Regulation

I commend The American Consumer Institute for their excellent new book of scholar essays, “The Consequences of Net Neutrality Regulations on Broadband Investment and Consumer Welfare.”

• It's refreshing and very useful to have a bipartisan collection of of 13 essays authored by 11 senior economists and public policy experts, both Republican and Democrat. 
  • "The book provides insight about consequences Net Neutrality regulations have on two economic concepts that affect broadband consumers: “price and demand” and “cost and supply.”

The net neutrality/open Internet debate needs more of this kind and quality of substantive professional analysis.

To help the neutralism movement de-privatize the Internet and transform broadband providers into quasi-public-utilities, some attempt to rewrite the long and very bipartisan history of Internet privatization as a partisan history, despite overwhelming evidence to the contrary. 

The piece below ran on BigGovernment.com today. (One-page version here.)

Is FCC Declaring 'Open Season' on Internet Freedom?

The FCC, in proposing to change the definition of an “open Internet” from competition-driven to government-driven is setting a very dangerous precedent, that it is acceptable for countries to preemptively regulate the Internet for what might happen in the future, even if they lack the legitimacy of constitutional or legal authority to do so, or even if there is the thinnest of justification or evidence to support it.

The FCC's non-competitive-bid, sole source contract with the Harvard Berkman Center to "conduct an independent review of broadband studies to assist the FCC" with the National Broadband Plan -- appears to have been a near complete bust.

• The quality of the Berkman study is so poor, so riddled with key factual errors, so devoid of balance or objectivity, and so dependent on fatally-flawed economic analysis, that the FCC should not risk dragging down the credibility of the entire National Broadband Plan by relying on it in any way.
• The National Broadband Plan is too important a purpose, process, and effort to get right for the Nation to cut corners like the Berkman study routinely did. 

A summary of some of the critical flaws/errors of the Harvard Berkman study follow:

NTT-Japan commented that the Berkman study was "seriously in error." Specifically NTT said: "First, facilities based competition, not unbundling, has been the key to broadband growth in Japan." ... "Second, the report mistates the importance of 'government-subsidized loans' to the success of broadband deployment in Japan." ... "Third, the Berkman Center's draft study is internally contradictory."  

Anyone who cares about the competence of the studies the FCC has commissioned/outsourced to produce the FCC's National Broadband Plan, needs to read George Ford's devastating critique of the economic literacy of Harvard Professor Benkler's broadband survey for the FCC. 

In a nutshell, the econometric analysis Professor Benkler relied on would have earned a failing grade in any Harvard economics class, because the supply curve slopes in the wrong direction. Oops!

To be fair, Professor Benkler is a law Professor not an economist, but even an undergrad economics 101 student could have caught the fatal flaw in the analysis Professor Benkler relies upon.

The FCC should insist that Harvard employ competent reviewers to ensure that the basic information and analysis provided to the FCC is at least minimally competent in the disciplines covered by the survey.      

George Ou has a great new post -- "FCC NPRM ban on paid peering harms new innovators" -- that should be humbling and give some serious pause to the FCC and those pushing its proposed Open Internet regulations. 

The Internet's complex ganglia of technologies, networks, agreements, standards, incentives, collaborations, contracts, innovations, relationships, safeguards, protections, economics, etc. -- approaches the complexity of a brain. 

• The FCC's approach of "preserving an Open Internet" with the blunt instruments of FCC regulation is like pre-med student trying to do brain surgery with kitchen utensils and naively confident that he/she can figure it out as they go along.
• The FCC's problem is that this is very much like brain surgery, even real experts could mess this up, and if its done wrong it could cause permanent irreparable damage to the current Internet. 
• If the FCC makes a mistake in its Internet regulatory brain surgery -- in trying to surgically convert the functioning private Internet into a comparable functioning public Internet -- it could be like the functional equivalent of an Internet lobotomy. 

What is really scary is apparently how little regulatory humility there is on the subject of the Internet or appreciation that good intentions could easily become serious unintended consequences.

• The FCC should remember, the wisdom of... first do no harm.  

To see "smoking gun" proof that "net neutrality" is a made-up issue and argument, read the short but telling excerpt below from George Lakoff's Book: "Thinking Points" published October 3, 2006, when the only net neutrality incident at that time was the FCC's Consent Decree with rural telco, Madison River Communications in February 2005.  

From Thinking Points, Chapter 8, The Art of Arguments:

"Thus, the argument for Net neutrality becomes an argument for government regulation in this form by the FCC.

As the lead bankroller of the "open Internet" slogan that the FCC now proposes to adopt as new U.S. policy without Congressional authorization, Google knows what an "open Internet" is supposed to mean: Google gets the benefits of the Internet without its costs. 

Google responded to the FCC's questions that effectively address whether or not Google Voice should be subject to the FCC's proposed net neutrality regulations.

In a nutshell, Google basically asserted that it is acceptable for a benevolent provider of free services like Google Claus to discriminate and block calls as an information service voice provider, but it is unaccceptable for profit-seeking broadband voice and information service providers to discriminate or block calls.