupt the marketplace and bring innovation to all consumers. I am not worried about the ESPNs or Verizons of the world. I am worried that it will make getting started harder for the next Google or Facebook.

So I strongly urge the FCC to reclassify internet service providers as common carriers and re-institute and strengthen the net neutrality rules to ensure that the Internet continues to innovate in a free and fair way.

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