Tilly: The battle for the Internet


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The battle over the future of Internet entrepreneurship is heading to federal court this week.

The case in question is Verizon v. FCC, which pits the telecommunications giant Verizon against the Federal Communication Commission, the government’s longtime regulator of the telecommunications sector. At issue is the question of “net neutrality” — can Verizon sell its Internet bandwidth to the highest bidder?

Verizon says that because it built the infrastructure by which producers of Internet content reach their consumers, it should be allowed to manage it as they see fit. Verizon would like to be able to charge content providers that are willing to pay high costs to deliver their content at higher speeds, and relegate those providers unwilling to pay a premium to slower connections.

Such an arrangement could turn the Internet, currently a relatively egalitarian outlet for content-providers large and small, into a medium more similar to television, where most of the content is delivered by a handful of massive companies.

The FCC, however, believes that the country’s privately built and privately operated Internet pipelines should deliver online content from providers large and small at equal speeds — this is the principle of net neutrality.

Their concern is that selling bandwidth to large companies such as Google could stifle Internet entrepreneurship by denying equal access to consumers to smaller start-ups.

While the net neutrality debate raises a number of questions about the future of the Internet and the virtues of competition, this case is most illustrative of the perils of privatization.

When public goods of which Internet access, like national security or streetlights, are provided by a private company, how much control over the allocation and regulation of those goods can be reasonably exercised by the government?

In this case, the construction of the nation’s Internet infrastructure was left to the private sector, which built the national network. Companies such as Verizon spent billions to create this network with the expectation that they would be able to profit from it.

Because they were allowed to build these networks with profits in mind, is it morally acceptable for the government to allow private companies to build the nation’s infrastructure and then deny those same companies the ability to use that infrastructure to maximize their profits?

This is the gray area of privatization. When you turn over the task of infrastructure development to the private sector, you can cut a lot of costs and get a lot of credit as a champion of the free market. But those savings are offset by the fact that the government has significantly less say in how equitably that infrastructure is used and allocated.

With respect to privatization and regulation, the government shouldn’t be allowed to have its cake and eat it, too.

It’s true that Internet service providers have stifled competition by setting up local monopolies across the country, leading to a number of problems including the nation’s substandard, slow Internet speeds. But to deny Verizon and the nation’s other Internet service providers the opportunity to fully profit from their investment is wrong.

Better to target the anti-competitive establishment of local monopolies than to mandate how ISPs can use the infrastructure they built.

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