Sorry, Mr. President, The Internet Isn’t a 19th Century Railroad

Nov 13, 2014 by AFP

By Kuper Jones

This week, President Obama came out in support of far-reaching new regulations that would grant unprecedented new government control over the internet, threatening the largely free and unfettered market that has allowed our digital economy to flourish. Proclaiming that the web is in need of so-called “net neutrality,” President Obama voiced support for the new rules, which would impose sweeping new regulations in the online world that are based on antiquated laws from the early 1900’s – rules originally intended for telephone and telegraph companies, and before that railroad carriers.

If you are scratching your head, you aren’t alone.  Many internet users have expressed concern about the push for the proposed thicket of e-red tape.  Rules crafted a century ago are in no way appropriate for an internet which is light-years ahead of anything anyone could have imagined back in the era of Teddy Roosevelt’s famous charge up San Juan Hill.   If anything, these regulations would slap consumers with the potentially largest one-time tax increase on the internet, threaten the continued development and expansion of broadband, and open the door to more stringent and expansive government control over the internet that so many Americans enjoy today.

In his address, President Obama painted a rosy picture of what these regulations would mean for the internet – “The idea of net neutrality, has unleashed the power of the internet and given innovators the chance to thrive.”

This couldn’t be further from the truth. The internet experience consumers have enjoyed over the years has been in the absence of Mr. Obama’s “net neutrality.” In reality, the internet has thrived and grown rapidly due to the government taking a hands-off regulatory approach. Instead of continuing to reap these benefits, the Obama Administration wants to reclassify internet service providers as “common carriers” under Title II of the Communications Act of 1934 (you read that correctly – 1934). This move would throw ISPs into the same public utility category as telephone companies and subject them to the same archaic regulations.

In fact, these regulations can be traced back later than 1934. Free State Foundation President and former FCC attorney Randolph May has pointed out that the 1934 Act was actually created by copying the language from the Interstate Commerce Act of 1887 – more than a decade before San Juan Hill – which governed railroad monopolies in the 19th century. Instead of railroads, legislators made appropriate language modifications so the law would apply to telephones and telegraphs.

Taking into consideration where technology currently stands, it is safe to say that laws written in the 1880’s and 1930’s are nowhere near appropriate for regulating the internet in our modern age.

If regulating our internet infrastructure like railroads from the 19th century wasn’t bad enough, Title II reclassification would actually subject Americans to the federal Universal Service Contribution Factor – a tax on telecommunications services which was recently increased to 16.1 percent.

While the tax would take approximately $24 billion from consumers over all, wireline broadband providers would have to collect around $89 per household annually while wireless carriers would have to collect approximately $137 per smartphone annually –this is especially bad news for families with more than one smartphone on their phone plans. Even worse is that consumers could also be subject to state and local telecommunications taxes in addition to the federal tax if the lame duck Congress fails to extend the internet tax moratorium which expires on December 11th this year.

President Obama and his allies are attempting to scare Americans into believing that ISPs can decide what websites they visit or what online stores they can shop at. This is completely false. Not only have the President and his supporters failed to point out examples of where this is happening, but they neglect to mention both of these issues can be addressed and enforced by federal agencies – the Federal Communications Commission and the Federal Trade Commission – if consumers are being harmed by such practices.

The President also came out against paid prioritization, also referred to as “fast lanes”, where content providers that clog up ISPs’ servers with traffic – Netflix and YouTube who account for over half of all internet traffic during peak hours – can pay a premium to have their products delivered faster. In reality, such practices have been going on for some time and have had no negative impact on consumers. What the President and his supporters also fail to mention is that reclassifying broadband under Title II would not ban such practices but would actually authorize broadband providers to tariff, or charge content and service providers for using their networks –the exact opposite of what so-called “net neutrality” would seek to accomplish.

Forcing internet providers to comply with heavy-handed and outdated federal regulations will only spell trouble for the future of the internet and consumers. Title II reclassification would give the government authority over the business models of ISPs by dictating how they manage traffic on their networks while also determining the prices they charge consumers for services. This of course is only the tip of the iceberg, as ISPs would be subject to a plethora of other regulations which would ultimately slow or even halt network expansion, and choke competition by making it much harder for new competitors to enter the market.

The FCC must avoid approving any form of Title II reclassification. Approving such regulations will have adverse effects on innovation and the economy. In the event that reclassification does happen, Congress should take action to prevent the FCC from implementing these regulations in order to protect the internet as well as the consumers who can’t afford to be saddled with more taxes in this down economy.