Comcast and Net Neutrality: Is the Internet Better Off Unregulated?

Source: Thinkstock

Source: Thinkstock

The American business and tech industries are on edge, waiting to see what comes of the FCC’s decision on net neutrality. While a Federal court struck down the rules earlier this year, that was based on the current classification of Internet service providers. “Given that the Commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers,” wrote Judge David Tatel. “The Communications Act expressly prohibits the Commission from nonetheless regulating them as such.” The ruling has brought net neutrality to the forefront of everyone’s minds with the future of the Internet as we know it now resting in the hands of FCC officials. 

At the center of the controversy is the pending merger between Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TMC), that could potentially create the biggest ISP in the country. Comcast, already an industry behemoth with considerable political sway, could come away with even more consolidated power, and it has a lot of people worried about what will happen if it’s allowed to grow unchecked. If the merger is allowed to go through, a Comcast combined with Time Warner Cable would hold enough lobbying power to do almost anything it wanted. Chief concerns would be the company’s ability to abuse its market power, which could be a real problem, considering it would carry roughly 20 percent of the world’s Internet traffic.

The thing is, Comcast is already prone to market abuse, such in the case with video-streaming company Netflix (NASDAQ:NFLX). By slowing down traffic, Comcast allegedly used some clever tactics to force Netflix to approach the company directly and pay them to move things along faster to their customers. Essentially, Comcast had to pay for a “fast lane” on the Internet.

That’s where it all comes back to the net neutrality argument.

If net neutrality rules are thrown out by the FCC, it would allow Internet providers to give everyone the Netflix treatment. Those who wish to see neutrality rules lifted claim that consumers and subscribers would be better off in the hands of the free market, where competition would ultimately lead to an ideal scenario. The problem is there really isn’t any competition. The merger between Comcast and Time Warner Cable would lead to even less competition than there already is, and the tossing of neutrality rules would simply reinforce already-existing monopolies around the country.

This is a case in which the government actually needs to step in and lay down some regulation in order to preserve a free market. If content providers are forced to “pay to play”, the economic impact would be huge. Larger companies immediately would have an upper hand, and small Internet-based businesses and tech startups would need to find a way to stay afloat as they would be at the mercy of the service providers. It would create a big disincentive for entrepreneurs develop new technology, and a disincentive for the service providers to innovate and upgrade their infrastructure. Not to mention opening up the ability to discriminate on the service provider’s side.

The best way for American entrepreneurs to continue to thrive and innovate is if the FCC steps in and enforces a strong set of net neutrality rules. ISPs can be reclassified, if need be, so that they are required to abide by the rules. The service providers have already seemingly hit a point where they have maximized their profits, and are now looking to find a way to siphon off even more. As they argue the merits of a free market capitalism, it’s hard to put it finer than PC World, which says the free market argument is mostly a mirage. “The ideals of free market capitalism are based on an assumption that there will be competition and choice. In many areas, though, there is only a single provider, or no provider at all. There is a sort of equilibrium between the major providers that makes them more like quasi-monopolies sharing the balance of power than competitors fighting to earn customers.”

If the Internet is treated as a utility, much in the same way water or electricity is, it would allow for a prosperous and flourishing Internet to continue to develop, and allow America to remain as a world economic power, on the cutting-edge of innovative development. Yes, there would be impact, and there are drawbacks to implementing rules for operators to run by, but the costs of letting a few large corporations put a stranglehold on the Internet for the sake of higher profits.

Susan Crawford, a tech policy expert and professor at Cardozo Law School, sums it up nicely in her new book. “Truly high-speed wired Internet access is as basic to innovation, economic growth, social communication, and the country’s competitiveness as electricity was a century ago,” she says.

As the argument wages on, it tech companies are coming together to fight alongside citizen groups to give the FCC a piece of their minds. If net neutrality is truly struck down once and for all, the effects could be disastrous for consumers and content providers. Although Netflix was willing to pay its way forward, most others are not willing to without a fight. The FCC has a big decision to make regarding the future of the Internet, and we can only hope the people making the decisions understand the true impact its ruling can have for years to come.