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Research & Commentary: States Move to Re-impose Unnecessary Net Neutrality Rules

April 17, 2018

In this Research & Commentary, Matthew Glans examines the efforts by several states to re-impose net neutrality rules at the state level.

On April 9, Oregon Gov. Kate Brown (D) signed a bill that would prevent the state from doing business with internet providers that throttle internet traffic. The law is a reaction to a recent federal rollback of net neutrality requirements. Net neutrality is a set of federal rules requiring internet service providers to allow equal access to all online content and applications, regardless of the source. Providers (ISP) may not favor or block any particular product, service, or website. Net neutrality has been controversial ever since it was first proposed. Oregon is the second state (joining Washington) to pass a law attempting to reimpose net neutrality rules.

Net neutrality proponents have argued without net neutrality laws, ISPs would be able to create tiered high-speed access lanes on the internet. They argue this would inevitably lead to the wealthiest customers getting access to the fastest connections and relegating lower-income consumers to lower-speed connections.

To date, there has been no indication this doomsday scenario will take place. Service prices have remained constant even as the average speed of internet connections has dramatically increased. Furthermore, if ISPs were to offer customers reduced speeds, they would likely lose their business to competitors. While the internet has never been completely neutral, the best way to ensure fair service is to promote competition by reducing, not growing, regulation.

Net neutrality would also stifle broadband development and other innovations. When burdensome regulations blunt the profit incentive to develop new technology and build new networks, higher costs and inferior service inevitably follow. Net neutrality hurts the telecom industry and consumers, who lose out on groundbreaking products and services.

The imposition of net neutrality rules affect far more than just the telecommunications industry. Many other industries rely on network diversity to thrive and grow. Health care is one particular industry experts fear could be adversely affected by net neutrality. For example, telemedicine’s revolutionary technologies would be forced to compete for bandwidth with streaming downloads like YouTube and Netflix under net neutrality.

Net neutrality would also reduce internet security, another drawback its advocates overlook. Many security experts caution net neutrality policies would hinder more powerful security software and network protections, leaving digital networks more vulnerable to hacking and other cyber threats. Even popular services like voice over internet protocol (VoIP) and online gaming would be negatively impacted because of reduced online security.

The Internet Age emerged and revolutionized the world because the internet has operated in a free-market environment. Onerous regulations, such as net neutrality, would blunt the internet’s potential to thrive and innovate.  Internet users do not need the government to protect them, it needs protection from unnecessary and counterproductive government intervention.

Reimposing a vast array of government regulations such as net neutrality would stifle what has made the internet one of the biggest growth sectors of the economy. Doing this on a state by state basis would make some states less economically competitive and harm consumers.

To ensure the nation’s broadband infrastructure keeps expanding and the internet economy continues to flourish, all internet regulations should be scrutinized using a cost-benefit analysis. Future regulations covering the internet and broadband should focus less on outdated and ineffective regulatory models and instead on policies that would not hinder innovation.

The following documents examine network neutrality.
 

Neutralism: The Strange Philosophy behind the Movement for Net Neutrality
https://www.heartland.org/publications-resources/publications/neutralism-the-strange-philosophy-behind-the-movement-for-net-neutrality
This Heartland Institute Policy Study examines the philosophy that underlies the movement for network neutrality, which telecom expert Scott Cleland has dubbed “neutralism.” Neutralism stands in striking contrast to the innocuous-sounding internet “freedom” its advocates call for. Understanding neutralism helps explain why the consequences of network neutrality would be quite the opposite of what its proponents claim.

The Economics of Net Neutrality
https://www.heartland.org/publications-resources/publications/the-economics-of-net-neutrality  
Robert Hahn and Scott Wallsten examine the economics of net neutrality and broadband internet access. They argue mandating net neutrality would likely reduce the nation’s economic welfare. Instead, they argue, the government should focus on creating competition in the broadband market by opening up more spectrum and reducing barriers to entry created by local regulations. In cases where a broadband provider can exercise undue market power, the government can use its antitrust enforcement authority to police anticompetitive behavior.

The Impact of Regulation on Innovation and Choice in Wireless Communication
https://www.heartland.org/publications-resources/publications/the-impact-of-regulation-on-innovation-and-choice-in-wireless-communications?source=policybot
Everett Ehrlich, Jeffrey A. Eisenach, and Wayne A. Leighton explain how net neutrality regulations would hamper innovation and consumer choice in the wireless sector.

Goodbye Net Neutrality; Hello Competition
https://fee.org/articles/goodbye-net-neutrality-hello-competition/
Jeffrey A. Tucker of the Foundation for Economic Education argues that the recent repeal of net neutrality rules are a return to the open  competition and deregulation that were essential to the growth of the internet.

A Net Neutrality Primer
https://cei.org/content/net-neutrality-primer
In this primer on net neutrality, Jessica Melugin and Ryan Radia of the Competitive Enterprise Institute the policies, report how they work, and how they affect the internet economy. Melugin and Radia conclude the regulations “harm consumers because they prevent ISPs from experimenting with the network configurations and pricing models that serve consumers best.”

Debunking the Left’s Myths on Net Neutrality
https://www.heritage.org/government-regulation/commentary/debunking-the-lefts-myths-net-neutrality
James L. Gattuso, Senior Research Fellow in Regulatory Policy at the Heritage Foundation examines several popular arguments in favor of net neutrality and how the laws are not needed to maintain an open and affordable internet.

Repealing Net Neutrality is Actually Good for the Internet
https://www.heritage.org/technology/commentary/repealing-net-neutrality-actually-good-the-internet
James L. Gattuso argues that repealing net neutrality will not lead to its collapse, but will help encourage future growth. “The real world danger to the internet is too much government interference, not too little. The FCC’s repeal of these ill-conceived rules is a welcome step.”

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Lindsey Stroud, Heartland’s government relations manager, at lstroud@heartland.org or 312/377-4000.

Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR