June 9, 2014 / 6:21 PM / in 4 years

COLUMN-Net neutrality: A web of deceit

(Steve Forbes is chairman and editor-in-chief of Forbes Media. The opinions expressed are his own.)

By Steve Forbes

June 9 (Reuters) - Special-interest groups are calling for public-utility regulations to be placed on the Internet - the most innovative and society-shaping deregulatory success story of our time. These people are trying to exert control over the Internet through “net neutrality” regulations that will likely benefit only a few huge Internet companies and the top 1 percent of Internet users.

Net neutrality was developed to ensure that Internet users had the freedom to view all the legal content they wanted. Recently, however, there has been a shift in focus: Some of the largest Internet companies are citing “net neutrality” as a reason to enshrine specific privileges that largely benefit them.

If these content companies get their way - and the Federal Communications Commission is now deliberating this - Americans will be forced to shoulder the costs for the high-speed networks and infrastructure upgrades needed to support high-volume Internet traffic generators, such as Netflix.

Whether they use those services or not.

The math is simple. As a network carries more traffic, it has to grow or it will become congested. To expand a network requires significant investment and expense - tens of billions of dollars a year in the case of Internet service providers (ISPs).

These costs can be recovered in two ways: Either by charging all consumers equally or by having the large companies that use far more of the network resources pay their fair share.

In the real world it is reasonable and even expected that people pay more for a resource they use more than others. Under the guise of net neutrality, however, the large companies want everyone to pay more so that they and their users - the people consuming the bulk of the resources - do not have to.

Net neutrality advocates claim they are doing this for the good of the Internet and to protect future startups. But neither claim stands up to even the faintest scrutiny. They are both a cover for a bold-faced attempt to force the many to subsidize the powerful few.

The only way the Internet can thrive is if all parties have incentives to improve - and more efficiently use - our high-speed networks. If Internet service providers are forced to serve as mere intermediaries, carrying content for other large companies, there will be little motivation for them to invest in their networks and foster innovation. Similarly, there will be no incentive for the heavy-traffic-generating companies to develop new ways to reach their consumers.

As for the small companies and startups that the proponents of Internet regulation are allegedly trying to protect, they are the ones who benefit from the kinds of creative network arrangements now available in the absence of Internet regulations. These arrangements differentiate them from the larger, more established companies who have developed their own ways to provide faster service to their consumers built on existing service provider networks.

No startup or new-market entrant can afford to spend considerable resources on their own global networks. That’s why the arguments from the large-content providers are self-serving: They have preferred access to consumers and want to keep it that way.

Contrary to the claims from those who are now most vocal in calling for 1930s “common carrier” regulations - dating from the age of the telephone-monopoly - be placed on the modern Internet, their true aim is to ensure that a small handful of companies do not pay their share.

Though that may be a successful, if questionable, business model for them, they risk subjecting the Internet to stifling regulations that will deter the long-term investments needed to power our Internet economy.

Regulators at the FCC and those on Capitol Hill who support the large content companies should be able to recognize this masquerade - and abandon any effort to impose public utility regulations on the Internet. (Steve Forbes)

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