What is this Net Neutrality? Why should I care?
Imagine this. As a consumer, you’ve always purchased your widgets from Widgets ‘R Us. Everyone you know gets their widgets from them. They are the first company you think of when you think ‘widgets’. Come to think of it, they are the only name you think of when you think of ‘widgets’. Maybe that’s because they are the only company that makes them…
But… you have an entrepreneurial spirit. You realize that Widgets ‘R Us under serves the market. They don’t make those left-handed widgets that your brother is always looking for. You would really love those customized widgets that you’ve seen online that are all the rage in Europe. Or maybe you just think that people might want a choice in where they buy their widgets. That seems like a market that is ripe for innovation. You’ve got that entrepreneurial spirit. You decide to start you own business – Local Widgets, Ltd.
Oooh, there’s a problem, though. Widgets ‘R Us is a LARGE customer of the power utility that serves your area. So big and important of a customer, in fact, that Widgets ‘R Us gets preferential treatment from Power, Inc. Power, Inc. tells you that to buy power for your start-up widget-manufacturing facility it is going to cost you three times what Widgets ‘R Us pays.
Chances are, Local Widgets, Limited, doesn’t stand a chance. And that doesn’t just hurt you, my entrepreneurial friend. That hurts the consumers who ALWAYS benefit from competition in the marketplace. Because instead of you – the aspirational Local Widgets, Ltd. – competing in the free market against Widgets ‘R Us to offer better value by lower prices, more offerings, or whatever, the consumer now has one choice for their widgets. What motivation does Widgets ‘R Us have to innovate or expand their offerings without competition?
The United States has enacted, and benefited from, a free market, capitalistic economy. Make no mistake – I believe in the principles of the free market and capitalism. I think that the free market spurs competition which benefits the greater good. Capitalism supports incentive-based innovation. I am unabashedly in favor of these concepts. Concepts which, incidentally, abhor a monopoly.
Have you ever wondered why there is one set of electrical wires that run through your neighborhood? Everyone needs electricity, right? Shouldn’t someone have come up with a competitive idea to pit against your local energy utility? Why is there only one set of lines? Isn’t that a monopoly?
Yes, Virginia, there is a monopoly – sometimes. We allow these monopolies that provide societal utility. Those essential services necessary for our base infrastructure. What to call these things… maybe “utilities”? We allow (here in beautiful Upstate New York, for example) National Grid to corner the market on energy distribution. My choices for electricity when we built our new home were National Grid and… National Grid.
What if a purely for-profit energy distributor decided that it wasn’t profitable to provide electricity to a distant corner of our town? Should they be allowed to provide services only to the customers that they were most interested in? Or maybe they might offer rates so exorbitant that the hopeful start-up of Local Widgets, Ltd., could never enter the market and compete against Widgets ‘R Us.
The fact is, we allow monopolies in certain, very specific areas. It’s a trade-off. They are allowed a return on their investment related to infrastructure and capacity. They have to agree, though, to provide their services equally to their customers. Because what do you think will happen when Widgets ‘R Us has kept their potential competition out of the free market? Will they altruistically offer more bang for the buck?
Here in Camillus, a small suburb west of Syracuse, we benefited from Verizon’s aggressive expansion of fiber optic internet service – FIOS. What had been an absolute monopoly for years – serviced only by Time Warner – was now fertile ground for the competition of the free market. Guess what? We, the consumers, benefited. Sadly, prices remained mostly flat. However, both companies began offering more in their packages. More channels. Faster internet speeds. Additional services.
How did that work out for us consumers? Did free market competition spread to the surrounding towns or city of Syracuse? Was Time Warner forced to compete for consumers’ business against the invading threat of Verizon FIOS? Uh, no. Around the same time that Verizon announced the halt of its FIOS expansion, we read about the new cross-promotional opportunities it was unlocking with cable. You know, those folks with which they were formerly competing…
America is squarely in its post-Industrial Age. Our modern era has been described as the Information Age. How well do you think this Information economy will prosper if control of the flow of that information – our country’s newest natural resource – is held, without oversight, by a few companies?
Look, I’ve thrown together a mishmash of concepts related to Net Neutrality. There are LOTS of very good, very detailed pieces freely available on this great public store of human knowledge (AKA the “Internet”) that can walk you through the ideas in better detail. Google it. (Yes, a company that supports Net Neutrality.) Don’t let the casual nature of this post fool you into thinking that it is only the bomb-throwing anarchists that support this “Net Neutrality” concept. Even some of us fiscal conservative, MBA-holding rational folks believe it to be a good thing.
Net Neutrality is a *big* win for consumers and our economy. Don’t let anyone tell you different.
[Edit to make the point that my clumsy writing has missed. Verizon, Time Warner, Comcast – they have enjoyed all the benefits of de facto monopolies without the oversight. Net Neutrality will balance that.]