Wednesday, December 09, 2009

Net Neutrality Rules Would Dilute Concept Of Ownership On Internet By Steve Forbes



What do the Obama administration, the Federal Communications Commission, a handful of liberal academic elites and Google all have in common? Answer: a radical plan to regulate the Internet that may totally upend the free market in today's massive information economy.

Recently, FCC Chairman Julius Genachowski publicly proposed new net neutrality rules that flip the existing role of government in the net neutrality debate from a hands-off, free market enabler of consumer choice to a new, heavy-handed regulator of private companies and entrepreneurs.

With broadband providers in his sights, Genachowski announced a series of "principles" he claimed were geared toward consumer protection.

Four of these principles were similar to existing FCC practice, but with the added twist of applying only to broadband providers, thus imposing government sanctions on just one segment of the broader information economy.

Unfortunately, this one segment is one of the few bright spots in our otherwise moribund economy.

A fifth, and brand new, principle is equally discriminatory against broadband providers and even more damaging to the free market and the Internet economy. This principle of "nondiscrimination" will make illegal any attempt by broadband and content providers to offer the advanced services consumers want — prioritized high-definition movies, games, television shows and music.

All of these principles combined are but one more step to water down the concept of ownership on the Internet. The FCC may not believe this, or won't let on if they do, but that's certainly the agenda of many of net neutrality's most vocal backers in elite academia and the "public interest" community.

It is some of these voices — influential with the Obama administration — who believe that for-profit companies have no business charging for information or services in a digital environment.

In their utopia, "information equality" doesn't allow for such capitalist behavior because, as they say, "all information wants to be free." Think of it as the Internet version of rent control.

Rest assured, these FCC principles will radically transform the way business is done in our information economy, and taken to their logical conclusion could do extraordinary damage to the information economy itself.

And this is where Google comes into the picture.

With for-profit broadband providers the target of the government assault, Google stands to make windfall profits as its competition is handcuffed by federal regulators and its dominant advertising-content business model is supported and vindicated by official policy.

Nevermind that Google was the sixth-largest contributor to President Obama's campaign, or that a number of current and former Google executives sit as high-level advisers to the president and the FCC. The FCC in the name of consumer "fairness" has gerrymandered long-accepted broadband principles to target Google's competitors and give one of the administration's strongest political allies a competitive advantage every step of the way.

It appears the FCC has managed to redefine the definition of an Internet Service Provider (ISP), excluding Google from the category and thus also from its regulations. And so, although Google is in fact the largest ISP in the world (accounting for 6% of all Internet traffic according to a recent Arbor Networks study), it can continue with business as usual while Google's broadband competitors are saddled with heavy new FCC regulations.

Essentially, the Obama administration is securing Google's dominance in advertising-supported content on the web, while all but shutting down all other business models including subscription-based, streaming, downloaded and pay-per-view strategies.

This is not, and should not be, the way American government does business. It is a frightening realization of how little technical knowledge and how many political considerations have contributed to the FCC's current stance.

Recent criticisms of the FCC's net neutrality proposal by FCC Commissioner Robert McDowell in this regard are enlightening. "Do you really want five unelected bureaucrats such as myself — none of whom have an engineering degree, we're all liberal arts majors — making these types of decisions?" he asked.

Political payback for one company at the expense of an entire information economy is impermissible. The old game in Washington of industries lobbying for harmful regulations on their competitors appears to be alive and well.

The fact is that the same free market principles and intense competition that have made the Internet the powerful force it is today and that have constantly pushed America's corporations — including Google — toward new innovations and services must be allowed to endure.

Neither silly Utopian notions of net neutrality and equality — other words for price controls — nor political payback can be permitted to interfere. The Internet is a powerful force, and it would be to the detriment of all if the FCC is successful in trying to regulate its potential.

• Forbes is president and chief executive officer of Forbes Inc.

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